The case of remdesivir: How do you calculate the cost of a pandemic drug?
After the US FDA revoked its emergency use authorization (EUA) for hydroxychloroquine/chloroquine, a highly genericized repurposed malaria drug, Gilead Sciences (US)'s antiviral remdesivir is the only COVID-19 treatment with an EUA. Following in the FDA's footsteps, regulators in Europe, and Japan have approved emergency use of the treatment and have benefited from donations of the company's entire supply of remdesivir globally through June 2020 (1.5 million individual doses).
Now that Gilead will start commercializing the drug starting next month, it has announced that it will price it at $390 per vial in all developed countries where remdesivir is authorized. This is equivalent to $2,340 for a 5-day course of treatment, or $4,680 for a 10-day course of treatment. It seems that this is the net price after factoring in government rebates. The company notes that the US price for private insurance companies will be $520 per vial or $3,120 for a 5-day course of treatment.
Separately, Gilead has signed contracts with nine generic manufacturers globally, that will be selling "cheaper" authorized generics of remdesivir for lower and middle-income countries. Some of these companies have already disclosed the prices of their generics. Beximco (Bangladesh) has priced its remdesivir generic at about $590-$710 for a 10-day treatment course, while Hetero and Cipla (both India) plan to launch their products in India at a price range of $390-$780 for a 10-day course of treatment. These prices have somehow been factored into the US Institute for Clinical and Economic Review (ICER)'s model of calculating the "cost-recovery" price for remdesivir in the US.
ICER calculates cost-recovery and cost-effective prices
ICER previously released its first assessment of remdesivir in May based on preliminary data, and determined at the time that the "cost recovery" price would be around $10 for a 10-day treatment regimen. Last week, ICER updated its pricing assessment noting that changes to the models were made to incorporate "recent clinical data, updated cost estimates, public comments, and interactions with the manufacturer".
In the updated cost-recovery model, ICER provided two options of calculating the benchmark price. One of the methods took into account production costs of the raw materials and the approximate mid-point generic pricing - ranging between $10 and $600 - although it could be argued that the authorised generic prices could still have a notable profit-margin.
The other "cost-recovery" estimate is based on Gilead's forecasted 2020 clinical development expenses of $1 billion and the company's expectation to sell around 1 million treatment courses this year. ICER noted that around $1,000 should be added to account for recovery of R&D expenses in 2020. The new benchmark price range was suggested at $1,110-$1,600 for a course of treatment. ICER added that if Gilead spends more money on clinical development of remdesivir, these additional costs could be included in the cost-recovery price estimate.
For ICER's base-case cost-effectiveness assessment - which now takes into account new data, including an adjusted hazard ratio for mortality and an adjusted rate ratio for recovery time from the National Institute of Allergy and Infectious Diseases (NIAID) trial (ACTT-1) - remdesivir would need to be priced between $4,580 and $5,080 to not exceed the incremental cost effectiveness ratio (ICER) of $50,000 per quality-adjusted life year (QALY), or per equal value of life-years gained (evLYGs).
ICER also evaluated the potential use of remdesivir with dexamethasone, and determined that the cost-effectiveness price benchmark for remdesivir would drop to $2,520-$2,800 due to the estimated reduction in underlying risk of mortality stemming from dexamethasone. Although dexamethasone data is preliminary and non-peer reviewed, the inexpensive and widely available steroid medication can significantly reduce mortality in hospitalized coronavirus disease 2019 (COVID-19) patients. It has quickly been incorporated by several countries as a treatment for COVID-19 patients, including the UK's National Health Service. Some US hospitals have already started administering off-label dexamethasone to COVID-19 patients in advance of any regulatory approval, with clinicians anticipating the steroid to become a standard of care for hospitalized patients. Dexamethasone costs around $15 for a ten-day regimen.
Price of remdesivir sets precedent for other COVID-19 treatments
A lot of attention is being placed on remdesivir, as the first investigational COVID-19 drug, to be formally commercialized next month. The pricing strategy for remdesivir will likely be echoed by other drug developers with COVID-19 treatments in the pipeline. The ICER assessment has been clearly revised based on significant information provided by Gilead, and provides some insight into the company's framework for determining the price of the treatment, at least for developed countries. Gilead's CEO Daniel O'Day has now confirmed the company's strategy to navigate this "unchartered territory" with considerable care, adding that one price was announced for all developed countries that takes into account those with the lowest purchasing power, in order "to remove the need for country by country negotiations on price."
Based on the current recommended protocol for a 5-day course of treatment, remdesivir ($2,340)is priced significantly below the traditional cost-effectiveness benchmark ($4,580-$5,080), but more than the cost-recovery price taking into account R&D costs ($1,110-$1,600). In fact, the price lies almost perfectly in-between ICER's two benchmarks.
The method used by ICER is not traditionally utilized for calculating cost recovery benchmarks, particularly the assumption of recouping the R&D costs within such a short time frame - potentially six months. In fact, ICER noted in a statement , "the extent to which research and development costs should be considered as an empirical element in considerations of pricing for new treatments is disputed," adding that the model is highly sensitive to the actual R&D spend, the number of treatments sold, and the timeline for recovering the costs.
It is worth highlighting however, that many things could change over the next six months. With the world pushing for a COVID-19 vaccine as early as September or October this year, and Operation Warp Speed ensuring production of enough doses to vaccinate the entire US population by January 2021, the outlook for remdesivir and other COVID-19 treatments looks highly uncertain. In this climate, recovering R&D costs in 2020 would be crucial to mitigating long-term risks. So much has changed in the first half of the year due to the pandemic, no one can really predict what the world will look like over the next six months.
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