Earlier this month, Gilead Sciences announced the price of remdesivir, a drug that shows some promise in treating COVID-19. But does it show enough promise to justify its price tag—another $3,120 total for a course of treatment on private insurance—given that taxpayers spent $99 million on its development?
Clinical trials have shown that remdesivir shortens hospitalization times and severity of illness, shortening recovery times by as much as 47 percent in some groups of patients. But while it helps in milder cases, it isn’t as effective in the sickest patients. Remdesivir is promising, but we don’t know if it saves lives.
Researchers, public health groups, and patient advocacy groups worried that despite remdesivir’s limited effectiveness, Gilead Sciences would demand an exorbitant price for the drug. In 2013, the company gained infamy (spurring a Senate investigation) for its high pricing of lifesaving hepatitis C medications, stopping many of the most vulnerable patients, particularly Medicaid recipients, from getting treatment at all. This concern about remdesivir worsened in May. When Gilead donated the first 11.5 million doses, it told its shareholders that, while access was important, it wanted to price remdesivir to make its production economically sustainable. Meanwhile, a report by the Institute for Clinical and Economic Review indicated that Gilead could break even by pricing remdesivir at $50 for a five-day course of treatment.
Gilead’s pricing of $3,100 for those on private insurance puts remdesivir’s cost in the upper middle of the expected range. While the price could have been worse, it’s still high for a drug that was taxpayer-funded and is of limited help for the sickest patients. Essentially, the American taxpayer is paying for remdesivir twice—once via the original federal grants that supported the drug’s development, and once again at the point of care.
Part of the reason for remdesivir’s price is probably the financial pressures Gilead is experiencing. Back in 2014 and 2015, Gilead’s hepatitis C drugs made it massive profits ($35 billion by 2015), but they were short-lived. Competition has driven its hepatitis C profits down at the same time scrutiny over its drug pricing besmirched Gilead’s reputation (and spurred a 2015 Senate investigation) and entangled the company in legal battles. Worse still, Gilead hasn’t had another success like its hepatitis C drugs. Remdesivir was the product of a collaboration between Gilead and the U.S. Army Medical Research Institute of Infectious Diseases, developed to solve a problem: diseases caused by RNA viruses, like Ebola, SARS, and MERS. Remdesivir itself was originally meant to treat Ebola but didn’t work as well as the antibody therapies being tested at the same time. Gilead’s drugs for nonalcoholic steatohepatitis have failed to perform in clinical trials. Remdesivir’s one virtue, from a commercial standpoint, is that it was the first drug for COVID-19 to arrive on the market. More (and potentially better) drugs are coming, so Gilead needs to make its profits while it can.
This is only the most recent example of the much broader problems with prescription drug pricing. But coming in the middle of a pandemic, it’s particularly outrageous. At the core, the problem is that the private companies creating drugs like remdesivir have to think of their own bottom lines even as the world suffers—even if the brunt of the costs of those projects were shouldered by the very taxpayers who may then struggle to pay the costs of those same drugs.
But there is a better way to encourage vital innovation during global emergencies. In World War II, penicillin was more precious than gold. It could only be produced in minuscule quantities, not nearly enough to meet the needs of a nation at war.
To meet this need, the U.S. government launched an initiative to produce the precious substance, funding a group of governmental laboratories, universities, and pharmaceutical companies. The project was a roaring success. The drug had been literally priceless in 1940. In 1943, it cost $20 a dose (more than $300 today). In 1945, it cost $0.55 (equivalent to about $8.36 in 2020). Penicillin was an issue of drug production, rather than development, but like remdesivir, the federally funded and military-backed project was undertaken to solve a public health and security problem. But the partnership also found new strains of the Penicillium mold, and new methods of culturing it that vastly increased the yield of penicillin. The collaboration allowed industry, academic, and federal labs to share their methods and data, then leveraged the resources of multiple companies to scale up production. The War Production Board had paid for much of the manufacturing facilities needed, and the Defense Procurement Board promised participating companies a market for the finished product. Penicillin is a success story of public-private cooperation. And unlike modern public-private cooperation, its product became widely, cheaply available.
Before and during WWII, most government-funded research took place in government laboratories. Projects like penicillin increased cooperation among government, academia, and industry. By the 1980s, government funding for both academia and industry was common, and incentives like the Bayh-Dole Act of 1980, which allowed recipients of federal funding to hold patents on products of their funded research, sweetened the deal.
The shift toward funding industry isn’t necessarily a bad thing. The problems we currently face are more a result of a lack of political will to use laws we already have, to ensure access to these inventions. For example, Bayh-Dole’s detractors feared that the law would tilt the balance in favor of the patent holders, so they added a check on their power in the form of what are called “march-in rights.” If a patent holder fails to make an innovation appropriately available to the public on “reasonable terms” or fails to meet “health and safety needs,” a federal agency may “march in” and assign a license to ensure the invention’s production. But these march-in rights have never been used, thanks to a combination of the bureaucratic difficulty of the process, a lack of funding transparency, and precedent set by the National Institutes of Health. But the NIH has essentially set an impossible standard for the use of the provision. Its previous decisions about march-in essentially require another company to be standing by, ready to produce the patented product—but any company doing so would be exposing itself to the risk of an intellectual property lawsuit brought by the patent holder, without any reassurance of NIH’s protection. Still worse, in other agreements it has struck with the pharmaceutical industry during the COVID-19 crisis, the Trump administration has effectively waived its march-in rights. The existing arrangement the administration has come to with Gilead further undermines any possibility of invoking march-in, since the administration seems content to meet Gilead’s terms to purchase remdesivir.
Another law that could increase access to drugs like remdesivir is Section 1498 of the U.S. Code. This law has been used extensively by the Department of Defense and, more importantly, was a common method to procure drugs for federal use in the 1950s and 1960s. It essentially allows the federal government to arrange to have a patented product manufactured without the patent holder’s permission, as long as it pays the patent holders royalties set by a court. Section 1498 could be a powerful tool to ensure that we have access to needed medications in an emergency, but it has not been used since the 1970s.
The story of penicillin shows that it’s possible to make private-public partnerships work, particularly during emergencies, without granting companies enormous concessions. Even the Bayh-Dole Act makes provisions to restrain the power of the patent holder to hold the public hostage to its profits. The lesson from history is simple: If we are to pay private entities public money to develop drugs (a massively profitable endeavor—most pharmaceutical profits do not go to research and development, but to buying up their own stock), we must hold them to their obligations under existing U.S. law. We must use the many legal tools at our disposal to make sure that the patients who need these drugs can get them. Otherwise, the taxpayer won’t only pay for the development and value of a given drug, but to bolster flailing companies. During an emergency like COVID-19, we can’t afford limits to public access.