This story is part of The Cancer Letter’s ongoing coverage of COVID-19’s impact on oncology. A full list of our coverage, as well as the latest meeting cancellations, is available here.
Drug development in COVID-19
The global pandemic of coronavirus disease 2019 (COVID-19), caused by the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), has led to expectations of global deaths numbering in the hundreds of thousands. Promising therapeutic strategies have emerged slower than society would prefer. COVID-related deaths in the United States exceed 86,000 as of this writing, with projections as high as 134,000.
It is a humbling moment to reflect on not only the current situation, but also on whether drug reimbursement policy changes might help to encourage nimbler global responses to public health threats in the future.
A value-based framework centered on cost-effectiveness is one approach to guide society’s provisioning of precious resources. The incremental cost-effectiveness ratio (ICER), expressed in dollars per quality-adjusted life-year (QALY), demonstrates that the best “deal” for a utilitarian society is to spend its money on medical interventions providing the greatest return on investment.
Commonly cited “willingness to pay” thresholds in the United States tend to range from $50,000 to $150,000 per QALY, but are theoretical only and are not used to guide reimbursement. In the United Kingdom, on the other hand, the threshold of £20,000 to £30,000 per QALY is used to make reimbursement determinations.
Building on this concept, the Institute for Clinical and Economic Review released guidance toward an appropriate value-based price for remdesivir. Starting from a threshold ICER of $50,000 per QALY, remdesivir data available to date, as well as system-level COVID-19 outcomes data from a locality that was overrun, an estimated “fair” price of $4,500 per treatment course was arrived upon. Using a cost recovery-based model leads to a price of $10 per treatment course.
As the Institute for Clinical and Economic Review noted in their report, now is the time to discuss connecting pricing to effectiveness, despite the uncertainties surrounding the data. This discussion, however, requires context.
Putting remdesivir’s development in context
Drug development does not occur in a vacuum. Pharmaceutical companies’ activities increasingly target profitable disease spaces, resulting in a stampede toward investigational oncology drugs.
Importantly, these drugs are priced as a function of what the market has been willing to pay for recently approved therapies with similar indications, irrespective of the value created. Additionally, because of higher willingness to pay as a result of legislation, the pharmaceutical industry has pivoted toward drug development for orphan diseases. Altogether this leads to relatively little attention being paid to vaccine and antibiotic development.
Despite cost-effectiveness guidance, the ICERs of therapies in oncology routinely exceed $150,000 and, in some cases, reach $900,000 per QALY. Because expensive oncology therapies are reimbursed by government payers in the United States, often without any controversy at all, these are definitionally socially acceptable prices and cost-effectiveness.
Development in the infectious disease space requires incentives. So, what would happen if we were to apply the cost-effectiveness metrics deemed acceptable in cancer to drugs being developed for SARS-CoV-2? What would a fair, socially acceptable price for an efficacious SARS-CoV-2 drug be if it were priced like a cancer therapy, so as to promote infectious disease drug development? A back-of-the-envelope approach can be informative.
Applying oncology pricing to a successful SARS-CoV-2 drug
To develop estimates of value-based prices for a candidate SARS-CoV-2 drug administered to inpatients, we estimate the survival benefit (in number of lives saved per 100 treated patients) as a function of the baseline inpatient case-fatality ratio (CFR) and drug efficacy (Figure 1).
Depending on these factors and their interactions with health care systems, the number of lives saved per 100 treated patients could range from 22.5, if baseline inpatient CFR is 25% and relative mortality reduction is 90%, to a more conservative estimate of 7.5, if baseline inpatient CFR is 15% and relative mortality reduction is 50%, to zero if the drug is not at all efficacious (Figure 1, from top right to left).
Observational data on COVID-19 are only recently coming to the fore, with mortality data varying by population demographics, level of preparedness, and the degree to which a health care system is overrun.
At one end of the spectrum, the reported median age of inpatients who died from COVID-19 was 69 years, while at the other end, in Italy, the reported mean age of inpatients who died was 79 years. In the absence of other data, we estimate the mean age of a patient who otherwise would have died in the hospital from COVID-19 in the United States as 74 years.
Against a life expectancy of 11.8 years for a 74-year-old male, 10 QALYs can reasonably be expected to be gained if the patient survives and returns to his or her pre-COVID-19 health. Utilizing the earliest available data of remdesivir efficacy from the National Institute of Allergy and Infectious Diseases-sponsored placebo-controlled, double-blind randomized controlled trial in COVID allows for estimation of remdesivir’s socially acceptable price.
Starting from 11.6% inpatient CFR, 30% mortality reduction, and a WTP threshold of $100,000 per QALY, the socially acceptable price nears $34,800 per treatment course to gain those 10 QALYs. Applying the high end of oncology’s WTP thresholds ($900,000 per QALY in the case of regorafenib) to remdesivir yields a socially acceptable price of $313,200 per treatment course.
Aligning development goals with value goals in the post-COVID world
And yet, this is not the conversation being had. Instead discussion centers about Gilead’s pricing decisions in attempts to recover the $1 billion it believes it will have spent on the drug’s development, even after donating 1.5 million vials. Early projections from one Wall Street analyst suggested a one-time $2.5 billion windfall to Gilead for remdesivir.
In the context of an estimated two trillion-dollar domestic economic output gap, the $4,500 treatment course proposed in the Institute for Clinical and Economic Review’s analysis could well be a historic bargain—and that is before one considers the second-order effects resulting from the drug’s ability to shorten duration of hospitalization.
Intelligently applying “payment for value” logic limits expenditures on low-value drugs in disease states that are uniformly fatal, even with additional therapy. Payment for value also can be used to incentivize development of high-value products like vaccines and antivirals.
It is a humbling moment to ref lect on not only the current situation, but also on whether drug reimbursement policy changes might help to encourage nimbler global responses to public health threats in the future.
Extending the value-based framework to include not only a novel drug’s perpetuity value but also its option value and intangible value can be the beginning of an incentive structure that rewards both innovation and preparation.
Two policy proposals flow naturally. First, as previously proposed, large, global prizes to incentivize generation of option value and intangible value could be created. Second, the pharmaceutical industry’s repurposing prowess as well as its ability to generate accelerated discovery, development, and domestic manufacturing processes capable of withstanding supply shocks could be gleaned from the application of “war games” or “stress tests”.
Designing and building a system capable of withstanding and mitigating the next pandemic is sorely needed. Society’s takeaways from the COVID-19 pandemic will shape the narrative that emerges in the coming weeks and months. A cataclysmic event like a global pandemic carries the potential to reshape society’s priorities, and a time of great stress should provide the perspective necessary for it to clarify what it means when it talks about value.
Corresponding Author:
Mark J. Ratain, M.D.
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Disclosures and conflicts of interest: Dr. Strohbehn is supported by the Richard and Debra Gonzalez Research Fellowship at the University of Chicago (established through philanthropy by Abbott Laboratories; Lake Bluff, Illinois, USA). Dr. Goldstein has no conflicts related to this work. Dr. Ratain reports personal fees from Apotex, personal fees from Ascentage, personal fees from Teva, personal fees from Cyclacel, personal fees from Celltrion, personal fees from Breckenridge, personal fees from Par Pharmaceuticals, personal fees from Roxane, personal fees from Aptevo, personal fees from Accord, personal fees from Actavis, personal fees from Amerigen, personal fees from Argentum, personal fees from BPI Labs, personal fees from Belcher, personal fees from Dr. Reddy’s, personal fees from Fresenius Kabi, personal fees from Glenmark, personal fees from Hetero, personal fees from Mylan, personal fees from Sandoz, personal fees from Pneuma Respiratory, personal fees from Shionogi, personal fees from Aurobindo, grants from AbbVie, grants from Dicerna, grants from Genentech, grants from Xencor, other from BeiGene, outside the submitted work; In addition, Dr. Ratain has a patent US6395481B1 with royalties paid to Mayo Medical, a patent EP1629111B1 with royalties paid to Mayo Medical, a patent US8877723B2 issued, and a patent US9617583B2 issued and is Director and Treasurer, Value in Cancer Care Consortium.
Funding: There is no funding specifically for this work.
