Potential Pricing for Remdesivir

The FDA has approved Remdesivir for emergency use and Gilead Science will denote its current 1.5 million vials, which could potentially treat 300 thousand patients as it takes 5 to 10 treatments per patient. The WHO wants more Remdesivir:

The World Health Organization said Monday that it will speak with the U.S. government and Gilead Sciences on how antiviral drug remdesivir could be made more widely available to treat Covid-19 as data of its effectiveness emerges.

At some point we will need to consider pricing. This report considers two approaches with the first being to price at the economic cost of production:

For remdesivir, we used evidence on the cost of producing the next course of therapy from an article by Hill et all in the Journal of Virus Eradication (2020). Their methods sought to determine the “minimum” costs of production by calculating the cost of active pharmaceutical ingredients, which is combined with costs of excipients, formulation, packaging and a small profit margin. Their analysis calculated a total cost of producing the “final finished product” of $9.32 US for a 10-day course of treatment. We rounded that amount up to $10 for a 10-day course. If a 5-day course of treatment becomes a recommended course of therapy, then the marginal cost would accordingly shrink to $5.

In other words, $1 per vial. The report also estimates a value based price known as Cost-Effectiveness Analysis:

In this preliminary modeling exercise, remdesivir extends life and improves quality of life versus standard of care. In public health emergencies, cost-effectiveness analysis thresholds are often scaled downward, and we feel the pricing estimate related to the threshold of $50,000 per incremental qualityadjusted life year (and equal value of a life-year gained) is the most policy-relevant consideration. In the case of remdesivir, the initial ICER-COVID model suggests a price of approximately $4,500 per treatment course, whether that course is 10 or 5 days

In other words each patient would generate $4500 for the course of the treatments. Even if we assume 10 vials per patient, that comes to a price equal to $450 per vial. Someone call Dean Baker as he might want to write another one of his classic condemnations of the patent system. While I agree with the WHO on their call for an all hands on deck on getting this treatment produced and given to the patients who would benefit the most of this treatment, the policy debate over pricing should begin immediately. Update: Gilead Sciences is serious about ramping up production:

Gilead is in discussions with some of the world’s leading chemical and pharmaceutical manufacturing companies about their ability, under voluntary licenses, to produce remdesivir for Europe, Asia and the developing world through at least 2022. The company is also negotiating long-term voluntary licenses with several generic drug makers in India and Pakistan to produce remdesivir for developing countries. Gilead will provide appropriate technology transfers to facilitate this production. Finally, the company is in active discussions with the Medicines Patent Pool, which Gilead has partnered with for many years, to license remdesivir for developing countries. To further facilitate access in developing countries during this acute health crisis, Gilead is in advanced discussions with UNICEF to utilize their extensive experience providing medicines to low- and middle-income countries during emergency and humanitarian crises to deliver remdesivir using its well-established distribution networks.