As pharmaceutical and biotech companies scramble to identify treatments for Covid-19, a new disease that initially had none, we must begin to figure out what is an appropriate pricing approach — and price — for emerging therapies. Remdesivir, Gilead Sciences’ repurposed antiviral drug, offers the first opportunity to do this.

The Institute for Clinical and Economic Review (ICER) has conducted the first value assessment of remdesivir, a drug with early evidence of treatment effectiveness. Its analysis, however, is premature and highlights many of the flaws inherent in today’s value assessment models.

ICER’s analysis included two pricing scenarios that could set the bar for pricing of future Covid-19 treatments more broadly. The ICER analysis first assessed cost recovery for the manufacturer, and then modeled cost-effectiveness and assessed value by comparing the incremental health benefits and health system costs of remdesivir versus standard of care for hospitalized patients with advanced infections and impaired lung function.

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The cost-effectiveness modeling approach has several strengths: it captures potential quality-of-life improvements and mortality benefits, as well as the cost savings from fewer days in the ICU, fewer days on ventilation, and reduced length of hospital stay. ICER also recognized the substantial uncertainty underlying the clinical evidence.

But there is more work to be done. Our organization, the Innovation and Value Initiative, a nonprofit focused on engaging stakeholders to drive rigorous, patient-focused value assessment on an open-source platform, has a number of concerns about the process and substance of the analyses.

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The first problem is the current tremendous uncertainty about the underlying evidence on the prevalence and impact of Covid-19 infections and on the treatment effectiveness of remdesivir. The medical community does not have a strong indication of when and for whom this antiviral therapy will work most effectively. In a drug that is primarily indicated for reducing severity and duration of symptoms in hospitalized patients, we don’t know what proportion of patients will benefit because we lack comprehensive data about patient characteristics. While ICER’s analysis acknowledges that “results will evolve as further data are released,” the decision to release an assessment given the uncertainty may lead to premature conclusions that therapies will be low cost or deemed not cost effective.”

Second, there is a lack of transparency and alterability in the structural assumptions in ICER’s two models, which means users can’t change the assumptions and see the impact of these changes on model outcomes. In our view, ICER’s decision to publish a cost-recovery model is misguided at this juncture because it presumes that setting recoupment for research and development costs to zero is an acceptable approach for pricing. Instead, evaluating a plausible range of assumptions regarding R&D costs would yield a more nuanced discussion of accompanying price estimates that show the trade-offs between incentives for further development and patient access implications.

Third, in its standard cost-effectiveness approach, ICER omitted possible impacts of remdesivir on health system capacity and health care personnel. Longer hospitalizations from Covid-19 results in less availability of hospital beds and greater utilization of health professionals to care for hospitalized patients. Models also need to assess the impact on health professional resources and capacity, and on the mental health and even loss of life among providers.

Fourth, ICER’s cost-effectiveness model is also unclear concerning the magnitude and derivation of cost savings from reduced average length of stay in the ICU. Its presentation of results does not allow users to vary the inputs so the emerging data regarding the impact of remdesivir on mortality in moderately sick patients can be assessed. At the Innovation and Value Initiative, we believe that economic models should allow decision-makers to assess the impact of a plausible range of parameters on costs and outcomes in evaluating use in new subpopulations or new clinical contexts.

Finally, ICER’s assessment overlooks emerging thinking about how to improve value assessment frameworks in ways that better account for broader benefits to society beyond net costs and net quality-adjusted life years. In 2018, ISPOR, a professional society for health economics and outcomes research, published recommendations from its Special Task Force on Value Assessment Frameworks that one of us (L.G.) served on to incorporate elements of value for all drugs and medical technologies including impacts on productivity, scientific spillovers, fear of contagion, severity of illness, and elements related to uncertainty, such as the value of hope. There may be important scientific spillovers from the use of remdesivir: knowledge gained about treating the virus, for example, could be a first step toward developing a combination therapy. The absence of these elements in ICER’s analyses for remdesivir is a missed opportunity to align the reward-for-value equation with signals for long-term investments that generate valuable innovation over time.

How “value” is determined will have long-term consequences on future investments in Covid-19 treatments. The unintended impact of narrow assessments that omit key variables could create disincentives for investing in novel treatment discovery that could offer improvements or even a cure. Moreover, everyone knows that patients lose when they lack therapeutic options or an understanding of how to optimize their use, just as much as when the prices they face are unjustifiably high.

The win-win approach is to expand our national conversation about value to inform the long-term view of investment and the best use of our scarce health care resources. To increase confidence in efforts to base reimbursement and policy decisions on value, the Innovation and Value Initiative advocates using these value assessment principles:

  • Consensus on model inputs, methods, and structures based on public input
  • Flexibility to accommodate the information needs of stakeholders
  • Transparency to allow real-time review and updating
  • Open-source development of models to enable widespread use and customization

Just as life science companies are held accountable for the quality of their products, there must be accountability in the methods that researchers use to arrive at the label of value.

Major new investments in public health infrastructure, vaccines, and therapeutics will be essential to protect the globe from Covid-19 and its effects on human and economic health. As the pandemic has shown, the consequences are bleak in a world that does not foster ahead-of-the-curve science. The goal of all health care leaders should be to ensure that approaches to determining the value-based price of current treatments reflect cutting-edge health technology assessment methods, reward risk-taking and innovation, and emphasize comprehensive strategies to improve public health.

Patricia Deverka is a physician, chief science officer of the Innovation and Value Initiative, and executive director of Deverka Consulting. Louis Garrison is a health economist and professor emeritus in the Comparative Health Outcomes, Policy, and Economics Institute in the School of Pharmacy at the University of Washington. Samuel Nussbaum is a physician, president of the Innovation and Value Initiative, and senior fellow of the USC Schaeffer Center for Health Policy and Economics. He is also a board member for Coherus Biosciences; an adviser to Epstein, Becker, Green; and a consultant for Novartis, Sanofi, Ultragenyx, Sarepta Therapeutics, and Gilead.

  • The pricing decision needs to take into account existing drugs with the same mechanism of action that are currently approved for human use and are inexpensive. I refer to oral famciclovir, a broad spectrum anti-viral with an excellent safety profile. Patients who happen to be on famciclovir 500mg twice daily when they become infected with Covid-19 have had a short mild course of illness. Dipyridamole at 25-50mg orally three times daily has been shown to markedly reduce pulmonary, cardiac, and renal fibrosis resulting from Covid-19 infections. The mechanism of action is different than it’s anti-platelet clumping effect. Dipyridamole is also very inexpensive. Both famciclovir and dipyridamole can be prescribed to outpatients as they do not require intravenous administration with it’s attendent costs. Over 100 patients can be treated orally for every one patient treated intravenously, and that does not even include the cost of the remdesivir.
    Therefore remdesivir needs to be priced inexpensively on a per dose basis or risk becoming irrelevant as it has for Ebola.

  • Excellent analyses by these authors on all aspects. No values are realistic when based on R&D with shortfalls in patient data, types and duration of care, and effect on health care workers. The biggest pitfall as Covid spreads without a REAL treatment (that starts much earlier) and with far too many people being Covid-careless will be an excruciating shortage of health care workers – the very people that keep everyone alive. I have yet to read articles that address this rather major element in fighting a very labor-intensive and high-stress disease. Just like for PPEs – the health care workforce also needs to re-build a stockpile. Is this highly essential part of pandemic health care delivery being sufficiently addressed ?

  • Some very straightforward assessments of the flaws of the ICER value model.

    The economics of value imply the cost of R&D is not a factor in the pricing of any drug. R&D is an investment to get a product to market. Once the product is in market, I don’t understand why R&D costs matter in any way; the value is set by expectations of efficacy and uncertainties of safety only, and the transaction is between the healthcare provider, insurance company, and the patient. A voluntary purchase of the drug occurs if the benefits outweigh the costs and risks.

    This leads me to another thing that won’t appear in pricing due to economics: positive externalities. The positive externalities of treatment, such as increased hospital capacity, benefit society but not the insurance company, patient, or provider. Positive externalities always have this problem; if you want positive externalities to be factored in to pricing, the only mechanism is government subsidy.

  • Really nice to see this article.

    Transparency in the models would be a big help. Is there an opportunity here for a respository of assessment methods, algorithms, and models? The problem of assessment so early in the process is vexing. Pricing on a per-pill or per-dose basis makes it even worse.

    A final comment: profitability is clearly linked to incentives to invest in R&D. But in those calculations, the assumption is generally that investors or the firms cover all the costs. But of course they don’t; but it’s highly variable. Just look at the range of government and nonprofit “investment” in the Royalty Pharma success stories, and the number of fingers in the financial pie. I hope your IVI models might introduce some explicit modeling of various forms of cooperation between nonprofits, government funders, and for-profit developers, so we can preserve incentives for cooperation, but also serve the public interests when government and nonprofit contributions are substantial.

    Not as a criticism, but as a suggestion about transparency: Would be good to list funders of and the institutional base of the Innovation & Value Initiative. We don’t know what it is or who’s involved. Good name (but you might think about adding an “s” to Value).

  • Pharmaceuticals (at least ones needed for hospitals and prescription use) are part of what we should see as the social utility of healthcare. It is not like the option of air-conditioning on a car. As such, the answer to how they should be priced is actually very simple. It should be the cost to make and distribute the drug (with a properly designed and reasonable allocation for R&D, which I realize is easier said than done), plus what society should negotiate as a reasonable margin for risk profit and return – some percentage add on. Variations on “what the market will bear,” or “what current therapies cost,” or “quality life years gained,” or things requiring someone’s interpretation of the “value” are really non-starters, in my view, for a product/service that is part of a social utility. If everyone in the USA is supposed to have access and delivery of healthcare (and the financing behind that healthcare), normal models of economic product pricing theory simply should not apply. If it is not the case that healthcare is the “right” our society seems to have deemed it to be, then fine, open the floodgates and let “greed is good” dominate the marketplace.

  • Doesn’t Gilead have a drug that is being used very successfully for feline coronavirus that has been shown to have fewer side effects than remdesivir in humans as well? We need to not only be concerned about the price but whether or not there is a drug that is not on the shelf that would be a better treatment. Fewer side effects would be worth a higher price.

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