How to Stop the Drug Companies from Hiking Prices for Covid Vaccines

The vaccine makers who received billions of dollars in government subsidies to develop the first COVID-19 vaccines are planning a three- to fourfold price hike for the next round of booster shots, which many health experts predict will be necessary to protect against the cagey virus’s latest variants.

The looming price increases will slap Medicare, Medicaid, and private insurers with an extra $12 billion-$15 billion in additional costs this year—and that’s if only half the adult population gets boosted. While Covid cases are trending lower, the virus still kills more than 2,400 people each week—twice those who die during a bad flu season. Public health officials warn that a renewed surge this year remains a serious possibility.

The two leading vaccine producers—a joint venture between Pfizer and Germany-based BioNTech and Moderna—have offered no justification for the price increases beyond the many lives saved through vaccination. The federal government paid the companies $15.25 to $30.48 a shot in 2021 and 2022, according to a December analysis by the Kaiser Family Foundation. Government payments through purchase contracts—another subsidy—exceeded $25 billion. And the government provided a liability shield for all Covid-related products, not just vaccines.

It’s not just the U.S. subsidizing the Covid manufacturers. BioNTech received nearly a half billion dollars in aid from the German government.

But on May 11, the Covid public health emergency will end, and so too will the authority that made the vaccines available free of charge. From now on, government programs and private insurers must cover the full tab. In a call with investors in October, Pfizer, which co-markets the messenger RNA (mRNA), said it may charge $110 to $130 a dose when the emergency ends. “It reflects the value this vaccine has brought to society,” Pfizer’s global president for hospital business Angela Lukin told investors.

In January, officials at Moderna, which received at least $1.7 billion in direct government development subsidies plus exclusive access to a technology developed with government grants, told The Wall Street Journal they plan to follow suit for their mRNA vaccine. Senator Bernie Sanders immediately blasted them for their “unacceptable corporate greed.” Indeed, at least four of the company’s executives became billionaires from the run-up in the company’s stock price.

“Your decision will cost taxpayers billions of dollars. Your outrageous price boost will also increase private health insurance premiums. Perhaps most significantly, the quadrupling of prices will make the vaccine unavailable for many millions of uninsured and underinsured Americans,” Sanders wrote in a letter to Moderna CEO Stéphane Bancel. “How many of these Americans will die from COVID-19 as a result of limited access to these lifesaving vaccines?”

The company responded a month later by promising to create a patient assistance program to pick up the cost of any co-pays, thus making it “free” to patients. The primary payers—government programs and private insurers—would remain on the hook for the vaccines’ total cost.

“Announcements by Moderna, Pfizer, and other big pharma companies to hike Covid-19 vaccine prices—in some cases, by as much as 500 percent, is price-gouging, plain and simple,” a spokesman for America’s Health Insurance Plans told STAT, an online news site that covers the drug industry. The Senate Committee on Health, Education, Labor and Pensions, chaired by Sanders, will hold a hearing on the price hikes on March 22.

Let’s put pharma’s Covid profits in perspective. Pharma companies are renowned as being among the world’s most profitable firms. But in 2021 and 2022, Moderna, whose only revenue-generating product is the vaccine, generated $20.6 billion in after-tax profits on $36 billion in sales, a 57.2 percent profit margin. In 2021 (2022’s results won’t be reported until the fall), BioNTech earned €10.3 billion in after-tax profits on €19.0 billion in sales, a 54.2 percent profit rate. Their profits far outdistance the eye-popping profitability of traditional drug manufacturers, which typically are 20 percent to 30 percent of total sales.

There is one big difference between the two firms, though. Moderna paid just $2.3 billion in taxes on pretax profits of $22.9 billion, an effective tax rate of 10 percent. Germany-based BioNTech, on the other hand, paid €4.7 billion in taxes on pretax profits of €15 billion, an effective tax rate of 31.3 percent.

There is another way, besides taxation, to counter drug industry greed—if the Biden administration wants to pursue one. It could pay some company to test a new vaccine that can pass the Food and Drug Administration’s stringent standards—one that can be produced at a fraction of the price planned by Pfizer/BioNTech and Moderna.

Fortunately, the technology already exists. The Corbevax vaccine, which generates antibodies based on genetic fragments of the COVID-19 virus, was developed by philanthropic-minded doctors Peter Hotez and Maria Elena Bottazzi at the Texas Children’s Hospital and Baylor College of Medicine. It has already passed regulatory muster in India, Indonesia, and numerous African countries. Its effectiveness, according to documents submitted to the Indian drug approval agency by Hyderabad-based Biological E., India’s largest vaccine producer, is around 90 percent, just a shade below the mRNA vaccines from the likes of Pfizer and Moderna.

Hundreds of millions of Corbevax shots have been administered in the developing world. The results of a new trial that tests the bivalent vaccine (it protects against multiple strains of the COVID-19 virus) are expected soon, Hotez told me this week. He added that the Corbevax researchers had developed a prototype and shared it with Biological E., giving the Indian manufacturer not only free access to the intellectual property but the techniques for its manufacture.

The key to the vaccine’s low cost—and to keeping it low—is that Hotez and Bottazzi make their patents publicly available to anyone who wants to produce the vaccine. No one gets an exclusive license. The technology has been transferred to four firms making vaccines for Africa “at a fraction of the cost,” Hotez said.

Dean Baker, a senior economist at the Center for Economic and Policy Research, is a proponent of generic manufacturing of technologies developed with government funding. He estimates a low-cost vaccine option would save nearly $6 billion per booster round. “It is reasonable to believe that around half the people getting boosted would get Corbevax because of some push from insurers,” Baker told me. “I suspect there will also be some vaccine-hesitant people who will welcome the opportunity to get a non-mRNA vaccine, which may not be terribly rational, but we know most hesitancy is not terribly rational.”

Hotez lists some of the benefits of an effective non-mRNA vaccine. “It appears more durable. It can be transported with simple refrigeration. It has a great safety profile. It doesn’t use animal products, so it is halal [meets Muslim dietary restrictions],” he said. “It really does check a lot of boxes.”

The biggest roadblock to quick U.S. approval is the FDA’s reluctance to use vaccine efficacy data generated exclusively in foreign countries by foreign firms. In India, for instance, Biological E. still produces vaccines under emergency use authorization. Pfizer/BioNTech and Moderna received their initial approvals through EUAs, but in 2021 and 2022, respectively, they also submitted trials for regular approval.

Getting regulatory approval for Corbevax would require a trial comparable in size to the ones conducted by those two firms—about 40,000 subjects. Assuming the highest estimated cost of $25,000 per volunteer, a Corbevax clinical trial meeting FDA standards could cost $1 billion.

That would be less than 60 percent of the subsidy given to Moderna. Plus, it would generate savings in the first year of nearly six times the trial cost. “That’s not a bad day’s work,” Baker said. “Isn’t it time we give competition a try?”

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