What Do Gilead And Martin Shkreli Have In Common?

Summary

The U.S. Attorney for Massachusetts issued Gilead a subpoena pursuant to donations to charities that help patients pay for drugs.
Former Turing CEO, Martin Shkreli, partnered with a copay charity to help patients afford Daraprim after hiking prices 5,000 percent.
Medicare prohibits drug makers from helping patients afford their copays.
The investigation could result in a ban on donations to copay charities, a decline in Gilead's customer retention and/or a fall in revenue.

Turing Pharmaceuticals Former CEO Martin Shkreli

Gilead (NASDAQ:GILD), along with Jazz Pharmaceuticals (NASDAQ:JAZZ) and Biogen (NASDAQ:BIIB), have received subpoenas pursuant to their use of charities to help patients pay for their drugs:

Gilead Sciences Inc., Biogen Inc. and Jazz Pharmaceuticals Plc said they've received subpoenas this year for documents related to such nonprofits ... Two companies, Gilead and Jazz, said their subpoenas came from the U.S. Attorney for the District of Massachusetts. The filings didn't disclose names of specific charities.
The new subpoenas follow an October disclosure from Valeant Pharmaceuticals International Inc. that it received subpoenas from U.S. Attorney's offices in Massachusetts and the Southern District of New York, seeking materials related to Valeant's patient-assistance programs.

The drug makers' responses to the subpoenas have not been divulged. However, the investigation could potentially impact their images and their bottom lines.

The Situation

Drug makers have donated billions to charities that help patients with their drug costs. Such donations provide excellent public relations amid an environment where drug costs are soaring. Copays offered by charities allow customers to forego having to seek lower-priced medicines. Given soaring drug costs, a patient's copay could still be $10,000 to $20,000.