Battle Over Pricing COVID Treatments Shows Danger of Biden’s Rationing Approach

Given the dramatic impacts of coronavirus on our daily lives — killing tens of thousands and shutting down hundreds of thousands of businesses — most Americans would find it unthinkable to deny patients access to COVID-19 treatments on the grounds of cost. But that is just what presumptive Democratic nominee Joe Biden proposes to do. It is simply the latest in a long string of examples of how the left’s support for centralized health care will harm patients and the economy.

Gilead Sciences recently announced pricing plans for its new coronavirus treatment named remdesivir. It set the price for the drug at $3,120 for a five-day course of treatment; government payers will pay roughly one-third less than that ($2,340), in another case of individuals with private insurance subsidizing those on Medicare and Medicaid.

For a drug that reduces the length of virus-related hospital stays, Gilead’s price sounds like good value for patients and insurers. But the bureaucrats Biden wants to place in charge of health care won’t necessarily agree.

Bureaucratic Analysis

Biden’s campaign health-care plan calls for “establishing an independent review board to assess pharmaceuticals’ value,” based on either the therapy’s price overseas “or, if the drug is entering the U.S. market first … an evaluation by independent board members.” Medicare and Obamacare plans will pay the rate set by these “independent” bureaucrats.

Yet consider the way one such board determined prices for remdesivir. According to a National Institutes of Health study, the drug reduced the average hospital stay for COVID patients by four days compared to individuals who did not receive the drug. Additionally, although the changes were not statistically significant, it also reduced death rates slightly.

Remdesivir’s manufacturer, Gilead Sciences, donated nearly 1 million courses of the drug, which the federal government and hospitals will distribute to patients (the prices Gilead set will take effect when hospitals run out of the donated doses in the next few weeks).

Two days after National Institutes for Health reported its results, the Institute for Clinical and Economic Review, which conducts cost-effectiveness research on new pharmaceuticals, released a preliminary pricing analysis for remdesivir. It arrived at a maximum value of $4,460 for a full treatment course if remdesivir reduces mortality in coronavirus patients, and $390 if it does not. A revised analysis, released in late June, slightly increased remdesivir’s maximum value ($4,580-$5,080) if it reduces mortality, and slightly decreased its value ($310) if it does not.

‘Economic’ Institute Excludes Economic Impact Analysis

The glaring omissions in ICER’s analysis, however, reveal an organization that knows the price of everything and the value of nothing. The institute assumed “that policymakers would view it inappropriate” to include “potential broader economic benefits associated with future economic recovery” in its pricing.

Likewise, an updated document regarding assessments of coronavirus treatments states that “the scale of the COVID-19 pandemic makes it impossible to model the impact of patient treatment on economic factors such as unemployment, taxes, [and] education” and that it would only attempt to quantify economic benefits for “a universally effective vaccine or a near/total cure.”

Despite a name that states the institute engages in economic review, ICER shows a callous indifference towards the more than 46 million people who have filed for unemployment since the pandemic began. That a drug like remdesivir might help end coronavirus lockdowns and other social distancing measures, restoring normalcy to a nation severely affected by the virus, doesn’t apparently matter to the ICER bean-counters.

The problems with ICER’s analysis don’t end there. One of its models “set the costs of research and development to zero” because Gilead had previously developed remdesivir as a Hepatitis C drug — ignoring the costs needed to determine whether and how a Hepatitis drug might treat coronavirus. Moreover, by reducing hospital stays by an average of four days, remdesivir would save the health system money at a price well above $310—and perhaps even above $5,080.

Life and Death Access to Treatments

Both ICER’s analyses and the premise behind them seem fundamentally flawed, yet Biden wants to impose them on American patients. His “solutions” would limit access to breakthrough therapies — either because companies will refuse to sell to government programs at the prices bureaucratic boards dictate, or because these price controls mean companies will develop fewer such drugs to begin with.

For patients with critical illnesses, restricting access to drugs could become a matter of life and death. But Biden’s plan could restrict access to coronavirus therapies in a way that becomes a matter of life and death not just for millions of Americans, but the economy as well.

This post was originally published at The Federalist.

The Tough Cost-Benefit Choices Facing Policymakers Regarding Coronavirus

Right now, the United States, like most of the rest of the world, faces two critical, yet diametrically opposed, priorities: Stopping a global pandemic without causing a global economic depression.

Balancing these two priorities presents tough choices—all else equal, revitalizing the economy will exacerbate the pandemic, and fighting the pandemic will worsen economic misery. Yet, as they navigate this Scylla and Charybdis, some policymakers have taken positions contrary to their prior instincts.

In his daily press briefing Tuesday, Gov. Andrew Cuomo (D-NY) discussed the false choice between the economy and public health. He made the following assertions:

My mother is not expendable, your mother is not expendable, and our brothers and sisters are not expendable, and we’re not going to accept the premise that human life is disposable, and we’re not going to put a dollar figure on human life. The first order of business is to save lives, period. Whatever it costs….

If you ask the American people to choose between public health and the economy then it’s no contest. No American is going to say accelerate the economy at the cost of human life because no American is going to say how much a life is worth.

On this count, Cuomo is flat wrong. Entities in both the United States and elsewhere—including within his own state government—put a dollar figure on human life on a regular basis.

Rationing on Cost Grounds Already Happens

Consider the below statement describing the National Institute of Health and Care Excellence (NICE), a British institution that determines coverage guidelines for the country’s National Health Service (NHS). NICE uses the quality-adjusted life year (QALY) formula, which puts a value on human life and then judges whether a new treatment exceeds its “worth” to society:

As a treatment approaches a cost of £20,000 [about $24,000 at current exchange rates] per QALY gained over existing best practice, NICE will scrutinize it closely. It will consider how robust the analysis relating to its cost- and clinical-effectiveness is, how innovative the treatment is, and other factors. As the cost rises above £30,000 [about $36,000] per QALY, NICE states that ‘an increasingly stronger case for supporting the technology as an effective use of NHS resources’ is necessary.

Entities in the United States undertake similar research. The Institute for Clinical and Economic Review (ICER) also performs cost-effectiveness research using the QALY metric. The organization’s website notes that “the state of New York has used [ICER] reports as an input into its Medicaid program of negotiating drug prices.” In other words, Cuomo’s own administration places a value on human life when determining what the state’s Medicaid program will and won’t pay for pharmaceuticals.

Cost-Effectiveness Thresholds

Cuomo represents but one example of the contradictions in the current coronavirus debate. Donald Berwick, an official in the Obama administration and recent advisor to the presidential campaign of Sen. Elizabeth Warren (D-MA), infamously discussed the need to “ration with our eyes open” While many liberals like him have traditionally endorsed rationing health care on cost grounds, few seem willing to prioritize economic growth over fighting the pandemic.

Conversely, conservatives often oppose rationing as an example of government harming the most vulnerable by placing an arbitrary value on human life. Nonetheless, the recent voices wanting to prioritize a return to economic activity over fighting the pandemic have come largely from the right.

The calls to reopen the economy came in part from an Imperial College London study examining outcomes from the pandemic. The paper concluded that an unmitigated epidemic (i.e., one where officials made no attempt to stop the virus’ spread) would cost approximately 2.2 million lives in the United States. Mitigation strategies like social distancing would reduce the virus’ impact and save lives, but would prolong the outbreak—and harm the economy—for more than a year.

The paper’s most interesting nugget lies at its end: “Even if all patients were able to be treated”—meaning hospitals would not get overwhelmed with a surge of patients when the pandemic peaks—“we predict there would still be in the order of…1.1-1.2 million [deaths] in the US.” Based on the Imperial College model, shutting down the economy so as not to let the virus run rampant would save approximately 1 million lives compared to the worst-case scenario.

A Cost of $1 Million Per Estimated Life Saved

Some crude economic math suggests the value a pandemic-inspired economic “pause” might place on human life. Based on a U.S. gross domestic product of approximately $21 trillion, a 5 percent reduction in GDP—which seems realistic, or perhaps even conservative, based on current worldwide projections—would erase roughly $1.05 trillion in economic growth. The Imperial College estimate that mitigation and social distancing measures would save roughly 1 million lives would therefore place the value of each life saved at approximately $1 million.

Of course, these calculations depend in large part on inputs and assumptions—how quickly the virus spreads, whether large numbers of Americans have already become infected asymptomatically, whether already infected individuals gain immunity from future infection, how much the slowdown harms economic growth in both the short and long-term, and many, many more. Other assumptions could yield quite different results.

But if these types of calculations, particularly when performed with varying assumptions and inputs, replicate the results of the crude math above, policymakers likely will sit up and take notice. Given that Britain’s National Health Service makes coverage decisions by valuing life as worth tens of thousands of pounds, far less than millions of dollars, it seems contradictory to keep pursuing a pandemic strategy resulting in economic damage many multiples of that amount for every life saved.

Tough Cost-Benefit Analysis

Unfortunately, lawmakers the world over face awful choices, and can merely attempt to select the least-bad option based on the best evidence available to them at the time. Slogans like “Why put your job over your grandmother?” or “If you worry about the virus, just stay home” belie the very real consequences the country could face.

Consider possible scenarios if officials loosen economic restrictions while the pandemic persists. Some individuals with health conditions could face the prospect of returning to work in an environment they find potentially hazardous, or losing their jobs. Individuals who stay home to avoid the virus, yet develop medical conditions unrelated to the virus—a heart attack, for instance—could die due to their inability to access care, as hospitals become swarmed with coronavirus patients. And on and on.

The president said on Tuesday he would like to start reopening the economy by Easter, a timeline that seems highly optimistic, at best. If by that time the situation in New York City deteriorates to something resembling Italy’s coronavirus crisis—and well it could—both the president and the American people may take quite a different view towards reopening the economy immediately. (And governors, who have more direct power over their states, could decide to ignore Trump and keep state-based restrictions on economic activity in place regardless of what he says.)

Nonetheless, everyone understands that the economy cannot remain in suspended animation forever. Hopefully, better data, more rapid viral testing, and the emergence of potential treatments will allow the United States and the world to begin re-establishing some sense of normalcy, at the minimum possible cost to both human life and economic growth.

This post was originally published at The Federalist.