Currently, the federal government is covering the cost of COVID-19 vaccines for all people who live in the U.S. But once the COVID vaccines move from emergency use authorization to full approval, the U.S. is no longer in a public health emergency and the federal government isn’t reimbursing for the vaccines anymore, how will payers manage the COVID vaccines? And how will manufacturers price the vaccines?
According to an article published May 26 on BioSpace, the current U.S. price for the Pfizer Inc./BioNTech SE vaccine, which requires two doses, is $19.50 per dose for the first million doses. The Moderna, Inc. vaccine, also a two-dose product, is between $25 and $37 per dose, and the Johnson & Johnson/Janssen Therapeutics single-dose vaccine is priced at $10 per dose.
The topic of post-pandemic vaccine pricing has come up a couple of times recently for Pfizer, including during the Q&A portion of Pfizer’s Feb. 2 conference call to discuss the company’s fourth-quarter and full-year 2020 earnings. When asked about the vaccine if COVID ends up becoming an endemic as opposed to a pandemic, Frank D’Amelio, Pfizer’s chief financial officer and executive vice president of global supply, remarked, “let’s go beyond a pandemic-pricing environment, the environment we’re currently in. Obviously, we’re going to get more on price. And clearly, to your point, the more volume we put through our factories, the lower unit cost will become. So clearly, there’s a significant opportunity for those margins to improve once we get beyond the pandemic environment that we’re in.”
And then on March 11 during the Barclays Global Healthcare Conference, when D’Amelio was asked about the potential for a higher price in the long term, he replied, “So what we believe, what I believe, is as we move from a…pandemic situation to an endemic situation…normal market conditions will start to kick in. And factors like efficacy, booster ability, clinical utility will basically become very important, and we view that as quite frankly a significant opportunity for our vaccine from a demand perspective, from a pricing perspective given the clinical profile of our vaccine. So clearly more to come here. But we think as this shifts from pandemic to endemic,…there’s an opportunity here for us.”
Moderna has addressed the issue as well. CEO Stephane Bancel commented during an Aug. 5, 2020, conference call to discuss second-quarter 2020 earnings that its COVID vaccine would be priced “well below value during the pandemic.” However, “in endemic period, pricing considerations will follow traditional dynamics and market forces, including vaccine efficacy and the competitive landscape. We will look to price in line with other innovative commercial vaccines. We expect traditional approaches to vaccine purchases and distribution in the endemic phase.”
Complicating matters is that most industry experts agree that booster shots will be needed — perhaps on an annual basis — as variants of the coronavirus continue to emerge.
According to Steven Robins, managing partner and principal at The New England Consulting Group, “it would be surprising if the manufacturers weren’t looking at multiple pricing strategies to try to drive the best returns, but this may include lowering prices on initial dosing to lock patients in to future doses.”
What Is Reasonable Price?
In an opinion piece in the New York Times last July, Elisabeth Rosenthal, M.D., editor-in-chief of Kaiser Health News, pointed out that “recent vaccines targeting more limited populations, such as a meningitis B vaccine for college students and the shingles vaccine for older adults, have a retail cost of $300 to $400 for a full course. If a Covid-19 vaccine yields a price of, say, $500 a course, vaccinating the entire population would bring a company over $150 billion, almost all of it profit.
“Kevin Schulman, a physician-economist at the Stanford Graduate School of Business, called that amount ‘staggering,’” she continued. “But Katherine Baicker, dean of the University of Chicago Harris School of Public Policy, said that from society’s perspective ‘$150 billion might not be an unreasonable sum’ to pay to tame an epidemic that has left millions unemployed and cost the economy trillions.”
Manufacturers have said that drug prices are justified because they prevent more expensive downstream costs, Rosenthal wrote. “Such logic would be disastrous if it were applied to a successful Covid vaccine. Covid-19 has shut down countless businesses, creating record-high unemployment. And the medical consequences of severe Covid-19 mean weeks of highly expensive intensive care. ‘Maybe the economic value of the Covid vaccine is a trillion and even if the expense to the company was a billion. That’s 1,000 times return on investment,’ said Dr. Schulman. ‘No economic theory would support that.’”
According to Rosenthal, “it won’t feel like a bargain if we get free or cheap vaccines during a pandemic, but pay dearly for annual Covid-19 shots thereafter. Drug companies deserve a reasonable profit for taking on this urgent task of creating a Covid-19 vaccine. But we deserve a return, too.”
How Will Payers Manage Vaccines?
Robins says that post-pandemic, it’s “most likely that payers will adopt similar policies to other common vaccines including the flu shot. This will be particularly true if annual booster shots are required.” The Centers for Disease Control and Prevention shows that prices for adult influenza vaccines are less than $30 per dose.
“Benefit designs will surely cover COVID vaccines, most likely as they do other vaccinations,” says Elan Rubinstein, Pharm.D., principal at EB Rubinstein Associates. He notes that the Affordable Care Act requires most health insurers to cover recommended preventive services without requiring member cost sharing and that the Advisory Committee on Immunization Practices recommends COVID-19 vaccines. “That said, COVID-19 vaccine coverage isn’t a preventive services requirement, because no requirement is relevant at this time since the vaccine is not fully FDA approved and for now is available at no charge in the U.S.”
Rubinstein says he does not expect payers to put a prior authorization requirement on the vaccines, “particularly if the vaccine becomes classified as a preventative service.” Robins agrees that such a step is “unlikely given the public health impact. There may be some small requirements for low-risk groups over time but not for the next couple of years.”
According to a source who prefers to remain unidentified, “any payer who puts prior authorization on a COVID vaccine would be attacked and killed in the street.”
With three vaccines currently available in the U.S. and many more in the pipeline, will payers prefer one or two over the others? Rubinstein says he doesn’t anticipate this happening, “absent evidence of differences in efficacy or in adverse events.” Adds Robins, “this will depend on where the vaccines ultimately net out in terms of cost, safety and efficacy in terms of subpopulations, etc. Obviously, single-dose vaccines have an advantage in workflow productivity, but that will need to be measured against other factors.”
Robins says he anticipates that management of the initial doses and boosters likely will be the same system. “As the age groups and comorbidity data are studied further, there may be different recommendations around booster frequency, age of first vaccine and comorbidity-specific findings that influence the payers’ published guidelines” for the vaccines and boosters, he says. The handling and storage requirements for the vaccines also may factor into payers’ management of them, he suggests.
“Manufacturers, experts and evidence-based review bodies will likely publish recommendations regarding COVID-19 booster shots,” says Rubinstein. “Payers will likely defer to recommendations regarding COVID-19 booster coverage.” For this reason, he states, “I don’t anticipate that public perception of payers will be an issue in COVID-19 vaccine management.…It will be up to individuals, in consultation with their doctors, to decide whether to be immunized.”
Robins tells AIS Health, a division of MMIT, that “over time, the public expectation that payers provide very low-cost access to the vaccines may wane, but for the foreseeable future, payers will face high public scrutiny if they do not provide adequate coverage.”
Ultimately, says Rubinstein, “I don’t see utilization management applied to the COVID-19 vaccine, which implies folks demanding access that payers find inappropriate. No inappropriate demand of payer concern that I can see. Some demand may be clinically inappropriate, but doctors will manage that situation. The more likely problem is with folks who need it — for their own and community protection — but are unwilling to be vaccinated.”
Employers Will Have Role in Process
He says that employers will have a role in the vaccination process, pointing to Indiana University (IU) as an example. IU is requiring that all students, faculty and staff must be fully vaccinated by the time by the time they return to campus in the fall, with “extremely limited” exemptions granted. Those not adhering to the requirement and not receiving an exemption will face “strong consequences,” says IU: “For students, they will see their class registration cancelled, CrimsonCard [the official photo ID card] access terminated, access to IU systems (Canvas, email, etc.) terminated, and will not be allowed to participate in any on campus activity. Faculty and staff who choose not to meet the requirement will no longer be able to be employed by Indiana University. Working remotely and not meeting the COVID-19 vaccine requirement is not an option.”
“This is what some employers will do,” Rubinstein says. “No idea how many will follow that path. My opinion: They should all do that, to protect coworkers, customers and public health.”