“The federal government is taking a large financial risk right now to ensure that a vaccine is ready to be distributed at no cost to Americans once proven safe and effective,” Rep. Brett Guthrie (R-Ky.), who serves on a House oversight panel that will hear from five vaccine makers next week, wrote in an email. Another hearing this month will look at safety, and more congressional scrutiny is likely.
Lawmakers say they don’t know how the coronavirus vaccines will be priced, or how much money governments, in the U.S. and abroad, may have to spend to purchase millions, if not billions, of doses to halt the pandemic, on top of the spending on research and production.
“A drug company’s claim that it’s providing a vaccine at cost should be viewed with the same skepticism as that by a used car salesperson,” Rep. Lloyd Doggett (D-Texas), a leading critic of the industry in Congress, told POLITICO in an email.
“How has that cost been determined? For how long will it be available? Is this just a clever marketing strategy?” added Doggett, who complained it’s hard to get information on coronavirus drugs and vaccines because the “Trump administration that’s dominated by former pharmaceutical executives, won’t tell.”
Other members of Congress want to restrict profits, especially when vaccines are developed and manufactured with government funds.
“I’m not saying [vaccine developers] don’t have any interest in protecting public health, but their business is about maximizing their returns for investors,” Sen. Tina Smith (D-Minn.) said in a phone interview. Any profit should be “reasonable” — and government should be able to verify that, she added.
Several prominent Democrats on Monday outlined a new framework to ensure profits are modest, government costs are manageable — and Americans themselves won’t have to pay out of pocket for vaccines, whether or not they have health insurance.
“If the federal government does not directly purchase enough COVID-19 vaccines for the full population, Congress must act to ensure that all individuals will have access to eventual COVID-19 vaccines free of charge,” Senate HELP ranking member Patty Murray (D-Wash.), Senate Minority Leader Chuck Schumer and other Senate Democrats wrote in a white paper.
In response to the white paper, Senate HELP Chairman Lamar Alexander (R-Tenn.) also called on Democrats and Republicans to work together on accelerating the development and distribution of vaccines. His brief statement didn’t specifically address the nonprofit claim.
If the “no profit” pledge had already raised questions among policymakers, the fact that one major company, Pfizer — which is not among the U.S.-government financed firms — has said it does expect to make money on its vaccine is only fueling the doubts.
Industry watchers on and off the Hill are asking whether the “nonprofit” vaccine pledge from some big companies — and a related promise from smaller companies to make sure it’s affordable around the world — will prove to be an empty promise from companies already struggling to earn the public’s trust after years of rising prices.
The U.S. government so far has invested nearly $4 billion in six vaccines through the government’s Biomedical Advanced Research and Development Authority, or BARDA, and more recently via Operation Warp Speed, a special government program set up to manage the race for treatments and vaccines. The goal is to deliver 300 million vaccine doses for the U.S. by January.
Biotech investor Brad Loncar said these large companies are not working on Covid-19 vaccines to boost their bottom lines as much as to be at the forefront of trying to solve a one-in-a-generation humanitarian problem.
And if — as many scientists hope and expect — several vaccines will be deployed to fight the pandemic, market forces will prevail to drive down prices, Loncar said. “I have a hard time seeing how some companies can offer premium pricing unless one is way better at protecting people,” he said, noting the vaccine space has not been an attractive investment in recent years.
Rep. Michael Burgess (R-Texas) also noted in an email that vaccines have been made affordable in the past and that “clearly, Congress has thought about the cost” of developing a vaccine for Covid-19.
At least two vaccine candidates, from Pfizer and Moderna, are expected to enter the final phase of clinical trials this month, and one from AstraZeneca has already entered late-stage trials overseas. Governments and international organizations procuring vaccines are looking to hedge their bets and buy doses even before the vaccines are proven effective. With the severity of the pandemic, there’s an imperative to line up supply so immunization can move ahead quickly if one of the vaccines work.
In the years before the pandemic, pharmaceutical companies had been abandoning vaccine development. It requires hefty expenses in research, testing and manufacturing, and the market can be limited.
For Covid-19, however, the vaccine market spans the globe and much of the manufacturing and development costs are government-subsidized.
Operation Warp Speed last week invested $1.6 billion in a vaccine candidate from Novavax. It said the U.S. “will own the 100 million doses of investigational vaccine” produced by the research. The Department of Health and Human Services also made clear that if the vaccine proves safe and effective, those 100 million doses would be provided “at no cost” to Americans.
That’s the first, and so far only, guarantee made on pricing and doses by the government — even though it’s the sixth vaccine to receive U.S. funds.
Rep. Rosa DeLauro (D-Conn.), chair of the House Appropriations health subcommittee, said she expects that “Congress will need to provide further supplemental appropriations to purchase hundreds of millions of doses of vaccine once it has been developed.” House appropriators are communicating with HHS to determine how many doses are guaranteed under current contracts with vaccine manufacturers, she added.
An HHS spokesperson offered some reassurance on eventual costs, saying “one of the considerations in the dose price is any federal funding that was provided to develop the vaccine.” And she noted, as seen with Novavax, that “when the federal government pays for all of the development and manufacturing of a product, the federal government owns the doses manufactured with tax dollars.”
But she said that the money BARDA invested earlier in jump-starting vaccine manufacturing capacity didn’t include a purchase of doses.
AstraZeneca and Johnson & Johnson, which together have received more than $1.5 billion from the U.S. government, said last month that they would develop their respective vaccine candidates on a nonprofit basis during the pandemic.
“Just like everyone else, we’ll do it at no profit,” AstraZeneca CEO Pascal Soriot said. “This is what a successful, healthy pharmaceutical industry can do.”
But the companies’ caveat that the vaccines would be offered at no profit “during the pandemic” potentially sets up a scenario where if the outbreak is declared over, the companies could charge more — even if people need boosters or annual shots to keep the virus at bay.
When contacted by POLITICO, neither company was willing to offer further details on what they mean specifically by “no profit.” That lack of detail leaves many wondering what, if anything, to expect, especially given Pfizer’s stance.
Pfizer initially said in an industry media briefing in late May that its vaccine’s price would be aligned with Johnson & Johnson and AstraZeneca. Pfizer CEO Albert Bourla said financial returns were not driving the vaccine work.
But then Bourla told a Goldman Sachs conference in June that the vaccine would be priced in line with shots on the market for other conditions. Later that month, he said at a Milken Institute event that it would be manufactured and produced on a for-profit basis.
Pfizer’s existing vaccines have brought in more than $20 billion since 2015.
The general lack of transparency about the U.S. government’s initial contracts with vaccine developers means even Congress doesn’t know if doses of those vaccines are assured. Nor do lawmakers know what the companies’ nonprofit pledges mean, one senior Hill staffer noted. That matters as the government will be a major purchaser.
Sen. Maggie Hassan (D-N.H.) emailed POLITICO that the administration has been “conspicuously silent about the actual terms of these agreements and at what price the federal government would secure doses.”
Even if vaccines are developed on a nonprofit basis, that doesn’t mean there aren’t any costs. In fact, costs could be shifted onto insurance premiums or higher deductibles, hitting consumers indirectly.
Advocates who have been pushing for lower drug prices worry that the nonprofit promises ring hollow because of the billions of taxpayer dollars that have gone into the vaccine projects and the lack of transparency on what developers are spending on their research, development and manufacturing operations.
David Mitchell, a cancer patient who founded and leads the nonprofit Patients For Affordable Drugs, called the nonprofit pledge “part of the charm offensive to rescue us from the coronavirus, but billions are going from taxpayers to these companies.” He predicted U.S. taxpayers will be forced to buy back the doses that prove effective.
Kate Elder, vaccines policy adviser at Doctors Without Borders, echoed Mitchell’s concerns, noting that what the U.S. gets on the back end from vaccines developed under these BARDA transactions may have no relation to what’s paid upfront. She also said the deals between BARDA and the vaccine developers are confidential, so “no one knows if certain vaccine prices are baked into them.”
Peter Maybarduk, director of the consumer advocacy nonprofit Public Citizen, similarly questioned the pledges: “What is a nonprofit price when the investment is covered by taxpayers and the invention is based on public funds?”
The nongovernmental organization Knowledge Ecology International obtained redacted versions of some of the BARDA vaccine contracts in early July. In a version of the J&J contract, at least, the government has limited its ability to intervene even if a vaccine developer charges an unreasonable price.
How the government could step in if a vaccine was overpriced is unclear. At a recent Senate hearing, NIH Director Francis Collins was questioned on the KEI documents, but he said the Bayh-Dole Act is not intended to address unacceptable prices. That 1980 law does include a provision that lets the government break a patent and bring cheaper alternatives to market if it has significantly invested in a drug’s development. But the provision has never been used.