Does it break the law to charge a lot for a cure?

In a sternly worded letter, the Attorney General of Massachusetts has threatened Gilead with legal action if it doesn’t cut the price it charges for its blockbuster Hepatitis C drugs, Sovaldi and Harvoni. But the AG’s letter making that threat is a five-page bill of particulars of Gilead’s misdeeds. It doesn’t actually say what law Gilead supposedly broke.

So what’s the AG’s legal theory? Although the letter doesn’t cite any law, its reference to Gilead’s “unfair trade practices” suggests that the AG is thinking of Ch. 93A of the Massachusetts General Laws. Chapter 93A is couched in very broad terms; it outlaws “unfair or deceptive acts or practices in the conduct of any trade or commerce.”

What are unfair trade practices, you might ask? The Massachusetts Supreme Court had this to say about it in 1979:

What is unfair is a definitional problem of long standing, which statutory draftsmen have prudently avoided. “It is impossible to frame definitions which embrace all unfair practices. There is no limit to human inventiveness in this field.” … The criteria [we have] adopted … require us in a case such as this to look for conduct which is (1) within “at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) . . . is immoral, unethical, oppressive, or unscrupulous . . .” Whether a given practice runs afoul of these touchstones must be determined from the circumstances of each case. The objectionable conduct must attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce.

That’s a really mushy legal standard. What raises an eyebrow for one person won’t raise an eyebrow for another. Chapter 93A is essentially a delegation to the courts to work out what’s “unfair” on a case-by-case basis, keeping in mind what passes for normal in the marketplace.

Is Gilead’s conduct really beyond the pale? I doubt the AG’s got case law on her side. (If she did, wouldn’t she have cited it?) In the past, the sort of conduct that’s run afoul of 93A has tended to involve sharp business practices—not high prices per se, but some sort of transactional shadiness. Gilead’s been up front about its prices and its business practices are, by pharmaceutical standards, totally conventional.

Odds are the AG knows that. Odds are she’s hoping to jawbone Gilead into cutting its prices, knowing full well her legal theory is unimpressive. If publicly shaming Gilead makes it cheaper for Massachusetts to procure Sovaldi and Harvoni for its Medicaid beneficiaries and state prisoners, that’ll be a victory for her.

What’s more, Ch. 93A’s open-ended legal standard invites judicial elaboration of what counts as unfair. I don’t think Gilead can totally rule out the possibility that the widespread disgust at staggeringly high prices for pharmaceuticals might lead the Massachusetts courts to extend the law of unfair trade practices to cover abusive pricing. The law may not give the AG much leverage, but it does give her some.

Still, there’s something about the AG’s letter that rankles. The AG is explicit that she’s targeting Gilead because Sovaldi and Harvoni are cures: “especially in a case like this one where the breakthrough drug cures,” she writes, “a balance must be struck that allows the drug to achieve its intended purpose: the effective treatment and achievable eradication of a life-threatening infectious disease.”

In other words, if the drugs didn’t work so well, Gilead would be free to price them however it wanted. But because they’re cures, it’s unfair to charge a lot for them. Talk about sending the wrong signals about what sorts of drugs we value most. As Rachel Sachs wrote in an email:

In my view, Sovaldi is a drug that shouldn’t exist given the normal financial incentives of drug companies. It’s a drug that 1) not just treats, but cures a disease that’s 2) prevalent disproportionately among people of low socioeconomic status, 3) particularly including marginalized groups like IV drug users and people in prison. I think it’s unfair that companies charge $250,000 a year for drugs that patients with rare diseases will take for the rest of their lives. But I also think it’s unfair how aggressively the media, the public, and lawmakers have gone after Gilead for their giving Sovaldi a list price of $84,000. We should be praising Gilead, a company who got its start developing HIV/AIDS drugs and has developed some of the best global access policies for its medicines of any company out there, not criticizing it. If we criticize Gilead for setting a high price for Sovaldi, we have to criticize other companies even more for not engaging in research in these fields to begin with. And I don’t see us doing that.



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