VA Reviewing Rights to 'Miracle' - and Profitable - Hepatitis Drug

The Veterans Affairs Department is attempting to learn if it has a financial right to a Hepatitis C drug it says was developed under the leadership of a former agency senior scientist.

Pressed by lawmakers in Congress, department officials are also trying to find out if the former scientist with the VA Medical Center in Atlanta unfairly benefited from his work there by developing the drug with agency resources and then sold it and his company in 2011 for $11 billion.

"We are going to make sure that we get to the bottom o of this with all the fact with the external reviews we set in place and the internal reviews," VA Under Secretary for Health Dr. David Shulkin told the House Veterans Affairs Committee Chairman on Wednesday.

Committee Chairman Rep. Jeff Miller, a Republican from Florida, last week accused the company that now owns the drug -- Gilead Sciences of California -- of price gouging the country.

During Wednesday's hearing, however, Miller and other lawmakers focused on Dr. Raymond Schinazi, the recently retired senior VA scientist in Atlanta who they believe discovered the drug and possibly failed to go through the proper steps to ensure the department could assert a financial interest in its commercial sale.

"If, in fact, it is found that it was a [VA] employee that did, in fact, discover the drug … I think it's important that this committee … really try to get to the bottom of it," Miller said.

Schinazi worked for the VA part time for 33 years before retiring on Feb. 1. He also works for Emory University in Georgia and has owned several companies.

In late 2011, he sold Pharmasset -- a family business -- to Gilead Science for $11 billion. When the sale went though he made more than $440 million. That was on top of the $45 million he earned the previous April when his shares of Pharmasset climbed by 38 percent in a single week, Forbes magazine reported at the time.

In an email to Military.com on Wednesday, Schinazi said all his work with the drug occurred at Pharmasset.

"To the best of my knowledge the VA had no role" in its development, he said. "In fact, I did not even have any chemistry labs and chemical staff [at VA] to make the drug during that time period." He also said he told VA, along with Emory, about his stake in Pharmasset.

Schinazi was not at the hearing on Wednesday, and Miller and other lawmakers noted the scientist put in for retirement on Jan. 21, the same day that Miller requested VA to have Schinazi, Shulkin and other VA officials to attend the hearing.

His retirement became effective on Feb. 1, two days ago, and some lawmakers believe Schinazi retired abruptly to be out of the VA before the hearing -- an allegation Schinazi denied to Military.com.

"I never received the letter or was asked by the VA to attend this meeting," he wrote in the email. "I decided to retire from the VA well before all this. My labs are now based at Emory University and I am now 65 years old."

He added, "If I was invited to DC I would have attended and participated even as a non-VA employee. I can always defend my reputation well."

Shulkin called the drug, alternately called Sofosbuvir and Solvaldi, "truly a miraculous new drug" for treating Hepatitis C, which afflicts thousands of veterans, especially those who served in Vietnam.

By law, the VA has the right to assert a financial interest in science and technology developed by its employees and using VA resources and funding. When it does, commercial sales of a product or medicine put money back into the VA budget.

The Hepatitis C drug is estimated to be worth billions annually on the commercial market.

At the same time, the VA is currently paying an estimated $40,000 for an eight or nine week course of the drug for veterans, even though in other counties, including Egypt, the same treatment cost about $900.

--Bryant Jordan can be reached at bryant.jordan@military.com. Follow him on Twitter at @bryantjordan.