Some Democratic lawmakers and policy experts attacked remdesivir's price as soon as it was announced.
That critique makes little sense. Even some of the drug industry's most prominent critics have acknowledged that remdesivir's price is fair, as the value it delivers could end up being a lot higher than its price tag. Further, selling innovative drugs for pennies would starve companies of the funding they need to develop the next generation of cures. If the government set drug prices or seized patents to give away drugs for free, drug development would grind to a halt.
Nonetheless, critics have denounced remdesivir's price tag. Some have pointed to an earlier ICER assessment, which said Gilead could recoup its costs by selling remdesivir for just $1 per dose. Public Citizen, a progressive advocacy group, claims that price is justified because the federal government invested $70 million in remdesivir's development, largely by funding early-stage research and clinical trials. As such, it claims taxpayers have already paid for the drug.
Such assertions ignore the economics of drug development. On average, it takes $2.6 billion and over a decade to bring a single new drug to market. Seventy million dollars is a lot of money – but it's less than 3 percent of the cost of the average drug's development cost.
We can often trace the origin of a successful drug back to government-funded basic research. But the story of drug development is often one of failure. Just 12 percent of promising experimental compounds that enter clinical development garner FDA approval. So drug companies rely on a handful of successful drugs to recoup the costs of their failures and fund future research.
If the government set drug prices or seized patents to give away drugs for free – two policies that have recently gained ground among Democrats – drug development would grind to a halt. No investor would fund such risky research if the chances of recouping their outlays were null. Without adequate funding, it would take even longer to develop a successful new drug than it does today.