Blog December 19, 2022

COVID Vaccines Transition from Government Supply to Private Marketplace

The rapid development of vaccines against COVID-19 has been one of the most notable success stories of the pandemic. Aiming to acquire and offer free access to useful tools to mitigate the effects of the virus within a year of the pandemic taking hold, the U.S. government covered much of the cost of development and acquisition of the COVID-19 shots, as well as diagnostics and therapeutics, under Operation Warp Speed. The reasoning behind this move was that fast availability of vaccines and therapeutics would help reduce the hospitalizations that were straining health systems and professionals across the country, and ultimately benefit the US population. Indeed, experts estimate the effort saved more than 1 million American lives in 2021 alone. Today, around 70% of Americans have received at least the initial two-dose vaccination against COVID-19. But Operation Warp Speed was a considerable undertaking that ended up costing the U.S. government over $18 billion dollars. 

Bionest experts examine the challenges and opportunities of moving COVID19 vaccines to the private marketplace.

The United States is now withdrawing from being the sole purchaser and distributor of COVID-19 vaccines and therapeutics. The Department of Health and Human Services (HHS) has secured 171 million doses of the bivalent, omicron-targeted boosters, authorized for use in August 2022, for the remainder of 2022. But Congress has not authorized further funding, and starting in January 2023, HHS will not be able to support further purchase and distribution of COVID vaccines, therapeutics and diagnostics. While HHS had always intended to hand over the purchase and distribution of such supplies to the private marketplace, the lack of additional funding has caused that milestone to arrive quicker than anticipated.

This move has implications for both U.S. healthcare costs and for Pfizer-BioNTech and Moderna, the developers and suppliers of the two main available COVID-19 vaccines. Vaccine sales are expected to slow down as patient uptake of booster shots in the United States has become increasingly limited. Manufacturing costs are also expected to rise. Until now, vaccines have been supplied in multi-dose vials, but single dose vials will soon be required for the private market. Similarly, distribution costs are expected to increase, as broadening distribution efforts to doctors’ offices will be more complex and expensive than selling to a single governmental buyer. As a result, the cost of these vaccines is projected to rise substantially once these products are sold privately in the marketplace and companies need to raise prices to cover increased costs.

For example, the last governmental supply contract for Pfizer’s vaccine was priced at $30.48 per dose, which generated sales of $37 billion in 2021 and will generate an expected $32 billion for 2022.  In late October, Pfizer said the company was considering a four-fold price hike sometime in 2023 for its vaccine Comiraty for the private marketplace, to reach a price point between $110 and $130 per dose. While this price is higher than the $50-$95 per dose that pharmacy giant CVS pays for flu vaccines, it will be slightly lower than the price of Pfizer’s world leading adult vaccine, Prevnar ($141) to prevent pneumococcal disease, and the company’s vaccines for hepatitis ($145), meningitis ($179), shingles ($205), and HPV ($261). And as for Moderna, the company is yet to comment on the likely pricing for its COVID vaccine, SpikeVax, saying it was still in discussions with commercial payers, distributors, and key pharmacies.

Although it creates a challenging transition point, moving COVID vaccines to the private marketplace will open opportunities for the companies, as it will give them access to more distribution channels and the ability to use additional marketing tools to encourage sales. In addition, once normal market forces start driving and shaping sales, factors like efficacy and clinical utility will be available to aid in product differentiation.

Pfizer expects to have a significant competitive advantage in the private marketplace based on its strong existing commercial organization and marketing skills. Furthermore, while Pfizer’s marketing efforts for its COVID vaccine are currently limited to general consumer education and unbranded disease awareness, in the commercial setting the company can focus branded marketing on multiple COVID-related products, including both vaccines and the company’s oral antiviral, Paxlovid. Moderna, in contrast, is new to private commercialization, potentially putting it at a disadvantage, at least initially.