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.

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$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.

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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.”

  • You are all ignoring the elephant in the room, which is litigation. You speak of a drug being free and low cost for all? Then the patient must accept the reasonable risk. Short of openly deceitful actions the drug manufacturer must be free of risk for ALL litigation. No looking back 10 years later and saying that this drug caused an unforeseen side effect. Until and unless you accept that then the risk of providing ANY drug means that the drug will carry a high price.

    As for any national health care system…I know people who are on them in countries like Australia. Yes, my friend there thinks it is great because it is all she has ever known. In some ways it is good. BUT…She has to fight for EVERYTHING she needs, such as a wheelchair despite the fact that she is clearly disabled, Wait times are also much longer than here for both hardware and procedures. The grass is not always greener……

  • I can’t find a report I looked at a few min ago on STAT. It described a Dr who was critical w CoVid. He was given CHEAP anti rheumatic arthritis drug that reduced cytokine IL-6. He recovered in few days. THAT shd be investigated. Where’s that article?

  • How about a price of cost + 10% to the manufacturer (requires transparency) – paid by the government? For a nation to be civilized, its population should be automatically protected from highly contagious diseases for which vaccinations exist – free for patients = paid by the government health care system. In many civilized countries this is indeed established for vaccinations for measles-mumps-rubella, polio, tetanus, diphteria, hepatitis, chickenpox, rabies, etc. The same should apply to a Covid-19 vaccine. Imagine the alternative, what would have happened would there have been no such action for smallpox or the Spanish flu ? And for polio that is almost eradicated globally (only Pakistan, Afghanistan, Nigeria have cases)? This powerful, highly contagious, fast-spreading SARS-CoV2 virus warrants global immunization effort. But it has to be vaccine that truly is undoubtedly effective, not another quickie off-an-old-shelf fix / non-solution.

    • And a tug of war over pricing remdesivir is far too premature – because there are better drugs in trials. Sorrento Therapeutics had an announcement today, Mesoblast a few weeks ago, and now anakinra (arthritis drug) shows excellent results. Over-hyping remdesivir on long term visions is unacceptable, just another quick-fix promo.

  • “The price must be ‘You make it, We take it’ “

    — Fondest regards, Tedros and the WHO

  • The fallacy in all your thinking is very visible. All these wildly differing prices are ignoring one basic fact. Most of the world is poor and even $250/treatment would be out of reach for a great number of the world population. In other words the more well to do people would get the larger percentage of the drug while the less fortunate would get what was left.
    If this is truly about treating the whole world population than the price must be very cheap indeed. I understand that Gilead is profit driven and needs to be recompensed for their labours but in the end they would profit enormously as the ‘saviors of the world’ which would catapult their reputation and the sales of their other drugs to unnatural highs way into the foreseeable future. I am sure they do not rely on Remdesivir alone to pay the bills…and look at the good they could do.

  • In the US, the cost of the hospitalization will far exceed any associated drug costs. Saving a few days of hospitalization will easily save the patient over $10,000.

  • The $10 price is really nothing but an educated guess. Unlike with other drugs whose potential cost was evaluated, they have no hard data on API cost; they only guess what the API cost is based on potential methods of sysnthesis. Also, the study does not take into account capital equipment or any other typical costs, only API, packaging, and a few other minor costs. There is also no consideration for opportunity cost, i.e. the factory could be used to produce something more profitable…. Really not a very realistic study, just a bunch of ivory tower academics from the UK.

    • I also read the study, and was really surprised at how little there was to it. There was no actual research or effort put into it … a couple of folks at a bar, half drunk, sketched it out on a cocktail napkin. (Or, so it appears). I suppose there are so many journals floating around out there that it’s pretty easy to get published. In any event, before citing this paper it might be a good idea to read it.

  • Instead of manufacturing and or licencing the production of Remdesivir, they should sell the drug and all patents and rights to a consortium of nations in exchange for one lump sum amount and a guarantee of immunity from any civil or criminal action (should unintended harm or complications result from use). This way Gilead makes all profits upfront without the hassle of having to produce or distribute the drug and never has to deal with liability for harm. Since the total price will be borne by the governments of all nations, the amount can reflect the true value of a drug that will help protect the health and economic stability of all people in countries around the world. From a public relations viewpoint, this idea makes a lot of sense. After all, its easier to justify the cost of the medicine if it is divided over the entire population (ie: if 5% of the population would be expected to need a drug that costs $5,000 per treatment, spreading the cost over the entire population brings down the cost to $250 per person). Not unreasonable to save lives, and keep economies running. Each member of the consortium could produce (or make a deal to purchase from other members of the consortium) as much remdesivir as needed for its own use and decide to charge or provide it free to its citizens.

  • a. Start negotiation at half of the ICER $4,500 that gives $2,500.
    b. Settle for sticker price in range of $1,750.
    c. Use price discrimination: Discount on the basis of ability to pay, including patient assistance program.
    d. Reward benefit managers and distributors with volume discounts, clawbacks, etc.

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