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The US is buying COVID-19 vaccine for everyone. That could pave the way for drug price reform

Sarah Gantz, The Philadelphia Inquirer on

Published in Business News

Before the coronavirus vaccines had even been proven to work, the United States scrambled to pre-order hundreds of millions of doses. The government has paid billions to Pfizer, Moderna and other vaccine makers so that every person in the country can get vaccinated free of charge.

It doesn’t matter if you’re uninsured, undocumented, don’t have a regular doctor or a driver’s license. In the interest of taming the pandemic, the government did away with some of the biggest barriers people often face in accessing health care.

Industry analysts and patient advocates are keeping a close eye on what happens next: If, once the federal health emergency has ended, the government stops bulk-buying the vaccine, costs could go up and people who are uninsured may be at risk of going without. Or perhaps the government’s approach to COVID-19 vaccination could lead the way to drug price reform that would allow federal programs, such as Medicare, to negotiate prices.

“The price negotiation the U.S. government has engaged in with COVID-19 vaccines is exactly what is prohibited for other drugs,” said Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation. “We in the U.S. pay far higher prices for drugs than in other countries where governments negotiate or set prices. COVID-19 vaccines have been the exception because of the role the federal government played in purchasing doses and providing them to everyone at no charge.”

Normally, private health insurers, Medicare, Medicaid and other agencies that operate public health programs, such as Veterans Affairs, all independently negotiate rates for vaccines and prescription medications directly with pharmaceutical companies. Access depends on what type of health insurance you have.

But in order to get as many people as possible vaccinated quickly, the government took a different approach for the COVID-19 vaccine.

Under bulk purchasing agreements each worth over $1.5 billion, the U.S. is paying about $15 per shot for Moderna’s vaccine and $19.50 per shot for Pfizer’s vaccine — a price Pfizer’s chief financial officer, Frank A. D’Amelio, called “pandemic pricing.”

“Obviously, that’s not a normal price,” he said in February, during a call with investors following the release of the company’s 2020 fourth quarter earnings. Pfizer would normally charge between $150 and $175 per dose for this type of vaccine, he said.

The government’s ability to negotiate as the sole purchaser of vaccines in the U.S. only partly explains the bargain prices, Levitt said. Pre-purchasing before the vaccines were available likely helped hold down prices.

“Drug companies have likely been hesitant to look like they were price gouging in the middle of a pandemic, especially with a coming political debate over drug prices more generally,” Levitt said.

The pharmaceutical industry’s public reputation has soared during the pandemic, as people saw competitors collaborate in a worldwide moment of crisis.

Even at a steeply discounted price, drug companies have profited from the coronavirus vaccines. Pfizer, for instance, has a 20% profit margin on its vaccine, D’Amelio said during the February earnings call.

In response to questions from the Inquirer about its plans for vaccine pricing, Pfizer pointed to its 2021 proxy statements, in which executives said the company expects a “pandemic phase” — where governments are the primary purchasers of the vaccine — could last into 2022.

 

“We recognize the urgent need for people all over the world to receive this vaccine and have accordingly set the price of our vaccine for the pandemic period to encourage broad access, rather than using traditional value-based pricing frameworks,” the company wrote in its proxy statement.

IQVIA, a health care analytics company, estimates global spending on coronavirus vaccines will top $157 billion over the next five years. Competition from new manufacturers could help drive down prices, though cost will vary by country, said Murray Aitkin, a senior vice president and executive director of the IQVIA Institute for Human Data Science.

The U.S. government is expected to continue negotiating bulk purchasing agreements with vaccine makers for the duration of the public health emergency. If boosters are needed to protect against new variants or if researchers discover immunity lasts for only so long, the government will most likely purchase those, too, said Stacie Dusetzina, an associate professor in the Department of Health Policy at Vanderbilt University. That should help keep prices steady — at least for now, she said.

Pharmaceutical companies are known for routinely hiking prices of drugs that have been on the market for years. But a vaccine for a global pandemic is different, Dusetzina said.

“People really don’t have any leeway for price gouging when the country is in a bind, and this is definitely one of those times,” she said. “Globally, nationally, we’re in a bind. We should expect companies to be able to make a profit, but we should not expect or allow companies to make excessive profit.”

But eventually, once the pandemic is over, a coronavirus booster may be just one more of the common immunizations that children and adults receive, like those for influenza or hepatitis.

Under the Affordable Care Act, most health insurance plans are required to cover routine immunizations without an out-of-pocket cost. Medicare and Medicaid also cover at no additional cost most vaccinations.

The federal childhood immunization program ensures that all children are able to get vaccines, even if they are uninsured. Pfizer recently received emergency use authorization for its COVID-19 vaccine among children ages 12 to 15. Both Pfizer and Moderna are conducting clinical trials to test the vaccine in children as young as 6 months.

But without careful planning — or a policy change — people at the greatest risk of getting sick could have the least access to the vaccine, said Jen Kates, a senior vice president at the Kaiser Family Foundation. People who are uninsured often hold “essential worker” jobs that do not offer health benefits, and may be unable to work from home, take time off work or social distance.

Uninsured adults are often able to access routine vaccines at federally funded health clinics, but coverage isn’t guaranteed. People without health insurance are often reluctant to seek out medical treatment for fear that they won’t be able to pay.

“COVID is probably the clearest example people have had in their lifetime of what happens if you have an infectious agent that causes a subset of people to become very sick, be hospitalized and possibly die,” Kates said. “It really goes against everyone else’s best interest if there are groups that don’t have access to the vaccine.”

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