Seeking to blunt criticism of its pricing, Gilead Sciences (GILD) is donating enough of its HIV prevention pill to cover as many as 200,000 patients over the next 11 years. The donation will cover both the existing Truvada pill, which has been the subject of battles with AIDS activists, and still another drug the company hopes will also win regulatory approval to prevent the virus.

The move was hailed by the Trump administration, which announced plans to end HIV in the U.S. by 2030, but has also been criticized by activists for not taking steps to reduce the cost of Truvada. The pill, which is also sometimes referred to as PrEP, costs about $1,675 a month, or $20,000 a year, but has been climbing steadily since it was first introduced in 2004 for treating HIV.

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  • The real cost of Truvada is NOT $60/year. That’s the manufacturing cost. The largest cost of putting a drug on the market is meeting FDA requirements which generally takes more than a decade and now costs about $3 billion. Since only 3 out of 10 approved drugs make back their R&D, those 3 drugs must be marked up to pay for the 7 that lose money or the company will go out of business. Bashing a drug company that is giving drug away because of ignorance about the true costs of putting a drug on the market is going to discourage other companies from doing the same. My personal thank you, Gilead, for trying to help prevent HIV! I’m sorry that you aren’t getting more kudos for your efforts.

    • Hi Mary,

      Thanks for stopping by.

      The $60 figure refers to the unit production cost now that the various sunk costs have receded into the background.

      More generally, the $3 billion figure you cite comes from a Tufts report a few years that was actually $2.6 billion – but has been rounded up for some reason – and also included $1.16 billion in opportunity costs, which are not the same thing as R&D or costs related to winning FDA approval. You can read about that here..

      https://blogs.wsj.com/pharmalot/2014/11/18/developing-a-drug-costs-2-6-billion-but-not-everyone-believes-this/

      This particular episode is a more complicated matter than simply the cost to develop and manufacture a drug. One reason is that some of the early research was actually financed by taxpayer grants.

      The Gilead donation is admirable, but it does follow a protracted period where pricing did appear to be a barrier, at least to some. Gilead deserves credit for ensuring the product got to market, but unfortunately, this also became an example of the push and pull in sorting out profits and patients.

      Regards
      ed at pharmalot

    • Ed,

      If you look at R&D costs over time, they are rising exponentially each year. The $3 billion is actually an underestimate extrapolated from the Tufts studies. You can see the graph at http://www.ruwart.com/blog/2010.html. BTW, I couldn’t read the article you cited in full as it requires a WSJ subscription. Since you know my e-mail address, perhaps you can e-mail me a copy so I can better respond.

      The $3 billion figure is the capitalized cost of bringing the average new drug to market and doubles the out-of-pocket costs. The capitalized costs are real: very few manufacturers have a timeline in excess of 10+years after they design a project. Borrowing money for drug development or not developing another drug is a true loss.

      Investigators other than Tufts have come up with even higher cost estimates than Tufts does. The only ones who don’t fail to include the cost of failures leading up to an approval which are somewhere in the range of 67%-84% of that $3 billion estimate. Also, since universities can now patent their discoveries, the university recovers taxpayer funding when the company that develops the drug licenses it from the university or the start-up that pays the university to acquire rights to those patents. Taxpayers, or more accurately, universities, are being compensated for their research investment.

      In addition, 7 out of every 10 drugs approved by the FDA don’t recover their R&D. This means that the 3 that do are priced higher in order to recover the R&D of the 7 losers. I haven’t seen a single drug pricing study that takes this into account.

      Because I was in R&D of a major drug firm for two decades, I’m more aware of some of these complexities than the average person. I don’t pretend that I know everything, but I know enough to recognize that a large number of the critics of drug pricing are totally unaware of these nuances. That’s not surprising, because drug pricing IS complex. However, those who think that drugs should sell for the cost of manufacturing are way off base, because that’s a very minor part of the costs that drug companies must pass on to the consumer to stay solvent.

      The only way that drug prices are going to come down without slashing innovation is to get rid of the regulatory red tape that doesn’t increase safety and effectiveness. Basically, that’s most, if not all, of the 1962 Amendments to the Food & Drug Act.

      For example, prior to the Amendments, 2.5% of all drugs that were approved by the FDA were withdrawn for safety reasons. In the decades after the Amendments, 3.3% were withdrawn, so drugs haven’t gotten any safer. Several studies on effectiveness have been done before and after the Amendments. They’ve found that—at most—10% of the marketed drugs didn’t do what the manufacturers said they did prior to the Amendments. However, the cost of the Amendments has caused drug prices to rise at least 8 times as high as they otherwise would be. This means that drugs would be less than 12.5% of what they are today without the 1962 Amendments. Getting rid of excess regulation, which is growing every year, is the only way to slash drug prices without killing a great deal of innovation.

      Finally, the cost of the Amendments has shifted the money that would have gone into discovering new drugs into satisfying the regulations. Development time has gone from 4 pre-Amendment to 14 years post-Amendment at its peak, causing people to die waiting for life-saving drugs and lack of innovation. I estimate that we’ve each lost at least 5 years of our lives because of that and perhaps another 5 years because the Amendments shifted our medical paradigm from prevention to treatment.

      We are greatly in danger of destroying the pharmaceutical industry by trying to force the lowering of drug prices without dealing with the primary cause of their rise. The result is that we may have to watch our loved ones dying of an “incurable” disease because we took the wrong road when drug prices became unsustainable.

  • Why is there too much advocacy of PREP medication when condoms are better option than PREP. Before invention of PREP, people were taking their own precautions dealing with the HIV disease. Nowadays, U=U campaigning and PREP advocacy are encouraging people for promiscuous behaviour.
    From the ethical point of view, a government policies should not be in the the interest of particular company as it promote commercialization of disease for the own selfish interests and hamper true spirit of new inventions among scientist community. Eventually, delay in finding permanent cure.

    • even if they had a cure they would never release it. they will continue to milk people and use these diseases as an income source. this article clearly shows that they do not actually care about people they only care about their investors.

    • @James,
      Tell that to the people cured of HCV by Gilead’s Harvoni/Solvadi. The company took a 40% hit in stock over the last 2 years because they were curing patients instead of treating them. Maybe if Wall Street didn’t punish a company for such a grand achievement, more companies would be willing to ‘cure’ HIV/AIDS and other infectious diseases.

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