Industry Will “Walk Away” from Price Controls

Despite continuing clamor against high prices on critical treatments and vaccines to combat COVID-19, the leading authority on developing effective countermeasures against the pandemic believes that price control strategies will backfire. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases (NIAID), says that efforts to limit all returns on investment will drive biopharma companies away from developing much-needed interventions.

Even after several decades of addressing major lethal diseases such as HIV and Ebola, dealing with the COVID-19 outbreak is “my worst nightmare,” he conceded. Such a highly transmissible virus that has devasted the world in just four months is unprecedented, Fauci lamented. And “it isn’t over yet,” he warned in an online presentation to the 2020 annual conference of the Biotechnology Innovation Organization (BIO), held digitally this year.

The main strategy for containing the current pandemic involves developing effective therapies and vaccines, and industry collaboration with government and academia is vital for advancing the science. But if you try to enforce price controls on companies that have multiple different opportunities to do different things, Fauci warned, “they will walk away.” In a profit-driven industry, Fauci acknowledged that companies expect some degree of economic return. At the same time, he advised, that pricing calculations have to ensure that regions of the world that cannot afford very expensive interventions will be able to access needed therapies. As long as a price is “not so outrageous” that it becomes “completely outside the realm” of the people who really need the medicines, some degree of profit may be appropriate.

Fauci would like to see “fair pricing” for new therapies but aims to achieve that by working with companies to gain an understanding of what that means, especially in situations where government funding helps the company in developing a product. He acknowledged that there is a good deal of discussion about utilizing the “reasonable pricing clause” in government contracts to obtain low prices, but he has found that the big question always is “what’s a reasonable price?” When you’re dealing with firms that expect some kind of economic return, you cannot realistically expect companies to “just give it away,” he said.

Multiple “winners” a plus

Fauci praised industry for aggressively stepping up to the plate in developing many different types of therapeutics and a number of vaccine candidates. The expanded collaboration between industry and government is “something we should be proud of,” he commented. He expects current research will lead to “more than one winner” in each area, as multiple candidates get approved and widely used. Fauci considers this a plus, as vaccine experts believe that different individuals and patient groups may respond better to one vaccine, as compared to another.

With the spotlight on industry’s involvement in developing pandemic treatments, financial analysts expect pharma companies to refrain from high pricing moves and to shift away from a what-the-market-will-bear pricing strategy. Although economists calculate that new drugs and vaccines able to contain the COVID outbreak could prevent trillions of dollars in economic losses, basing prices on such potential gains would cost industry a great deal in public good will and policy decisions.

All eyes are on Gilead Sciences, as speculation continues about how the company will price its experimental treatment remdesivir. Gilead has avoided controversy so far by providing the medicine at no cost under its emergency use status. But once it gains FDA approval, the company is expected to set a price around $4000 per course of treatment in the United States and $2000 in less developed countries, despite considerable federal government assistance over the past decade in developing the drug. Gilead is familiar with these issues, as it was blasted several years ago for setting a high price initially for its hepatitis C treatment Solvaldi and continues to be embroiled in lawsuits over prices and patents for its HIV-prevention treatment.

Biopharma companies have won plaudits for sharing strategies and joining collaborative research programs with competitors, non-profits, and public agencies to advance knowledge and evidence for effective anti-COVID treatments. Broad drug pricing legislation appears to be a low priority for now on Capitol Hill and in the White House, and industry would like to maintain that situation through this election year. At the same time, leading Democrats continue to back a measure limiting new drug prices during a public health emergency to no more than 10% of cost, and public pricing controversies would only generate support for such requirements.