Can the price be right? With the world watching, Gilead faces a no-win decision on remdesivir

The world is waiting for Gilead Sciences to set a price tag for remdesivir, the first brand-new med authorized to treat COVID-19.

And the world is full of its own ideas.

Patient advocates and some researchers are clamoring for $1 per day but an influential U.S. cost watchdog says $4,450 per patient is warranted, provided it can save lives. Investors will want the higher end. Anything more than free will anger others. Between those two extremes is a minefield of tone-deaf accusations, accessibility blame and reputation hits.

Gilead's choice will affect its own reputation and bottom line, set a tone for follow-up meds and either help polish up the pharma industry's image or create a new flashpoint for criticism.

"Consumers are facing financial insecurity, health insecurity and mental health insecurity. That's the triple whammy of this pandemic. Everybody is feeling this in their own proportion and through their own lens," said Jane Sarasohn-Kahn, a health economist with THINK-Health and blogger at Health Populi. "And everyone is watching Gilead. They are setting the initial context, strategy and framing."

The definition of affordable

Gilead Chairman and CEO Daniel O’Day promised in an open letter in late March that Gilead would “ensure affordability and access so that remdesivir is available to patients with the greatest need.”

The recently passed coronavirus CARES Act demands that drug prices must be “fair and reasonable”

But what is affordable or fair or reasonable? Gilead said in a first-quarter securities filing that it spent $50 million on remdesivir in Q1, but by year's end it could shell out $1 billion or more. What constitutes a fair payback depends on whom you ask.

Watchdog group Public Citizen maintains $1 per day is fair. It points to a cost-recovery model developed by the University of Liverpool which calculated that the cost of manufacturing remdesivir at scale would be 93 cents per dose, leaving the remainder as, in its view, "a reasonable profit to Gilead.”

RELATED: Gilead's remdesivir scores emergency FDA nod in COVID-19 days aftebig data reveal

Industry analysts figure a higher price is reasonable, although maybe not as high as the Institute for Clinical and Economic Review's calculated estimate of up to $4,500.

Jeffries analyst Micheal Yee said in a note to investors that a middle ground of $1,000 to $2,000 per patient “would seem unremarkable and plenty reasonable to most people, in our view, given a global view of modern prices of other drugs.”

Cantor Fitzgerald analyst Alethia Young didn't name a figure. The situation is indeed tricky, she acknowledged in an investor note, but “[i]t would be odd to think a company spends $1 billion on developing a drug and gets no revenues.”

Her firm estimates peak annual sales of $700 million for Gilead, although added “there could be potential for upside ... considering there could be a second wave and governments will need to be prepared.”

The ICER model turned out a lower-end price as well—$390 per patient if remdesivir doesn't prove lifesaving.

In both sets of calculations, the group took into consideration the much-discussed $37.5 million in federal funding granted when remdesivir, originally tested for hepatitis C, was in development for Ebola.

It didn't include that funding—or any of Gilead's previous R&D costs—because the company's hep C sales since have been payback enough, ICER said. As Gilead spends "new money" on COVID-19 trials, the watchdog said, it will consider including that spending in a new cost-effectiveness calculation.

Will history repeat itself?

Drug pricing is an age-old dilemma in the pharma industry and one in which Gilead hasn’t always fared well. In 2013, the company garnered widespread criticism for its $84,000 price tag for groundbreaking hepatitis C treatment Sovaldi—followed up by its combo pill Harvoni, priced at $94,500.

And that was after years of criticism for six-digit prices on its lifesaving HIV meds. The fallout from those stumbles lasted years.

So here Gilead is again, and it's already faced some backlash. Early in the COVID-19 crisis it quickly won FDA orphan drug status for remdesivir, gaining seven years of market exclusivity and some development incentives. The news touched off a public outcry—and perhaps wiser for those hep C battles, Gilead just as quickly asked the agency to rescind the designation.

Through its work in HIV, Gilead has also gained experience in public health and knowledge of underserved populations, both of which are applicable to COVID-19. The company has already pledged to donate its current supply of remedesivir, or about 1.5 million doses, in addition to setting up more general COVID-19 help with a $20 million fund that donates to not-for-profit groups affected by the pandemic.

Gilead's also in talks to distribute remdesivir around the world. Besides seeking partners to manufacture the med for developed markets in Europe, Asia and beyond, it's discussing generic licenses with companies in India and Pakistan, which could supply developing nations. It's also in talks with the Medicines Patent Pool to share its IP and working with UNICEF to tap its expertise on distribution to low- and middle-income countries.

But it's safe to say there’s no way Gilead will satisfy everyone, whatever it chooses. A higher price will ruffle consumers and zealous watchdogs, while a lower price will tick off Wall Street pundits and shareholders. Gilead did not respond to FiercePharma's request for comment.

Explanations necessary

The stakes are high. And not just for Gilead, but the whole pharma industry.

COVID-19 is uncharted territory—an unprecedented global public health crisis amid a global economic collapse. Consumers who already felt "screwed" by increasing insurance deductibles and drug co-pays before COVID-19 are now under even further economic stress, Sarasohn-Kahn said.

From the consumers’ point of view? "This is a public health issue and we're broke," she said.

RELATED: Coronavirus tracker: Gilead spent $50M on remdesivir in Q1; Moderna plans phase 3 vaccine trial in summer

Transparency, health literacy and a reliance on science will all be important for Gilead in talking about remdesivir pricing when it's set, she said.

"They've got to 'open the kimono' as much as they can to explain how they're getting to that end dollar amount," she said. "They can say, 'Yes, we're in this moment, we worked fast, we've deployed all these scientists and manufacturing and now remdesivir is ready to meet the moment for these certain patients.'"

"Look to the science and the scientists to understand and explain the value—and the limitations—of the therapy," she added.

Harris Poll managing director Rob Jekielek said Gilead needs to deliver a clear and transparent story that is both empathetic and shows tangible value around the price it sets.

“Being emotionally empathetic while at the same time delivering a high-value solution is the key balancing act. That can be very difficult when you have an issue (drug pricing) that for the last 10 years has been the biggest lightning rod around the pharmaceutical industry’s reputation,” he said.

The good news for Gilead, and pharma in general, however, is that consumers are feeling much more positive about the industry during the COVID-19 crisis. Recent surveys from Harris Poll show industry reputation up 40% over earlier this year. That could help ease Gilead’s way toward explaining the pricing strategy they eventually choose.

Still, while it’s certain that Gilead’s list price decision will arrive and certain there will be plenty of commentary on it, it's also a pretty safe bet that every other pharma company will be glad to have gone second.