Gilead Sciences has a knack for putting itself at the center of the drug pricing debate.
The company drew public ire when it priced the hepatitis C drug Sovaldi at $84,000 after buying its developer for $11 billion. Last week, it agreed to pay $11.9 billion for Kite Pharma, whose non-Hodgkin lymphoma treatment will sport a price tag above $500,000.
Don't let the wow factors behind this new drug—personalized medicine, a one-time treatment course, potentially curative—mask what's actually driving its price. It's Wall Street, not the cost of developing the drug or its medical value.
Since its creation in 2012, Kite Pharma spent just $304.3 million in developing CAR-T (chimeric antigen receptor T-cell) therapies, which work by genetically modifying a cancer patient's immune cells to fight a specific cancer. The company was formed by Dr. Arie Belldegrun, a former National Cancer Institute employee, who will clear $600 million in the deal. He licensed two of the four key technologies behind the new drug from the National Institutes of Health or NIH-funded institutions, and signed a cooperative research and development agreement with NIH-funded scientists to conduct the clinical trials.
Gilead/Kite will recoup its R&D investment after treating just 600 non-Hodgkin lymphoma patients (about 20,000 terminally ill patients will be eligible for treatment each year). Insurers, health systems and taxpayers (who already funded the research) will continue paying the return on Gilead's $11.9 billion investment until the last government-funded patent runs out in 2027.