With the federally designated COVID-19 public health emergency set to expire on May 11, Pfizer-BioNTech and Moderna have announced they plan to charge health insurers up to $130 for each COVID-19 vaccine. That’s a 650 percent to 800 percent increase compared to the initial prices the US government paid via Operation Warp Speed in the summer of 2020 — prices that were guaranteed by the government to “de-risk” the manufacturing costs for the companies even before the effectiveness and safety of the vaccines had been fully studied. It costs $3 or less to manufacture each dose.
As ludicrous as this plan may sound, pharmaceutical manufacturers have a history of dramatically increasing prices for drug products. Martin Shkreli, dubbed the “Pharma Bro,” purchased the license for Daraprim, a half-century-old antiparasitic drug , and increased the price of one tablet from $13.50 to $750 overnight. When asked why, he said, “Because I can!”
The COVID-19 vaccine and Shkreli case help illustrate two important aspects of the US drug market. First, that the federal government gives manufacturers the freedom to set prices for brand-name drugs at whatever level they want through government-granted patent monopolies. Second, that it allows manufacturers to maximize their profits on patented products even when US public investments directly contributed to the initial discovery or development of that drug product.
Some of the most important drugs on the market — from Sovaldi (sofosbuvir) for hepatitis C infection to Truvada (emtricitabine-tenofovir) for HIV preexposure prophylaxis to Xalatan (latanoprost) for glaucoma and Xtandi (enzalutamide) for prostate cancer —were discovered with substantial support from the National Institutes of Health, the largest funder of biomedical research in the world. Despite this, patients faced affordability challenges for many years.
History is about to repeat itself. In a recent study published in The BMJ, we found that from 1985 to 2019, the US government invested $337 million in research and development that directly led to the invention of the mRNA COVID-19 vaccines. This included NIH-funded grants in basic and translational science that helped elucidate the structure of a prefusion human coronavirus spike protein in 2016. This capability was key for developing a vaccine for SARS-CoV-2 after the virus genome became available in early 2020.
Involvement of federal scientists was so central that several of them were to be named on Moderna’s original patent for the vaccine, though the company later objected to this inclusion. The US government also invested in mRNA vaccine technology, human clinical trials, and manufacturing capacity through the Department of Defense and the Biomedical Advanced Research and Development Authority. Public funding of phase 1 clinical trials of CureVac’s mRNA rabies vaccine in 2013 and phase II and III studies of Moderna’s mRNA Zika vaccine in 2016 was vital for learning how to use this approach to safely elicit an immune response in humans.
These targeted pre-pandemic investments were paired with a historic $31.6 billion in funding during the first two years of the pandemic (Jan. 1, 2020, to March 31, 2022) to support manufacturing, clinical trials, and to guarantee purchase of 1 billion vaccine doses.
So how can more than quadrupling the price be justified? On March 22, Moderna CEO Stephane Bancel will testify before a US Senate committee about his company’s proposed price escalation decision. Pfizer-BioNTech leaders should also testify as they benefited from the substantial publicly funded work on mRNA vaccines for decades before the pandemic; that work was paid for by US and German taxpayers, among others. Pfizer-BioNTech also licensed patents from public and academic institutions to develop its vaccine.
Last March, President Biden launched, and Congress appropriated $1 billion to, the new Advanced Research Projects Agency for Health to advance transformative high-quality research of difficult biomedical questions. How will the federal government ensure that these scientific breakthroughs are made available at an affordable and accessible cost to all Americans after they are commercialized by the private sector?
The recently expanded American Cancer Moonshot Initiative aims to cut the age-adjusted cancer death rate by 50 percent by 2048. The US government invested $1.8 billion through the 21st Century Cures Act and the Centers for Disease Control and Prevention pledged $1.1 billion over five years for national cancer prevention and control programs. How will the federal government ensure that the fruits of this publicly funded initiative are accessible and affordable to all Americans in an equitable way?
Moderna has downplayed the potential problems in vaccine access that its price increases could cause by noting that public and private insurers will pick up most of the cost, and announcing plans for patient access programs to cover the out-of-pocket costs uninsured patients may face. However, having commercial or government insurers absorb these high vaccine prices will raise health care premiums and taxes for everyone. And drugmakers’ “public access programs” often have onerous application requirements and can be modified or shut down whenever a company chooses to do so.
Policy makers have several options to maximize benefits from public investments in pharmaceutical products and improve returns for the entire global community. First, public funding research contracts could be modified to require clear access, affordability, and equity benchmarks for any resulting medical products. Second, licenses based on publicly funded research could require that manufacturers make such products available at affordable prices to benefit the public’s health. Third, we could pass laws like the bipartisan We PAID Act of 2019 to ensure that prescription drugs developed with federally funded research are reasonably priced. Fourth, the federal government should reaffirm the Doha Declaration of 2001 on the Trade-Related Aspects of Intellectual Property Rights agreement and pledge to freely share intellectual property licenses for essential public health inventions with the global community. Fifth, the NIH could commit to fairly implementing existing rights already provided in the law — but never used — to allow the government to obtain publicly -funded prescription drugs or technologies from lower-cost suppliers if a manufacturer imposes prices that render these products unavailable to many patients who need them. Finally, Congress could expand the number and scope of drug products that can be negotiated by the Inflation Reduction Act and apply those prices more broadly.
Industry defenders will argue that any attempts to set access, affordability, or reasonable pricing provisions will negatively affect future drug innovation. Manufacturers certainly do make important investments in new products and deserve fair returns. But when product development relies so heavily on innovative scientific findings from government-funded researchers as with COVID-19 vaccines, much of the highest-risk activities have already been covered and enormous price increases should be adjusted accordingly. Even without such principles in place, Pfizer-BioNTech and Moderna have received about $100 billion in revenue from COVID-19 vaccines in the first two years of sales — certainly a generous return on their own investments by any standards.
The astonishing COVID-19 vaccine price spikes planned by Moderna and Pfizer-BioNTech should sound a loud warning to Americans and policy makers about how current laws and policies fail to fairly account for the critical contribution of public research funding throughout the development process of new medicines and instead reward manufacturers excessively for the role they play in getting those products to the public. Policy makers can do better.
Hussain S. Lalani is a primary care physician, STAT Wunderkind 2022, and a health policy researcher at the Program On Regulation, Therapeutics, And Law (PORTAL) at Brigham and Women’s Hospital and Harvard Medical School. Sarosh Nagar is a research assistant at PORTAL. Jerry Avorn and Aaron S. Kesselheim are professors of medicine at Harvard Medical School.