Gilead CEO Daniel O. & # 39; Day said in the company's first-quarter revenue this week that "it's too early" to tell what the remdesivir business model can be.
"Our focus will be to ensure that we come up with a sustainable model that allows us to provide remedial care to patients across the globe, which is meant to provide access and affordable pricing," said O & # 39; Day. "We are currently reviewing the clinical data, the demand scenarios, the regulatory approvals."
Experts say it's important for the company to find a balance between pricing the drug at an affordable price and earning at least enough money to recoup the $ 1 billion it plans to spend on remedial development costs this year. The price may also be important to encourage Gilead and other pharmaceutical companies to continue to develop potentially important treatments.
"They need some kind of assurance that they will get their investments back," said Piper Sandler analyst Tyler Van Buren.
A promising potential Covid-19 treatment
The study showed that patients taking remdesivir recovered faster than patients who did not. The drug improved coronavirus patients' recovery time to 11 days from 15 and showed numerical mortality benefits – the number of patients who died of Covid-19 – although there were too few participants to prove at that time that remdesivir reduced mortality with statistical significance.
The company says it has not yet made a decision on how much it will charge for the drug after the donated supply is depleted.
"Given the continuing uncertainty in the path of the pandemic and in remdesivir clinical data, it is too early to define what the right business model after donation is to create a sustainable long-term supply for global needs," said Chief Financial Officer Andrew Dickinson on the call, adding that the company plans to provide a revenue update for the June quarter.
In theory, the drug could be a "blockbuster" for the company, even if it was moderately priced, says Raymond James analyst Steven Seedhouse. If the company achieves its hopeful treatment of 1 million Covid-19 patients by year-end and more by 2021 at a cost of several hundred dollars per treatment, Gilead could look at $ 1 billion in sales in a relatively short time period.
But Seedhouse said he was skeptical that the company would pay for his work.
Other analysts have taken a similar stance.
"The company should be commended for its efforts to quickly address this public health condition," JPMorgan analyst Cory Kasimov said in a recent note. "But we still think it is unlikely to lead to tangible, long-term cash flows," JPMorgan analyst Sa Cory Kasimov said in a note.
Serves in the middle of a pandemic
Some lawmakers and activists have asked Congress to intervene to ensure that remedies and other potential covid-19 treatments and vaccines are affordable.
"To beat this pandemic, it's clear we need better laws governing drug companies to make sure everyone – no matter where they come from or how they look – can afford Covid-19Reme treatments," said Minnesota Attorney General Keith Ellison in a release. "That is why I ask Congress to take swift action to cut down on pandemic profits."
But raising the cost of remedies, if proven effective in treating covid-19, can be profoundly detrimental to Gilead's image, according to Seedhouse. Retaining the company's reputation, he said, could end up being more valuable than raising the $ 1 billion it plans to spend this year on development, research and production work on remedies.
"This is a company that spends billions every year on research and development that doesn't come out," Seedhouse said. "Or is it more worthwhile to be the poster child of a responsible biopharmaceutical company doing the right thing? … The feeling and perception of the company means as much as the EPS they print."
Gilead CFO Dickinson emphasized that the company wants to keep remedivir "both accessible and affordable for governments and patients around the world."
Potential pricing models
Experts say it's important to start the conversation about a reasonable price for remdesivir now, before Gilead's donated supplies run out and ahead of official approval.
The report includes several potential pricing models, which the organization said will be updated as more data becomes available.
The first model, a "cost increase" approach, takes into account the marginal costs of producing additional doses of remedies, and the research and development costs incurred by the company. The first analysis puts the company's research and development costs at zero, because the drug was developed as a hepatitis C treatment before coronavirus.
That model puts the price of a 10-day race with strap divider for a Covid-19 patient at $ 10.
The other uses an analysis based on "quality-adjusted years of life" achieved by the drug, a model often used for pricing drugs that assess how much a drug can extend and improve the quality of a person's life.
That model suggests that prices should be offered from $ 390 per 10-day course of treatment if the drug ultimately found no benefit in reducing mortality, and $ 4,460 per course of treatment if the drug is found to reduce mortality.
Even the highest price – nearly $ 4,500 per 10-day treatment – is quite reasonable for other, similar types of emergency intervention drugs that reduce mortality, said Van Buren, the Piper Sandler analyst, calling it "one of the most affordable price tags you can see on a drug with mortality benefits. "
For the most part, this amount will also not be paid by patients, but by insurance companies or public insurance programs.
The ICER study is not intended to set exact prices for strap divider, a decision that will ultimately be up to Gilead, said ICER's vice president of communications and outreach David Whitrap.
"What we hope to do is talk," Whitrap said. "We believe now is the time, before there is a cost to this treatment, for the United States and the pharmaceutical industry to think about how we want to stimulate and reward this type of therapy, or any kind of therapy for Covid-19, in a way that accelerates development. of drugs and are also affordable and accessible to patients. "