Price, profit and the Covid-19 health technology pool: The example of remdesivir

We cannot yet know the precise trajectory of the Covid-19 pandemic, nor which therapies or vaccines will eventually prove most effective in its treatment or prevention. Nevertheless, decisions may have to be taken soon about scaling up the manufacture and deployment of some of those that are already available, depending on the outcome of large- scale clinical trials such as the Solidarity trial being undertaken by the World Health Organization (WHO). Price will be an important factor in this scale up.

Let’s take the example of remdesivir, an antiviral medicine developed by the American biopharmaceutical firm Gilead Sciences. Based on the outcome of a small clinical trial conducted by the National Institute of Allergy and Infectious Diseases (NIAID) in the United States, the American Federal Drug Administration (FDA) has granted emergency approval for remdesivir in the treatment of Covid-19. Gilead owns IP rights covering remdesivir in most high-, middle- and low-income countries and so, at least at first, it will be for Gilead to decide how it is to be marketed. Following the expiry of an initial donation programme, it seems likely that Gilead will broadly pursue a ‘higher price’ for high- and middle-income countries and one or more ‘lower prices’ for low-income countries.

If Gilead were to follow the same ‘higher price’ approach it took with earlier blockbuster medicines such as sofosbuvir (Sovaldi, a hepatitis C treatment), it will price remdesivir not on the basis of the cost of its manufacture or its development, but instead in terms of the ‘value’ that it is perceived to bring in the treatment of Covid-19. The NIAID clinical trial suggests that a 10-day course of remdesivir, administered intravenously, yields a 31% reduction in recovery time for Covid-19 patients. Treating this modestly positive outcome in terms of a ‘value-based’ pricing model, an analysis by the Institute for Clinical and Economic Review (ICER) suggests that $4,500 per treatment course would be reasonable. Other pharmaceutical analysts have suggested a price of $10,000. Given that Gilead is anticipating it will supply at least a million courses of treatment of remdesivir by the end of this year, this approach suggests that remdesivir could become another of the firm’s multi-billion dollar blockbuster medicines.

Gilead will be taking a different approach to ‘lower prices’ for remdesivir in low-income countries, building on its experience with voluntary licensing programs, for example, those undertaken in conjunction with the Medicines Patent Pool (MPP). Gilead has announced the agreement of non-exclusive voluntary licences with Cipla Ltd., Ferozsons Laboratories, Hetero Labs Ltd., Jubilant Lifesciences and Mylan, manufacturers based in India and Pakistan, permitting the production of ‘authorised’ generic versions of remdesivir. These licences will be royalty-free until either the WHO declares that the Public Health Emergency of International Concern (PHEIC) is over (signalling the end of the pandemic) or another medicine or vaccine is approved to treat or prevent Covid-19. These licences permit the generic manufacturers to set their own prices, although none of these generic prices have yet been announced. One problem, though, is that these licences restrict export to a list of 127 predominantly low- and lower-middle income countries. The limited economies of scale that follow from this market partitioning therefore constrain how low these generic prices can go.

An indication of where they could start is provided by Beximco Pharmaceuticals Ltd. (a manufacturer in Bangladesh, part owned by Norges Bank, the Norwegian Central Bank), which has announced the independent development of a generic version of remdesivir. WTO Members agreed in 2015 that Least Developed Countries (LDCs) are not required to provide IP rights covering pharmaceutical products until 2033. Gilead has no relevant IP rights in Bangladesh and its permission is not therefore required to manufacture there (this will also be true in countries where Gilead lose all their IP rights: actions have been launched to revoke its patent(s) in India). Beximco’s generic version of remdesivir will be donated to the public sector in Bangladesh. It will be supplied to the private sector in Bangladesh, and presumably to other LDCs, at a price likely varying between $295 and $781, depending on the length of the course of treatment required. Independent analysis suggests that the lowest possible theoretical price for generic remdesivir, taking account of both reasonable profit and tax, should be significantly lower still, at about $10 per 10-day course of treatment.

Prices currently discussed for one 10-day course of treatment with remdesivir therefore range over three orders of magnitude: from $10,000 to $10. Such a range is painfully familiar to those who worked on getting adequate access to HIV medicines after the entry into force of the WTO TRIPS Agreement, where treatment prices for one patient for one year began at $10,000 in 2000 but fell by 99% to around $100 in 2006 due to generic competition. On the basis of these prices for remdesivir, decision makers could theoretically choose to treat either one patient or one thousand patients per $10,000 of health budget.

If remdesivir does prove to be sufficiently effective in the treatment of Covid-19 and if Gilead decides to adopt a blockbuster strategy and to set the price of remdesivir at the higher end of the spectrum, governments will have to decide whether this price can be justified. They will also have to decide whether it is affordable. A transparent accounting of the costs incurred by Gilead during development is unavailable. A significant portion of these costs will already have been covered by the estimated $60 billion earned from its Hepatitis C virus (HCV) R&D programme, from which both sofosbuvir (Solvadi) and remdesivir came. The subsequent development of remdesivir for use in the treatment of Covid-19 has been something of an accident from Gilead’s perspective and would not have taken place at all were it not for the pre-clinical and clinical trials undertaken by various agencies of the U.S. government, who tested remdesivir for use in the West African Ebola outbreak of 2014 – 2016. This vital public support has led to claims that the U.S. government ought to be able to influence Gilead’s pricing decisions for remdesivir, or that U.S. government scientists ought to have been listed as co-inventors on remdesivir-related patent applications.

If governments cannot agree with Gilead on a justifiable and / or affordable price, they are free to grant compulsory licences (as provided for in Art. 31 WTO TRIPS Agreement and as expressly confirmed in the 2001 Doha Declaration on the TRIPS Agreement and Public Health), authorising the manufacture, importation and/or sale of generic remdesivir without Gilead’s permission. A coordinated set of compulsory licences in a significant number of high- or middle- income countries could permit the price of generic remdesivir to be brought sharply down towards the lower end of the spectrum. It is true that many of the wealthiest High-Income Countries (HICs) have unilaterally opted-out as importers from the Art. 31bis mechanism agreed by WTO Members to facilitate compulsory licensing for export, which will constrain the size of the market that can be served via compulsory licences for export in other countries. Nevertheless, with political will, it is possible that they will reconsider and find a solution to this opt-out problem. Compulsory licensing would represent a reputational catastrophe for Gilead, and by association the whole pharmaceutical industry. Given the context of Covid-19, though, it may be more likely than ever before.

A more positive alternative to blockbuster strategies and compulsory licensing can readily be suggested. Prompted by the government of Costa Rica, the World Health Organisation (WHO) will soon be launching a Covid-19 health technology pool, supported by UNITAID and the Medicines Patent Pool. The WHO will call for an open and collaborative approach to battling Covid-19 which, as recognised in a strongly worded editorial in the leading journal Nature (“Coronavirus: everyone wins when patents are pooled”), is needed more than ever now. This initiative should encourage pharmaceutical firms to pool potentially vital scientific information about their therapies, including relevant pre-clinical and clinical trial data, such that the development of optimal formulations and combinations of therapies can be driven forward as quickly as possible. Gilead has excellent technical skills and resources but so too do many others around the world. The use of remdesivir in the treatment of Covid-19 (and perhaps its potentially advantageous precursor compound GS-441524) might be more quickly improved in collaboration with others than if Gilead tries to do it alone.

Further, this initiative should encourage pharmaceutical firms to abandon their market partitioning and expand existing voluntary licensing programmes to permit worldwide generic production, harnessing maximum economies of scale to drive the prices of those optimised therapies down as quickly as possible for everyone. This would require pharmaceutical firms to cede their monopoly control over who is, and who is not, permitted to produce. Many people will be astonished that companies were in a position to exert such monopoly control in the first place. It would not, however, require them to waive their IP altogether and they could still be remunerated with fair and reasonable royalties for the production that does take place.

A positive engagement by Gilead and other pharmaceutical firms with the Covid-19 health technology pool would reflect their recognition that a business-as-usual maximisation of individual profit is not the appropriate response to the pandemic. Instead, what needs to be maximised is the chance that the best possible versions of their therapies, vaccines and other health technologies can be deployed as quickly, cheaply and effectively as our combined planetary resources allow. Governments have already had a change of heart about business-as-usual and have announced a much more public health focussed ‘global public good’ approach to developing therapies, vaccines and other health technologies for use against Covid-19. It is up to Gilead and the rest of the pharmaceutical industry to follow their lead. As they must be acutely aware, the whole world is watching.