Gilead tussles with the Malaysian government over licensing for its hepatitis C treatment.

An ongoing battle between Gilead Sciences (GILD) and the Malaysian government over hepatitis C treatment intensified in recent weeks as U.S. officials placed pressure on Malaysian officials to back down from a plan to sidestep patents, according to sources familiar with the matter.

The fracas stems from a move in 2017 by the Malaysian government to issue a license to generic companies to supply a version of the pricey Sovaldi hepatitis C pill, although only to public facilities, such as hospitals. In doing so, Malaysia became the first country to take such a step amid growing global pushback over the cost of the groundbreaking medicine.

The government did so in hopes of widening access to a drug that has revolutionized treatment but threatened to strain its budget. About 450,000 people, or 2.5 per cent of the Malaysian population, are believed to be living with the chronic liver disease, and about half of those are estimated to be eligible for treatment through public facilities, a government source told us.

Over the past few months, though, Gilead has sought to unwind the move, but is at loggerheads with Malaysian officials and so has increasingly relied on the U.S. government to help make its case. And one expert says the impasse is likely to be closely watched by other countries that have been similarly battling Gilead over the cost of its medicines and licensing maneuvers.

“I would imagine Gilead may be concerned about other countries using a government rights license,” said Ken Shadlen, a political scientist at the London School of Economics who studies the global pharmaceutical industry and patent issues. “But they could also be concerned about any supplier to the Malaysians becoming a global supplier and other countries asking Gilead to lower its price even more.”

“Gilead may be concerned about other countries using a government rights license.”

KEN SHADLEN, LONDON SCHOOL OF ECONOMICS

A country may grant a license to a public agency or a generic drug maker, allowing it to copy a patented medicine without the consent of the brand-name company that owns the patent. This right was memorialized in a section of a World Trade Organization agreement known as the Trade-Related Aspects of Intellectual Property Rights, or TRIPS (here is a primer).

Drug makers, however, argue that such licensing eviscerates patent rights and has urged the U.S. Trade Representative to scold countries that have taken steps to pursue licenses. For their part, patient advocacy groups, including those in Malaysia, have countered that industry efforts to enforce patent rights may come at the expense of patients who cannot afford increasingly costly medicines.

Malaysia had signaled its intent to issue a so-called government use license in mid-2017, which prompted Gilead to then expand a 2014 licensing deal to allow seven larger generic drug makers with operations in India to sell copycat versions in Malaysia and three other middle-income countries — Ukraine, Belarus, and Thailand.

Initially, the Malaysian health ministry issued the license to Pharco, an Egyptian manufacturer, and a domestic company to supply a generic version. To date, the government has offered the treatment for free in 22 public hospitals. But amid pushback from Gilead, the government also offered to strike a deal in which the company could instead license a generic supplier to make the medicine. However, the government wants Gilead to ensure availability at a low price.

Specifically, under the government use license issued last year, the health ministry can obtain a generic at nearly $300 per patient for a course of treatment, but Gilead has been unwilling to commit to such a price, according to government sources. The company also offered to provide enough of its brand-name Sovaldi to supply 5,000 patients, but government officials balked at this number.

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Against this backdrop, U.S. officials accelerated efforts to convince Malaysian officials to acquiesce, sources told us. In mid-November, for instance, U.S. embassy officials and representatives from the Office of the U.S Intellectual Property Enforcement Coordinator, which is part of the Office of Management and Budget, met with Malaysian health and trade ministry officials.

We asked the OMB, which is part of the White House apparatus, for comment and will pass along any reply.

Those meetings followed a session last spring between the American Malaysian Chamber of Commerce, the U.S. Chamber of Commerce’s Global Innovation Policy Center, industry representatives, and the Malaysian health ministry. This occurred about the same time that the U.S. Trade Representative, at the urging of the pharmaceutical industry, indicated plans for a special review of Malaysian patent rules.

For now, the Malaysian officials are expected to continue talks with Gilead about a licensing option, but sources explained that the government is unlikely to reach agreement unless the company is able to lower its pricing. Until then, the health ministry plans to rely on the government rights license, the sources told us.

[UPDATE: A Gilead spokeswoman later wrote us that “Malaysia is among the more than 100 developing countries eligible to receive generic versions of our regimens through voluntarily licensed manufacturers. Gilead licensed manufacturers are free to set their own prices for licensed product which is then negotiated between the licensee and the government, with no involvement from Gilead.]

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