Unsanitized: The COVID-19 Report for June 30, 2020

Time to Seize Drug Patents
Plus, the scene in Los Angeles, and the end of the PPP.

 

Remdesivir costs $10 to produce a 10-day treatment. It will be sold at
$3,120 in the U.S. (Fadel Dawood/AP Images)

First Response

Gilead Sciences is nothing special. The entire pharmaceutical sector has
been raising prices

during the pandemic: 245 drugs hiked up between January and June
according to Patients for Affordable Drugs, including 61 being used for
COVID-19 treatment and another 30 in use in clinical trials. That's
what the industry does: it anticipates demand spikes or new uses for its
product and runs up the price accordingly. You would too if you were in
business and had no restrictions on price. The fact that the products
mean life and death to millions of Americans may complicate things
morally, but profit maximization is one hell of a... drug.

So Gilead announcing that it will charge hospitals $3,120

for an average patient course of treatment of remdesivir, which has had
limited success in reducing the length of coronavirus admissions, is
just obvious. Dexamethasone, which has shown success in preventing death

in seriously ill COVID-19 patients, was already a cheap steroid on the
market that cost about $8 for 30 tablets, and the manufacturer didn't
have time to react. Gilead did. It's the same madness that has two
friends test for the virus, and one paid $199 while the other paid
$6,408
,
when both were supposed to pay nothing because we've passed three
bills saying "free testing." There's no rhyme or reason to any of it.

Patients won't pay $3,120-that will be mediated through their
insurer and whatever their out-of-pocket costs end up being. (If
you're already hospitalized, chances are you've hit your limit
anyway, and remdesivir added to that might not cost you much extra.) But
of course the insurer eventually offloads their costs, so really we're
all paying that price in higher premiums and co-pays and other fees.

The VA and Indian Affairs prices for Gilead will be one-third the level
of the price for hospitals, because those programs have built-in
discounts. Nowhere else on Earth will there be two prices, because the
rest of the world has figured out how to deal with drug
companies-limit pricing and buy wholly in bulk-and America is the
exceptional nation. Hilariously, Gilead's stock fell in Monday trading
because investors thought they should charge more.

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If remdesivir were sold at the cost of production, it would cost $10
,
not $3,120. The "value" of the drug comes with the reduction in
admission length, and the savings to hospitals and patients. But even
that value, based on the known science, shouldn't go too far past
$400, according to the Institute for Clinical and Economic Review
.
You could say that Gilead needs to recoup its research and development
costs, but of course the U.S. government financed much of that research
.

This seems like a job for a policy we at the Prospect highlighted in the
Day One Agenda for the next
president, which can force drug companies to reduce prices
.
As we explained then, the government can use Section 1498 of the U.S.
Code to override Gilead's patent rights, while giving them "just
compensation" for the product, which might be either the production cost
or that value-added $400 cost, a savings of $2,700 or $3,100 per
treatment. Kestine Thiele explains Section 1498, sometimes called
"eminent domain for patents," at Medium
.

The George W. Bush administration threatened Section 1498 for Cipro, the
anthrax drug, and that was enough for Bayer to sell it to the U.S. at
less than a dollar a pill. And if there's any drug treatment that fits
the profile for using this measure, it's remdesivir, which will be
needed at much higher levels as cases surge. The government can simply
ask to negotiate the price with the threat of patent seizure. Of course,
with the current Secretary of Health and Human Services a former Eli
Lilly executive, I wouldn't hold my breath. This is why hedge fund
managers see pills as bets
on the
future; there's no expectation of government intervention.

However, several presidential candidates, including two of the leading
potential vice presidential choices (Kamala Harris and Elizabeth
Warren), proposed forms of this policy during the campaign. This is a
perfect issue for a presidential nominee who has to this point resisted
such interventions
.
There's an available option to make coronavirus drugs affordable:
seize the patents. It's time to tell the pharma reps that it's
happening.

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Debit Card Update

In my burgh tensions have raised, as a premature opening is leading to
nasty consequences. The city of Los Angeles reports

that, after bars re-opened on June 20, 500,000 people returned to party,
according to Foursquare data. (This actually doesn't line up with the
spike in positive cases, it's too soon, which makes things more
frightening.) That same report from the health department shows the
majority of nightspots not following social distancing guidelines and
over half of bar and restaurant workers not wearing masks or face
shields.

And it's led to a serious crisis in the city, particularly in the
hospitals, where admissions are surging. In addition to nearly 3,000
cases in L.A. just yesterday, a new high, public health director Barbara
Ferrer warned that hospitalizations could jump four to five times above
the peak in April and May, and even exhaust regular and ICU beds by the
middle of July. R0 is at 1.26, which means that 1.26 people are being
infected for every one carrier. And close to three times as many
infected people are infecting others.

L.A. has responded by trying to cancel the Fourth of July, and good luck
with that. Shutting down the bars

makes sense; closing the beaches

and banning fireworks displays, less so. Putting aside that health
officials single out workplaces as one of the biggest vectors for
spread, indoor gatherings generally (including weddings and other
events) have been the problem, not the outdoors. I get that the beaches
and fireworks shows were likely to be packed, but forcing people indoors
on what's scheduled to be a hot weekend doesn't seem like an ideal
solution.

While thousands of cases in one city sounds like a lot, this is the most
populous county in America, and armed with only a laptop, I can safely
avoid, well, everyone. So your scribe will be on the case. Just in
isolation.

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Time's Up for PPP

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Today is the application deadline for the Paycheck Protection Program,
for some reason
.
The SBA site reads

that $519 billion has been dispersed, leaving about $140 billion in the
holster, less bank fees. There is no rationale for pulling back this
money right now.

I talked yesterday to Daisy Bedoya of Largo, Florida, owner of Graphx
Signs, a design company that makes window lettering, LED light displays,
and other designs. She's been in business since 2004, and it's
really a one-woman operation. PPP, which is intended to pay employees,
really didn't help her as initially envisioned. Congress only changed
the program in mid-June, leaving her little time to decide if she should
apply. She didn't have a pre-existing banking relationship like a line
of credit, that might have got her through the queue faster. The
language barrier (Bedoya speaks mostly Spanish) was also a hurdle.

"I don't think they have to close [PPP] too soon," Bedoya told me.
"Thousands of small businesses need that help." As a single operation,
Bedoya only qualified for a few thousand dollars, so the program itself
was problematic for her. And with cases rising in Florida, she's even
more worried. "I have to let the customer know we're still open," she
said. "I have to pay rent, no matter if I'm closed. I have debts to
pay. I don't want to close my business."

Why this artificial deadline exists, and why the country isn't doing
all it can to seek out and assist people like Daisy, is beyond me. I
know Ben Cardin wants more support

for small business in the next bill. Why are we removing the support
from the last one?

Days Without a Bailout Oversight Chair

[link removed]
95
.
And yesterday we learned the names of 794 companies

whose corporate bonds the Fed plans to pick up. The Fed will buy debt
from Apple, Verizon, and AT&T, along with six automakers
. There's a
bunch of energy debt

in there. In general it's a blue-chip bonanza. Maybe if there was a
bailout oversight chair we could make even a little sense out of what
this program even is and what's it's supporting (Apple's recent
debt issuance, for example, explicitly says it will be used for "share
buybacks and dividends
.")

We Can't Do This Without You

Today I Learned

* In exactly the news we need, there's a virus in pigs
with the potential to jump to
humans and become a pandemic. (BBC)

* Nearly 11 percent of the workforce

is unemployed without a possibility of being called back off furlough.
(Economic Policy Institute)

* CDC says: "too much virus
"
to get it under control. (CNBC)

* That signals lockdowns
,
which would spiral the economy even further. (Axios)

* We're already seeing that; Arizona has reversed its reopening
.
(Financial Times)

* Michelle Goldberg

on the harm of closed schools. (New York Times)

* Alec MacGillis

on dollar stores. (The New Yorker)

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