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1/
Gilead announced its #pricing pricing for antiviral drug Remdesivir (try saying that fast) and justified it with an open letter from their CEO.
2 price points for the same drug:
For Governments of developed world: $390/dose, $2340 total
For US insurers: $520/dose, $3120 total
Gilead announced its #pricing pricing for antiviral drug Remdesivir (try saying that fast) and justified it with an open letter from their CEO.
2 price points for the same drug:
For Governments of developed world: $390/dose, $2340 total
For US insurers: $520/dose, $3120 total
2/
Before I make my observations on pricing, the announcement and the reasoning behind this, let us look look at the two predictable reactions from two different stakeholders.
People (and some Politicos): Too high, profit maximizing
Wall Street: Too low, left money on the table
Before I make my observations on pricing, the announcement and the reasoning behind this, let us look look at the two predictable reactions from two different stakeholders.
People (and some Politicos): Too high, profit maximizing
Wall Street: Too low, left money on the table
3/
The second opinion has softer variants, clustered around the idea that the price is not too high.
WSJ: Gilead wise to leave money on the table https://www.wsj.com/articles/gilead-is-wise-to-leave-remdesivir-money-on-the-table-11593439722
FiercePharma: Fair price https://www.fiercepharma.com/marketing/gilead-s-covid-19-therapy-remdesivir-worth-4-460-per-course-says-pricing-watchdog
ICER: Responsible pricing https://icer-review.org/blog/icer-comments-on-gileads-pricing-for-remdesivir/
The second opinion has softer variants, clustered around the idea that the price is not too high.
WSJ: Gilead wise to leave money on the table https://www.wsj.com/articles/gilead-is-wise-to-leave-remdesivir-money-on-the-table-11593439722
FiercePharma: Fair price https://www.fiercepharma.com/marketing/gilead-s-covid-19-therapy-remdesivir-worth-4-460-per-course-says-pricing-watchdog
ICER: Responsible pricing https://icer-review.org/blog/icer-comments-on-gileads-pricing-for-remdesivir/
4/
There is one more opinion from another leading financial pub FT. @FTLex rehashes points from the Gilead letter, touches basic supply-demand and ends up the observation that given short time demand due to pandemic this could be seen as surge pricing
There is one more opinion from another leading financial pub FT. @FTLex rehashes points from the Gilead letter, touches basic supply-demand and ends up the observation that given short time demand due to pandemic this could be seen as surge pricing
5/
So what is it? Is this a case of #pricing right?
How about some basics like does the drug work and/or save lives?
The drug's stated benefits (I believe vetted by FDA?) is average of 4 days reduction in hospital stay.
So far no stated claim of saving lives but others hint at it
So what is it? Is this a case of #pricing right?
How about some basics like does the drug work and/or save lives?
The drug's stated benefits (I believe vetted by FDA?) is average of 4 days reduction in hospital stay.
So far no stated claim of saving lives but others hint at it
6/
This drug, 6 vials taken over 5 days by those hospitalized due to COVID-19, lets them return home, on average 4 days earlier than if they did take the drug.
We do not know the variance to say what percentage would be unlucky to not save any days despite taking the drug.
This drug, 6 vials taken over 5 days by those hospitalized due to COVID-19, lets them return home, on average 4 days earlier than if they did take the drug.
We do not know the variance to say what percentage would be unlucky to not save any days despite taking the drug.
7/
So Gilead leads with this benefit in its letter and anchors on the value created (cost avoided) from this 4 day early discharge-
"Taking the example of the United States, earlier hospital discharge would result in hospital savings of approximately $12,000 per patient. "
So Gilead leads with this benefit in its letter and anchors on the value created (cost avoided) from this 4 day early discharge-
"Taking the example of the United States, earlier hospital discharge would result in hospital savings of approximately $12,000 per patient. "
8/
Notice that their letter does not state early recovery but says discharge. This nuance matters. The benefits are circumscribed to just savings from hospital fees, and that too in US. It is savings for insurers.
Notice that their letter does not state early recovery but says discharge. This nuance matters. The benefits are circumscribed to just savings from hospital fees, and that too in US. It is savings for insurers.
9/
Gilead only hints at other benefits from shorter stay. It is likely the patients recover just enough to be discharged but may not fully recover to resume normal activities or return to work. Others like ICER are not so subtle with these supplemental benefits.
Gilead only hints at other benefits from shorter stay. It is likely the patients recover just enough to be discharged but may not fully recover to resume normal activities or return to work. Others like ICER are not so subtle with these supplemental benefits.
10/
This is value messaging, asking customers to focus on economic value created from the product and using high estimate to anchor them with $12000 hospital savings.
Compared to this $3120 is a steal no?
This is value messaging, asking customers to focus on economic value created from the product and using high estimate to anchor them with $12000 hospital savings.
Compared to this $3120 is a steal no?
11/
Naturally Wall street camp is not happy. They contend that Gilead is leaving money on the table when the customer savings are $12000. They should note that you can't capture all value, nor is the value delivered same to all (average of 4 days, remember).
Naturally Wall street camp is not happy. They contend that Gilead is leaving money on the table when the customer savings are $12000. They should note that you can't capture all value, nor is the value delivered same to all (average of 4 days, remember).
12/
Striking a balance, some state Gilead should have priced it close to $5000 for the six doses, $4460 to be precise. https://icer-review.org/wp-content/uploads/2020/05/ICER-COVID_Initial_Abstract_05012020-3.pdf
For all this precision their model makes whole lot of assumptions.
Striking a balance, some state Gilead should have priced it close to $5000 for the six doses, $4460 to be precise. https://icer-review.org/wp-content/uploads/2020/05/ICER-COVID_Initial_Abstract_05012020-3.pdf
For all this precision their model makes whole lot of assumptions.
13/
You would think the people in the first camp are the first to bring up the cost of goods argument. That is not the case, it is the people supporting Gilead's position who are quick to embrace the cost argument, so they can dismiss it quickly.
You would think the people in the first camp are the first to bring up the cost of goods argument. That is not the case, it is the people supporting Gilead's position who are quick to embrace the cost argument, so they can dismiss it quickly.
14/
Journal of Virus Eradication states that for making and delivering 6 doses of Remdesivir, it would cost Gilead $10.
People in price is right camp state the cost but then say, "but what about the R&D investments", while simultaneously making a value based pricing argument.
Journal of Virus Eradication states that for making and delivering 6 doses of Remdesivir, it would cost Gilead $10.
People in price is right camp state the cost but then say, "but what about the R&D investments", while simultaneously making a value based pricing argument.
15/
Cost based argument goes like - Gilead sunk $1B and they need to recover it. The US government has already committed to buying half a million courses (6 vials each) at $2340 a course. That is $1.165B in revenue net $10/course and $165M in profit in 3 months.
Cost based argument goes like - Gilead sunk $1B and they need to recover it. The US government has already committed to buying half a million courses (6 vials each) at $2340 a course. That is $1.165B in revenue net $10/course and $165M in profit in 3 months.
16/
I do not see the cost based argument or the justification to offset R&D stand up at these numbers. It comes down to hospital fee savings as only justification.
It begs us to ask why does it cost $3000/day in US hospitals?
I do not see the cost based argument or the justification to offset R&D stand up at these numbers. It comes down to hospital fee savings as only justification.
It begs us to ask why does it cost $3000/day in US hospitals?
17/
To further weaken the R&D argument, the drug was not researched, invented and developed just for COVID-19. It was originally developed for Ebola, it didn't work, used for SARS treatment, and recently for Hepatitis-C a $1000 a dose for 84 doses.
To further weaken the R&D argument, the drug was not researched, invented and developed just for COVID-19. It was originally developed for Ebola, it didn't work, used for SARS treatment, and recently for Hepatitis-C a $1000 a dose for 84 doses.
18/
At this point in its lifecycle it is fair to state they must have recovered several times their original investment.
Oh in in India and Bangladesh the drug is priced $300-$800 a course (1/10 to 1/4).
You wonder what happened to cost argument there.
At this point in its lifecycle it is fair to state they must have recovered several times their original investment.
Oh in in India and Bangladesh the drug is priced $300-$800 a course (1/10 to 1/4).
You wonder what happened to cost argument there.
19/19
I think the drug may be priced correctly but it is not priced right. But that is not just the issue with the pharma. It is a problem with our system, infrastructure and all the world governments' (especially US) lack of investment for public health.
I think the drug may be priced correctly but it is not priced right. But that is not just the issue with the pharma. It is a problem with our system, infrastructure and all the world governments' (especially US) lack of investment for public health.
