Pricing Remdesivir: A Domestic Reference Price Approach

June 23, 2020

by Sean Dickson and Timothy A. Lash 

As COVID-19 continues to ravage US communities, the costs in terms of lives and lost wages are severe, particularly among seniors and minority communities. Treating COVID-19 shouldn’t disproportionately add to these costs, but the history of drug pricing in the United States provides reason for concern. The most prominent treatment, Gilead Sciences’ remdesivir, does not yet have a price, creating an opportunity to think critically about what boundaries may help define a reasonable price. While some boundaries have been suggested—ranging from $10 to cover only the cost of production to $4,500 to account for therapeutic benefit—we believe a more useful touchstone is the historical pricing of similar drugs. We call this approach domestic reference pricing, and we believe it can provide pricing guidance in advance of definitive evidence of therapeutic benefit that justifies a higher price.

Reference pricing has been proposed by both the Trump administration and House Democrats as a solution to the country’s outlier spending on prescription drugs. In both cases, proposals have focused on the prices paid in other countries. While this may be an effective approach for existing drugs, for new drugs, other countries may not yet have established pricing to use as a reference. For a drug such as remdesivir that treats an emergent condition, we cannot wait to see how other countries will price the treatment. For new drugs, and drugs treating COVID-19 in particular, domestic reference pricing offers a touchstone to guide pricing discussions immediately upon a drug’s launch.