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Lawmakers Press HSS for Information on Remdesivir Pricing Negotiations with Gilead

Last month, the Food and Drug Administration (FDA) gave its first full approval for a COVID-19 therapeutic to Gilead Sciences’ remdesivir, an antiviral drug that has demonstrated moderate effectiveness in shortening the median recovery time from 15 days to 11 days for patients hospitalized with COVID-19.

In July, lawmakers first raised questions with Secretary Azar about the high cost of the therapy for U.S. insurers, consumers, and taxpayers. HHS has not yet responded to this inquiry. Under an agreement with HHS, Gilead charged U.S. hospitals $3,200 per treatment for remdesivir-the highest price in the world, $860 more than other developed countries. That difference represented a revenue windfall for Gilead of nearly half a billion dollars under the company’s agreement with HHS for half a million treatment courses.

In a new request submitted Nov. 19, Senators Elizabeth Warren (D-Mass.), Tina Smith (D-Minn.), Tammy Baldwin (D-Wis.), Bernard Sanders (I-Vt.), all members of the Senate Committee on Health, Education, Labor, and Pensions (HELP); and Chris Van Hollen (D-Md.) and Sherrod Brown (D-Ohio), sent a letter to Department of Health and Human Services (HHS) Secretary Alex Azar requesting an update on HHS pricing negotiations with Gilead Sciences and urging the Trump Administration to invoke its compulsory licensing authority under 28 USC § 1498 which allows the federal government to authorize production of the drug. 

“Gilead has licensed generic manufacturers to produce the drug for other countries, further driving down the price abroad, and the federal government can-and should-do the same in the United States,” the senators wrote.

In addition to requesting a response to their July 16 letter, the senators asked a series of questions  regarding HHS’s current status of pricing negotiations with Gilead, and whether officials plan to use the federal procurement and production authorities available under the CARES Act and the Defense Production Act to ensure access to the drug. The senators have requested a response to their letter no later than November 30, 2020.

A summary version of the letter follows. View the full version here.

The Honorable Alex Azar
U.S. Department of Health and Human Services
200 Independence Avenue S.W.
Washington, DC 20201

Dear Secretary Azar:

We write to follow up on our July 16, 2020 letter to the Department of Health and Human Services (HHS) regarding the Department’s pricing negotiations with Gilead Sciences for a large supply of remdesivir. This arrangement allowed Gilead to charge American health insurers the highest price in the world for remdesivir—representing windfall revenues of up to almost half a billion dollars for the company, paid for in whole or in part by increased insurance premiums for American families—despite having several other options available to expand remdesivir access in the U.S, and despite the fact that American taxpayers spent over $70 million to help develop and test the drug. Last month, the U.S. Food and Drug Administration (FDA) announced full approval of remdesivir, making the antiviral the first approved COVID-19 treatment in the United States and making questions about remdesivir’s pricing and accessibility even more important.

At the time of HHS’ initial agreement with Gilead, outside analysts concluded that the deal was “amazingly good for Gilead’s executives and shareholders and amazingly bad for everyone else—bad for taxpayers, terrible for public health, and unethical.” Since then, randomized control experiments have shown that remdesivir had demonstrated modest effectiveness in reducing recovery time for patients hospitalized with COVID-19, including one that showed the treatment shortened recovery time for hospitalized patients from 15 days to 11 days. But no rigorous studies have found a survival benefit to the drug, and last week, researchers at the World Health Organization (WHO) studying remdesivir’s effects in nearly 3,000 patients worldwide found that the treatment had little or no effect in reducing deaths from COVID-19 among hospitalized patients or reducing hospital stays.

Uncertainty around whether the drug provides even modest benefits raise questions about Gilead’s justification for remdesivir’s exorbitant price tag at $3,200 per treatment course, which is $860 more than purchasers in other countries pay. In our July 16 letter to you, we wrote that the sky-high high prices charged by Gilead are unjustified and profoundly unfair to American taxpayers who furnished over $70 million in research costs for the drug. We cannot see any reason that Gilead should be charging U.S. consumers the highest price in the world, and even the lower price Gilead charges in other countries is likely too high. According to one study, a full course of remdesivir treatment can be manufactured and sold with a 10% profit margin for about $9—meaning that the price set by Gilead for health insurers is more than 350 times greater than the price necessary to produce and profit from the drug.

Now that remdesivir is an FDA-approved COVID-19 therapeutic, this Administration can and should invoke any number of legal provisions that allow it to assert control over the production and distribution of remdesivir. One provision, 28 USC § 1498, provides the federal government with compulsory licensing authority. Under this authority, the federal government can “use or acquire patented inventions” in exchange for providing “reasonable and entire compensation” to the patent holder. The U.S. government frequently used this authority in the 1960s to acquire lower-cost versions of on-patent drugs, and has used it to acquire patented military equipment. Some advocates have argued that using this authority could “provide adequate supply [of remdesivir] while pushing prices down.” Gilead has licensed generic manufacturers to produce the drug for other countries, further driving down the price abroad, and the federal government can—and should—do the same in the United States.

We are still awaiting answers to our questions from July 16 letter regarding HHS’s
negotiations with Gilead. In addition to those responses, we are requesting answers to the following questions regarding HHS’s current status of pricing negotiations with the company and whether it has plans to challenge Gilead’s monopoly control to ensure that the drug is accessible.

Please respond to the following questions by November 30, 2020:

  1. While patients are unlikely to see itemized charges for remdesivir on their hospital bills, Americans are paying for the drug through taxes and premiums. Now that remdesivir is an approved treatment for COVID-19, how will HHS ensure that U.S. taxpayers and health care programs are not price gouged by Gilead for a medicine the U.S. government helped to invent? What formula will be used to determine how providers will be reimbursed for remdesivir under (a) Medicare (b) Medicaid?

2. Will the Administration consider invoking its compulsory licensing authority under 28 U.S.C. § 1498?16 If not, why not?

3. Now that the original terms of the agreement between HHS and Gilead for 500,000 doses of remdesivir have been fulfilled, what is your plan to secure the domestic supply of remdesivir? Will you use federal procurement and production authorities, including those under the CARES Act and the Defense Production Act, to ensure there is not a shortage of remdesivir and the materials necessary to administer it?

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