Gilead’s stock jumped when the drug remdesivir was first shown to actually have some effect against coronavirus or Covid-19. Some thought that it was going to make a fortune for the company and in short order too. After all, who wouldn’t like to own the only known drug to have any effect against a global pandemic?
At which point, well, not so fast. For, as I said at the time, there will be political implications here.
My reading of the current febrile state of play is that no Covid-19 treatment will be viable at anything very much above manufacturing cost. The political head of steam about drug pricing is already at a pretty high pressure. With economies closing down left and right, GDP likely to fall 30% and all that I just can’t see that the above arguments about development costs are going to work at all.
So, assume that this new drug works. In fact, assume that any new drug or treatment does. I have a very strong feeling that the people who develop it aren’t going to be allowed to make much money out of it.
One of two things is going to happen. The developers themselves will, noting the politics of the issue, agree to sell it at around cost, or to licence it freely and for a low royalty. On the grounds that if they don’t then compulsory licences, likely on worse terms, will be imposed upon them.
Or, if they don’t do that then compulsory licences will be imposed upon them upon those bad terms. Yes, I know, this leaves us back with the public goods problem of how to entice people into doing drug development but that’s often enough the way politics works.
As it happens, that is roughly what has happened – option 1 there:
Shares of Gilead Sciences Inc. were down 1.2% in trading on Tuesday after the drugmaker listed on its website five generic drugmakers that will produce remdesivir, its experimental COVID-19 treatment. The non-exclusive voluntary licensing agreements are with Cipla Ltd. Ferozsons Laboratories Ltd. FEROZ, , Hetero Labs Ltd., Jubilant Life Sciences Ltd. and Mylan MYL, to manufacture remdesivir in 127 countries.
The important part of the announcement?
Drugmakers Mylan, Cipla, Ferozsons Laboratories, Hetero Labs and Jubilant Lifesciences will manufacture remdesivir for distribution in “low-income and lower-middle-income countries, as well as several upper-middle- and high-income countries” that face health-care obstacles amid the coronavirus pandemic, the company said.
The deal is “royalty-free” until the World Health Organization says the Covid-19 outbreak is no longer a global health crisis or “until a pharmaceutical product other than remdesivir or a vaccine is approved to treat or prevent Covid-19, whichever is earlier,” the company said.
Sure Gilead will make good money out of the drug, After all, they are keeping the US and some other high income countries for themselves. And there will be money to be made – in royalty payments from these five – once there’s another treatment on the market or the emergency has passed. But it just isn’t going to be the goldmine that being able to charge a proper price for the only drug known to work currently would be.
This is rather why the stock prices hasn’t risen, in fact is off just a bit, since I mentioned this point. No, not because I mentioned it, but rather because it’s obvious to anyone paying attention – a group including the management of Gilead.