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Name the price.
EXCEPTIONAL

The world has a price tag for the first Covid-19 treatment. The US has two

Annalisa Merelli
By Annalisa Merelli

Geopolitics reporter

Remdesivir, an antiviral medication developed to treat Ebola that was in May approved for emergency use on Covid-19 patients, is ready to be marketed. Gilead, the California-based pharmaceutical company producing the drug, has announced its price—or rather, prices.

Remdesivir will be sold to high-income countries’ governments for $390 a vial—for a total of $2,340 for a standard five-day treatment (with a double dose on the first day). Gilead also announced a partnership with local producers serving 127 lower-income countries—such as India, Egypt, and Bangladesh—that will make and market a generic version of the drug, with Gilead’s permission, until the end of the pandemic is declared by the World Health Organization. So far, drugmakers in India and Bangladesh have announced remdesivir prices for healthcare providers between $59 and $71 a vial.

Chinese pharmaceutical company BrightGene is manufacturing its own version of remdesivir without approval from Gilead, although it contends it isn’t a copyright infringement because it plans to distribute the drug at no profit.

In most developed countries the drug will be purchased by the government and administered, typically free of cost, to hospitalized patients. In the US, however, the situation is more complex—and costly.

The American exception

The US is the only country where Gilead set two separate prices for remdesivir. One, $390, is the same paid by all other wealthy countries, and is charged to some US government programs. The other, $520, is charged to America’s private buyers, such as hospitals, which will spend $3,120 for the typical treatment. The $520 price also applies to Medicare and Medicaid.

The US government secured the first 500,000 doses of remdesivir, which will be managed by the Department of Health and Human Services (HHS). That accounts for the majority of Gilead’s production of the drug through the summer, raising concerns about availability in other high-income countries. Allocation plans past September aren’t yet finalized.

According to Gilead CEO Daniel O’Day, the reason remdesivir costs more for private insurers is built into the US system: The drugmaker wanted to charge the same price to all high-income countries’ governments. Administrators of US government programs expect to get any drug for at least 30% less than it would cost on the private market. So the drugmaker charged 33% more to private buyers.

Even at $390, Gilead priced remdesivir higher than patient advocates and healthcare providers had hoped. “The price puts to rest any notion that drug companies will ‘do the right thing’ because it is a pandemic,” Peter Bach, a health policy expert at Memorial Sloan Kettering Cancer Center, told the Times Union. But Gilead has all of the leverage here: Remdesivir is without competition, and the whole world wants it.

The US is the only country where Gilead is able to sell at a higher price point: Government programs represent a large share of the market, so Gilead has an incentive to honor any demands for a discount. By setting a higher price on the private market, the company can also serve its bottom line while giving the US government the impression it’s getting a good deal. Private insurers, on their hand, can pass added costs on to policyholders, and thus have less incentive to keep a price low.

“In most other countries there is a publicly accountable process for the determination of a reasonable [drug] price,” says John McDonough, a health policy professor at Harvard School of Public Health. “In the US we don’t have that.”

So how much do patients pay?

McDonough notes that even this level of transparency is fleeting. High-income countries, US insurers, and US private buyers will now begin negotiating with Gilead over its asking price(s). “No major insurance company or large employer pays the listing price,” McDonough says, and private buyers won’t release information on what they actually do pay. (US legislation to establish price uniformity has stalled in Congress.)

When it comes to how much American patients will pay, there’s even less reason to expect consistency. Whether they have Medicare, Medicaid, or private insurance, the cost will depend on individual policies. The actual price will also be hidden to most patients, who only owe a copay, even as the drug’s overall cost to insurers likely drives up premiums. “The coverage rules for this medication and the out-of-pocket cost a person pays will vary by plan,” a spokesperson for Cigna said in an email.

This is also the case for the uninsured. The CARES Act provides reimbursement for remdesivir to hospitals treating uninsured or underinsured Covid-19 patients, but places the onus on hospitals to not bill patients and instead apply for reimbursement. When hospitals do bill patients for drugs, it tends to be at exorbitant rates—497% of the drug’s cost, on average—and the charges can be a nightmare to dispute.

“If you look at the way rates work here,” says Caitlin Donovan, director of the National Patient Advocate Foundation, “private insurance pays more than Medicare, and they bill uninsured people the most.”

Hospital groups AmeriCare, Kaiser Permanente and HCA Healthcare, which together operate over 250 hospitals in the US, did not respond to Quartz’s enquiry about their planned remdesivir listing prices.

Is the price right?

Gilead says it set the price for remdesivir far below the drug’s market value—a claim the company and analysts base on potential savings to hospitals, at least in the US. Earlier discharges for Covid-19 patients would save hospitals about $12,000 per patient, Gilead’s O’Day explained. He also said the drug will cost Gilead $1 billion this year, mostly to scale up production.

Analysts expect Gilead to make over $525 million globally on remdesivir sales this year, and more than $2 billion in 2021.

In May, the Institute for Clinical and Economic Review (ICER), the most established institution providing evaluation of drug pricing in the US, delivered its own assessment (pdf) of a fair price for remdesivir, landing slightly higher—$2,520 to $2,800 per course—than the one set by Gilead. On Monday, ICER president Steven Pearson said Gilead set a responsible price, noting that ICER’s own assessment assumed the drug would be found to have lifesaving benefits.

But Gilead’s critics include patient advocates, healthcare providers, and insurance companies themselves. “We are disappointed that remdesivir is priced this high, considering its relative benefit,” Cigna said in a statement.

Others have pointed out the US’s significant investment in remdesivir-related research. In April, Texas representative Lloyd Doggett asked HHS to share details of all public investment in the development and testing of remdesivir. Doggett says US taxpayers have spent at least $99 million on the drug, and on Monday called Gilead’s price “outrageous.”

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