The US government wants reasonably priced Covid-19 vaccines.

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What is reasonable? Covid-19 is largely off the radar of most Americans. Yet, as with the flu, we can expect a new outbreak of Covid-19 later this year. This prompted Xavier Becerra, the Secretary of Health and Human Services, to issue a warning to the biopharmaceutical industry about the prices of the next generation of vaccines.

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Updated Covid-19 vaccines hitting the market this fall should be priced reasonably, reflecting the value you’ve gotten from the US government’s investment. Price-raising behavior takes advantage of the trust the American people have placed in you through the Covid-19 response.

Unfortunately, Becerras’ rhetoric reinforces many misconceptions about the history of the discovery and development of Covid-19 vaccines, work that was essential to overcoming the worst pandemic in 100 years. Yes, through Operation Warp Speed, the United States guaranteed that it would purchase millions of doses of Covid-19 vaccines if deemed SAFE AND EFFECTIVE by the FDA and CDC. Why wouldn’t the government do this? We were in the middle of a pandemic. People were dying. Businesses have been closed. It is hoped that the role of the government is to take such measures to save lives and revive the economy.

Did these vaccines have any value? According to data collected by the Commonwealth Fund, an American foundation seeking to promote a high-quality health care system, the impact of these vaccines has been extraordinary. From 12/12/20 to 3/31/22, thanks to these vaccines, there were 2,265,222 fewer deaths, 17,003,960 fewer hospitalizations and 66,159,093 fewer infections, which saved $899.4 BILLION in healthcare costs! All this for the low price of $39 for Pfizer’s two-dose vaccine regimen and about $32 for Modernas. By the way, when someone went to a pharmacy like CVS or Walgreens for their Covid-19 injections, the government paid the pharmacy $43 for each injection given. Pfizer, which received no government money in its Covid-19 R&D efforts and invested $2 billion at risk in then-unproven mRNA technology, got $19.50/injection, less than half of what was paid to administer the vaccine. (I also challenge anyone to walk into a pharmacy to get a Covid-19 shot and not buy anything while there!)

So what fuels Becerras’ concern? For one thing, the US government no longer provides free Covid-19 vaccines to the public. Congress has not renewed the funds to continue doing so. Thus, the cost of vaccines will be transferred to insurance companies and they will now demand their share of the commercial pie. There were no such intermediaries when the government was the only customer for the vaccines. As a result, Pfizer and Moderna have announced that prices for these vaccines will increase significantly, possibly as much as $120. How to justify such a price? Is this the blatant price spike that Becerra feared? In fact, the $120 price tag is misleading. This would be the LIST price of the vaccine, the price which would then be used to enter into negotiations with insurance companies. This is what is happening in our health care system. Insurance companies will determine which vaccine they will provide to their customers based on the best price they negotiate with vaccine manufacturers. So the NET PRICE, the price that vaccine innovators will actually receive, will be well below $120, maybe around $85.

Still, $85 is a lot more than the initial prices of $32 to $39. Is it justified? In fact, there are reasons why higher prices will be necessary. On the one hand, research investments have been made to find a modified vaccine to protect against new variants. The next series of vaccines will differ significantly from the original, resulting in new manufacturing processes, etc. In addition, other factors will drive up costs: the next generation of vaccines will be delivered via single-dose vials as opposed to vials that contained six doses during mass inoculations; there will be higher distribution costs; and vaccines will expire before use. All this will lead to higher costs for the manufacturer.

The cost of the Covid-19 vaccine should be placed in the context of that of other vaccines. The average cost of the high-dose flu shot (for people over 65) is $75 for people without insurance. Keep in mind that while Covid-19 vaccines are over 95% effective, the effectiveness of flu vaccines hovers around 50% each year, another important point when considering the value of Covid-19 vaccines. Meningitis vaccines cost around $150,200, shingles – $325 (two doses) and measles/mumps/rubella – $90. Obviously, a net price of $85 for the Covid-19 vaccine is quite reasonable.

Nevertheless, politicians will howl when the new higher Covid-19 vaccine prices are announced. No one will remember how vaccine makers saved lives and the economy through their efforts. Instead, Covid-19 vaccine prices will be wrongfully attacked as an example of biopharma greed. It will be a shame.

(John L. LaMattina is the former president of Pfizer Global R&D and the author of Pharma & Profits Balancing Innovation, Medicines, and Drug Prices.)

Follow me on Twitter. Check out my website.

I was president of Pfizer Global Research and Development in 2007, where I led over 13,000 scientists and professionals in the United States, Europe and Asia. I have received many awards, including an honorary doctorate of science from the University of New Hampshire. I am also the author of “Drug Truths: Dispelling The Myths Of R&D” and Devalued And Distrusted: Can The Pharmaceutical Industry Restore Its Broken Image? I’m also a senior partner at PureTech Health.

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