Gilead Sciences is factoring potential savings to hospitals into its pricing decision for its promising COVID-19 treatment remdesivir, but hospitals and health policy experts say hospital savings will be difficult to quantify this early.
Gilead is running its own cost-savings analysis for hospitals, according to a SVB Leerink investor note. So far, hospitals have received remdesivir for free because Gilead has plans to donate enough doses to treat more than 120,500 hospitalized COVID-19 patients by early June.
Little data is available on remdesivir's clinical effectiveness, not to mention its comparative- or cost-effectiveness. Health policy experts said it's too early to put a dollar amount on potential savings, and noted that hospital costs vary widely.
Chris Fortier, the chief pharmacy officer at Massachusetts General Hospital, said remdesivir has only been in use for roughly six weeks since FDA gave the drug an emergency use authorization on May 1, and the hospital is focused more on studying its clinical outcomes than its cost savings. Fortier is skeptical of analyses that point to cost savings for certain parameters this early.
"There are so many compounding factors that could cause someone to be moved back to another floor, or moved to home care. With these diseases it's difficult, almost impossible, to come up with a hard dollar figure," Fortier said.
Preliminary data from a government-sponsored trial showed a median time to recovery of 11 days for those treated with remdesivir, compared with 15 days for patients who were not. However, it's unclear exactly what that means for hospitals' costs.
Two important metrics that could produce cost savings are the length of hospital stays and intensive care unit admissions.
"There's no guarantee that it will always shorten a hospital stay, which is where most of the savings will be," said Walid Gellad, an associate professor of medicine and health policy at the University of Pittsburgh who researches prescribing and prescription drug use.
Memorial Hermann Health System has received doses of remdesivir, and a spokesperson said the system has anecdotally seen faster recovery times for COVID-19 patients treated with the drug.
"From a cost savings perspective, as you know, health systems can benefit financially from shorter lengths of stay; however, it would be difficult to put an exact number on any potential savings this early on," the spokesperson said.
Savings calculations could be hindered because hospital costs vary greatly in different geographic areas. Gellad said the underlying issue with using hospital savings to justify drug prices is that hospital costs are high to begin with.
"The pharma industry is always the first to point out that hospital prices are too high," Gellad said. "The drug can save a lot of money because hospitals are expensive."
A Gilead spokesperson said the company has not yet set a price for remdesivir and is ensuring access through its donation.
"Post-donation, the company will work closely with governments and healthcare systems to provide access for healthcare providers to prescribe remdesivir for appropriate patients," the spokesperson said.
Whether hospitals will ultimately save money will be determined by several variables that aren't clear yet, but a significant factor will be how the drug factors into the diagnosis-related group, or DRG, payments for COVID-19.
Congress chose to inflate DRG payments for COVID-19 patients by 20% during the public health emergency, but payments will decrease after the emergency ends. Public health emergencies have to be renewed every 90 days, and HHS Secretary Alex Azar most recently renewed the designation on April 26.
DRG payments are based on historical costs from claims data. Avalere senior consultant Abby Moorman said there could potentially be a gap when claims data for COVID-19 patients are available and factored into DRG payments, but the cost of remdesivir isn't because hospitals got the drug for free for a while.
The New Technology Add-On Payment, or NTAP, was introduced to help bridge that sort of gap. If CMS provides a NTAP, hospitals get paid some of the cost of the product if a patient's care ends up costing more than the related DRG payment.
"A NTAP is never a winner for a hospital," Moorman said, though she said the payment could help mitigate losses.
A product has to meet criteria on newness of the technology, a cost threshold, and clinical improvement to be approved for an NTAP.
Under the normal pathway for NTAP approval, the payments wouldn't be available until October 2021. Hospitals could be eligible for a maximum add-on payment of 65% of the drug's cost.
It may be possible for CMS to expedite the process to grant remdesivir an NTAP, Moorman said, though it hasn't been done before.
"Though it is unheard of, it is a possibility," Moorman said.
However, Cornelius J. Clancy, chief of the Veterans Affairs Pittsburgh Health System infectious disease program, said CMS may be wary to set a precedent for a treatment for COVID-19 as opposed to other diseases.
CMS did not respond to a request for comment on whether it has considered payment policies for remdesivir. The drug does not yet have FDA approval.
