Tuesday, December 1, 2020

Gilead: The high price of COVID-19 drug that the government already paid for. (June 2020)


Gilead Sciences, Inc. is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical needs around the world, like COVID-19. Their antiviral drug, remdesivir, has become the first known medicine that has shown to have an impact on COVID-19. In June, Gilead announced that they were pricing remdesivir at $390-$520 per vial. This caused controversy to occur because many people believed that the government was responsible for creating this drug, due to the amount of funding they put into its research.

This case will be analyzed by four ethical theories, and each will determine, under their respective theory, if Gilead’s decision was ethical or unethical. First we will look at this case from the Individualism perspective. An individualist would find this decision to be ethical because Gilead is maximizing profit with their high price, and they are doing so within the law. Utilitarianism is the next theory, and a utilitarian would find this case to be unethical because Gilead is making a lot of people unhappy with their decision, especially taxpayers and patients with COVID-19. Kantianism is the third ethical theory, and I believe that Kant could be split between determining if Gilead’s decision was ethical or unethical because one could argue that Gilead is not treating its customers rationally, and one could argue that they haven’t done anything wrong. The fourth and final ethical theory is Virtue Theory, and a virtue theorist would argue that the actions of Gilead are unethical because of the lack of prudence and justice that Gilead has shown its customers with its decision.  

In the future, Gilead should look into re-evaluating the actual cost to make the drug and reference that when coming up with a new price. Gilead must lower the cost per vial of their drug in order to meet the needs of its consumers.

Small timeline of events that brought light to Remdesivir.


Gilead sets a high price on antiviral drug that the government paid for. (June 2020)

Gilead’s antiviral drug, Remdesivir, has become the first known medicine that has shown to have an impact on COVID-19. In February 2020, The National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health(NIH), sponsored and conducted a clinical trial that involved 1063 patients to evaluate Remdesivir for COVID-19. According to NIH’s clinical trial “Preliminary results indicate that patients who received Remdesivir had a 31% faster time to recovery than those who received placebo. Specifically, the median time to recovery was 11 days for patients treated with Remdesivir compared with 15 days for those who received placebo.”(NIH 2020) Remdesivir hasn’t proven to reduce the risk of dying for patients with COVID-19, but it has shown to help seriously ill patients recover from the virus more quickly. Two days after the positive results from NIH’s trial, the FDA issued an emergency use authorization for Remdesivir, allowing Remdesivir to be administered by healthcare providers to treat suspected or laboratory-confirmed COVID-19 in adults and children.(FDA 2020) In May, Gilead entered into an agreement with the U.S. Department of Health and Human Services (HHS) whereby HHS will manage allocation of donated vials of Remdesivir to hospitals until the end of September.  According to HHS, from the beginning of may till the end of September Gilead will be committed to donating their fist 1.5 million doses worldwide. More than 500,000 of those vials have been secured by the Trump Administration first in order to supply U.S. hospitals that are in need of a treatment for its patients.(PHE 2020)  After this period, once supplies are less constrained, HHS will no longer manage allocation and Gilead will be allowed to start commercially selling Remdesivir directly to hospitals and patients in need.(HHS 2020)  

A concealed vial of the antiviral drug, Remdesivir

As you can see, Gilead has not been alone in the development of Remdesivir. Prior to this pivotal trial, government scientists and agencies have been heavily involved in researching and developing Remdesivir. Although Gilead has been working on Remdesivir for almost a decade prior to any government involvement, it is the government, now, that is doing all the heavy lifting for Gilead. The U.S. government has funded many trials leading up to the pandemic. The final thing left to do for Gilead was to set the price for the antiviral drug, and that is where the controversy started.  

In an open Letter from the Chairman & CEO of Gilead Sciences, Daniel O’Day explains the company’s decision of how they came to a price for Remdesivir. O’Day states “In the U.S., the same government price of $390 per vial will apply. Because of the way the U.S. system is set up and the discounts that government healthcare programs expect, the price for U.S. private insurance companies, will be $520 per vial.” The majority of patients are expected to receive a 5-day treatment course using 6 vials of Remdesivir, which equates to $2,340 per patient, or $3,120. O’day believes that the company has discounted the price to a level that is affordable for developed countries with the lowest purchasing power. This means that countries around the world have access to purchase the drug, at what the company thinks is the most reasonable price.(Gilead 2020)  

Though the company may feel that the price is reasonable, Gilead received a load of negative publicity for the pricing of Remdesivir, with people saying that it is way overpriced, it should be free to taxpayers, and that taxpayers shouldn’t have to pay a dime to the company because they've funded most of their trials and research. According to a Public Citizen article, Public Citizen estimates that taxpayers are contributing at least $70.5 million to develop Remdesivir. (Public Citizen 2020) They believe that taxpayers are taking a significant risk because they are going to have to pay for something they already paid for. The public feels as if Gilead is just capitalizing on the work that was done by government scientists.  

Another issue that arose after the company’s announcement of their price was the price difference between having private insurance and not. The way America’s system is set up, people who are insured by a private insurance company will have to pay the extra $780 to cover the cost of the treatment. It is not Gilead's fault for the switch up in price, though they are the ones who set the price, it is up to the insurers to determine how much of the cost they are willing to cover. Gilead claims its price for Remdesivir is "well below" the drug's value, citing an estimate of $12,000 in hospital savings for each patient discharged four days early. However, the company's pricing overlaps with what the Institute for Clinical and Economic Review, an influential drug price watcher, estimates would be cost effective for the drug. In an article that analyses pricing models for Remdesivir as a treatment for COVID-19, ICER estimates Remdesivir would only be cost effective at a price of $310. ICER estimate of Remdesivir is about 10 times lower than the price Gilead set for the drug. (ICER 2020)  However, ICER assumes Remdesivir helps patients hospitalized with COVID-19 survive, which is a benefit that has not yet been proven in any other drug. Despite the outrage about the price, Gilead still believes that all patients will have access to Remdesivir.

Gilead Science's Chairman and CEO, Daniel O'Day


There are a few important groups that are stakeholders in this case. Many people will be affected by the price that Gilead has set on Remdesivir. The main stakeholder in this case is the company, and the CEO, Daniel O’Day. Their decision will affect many things related to how to price a drug that is useful during a worldwide pandemic. There was no playbook for the company to follow when coming to this decision, so it was very hard for them to determine what the right price should be.(Gilead 2020) One group that may not be happy with Gilead’s decision are the investors, or stockholders. When the company announced its price, Gilead faced a large number of complaints which brought a lot of negative publicity to the company.

 This can negatively impact the price of the stock and cause it to decrease, which is not ideal for someone already invested into the company. Another group affected by the newly set price is private insurers. Patients that are insured by private insurance companies are to pay the higher price of $520 per vial instead of the lowest price of $390 per vial. They have to pay up to 33% more than the actual cost, and it is up to the insurers to decide how much of the cost they will cover for the treatment. The government is another stakeholder in this case because of their heavy involvement in the research and development of Remdesivir. Since they have been so deeply involved, people are trying to push the government to be more aggressive in trying to lower the cost to make it more affordable for citizens. One of the most important groups that are stakeholders in this case are patients with COVID-19. The price affects patients because the cost is so expensive that it may be hard for some to be able to afford it. During a pandemic, many people have gone unemployed and so affordability is a very big issue for patients who are in need of some sort of treatment to help them recover. Without the help from the government, or insurance, it will be very hard for some to be able to afford to pay for the 5-day treatment. This also includes taxpayers, who are not happy with the price and feel that they shouldn’t have to pay for the drug twice. They don’t feel that they are being compensated for funding most of the research that went into the development of Remdesivir.


The only goal, according to Milton Friedman’s Individualism, of business is to maximize profit for the owner of the stockholders within the law of the land. (Salazar, 17) Tibor Machan tells us the same thing about Individualism. However, Machan says that at times the direct goal of profiting may need to be met by other indirect goals not aimed at profiting. He also says businesses, at times, may have other goals that may be prioritized over profit maximization.  In this case, Gilead has set a high price for Remdesivir, a COVID-19 drug that the Government paid for. According to the theory of Individualism, Gilead Sciences, Inc. has maximized profits in this case. Gilead’s obligation to the world is to provide them this drug at a reasonable value. Now some don’t feel that the price is reasonable whatsoever at the price of $390 or $520 per vial. Along with the price, many are upset that Gilead is allowed to set the price and not the Government. Government scientists and agencies were alongside Gilead almost every step of the way in the development and research for Remdesivir. However, Gilead has all the rights to Remdesivir, so the government has no say in what their price should be for the drug, they can only ask them to lower it. So, in this case, Gilead is maximizing profit by setting the price of Remdesivir at what they believe is the best possible value, and they are doing so within the law. An Individualist would consider Gilead's decision permissible, and therefore, ethical.


The goal of Utilitarianism, according to John Stuart Mill, is to maximize happiness for all conscious beings in a long-term period, not just for one individual or one company, that are affected by the business action (Salazar 19). Applying the theory of utilitarianism to this case, a utilitarian would say that Gilead's pricing on Remdesivir is unethical. If you take a look at the stakeholders in this case, you can see that taxpayers are very unhappy with the price. Citizens are unhappy about the company’s price on Remdesivir because it is way too expensive. Being in the midst of a global crisis, the people feel that the company should have taken a lot more into consideration when figuring what the best value for it was. Although, the company did say that they have discounted the price to a level that is affordable for developed countries with the lowest purchasing power.(Gilead 2020) However, they were mainly focusing on making sure that most of the world has access to Remdesivir, and not worried about the people who actually contributed and funded a lot of the development and research for the company’s drug. As for the patients who are suffering from the virus and are in need of treatment, ones who are insured by a private company will be paying the higher price of the two. Patients are unhappy at having to pay an extra $780 to cover the costs, and private insurers are also unhappy because they are stuck with that price and it's up to them to decide how much of the cost they will cover. This puts the patients in a predicament for affordability of the entire treatment. Regardless of what the people say about the price, Gilead is still going to be the only benefiter when it comes to happiness because they are making the profits from it. Everyone else has to suffer the consequences of their decisions. Therefore, a utilitarian would view this case unethical because Gilead is not maximizing happiness for everyone involved.  


In Immanuel Kant's basic principles of Kantianism, Kant focuses on how individuals are treated. Kant believes in treating individuals rationally and respecting them and their choices. According to Kant, The Formula of Humanity describes how an individual should not be treated merely as a means, and instead as an end. Looking at this case from a Kantian perspective, it is hard to determine if Gilead’s pricing of Remdesivir was the right decision by the company. With heavy involvement by the government, many believe that the price of Remdesivir should be significantly lower than what the company said it will be. One could even argue that under Kantianism, Gilead's pricing was an unethical decision. This is because Gilead is not treating its customers rationally by putting the price that high. Instead, Gilead is treating taxpayers as a means rather than as an end because they are not even considering the possibility of lowering the cost of each vial.  

On the other hand, one could argue that Gilead has done nothing wrong in terms of what they put the price at for Remdesivir. Their decision of pricing it at $390 and $520 was a well thought out decision. Also, there was nothing to base their pricing off of because they are one of the first companies to have a working treatment that fights against the virus. With no other price to reference when coming to the decision of what to set the price of one of the only drugs to have an affect on a coronavirus, you can’t say that Gilead was acting irrational when it came to pricing Remdesivir.  


According to the Virtue Theory, one must act so as to embody a variety of virtuous or good character traits and so as to avoid vicious or bad character traits.(Salazar 2020) The Virtue Theory is based on the four cardinal virtues: prudence, courage, temperance, and justice. In this case, Gilead seems to not embody two out of the four virtues. Their decision has caused them to violate many virtues it takes to be a virtuous leader.  

The virtue of prudence means having good judgment, and acting with knowledge. Gilead doesn’t embody the virtue of prudence because many believe that they did not make the right decision to price Remdesivir that high. Having the drug’s price that high shows bad of a judgement they made to think that patients will be able to afford the drug at that high of a price during a pandemic. Courage means taking risks and willingness to take a stand for the right ideas and actions. When it came to pricing Remdesivir, Gilead admitted to not knowing what to price the drug at because there wasn’t a playbook that gave directions on how to price a drug of high importance in the middle of a pandemic.(Gilead 2020) Despite the outrage of the price, Gilead had the courage to come out and tell the world about its process in pricing Remdesivir.  Showing temperance as well, they respectfully explained how they came to their price for Remdesivir and why they felt it was the best possible value. Justice is fair treatment for all and giving people what they want. In this case, Gilead is not treating patients with Covid-19 fairly by setting the price that high. They are not giving the patients a fair chance at being able to afford the 5-day treatment with the price being that high. If one virtue is lacking everything collapses, so since two virtues, almost three, are lacking that means that everything collapses, and this case is deemed unethical.  


Personally, I thought that Gilead was not in the wrong for pricing Remdesivir that high at first. If you take a step back and look at how serious this drug’s price is affecting the world, it really didn’t seem like the pricing was too big of an issue. It was estimated that Remdesivir decreases the amount of time you stay in the four days. Those extra four days in the hospital may cost you more than the price for the 5-day treatment, which costs between 2340-3120 USD. I also thought Gilead could have even priced it at a lower cost of something like $290 instead of $390 per vial and people still would have had an issue with it being too high. Along with that, they have been committed to donating over a million vials of Remdesivir to hospitals all over the U.S. and the rest of the world.  

However, after researching this case for quite some time, I believe that Gilead’s decision in pricing Remdesivir was unethical. In my opinion, Gilead could've been more lenient when it came to pricing Remdesivir. Considering the circumstances we’ve been put in because of this pandemic, being able to afford a treatment that high of a price seems a little unrealistic. With the price set that high, as you can clearly see, it affects many individuals who are dealing with COVID-19. Whether it be not being able to afford it at that price, or not wanting to pay at all, Gilead’s pricing has made many people furious. Also, because Remdesivir is, as of right now, the only working treatment against Covid-19, it is as if Gilead is exploiting the market for antiviral drugs. Having nothing to reference when it comes to pricing a drug that fights against a virus, Gilead is now going to be the company that is referenced for pricing because they are the first ones to have to do this during this pandemic. Overall, I think that the government should have been the ones to decide the price of Remdesivir because they were so heavily involved in its research and development. Also, it was a government sponsored trial that was pivotal for the Gilead and it brought their antiviral drug into the light. But, because Gilead has the rights to Remdesivir prior to any government involvement, the government basically had no say in what the company can price it at. It feels as though Gilead is capitalizing on a drug that the government already paid for.  


The current issue in this case is that Gilead has set a high price for Remdesivir, a drug that the government funded most of its research and development. Remdesivir was basically paid for by taxpayer’s money and government funding. The first step to resolve this issue is to reevaluate  the research that went into deciding what the best possible value was for Remdesivir. In order to lower the cost, Gilead has to consider the amount of contributions we made as taxpayers and how much the government funded to make Remdesivir. Also, they must take into account that we are in the middle of a worldwide pandemic, so they have to look at what is a reasonable cost that [people can afford to pay in times like this. The next step would be to simply lower the cost per vial of Remdesivir. This would solve the issue of having to deal with the negative publicity that stemmed from its initial pricing. Also, this would save a lot of people money who are suffering during this pandemic. There is nothing stopping Gilead from making a profit, even if they decided to lower the cost per vial, they would still be making a huge profit. Also, seeing how this virus isn’t going away anytime soon, Gilead has all the time they need to make large sums of profit when the time comes to commercializing Remdesivir. Once they figure out the price situation, Gilead can move on to focusing on how they are going to create an amount of supplies that meet the demand of hospitals around the world. That way everyone has access to Remdesivir.

It seems as though Gilead may need some guidance as to what they need to do to resolve this issue. At the moment Gilead strives to make the medicine affordable for everyone able to purchase it. The company’s current mission statement is “To discover, develop and deliver innovative therapeutics for people with life-threatening diseases.” They need to focus on how to make their medicine available to everyone, and that means even those who can’t afford to pay for it. I recommend that Gilead  If they try to make Remdesivir available for everyone to use, and not worry about overpricing it, they could eventually find a median cost that is affordable for everyone and still brings in profit for the company. Some core values that are specifically relevant to Gilead are integrity, inclusion, teamwork, and accountability.  By doing what’s right, encouraging diversity, working together, and taking personal responsibility for their actions, Gilead can ensure its customers that they are a transparent and trustworthy company.  

Ensuring ethical productivity and monitoring ethics in the future will be very important for Gilead in order to prevent a problem like to ever happen again. Gilead should have a sit-down discussion with their employees on how to be ethical when dealing with decisions like pricing a drug in the middle of a pandemic. Also, Gilead may need to train employees on how to evaluate the cost of a drug, while maintaining an ethical mindset. With the controversy surrounding this issue, firing any employees wouldn’t really help with the situation getting resolved. Instead, Gilead could hire an expert in pricing medicine to help evaluate and determine a new price that the company could use to maintain a healthy profit while still being able to provide the medicine to everyone in need of it. Once the company finds a new balanced price, they could market their new price and begin to commercialize their product for sale. This can bring in good publicity to the company by showing that they are thinking about the citizens who are currently suffering financially and health wise during this difficult time. Again, by lowering the price, Gilead will still remain profitable while being able to provide the medicine to more people now because of its affordability.  

O’Day, Daniel. An Open Letter from Daniel O’Day, Chairman & CEO, Gilead Sciences. 29 June 2020, stories.gilead.com/articles/an-open-letter-from-daniel-oday-june-29. (Gilead 2020)

“NIH Clinical Trial Shows Remdesivir Accelerates Recovery from Advanced COVID-19.” National Institutes of Health, U.S. Department of Health and Human Services, 29 Apr. 2020, www.nih.gov/news-events/news-releases/nih-clinical-trial-shows-remdesivir-accelerates-recovery-advanced-covid-19. (NIH 2020)

Commissioner, Office of the. “Coronavirus (COVID-19) Update: FDA Issues Emergency Use Authorization for Potential COVID-19 Treatment.” U.S. Food and Drug Administration, FDA, www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-issues-emergency-use-authorization-potential-covid-19-treatment. (FDA 2020)

“The Real Story of Remdesivir.” Public Citizen, 7 July 2020, www.citizen.org/article/the-real-story-of-remdesivir/?eType=EmailBlastContent. (Public Citizen 2020)

“HHS Announces Shipments of Donated Remdesivir for Hospitalized Patients with COVID-19.” U.S. Department of Health and Human Services, 9 May 2020, www.hhs.gov/about/news/2020/05/09/hhs-ships-first-doses-of-donated-remdesivir-for-hospitalized-patients-with-covid-19.html. (HHS 2020)

Hannah Denham, Yasmeen Abutaleb. “Gilead Sets Price of Coronavirus Drug Remdesivir at $3,120 as Trump Administration Secures Supply for 500,000 Patients.” The Washington Post, WP Company, 29 June 2020, www.washingtonpost.com/business/2020/06/29/gilead-sciences-remdesivir-cost-coronavirus/. (TWP 2020)

“ICER Provides First Update to Pricing Models for Remdesivir as a Treatment for COVID-19.” ICER, 23 July 2020, icer-review.org/announcements/updated_icer-covid_models_june_24/. (ICER 2020)

“Veklury (Remdesivir).” Phe.gov, 2020, www.phe.gov/emergency/events/COVID19/investigation-MCM/Pages/Veklury.aspx. (PHE 2020)

Salazar, Heather. The Business Ethics Case Manual. n.d. (Salazar)

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