Summary: A new article in the Journal of the Royal Society of Medicine describes how the price charged by US-based COVID-19 manufacturers exceeds production costs by 10-fold or more. That’s a stunning profit margin, for technology developed with huge government support and a guaranteed market. Comprehensive pharmaceutical price regulation is essential in any comprehensive health care financing reform.
The costs of coronavirus vaccines and their pricing
Journal of the Royal Society of Medicine
By Donald W Light and Joel Lexchin
COVID-19 vaccines need to be as globally affordable and accessible as possible as a public health good to help counter [the] threat to global public health.
[P]ublic funding to corporations has directly or indirectly financed all phases of vaccine research, development, testing and manufacturing, including the development of the innovations on which the RNA platform (mRNA) and other vaccines are based. Billions in funding from taxpayers, multiple branches of the United States (USA) government, from the European Union (EU) and countries such as Germany, has been so extensive that there is little investment or sunk costs for corporations to recover, except perhaps for those associated with manufacturing the vaccines themselves. In addition, company costs for liability are minimised, as are the large marketing costs typical of pharmaceutical products.
AstraZeneca [British-Swedish] has said it is selling its Oxford-based vaccine without profit during the global pandemic, but its inter-country price per dose varies – $2.15 in Europe, $3–4 in the USA and $5.25 in South Africa … Moderna and Pfizer [American] were charging more affluent nations and the EU for their mRNA vaccines with prices ranging from $14.70 to $23.50 a dose. Do their costs of developing and manufacturing vaccines, net of public subsidies, justify these prices, or are the companies just ‘making a killing’?
Adding these costs together, net manufacturing costs for 100 million doses ready for shipping appear to range from US$ 0.54 to US$ 0.98 a dose.
Comment by: Jim Kahn
This excellent synthesis of available cost information [imprecise, because cost detail is treated as proprietary] demonstrates that COVID-19 vaccine production costs are a very small fraction of charged prices. Especially for US-based manufacturers.
Of course we want companies to profit from drug development success – and the COVID-19 vaccines are a remarkable, indeed historic example of that. But the work was done with huge government financial support, the market is guaranteed by the government, and liability is restricted. So why do prices need to exceed costs by ten-fold or more?
They don’t. AstraZeneca – the only non-US company in this mix – charges about 85% less than Moderna and Pfizer.
Fair returns, based on full disclosure of production costs and reasonable adjustment for government support, is the proper basis for determining price.
The Build Back Better social infrastructure bill currently in Congress includes a few drug price control mechanisms, but far less scope than originally proposed – for limited numbers of drugs, and substantially gameable. More on that another day.
We need drug price controls as the default condition, not voluntary or sporadic.