Michael Hiltzik: Our greedy vaccine manufacturers

Stéphane Bancel, the CEO of pharmaceutical company Moderna, couldn’t contain his pride as he released his annual letter to shareholders on January 1. 3.

“From the beginning, our mission has been to deliver on the promise of mRNA technology to patients,” Bancel wrote, referring to the company’s pipeline of vaccines that use short pieces of the genetic code to help cells build immunity .

“And we delivered quickly with our COVID-19 mRNA vaccine,” he continued. “As our first approved product, it has impacted hundreds of millions of lives around the world. … We are harnessing the power of mRNA to create a new category of drug and company that maximizes its impact on human health.”

Moderna is committed to pricing that reflects the value that COVID-19 vaccines bring to patients, healthcare systems and society.

— Moderna voice talent Christopher Ridley

A few relevant points were missing from Bancel’s 2,700 words of self-congratulation. On the one hand, the federal government’s contribution to the company’s success.

These included a nearly $1 billion research grant from the government’s Biomedical Advanced Research and Development Authority (BARDA) through 2020, as well as a $1.5 billion federal purchase guarantee in 2020 for COVID vaccines before the Tests were even completed – a deal that significantly reduced Moderna’s financial risk in developing the vaccine.

That also doesn’t count the millions, possibly billions, in government-funded basic research at academic institutions and government laboratories in mRNA technology – the basis of the product Moderna is developing.

Also glossed over was Moderna’s intent to lower the price of its COVID vaccine from the estimated $20.69 per dose that the federal government will set by December 2022 for 1.2 billion doses of COVID vaccines, including Moderna’s product and a similar one from Pfizer manufactured mRNA formulation, were paid to increase up to $130 per dose.

Pfizer, which received no federal research funding but a government purchase guarantee, has also announced a price increase to up to $130 per dose.

Pfizer’s vaccine also comes from state-funded basic research; In fact, on its website, the company acknowledges the seminal work on mRNA technology by Katalin Karikó and Drew Weissman of the University of Pennsylvania, research that was funded in part by the National Institutes of Health.

Both companies partly justify the planned price increases with savings in healthcare costs from the vaccines.

In an email, a Pfizer spokesperson told me that its vaccine and other therapies “have saved hundreds of thousands of lives [and] Tens of trillions of dollars in healthcare costs.” Pfizer “priced the vaccine to ensure the price matched the value delivered,” the email said.

Moderna makes a similar point. “Moderna is committed to pricing that reflects the value that COVID-19 vaccines bring to patients, healthcare systems and society,” company spokesman Christopher Ridley said via email.

It is impossible to exaggerate the moral depravity of this argument. The companies are essentially saying they deserve a cut in the life and money savings attributable to their products, and they will determine the size of that cut themselves — regardless of considerations like the cost of developing and manufacturing the drugs or the impact , which will have higher prices on patient access.

A chart showing that COVID vaccines have greatly reduced death rates from the pandemic

The COVID vaccines have greatly reduced mortality rates from the pandemic across the board.

(US Centers for Disease Control and Prevention)

No industry other than pharmaceuticals claims that their prices should be based on the higher cost of alternatives, but that’s a well-known factor in drug pricing. Gilead Sciences, for example, priced Sovaldi and Harvoni, its hepatitis C treatments, at over $80,000 for a 12-week course based on the drugs’ “premium” — the higher cost of alternative treatments.

After a US Senate committee issued a fierce report on Gilead’s pricing strategy, the company said the drugs’ prices were “consistent with previous standards of care” and that the prices were “less than the cost of previous therapies, although our therapies have significantly higher cure rates and very few side effects.”

Price hikes in Pfizer’s and Moderna’s vaccines will almost inevitably translate into lower vaccination rates, even as executives from both vaccine companies claim the price hikes will be invisible to most Americans.

“Anyone with commercial or government insurance who is eligible for a vaccine should be able to access the vaccine without making their own payments,” Pfizer chief executive Angela Lukin said on a May 20 conference call when the company announced its announced a proposed list price of $110 to $130 per dose.

However, this is very misleading. Underinsured or uninsured Americans could be charged the full price, leaving the vaccine beyond their ability to pay. To the extent that insurers or Medicare and Medicaid would cover most of the cost for their insured, this could translate into higher premiums.

Pfizer says some uninsured Americans will be eligible for the company’s patient assistance program, which covers some co-payments for its drugs. But this program requires an application and considerable paperwork; It is not a substitute for going to a pharmacy and getting the syringe on demand, as the government program has made possible.

Make no mistake: this is a public health issue. The government’s COVID vaccination program prevented more than 18.5 million excessive hospital admissions and 3.2 million excessive deaths, according to research from the Commonwealth Fund.

“Without vaccination, there would have been nearly 120 million more COVID-19 infections,” estimated the Commonwealth Fund, which also calculated that the vaccination program “would have saved $1.15 trillion in medical costs that would otherwise have been incurred.”

Government statistics clearly show that vaccinated individuals have a greatly reduced COVID-related mortality rate, with gains multiplying for fully vaccinated and refreshed patients.

While vaccines have undoubtedly saved society money and lives, the question remains how much profit manufacturers make – and how to calculate the cost of having limited access to these products due to higher prices.

List price increases are only part of the story. The other side of the coin is the profit margin that Moderna and Pfizer expect from the vaccines. According to an analysis by Oxfam, the mRNA vaccines can be made for as little as $1.18 to $2.85 per dose, meaning the companies made huge profits even at the government price.

There seems to be enough room for Moderna and Pfizer to capitalize on the vaccines even at lower prices. Pfizer has forecast annual sales of its vaccine at $34 billion and Moderna at $18-19 billion. These estimates were based on sales in 2022 before price increases take effect. Government agencies have started talking about a regimen of annual COVID vaccine boosters, similar to flu vaccines, which will mean a steady stream of revenue for the companies in the years to come.

The price increases reflect what Moderna and Pfizer are both calling a transition to commercializing the vaccines. This is necessary because the federal government has run out of money to buy cans and give them out for free. Last year, President Biden asked Congress for $3.9 billion “to provide Americans with easy access to immunizations, testing, treatment, and operational support.” He didn’t get it.

The impact of federal funding on Moderna has been tremendous — and a large portion of that gain has gone directly to shareholders. According to the company’s latest quarterly report, the company spent $2.1 billion on R&D in the first nine months of 2022. But it spent $2.9 billion on share buybacks during the same period, which pushed the value of its shares higher.

These repurchases were part of a $6 billion share repurchase program approved by Moderna’s board last year, of which more than $3 billion is still available. Basic math tells you that if Moderna hadn’t received its more than $1 billion in R&D support from the government, it would have been upfronting at least that much less to shareholders.

As I’ve written before, it is the cowardice of political leaders and government regulators that allows pharmaceutical companies like Moderna and Pfizer to dictate higher prices for products developed in part with government funds.

The government arguably has authority over pricing and distribution of products developed with federal funds, such as B. the COVID vaccines. The key factor is the Bayh-Dole Act of 1980, which allowed private companies to commercialize inventions resulting from government-funded research, but retained certain government rights to protect taxpayer investments.

The most important of these are “invasion rights”. These allow the government to require a state-funded drug to be licensed to other manufacturers, or to offer a license to alternative drug manufacturers themselves to ensure the drug is widely available. These rights can be exercised when the government concludes that a manufacturer has not taken sufficient steps to make a product publicly available or has not released it on “reasonable terms”.

The government has never exercised its right of invasion, although it has occasionally threatened to wring concessions from manufacturers. But as drug prices soar, pressure mounts on federal agencies to take action.

Prostate cancer patients, for example, have urged the Department of Health and Human Services to take action against Xtandi, a miracle cure for the disease that was being developed at UCLA with significant funding from the Pentagon and the National Institutes of Health.

The average wholesale price of Xtandi, which Pfizer is licensed to manufacture, is $189,800 per year. (UCLA earned more than $520 million in royalties on the drug when it sold the rights in 2016.) To date, Health and Human Services hasn’t even held a hearing on a year-old prostate cancer patient petition targeting it , that bring drug prices down by exercising marching rights.

The COVID vaccines could be another test case. Few drugs on the market today have the power to benefit public health, and few are so sensitive to the magnitude of Moderna’s and Pfizer’s planned price hikes.

This is a subject on which the federal government cannot and should not remain silent.

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