Health, Law, and Access to Treatments: A conversation with Gilead Sciences Executive Vice President Gregg Alton and Professor Michelle Mello

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(Illustration by Christian Northeast)Gregg Alton, JD ’93

A firestorm has been brewing recently about treatment costs for some of the world’s most challenging diseases—HIV and chronic hepatitis C—with patient activists in some countries lobbying governments to void or block patents on the medicines developed to treat the diseases. At the same time, state Medicaid programs are placing restrictions on the drugs and tightly controlling availability.

The scope of the health challenge is enormous too. The U.S. Department of Health and Human Services estimates that 3.2 million people in the United States are living with chronic hepatitis C, a disease that attacks the liver—often causing cancer, cirrhosis, and, ultimately, death. In 2013, 20,000 deaths in this country were attributed to the disease—with rates of disability even higher. But treatment is not cheap.

At the center of this debate are the companies that make the treatments, including the Foster City-based biotech company Gilead Sciences, which has, since its founding in 1987, focused its research and development on drugs to address HIV, hepatitis C, cancer, influenza, and even dengue fever. The company’s breakthrough drugs—particularly Harvoni (FDA-approved in 2014), which actually cures hepatitis C—are expensive. Harvoni costs $95,000 for a 12-week course of treatment before discount. So, what price for a treatment?

Gilead’s executive vice president of corporate and
medical affairs, Gregg Alton, has spent the past 16 years addressing this question and negotiating for both better access to the company’s drugs and fair reimbursement from countries that can afford to pay.

Alton joined Gilead when it was still fairly small—coming on as associate general counsel in 1999 when the legal team included just two other attorneys. Six years out of law school, he took a career gamble to leave the familiar surroundings of Cooley LLP, where he had been building a health care and M&A practice.

“It was a huge risk. I took an almost fifty percent pay cut and joined a company that had no revenues and was losing money,” Alton said when he sat down with the Stanford Lawyer for the interview that follows.

Alton’s interest in health dates back to his childhood—his grandfather was a physician and he thought he’d follow in his footsteps. Alton began his UC Berkeley undergraduate studies in pre-med, but he quickly switched to law. “I did not do well with Organic Chemistry. And I think all along I really wanted to be a lawyer,” he said. “I think most lawyers go into law because they want to help people. I know I did.”

With Gilead, Alton found symmetry—a way to combine his interests in a company working on important treatments for challenging diseases.

Alton has grown with Gilead as much as it has grown with him. “It’s kind of cool to see all that we’ve built as a management team.” Alton has ridden the highs and lows of Gilead Sciences—balancing patient needs and the cost of their treatments  with shareholder responsibilities. Along the way, he has introduced true innovation to drug distribution worldwide. He led the access effort for the company’s early HIV treatments, negotiating local manufacturing and generic licensing deals to ensure distribution and competitive pricing in Asia, Africa, and Latin America. That effort established a successful model for not only Gilead but a range of companies interested in fair access to drugs for those in need.

It’s a tough job, with Alton on the road—or up in the air—most weeks, traveling to Washington, D.C., and the EU to meet with policymakers or to Brazil to negotiate an agreement for a patent license or to India to check in on a generic manufacturer. His hands are full not only with his job but with his family life—he and his wife have five children—and service commitments. He is a member of various boards including the AIDS Institute, the Boys and Girls Clubs of Oakland, the U.S. Government’s Industry Trade Advisory Committee on Intellectual Property Rights, and the advisory boards of UCSF Global Health Group and USC Schaeffer Center for Health Policy and Economics, to name a few. And he’s just hitting his stride.

“This is a fantastic job. We make products, we deliver health care—we save lives. We are curing people. We built a delivery model with HIV to get our drugs to poor people around the world. We’re doing things with hepatitis C that have never been done before. We launched in Africa less than a year after we launched in the U.S.—that’s unheard of in this industry. I feel very lucky.”

Michelle Mello (BA ’93)

Over the past year, Michelle Mello has published scholarship—in academic journals and popular media—on an array of health law topics including vaccination policy, the regulation of sugar-sweetened beverages, malpractice settlements, the retail promotion of marijuana edibles, medical liability, issues involving medical personnel who took care of Ebola patients, and the oversight of faculty-industry consulting relationships in U.S. medical schools. She is a leading empirical health law scholar who looks to the data for ways to address stark public health challenges. A member of the faculty at both Stanford Law School and Stanford School of Medicine who holds a PhD in health policy and administration as well as a JD, Mello has spent her career studying the effects of law and regulation on health care delivery and health outcomes.

She’s passionate about the field too, convinced that academic research can help to guide public policy to improve health outcomes. “When public health law is done right, it is powerful,” Mello said in an interview with Stanford Lawyer. “Our task is to really understand why leaving health-related choices purely to individuals and markets fails to produce the population health outcomes we want. And it’s our task to identify the solutions—among these, to discover whether and how smart regulatory actions and laws can help.” She points out that laws regarding restaurant and workplace smoking as well as the use of seat belts, motorcycle helmets, and rear-facing child seats on the road have gone a long way toward improving public health and safety—adding that these laws are widely accepted today though some were opposed when introduced.

Mello has published more than 140 articles, her pathbreaking investigations exploring, among other things, the politics of public health laws, the dynamics of medical malpractice litigation, the effects of medical liability reforms, and ethical and regulatory issues relating to pharmaceuticals. Her work has garnered the Alice S. Hersh New Investigator Award from AcademyHealth; a Greenwall Faculty Scholars Award in Bioethics; and a Robert Wood Johnson Foundation Investigator Award in Health Policy Research. In 2013, Mello joined a small cadre of legal scholars elected to the National Academy of Medicine (formerly known as the Institute of Medicine), one of the highest honors in the fields of health and medicine.

By Sharon Driscoll


Michelle Mello You’ve been with Gilead for 16 years—through the early launch of HIV treatments. Your job today is multifaceted, covering everything from IP lawyering to public relations. What has been the steepest learning curve?

Gregg Alton Definitely the steepest learning curve was the work that we did in the early days internationally to expand access to our HIV treatments. Everything we did was trial and error for us because there weren’t really any companies that, in our minds, were doing a good job in the critical area of HIV drug delivery. We needed to find another way to provide access to our drugs, which became my main focus. And we did find another way and I think it’s been quite successful.

Mello Can you talk about that—the access program to deliver first HIV and now hepatitis C drugs in developing countries and the issues you faced?

Alton There have been several issues. We launched our first HIV product in 2001 and between 2003 and 2006 we were able to scale up to about 30,000 patients on HIV treatment, which was a small fraction in the developing world. This was in-market, post-approval in the developing world, where somewhere in the region of 30 million people needed the drug. That was when I took over the access program.

We looked at what was standing in the way of greater access. We knew that price was one factor—our product was more expensive than some of the older products out there, but those had greater toxicities and probably worse treatment outcomes. Also, local registration was a big problem for us. We were a small company; we are still a relatively small company compared with a Merck or a Pfizer. We don’t have people on the ground in these small countries so we had a hard time working with the regulatory agencies to get our products approved. And the third factor was local awareness of our product and its benefits. Our product really is the one that is most appropriate for the developing world because it’s very easy to use, has very low toxicity and low resistance. But we needed more education about our products.

Mello How did you address those challenges?

Alton We were able to do a couple of things. Starting in 2006, first, in terms of price—and really distribution and supply—we looked at who was doing the best in this area. And the indigene, local companies were doing the best at the time. So we said, well, we can try to replicate what they’re doing or we can try to partner with them. Why not partner with them? And we sort of kicked it around and decided if we’re going to do this, we need to do it in a way that allows them to use their model.

So we actually went to India—and here’s where I used my legal skills—and we entered into a license agreement with roughly eight Indian companies allowing them to manufacture our product in India and distribute it to developing countries around the world.

Mello How did that affect price?

Alton That brought the price down from our manufacturing cost of about $17 a month to about $3.60 a month. So that was very significant.

We also looked at registration of the drug locally. The challenge of registration is that you need to be physically present in that market. For us, it didn’t and doesn’t make any sense at all to set up local affiliates in each of these countries—in terms of cost and logistics. So we came up with a program of regional partners. We work with local companies—it must be 30 different companies right now—and they will usually cover six or seven countries in a geographical area, and they are sort of the eyes and ears and brains of Gilead in that market. They do the registration work for us, they do the promo revisions for us, they do all the product support and medical education support, with our help. They sell our branded products. But when the generic products come in, that market dries up, so we support the generics too through a royalty charge, which is roughly 3 percent on the generic. And that’s been very successful too.

Mello And access?

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Gregg Alton, JD ’93, receiving the Clinton Foundation Commitment to Action award (Credit: Paul Morse / Clinton Global Initiative)

Alton Since 2006 we’re now reaching 7.6 million patients through this program. It’s been really successful, and now we’re seeing other companies following it. And it formed the base for distribution of Sovaldi, our first hepatitis C drug. We’re doing the same with Sovaldi and Harvoni and we will also do the same with our next generation of hepatitis C and HIV products. So this experiment with earlier HIV drugs became our strategy across the board—in terms of both the licensing as well as the approach. We don’t build our own infrastructure on the ground, but instead work with local companies.

Mello With that agreement for Sovaldi, my understanding is that it creates access for the lower- and middle-income countries, but there are other countries, like Brazil and Argentina, with similar incomes that can’t access the drug as part of the licensing agreement. How does Gilead think about the design of those licensing agreements—who’s in and who’s out?

Alton If you look at who’s included in the HIV and hepatitis C licenses, they are the poorest countries of the world. We look at the country’s per capita GDP or GNI because it’s the best way to figure out how much the country can afford. Then we look at disease burden. An example of that would be Thailand, which is an upper-middle income market, but it has a very high rate of HIV, so we actually included it in our license for HIV. But for hepatitis C, Thailand is not a high burden country, so we did not include it in our hepatitis C license. That’s just an example of how we’ve done it.

But in terms of Brazil, we actually just launched there. We reached a direct agreement after negotiations with the Ministry of Health and within the local NGO community of Brazil; it was quite positively received. A lot of this came from lengthy discussions with NGOs around the world, also with a lot of activists and community people. But we’re never going to please the anti-IP activists around the world; that’s not our goal. Our goal is to provide access, so we negotiate directly with countries. So this is what I spend a lot of time doing.

Mello The U.S. is pretty unique in not imposing direct price controls on drugs and there’s pressure to conform to our European counterparts. What do you think would happen in the U.S. if we implemented that?

Alton First of all, I think the phrase price controls is a
little bit misleading, because the Europeans don’t have price controls—they negotiate prices.

Mello But they are the only buyer, in fact.

Alton They are the only buyer. But it’s not based on price controls. They look at value—what they’re getting for their money—and then they say this is what we think the value is. Now the U.S. is one of the most unusual countries, because you do negotiate but you don’t negotiate with one party, which presents certain challenges.

In the U.S., if there were a big single entity to negotiate with, it would be the Centers for Medicaid and Medicare Services (CMS). Within CMS, you have Medicare and Medicaid. We come along, we set a WAC price—a wholesale acquisition cost—which is basically the highest price you can charge, and then negotiate discounts from there. Medicaid gets an automatic discount, plus we negotiate additional voluntary discounts. The Medicaid price of Sovaldi/Harvoni is one of the lowest prices in the developed world, by far—including other countries from around the world. Southern European countries have equivalent pricing. The Medicare price also has heavy discounts, but not as much.

Mello So it’s about legal authority.

Alton Yes, it’s the legal authority because in the U.S. there are two different bodies: Medicare and Medicaid. In the EU there is one group, a group that—yes—has more pricing leverage, but can also make smarter decisions in terms of treating the patients at the right time. Wouldn’t it make more sense for CMS to treat all the patients on Medicaid, before they go to Medicare? You would get a lower price because it has the biggest discounts and, also, if you treat people earlier, you have to use only two bottles instead of three bottles. That would make perfect sense. But here we have a group that doesn’t have the authority to do that. It can’t do that, even though it would save our health system a tremendous amount of money—but the Europeans do it.

Mello Well, they have different incentives. Our system of care is so fragmented that many payers know they’re passing along a future set of problems to a future payer.

Alton And who’s the big payer that’s going to be bearing much of the cost of not treating? Medicare. The taxpayers.

Mello There is pressure on the Obama administration to standardize Medicaid state policies around this new generation of hepatitis C drugs. A lot of the state policies, it would seem, are not particularly evidence based. As a general proposition, how much latitude do you think state Medicaid systems should have to decide which drugs are covered and for which patients?

Alton I think that states should have some latitude—as do the private plans. The private plans exclude drugs from their plans as well. But I think in a particular class—whether it’s our drug or another drug—they should be buying the more effective drug for patients. HIV is now a protected class within Medicaid and the state systems. Hepatitis C should be too. Look, we can now cure
hepatitis C patients. But it comes down to funding and the states need to fund it.

Perception also plays into this. If this were any other disease—cancer or Alzheimer’s—there’d be no question that they’d be covering this.

Mello Because the population that gets hepatitis C sometimes falls into a class that is disfavored, like IV drug users, people in the correctional system … ?

Alton I think people do look at hepatitis C as something that’s different from cancer, for example, which elicits more sympathy. That is the challenge we face, particularly in the Medicaid population.

Mello In the 16 years that you have been on the job, have you observed changes with the company or the industry about how ethical obligations to ensure access are viewed?

Alton At Gilead, no, because we’ve had the same leadership and the same commitment to access. John Martin was the CEO when I came to Gilead and he’s very committed to this. He’s the one who said, after Viread was launched, “You’ve gotta figure out how to get this into
Africa.” In terms of what we’re doing in the U.S., historically there’s been a wait list for ADAPs—the AIDS drug assistance programs. But we’ve provided free drugs for ADAP patients, and we’ve got a patient-assistance program for others. In the U.S. right now, if you’re uninsured, we actually provide free drugs—we’ve always been that way. We do the same with our hepatitis C treatments.

I think there’s more visibility on this issue today. Obamacare raised awareness about people who don’t have good access to health care. But we work in a disease area that is different. HIV has always been looked at differently and I don’t think there’s been a lot of sympathy for it. But if you look at it globally, I don’t think there’s any other area that has such progressive policies in terms of what the industry does to provide access to HIV drugs. And we’ve helped to develop that access.

Mello A big part of your job involves policy work. Can you tell us about the types of policy issues you work on in Washington?

Alton It’s varied. It can be IP issues, working with USTR (U.S. Trade Representative) and others on helping them understand what we’re doing, particularly in terms of access to our drugs, explaining our programs that help to provide access. A big area for us is HIV, so I spend a lot of time on the Ryan White CARE (Comprehensive AIDS Resources Emergency) Act, which must get reauthorized or re-appropriated every few years. We try to make sure that money from that act goes where it is needed the most. And need has changed. In the past, most funding went to places like New York, L.A., and San Francisco. But the HIV epidemic has really moved into the South and the funding hasn’t followed. So we spend a lot of time in Washington, D.C., educating the policymakers—sharing what we’ve learned as makers of important HIV drugs. If you look at the epidemiology of HIV, it has changed a lot but how we fund care and how we fund outreach hasn’t kept up.

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Professor Michelle Mello (BA ’93) (Photo by Jennifer Paschal)

Mello The pharmaceutical industry is often criticized for devoting itself to the production of so-called “me too” drugs that offer little or no incremental improvement over existing therapies. But Gilead, in developing Sovaldi and its follow-on drugs, has made a true breakthrough—a drug that cures hepatitis C at astonishing rates, with a mucbetter safety profile and a much shorter duration of treatment for patients than previously available therapies. How important is it to produce breakthrough medications to maintain a system in which drug companies can charge what the market will bear?

Alton I think it’s very important. You can look at hepatitis C as a holy grail of sorts for our industry. We’ve been working on hepatitis C since the mid-90s. We actually did a study with a consulting group on this: We found that there have been hundreds of molecules studied—I think tens of billions of dollars invested in this area by the industry over the last 10 to 15 years, largely because there’s an expectation that if you come up with a real breakthrough product, that you’d get a big reward for it. That’s why people invest. Otherwise, they’re not going to invest. And if it was a disease area that didn’t have that expectation, I don’t think you would’ve seen that investment.

The irony here is that people have been focusing on the price of Sovaldi and, for HIV, Stribild, but we’ve been very fair. The price that we charge for a cure of hepatitis C today is less than the old less effective and toxic regimens of the past.

I think it does send a really negative message that if you do come up with something that truly solves a medical need that before was not addressable, you’re going to have all this pressure and negativity. We need these drugs and the research that leads to them.

Mello Let’s talk about the global patent system. It is supposed to serve two goals: encouraging innovation and providing reasonable limits on monopoly rights to ensure long-term access to innovations. How well is it working in your view?

Alton I think it works well in encouraging innovation where there is a commercial market and there are good IP protections, so in the U.S. and Europe and Japan, to a degree. But IP in the rest of the world is pretty poor. And I do think that has a negative impact on investment in developing drugs for those markets, because there is a very low assurance of having intellectual property protection, which means that there’s also low assurance that there’s any reimbursement.

Mello For drugs to target diseases in countries where there isn’t a robust market as in Europe and the United States, does the presence or absence of patent protection make a difference to drug companies, or would these be markets that would be unappealing anyway?

Alton The experiment can’t be done right now because the view of our industry is largely that you don’t get good patent enforcement outside of the U.S. and Europe.

But I think that it’s changing—a lot of countries are developing and they see that intellectual property will help their industries and economies and their citizens. There’s an understanding that, in the area of medicine, a lack of proper IP protections may actually deny access to medicines.

This is one reason that we spend a lot of time in Washington, D.C., explaining the access model we developed for HIV and hepatitis C: high-volume, low-margin business in these developing markets, supported by intellectual property. And that could be the answer. If we look at diseases—tuberculosis or malaria or dengue fever—if you could come up with a model for some profit in these markets, using a small royalty on a generic, people might invest more than they do currently. We’ve made a tremendous amount of investment and we’ve continued investing our money in those areas, both in terms of treatment and in terms of cures.

Mello Can you talk about how well you think the system we have for new drug approvals in the U.S. is working for companies like Gilead?

Alton It works well for us. The FDA gets a lot of criticism, both from the industry and by Congress and others. But I actually think it does a very good job. And it’s a tough job. The FDA has the role of protecting people from unsafe drugs, but it also has a role of ensuring that the drugs that are going to help people get out there with the right data and with the right support. In Europe, there is the co-rapporteur system and it works pretty well. So I don’t have any complaints. I think there are people who want it to go faster or easier, but it’s a delicate balance.

Mello There is a lot of interest, both in Congress and at the FDA, in going faster and new pathways have been created for accelerated approval, such as requiring fewer clinical trials before approval and permitting smaller trials using surrogate endpoints. How do you feel about that approach, which trades off some degree of certainty about the safety and efficacy of drugs to achieve greater rapidity of approval?

Alton We have to break it into pieces. There’s the clinical data that you would have to require to approve a product and, actually, in this area the FDA has been pretty good. With some diseases—HIV for example, because that’s what I know best—the trials were very short, very small, and the review time was very quick. But as more products have gone on the market, and the unmet need has been reduced, it has taken longer. We expect to have our next generation HIV product this fall, and the trial for it was the longest HIV trial ever—with the longest duration and most patients. The FDA is demanding a longer review time and more data. But I think that makes sense. And if you look at cancer and other areas, where there’s really nothing for a patient, the FDA will expedite the process. I think it’s always done that.

Mello If you could change one thing about the U.S. legal regulatory system as it affects pharmaceutical companies, what would it be?

Alton This is a personal view that I have, so not Gilead’s point of view. I think we should have, within our government, a way to evaluate the value of what we’re spending our health care dollars on. And not just for drugs but for everything we spend on our health care. There’s a lot of focus on Sovaldi and Harvoni now, but those are just the last drugs in.

To do this well, you need to do a soup to nuts review of everything we’re spending money on and ask: Does it make sense? Is this the right place for those dollars? And it shouldn’t solely be about saving money but about using the money to ensure the best health care outcomes. There has been a lot of talk about the PSA testing, pet scans, and a lot of talk about the cost of cancer drugs. Well, shouldn’t we do a review of the relative value of all these things that we’re spending money on?

Mello There’s this much broader and more central challenge in health care, presented by the stunning advance of medical technologies that hold so much clinical promise, but also compound cost pressure in our system. How do you think about the way forward to resolving that type of central challenge?

Alton Well, I think one way forward is to rationalize how we spend our money.

Taking hepatitis C as an example, about three years ago the amount of money we were using to treat hepatitis C was very low because we really didn’t have anything to treat it with. The interferon regimen that was available was just too toxic for most patients, whether they were ineligible or otherwise. And it didn’t work well. Part of the cost equation is what the cost would be 10 or 15 years from now, when, without effective treatment, you have more liver cancer and cirrhosis. But let’s put that aside. Drugs like Sovaldi and Harvoni come along and suddenly we have the opportunity to cure patients—a lot of patients. We’ve already cured 130,000 patients this year, 140,000 patients last year, roughly 10 percent of the affected population. We’re curing a lot of people, but it’s a new cost. However, when you have a new cost like that, you have a choice. You either spend more money, in terms of your health care dollars, so you have to raise taxes to get that money, or you have to stop paying for something that you were paying for before.

How do you make those decisions? Is someone looking at the big picture of money saved on end-care treatment for an untreated disease and balancing that against the new cost of a new drug that is curing the disease? We’re not set up to do that analysis and to make those decisions.

Mello That seems right. So, what would you suggest?

Alton I don’t think it’s either-or. I do think that there’s a lot of waste in our health care system and just looking at the new treatments to target and critique for cost doesn’t make sense. Let’s just be neutral and impartial here: This new drug could be really cost-effective and the best use of dollars or it could be a terrible use of dollars. But before making that decision, let’s really look at what we already spend money on. We’re not doing that analysis.

Mello Do you think there needs to be a more explicit process of comparing cost effectiveness?

Alton That’s what a business would do and that’s what a family would do—they would budget for the new expenditure, finding money to cut elsewhere or raising new money. But there would be a process to go through. I’m not sure we do that in our government. I think we just layer new costs onto new costs, without really examining anything, which is why we have a growing health care budget. And it’s going to keep growing as we have more innovation.

Mello Thank you so much Gregg. It was a pleasure speaking with you.

Alton Thank you.