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Competition May Not Be Enough to Keep Covid Shot Costs Down (1)

July 23, 2020, 9:34 AMUpdated: July 23, 2020, 1:27 PM

Pharmaceutical companies are coy about what they’ll charge for an eventual Covid-19 vaccine, and several shots hitting the market at once may not be enough to keep costs down.

The National Institutes of Health previously had trouble recruiting companies to pursue vaccines for infectious diseases like Ebola and West Nile virus, but nearly 200 vaccine candidates are in development for Covid-19. With global demand for the shots, several vaccine options won’t necessarily create market competition to drive down costs. However, that doesn’t mean pharmaceutical companies will be price gouging.

“They know that they have to walk a careful line. They have to do the right thing. This is a pandemic. They are not going to be price gouging,” Lois Privor-Dumm, director of policy advocacy and communications at Johns Hopkins University’s International Vaccine Access Center, said.

Executives at Moderna, Pfizer, and Merck & Co., told a House Energy and Commerce oversight panel July 21 they won’t sell their Covid-19 vaccines at cost. But “at cost” can mean a lot of different things, Privor-Dumm said. It could mean selling vaccines at the cost of manufacturing them, or it could mean companies would try to recoup their research investment as part of the shot’s price.

“It’s clear to me that at this point there’s nothing preventing them from charging what they want to charge,” Rep. Jan Schakowsky (D-Ill.), who asked the vaccine executives about pricing, said in an interview. “In terms of really addressing this Covid-19 crisis, if everyone doesn’t have access to the vaccine, then there’s no use to it.”

The conversation arises as Pfizer unveiled its price at $20 a dose Wednesday, with a U.S. government contract for 100 million doses. That price point is relatively low compared to the seasonal flu vaccine, but it also will support a profit for the company. That will continue to be the deciding factor in vaccine prices going forward, which could mean they fluctuate.

Watching Competition

Covid-19 will need multiple approved vaccines to meet global demand, National Institutes of Health Director Francis S. Collins and others have said. While billions clamor for the shot, analysts are watching how much that competition will constrain prices.

“In the U.S., where drug prices are set freely by the manufacturer, having multiple brand-name drugs made by different manufacturers generally does not lead to substantial price reductions,” Aaron S. Kesselheim, a Harvard Medical School professor who studies the economics of medications, said. “The same would be true of vaccines on the open market.”

The pharmaceutical industry dismissed concerns about exorbitant prices for any eventual vaccines.

“During public health emergencies such as pandemics, the biopharmaceutical industry has a track record of responsible pricing and actively partnering with the government to ensure availability and affordability,” Andrew Powaleny, spokesman for the Pharmaceutical Research and Manufacturers of America, said in a statement to Bloomberg Law.

The first Covid-19 vaccine will likely have a markup on cost, but that price will eventually drop after a second vaccine comes onto the market, said Michael Abrams, managing partner of health-care consulting firm Numerof & Associates.

The U.S. government could help keep costs down by buying the vaccine, something it did during the 2009 swine flu outbreak, Kesselheim said. The government then made it widely available with a small administration fee, and there were no problems with access, he said.

“Obviously, the government will want to make sure that the price it pays for the vaccine is a fair price based on the value of the vaccine (how effective it is) and the cost of development,” he said.

—With assistance from Jacquie Lee

(Updates with Pfizer price and U.S. contract deal in sixth paragraph.)

To contact the reporter on this story: Jeannie Baumann in Washington at jbaumann@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Andrew Childers at achilders@bloomberglaw.com

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