The COVID-19 vaccine profit windfall

The two start-up companies that produce the shots -- each of which received substantial government aid during their development -- are planning big price increases

Though little noticed by the public or mainstream press, the two companies that produce nearly all COVID-19 vaccines currently in use are on the cusp of imposing a fourfold increase in the price of vaccination.

When the public health emergency ends in early May, the federal treasury, which picked up the entire cost during the PHE, will turn over payment to the commercial insurance market. States will begin picking up about half the tab for Medicaid beneficiaries.

During the PHE, the federal government paid an estimated $15 to $30 per shot for the vaccines. Last October, Pfizer, which markets the COVID vaccine developed by Mainz, Germany-based BioNTech, told investors it plans to raise its price to $110 to $130 per shot this year. A few months later, Cambridge, Mass.-based Moderna, the other major manufacturer, signaled it would follow suit.

The government spent nearly $30 billion to vaccinate the nearly 80% of Americans who have had at least one shot in the 18 months since the Food and Drug Administration gave its first emergency use approval. Private insurers and government agencies could spend almost that much again this year if only half that number get booster shots.

Annual shots likely

Public health authorities are still evaluating whether annual booster shots will be necessary to combat new strains of the always evolving virus. Though COVID infections are currently at a relatively low rate, there are still 2,400 Americans dying each week from the disease – a rate that is more than twice the fatality rate of the worst years of the annual flu.

Given the likelihood that close to a hundred million Americans will be rushing out to get their annual booster shot later this year, it’s worth looking at whether this looming price increase is justified.

In answering that question, it’s important to remember that the federal government subsidized the development of the vaccine to the tune of $1.7 billion for U.S.-based Moderna. The German government gave BioNTech close to a half billion euros for its development program. Both the Pfizer/BioNTech joint venture and Moderna also benefited from guaranteed purchase contracts, which reduce the risk of investing in manufacturing facilities.

I compiled the chart below from recently filed corporate annual reports at the Securities and Exchange Commission. You can see that BioNTech and Moderna, both of which have only one approved product, became the most profitable drug companies in the world last year from sale of COVID-19 vaccines. Pfizer was by far the most profitable Big Pharma company, with only one relatively small biotechnology company exceeding its 31.3% aftertax profit rate.

Sen. Bernie Sanders (I-VT), chairman of the Senate Health Education Labor and Pensions Committee, might want to bring this up when he holds a hearing on the looming COVID-19 vaccine price increases on March 22.