An ongoing patent infringement battle between Merck and Gilead over the latter’s hepatitis C blockbusters, Harvoni and Sovaldi, has swung back in Merck’s favor. A federal jury in Wilmington, Delaware, yesterday rejected Gilead’s claim that Merck’s patent, issued in 2009, is invalid and ordered Gilead to pay Merck $2.54 billion—the equivalent of 10% royalties on Harvoni and Sovaldi.
It was the largest verdict in a patent-infringement case in U.S. history, according to Bloomberg, and it came just four months after a different court ruled against Merck in a separate patent battle involving Gilead’s hep C crown jewels. In that case, Merck initially won but U.S. District Judge Beth Labson Freeman ruled that a Merck scientist gave false testimony about the early discoveries that resulted in Harvoni and Sovaldi. Merck was ordered to pay back a $200 million award it had received and $200 million in legal fees in that case, which it is appealing.
A Gilead spokeswoman told Reuters the company would appeal the verdict.
It’s no surprise Harvoni and Sovaldi are at the center of a massive patent battle. The two drugs, which effectively wipe out what was once an incurable virus for most patients, hauled in almost $20 billion in sales for Gilead in 2015. Merck’s Harvoni competitor Zepatier was approved in January this year and has brought in $326 million so far. Merck’s hepatitis C franchise also includes compounds from its 2014 acquisition of Idenix, which originally brought the lawsuit against Gilead.
“All of the Gilead work comes after ours. Our patent was first,” said Merck’s lawyer, Stephanie Parker, during closing arguments in the Delaware trial, according to Bloomberg. “The Gilead story starts years later.”
But hepatitis C is far from a guaranteed long-term market opportunity. The U.S. market is waning quickly, largely because so many patients have been cured. In September, Leerink Partners predicted that Gilead’s sales on Harvoni, Sovaldi and its third hep C drug, Epclusa, would be just $2.5 billion a year after 2017, and that they would fall to $1.7 billion by 2020. It’s enough to prompt some investors to demand that Gilead look for a merger or acquisition opportunity to prop up its top line.
It didn’t help that Gilead had to offer payers steep discounts to get Sovaldi and Harvoni on drug formularies. According to a September report from the IMS Institute for Healthcare Informatics, Harvoni debuted at $94,500, but it’s net price was only $50,400.
This latest ruling in Merck’s favor could give the company a chance to participate in the Sovaldi/Harvoni heyday, albeit a bit late. In a statement, Merck said that the jury award reflects damages for infringement of Idenix’s patent through August 2016. The judge could triple that, the company says, because the jury ruled the infringement to be willful. "The jury's verdict upholds patent protections that are essential to the development of new medical treatments," Merck said in the statement.