Remdesivir will cost $3,200 — A sharp reminder of why the United States payor system is broken
We’re often led to believe that pharmaceutical companies are the sole investors taking on massive risks associated with developing drugs. Some studies estimate that it cost around $19 million per drug for development while others claim it is upwards of $1.2 billion dollars per drug development. But these number are misleading. In reality, much of pharmaceutical company discoveries are dependent upon research generated by university academic researchers. These discoveries are often funded by National Institute of Health (NIH) grants that are paid for by taxpayers.
In the case of remdesivir, its discovery and development was heavily funded by taxpayers. In a Public Citizen investigation, Gilead was found to have received $70.5 million dollars in public funding to develop this drug. Even in clinicals trial done internationally, the trials (NEJM 1, NEJM 2, Nature, and The Lancet) show that overwhelming evidence was generated based on international government grants and philanthropic funds.
In their open letter, Gilead justifies its $3k price as it can generate potential cost savings of $12,000 to hospitals from shortening hospital length of stay. An L.A Times reporter compared this to a mechanic charging thousands of dollars to rotate tires because it clearly saves consumers tens of thousands from a potential accident. I have to agree. Consumers do not get priced by fraction of what it can prevent. Car manufacturers aren’t charging consumers $5000 for seatbelts in a car because it may save us a $1 million dollars in medical and rehab fees. They install seatbelts because they are legally obliged to.
The cycle clearly did not stop even in the midst of a global pandemic.
The cost savings purported by Gilead does not take into account the cost to treat non-responders to the drug and those that experience adverse events. 21% of patients that took remdesivir still experienced adverse events such as organ failure, hypotension, and viral pneumonia. These cost are again, passed on to the consumer through insurance premiums.
Just like deep-fried Oreos and reality TV, the pharmaceutical pricing nightmare is Made in the USA. Gilead knows it can get away with it here but it knows it cannot get away with it elsewhere. Gilead will be allowing a generic version of remdesivir to be sold in India for $66. Make no mistake that the high price of remdesivir is tolerated and accepted in the United States because Centers of Medicaid and Medicare are prohibited from negotiating drug prices. It didn’t matter if Gilead priced it at $50 or $10,000, CMS would have had to pay the price of this medication. It is solely on Gilead’s goodwill that remdesivir is priced at $3k instead of $10k.
Gilead and its supporters have told the public to relax. The price of remdesivir won’t be passed on to consumers as it will be paid for by insurance as part of your inpatient bill. But this is a short-term view of how health insurance cost works in America. Ultimately, all costs come back to consumers. Insurance companies will increase premiums and roll back on paying for other treatments to keep paying for high-priced drugs like remdesivir. This endless loop of highly priced drug > increase in insurance premiums > allowing high priced drugs > requiring high insurance premiums: has been ongoing for decades.
The cycle clearly did not stop even in the midst of a global pandemic. Gilead will be expecting a revenue of $8.5 billion from remdisivir sales alone by 2021, far exceeding the $1 billion investment they claimed to have made in developing this drug. They will be profiting handsomely from this pandemic, on a drug that was discovered on public grants.
This, among many other things, is what’s wrong in American healthcare. There is so much work to keep doing in order to fix it. For starters, we must allow CMS to negotiate for drug prices. At the very least, we must remain outraged at high drug costs and keep reminding ourselves that this should not be the norm.