November 29, 2021

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Merck Sells Covid Pill for 40 Times What It Costs to Make

A five-day course of molnupiravir, the new medicine being hailed as a “huge advance” in the treatment of Covid-19, costs $17.74 to produce, according to a report issued last week by drug pricing experts at the Harvard School of Public Health and King’s College Hospital in London. Merck is charging the U.S. government $712 for the same amount of medicine, or 40 times the price.

Last Friday’s announcement that the new medicine cut the risk of hospitalization among clinical trial participants with moderate or mild illness in half could have huge implications for the course of the coronavirus pandemic. Because it’s a pill — as opposed to monoclonal antibodies, a comparable antiviral treatment that is administered intravenously — molnupiravir is expected to be more widely used and, hopefully, will cut the death rate. In the first 29 days of the trial, no deaths were reported among the 385 patients who received the drug, while eight of the people who received a placebo died, according to the statement put out by Merck and Ridgeback Biotherapeutics, the two companies that are jointly launching it.

In addition to having huge implications for health, the pill could bring staggering profits to both Merck and Ridgeback Biotherapeutics. A small Miami-based company, Ridgeback licensed the medicine from Emory University in 2020 and two months later sold the worldwide rights to the drug to Merck for an undisclosed sum. Although Ridgeback remains involved in the development of the drug, some have described the deal as “flipping.”

Like the vast majority of medicines on the market, molnupiravir — which was originally investigated as a possible treatment for Venezuelan equine encephalitis — was developed using government funds. The Defense Threat Reduction Agency, a division of the Department of Defense, provided more than $10 million of funding in 2013 and 2015 to Emory University, as research done by the nonprofit Knowledge Ecology International has revealed. The National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, also provided Emory with more than $19 million in additional grants.

Yet only Merck and Ridgeback will reap the profits from the new antiviral, which according to Quartz could bring in as much as $7 billion by the end of this year. After the announcement of the encouraging clinical trial results on Friday, Merck’s stock price climbed, while stock prices of some vaccine makers sagged. Despite its initial investment, the U.S. government seems to be facing a steep markup in prices. In June, the government signed a $1.2 billion contract with Merck to supply 1.7 million courses of the medication at the $712 price. The transaction is due to take place as soon as molnupiravir receives emergency use authorization from the Food and Drug Administration.

Reasonable Terms

Good government advocates are pointing out that because federal agencies spent at least $29 million on the drug’s development, the government has the obligation to ensure that the medicine is affordable. “The public funded this drug, and therefore the public has some rights, including the rights you have it available under reasonable terms,” said Luis Gil Abinader, senior researcher at Knowledge Ecology International.

In an interview on CNBC, Ridgeback co-founder Wendy Holman noted that the company asked for but “never got government funding” to help manufacture molnupiravir. A whistleblower complaint filed by Rick Bright, the former director of the Biomedical Advanced Research and Development Authority, or BARDA, in May 2020, described Ridgeback’s unsuccessful efforts “to secure approximately $100 million” from BARDA to develop the drug as a Covid-19 treatment. The company’s press release about the study results also noted that “since licensed by Ridgeback, all funds used for the development of molnupiravir have been provided by Merck and by Wayne and Wendy Holman of Ridgeback.”

Abinader was critical of Ridgeback’s failure to acknowledge the government’s initial investment in the drug before the company acquired it. “What they want to do, apparently, is to shape the narrative about who paid for the development of this drug in order to avoid demands from the public to make it available at reasonable prices,” he said.

In an emailed response to questions submitted to Ridgeback Biotherapeutics for this article, Davidson Goldin wrote, “Ridgeback has never received any government funding for molnupiravir and self-funded the development of this medicine for treating SARS-CoV-2 when the government did not provide financial support.” Merck did not respond to inquiries about this article.

No Strings Attached

Merck has promised to make molnupiravir accessible around the world and has already entered into licensing agreements with five Indian companies that manufacture generic drugs. “Merck has committed to providing timely access to molnupiravir globally, if it is authorized or approved, and plans to implement a tiered pricing approach based on World Bank country income criteria to reflect countries’ relative ability to finance their health response to the pandemic,” the company said in its announcement of the trial results on Friday. Indian companies are planning to price the drug at less than $12 for a five-day course, according to recent reports.

In the U.S., and likely in many upper-middle-income and all high-income countries, the price will be determined by the market. Noting that the treatment may be offered to people who are not yet severely sick with Covid-19, health advocates fear that will mean some in these countries will not be able to afford the new drug. “Offering someone a $700 treatment when they don’t yet feel that ill is going to mean that a lot of people are not going to take it,” said Dzintars Gotham, a physician at King’s College Hospital in London and a co-author of the report on the pricing of molnupiravir. According to the report, pricing molnupiravir at $19.99 would allow a company a 10 percent profit margin.

Melissa Barber, a doctoral candidate at the Harvard School of Public Health and co-author of the report on molnupiravir, said that, while its pricing is not as extreme as that of some other drugs, it will likely still place the antiviral out of reach of some who could benefit from it. “If you can’t afford medicine because it’s 1,000 times more than you can afford, or because it’s 100 times more than you can afford, it doesn’t matter,” said Barber. “Those are both bad.”

Barber and Gotham acknowledge that the $17.74 cost of producing a five-day course of the antiviral pills is an estimate but said that the algorithm they used, and have employed to estimate the production costs for hundreds of drugs, tends to result in overestimates in the long run.

Meanwhile, the prices that private companies charge for drugs tend to go up rather than down. “For all these deals that have happened for therapeutics or vaccines, the price has only increased as uncertainty has decreased,” she said. “One price is given and then, for the next sale, the price goes up. The price went up for other drugs and vaccines, so I would be very surprised if this price didn’t go up, too.”

The pricing differential should be grounds to demand a better price under the Bayh-Dole Act, according to Knowledge Ecology International’s Abinader. Bayh-Dole, passed in 1980, regulates the transfer of federally funded inventions into commercial property and allows the government to “march in” and suspend the use of patents that were developed with government funding if it determines that the products are excessively priced.

“The pressure for march-in rights around this drug is going to be huge,” predicted Abinader, who suggested that the government could use the law to lower the price of molnupiravir. “When the Biden administration negotiates another supply agreement with Merck, they should probably leverage those rights in order to get a better price,” he said.

According to Gotham, who is based in London, the short story of molnupiravir already sums up the best and the worst of the U.S. pharmaceutical system. “It’s a great coup that the American government funded some scientists to develop antivirals,” he said. “The great tragedy is that, after their great success, they just gave it away to private industry with apparently no strings attached.”


https://theintercept.com/2021/10/05/covid-pill-drug-pricing-merck-ridgeback/