An influential organization in the pricing of drugs in America, the Institute for Clinical and Economic Review (ICER), recently revealed the results of an initial analysis used to inform the debate around remdesivir pricing—an important matter given the recent COVID-19 clinical trials response the FDA’s emergency use authorization. ICER, in collaboration with external academic partners, developed the ICER-COVID models, involving 1) “cost-recovery” for the manufacturer, representing an estimate based on peer-reviewed methods of calculating minimum costs of production for a course of therapy; and 2) traditional cost-effectiveness analyses looking at the incremental health benefits and costs within the health system. Preliminary data available on remdesivir allows for initial non-peer-reviewed pricing analyses at this time, and the models will be used to track and evaluate any future COVID-19 treatments.
Gilead hasn’t shared any public marketing documents in regards to remdesivir but based on the recent clinical trial the anti-viral therapy does show clinical benefits. ICER suggests the drug is cost-effective at $4,460 per course of treatment. If the price tag was cut down to $1,000, Gilead could drive $1 billion in turnover this year alone. Jefferies analyst Michael Yee noted that the company is readying its supply chain to treat at least 1 million patients by year’s end.
ICER-COVID Model 1: Cost Recovery
This model consists of conceptual elements of the ICER model for a cost recovery pricing estimate, including 1) minimum cost of producing the final finished product; 2) research and development costs provided by the innovator; 3) research and development costs provided by the federal government; and 4) additional profits beyond cost recovery.
For the cost of producing the final finished product assumption, ICER uses data in an article by Hill et all in the Journal of Virus Eradication (2020). In the article, they calculated a figure of $9.32 US for a $10-day course of treatment. They round up to $10 for a 10-day course. If a 5-day course of treatment becomes the standard of care then the cost of recovery would accordingly shrink to $5.
Assumptions around R&D Costs
For this model, ICER assumes the costs of research and development to be $0. Here they position that because the drug was previously developed as part of a suite of agents for potential use in chronic Hepatitis C—and that given the maker successfully launched other dugs for Hepatitis C—that is appears reasonable that such costs have already been recouped in the successful market experience of the manufacturers other treatments in that area. Hence, they do not include research and development costs separate from the development costs already captured in the cost of production. ICER will consider as Gilead spends more on clinical trials that that total be considered.
ICER-COVID Model 2: Traditional Cost-Effectiveness
ICER developed a traditional cost-effectiveness model for COVID-19 treatments in collaboration with Drs. Melanie Whittington and Jon Campbell. These base case model results are based on the estimates of benefits on time to improvement and mortality, although of course the data from the clinical trial showed limitations on this front. This model captures quality of life improvements, mortality benefits, and the benefits of fewer days in the ICU, on ventilation, and in hospital.
Cost Effectiveness Analysis: Proceed with Caution
ICER notes that given we are in the midst of a pandemic, that generally public health emergencies with such great clinical evidence uncertainty, cost-effectiveness analysis results should be viewed with caution. In the case where cost-effectiveness is used to evaluate large-scale interventions, then policy makers should consider lower thresholds to accommodate both the uncertainty and to maintain affordability for immediate broad usage. Hence why ICER emphasizes the threshold price at $50,000 per incremental quality-adjusted life year (and equal value of a life-year gained). ICER reports that this threshold remains an established one in the U.S. context and is more likely to be policy-relevant for consideration of a treatment being evaluated for use in a public health emergency.
ICER’s assessment of remdesivir, based on the ICER-COVID model, leads to a price point of $4,500 per treatment course based on the assumption of mortality benefit form the findings from the ACCT study using a 10-day treatment course.
Broader Societal Benefits of an Economic Recovery
ICER positions that a true treatment will have powerful implications in regards to the broader economy. ICER is aware that such a treatment may alter how society contemplates the risk/reward tradeoffs of relaxing social distancing measures, which in turn could spur an economic recovery. ICER precludes such assumption(s) as they assume policymakers would view such a calculation as inappropriate—e.g. setting drug prices based on potentially broader economic benefits associated with future economic recovery.