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Profiting from Delayed Release of a Promising H.I.V. Therapy by a Drug Maker

In 2004, Gilead Sciences made the decision to discontinue the development of a new H.I.V. drug. The public explanation provided by Gilead was that the drug wasn’t different enough from an existing treatment to warrant further development. However, internal documents made public in litigation against the company revealed that Gilead had actually planned to delay the release of the new drug to maximize profits, despite the possibility that it could be safer for patients.

Gilead, one of the largest drugmakers in the world, appeared to be using a tactic commonly employed by the industry: manipulating the U.S. patent system to protect profitable monopolies on popular drugs. At the time, Gilead already had two highly successful H.I.V. treatments based on a drug called tenofovir. The patents for these treatments were set to expire in 2017, which would allow competitors to introduce cheaper alternatives.

The new drug that Gilead was developing was an updated version of tenofovir, expected to be less toxic to patients’ kidneys and bones. Despite the potential benefits, Gilead executives determined that the new drug could compete with their existing formulation, which was protected by patents. By delaying the release of the new drug until just before the expiration of the patents, Gilead could extend the period of time during which their H.I.V. treatments remained patented, thus keeping prices high. This strategy, known as the “patent extension strategy,” had the potential to generate billions of dollars in profits for the company.

Ultimately, Gilead introduced the new version of the drug in 2015, almost a decade after it could have been available if development had not been paused in 2004. The patents for Gilead’s H.I.V. drugs now extend until at least 2031. However, the delayed release of the new treatment has led to state and federal lawsuits in which over 26,000 patients claim that Gilead unnecessarily exposed them to kidney and bone problems with the older H.I.V. drugs.

Gilead has denied the allegations, stating that they halted the drug’s development for reasons other than increasing profits. They provided internal memos from 2004, estimating that the new version could generate an additional $1 billion in revenue over six years if released in 2008. Gilead’s top lawyer emphasized that the company’s research and development decisions prioritize the safety and effectiveness of their medicines.

Currently, Gilead’s expensive drugs containing the updated version of tenofovir hold a significant market share in H.I.V. treatment and prevention. However, if Gilead had proceeded with the development of the new drug back in 2004, their patents would have expired by now or would be expiring soon. The case highlights a common practice in the pharmaceutical industry known as “product hopping,” where companies switch patients to a newly patented version of a drug just before generic competition arrives, thereby prolonging their monopoly.

The Gilead case reveals how the U.S. patent system incentivizes companies to delay innovation. Experts argue that there is a fundamental flaw in the system, as it allowed Gilead to delay the development and launch of a potentially better H.I.V. drug for the sake of maximizing profits. Patients who took the older H.I.V. drugs are now seeking legal action, claiming harm caused by Gilead’s actions.

Gilead’s tactics are not unique in the industry. Merck, another drug maker, is developing a version of its blockbuster cancer drug, Keytruda, that is expected to extend revenues after the existing version faces competition in 2028. This practice highlights how the pharmaceutical industry takes advantage of the patent system to extend their revenue streams.

The case of Gilead and tenofovir underscores the need for reform in the pharmaceutical patent system to encourage innovation rather than hinder it. Patients like David Swisher, who experienced health complications from the delayed release of the new drug, feel that their valuable time was lost due to Gilead’s actions.

Tenofovir, initially synthesized in the 1980s, became the foundation of Gilead’s dominance in the H.I.V. treatment and prevention market. Its introduction in 2001 marked a significant milestone in the fight against AIDS, saving millions of lives globally. However, a small percentage of patients experienced kidney and bone problems while taking the drug, especially when combined with other drugs to boost its effectiveness. The newer version of the drug does not have these issues but may cause weight gain and elevated cholesterol levels. Overall, both variations of tenofovir offer similar risks and benefits for most individuals.

Internal records from the early 2000s indicate that Gilead executives debated whether to expedite the release of the updated formulation. While some documents suggested that the two versions were similar in terms of safety, others indicated that the newer version was less toxic based on laboratory and animal studies. These studies demonstrated that the updated formulation delivered tenofovir more effectively to target cells, reducing leakage into the bloodstream and potential harm to kidneys and bones. It was also administered at a lower dose.

However, Gilead executives grew concerned about the potential impact on the existing tenofovir market and explored the new formulation as a means of extending their intellectual property rights. This analysis resulted in a memo in September 2003, outlining a strategy to replace the original version with the newer formulation and launch it in 2015. Gilead’s own calculations estimated over $1 billion in annual profits between 2018 and 2020.

Gilead revived the newer formulation in 2010 and positioned it for release in 2015 as a “kinder, gentler version” of tenofovir. The company successfully marketed the updated drug as safer for kidneys and bones, and by 2021, nearly half a million H.I.V. patients in the U.S. were taking Gilead products containing the new version of tenofovir.

In conclusion, the delayed release of the promising H.I.V. therapy by Gilead highlights the manipulation of the patent system to maximize profits in the pharmaceutical industry. The case raises questions about the flawed incentives created by the patent system and calls for reforms to ensure patients’ well-being and encourage genuine innovation.

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