With Gilead Sciences Inc. donating its existing stock of finished and unfinished remdesivir to help address the global COVID-19 pandemic through clinical trials, emergency use authorization (EUA) and compassionate use programs, patient accessibility to the investigational drug will be limited by supply, not price.
But that isn’t keeping pricing experts and some lawmakers from weighing in on how the antiviral should be priced once it’s approved. Friday, the same day the FDA granted an EUA to the drug for use in adults and children hospitalized with severe COVID-19, the Institute for Clinical and Economic Review (ICER) released its initial analysis of pricing for remdesivir and other potential treatments for the coronavirus.
The analysis looks at two models that present a huge variant in price. Under a “cost-recovery” scheme, which considers the minimal costs of producing a course of the treatment, a 10-day course of remdesivir should be priced at $10, according to the preliminary ICER analysis. A five-day course would be $5.
However, under the traditional cost-recovery model, which looks at the incremental health benefits and costs within the health system, that same course of treatment would be reasonably priced at $4,500, ICER said.
“The results of a cost-recovery approach and a cost-effectiveness approach are going to produce very different pricing estimates. … We are releasing these estimates now, despite the fact that the evidence is highly uncertain and evolving, because now is the time when the public and policymakers should be actively debating how to link pricing to an overall platform to develop treatments for COVID-19,” ICER President Steven Pearson said.
“The consequential discussion about the tradeoffs and priorities involved with different pricing approaches cannot wait,” he continued. “All share the common goal of achieving rapid discovery, development, production and distribution of effectiveness treatments. All share the understanding that treatments must be affordable in order for this goal to be realized.”
Evercore ISI analyst Umer Raffat used a different “model” to come up with a likely U.S. list price of about $4,000 for remdesivir, with a net price of $3,000. He said he based his pricing on novel gram-negative antibiotics, which, like remdesivir, are administered in hospitals intravenously on a short-term basis to treat an acute infection that could be life-threatening. The cost of treating a patient with those antibiotics ranges from $2,000 to $15,000, depending on the specific drug and the length of the treatment.
“At a net price of $3,000, remdesivir is likely a multibillion-dollar opportunity,” Raffat said, “although sales may fade materially year-over-year because of [a] lower number of infections plus possible oral competition and vaccines.”
Fear of pandemic profiteering
Despite the other two models, some U.S. lawmakers and watchdog groups are sure to latch onto ICER’s $10 cost-recovery figure, seeing anything else as yet another example of industry price gouging. On the eve of the FDA granting the EUA, Reps. Lloyd Doggett (D-Texas) and Rosa DeLauro (D-Conn.) wrote to Health and Human Services Secretary Alex Azar asking for information about the federal government’s support for the R&D of remdesivir and for his help in preventing “pandemic profiteering.” The letter specifically asked for information about:
Doggett and DeLauro also noted the government’s funding on other coronavirus research in the past. “Prior to the emergence of the COVID-19 pandemic, the NIH spent nearly $700 million on coronavirus research,” they said. “Congress has since appropriated over $6.5 billion for the research and development of therapeutics and vaccines. Taxpayers are often the angel investors in pharmaceutical research and development, yet this is not reflected in the prices they pay.”
Such a focus on government investment downplays or ignores the private investment that’s needed to turn government-funded research into an approvable, marketable therapy, according to academic, government and industry experts speaking at a recent Information Technology & Innovation Foundation webinar on the role of Bayh-Dole during the COVID-19 pandemic.
“It’s not just a one-way street with NIH supplying the funds,” Mark Rohrbaugh, special adviser for technology transfer at the NIH, said during the webinar. “Companies are offering up their resources, their intellectual property, their expertise, taking on large risky investments.”
What about the costs?
While ICER’s $10 cost-recovery estimate for remdesivir is sure to be touted as an example of industry greed, that price is based on assumptions industry would say don’t reflect the complete complexity of drug development.
By ICER’s own account, a cost-recovery estimate is supposed to consider the minimum cost of actually producing the final finished product, the R&D costs provided by the innovator, R&D costs provided by the federal government and additional profits beyond cost recovery. However, ICER limited its $10 minimum price to just the cost of producing the finished drug – as estimated in a recent article in the Journal of Virus Eradication.
The ICER analysis set Gilead’s R&D costs to zero, saying that sunk R&D costs shouldn’t be used to help justify the price of new drugs. “For remdesivir, this perspective is strengthened by the fact that it was previously developed as part of a suite of agents for potential use in chronic hepatitis C,” according to the analysis. “Given that the manufacturer successfully launched other drugs for hepatitis C, it seems reasonable that any sunk costs for research and development have already been recouped in the successful market experience of the manufacturer’s other treatments in that area.”
While Gilead, of Foster City, Calif., was successful in developing a hepatitis C cure, it initially was developing remdesivir as a potential Ebola therapy. The compound then showed in vitro and in vivo activity in animal models against the viral pathogens MERS and SARS, which are coronaviruses that are structurally similar to SARS-CoV-2, the coronavirus responsible for COVID-19.
ICER acknowledged that both its models are based on preliminary, incomplete data that are likely to change as the use of remdesivir evolves. It said it would consider including costs Gilead faces as it moves remdesivir forward in clinical trials as a component of its cost-recovery price estimate. But it said nothing about Gilead’s opportunity cost in focusing its resources to accelerate the development and manufacture of the drug – and the risks involved.
As other biopharma companies have, Gilead has mobilized every area of its organization to respond to the global health emergency from the moment the novel coronavirus was identified, it said. And since January, it has invested what it describes as “significant capital” to establish a supply chain capable of large-scale production of remdesivir.
Producing the sterile intravenous drug is not as simple as assembling off-the-shelf parts on a factory line. The “production is a long, linear chemical synthesis process that must be completed sequentially and includes several specialized chemistry steps and novel substances with limited global availability,” according to the company. Some of the manufacturing steps take weeks to complete, which impacts the ability to rapidly produce large quantities of the drug to meet an emergency situation.
Subsequently, the company also has invested in improving processes to shorten the manufacturing time for the drug, which has yet to be approved. “The typical timeline for manufacturing a drug like remdesivir at scale is nine to 12 months; we have reduced that period to six to eight months,” Gilead said, adding that it continues to work to optimize “the chemical synthesis processes to further accelerate product deliveries and volumes.”