Big Pharma's Covid-19 Profiteers
By Matt Taibbi, Rolling Stone
16 August 20
How the race to develop treatments and a vaccine will create a historic
windfall for the industry and everyone else will pay the price
On June 29th, 2020, while America remained transfixed by anti-police
protests, the chairman and CEO of the pharmaceutical company Gilead issued a
much-anticipated announcement. In a breezy open letter, Daniel ODay
explained how much his company planned on charging for a course of
remdesivir, one of many possible treatments for \Covid-19\. In the weeks
since we learned of remdesivirs potential against Covid-19, one topic has
attracted more speculation than any other: what price we might set for the
medicine, ODay wrote, before plunging into a masterpiece of corporate
doublespeak.
The CEO noted a study by the National Institute of Allergy and Infectious
Diseases, a division of the National Institutes of Health, showing that
Covid-19 patients taking remdesivir recovered after 11 days, compared with
15 days for placebo takers. In the U.S., he wrote, earlier hospital
discharge would result in hospital savings of approximately $12,000 per
patient.
The hilarious implication seemed to be that by shortening hospital stays by
four days on average, remdesivir was worth $48,000 a dose. That ODay might
come to such a conclusion was not outlandish. Gilead became infamous a few
years ago for charging $84,000 per course of treatment for Sovaldi, a
groundbreaking hepatitis-C drug. The companys policies for pricing have
more than once prompted congressional hearings, as in the case of Truvada, a
drug to combat HIV transmission that was developed in part with the aid of
government grants and that earned Gilead more than $30 billion in revenue.
Would they try something similar at a time of unprecedented medical terror
with one of the few available Covid-19 treatments?
No, as it turned out. Although we can see the value that remdesivir
provides i.e., we could have charged $48,000 per dose Day wrote, we
have decided to price remdesivir well below this value. He went on to say
that to ensure broad and equitable access at a time of urgent global need,
Gilead had generously decided to place the price for remdesivir at a measly
$3,120 per patient.
Investors were bummed. Gilead even undercut the prediction of the Institute
for Clinical and Economic Review (ICER), a watchdog that calculated a fair
price for remdesivir at $4,500 per course of treatment. When Gilead
announced a price below that level, it caused a tremor on Wall Street, as
its share price fell. The company had already offended the Gods of
Capitalism by donating hundreds of thousands of existing doses of remdesivir
to the government. What self-respecting American corporation voluntarily
undermines its own market?
Not Gilead, as it turns out, and really, not any pharmaceutical company.
What Americans need to understand about the race to find vaccines and
treatments for Covid-19 is that in the U.S., even when companies appear to
downshift from maximum greed levels and its not at all clear theyve done
this with coronavirus treatments the production of pharmaceutical drugs is
still a nearly riskless, subsidy-laden scam.
Americans reacted in horror five years ago when a self-satisfied shark of an
executive named Martin Shkreli, a.k.a. the Pharma Bro, helped his company,
Turing Pharmaceuticals, raise the price of lifesaving toxoplasmosis drug
Daraprim from $13.50 to $750 per pill. Shkreli, who smirked throughout
congressional testimony and tweeted that lawmakers were imbeciles, was
held up as a uniquely smug exemplar of corporate evil. On some level,
though, he was right to roll his eyes at all the public outrage. Although he
was convicted on unrelated corruption charges, little about his specific
attitudes toward drug pricing was unusual. Really, the whole industry is one
big Shkreli, and Covid-19 a highly contagious virus with unique properties
that may require generations of vaccinations and booster shots looms now
as the ultimate cash cow for lesser-known Pharma Bros.
The power of the industry combined with fear is driving extraordinary
spending, says U.S. Rep. Lloyd Doggett (D-Texas), who has been an outspoken
and sometimes lonely voice warning about pandemic profiteering. It all
suggests rosy times ahead for the pharmaceutical industry.
Doggett cautions that the rush for a cure is already padding the bottom
lines of drug companies. Take the example of remdesivir, which he describes
as having been pulled off the scrap heap to become a major revenue-driver.
Having failed to be approved as a treatment for hepatitis and Ebola, it is
now one of the most in-demand products in the world, and its price isnt
quite so low as Gilead claims.
For one thing, ICER reported it costs just $10 of raw materials to make each
dose of remdesivir. Generic-drug producers in Bangladesh and India were
already making a version of it, and their price per course of treatment was
$600. Meanwhile, Gileads own price for governments around the world the
price it settled on for everyone except American private insurers was
$2,340 per treatment.
Moreover, ICERs assessment of remdesivirs price relied significantly on
the idea that it would actually help save the lives of Covid-19 sufferers.
If the drug doesnt impact mortality, and only shortens recovery time,
says Dave Whitrap of ICER, we figure a course of treatment is worth about
$310.
To recap: Gilead, a company with a market capitalization of more than $90
billion, making it bigger than Goldman Sachs, develops an antiviral drug
with the help of $99 million in American government grant money. Though the
drug may cost as little as $10 per dose to make, and is being produced
generically in Bangladesh at about a fifth of the list price, and costs
about a third less in Europe than it does in the U.S., Gilead ended up
selling hundreds of thousands of doses at the maximum conceivable level,
i.e., the American private-insurance price which, incidentally, might be
about 10 times what its worth, given its actual medical impact.
But almost no one cared. A day after the remdesivir price was announced,
Donald Trump bought 500,000 doses through September, basically the entire
world supply of the drug. There were a few stories in the American press
quoting Europeans who seemed startled by the selfishness of the act.
Imagine if this was a vaccine? Liverpool Universitys Dr. Andrew Hill
wondered. Mostly, however, the reaction to the U.S. hoarding one of just two
drugs shown to have positive effects in treating a civilization-imperiling
disease (the other is the steroid dexamethasone) was muted.
Why? As articulated by Trump press secretary Kayleigh McEnany, no sick
person will ever see anything like a bill for the real cost of the drug.
The hospitals have to eat the cost of treatment use, McEnany said. The
patient will not see the cost.
This sounds great on the surface, but of course, Americans, through their
tax dollars, will pay for treatments like remdesivir and for potential
vaccines. Recent House and Senate emergency-spending bills allocate as much
as $20 billion or more for vaccine development, and another $6 billion for
manufacturing and distribution. The public will pay for much research and
manufacturing, says Doggett. Only the profits will be privatized.
Still, because individuals wont be handed physical bills for pills or
shots, nobody balks at prices companies set, if they even know what they
are. With remdesivir, nobody in the Trump administration complained about
price, says Gerald Posner, author of Pharma: Greed, Lies, and the Poisoning
of America. Just as nobody in a Biden administration likely would have
complained. Does anybody care?
Its surprising, or maybe it isnt, that all of this is going on during a
period of intense political protest. For as much as America is going through
changes, many of the dumbest aspects of our political system have remained
impervious to reform. There was political will to change the formula for Big
Pharma in the early Nineties and in the Obama years, and revolution is in
the air now. Just likely not enough to bring drug prices down to a
reasonable level.
Profiteering over the coronavirus pandemic is still in the larval stage. The
average news reader has heard some enraging stories a man busted for a $45
million scheme to defraud New York City through phony PPE sales, another
arrested for hoarding 192,000 N95 respirator masks and 598,000 medical
gloves, a third caught trying to bilk the VA out of $750 million but the
giant-scale gouging will take place later. And it will all be legal.
Soon enough, the infected and uninfected alike will pay any price to try to
stave off illness through vaccines and cocktails of expensive treatments. It
is an unprecedented profiteering opportunity, because most everyone on Earth
is destined to become a customer of some kind in fact, the United States
is already a massive buyer of Covid-19 treatments despite no evidence of
efficacy. Were in the extraordinary position of spending billions on
vaccines before we know if they work, says Doggett.
Some of the rush to spend money on treatments is driven by a
perhaps-unrealistic expectation that vaccines will be available soon, or at
all. Dr. Robert Gallo, co-founder and international scientific adviser of
the Global Virus Network and one of the worlds leading virologists he is
the co-discoverer of HIV and the developer of the HIV blood test, among
other things worries that the unique characteristics of Covid-19 will make
it hard for any traditional vaccine to have durability.
You look at the structure of the proteins, and its a lot like HIV, because
of its glycan shields, he says, referring to sugars that protect viruses
from antibodies. Antibodies that are glycosylated in this way do not last.
Because of this, Gallo says, he worries that companies might be tempted to
declare victory prematurely. He warns that people who put timetables on when
treatments might be available Trump often says things like, Were very
close, and press observers like Politico have warned that the
administration is sitting on an October vaccine surprise are almost
always being disingenuous. Ive always said, you dont have a vaccine until
you have one, until youre sure it works.
Still, theres widespread expectation that vaccines are coming weve heard
reports about vaccines like AstraZenecas AZD1222 supposedly producing good
results in trials and an observer looking on the surface level might
conclude that Big Pharma in this crisis is breaking long-standing patterns
of exploitation. After all, several of the biggest drugmakers have made
public pledges to produce vaccines at cost, including Johnson & Johnson and
AstraZeneca. Well do it at no profit, AstraZeneca CEO Pascal Soriot said.
This is what a successful, healthy pharmaceutical industry can do.
The problem with these pledges is nobody knows what they mean. In the case
of Johnson & Johnson, the company promised to produce vaccines at cost for
the duration of the emergency. When Doggett and his staff asked what this
means, they got no answer. Nor is there any transparency about what terms
like cost mean, or how the billions allocated for research are being
spent.
Add the unique arc of the Covid-19 story which may require decades of
intense, ongoing investment and gestures like the ones made by Johnson &
Johnson and AstraZeneca begin to give off an ominous odor. You can put
about as much faith in their promises as you can in the pitch of any
salesperson, says Doggett.
The Covid-19 disaster will rely significantly upon these corporate
drugmakers to not only come up with cures and treatments, but to also create
a manageable price for people around the world, since the pandemic wont be
stopped unless the whole world gets treated. Is Big Pharma going to do the
right thing? asks Dana Gill, U.S. policy adviser for Doctors Without
Borders. Citing the historic example of the drugmakers reluctance to
provide HIV drugs to poor nations, and even the high price of hepatitis
treatments like Sovaldi, she adds, Theres plenty of examples of pharma
companies not doing the right thing.
What guarantees there will be a problem? The central role of the United
States, whose dystopia of a medical bureaucracy is Gods gift to
pharmaceutical companies.
Every other country in the world has a three-stage process for approving and
pricing prescription drugs. Governments first ask if the drug is safe. If
the answer is yes, it asks if the drug is effective.
If the drug passes those two hurdles, most governments then ask how much
more effective the new drug is compared to existing medicines. This efficacy
calculation becomes the starting point for price negotiations, which usually
involve threatening to keep the drug out of the countrys state-insured pool
of medications if the company does not come up with a reasonable price.
The U.S. either skips or botches these steps. First, there is no regulatory
review that determines comparative efficacy. In the U.S., the FDA review
ends after the first two steps: Once a drug is deemed safe and effective, it
goes on the market.
Then comes the whopper: All FDA-approved drugs must, by law, be covered by
Medicaid. This rule dates to 1990 with the creation of the Medicaid Drug
Rebate Program. The grand bargain that was supposed to be built into this
reform concept was that all FDA drugs would be purchased by Medicaid,
provided that manufacturers gave the government either the best price
available to insurers, or a 23.1 percent discount over the drugs list
price.
This sounds great, except drug manufacturers simply began figuring the
Medicaid discount into their list-price calculations. If the medical
condition is serious enough and the drug has no effective analog, companies
can dictate their price. As a result, we end up with situations like the
2014 Sovaldi episode, in which Medicaid spent $3 billion in a single year
just on the one drug, and was still forced to severely ration the medicine,
giving it to just 2.4 percent of hepatitis-C patients. Gill notes that only
37 percent of Americans are treated for hepatitis C even now, in part
because of the high price of the drug.
The business model for Big Pharma is brilliant. A substantial portion of
research and development for new drugs is funded by the state, which then
punts its intellectual work to private companies, who are then allowed to
extract maximum profits back from the same government, which has over
decades formalized an elaborate process of negotiating against itself in
these matters.
How big are these giveaways? Since the 1930s, the NIH has spent about $930
billion in research. Between 2010 and 2016, every single drug that won
approval from the FDA 210 different pharmaceuticals grew at least in
part out of research funded by the NIH. A common pattern involves R&D
conducted by a small or midsize company, which sells out to a behemoth like
Gilead the instant its drug makes it through trials, and obscene prices are
set.
This was the case with Sovaldi, for instance, which Gilead acquired when it
spent $11 billion in 2012 buying out original developer Pharmasset, which
had worked on a line of hepatitis drugs. Within five years, Gilead earned
more than $58 billion on a line of hepatitis treatments it won in the
Pharmasset deal.
This same pattern seems likely to hold with Covid-19 treatments, only the
cycle of exploitation will be accelerated. Its a microcosm of a larger
broken system, in which you have an R&D system thats profit-driven rather
than people-driven, says Gill. These problems existed before Covid-19, and
now the U.S. is pumping billions of taxpayer funds into these companies, in
most cases with no strings attached.
Those billions are going to a handful of pharmaceutical companies
participating in the Trump administrations Operation Warp Speed, the stated
aim of which is to deliver 300 million doses of Covid-19 vaccine by January
2021. On March 30th, the Department of Health and Human Services announced
$456 million in spending for a Johnson & Johnson vaccine program. On April
16th, it announced $483 million for Moderna, a company that (this is not a
joke) has never once successfully brought a drug to market. AstraZeneca got
$1.2 billion for its vaccine program on May 21st. On June 1st, Emergent
BioSolutions won $628 million to provide manufacturing for vaccines. On July
7th, Novavax cashed in, with $1.6 billion for vaccine development. Toward
the end of July, the Trump administration announced a deal with Pfizer and
the German firm BioNTech to spend $2 billion on 100 million doses of a
vaccine. One of these companies is likely to develop the drug that allows
the world to go back to normal, and the heroism of those researchers is
going to be overshadowed by a profiteering system that rewards their bosses
instead of them.
Indeed, the Pfizer deal surprised some, because it seemed to be priced at
just $19.50 per dose. But experts estimate that when all is said and done,
the same drug will sell overseas for about half that cost. As one Democratic
Hill staffer puts it, Theyre making sure that the U.S. pays the highest
possible price.
The Trump administration has tools at its disposal that it could use to
lower prices. The Bayh-Dole Act of 1980 gives any agency that funds research
leading to a patent to use march-in rights to give out licenses to other
manufacturers, if, among other things, the patent holder has not done enough
to meet the health or safety needs of consumers. The president could also
employ a federal law called Section 1498, which essentially allows the
government to ignore patent rights in an effort to lower prices. Such rights
have been invoked before, such as when Bayer cut prices of the anti-anthrax
drug ciprofloxacin after the Bush II administration threatened to use that
authority (ironically, current Trump HHS Secretary Alex Azar worked under
Bush during that time).
Taxpayers are the angel investors in pharmaceuticals, says Doggett. Any
other investor would demand a stake in the outcome.
To date, Trump has shown no interest in invoking either power. He recently
signed four related executive orders that ostensibly would lower prices of
generics through several means, including allowing importation from Canada
and forcing Medicaid to buy drugs at the same prices that other countries
pay. One Democratic aide called it interesting but it was amusing to
hear Pfizer CEO Albert Bourla complain that Trump was ushering in
socialized medicine.
The casual follower of this story is probably best served understanding the
Covid-19 crisis less as a historic boondoggle (thats more likely to be
found in the financial bailouts) and more as an all-out war by industry
lobbyists to retain a system that is already sociopathic and grotesquely
anti-competitive in the face of intense public pressure during the pandemic.
To be sure, companies like AstraZeneca and Pfizer will end up making a giant
pile of money from vaccines and therapies. This is particularly the case
because of the somewhat eccentric nature of the disease.
We might need several vaccines, says Whitrap, echoing a sentiment
suggested by numerous scientists, that the best course ultimately might be a
cocktail of different antibody-producing techniques that will have to be
administered in an overlapping strategy, perhaps with regular booster shots.
Add the fact that treatment of the already-infected will involve combination
therapies (like remdesivir with dexamethasone, to begin with), and the
endgame for pharmaceutical companies might be years if not decades of doses
that will have to be stockpiled in enormous quantities everywhere on Earth.
This will be worth many billions to firms like Gilead, but the more
important win for these companies is staving off efforts to end the
monster-subsidy system built into the grant-to-patent process that is
suddenly in plain view because of this disaster.
The early days of the pandemic provided ominous clues on these fronts. In
March, Gilead had the stones to apply for an orphan designation for
remdesivir, which would have given it a seven-year exclusivity window, tax
breaks, waived FDA fees, and other commercial advantages.
The orphan designation was created in 1983 to provide an incentive for drug
companies to develop treatments for rare disorders that affect comparatively
small numbers of people, like Wilsons disease or familial
hypercholesterolemia horrific diseases that are a major challenge to
treat, but dont offer drug companies a potential significant windfall if
they develop a cure. Under the law, companies can earn orphan designation
for a drug if its intended for treatment of fewer than 200,000 Americans.
Gilead applied for orphan perks before there were 200,000 sufferers of
Covid-19 in the United States, but everyone knew this was no rare disease.
Such a brazen effort to try to get the government to hand over tax credits
and help squeeze out generic competitors through the use of a law designed
to bribe pharmaceutical firms into developing cures for financially
unpromising diseases was crude, but effective. The FDA granted the request!
(Gilead did not respond to requests for comments on this story.)
Public Citizen called the move outrageous, and so did Bernie Sanders
(well, Bernie said truly outrageous), and there was enough of a backlash
that Gilead rescinded its own request on March 25th.
The Gilead orphan example, however, was indicative not only of the
pharmaceutical companies thinking, but also of the political climate. Big
Pharma has been extraordinarily adept at lobbying and keeping effective
control of Congress. In 2003, Congress passed the Medicare Prescription Drug
act, a bill pitched as a way to reduce drug prices that became a titanic
industry handout.
The Bush-era law included a notorious anti-competitive provision barring the
government from using its purchasing power to negotiate with companies. Much
of the bill was written by Louisiana Rep. Billy Tauzin, who retired from the
House shortly after it was passed and took a $2 million-per-year Thank You
for Smoking-style plum job from the trade group PhRMA as the drugmakers
Spokesperson for Evil.
A few years later, when a popular young politician named Barack Obama ran
for president and won the White House promising to lower drug prices through
reimportation and bulk negotiation, Tauzin and his crew met repeatedly with
the new leader. At the conclusion of those meetings, the Obama
administration took those proposed reforms off the table.
The pharmaceutical companies are clearly nondiscriminatory in the political
sense, says Doggett. Their political power is incredible.
In March, we saw a dramatic demonstration, when the first $8.3 billion
emergency-spending bill made its way through Congress. The bill included a
provision inserted by Democrats that would have limited the
intellectual-property rights of companies developing vaccines the government
thinks are priced unfairly. Industry lobbyists not only managed to kill that
provision, they also got another one inserted that protected the industry
from having the approval of drugs delayed if the product is overpriced.
They couldnt even hold off those two clauses, Posner says.
For Posner, who has written extensively about Big Pharma, the spectacle of
Democrats pounding the table for an end to price gouging is more like Kabuki
theater. A few scattered members, like Doggett, will make elaborate demands,
but in bills that have no hope of passing. Meanwhile, pharmaceutical
companies always seem to get what they want. Posner points to the swine flu
vaccine in the Gerald Ford years, when companies like Sharp and Dohme
(Merck) refused to help develop vaccines unless they were guaranteed profits
and shielded from liability.
Ultimately, the swine flu vaccine was a fiasco, resulting in a number of
horrible side effects, including as many as 450 cases of the degenerative
nerve disease Guillain-Barré. The taxpayer ended up paying for the swine flu
vaccine coming and going, through guaranteed profits at the front and
outlays for piles of lawsuits from victims on the other side. Nothing like
that has happened with Covid-19, but the same pattern of major concessions
won upfront, mixed with what amounts to guarantees of profit, is present.
Its a rip-off, says Posner, comparing the olive-branch no profit
promises by vaccine-makers to the free samples handed out by heroin dealers.
In the lifesaving drug business, once youre in the door, the rest is just
counting money. And with Covid-19, the counting has already begun.