Sunday, 26 June, 2022
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Gilead has got it right with the pricing of remdesivir for Covid treatment

Gilead CEO Daniel O'Day wrote in an open letter that the drug's ability to reduce hospital stays by four days equates to savings of $12,000 per patient in the US

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Pricing a new medicine aimed at taming a pandemic is one of the touchiest scenarios imaginable for a drug company. Set the price too high, and the world will assail you for price gouging. Too low, and you risk bleeding money and investors. No decision will ever make everyone happy, but Gilead Sciences Inc.’s price for its Covid-19 treatment remdesivir is a solid attempt.

According to details released by Gilead on Monday morning, a five-day course of remdesivir will cost about $2,340 in developed nations, including U.S. plans administered by the government. Private insurers will pay a steeper $3,120 in America. Developing nations will pay significantly less after Gilead in May decided to let generic drugmakers make a cheaper version of remdesivir for low-income nations that could cost as little as $600 a course.

The developed-world price will attract critics, and the price gap with generics will grate. However, it’s substantially lower than what Gilead could charge. Not maximizing profit in a pandemic is a low standard, but it’s a good sign that the first drugmaker to the finish line cleared it.

There’s no set formula for pricing medicines; drugmakers often charge what they think will be most profitable in different markets. A pandemic throws the usual priorities into disarray. Any effective medicine is dramatically more valuable, given enormous demand, but that same demand creates an imperative to avoid pricing that makes the drug less accessible. Meanwhile, companies also have to pour extra resources into development and expanding supply. Gilead, for instance, may spend as much as $1 billion on remdesivir this year. So it’s a tricky balance.

Some argue for a price that doesn’t do much more than recoup input costs. Given the need to incentivize further rapid research on treatments, that’s an unrealistic and arguably misguided expectation. The Institute for Clinical and Economic Review (ICER) — an independent group that does cost-effectiveness analysis on medicines — has suggested that a reasonable price range for a full course of remdesivir ranges from $4,580 to $5,080, well above where Gilead settled on.

Gilead’s pricing looks less generous, though, without a somewhat optimistic read of the data. ICER’s base calculations don’t account for broad use of the potentially life-saving steroid dexamethasone and assume that remdesivir prevents deaths, something that hasn’t been conclusively proven. Without those assumptions, its estimated fair price drops significantly, to as  little as $310. What’s more, though a Gilead study suggests five days of infusion may be as good as a longer course, some patients may get a full 10 days, increasing the effective price.

In an open letter published Monday about the pricing decision, Gilead CEO Daniel O’Day wrote that the drug’s ability to reduce hospital stays by four days equates to savings of $12,000 per patient in the U.S.  By that analysis, which excludes any other benefits, the drug is priced well below its value and likely cost in a less fraught environment. The letter is pretty clearly an effort to anchor the debate in a way that flatters Gilead; America’s wildly inflated hospital prices are perhaps not the best pricing benchmark.

This is still the sort of analysis drugmakers routinely use to justify prices that leave ICER estimates in the dust. Gilead is clearly showing some degree of restraint, especially given that some analysts suggested a higher figure. The company may also have a limited window of peak sales. Demand is likely to fall off if a vaccine or better options arrive.

There’s no perfect price for medicine, especially right now. However, especially when you factor in the availability of generics in the parts of the world where the price is a bigger impediment to access, Gilead did a decent job of walking a difficult tight rope.

The company set a bar that other drugmakers at least need to match, and hopefully will exceed. Anything less will be tough to justify. –Bloomberg

Also read: ‘Worst is yet to come’: WHO chief gives countries strict warning to contain Covid spread


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