By Pat Beall / Palm Beach Post
Posted Sep 28, 2018 at 1:49 PMUpdated Sep 28, 2018 at 1:49 PM
  
Gov. Rick Scott says he has nothing to do with it: His holdings were put in a blind trust shortly after his election, specifically to avoid potential conflicts of interest.
Gov. Rick Scott and his wife Ann have drawn profits of at least $250,000 — and as much as $2.1 million — from a drug company whose sky-high prices are draining state Medicaid coffers.
Florida Medicaid, the perennially cash-strapped health program for Florida’s poorest and sickest residents, has paid as much as $770 million for Gilead Sciences drugs since 2013, a Palm Beach Post analysis shows. That bill includes Gilead’s $1,000-a-pill cure for the liver-destroying hepatitis C virus, a cost that generated congressional scrutiny and forced Florida Medicaid to ration life-saving treatment.
And when other Medicaid programs across the nation collectively slowed purchases of Gilead’s expensive drug in 2017 in favor of cheaper drugs from other manufacturers, Florida did the opposite.
After splitting its spending among various manufacturers in 2016, Florida Medicaid went all in on Gilead, with 83 percent of its hepatitis C payments in 2017 going to the company in the stock portfolio of the governor and his wife, The Palm Beach Post found.
State officials defend Gilead spending, saying they don’t control what drugs doctors prescribe for their Medicaid patients. And Scott says he has nothing to do with it: His holdings were put in a blind trust shortly after his election, specifically to avoid potential conflicts of interest.
“Governor Scott has never made a single decision as governor with any thought or consideration of his personal finances,” said spokeswoman Lauren Schenone, the same statement the Scott campaign made last week after a GateHouse News report of his holdings in a different company, Anworth Mortgage Asset Corp.
“The rules of the blind trust prevent any specific assets or the value of those assets within the trust from being disclosed to the governor, and those requirements have always been followed.”
Exactly how much Florida Medicaid has paid Gilead for its hepatitis C and HIV drugs is literally a state secret: Beyond a federally required 23 percent rebate, additional cost breaks are exempt from state and federal public records laws.
But pre-rebate charges for all Gilead drugs totaled more than $1 billion in the four years from 2013 to 2017, the newspaper’s analysis of federal Medicaid data found.
Scott’s blind trust is the subject of an ongoing legal challenge that argues the trust and its secrecy violates state financial-disclosure law.
In July, the Sarasota Herald-Tribune disclosed that Scott was making money in Gilead holdings even as three prison inmates sued the state over its failure to treat at least 20,000 prison inmates with hepatitis C. A judge ordered the Department of Corrections to pony up $21.7 million for their care. One of the three inmates, Carl Hoffer, has died.
Policy and profit
Even absent controversy over drug prices, the governor’s Gilead shares fuel an ongoing question that has dogged the multimillionaire Republican: Has his family fortune profited from his policy decisions?
Take needle exchanges. By providing addicts clean needles, they stall the spread of blood-borne hepatitis C and HIV, and the need for expensive drugs to treat them. It’s why, as governor of Indiana in 2015, Vice President Mike Pence greenlighted needle exchanges.
Despite Florida’s soaring rates of hepatitis C and HIV, however, Tallahassee has rebuffed efforts to legalize needle exchanges. Scott signed into law a pilot needle exchange program two years ago, but his sweeping opioid legislation this year makes no mention of needle exchanges, and Scott has remained silent on the issue.
“Scott as governor has the ability to influence policies that impact the bottom line of Gilead,” said Craig Holman, lobbyist on campaign finance and governmental ethics for the Washington-based advocacy group Public Citizen.
“Even if Rick Scott is not deliberately manipulating policy to line his own pockets, the fact that (policy) is lining his pockets provides the appearance of a conflict of interest,” he said.
“This may be perfectly legal, but it shouldn’t be.”
How much Scott owns
In 2013, Scott reported owning shares of Gilead valued at $1.1 million, according to state financial disclosure filings.
The stock, and its hefty profits, show up again in federal disclosures recently filed as part of the governor’s U.S. Senate bid. Specific amounts aren’t required to be reported, just a range. For the Scotts’ Gilead investments, that range starts at six figures.
Gilead shares generated between $100,001 and $1 million in dividends and capital gains for Rick Scott as part of his blind trust. A separate trust for Ann Scott generated between $100,001 and $1 million in dividends and capital gains. The couple’s limited partnership garnered between $50,001 and $100,000 in profits.
Some stock has been sold. However, Ann Scott’s general trust and Rick Scott’s IRA still hold Gilead shares valued at between $65,000 and $150,000, the disclosures show.
Scott would have been unaware of any of these Gilead holdings, said Schenone.
“The governor does not have knowledge of, or control over, any of the entities you listed,” she said.
The retirement account is managed by a financial adviser. Ann Scott’s trust and the couple’s limited partnership are under Ann Scott’s control, and, said Schenone, “The governor does not discuss the first lady’s investments with her or her financial advisers.”
The Scotts’ health stock holdings “should be coming as no surprise to anyone,” said Bob Jarvis, a Nova Southeastern University law professor and expert on ethics.
With Scott coming from the chief executive post at the HCA hospital chain, and as founder of a chain of clinics, Jarvis said, “Everyone knew and knows that a big piece of his millions came from health care. How could it be any different?”
Cure for killer disease
Still, Gilead is not a run-of-the mill health stock. It earned its 2013 status as a Wall Street darling on the basis of revenues from hepatitis C treatment, and those revenues prompted insurers, including Medicaid, to ration the company’s breakthrough hepatitis C cure.
The virus kills, and not quickly. It can take a decade or more for symptoms to appear, meaning people can unknowingly infect others for years. Untreated, it leads to scarring of the liver, cirrhosis and cancer. It’s the primary cause of liver transplants in the United States.
Pushed by the surge in heroin use triggered by decade-old state drug policy, Florida was already experiencing a deluge of hepatitis C cases as growing numbers of young adults were caught up in opioid addiction. Florida’s hospitals reported 64,000 cases involving a hepatitis C diagnosis in the year leading up to the release of Gilead’s new drug. Yet there was no safe way to treat the disease, much less cure it.
That’s because before Gilead introduced Sovaldi, hepatitis C treatment consisted of a brutal, lengthy regimen of multiple drugs, which in itself could be fatal.
“The combination (of drugs) was horrifying,” said Dr. David Becker, a Clearwater gastroenterologist who treats hepatitis C. “You were essentially torturing people for months at a time, sometimes a year, and it had only a 50 percent cure rate.”
Gilead changed everything. A true breakthrough, Sovaldi was a once-daily pill which frequently needed to be taken only for 12 weeks. It did not have the same side effects. And the cure rate was above 90 percent.
There was nothing else like it.
The drug company could price its pill at whatever number the market would bear.
Gilead pegged that number at $84,000 for 12 weeks of treatment: $1,000 a pill before any rebates. Because Sovaldi was typically taken with at least one other drug, full costs easily could top $100,000.
A year later, Gilead released Harvoni, a more advanced cure with its own sticker shock: $94,500 for 12 weeks of treatment.
“They were sitting on the monopoly,” said Matt Salo, executive director of the National Association of Medicaid Directors. Gilead, he said, “didn’t have to come to the table” with lower prices.
Coverage for all
Faced with the inability to buy drugs for everyone infected with the virus, Florida Medicaid started sharply restricting who could get them. The disease would have to severely scar the liver, a first step toward painful and deadly liver failure, before patients could get treatment.
As a result, for roughly 2½ years beginning in early 2014, an unknown number of Florida Medicaid patients were left to suffer through the early stages of untreated, and in some cases permanent, liver damage.
Vickie Goldstein and her lawyers put a halt to that.
Weighing just 100 pounds and with liver scarring, the Delray Beach woman threatened legal action to get a cure. In mid-2016, Medicaid rationing stopped.
Goldstein was given a new, “cheaper” hepatitis C drug from a competing manufacturer; one that cost $83,000.
By then, the same high price barring access to patients had propelled Gilead’s stock price through the roof.
According to Rick Scott’s 2013 state financial disclosure, the governor owned Gilead shares valued at $1.1 million on Dec. 31, the same month Gilead introduced Sovaldi. That figure roughly translated to 15,000 shares.
Less than a year later, in 2014, the value of 15,000 shares would have increased by nearly $600,000.
During that time, Florida Medicaid’s pre-rebate outlay for Sovaldi topped $61 million.
In the last 12 weeks of the year, when Harvoni was first sold, Florida shelled out another $1.2 million on Harvoni.
It was enough for 39 prescriptions.
An unexpected surge
Other companies began bringing similar hepatitis C drugs to market, some at lower prices. Merck & Co.’s Zepatier, introduced in 2016, was priced at $54,600 for 12 weeks. AbbVie’s Mavyret, introduced in 2017, cost $26,400 for eight weeks of treatment.
Florida bought in. After nearly monopolizing Florida Medicaid hepatitis C spending in 2014 and 2015, Gilead split the market with competitors in 2016. Before rebates, the $64 million Medicaid paid for all Gilead hepatitis C drugs was only slightly higher than the $58 million paid to all other manufacturers.
The next year, though, as other states’ Medicaid programs started spending less on Gilead drugs, Florida started spending much more:
Florida prescriptions and payments to Gilead shot up by more than 69 percent, with pre-rebate costs topping $109 million. Prescriptions and payments to other drug makers dropped by more than 61 percent, with pre-rebate costs dropping to $21.4 million.
In Florida, Gilead drugs accounted for 8 of every 10 hepatitis C prescriptions in 2017, a double-digit increase. In the country’s other Medicaid programs, Gilead drugs collectively made up roughly 6 of every 10 hepatitis C prescriptions that same year — a decrease.
Nationally, pre-rebate treatment costs dropped by a collective 20 percent. In Florida, though, overall Medicaid costs for hepatitis C treatment grew by 6 percent
In another populous state, California, Medicaid hepatitis C costs dropped in part because “the cost of hepatitis C medications has decreased,” said a spokesman for the state’s Department of Health Care Services.
Similarly, payments for hepatitis C drugs in New York’s Medicaid program dropped by 33 percent from 2016 to 2017, “mostly related to moving of market share to newer, lower cost products like Mavyret,” said Jill Montag, spokeswoman for New York’s Department of Health.
In Texas, the number of Gilead prescriptions rose. But Gilead drugs accounted for only about 54 percent of all hepatitis C prescriptions in Texas, compared to Florida’s 83 percent.
Doctors in the driver’s seat
AHCA could offer no explanation for Florida’s surge in Gilead prescriptions, and particularly Harvoni, which almost doubled here. At the same time in the rest of the country, Harvoni prescriptions, and sales, collectively dropped by almost half.
The process for picking which drugs are preferred by Medicaid, and how easily doctors can prescribe them, isn’t directly political. That doesn’t mean it is devoid of politics. Governor-appointed panels make decisions about Medicaid drugs. Lawmakers vote on Medicaid budgets and policy.
However, in a written statement, Mallory McManus, AHCA’s communications director, pointed out that doctors and patients are making prescription choices, not Tallahassee.
“Any uptick in prescribing one Hepatitis C drug over others would therefore be based on the best judgment of a treating physician and/or a patient.” she said.
Further, different drugs offer different advantages to patients.
Epclusa was the first to treat all six versions of hepatitis C, McManus said. Zepatier was marketed to patients who were on dialysis. Harvoni could be used with some patients for eight weeks instead of the usual 12.
And in 2017, two Gilead drugs were approved by the FDA to treat adolescent patients, opening that market exclusively to Gilead.
AHCA could offer no explanation as to why doctors in Florida, but not the rest of the country, started writing unexpectedly large numbers of prescriptions for Harvoni, Gilead’s older, more expensive drug.
However, why doctors prescribe Harvoni and Sovaldi, as well as other Gilead drugs, is under investigation, although not in Florida.
Gilead paid $5 million to 293 doctors and health care providers in 46 states in 2014 to promote Sovaldi and Harvoni as part of a speaker’s program, congressional records show. The U.S. attorney for the Southern District of New York has subpoenaed information about that program.
U.S attorneys in Pennsylvania and Massachusetts have requested documents tied to marketing or co-pays, as has the California Department of Insurance. The U.S. Department of Health and Human Services requested information on a Gilead nonprofit organization that has worked to make screening for hepatitis C and HIV routine.
Gilead has stated in SEC filings that it is cooperating with the requests.
Politics and policy
Marketing hepatitis C drugs in Florida was to be expected. In 2016, Florida was one of eight states accounting for more than half of all acute hepatitis C cases in the country. The same year, the largest reported number of chronic hepatitis C cases was also in Florida; 17,724, more than one of every 10 cases in the nation.
For years, the largest group of people with the virus were aging baby boomers, many of whom contracted the disease from blood transfusions.
But injected drugs are now propelling hepatitis C growth, and the number of young people with the illness is growing hand-in-hand with the opioid epidemic.
In the 24 months after Florida’s crackdown on pills ignited the upsurge in heroin use in Florida and across half the country, people in their 20s accounted for nearly half of all Florida hospital emergency room visits for heroin overdoses.
That’s also when people in their 20s became the fastest-growing group of hepatitis C cases treated in those same hospitals, a Palm Beach Post analysis of the Florida Agency for Health Care Administration’s limited data set showed.
Syringe exchanges are about more than clean needles. They offer treatment counseling. They screen for and treat HIV and hepatitis C, letting users know they are sick — and at risk of spreading the deadly viruses to friends and family.
In fact, the Florida Drug Policy Advisory Council’s 2017 report called for legalizing needle exchanges. Among other benefits, the report pointed out, “every dollar spent on syringe services programs saves at least three dollars in treatment costs averted.”
The failure to create such programs and reduce that risk, says the National Institute on Drug Abuse, “is irresponsible from a public health perspective.”
Beyond a single pilot program in Miami-Dade County, needle exchanges remain illegal here. Florida’s Legislature has rebuffed efforts to expand them.
While Scott signed off on the Miami-Dade pilot, he has remained silent on needle exchanges, even as he successfully shepherded a $65 million bill tackling opioids into law this year.
Given his health care background, “You would expect Scott to be much more in tune and take a leadership role” on the issue, said Jarvis.
The policy, and the Gilead shares, are the latest in a series of controversies over Scott investments bubbling up as part of his Senate bid, including holdings linked to a plastics firm, the parent company of a high-speed rail line and businesses opposed to climate change.
Should Scott win, the same stock questions may go to Washington with him: Two senators have introduced legislation that would either bar members of Congress from buying and selling stocks, or require them to put individual stocks in government-managed investment accounts.