Trump administration sues Gilead Sciences over HIV prevention patents

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The Trump administration filed a lawsuit in federal district court against Gilead Sciences Inc., alleging the drugmaker has profited from taxpayer-funded research for Truvada and Descovy when the HIV drugs are used for prevention.

The U.S. Department of Health and Human Services (HHS) said Wednesday it has made multiple tries to license Gilead’s patents without success. Both drugs were first approved by the U.S. Food and Drug Administration as treatments for HIV, but HHS said that Centers for Disease Control and Prevention researchers later developed the regimen that led to the treatments’ use for pre-exposure prophylaxis (PrEP) and post-exposure prophylaxis (PEP) for HIV prevention.

Shares of Gilead GILD, -1.98%  slumped 1.9% in afternoon trading, which puts them on track to snap a five-session win streak.

The U.S. Patent and Trademark Office has granted four patents to HHS in 2015 that would allow the agency to receive royalties for those regimens. Gilead disputes the validity of the patents, saying others had considered using the drugs for prevention prior to the CDC’s trials. In a statement Thursday, Gilead said that “HHS improperly filed for patents without alerting Gilead, despite its obligation to do so, and we have openly explained the defects in the patents since becoming aware of them.”

The FDA approved Truvada for PrEP in 2012. Utilization for the therapy got off to a slow start, in part because of a lack of marketing and advertising investment. The regulator approved Descovy for a PrEP indication in October.

HHS said that “hundreds of millions of taxpayer dollars funded” the CDC’s PrEP clinical trials. “Gilead must respect the U.S. patent system, the groundbreaking work by CDC researchers, and the substantial taxpayer contributions to the development of these drugs,” HHS Secretary Alex Azar said in a statement.

U.S. sales of Truvada rose 3.4% from a year ago to $688 million in the third quarter, while Descovy’s U.S. sales fell 17% to $256 million. Like most drugmakers, Gilead doesn’t break out sales for indication.

In October, Gilead chief commercial officer Johanna Mercier said that about 224,000 people are taking Truvada for PrEP, a figure that is up 25% year-over-year, according to a FactSet transcript of an investor call.

Gilead’s stock is up 2.6% year-to-date, while the S&P 500 index GILD, -1.98%  has gained 23.3%.