[Ip-health] Ed Silverman: Merck’s Covid-19 pill may be a game-changer, but questions are already being raised about cost

Luis Gil Abinader luis.gil.abinader at keionline.org
Mon Oct 4 15:59:56 PDT 2021


Merck’s Covid-19 pill may be a game-changer, but questions are already
being raised about cost

By Ed Silverman  Oct. 4, 2021

Behind the unvarnished enthusiasm over an experimental Covid-19 pill,
questions are emerging about the cost of the treatment and the leverage the
U.S. government may have to address excessive pricing.

At issue is molnupiravir, which is being developed by Merck and Ridgeback
Biotherapeutics. Last week, the companies released top-line data showing
the pill reduced the risk that newly diagnosed patients would be
hospitalized by about 50%. Moreover, no deaths were reported among those
given the pill, compared with eight deaths among people who received a

Although disclosed only in a press release, the findings were excitedly
embraced by physicians, policymakers and investors, because the results
suggested the pill would make it much easier and less costly to treat
Covid-19 patients, who might otherwise receive pricey medicines that must
be infused.

As a result, manufacturing terms and related patent applications are being

Last June, the U.S. government signed a $1.2 billion deal with Merck for
1.7 million doses, which works out to a $712 unit cost for a five-day
treatment course, according to the contract. This assumes the U.S. Food and
Drug Administration will authorize emergency use of the pill. Separately,
the company has indicated there are plans to produce 10 million doses by
the end of this year.

For the moment, Wall Street analysts say the sales potential is uncertain,
since Pfizer (PFE) and Roche (RHHBY) are running late-stage trials of their
own pills and could provide stiff competition in coming months. And Merck,
which has exclusive worldwide rights to market molnupiravir, has not yet
disclosed pricing in the U.S., because the drug is not yet available.

Nonetheless, there is already debate about the cost to American taxpayers
and their health care system.

One reason is that the actual manufacturing cost for a five-day treatment
course is estimated to be $20, which is a fraction of the unit cost,
according to a new estimate by Melissa Barber, a doctoral candidate in the
Department of Global Health and Population at Harvard University, and
Dzintars Gotham, a World Health Organization consultant.

This figure includes raw materials costs, which were mostly obtained from
the Panjiva database that tracks product movements around the world, as
well as the expense of placing the medicine in capsules and then in
packaging, explained Andrew Hill, a senior visiting research fellow in the
Department of Pharmacology and Therapeutics at the University of Liverpool,
who developed the methodology.

“The issue for any high-income country is how to fix a price which could
allow widespread use… With 100,000 new infections per day in the U.S., a
unit price of $700 per treatment course would create a huge burden on
budgets if this drug was used to prevent new infections as well. The 1.7
million doses would be used up inside a month,” said Hill, who has
researched manufacturing costs for other drugs.

Indeed, if the Merck study data proves to be as strong as implied, “then
presumably payers won’t really have a choice here,” wrote Wolfe Research
analyst Tim Anderson in an investor note. The government could foot the
bill, he added, as it has with vaccines and also a Regeneron
Pharmaceuticals (REGN) treatment, although some patients may pay a fee for
the drug to be administered.

A Merck spokesperson wrote us that the company is “committed to providing
timely access to molnupiravir globally, if it is authorized or approved,
and plan to implement a tiered pricing approach based on World Bank data
that recognizes countries’ relative ability to finance their health
response to the pandemic.

“We take into account a number of factors in establishing our pricing for
our medicines, but fundamentally we look at the impact of the disease, the
benefits that the drug delivers to patients and to society, and at
supporting ongoing drug development… These investments are made possible by
a pricing model that rewards risk-taking and innovation.”

The spokesperson noted that Merck reached voluntary licensing agreements
for molnupiravir with eight large generic makers — Aurobindo Pharma, Cipla,
Dr. Reddy’s Labs, Emcure Pharmaceuticals, Hetero Labs, Sun Pharmaceuticals,
Torrent Pharmaceuticals and Viatris. Each company will set the price for
104 countries globally.

It remains unclear whether the U.S. government will pick up the tab, but
already the purportedly large difference between manufacturing and unit
costs is prompting concerns about any strain on U.S. taxpayers. As a
result, the patent applications filed in connection with molnupiravir are
triggering discussion about the ability of the U.S. government to take
steps to lower the price.

Between 2013 and 2020, the U.S. government awarded an estimated $35 million
in grants to the Emory Institute for Drug Development, which discovered and
developed molnupiravir. The EIDD, which is headed by George Painter, later
licensed the drug to Ridgeback Biotherapeutics to continue its development
as a potential treatment for Covid-19.

EIDD has five published U.S. applications concerning a molnupiravir parent
compound and Painter is listed as one of the co-inventors, according to
Knowledge Ecology International, an advocacy group that tracks patents and
pharmaceuticals. One patent claims methods of treating “a human coronavirus
infection” using molnupiravir and another discloses methods of using the
drug to treat Covid-19.

The advocacy group contended in a blog post that the Biden administration
has leverage to negotiate reasonable pricing with Merck, since the patents
acknowledged government funding and because Emory last year licensed the
compounds and methods claimed in one application to the Defense Threat
Reduction Agency and the National Institute of Allergy and Infectious
Diseases. (See here and here).

The argument stems from an interpretation of a 1980 federal law known as
the Bayh-Dole Act that was designed to promote access to generic drugs. But
more recently, there has been debate over the extent to which it should be
used as a tool for lowering the cost of expensive medications when U.S.
taxpayers help fund discovery and development.

However, KEI also noted that the language in the government contract
redacted intellectual property terms and suggested that any invention
arising from the agreement is not subject to the Bayh-Dole Act. However,
there are also inconsistencies in the contract language in an effort to
provide investors with “a more favorable view of the potential profits,”
the advocacy group wrote in a separate blog post.

We asked Merck for comment about these assertions and will update you

The contract, meanwhile, limited technology transfer and includes a clause
that allows the U.S. government to donate any unneeded doses of
molnupiravir “to any foreign nation that has an active marketing approval
in place,” or an active regulatory authorization and entered into an
indemnification agreement with Merck.”

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