Dan Gorenstein: Something dramatic happened at the end of March.

The price of a pill virtually guaranteed to prevent HIV plummeted.

Tim Horn: We’ve already seen close to a 90 percent price reduction.

DG: Pharmaceutical giant Gilead had created a revolutionary pill, Truvada, often called PrEP. 

And with no competition, Gilead had named its price for nearly a decade. 

Rep. Alexandria Ocasio-Cortez: In Australia PrEP is $8 a month. In the United States it’s almost $2,000 a month.

DG: But only a fraction of the people recommended to be on PrEP take it.

And about 35,000 people still get HIV every year in the U.S.

Now that generics are finally hitting the market, you can buy PrEP for around $80 a month.

For better and for worse, this is how our drug system works.

Today, we look back at how Gilead kept prices so high for so long and whether cheaper drugs will finally increase access.

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein, and this is Tradeoffs.

*****

DG: I’m joined today by Tradeoffs producer Ryan Levi, who has spent more than a month digging into this.

And he is going to help us rewind the tape, so to speak, to see what we can learn from the story of Truvada and Gilead.

Nice to have you here, Ryan.

Ryan Levi: Good to be here, Dan.

DG: To really appreciate how far we’ve come when it comes to HIV and AIDS, Ryan, let’s go back to when the HIV/AIDS crisis first started in the U.S. in the 1980s.

RL: It was a really dark and scary time for a lot of people.

Larry Kramer: Jane, can you imagine what it must be like if you had lost 20 of your friends in the last 18 months?
Jane Pauley: No.

RL: Hospital wards in major cities were full of mostly gay men wasting away and dying. Entire communities were devastated.

Jane Pauley: And you don’t know why?
Larry Kramer: No cause, no cure, people in hospitals. It’s a very angry community.

RL: In 1992, AIDS was the leading cause of death for men 25-44.

By 1995, more than 260,000 people had died.

Right around then is when really effective treatments for HIV/AIDS finally hit the market.

These were complicated combinations of pills with nasty side-effects.

But they worked — the death rate from AIDS dropped by two-thirds within just a few years.

And treatments kept getting better and better.

DG: And presumably, this is where Truvada enters the picture.

RL: Right. Gilead introduced Truvada in 2004 as an HIV treatment and within three years, it was their best-selling product.

By the end of the decade it had made them nearly $8 billion. And as a company that launched only in the late ’80s as a biotech startup in California, this really catapulted Gilead into the sphere of a pharma juggernaut.

DG: $8 billion. That is some serious money. And you said that was for HIV treatment.

But today, we’re talking about Truvada as PrEP, short for pre-exposure prophylaxis. 

So first, can you walk us through how Truvada went from treatment to prevention?

RL: So researchers had been floating this idea from the beginning, Dan.

And in the mid-to-late 2000s, the federal government funded and ran a couple of clinical trials to test the theory. 

Gilead offered some guidance and support and donated the pills for the studies.

DG: And that’s normal, right. A drug company using government funded research to develop their products.

RL: Definitely. Normally, though, it happens earlier on, like the government figures out the basic science and then pharma turns it into an actual treatment.

DG: Got it, go on.

RL: Right, so the big news came at the end of 2010.  

Judy Woodruff: A global study of high risk gay men found that daily doses of the drug Truvada cut their chance of infection by as much as 70%.

RL: TIME Magazine called it the medical breakthrough of the year.

Anthony Fauci called it “huge.”

And in 2012, the FDA approved Truvada as PrEP.

DG: And how excited were people about PrEP? I mean, it sounds like this changed the game.

RL: That was definitely the hope.

The Obama administration had just set a goal of cutting new infections 25% by 2015.

President Barack Obama: We’re here because we believe that while HIV transmission rates in this country are not as high as they once were, every new case is one case too many.

RL: And, really, people thought PrEP could be the missing piece, you know, the thing that would help us finally eradicate this virus.

But very, very few people started taking it, and a lot of people were blaming the price tag.

Facui: If you look at a person taking Truvada for an entire year, the price range is somewhere between $12,000-$14,000 a year. It’s not an inexpensive drug.

RL: Dan, these twin issues — high cost and low uptake — have been at the heart of the Truvada story ever since.

Today, fewer than 20% of the 1.2 million people the CDC says should be on PrEP actually take it.

This includes gay men, anyone with an HIV positive sex partner, transgender women and people who use injection drugs. 

Half of new cases in 2018 were in the South, and most of those cases were among Black and Hispanic people, groups where PrEP use is much lower.

By the way, we still haven’t hit that goal Obama set for reducing new infections.

DG: And so, the list price for Truvada was $14,000 about 10 years ago when the drug hit the market. What is it now? 

RL: Around $22,000. 

DG: And what are people typically paying?

RL: So most people, not all but most, usually end up paying very little or nothing out of pocket.

That’s because insurers including Medicare and Medicaid are picking up most of the tab, and Gilead has a program to help people with private insurance pay their copays or deductibles.

For people without insurance, Gilead has donated enough pills to the federal government to cover 200,000 people for the next decade, and the company also runs its own assistance program.

DG: So you just said health policy folks think high prices are a big reason why so few people take the drug. But lots of people aren’t paying that much out of pocket. What’s going on?

RL: This is an important question. Even though there’s all this focus on cost, there’s no clear-cut evidence that proves price is keeping people off PrEP.

There’s a CDC study that estimated just 7% of people who should be on PrEP struggle to afford it.

So there’s that. 

But at the same time, as I just said, only 20% of people are on the drug, and there are surveys and tons of one-off stories of people who didn’t start PrEP or stopped taking it because of the cost. 

DG: So it sounds like one way or the other, maybe not causal, but there’s some connection between all these people not taking PrEP and how much Gilead has charged.

RL: Obviously Gilead disagrees with that framing, but it’s certainly a piece of the puzzle. 

High drug prices have always been a part of our country’s history in trying to fight HIV. 

And looking back on the prices Gilead set for PrEP and why they’ve stayed so high is an important part of that history and a useful case study in how our drug pricing system works.

DG: Ok, Ryan, so why have these prices stayed so high? 

RL: Well there are three big things, and as you know, Dan, I’m a big fan of acronyms to help me remember things, so I came up with P-S-A.

DG: P-S-A. Public service announcement, Ryan?

RL: You got it. I feel like we see our stories as a kind of public service announcement, so I thought it fit.

DG: Ok, great. So I guess we’ll start with the letter P.

RL: Right. P is for patents.

If I only had one word to answer your question, Dan, it would be patents. 

Because that’s what really drives the prices we all pay for prescription drugs.

Patents are also very complicated, so to really understand their role in this story…

Robin Feldman: What do you need?

RL: I needed some help.

RF: I’m on the faculty at University of California, Hastings

RL: The first person I talked to was Law Professor Robin Feldman.

RF: And I run a think tank at the law school called the Center for Innovation.

RL: Robin’s work focuses a lot on drug patents and drug pricing.

And she says when companies come up with a new scientific discovery, the U.S. Patent Office slaps a patent on it, and the drugmaker gets a monopoly — usually about 20 years. 

Dan, this is when they can charge whatever they want without competition, and it’s an incentive for the companies to develop new, innovative treatments.

RF: And after that, cheaper drugs should be able to enter the market and drive the price down.

RL: That is the straightforward part of patents.

Then we get into what you might call the gamesmanship.

One common move, Robin says, is for companies to file a bunch of patents on a single drug.

RF: You can think of them as walls or you can think of them as a bag of weapons that you can throw at a potential competitor one after another. The more you have, the harder it is for cheaper drugs to get to market.

RL: People call this patent thicketting, and the idea is that the longer it takes for generics to enter, the longer the original company keeps making top dollar.

RF: All the company needs is one, to block the generic out. So if you’ve got 10, 15, 20, you’ve got a lot greater chance that something will stand and hold off the competition as long as possible.

DG: And, Ryan, how many patents does Gilead have for Truvada?

RL: 14, with protection lasting through 2024.

Now Gilead, for its part, says these patents are based on their scientific discoveries. They’re what they should have.

And they say it’s natural that Truvada is going to have several patents because it’s combining two separate ingredients. 

In other words, nothing to see here.

But there’s at least one court case against Gilead that suggests that there is something to see here.

Robin says it’s common for courts to get involved in these kinds of cases because not all patents are created equal.

RF: Patent examiners have a limited amount of time and limited resources to look at each patent that comes through. Some of those patents and protections may be weak. So we have historically relied on the court system to sort these issues out.

DG: When we come back, Gilead goes to court, pushes a new pill, and we look ahead to a world of cheap and plentiful PrEP.

BREAK

DG: Welcome back.

We’re here with Tradeoffs producer Ryan Levi who is running us through a drug pricing case study focused on Gilead’s HIV prevention medication Truvada.

Ryan, you just told us about the key role patent protection played in the high price of the drug. That was the P in your PSA. 

And you were about to tell us about how some of Gilead’s patents got challenged in court, which I assume gets us to S? 

RL: Right. S is for settlement as in settling a lawsuit. 

Remember, Dan, how I was telling you that not all patents are created equal?

DG: Yeah.

RL: So of those 14 patents Gilead has on Truvada, the Israeli generic drugmaker Teva challenged two of them.

Teva argued that those two should be thrown out because the inventions they claimed to cover were included in earlier Truvada patents.

DG: So basically patents are supposed to be for new discoveries, things that have never been patented before.

And Teva was saying in court that Gilead had effectively patented the same science a few times.

RL: Right, and in 2014, the two sides settled, but the details of the agreement are secret.

All we know is that Gilead eventually said that as part of the settlement, Teva would launch a generic version of Truvada in September 2020.

DG: So, September 2020, that’s before Gilead’s patents would’ve expired, but also several years after Teva could’ve hit the market, had the company won their case in court against Gilead. 

RL: Exactly. And that’s presumably why Teva made this deal — trade the uncertainty of winning a court challenge and getting to enter the market right away for the certainty of entering the market a few years down the line. 

Which makes sense.

But there’s another reason, that a different patent expert I talked to raised as a possibility.

Tahir Amin: Hi, my name’s Tahir Amin, I’m the co-founder and co-executive director of an organization called the Initiative for Medicines, Access and Knowledge.

RL: Tahir’s a patent lawyer who co-runs I-MAK, a research organization that pushes for lower priced drugs by focusing on patent reform.  

He told me about something known as pay-for-delay.

TA: Many of these settlements usually the branded company will tell the generic company, why don’t you delay your entry, we’ll pay you X million dollars, maybe even a billion.

RL: Now I want to be clear: Gilead told us Teva received no payment in this deal, and Teva did not respond for comment. 

But in March, the state of New Mexico filed a lawsuit alleging there was pay-for-delay here.

Obviously, that will have to work its way through the courts, but big picture, pay-for-delay is right out of the pharma playbook.

TA: They know they’re going to get a chunk of change to sort of wait for an extra year or two, generic gets a nice sort of golden handshake. So it works out for both generics and the brand company that’s holding the patents.  

RL: A 2010 Federal Trade Commision study found, on average, these pay-for-delay deals give brand drugs an extra 17 months of exclusivity, and, in total, they cost consumers an extra $3.5 billion a year in higher drug costs.

DG: Ryan, before we get to that final letter, I want to take stock for a minute.

How much money did Gilead make on Truvada as PrEP from 2012, when it hit the market, until the first generic arrived in the fall of 2020?

RL: We don’t have them broken out, but total Truvada sales for PrEP and treatment in the U.S. were $19.5 billion.

DG: And how many new HIV infections were there over that same time period?

RL: Through 2019, around 300,000.

DG: Given like you’ve already said, there is no empirical evidence that draws a straight line from price to people not being on PrEP, how do you think about those two numbers?

RL: They’re both part huge parts of the story, Dan.

We’ve made a lot of progress on HIV but people are still getting sick.

And Gilead has made a lot of money on a prevention drug that most people aren’t using.

The tricky thing is how related are they?

And the truth is we just don’t have as clear an answer as we’d like. 

DG: Okay you’ve got one letter left in your PSA. 

What does A stand for?

RL: A stands for “A new pill.”   

Back when Gilead was first developing the ingredients for Truvada in the early 2000s, Tahir says they were also doing research on another, slightly different version of one of the ingredients.

TA: This was around 2004 and it actually showed some slight benefits, like, for example, you could get higher antiviral potency at a lower dose. But then they just totally scratched it. It just went dead. 

RL: At the time, the company issued a press release saying they didn’t think this new ingredient was different enough from the one in Truvada to keep developing it.

But in 2010, Gilead dusted it off and started working on it again and turned it into a new drug called Descovy, which they got FDA approval first as treatment and then as PrEP in 2019.

DG: That’s right before Truvada was set to go generic.

RL: Right and a lot of advocates and doctors I talked to don’t think that was a coincidence.

TA: This is a common business strategy pharmaceutical companies use. We call this sort of product switching or product hopping. They basically will take an existing product, slightly modify it and switch it over to a new one because they now have a new generation of patents so they could keep off competition.

RL: Gilead says they started working on Descovy again because they thought it could be a better and safer treatment option.

And a lot of their marketing around Descovy as PrEP also really focused on safety. 

But that emphasis really bothered a lot of HIV physicians.

Oni Blackstock: It was super, super frustrating because like, you know, many of us knew that Truvada was a very fine and really excellent medication.

RL: Oni Blackstock is a primary care and HIV physician in New York City.

And she was seeing patients and running the city’s HIV response out of the health department when Descovy came out.

OB: People already had all this information that they had received about this newer, safer medication that either friends had told them about or that they had, you know, seen a commercial about…

Descovy Ad: Step Up, PrEP Up. Descovy is the newest way to PrEP.

OB: …you know, how it was different from Truvada, which more folks were familiar with. It just felt like pushing against this huge storm of information.

RL: There were ads on TV and online. 

The wildest piece of this for me is if you go to truvada.com, the first thing you see is a pop-up offering for a “new prescription option.” Which of course is Descovy.

And to be clear, Truvada and Descovy are both very safe.

I talked with several doctors who told me they’d likely recommend Descovy for patients with pre-existing bone or kidney issues.

But for the vast majority of people, evidence from Gilead’s own clinical trial found Descovy and Truvada equally effective at preventing HIV.

And now that the price of generic Truvada is plummeting there’s no financial reason to pay around $2,200 a month for Descovy.

And yet, Gilead’s campaign has worked. 

The company says 46% of people who had been on Truvada are now on Descovy, which has patents that go until at least 2025.  

DG: Ok. there’s lots of people on Descovy, the new brand on the block, but there’s all this new generic competition now too. So prices, I’m sure, are falling fast.

RL: Yep. In 48 hours, the price of PrEP dropped more than 90%, Dan.

DG: Damn.

RL: Right? It’s not like that everywhere, but I looked around and with a coupon from the online discount site GoodRx, you can get generic Truvada for around $80 a month in all the biggest U.S. cities. 

And I talked with one pharmacy in San Francisco that’s as low as $36.60.

Tim Horn: It basically is a race to the bottom now.

RL: Tim Horn is the director of health care access at the National Alliance of State and Territorial AIDS Directors.

He says it’ll take some time for everyone to see these new low generic prices, but cheaper, affordable PrEP has definitely arrived.

DG: I’m curious, Ryan, how optimistic are people like Tim Horn that lots more people will take PrEP and we’ll see a real drop in the 35,000 Americans who get HIV every year?   

RL: So no one I talked to thinks that high prices alone explain the PrEP problem — not providers, not activists, not researchers, nobody.

There’s a whole web of barriers.

There are still a lot of people who don’t know about PrEP, or they think it’s not for them because they already take enough precautions or because they’re not gay.

And there are still millions of people who don’t have health insurance in this country — especially in the dozen states that haven’t expanded Medicaid — making access that much harder. 

Putting that aside, one concrete thing Tim thinks will change is it’s now going to be a lot easier for public health departments to get PrEP out there.

TH: We’ve certainly heard from health departments that would like to be able to purchase PrEP at prices that are considerably more affordable than those available to brand name products to give to a university clinic, to give to a Department of Corrections program, to donate to a community program.

RL: So that would definitely help those people you were talking about, Dan, but there’s a potential downside too. 

A lot of HIV clinics right now can buy Truvada or Descovy at a big discount, but are allowed to charge a patient’s insurance for the full amount. 

That difference — about a thousand bucks — funds their clinic covering labs, outreach work, and care for the uninsured.

But these safety-net clinics are worried that if insurers switch to only paying for generics, as some already have, the clinics will lose a lot of money.

It’s just too early to know how this will all shake out.

DG: Fair enough. As we enter this new Truvada chapter, Ryan, given all of your reporting what’s your big takeaway? How should we think about the story of Truvada?

RL: I think there are three things.

The first is actually a quote from New York Congresswoman Alexandria Ocasio-Cortez. This is from back in 2019 when she was talking to Gilead’s CEO Daniel O’Day at a congressional hearing on the cost of PrEP.

Ocasio-Cortez: This isn’t about you as an individual or who you are or your character. This is about the system of incentives we have set up. And when it comes to who to blame for this, I don’t blame you. I blame us. 

RL: Yes, Gilead got their patents, they delayed generic entry, and they’re pushing out Descovy. 

And it’s really tempting to boil this down to a greedy drug company putting profits over a million people who still aren’t taking this drug. And that narrative is out there. 

But this is the U.S. drug system in action. This is the basic contract the U.S. has made with drug companies.

DG: What do you mean by contract?

RL: So this is the second takeaway.

Craig Garthwaite: At the center of the pharmaceutical pricing discussion is a tradeoff between the access to the drug today and the access to new drugs in the future.

RL: I talked with Craig Garthwaite. He’s an economist at the Kellogg School of Management at Northwestern, and he generally believes the innovation we get is worth the high prices we pay. 

CG: We need to provide the incentives for firms to want to develop treatments in the first place. And the way we do that is through prices that mean that some people don’t get access to treatments that exist.

RL: Basically in this contract, we’re agreeing that Gilead should have a financial incentive to find a cure for HIV in the future and that is worth some people not being able to afford PrEP today.

But this is the core tension in drug pricing debates and in this Truvada case: How big does the financial incentive have to be to still get these breakthrough treatments?

Is there room to bring down prices and preserve the innovation we want the most? 

A lot of people in Washington think there is that room.

My last take away brings me back to Tim Horn.

Because regardless of what’s happened before, we are now entering a new chapter in HIV prevention.

TH: We’ve never really gotten a chance just to see what the impact of a low cost generic can actually make in terms of really scaling up access.

RL: And that’s why I’m so interested to see what happens with these new generics over the next few months because this is uncharted territory.

Are we finally going to see that huge jump in the number of people getting on PrEP?

You know, the federal government has a new HIV goal — cut new infections 90% by the end of the decade.

And there’s a lot of excitement and hope that cheap PrEP helps us finally get rid of this virus. 

DG: And it’s a story I know we’ll be following. 

Ryan, thanks so much for this.

RL: Happy to do it, Dan.

DG: I’m Dan Gorenstein. This is Tradeoffs.