Gilead Sciences Inc. has patent exclusivity on its potential Covid-19 treatment remdesivir for the next 15 years—poising the company for major profits if the drug is successful in treating the pandemic.
But the company could be forced to license its patents if the drug is approved and it can’t keep up with production demand, attorneys say.
“This is an emergency use drug, so the federal government will certainly want to make this drug available to everyone who needs it,” Steven Roth, a partner and intellectual property attorney with Lucas & Mercanti, LLP in New York, said.
The company, which started developing remdesivir in 2010 as a potential Ebola treatment, has at least three patents to protect the drug, extending its monopoly until at least until Oct. 29, 2035—assuming the patents are valid. It also has an unknown number of pending patent applications for remdesivir.
Separately, Gilead would receive five years of FDA exclusivity if the drug is successful, meaning the agency wouldn’t approve any generic versions of remdesivir during that time.
All of that could add up to market wins if remdesivir lives up to expectations and Gilead can ramp up to sufficiently respond to Covid-driven demand.
But if it can’t, Gilead could be “very vulnerable” to the federal government using its powers to compel the licensure of remdesivir patents, Roth said.
“We’re in uncharted territory here, but Gilead is going to want to avoid having sort of the public discourse be that there’s not enough of this product to go around,” Jeffrey Morton, a partner in the San Diego and Phoenix offices of Snell & Wilmer, said.
“I’m sure they’re going to be watching supply and demand very carefully not only in the United States but around the world. And I think governments will be doing the same,” he said.
Gilead received Food and Drug Administration authorization on May 1 for emergency use of remdesivir, the first medication backed by early clinical data to be made available to fight the novel coronavirus.
Questions remain about how the company will profit from the drug. Gilead has faced massive public pressure to price the drug affordably, including from Democrats in Congress who have been pushing Gilead’s CEO for details on pricing, taxpayer investment in the drug, and how the company will secure the supply chain.
Gilead officials have said it may spend $1 billion on remdesivir this year. However, analysts at Piper Sandler said the company could reasonably price the drug at $4,500 for a round of treatment and still generate more than $2 billion in revenue for the biotech company.
Gilead didn’t respond to requests for comment.
Fifteen years of patent exclusivity could result in Gilead making its own early decisions about licensing out the patents for remdesivir, said Chad Landmon, who chairs Axinn Veltrop & Harkrider LLP’s IP and FDA practice groups.
“If they can produce enough supply then everybody will be happy, but if they struggle with that they’ll really have an interesting conundrum of whether they go out and license it, or if the government is going to come in and use a compulsory license,” he said. “I think a lot of it comes down to how effective the product is at the end of the day.”
The government has the option to use what is known as “march-in” rights, a provision of the Bayh-Dole Act of 1980 that allows the government to seize patents for inventions created with government funding and license them to other entities.
No administration has ever used march-in rights, though the process has been initiated a handful of times, with the George W. Bush and Obama administrations declining to pursue the rights.
The government could also choose to use eminent domain-like authority to step in during a pandemic and mandate how a new vaccine, test, or treatment is produced, distributed, or even priced—known as compulsory licensing. Most recently, the threat of compulsory licensing was enough to persuade Bayer AG to lower its prices on a treatment for anthrax following the 9/11 attacks.
Compulsory licensing was created under 28 U.S.C. 1498, part of the judiciary and judicial procedure code, which allows the government to authorize the production of cheaper versions of drugs. The section, which applies to all patented inventions, including drugs the government hasn’t funded, has a provision requiring the government to pay the patent-holder royalties.
However, federal officials want to encourage the production of new coronavirus treatments—which means the government will have to carefully consider the need for drugmakers to profit while also making new drugs available to as many Americans as possible.
In addition to any profits from selling the drug, Gilead could see “significant licensing revenue” if it chooses to go the licensing route with remdesivir, Morton said.
However, the company will need to walk a fine line to satisfy both investors and public demand.
Obtaining the first FDA authorization for a Covid-19 treatment “presents potential for a significant windfall under normal circumstances,” Morton said. “These aren’t normal circumstances; the perception if they charged exorbitant prices would be very negative.”
One “jump start” that Gilead has on competitors who may be working with newer drug candidates is that remdesivir has been around for a long time, Landmon said.
“The FDA and CDC and others already have experience with the product; there’s a lot of knowledge established that there might not be for newer treatments that are being developed,” he said. “Doctors will take a bit of comfort that there’s more knowledge with this product rather than for a new molecule that’s never been given to patients before.”