Is the price of remdesivir too high or too low?

In late June, Gilead revealed the price of their antiviral drug remdesivir to an eagerly-awaiting audience: $2,340 for a course of treatment for those covered under government programs and $3,100 for those covered under private insurance.

While many patient advocates have deemed this price too high for most Americans to access it, others say it is too low. Let’s take a closer look:

The price is too high

Doctors and patient advocates have argued that the price of remdesivir is too high given that 1) Taxpayers spent $70 million in public funding for development of the drug, 2) It costs Gilead as little as $10 to manufacture remdesivir, and 3) The drug has not been proven to save lives from Covid-19.

Public funding for new drug development is extremely common; a 2018 study found that all new drugs approved by the US Food and Drug Administration between 2010 and 2016 benefited from NIH research. Yet the public investment in research is rarely reflected in the prices of new drugs. Patient advocates have pushed for remdesivir to be in the public domain and to be priced only what it costs Gilead to manufacture the drug.

Gilead claims that they spent about $1 billion on researching and development for remdesivir as a Covid-19 treatment. Given these costs, the manufacturing costs of producing a dose of remdesivir (about $10 for a ten-day course), and the prices set by generic manufacturers in developing countries, the Institute for Clinical and Economic Review estimated that a price of $1,600 per dose would recover all of Gilead’s cost to develop and produce remdesivir.

The ICER report also provides an estimate of price based on remdesivir’s effectiveness. So far, remdesivir has shown to reduce the amount of time Covid-19 patients spend in the hospital by 4 days. However, the drug has not shown to improve mortality in randomized controlled trials. With this in mind, ICER gives two cost-effective prices for remdesivir: If there is no mortality benefit, it should cost only $310; if there is a mortality benefit, the drug could be priced up to $5,080 (using a threshold of $50,000 per quality of life-year).

However, the fact that the steroid dexamethazone has demonstrated a mortality benefit in patients with critical Covid-19 and will likely become the standard of care, makes remdesivir less valuable. With dexamethazone in the mix, ICER bumps the cost-effective price for remdesivir down to $2,800 at the most (this is assuming that remdesivir also saves lives).

Gilead’s price of $3,100 exceeds the maximum cost-effective price given the lack of mortality benefit shown and the existence of other treatments. This price also far exceeds what Gilead would need to recover their investment.

The price is too low

However, many in the pharmaceutical industry think Gilead’s price was generous, or even “too low.” They cite the value of remdesivir in keeping people out of the hospital, what Gilead analysts estimate is worth $12,000. And that’s not even counting the “societal value” of getting people back to work sooner. Yet, as Bloomberg’s Timothy O’Brien points out, drug companies have been able to define value in whatever way works best for them:

“Just for speculation’s sake, what would all those societal benefits add up to? Another $40,000 per patient? $100,000? $1 million? Pick your number because any figure, in the context of squishy and hard-to-quantify externalities, will be squishy and hard to quantify,” he writes.

Gilead executives have framed themselves as heroes by saying that they are pricing remdesivir “well below” its value. They are essentially patting themselves on the back for not taking advantage of the pandemic and setting a higher price. However, their statements beg the question: Why is access to lifesaving medications only important to Gilead during this pandemic?

As James Krellenstein, co-founder of the HIV-prevention advocacy group PrEP4All writes in Stat News, “Why is a Covid patient’s life more valuable than a person living with HIV or hepatitis C virus?” If Gilead is making the “responsible” decision by pricing remdesivir so that all can access it, then by definition their usual method of pricing drugs beyond what many can afford is immoral.

Framing remdesivir “under-priced” also may shift our view of how to allocate resources during this pandemic. For example, the US has bought up the entire world’s stock of remdesivir, leaving little for other countries for the next few months. Why spend so much to monopolize this drug, when we desperately need to spend more on testing, contact tracing, and PPE? The idea that remdesivir will be a positive return on investment from lower hospital costs ignores all of the much-lower cost policy options we have to prevent people from contracting Covid-19 in the first place. Remdesivir is far from our best option to reduce harm from Covid-19, and putting all of our eggs in one basket is a poor use of resources.

The price is not right

It is not clear how Gilead arrived at the price it did, since executives claim it was not made based on the drug’s value. Like most other new drugs, it seems that the price of remdesivir was based on how much the market could bear, but this threshold was altered by the current political climate of Covid-19.

The price of remdesivir, while higher than its likely value and cost to manufacture, is low enough to hopefully set a better precedent for new drugs. If drug companies know that patients will not accept an unaffordable price, this may bring down the threshold for drug prices. In the absence of any real regulation on drug prices, this may be the most we can do.