Two weeks ago, the world learned that remdesivir, a treatment from Gilead Sciences, has a moderate but much-needed benefit for patients with Covid-19. In the days since, public health experts, economists, and industry watchdogs have been mulling the next big question: How much should it cost?
Gilead has time and again downplayed the commercial potential of remdesivir, promising to ensure patients around the world will have access to it and taking steps to make sure that’s the case. But the company isn’t running a charity, meaning it will eventually charge some amount of money for the medicine.
STAT spoke with leading thinkers on drug pricing to get their views on what constitutes a fair price, how much of a reward Gilead deserves, and what the price of remdesivir means for the future of treatments for Covid-19. Here’s what they said.
$12.50: It should cost less than a movie ticket
Paul Fehlner, a former global head of intellectual property at Novartis who now runs a startup called ReVision Therapeutics that’s devoted to repurposing medicines, believes Gilead should set profits aside for as long as the novel coronavirus remains an uncontrolled problem. That means remdesivir should be priced “at the cost of manufacturing plus a reasonable margin, say 25%,” Fehlner wrote in an email.
Gilead hasn’t disclosed how much it costs to make remdesivir, although a recent study in the Journal of Virus Eradication suggested it is 93 cents for a day’s supply. Based on that analysis, the nonprofit Institute for Clinical and Economic Review estimates the cost is roughly $10 for a 10-day course of therapy. If ICER’s numbers are correct, Fehlner would have Gilead charge about $12.50 per patient.
But that’s only if governments meet Gilead halfway, Fehlner said. In exchange for Gilead taking a low margin, the payers of the world would need to commit to buying enough remdesivir to cover at least half of what they expect to use, and they would have to pay Gilead in a lump sum. Once remdesivir is no longer needed for pandemic response, Gilead should be free to price it using the normal calculations of market potential, benefit to the health system, and exclusivity, he said.
David Mitchell, founder of the advocacy group Patients for Affordable Drugs, said Gilead is entitled to make a profit on remdesivir, but only under two conditions: The company has to disclose, in detail, how much money it has spent developing and manufacturing the drug, and it has to price it at a margin less than 50% above the cost of production.
“For us and for me, transparency is the issue here,” Mitchell said in an interview. “It’s the key to pricing, and it’s the key to rebuilding trust in the industry and in Gilead.”
$1,000: The sweet spot between incentive and reward
The best data available on remdesivir, from a federally sponsored study, suggests the drug has an effect on how long patients stay in the hospital, but its ability to prevent death remains an open question. That makes it difficult to determine the value — and thus price — of the drug, said Michael Carrier, a Rutgers University law school professor who specializes in intellectual property. But “as a practical matter,” a price of less than $1,000 would be ideal to ensure global access to remdesivir, Carrier wrote in an email.
To Peter Bach, director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes, remdesivir’s price needs to hit a sweet spot. It should generate at least some profit, providing incentive for other companies to develop something better. But it can’t be so lucrative that Gilead is discouraged from further investigating remdesivir’s benefits.
“As soon as you’re in a situation where you lose money or share price if you do the study that shows your drug isn’t as effective as something else, you have a strong incentive not to do that,” Bach said.
At around $1,000 per patient, society might be able to preserve the balance, he said.
$4,500: A price that works on paper but fails to account for reality
The coronavirus pandemic has slowed global economies nearly to a halt. In pure economic terms, if remdesivir can get people back to work even a few days faster than is otherwise possible, its value would be measured in billions. That’s part of why ICER’s report concluded that remdesivir could be cost-effective at up to $4,500 per patient.
But that’s a wrongheaded framing for a real-world problem, said Jane Horvath, who has worked with the National Academy for State Health Policy and spent a decade at Merck. Remdesivir’s on-paper value is irrelevant if governments have to divert funds for essential services in order to afford it.
“What if electricity were priced on value to health and well-being? Clean water? We certainly would not be able to afford these services as individuals or society based on value without trade-offs involving other valuable items and services important to life and health,” Horvath said in an email.
To Walid Gellad, an associate professor of medicine who heads the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, the next task will be setting a definition for “affordability” when it comes to remdesivir. If you define that as a patient’s ability to pay, Gilead could charge quite a bit. Remdesivir is administered in hospitals, meaning individual patients wouldn’t be saddled with an added copay to get it. But the system as a whole would bear the cost, and if Gilead charges a high price for remdesivir, it could break health budgets.
‘It’s impossible to overpay for a truly effective drug’
If the world is ever going to get back to something like pre-pandemic normalcy, it’s going to need a lot more than remdesivir in its anti-coronavirus armamentarium. That means society has an overwhelming interest in incentivizing drug companies to invent better medicines, said Craig Garthwaite, director of the health care department at Northwestern University’s Kellogg School of Management. And history suggests the best motivational tool is money.
“One way of viewing the price here is that it’s a way we’re going to split the surplus of the value [remdesivir] creates between profits of the producer and benefit for society,” Garthwaite said. “The other way to look at it is this price is a signal to the market: How do we value drugs that meaningfully address Covid-19? And in that sense, we want to be careful about how hard we push for a low price.”
To Garthwaite, instead of focusing on value or affordability, governments should look at remdesivir this way: What’s the return that would make another drug company willing to take the risk of trying to develop something better?
A few firms working on experimental coronavirus treatments, including Johnson & Johnson and AstraZeneca, have pledged to sell any future medicines at virtually zero profit. But banking on the altruism of for-profit companies isn’t a reliable plan for a world in need of new therapies, Garthwaite said.
“If, at the margin, we slightly overpay for the drug and that makes even one more company move one more set of scientists to think about the problem of Covid-19 and that leads to a better drug, you almost can’t put a price on that,” he said. “It’s impossible to overpay for a truly effective drug, something that truly made it so that we could all go back to work.”