Gilead's long-awaited remdesivir price is $3,120, in line with watchdog estimates

Industry watchers and pharma critics have spent the past two months pitching their calculations on how Gilead Sciences would—and should—price remdesivir after the repurposed antiviral drug became the first to show benefits for COVID-19 patients in a large controlled study.

Now, the guessing is over.

For private insurance plans, Gilead set a list price of $520 per vial, Gilead CEO Daniel O’Day revealed Monday. The cost for a five-day treatment course using six vials, which most patients are expected to receive, would add up to $3,120. For governments of developed countries, including the U.S., the price will be lower, at $390 per vial or $2,340 per course.

“At the level we have priced remdesivir and with government programs in place, along with additional Gilead assistance as needed, we believe all patients will have access,” O’Day wrote in an open letter.

The prices are roughly in line with those an influential U.S. drug cost watchdog pegged on the drug in its latest cost-effectiveness analysis, but came below the sticker Wall Street was expecting.

In an update last week, the Institute for Clinical and Economic Review (ICER) found that remdesivir would be cost-effective at around $4,580 to $5,080 per patient. However, if low-cost steroid dexamethasone—which made a big splash recently with preliminary data—does deliver peer-reviewed data showing it can save the lives of seriously ill patients, remdesivir’s price should drop to the range of $2,520 to $2,800, according to ICER.

Now the finalized price is “a responsible decision from Gilead and a promising sign for pricing decisions of other treatments for COVID-19 on the horizon,” ICER’s president, Steven D. Pearson, said in a Monday statement.

RELATED: New fair price for Gilead's remdesivir? Below $2,800 if dexamethasone lives up to its COVID-19 promise

Results from a trial sponsored by the National Institutes of Health (NIH) among about 1,000 patients found remdesivir can cut the length of hospital stays by an average of four days. That earlier discharge would result in about $12,000 in hospital costs per patient, O’Day said, arguing remdesivir would add value to the health system at its current price even before factoring in benefits to patients themselves.

In the NIH trial, the death rate in all patients—including mild, moderate and severe groups—was 7.1% for remdesivir compared with 11.9% for placebo. It’s an improvement, though not a statistically significant one. If remdesivir doesn't show it can save patients' lives in the real world, its cost-effective price would fall sharply to just $310 per course, ICER figured.

As for dexamethasone, U.K. researchers recently announced that the treatment led to a 35% reduction in death rate among seriously ill, mechanically ventilated patients and 20% for those on oxygen support without invasive ventilation in a large-scale clinical trial dubbed Recovery.

Because of those data, clinicians are viewing dexamethasone as the standard of care of COVID-19, with remdesivir merely an “adjunct” to it, ICER suggested.

RELATED: Remdesivir stockpiling could help push COVID-19 drug into profitable territory for Gilead: analyst

On the other hand, Gilead investors may find the price less appealing. Wall Street analysts have been rooting for a fair price of around $5,000 for remdesivir. At that price, remdesivir could rake in $1.9 billion in sales this year and peak at $7.6 billion in 2022, SVB Leerink recently estimated.

Yet other market-watchers warned remdesivir wouldn't deliver much revenue in the short term, especially during the pandemic. And now, a modest pricing strategy following cost-effectiveness models’ suggestions offers a relief from the possibility of damage to the company's reputation, which could hurt Gilead’s business elsewhere. That’s probably why shareholders sent Gilead's stock price up by about 3% in premarket trading Monday.

O’Day obviously also sees the long-term value in pricing remdesivir reasonably. The company balanced the decision with its “longer-term responsibilities: to continue with our ongoing work on remdesivir, to maintain our long-term research in antivirals and to invest in scientific innovation that might help generations to come,” he said.

Will Gilead be able to make a profit out of remdeisivr at the current price? It looks like it. 

At the $2,340 government purchase price, Gilead could collect revenue of about $2.3 billion from selling around 1.5 million remdeisivr treatment course in 2020, RBC Capital analyst Brian Abrahams wrote in a Monday note to clients. Gilead expects to spend about $1 billion developing and distributing remdesivir this year alone. That would imply around $1.3 billion in profit.

However, Abrahams figured there wouldn't be much room for growth left afterward “given the likelihood of ultimate development of a vaccine (or herd immunity), the likelihood other therapies will produce similar or greater benefits perhaps with more convenient administration.”

Right now, Gilead’s planning to test an inhaled formulation of the drug for potential use in patients with earlier stages of the disease. It’s also exploring combinations with anti-inflammatory agents, including Roche’s Actemra and Eli Lilly’s Olumiant, both FDA-approved arthritis treatments.

During a Monday interview with CNBC’s “Squawk Box,” O'Day pointed to those second wave of clinical development investments as part of Gilead's “dual responsibility” alongside access.

In the developing world, Gilead has penned nine deals with generic makers to offer remdesivir at low cost. For example, India’s Cipla and Hetero Labs have launched generic versions in their home country at around $70 per vial.

Editor's Note: This story has been updated with additional statements from ICER, RBC Capital's Brian Abrahams and Gilead CEO Daniel O'Day.