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Big Pharma’s Got a Brand New Coronavirus Grift

America’s health care system is doing what it does best: rigging the game to extract maximum profits from an ongoing catastrophe.

Jim Watson/Getty Images
Daniel O’Day, CEO of Gilead Sciences Inc., stands during a meeting with President Donald Trump at the White House in May.

With each passing day, the federal government’s pathetic response to the coronavirus pandemic becomes more and more outlandish. We have never seriously tried to implement a federal testing and tracing effort that might slow the virus’s rampages. We have forced workers to choose between risking their lives at work and feeding their kids—and for those locked out of that impossible choice, good luck getting unemployment even if you qualify. Congress sent everyone $1,200 and said, You’re good now, right? The president said he asked his aides to slow testing because the more you test, the more instances of infection you uncover, and the more the numbers look bad. He hates bad numbers.

Now, as cases spike once again and states belatedly reverse their idiotic “reopening” plans, we have another story of that particularly American brand of incompetence and greed interfering with our ability to fight the virus. Pharmaceutical giant Gilead will begin charging for remdesivir, one of the few drugs that has been shown to be effective in treating Covid-19, and the cost is not only high—it’s higher for patients with commercial insurance. Call it a Failing Empire surcharge.

The United States is the only developed country where Gilead will charge separate prices for the government and private payers, at $390 and $520 respectively: A typical five-day course will cost $3,120 for a private patient versus $2,340 for a patient with government insurance. The drug costs less than $10 to manufacture. One could ask why patients should be charged at all for being treated during a global pandemic—but then, why charge patients for treating their cancer, or sprained ankles, or diabetes? The pandemic continues to unravel the frayed threads of American society, and the lack of logic or humanity in our health care system has been among the most clearly illuminated weaknesses. In the time since the coronavirus arrived on these shores, each major player in our health care system—insurance companies, pharmaceutical firms, and hospitals—has demonstrated its willingness, its compulsion, to grift off the global pandemic.

The news that remdesivir would be priced so exorbitantly could hardly be greeted with surprise. Everyone knows drug prices are ridiculous, and new drugs are consistently introduced at absurdly astronomical price points. It is almost too perfect that the drug is being sold by Gilead, the same company that priced its revolutionary HIV prevention drug, Truvada, at $20,000 per year in the U.S.; in other countries, a month of the same drug costs $6.

Big Pharma and its defenders usually point to the high cost of research and development: We simply must charge $1 million a year for a cancer drug in order to recoup the cost of its development. They point to (very shaky) research showing it can cost up to $2.6 billion to bring a new drug to market; other studies peg the figure at over half a billion, which still sounds like a lot of money. But is that actually why drugs cost so much? In The Atlantic, Ezekiel Emanuel points to a quote from a former Pfizer CEO, who explained that the high cost is actually derived from “the anticipated income stream, rather than repayment of sunk costs.” From there, it’s simply the case that the companies charge so much because there’s no countervailing force impeding them. One only has to look at the insane profits of drug companies (and their endless, nightmarish commercials) to recognize that these are not poor, virtuous companies sacrificing money for the public good. They spend so much on research because they’ve rigged the game to deliver vast profits; by the same token, they have little incentive to spend on research that doesn’t look promising to their bottom line.

Even if you are of the opinion that drug companies are unduly burdened with the cost of research, there is a very simple solution: Nationalize them. Critics of Gilead’s pricing plan were quick to point out that the clinical trial that brought remdesivir to market was funded by the National Institute of Allergy and Infectious Diseases. In May, Texas congressman and drug pricing advocate Lloyd Doggett sent a letter to Secretary Alex Azar asking how much the government spent on the trial; last week, the Department of Health and Human Services responded, providing figures showing that the 2020 remdesivir trial has cost $23 million as of April 30 and that NIH grants have provided tens of millions in funding to previous studies relating to remdesivir.

This happens with many, if not most, drugs. Even though private companies do sponsor their own expensive trials, much of the research that leads to the development of new drugs is government-funded. One study found that funding from the NIH contributed to the development of all 210 drugs released between 2006 and 2010. If it costs up to $2.6 billion to develop a drug, who is better placed to spend that sort of money than the government?

Almost no one will pay the full list price for remdesivir, as with other drugs. If you have health insurance, you may not even notice the full price that you would pay without insurance when you pick your medication up at the pharmacy. But someone, at some point, is paying that difference; the list price is still a price. Your insurance company might not pay that full cost, either: It contracts with pharmacy benefit managers, who negotiate discounts or rebates with drug companies in secret and who keep some largely unknown portion of that rebate. Drug companies claim these rebates are raising list prices, because every actor in the health care system is constantly pointing at other players and saying, it’s their fault for these high costs. Either way, the high prices your insurance company has to pay for your drugs can simply be passed on to you through premiums, which have risen to extraordinary heights—unless you’re unlucky enough not to have insurance at all, in which case the cruel joke of the high list price lands on your head. The average premium for a family employer-sponsored plan is now more than $20,000 a year.

Part of the outrage at Gilead was directed at its decision to charge two prices for the drug. As The Wall Street Journal reported, the cost for privately insured patients for a 10-day treatment course will be $980 higher than for patients with government insurance. Patients who owe co-insurance or a deductible and haven’t met their out-of-pocket maximum may be expected to pay a big chunk of this. This is outrageous, but it’s also routine. Hospitals always charge privately insured or uninsured patients far more than they charge Medicare, which sets the prices it will pay. A RAND study found hospitals charge private patients 241 percent of what they charge the government; some hospitals in the study charged as much as 400 percent of Medicare prices. Just as with drug companies’ bleating that they simply must charge more to make up for their spending on research and development, hospitals protest that they must charge privately insured patients more to make up for their losses on caring for government-insured patients.

For patients without government insurance, prices are not just massively inflated. They are also mostly inscrutable, and vary from patient to patient, even within the same hospital. Covid-19 treatments are no exception. A New York Times story from this week documented the different prices paid by Texans who received tests for Covid-19 at the Austin Emergency Center. Two friends who got the same test with the same negative result received wildly different bills: The one who paid cash was billed $199, and the one who paid with insurance was billed $6,408. The insurance company negotiated the hospital down to $1,128, of which the patient owed $928. (After media coverage of her bill, it was dropped entirely.) Remember, insurance companies are supposed to be able to negotiate better prices with hospitals; instead, they’re so good at negotiating that they end up paying five times what a patient who forgot their insurance card would pay. Apparently their lead negotiator is Lucille Bluth.

Once again, the answer is simple. If hospitals have to perform such complicated bullshit-billing to balance their books—or to make huge profits and pay their executives handsomely, and really, what’s the difference—then we can make it much easier for them by doing away with the entire payment model and funding hospitals based on how much care they perform instead. And if insurance companies are so bad at regulating and reducing hospital prices, we ought to relieve them of this duty and implement single-payer.

Insurance companies have not proven themselves to be good partners in fighting the pandemic, not that this was ever a remote possibility. Reporter Andrew Perez recently noted that the Trump administration has allowed insurers to refuse to cover the cost of Covid-19 testing for employment purposes—that is, tests that employees may need to take to return to work—and must only cover “medically necessary” testing. (It is hard to imagine who would stick a swab that far up their nose for nonmedical, non-necessary reasons.) One patient, whose complaint to the Washington state insurance commission was obtained by Perez, said her insurance plan had declined to cover the cost of the test she was required to get in order to return to her job. That patient was herself a medical provider, an optometrist. We are making doctors pay for their own coronavirus tests before they can return to work.

A press release from America’s Health Insurance Plans, the insurance industry’s lobby group in Washington, detailed a study it commissioned on the high cost of testing for the coronavirus, presumably to make us all feel so grateful for its sacrifice in paying for these tests. The release noted, with an apparently straight face, “Every American should be able to get the COVID-19 tests they need,” and claimed, “Health insurance providers stand ready to work with employers, public health leaders and policymakers to develop and execute robust strategies to protect Americans and reduce the risks of spreading of the virus.” Strategies that, apparently, include declining to cover the cost of tests. As ex-industry insiders like Wendell Potter have revealed, this sort of behavior is not just unsurprising, it is seen internally as necessary: They must do whatever it takes to impress their Wall Street shareholders. We cannot and should not expect insurance companies to be generous in their coverage of coronavirus testing or treatment.

Insurance companies promised to waive all cost-sharing for coronavirus testing and treatment, to much fanfare. But employees on “self-insured” insurance plans, where the employer pays for treatment costs and which cover the bulk of employer-sponsored insured workers, may find themselves out of luck if their employer declines to waive cost-sharing, which many will do. Journalists have already written stories about patients facing large bills for their coronavirus care, including patients who were supposed to be covered but still received “harassing” calls from hospital billing departments or for doing the right thing and getting tested. It is so often the case that once the media reveals the startling costs of an outrageous medical bill, the aggrieved patient is swiftly relieved of having to pay those costs. But you have to wonder how many such bills are escaping the media’s attention—given the quickness by which those so exposed cave without a fight, these exceptions must be exceedingly rare.

The stories of relatively small-bore grifting that surround the current administration and its coronavirus response—the investor who ripped off “not for medical use” labels from inadequate masks, the standard self-dealing—feel all too representative of the Trump era. It feels inevitable that having Trump, who is so rich and so famous because of his unpunished grifting, in the Oval Office would inspire hundreds of lesser crooks to imitate him, knowing that a country that allows such an obvious fraud to become president would probably let them get away with the same crimes. But there are daily, ongoing grifts that predate Trump’s election, perpetrated by major American institutions. Of these, there is no deadlier scam than the American health care system. Drug companies will soak patients for the crime of wanting to stay alive. Hospitals will charge completely made-up prices for coronavirus tests and treatment. Insurance companies will find ways not to cover treatment. All the while, people will continue to avoid care because they know the ruin that faces them if they seek it. If the pandemic doesn’t shake us out of this madness, maybe nothing will.