Philadelphia Agency Sues Drugmaker

Published December 30, 2014

In a move that could have serious consequences for the prescription drug industry, the Southeastern Pennsylvania Transportation Authority filed a lawsuit alleging drug-maker Gilead Sciences is engaging in “price gouging” because some buyers of Sovaldi , a hepatitis C cure manufactured by Gilead, pay much less than what SEPTA and other U.S. buyers pay.

A twelve-week treatment of Sovaldi typically costs $84,000.

But charging different prices to different payers is a normal and beneficial practice, says Yevgeniy Feyman, a fellow in health policy and deputy director of the Center for Health Progress at the Manhattan Institute.

“Price discrimination is a legal, ethical, and normal part of the pharmaceutical business,” said Feyman. He noted Medicaid receives an automatic 25 percent discount on the price of all drugs. Being able to give different prices to different buyers “improves net consumer welfare by increasing access to drugs,” he said.

‘Remarkably Effective Drug’

The lawsuit against Gilead, filed in the U.S. District Court for the Eastern District of Pennsylvania on December 9, notes Sovaldi is a “remarkably effective drug” that cures about 90 percent of patients, but it complains Gilead sells Sovaldi in Egypt for around $900 and recently agreed to license a generic form of the drug to be sold in 91 developing nations at deeply discounted prices. The Southeastern Pennsylvania Transportation Authority accuses Gilead of “price gouging” because it charges much higher prices in the United States.

If a court were to make it illegal for Gilead to offer different pricing, “Forget about developing countries” getting prescription drugs, Feyman said. He also said it would “stymie pharmaceutical research and development” by reducing the return on investment in new drugs.

Sean Parnell ([email protected]) is managing editor of Health Care News.