In total President Trump was given eight drugs after his Oct. 1 positive test for COVID-19. He now seems to be out of the woods and on the mend, which is good news. This offers the opportunity to discuss how such drugs might be priced for the average person who may not have access to similar medical resources.
Some of the drugs the President took are garden variety. He was given supplemental zinc, Vitamin D, melatonin, Famotidine (to treat acid in the stomach), aspirin, the steroid dexamethasone, which is widely available and used to treat other conditions, and also a monoclonal antibody cocktail called REGN-COV2, which is still in late-stage clinical trials.
Trump also was given a five-day course of Remdesivir, made by Gilead and allowed via an emergency use authorization by the FDA. As Remdesivir seems to show a moderate benefit for patients with COVID-19, speculation has run rampant as to what it could cost.
Initial thoughts from experts in STAT listed the potential price range on Remdesivir from a top end of $4,500 for the five-day course (it may get people back to work ASAP), down to what one expert thought it should cost (considering the perceived public health benefits to the world and assuming Gilead would be motivated to set profit aside), at $12.50.
Generations Now spoke with Sean Dickson, Director of Health Policy at the West Health Policy Center to get his educated opinion on how pharmaceutical manufacturers arrive at such pricing and what we might expect from Gilead in this instance. Dickson spends his days working to ensure that health spending in the United States is kept in check. He also works on encouraging policies that would allow Medicare to negotiate the price of drugs and policies that restrict high drug launch prices and foster production of affordable drugs and generics.
The path to creating a drug is long and expensive, but as Dickson noted, manufacturers are not necessarily having to recoup research and trials costs as the research is done at universities (although they may support such research) and the larger pharmaceutical companies hire smaller companies to move the drug down the chain of development. There is early speculation when research looks promising on what companies might be able to charge for a drug, largely dependent upon the perceived size of the potential market (i.e., a successful Alzheimer’s drug would mean a giant market) and whether or not Medicare, for instance, might be footing the bill.
What the market will bear is the guiding principle, or as Dickson, who previously worked in the pharmaceutical industry put it, pharmaceutical companies will charge “how much they can get away with charging.”
Dickson wanted to make clear that this way of pricing medications is a relatively new development in the United States, as prior to 2006 and the Medicare Part D prescription drug benefit implementation, many older adults paid for medications out of pocket or via employer-based insurance plans.
At that point, as Dickson says, “the market wouldn’t bear much,” so drugs were far less expensive. Now Medicare has little control over the cost yet has to provide coverage. Injectable drugs in particular, such as Redemsivir, are now, as Dickson said, “astronomical.” They also can be hidden in the price of a hospital stay as drugs administered for COVID would be administered in the hospital. And drugs administered in the hospital fall under Medicare Part A billing.
The situation with COVID-19 differs, however, in that with Redemsivir, Gilead is leveraging a product the company had sitting on the shelf, for another purpose. Originally designed to treat Ebola, Redemsivir hadn’t proven effective against that disease, which means a shorter, less expensive development period this time around.
The immense publicity surrounding COVID-19 also may work in the future consumer’s favor as drug companies are under lots of public scrutiny, and the government is buying doses and distributing them, said Dickson. But the issue remains, which is that our current drug pricing system has no limits to what manufacturers can charge; they’ll charge what they want and then the government will have to negotiate it down.
To clarify this complex situation, and find a way to exert pressure on pharmaceutical companies to charge less, Dickson described a potential pricing model for Redemsivir, called domestic reference pricing, on which he wrote a piece this past June in HealthAffairs with co-author Timothy A. Lash.
Domestic reference pricing helps to anticipate what a drug launch price might be without relying upon older, slower pricing models. Usually to estimate prices one could compare what other countries charge (waiting for their review of the drug) or compare effectiveness of similar drugs, which also requires waiting for data.
Dickson starts by estimating what a drug company might have charged historically, when prices were lower prior to Medicare Part D. “Drug companies still made money and recouped their costs,” says Dickson of that era. Using that price he then looks at drugs similar to the one in question, which might treat the same disease. Then he adjusts for inflation and comes up with what he considers a reasonable price.
If, however, it’s not what Dickson calls a “me too” drug or one that already exists, but a new, innovative drug, a higher base price might be justified.
Remdesivir is slightly different as it is only administered by a physician, but he and Lash established a price of $610 for similar antivirals. Financial analysts set the price at $750, which they thought would allow for healthy returns.
Gilead has announced it will charge $2,340 to the government for Remdesivir, and $3,000 for private use. Of course, as Dickson points out, no one will really pay outright for this drug, if it succeeds in trial and is offered widely.
For now, West is using their domestic reference pricing model to unveil the true cost of medications. With such reference materials, it hopes that new drug policies it puts forward might be taken up by policymakers and end up as legislation.
Depending upon who lands in office in November, things could look very different. But as Dickson said, “what’s really important is that clearly the American people see healthcare and drug pricing as a top priority, and both candidates are putting forward aggressive ideas. But [such legislation] is best done through comprehensive change at the federal level.”