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The Keckley Report

Is Gilead’s Price for Remdesivir Fair?

By July 6, 2020March 1st, 2023No Comments

Last week, Gilead Sciences announced pricing for its breakthrough Covid-19 drug remdesivir (brand name Veklury) approved by the FDA for emergency use in May. The company announced it will charge $2,340 for a typical course of treatment for people covered by government health programs (Indian Health Service, Veterans Health, and others) and $3,120 for U.S. patients with private insurance.

The Institute for Clinical and Economic Review (ICER), a nonprofit that sets benchmarks for what it thinks are fair prices for drugs sold in the U.S., said that remdesivir would be cost-effective at as much as $5,080 per treatment course. In its Phase 3 trial with 1063 patients hospitalized with the virus, the drug reduced hospitalization from 15 to 11 days for patients given remdesivir intravenously for 5 days: that a 31% faster recovery time and a mortality rate of 8% compared to 11.6% for those who didn’t have the drug. ICER estimates savings of $12,000 per patient as its rationale.

U.S. government analysts think ICER is right: they purchased 500,000 doses—essentially Gilead’s entire production capacity until September to be distributed to hospitals by HHS.

Patients hospitalized for Covid-19 virus and their families are hopeful.

Hospitals are waiting for details on how HHS plans to be distribute the drug, what it will cost as many face a surging hospitalization demand.

And Gilead investors are optimistic. Remdesivir’s clinical results to date have not been a slam dunk and competitive therapies (ex. steroid dexamethasone, Regeneron’s antibody therapy) are on the horizon. The majority of the company’s 36 stock analysts have advised their customers to hold their positions in Gilead Sciences (NASDAQ:GILD): its stock closed Friday at $76.35, up 17% year-to-date but below its 52-week high of $85.97. And sell-side analysts think remdesivir will add $2-4 billion a year to Gilead revenues through 2023 or perhaps beyond.


For the time being, remdesivir is the only drug approved by the FDA to treat patients being treated in hospitals for the Covid-19 virus. While more than 150 clinical trials for vaccines are underway, only a handful of anti-viral drugs to treat those infected are in development. That means that remdesivir will get lots attention about its clinical effectiveness and Gilead profits.

Gilead can make a strong case for its persistence in developing remdesivir: it traces its anti-viral R&D experience to 2009 in the Ebola, SARS, Marburg, MERS, and now COVID-19 pandemic outbreaks. Today, remdesivir if one of 4 “breakthrough therapies” in the company’s pipeline.

What’s delicate for the company is its pricing for remdesivir. That sensitivity is evident in the June 29 open letter from Gilead Chairman and CEO Daniel O’Day:

“In normal circumstances, we would price a medicine according to the value it provides… We have decided to price remdesivir well below this value. To ensure broad and equitable access at a time of urgent global need, we have set a price for governments of developed countries of $390 per vial. Based on current treatment patterns, the vast majority of patients are expected to receive a 5-day treatment course using 6 vials of remdesivir, which equates to $2,340 per patient…This price will be offered to all governments in developed countries around the world where remdesivir is approved or authorized for use..….By the end of this year, we expect our investment on the development and manufacture of remdesivir to exceed $1 billion (U.S.) and our commitment will continue through 2021 and beyond.”

O’Day is right to be sensitive to remdesivir’s pricetag. His company is betting big on its success. Gilead Sciences ((NASDAQ: GILD) has only been around since 1987. In 33 years, it has grown its revenues to $23 billion selling its virology, inflammatory disease, and oncology therapies in 35 countries. It’s the 13th biggest manufacturer competing for its piece of the $1.3 trillion global prescription drug market. Friday’s announcement that the European Commission granted conditional approval for remdesivir buoyed investor confidence. The prospect that remdesivir might increase the company’s global revenues by 10-20% per year for the next 4-7 years justifies attentiveness to its U.S. pricing: the U.S. represents 28% of the global market for prescription drugs. It’s key to a drug company’s profits.  But price transparency for drugs sold in the U.S. remains problematic for three simple reasons:

  • The details about the underlying Research and Development costs for drugs are closely guarded secrets in the industry.

  • The prices for drugs are based on a complicated supply chain involving manufacturers, distributors, retailers; legal and regulatory constraints involving patent laws and regulatory agencies and a highly fragmented payment system involving insurers and pharmacy benefits managers.

  • Public suspicion: Polls show that consumers trust that the drugs they are prescribed are safe and effective, but they distrust the companies that produce and distribute them believing manufacturers put profit above all else.Hoping to diffuse public pushback, Gilead defended its price based suggesting that “insurers and government programs, not patients, will shoulder most of the cost”.

We’re in the midst of a resurgence of Covid hospitalizations: in 36 states, hospitalizations are increasing, and no one is sure when it might slow down. No doubt, Gilead could justify a higher price for Remdesivir given ICER’s advisory that it could charge $2000/patient more than its announced price.

In its price for remdesivir, Gilead views its price as fair. ICER seems to agree. It remains to be seen whether it’s true.



Jake Frankenfield “Which Industry Spends the Most on Lobbying?” Center for Responsive Politics May 7, 2020

“Gilead Sciences Update On The Company’s Ongoing Response To COVID-19” Gilead

“An Open Letter from Daniel O’Day, Chairman & CEO, Gilead Sciences” June 29, 2020;–ceo-gilead-sciences

Matthew Herper “Gilead announces long-awaited price for Covid-19 drug remdesivir” STATNews  JUNE 29, 2020;

Rachel Cohrs “Hospitals will have to start paying for COVID-19 drug remdesivir this summer” Modern Healthcare June 29, 2020;

“Hospitals and Health Systems Continue to Face Unprecedented Financial Challenges due to COVID-19” American Hospital Association;

Fauci:  U.S. Could See 100,000 New Covid-19 Cases Per Day

The U.S. could see as many as 100,000 new Covid-19 cases a day if the current trajectory is not averted, infectious disease expert Anthony Fauci said during a Senate committee hearing Tuesday. The U.S. is currently seeing around 50,000 new cases daily with increases in 36 states.

“Fauci, CDC chief testify before Senate on US coronavirus response” The Hill June 30, 2020;

AP Report: Erosion of Public Health Funding

Since 2010, spending for state public health departments has dropped by 16% per capita and spending for local health departments has fallen by 18%, according to a KHN and Associated Press analysis of government spending on public health. More than three-quarters of Americans live in states that spend less than $100 per person annually on public health (spending ranges from $32 in Louisiana to $263 in Delaware). State and local spending for public health is 2.7% of budgets of which 27% is sourced from federal programs. At least 38,000 state and local public health jobs have disappeared since the 2008 recession.

Lauren Weber, Laura Ungar, Michelle R. Smith, Hannah Recht , Anna Maria Barry-Jester “Hollowed-Out Public Health System Faces More Cuts Amid Virus” Kaiser Health News July 1, 2020

Hospital Margins Negatively Impacted by Erosion of Commercial Payments

The Stanford researchers offer a sobering view of financial conditions for hospitals resulting from erosion of their commercially insured patient populations: 40.8 million have lost jobs in the pandemic reducing the commercially insured market by 20%. “These changes mean that shifting 10% of privately insured patients to Medicaid would result in a loss of revenue of 3.2%, whereas in 2000 it would have cost hospitals only 0.8%.”

“Overall, we estimate that hospitals will lose $95 billion in annual revenue because of the shift from public to private insurance and $33 billion owing to cost-aversive behaviors by the privately insured (assuming a 5% decrease in utilization).5 Combined, these losses will lower profit margins from their previous 7.8% to −1.7%”

Ben Teasdale, Kevin Schulman “Are U.S. Hospitals Still “Recession-proof”?” New England Journal of Medicine July 1, 2020;

Definitive: 40% of hospitals, 36% of Physician Organizations at Risk of Closure

According to a Definitive Healthcare survey of 81 ACO’s released last Tuesday:

  • 40% are at risk of closure: two-thirds have fewer than 100 beds and 44% are located in counties where 40% or more of COVID-19 hospitalizations are patients in intensive care

  • At some point this year, over 40% of organizations expect to hit peak bed capacity and 30% predict they will face clinical staffing shortages.

  • 75% of organizations indicated that they obtained personal protective equipment (PPE) from “means outside of their normal supply chain methods.”

  • 36% of physician practices are at risk of closure, including nearly 70% of organizations with 10 or less physicians.

“Impact on Acute Care Organizations & Physician Practices” Definitive Health June 30, 2020

AHA: Covid-19 losses for hospitals projected to be $323 billion in 2020

Hospitals and health systems currently report average declines of 19.5% in inpatient volume and 34.5% in outpatient volume relative to baseline levels. The AHA estimates an additional $120.5 billion in total financial losses from July 2020 through December 2020 should hospitals and health systems reach baseline patient volumes by July 2021, or an average of $20.1 billion per month. These estimates are in addition to the $202.6 billion in losses the AHA estimated between March 2020 and June 2020 bringing the total projected losses to hospitals and health systems in 2020 to at least $323.1 billion.

“Hospitals and Health Systems Continue to Face Unprecedented Financial Challenges due to COVID-19” American Hospital Association June 29, 2020

Pew: Pandemic Exacerbates Racial Tension

Per Pew Research’ poll of 9,654 U.S. adults conducted June 4-10, 2020:

  • 38% of African Americans and 39% of Asian Americans say people have acted as if they were uncomfortable around them because of their race or ethnicity since the beginning of the outbreak.

  • 31% of Asian Americans say they have been subject to slurs or jokes because of their race or ethnicity since the outbreak began, compared with 21% of Black adults, 15% of Hispanic adults and 8% of white adults.

  • 51% of African Americans say they have heard expressions of support because of their race or ethnicity since the coronavirus outbreak compared to 29% of Hispanic and 28% of Asian adults say the same.

Ruiz et al “Many Black and Asian Americans Say They Have Experienced Discrimination Amid the COVID-19 Outbreak” Pew Research July 1, 2020

Henry Ford System Study: Hydroxychloroquine Effective for Hospitalized Covid-19 Treatment

Treatment with hydroxychloroquine cut the death rate significantly in sick patients hospitalized with COVID-19 and without heart-related side-effects, according to a new study published last week by Henry Ford Health System.

In a large-scale retrospective analysis of 2,541 patients hospitalized between March 10 and May 2, 2020 across the system’s six hospitals, the study found 13% of those treated with hydroxychloroquine alone died compared to 26.4% not treated with hydroxychloroquine. None of the patients had documented serious heart abnormalities; however, patients were monitored for a heart condition routinely pointed to as a reason to avoid the drug as a treatment for COVID-19.

Overall, hospital system patients in the study experienced an 18.1% in-hospital mortality rate. Regardless of treatment, mortality was highest in patients older than 65, Caucasians, patients admitted with reduced oxygen levels and patients who required ICU admission.

Arshad et al “Treatment with Hydroxychloroquine, Azithromycin, and Combination in Patients Hospitalized with COVID-19” International Journal of Infectious Diseases July 1, 2020


Disparity: Racial Discrimination Linked to Increased Hypertension Risk

Researchers followed 2000 African Americans enrolled in a heart study in Jackson MS for 13 years. Overall, 52% of the participants developed hypertension over the follow-up period. After adjustment for age, gender, socioeconomic status and hypertension risk factors, medium versus low levels of lifetime discrimination and high versus low levels of lifetime discrimination were associated with a higher incidence of hypertension. No statistically significant interactions with gender, age, attribution, or coping were present. Higher stress from lifetime discrimination was associated with higher hypertension risk after adjustment for demographics.

Forde et al “Discrimination and Hypertension Risk Among African Americans in the Jackson Heart Study” Hypertension July 1, 2020

StartUp Health: Venture Funding for Pandemic Solutions Increased in First Half, 2020

According to StartUp Health, venture capital funding in healthcare intensified in the first half of 2020 as COVID-19 made virtual care and similar technologies indispensable.

  • Start-ups focused on telehealth, mental health, wearables and even transportation have gained new relevance during the pandemic.

  • Global venture capital funding for digital health and health innovation totaled $9.1 billion in the first half of the year, up from $7.7 billion during the same period in 2019.

  • The first half of 2020 recorded 23 so-called mega deals, those valued at $100 million or more, compared with just 14 such deals in the 2019 period. The biggest deal StartUp listed in its report is a massive, $390 million Series D round from Grail, which is working on a blood test to detect multiple forms of cancer.

Tara Bannow “Pandemic spurs flood of venture capital funding to healthcare startups” Modern Healthcare June 30, 2020

Oklahoma Voters Approve Medicaid Expansion

Tuesday, Oklahoma voters passed resolution 802 to expand the state’s Medicaid plan by a vote of 50.5% to 49.5% becoming the 37th state to expand. It potentially adds 200,000 to the state’s current enrollment of 833,302 and pre-empts Republican Gov. Kevin Stitt’s plan to pursue a Medicaid block grant from CMS.

“Oklahoma State Question 802, Medicaid Expansion Initiative (June 30, 2020)” Ballotpedia,_Medicaid_Expansion_Initiative_(June_2020)

Louisiana Abortion Law Struck Down

Last week, the U.S. Supreme Court struck down a 2014 Louisiana law that could have closed two of the state’s three abortion clinics in a 5-4 vote. The four liberal justices reaffirmed their 2016 decision that the key feature in both the Texas (2016) and Louisiana laws—that abortions could be performed only by doctors granted permission by a local hospital to admit a patient should something go wrong—has no medical benefits and thus interferes with a woman’s constitutional right to end a pregnancy. The fifth vote came from Chief Justice John Roberts, who wrote separately on narrower grounds to say that precedent required the same result.

Jess Bravin “Louisiana Abortion Law Struck Down By Supreme Court” Wall Street Journal June 29, 2020;

EmpowerHMS Leaders Indicted for Lab Billing Fraud

Jorge A. Perez, a Miami entrepreneur and 9 others who led a rural hospital empire was charged in an indictment unsealed Monday in what federal prosecutors called a $1.4 billion fraudulent lab-billing in rural hospitals acquired or managed by their company, EmpowerHMS. The company affiliated with18 hospitals in 8 states: in the past 2 years, 12 have entered bankruptcy (half of total rural closures) and 8 have closed.

Lauren Weber, Barbara Feder Ostrov “Hospital Executive Charged In $1.4B Rural Hospital Billing Scheme” Kaiser Healthcare News  June 30, 2020

AAMC: Physician Workforce Shortage Increasing

The new AAMC analysis of physician workforce demand through 2033 found:

  • Physician demand will grow faster than supply, leading to a projected total physician shortage of between 54,100 and 139,000 physicians by 2033.

  • A primary care physician shortage of between 21,400 and 55,200 is projected by 2033.

  • A shortage of non-primary care specialty physicians of between 33,700 and 86,700 is projected by 2033, including 17,100- 28,700 for surgical specialists, 9,300- 17,800 for medical specialists, 17,100- 41,900 for the other specialties category.

  • From 2018 to 2033, the U.S. population is projected will grow by 10.4%, from about 327 million to 361 million: the population under age 18 is will grow by 3.9%while the population aged 65 will increase by 45.1%.

“The Complexities of Physician Supply and Demand: Projections From 2018 to 2033” Association of American Medical Colleges June 2020;

Mental Health Hearing Spotlights Psychiatrist vs Psychologist Turf Battle

Last Tuesday, the House Energy & Commerce Health Subcommittee held a hearing on bills to address the growing mental healthcare crisis. One bill, H.R. 884, the Medicare Mental Health Access Act, that would treat clinical psychologists as physicians when it came to providing clinical psychology services to Medicare beneficiaries drew sharp reaction:

Arthur Evans Jr., PhD, CEO of the American Psychological Association “Requiring psychologists to have to go through psychiatrists to provide services is just unconscionable…” Jeffrey Geller, MD, MPH, president of the American Psychiatric Association, countered “Psychologists are not physicians. Psychologists do not have medical training. Psychiatrists treat patients with mental illness and co-morbid medical illnesses in inpatient and partial hospital settings. You cannot be equipped to do this without a medical school background.”

Note: The conflict between psychologists and psychiatrists is longstanding as each questions the relative value of cognitive therapies and counseling vs. treatments that often include prescription drugs.

Joyce Frieden Psychologists’ Practice Scope an Issue at House Hearing”” MedPage Today June 30, 2020

Dental Insurance Attractive to Medical Insurers

According to a report and survey of 106 insurance executives by Chicago-based consulting firm West Monroe Partners:

  • Approximately 80% of health insurers also offer dental coverage currently, an increase from 68% in 2018

  • The portion of health insurers offering adult dental benefits bundled with health coverage has grown from 22% in 2018 to 48% this year. Even so, about 97% of consumers still buy standalone dental plans.

  • 63% say they expect the market for individual dental plans to grow in the next five years, while 48% said they expect the market for employer-sponsored dental plan membership to grow.

  • While only a third of dental insurers today offer bundled products with a health insurer, 46% say they’ll do so in the next five years.

In 2018, according to the latest data from the National Association of Dental Plans, 260 million Americans (80% of the population), had dental coverage; 66.7 million Americans had no dental coverage which includes at 27.5 million who also had no medical insurance.

Shelby Livingston  “Health insurers drill deeper into dental benefits” Modern Healthcare July 2, 2020

JAMA: Physician Resilience Stronger, Burnout Lower than Working Population

In this cross-sectional survey study of 5445 respondents from among 30 456 physicians conducted between October 12, 2017 and March 15, 2018, the physicians had significantly higher resilience and lower burnout scores than the general employed US population.

West et al “Resilience and Burnout Among Physicians and the General US Working Population” July 2, 2020 JAMA Network;