Want to know how progressives would change our healthcare system? We’ve just been given a preview of Medicare for All.
Six Senate Democrats including Elizabeth Warren and Bernie Sanders sent a letter to the Department of Health and Human Services last week according to The Wall Street Journal editorial board. They are calling for price fixes for Covid-19 treatment. The six told HHS Secretary Alex Azar that the Trump Administration “acquired its supply of remdesivirat an exorbitant cost” in a deal that allows Gilead Sciences to reap “windfall revenues” that are paid “by increased premiums for American families.”
The WSJ editors say this claim is false. But is does reveal much of the left’s sweeping plan for the government to control drug prices and even pharmaceutical manufacturing.
A little background is needed. The FDA authorized remdesivir in May for emergency use in hospitals after a randomized trial showed it reduced the time to recovery on average by four days. The trial also showed a 31% decline in mortality – from 11.6% to 8% – but the study’s sample of patients was too small to make the difference statistically significant.
New data from Gilead released this month showed that severely ill patients treated with remdesivirwere 62% less likely to die than patients with similar characteristics and disease severity. A separate analysis found that 74.4% of severely ill patients treated with remdesivir recovered within 14 days compared with 59% in a control group.
HHS negotiated a deal with Gilead on June 29 that gives the U.S. 100% of Gilead’s projected production for July (94,200 treatment courses) and 90% in August and September (407,700 courses). The U.S. will pay $2,340 per course – the same price as other developed countries – but the U.S. will get treatments months earlier.
The progressive senators say the Trump Administration is paying too much, but the Institute for Clinical and Economic Review (ICER), a nonprofit often cited by liberals who say drug prices are too high, praised Gilead’s “responsible pricing decision.” ICER opined in their June review that the drug’s clinical benefits would merit a price between $4,580 and $5,080 per treatment course and between $2,520 and $2,800 after accounting for potential benefits from the steroid dexamethasone, which an Oxford trial showed significantly reduced mortality in severely ill patients.
None of this satisfies the progressives. They claim privately insured Americans will pay $860 more through higher premiums. This is highly doubtful when considering that if remdesivirshortens hospital stays by four or more days, insurers, hospitals and patients will save thousands since hospitals spend an average of $2,500 per in-patient day.
Gilead explains that private insurers will pay more because of regulations that require drug makers to give government programs a large discount off the wholesale price. This accounts for discrepancies in the prices charged to private individuals. But even though the prices paid by privately insured patients are higher, this doesn’t mean the added expense will be passed on in the form of higher premiums for the reasons mentioned above.
But pricing isn’t the only thing progressives want to control. The senators demand “legal provisions that allow it to assert control over the production and distribution of remdesivir” because taxpayers “furnished over $70 million in research costs for the drug.” They want the government to seize patents for drugs that result in part “from publicly-funded R & D” and license them to “a generic manufacturer for production at a lower cost.”
This kind of thinking fails to understand the reality of the high cost of drug development. There is a reason that the U.S. leads the world in new drug development while socialized medicine countries must suffer from unavailability of many new drugs. Gilead actually discovered and developed remdesivirover ten years ago while exploring new treatments for Hepatitis C and respiratory syncytial virus. While the drug failed to be effective in these diseases, the National Institutes of Health has since helped fund in vitro and mouse studies of remdesivir’s efficacy against emerging viruses including Ebola, MERS, SARS and now Covid-19.
NIH funding of vaccines and treatments for infectious disease is quite common because the success rate is low but the potential benefits to society are great. Only a third of vaccines and a quarter of treatments for infectious diseases are approved after entering Phase One trials. Many other beneficiaries are in developing countries where drug makers can never recover R & D costs.
Gilead has already licensed remdesivirto five generic manufacturers at no cost to make and sell in 127 developing countries. They expect their development and manufacturing costs to exceed $1 billion by the end of this year.
None of this would be possible if progressives are allowed to control drug prices and manufacturing. Americans would inevitably wait longer for new treatments, just as patients in socialized medicine countries do now. These companies would no longer have the incentives to invest billions in R & D that might never prove profitable. The WSJ sums up the situation well: “Better pray the pandemic subsides before these Democrats control the government.”