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MODERNA’S COVID VACCINE PRICE HIKE REVEALS GOVERNMENT’S FAILURE
 
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Lily H. Meyersohn
January 24, 2024
The American Prospect
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_ The U.S. co-invented the mRNA vaccine. So why doesn’t it act like
it? _

US Drug Pricing, by DES Daughter (CC BY-NC-SA 2.0)

 

In late 2021, as Moderna and the National Institutes for Health (NIH)
sparred publicly over one of the patents key to the mRNA COVID-19
vaccine, activists began charging the NIH with getting “taken
advantage of by pharma
[[link removed]].”
As co-inventor of the vaccine with Moderna, public health experts and
advocates on drug pricing said, the U.S. government should better
assert itself
[[link removed]].

But more than a year later—and more than two since the vaccine’s
initial rollout in the U.S.—the government has failed to
clarify its role in developing the vaccine, and failed to exercise
the power it has to shape the course of the drug’s future.

Given this history, Moderna’s announcement
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this month that it would consider a price hike on the vaccine was
inevitable. Pfizer and BioNTech had made a similar announcement
[[link removed]] last
October. But Moderna’s proposed quadrupling of the price—from the
current $26 per dose to between $110 and $130 per dose—is a stunning
4,000 percent increase from its manufacturing cost of $2.85 per dose
[[link removed]].
In earlier contracts, the government paid Moderna $15–$16 per dose
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offering the vaccine to Americans for free.

On January 10, Senator Bernie Sanders (I-VT), incoming chair of the
Senate Health, Education, Labor and Pensions (HELP) Committee, told
[[link removed]] Moderna’s
CEO, Stéphane Bancel, that the “outrageous” price hike would
raise private health insurance premiums and put the vaccine out of
reach for “many millions of uninsured and underinsured Americans.”
It would also have a “significantly negative impact on the budgets
of Medicaid, Medicare and other government programs.” Moderna has
not yet responded to Sen. Sanders’s letter, and did not respond to
the _Prospect_’s request for comment.

_MORE FROM LILY H. MEYERSOHN_
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That cost barrier makes the vaccines essentially worthless as a
population-level public health tool, since vaccines work their magic
through mass uptake. We can’t get anywhere “near herd immunity at
$130 per dose,” said Alex Lawson, executive director of Social
Security Works.

Pharmaceutical companies tend to shrug off price tags. “They go,
‘Oh, insurance will pay for it,’” said Peter Maybarduk, director
of Public Citizen’s Access to Medicines program. But it’s
impossible to predict what percentage insurers will pay for more
expensive COVID vaccines. More likely, plans will “spread the extra
cost… across all of its members in the form of increased premiums
[[link removed]],”
as Senator Sanders warned. For the uninsured, the results will be even
more disastrous.

Few may remember that in June 2020, former NIH-director Francis
Collins stated
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pharma companies did not see the vaccine as a “money-maker… nobody
sees this as a way to make billions of dollars.” But in Sanders’s
letter, he pointed out that Moderna has made over $19 billion in
profits in the past two years. Bancel’s personal wealth is estimated
at $6.1 billion.

The government is partially to blame here as well, especially in this
case, where they co-developed the drug. Christopher Morten, an
intellectual property law specialist at Columbia Law School, explained
that “HHS and the White House seem to be stepping back from active
management—even from active leadership—of the COVID vaccines.”
The administration’s withdrawal coincides with the long-awaited
evaporation
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funding for coverage
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COVID vaccines, testing, and treatment.

In the last decade, the 14 largest publicly-traded pharmaceutical
companies spent more on stock buybacks and dividends alone than on R&D

The U.S. can trace its predicament back to Operation Warp Speed (OWS).
Though OWS succeeded in bringing vaccines to market _quickly, _early
contractual agreements for the vaccines failed to include two
provisions in particular: non-exclusive licensing and reasonable
pricing. Non-exclusive licensing is common, including for other
NIH-funded technologies, Maybarduk told me. And until the 1990s,
“reasonable pricing for government-funded medicines was the norm…
without those clauses, we have few public health policy tools to
ensure a reasonable price.”

The situation may be aggravated by patent disputes between the NIH and
Moderna. Though the two entities collaborated on the vaccine’s
research, they have not necessarily operated as equals, let alone
partners.

In July 2021, in what was perhaps the most highly-publicized conflict
between the two parties, Moderna filed for a patent application
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did not list federal scientists as co-inventors of the vaccine. The
patent covered a genetic sequence that instructs the body to build a
harmless version of the virus’s spike proteins, which trigger an
immune response. That acquired immunity protects the body when the
real virus comes knocking, making the patent key to the vaccine.

Because a co-inventorship designation presumes co-ownership
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inventor status would have allowed the NIH to collect royalties
or license the patent to foreign manufacturers
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For Moderna, owning the patent by itself could help it “justify its
prices and rebuff pressure to make its vaccine available to poorer
countries
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Many scientists saw Moderna’s omission as a “betrayal
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by the company, given that it received $1.4 billion to develop and
test the vaccine
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over $8 billion more to provide the nation with its first doses. After
a few weeks, Moderna dropped its pursuance of the patent application
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citing the disagreement with the NIH. It also offered to share
co-ownership
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the patent to “avoid any distraction.” Meanwhile, the company
filed a continuance application that would allow it to secure the IP
claim in the future
[[link removed]]. Its
other pending and granted COVID vaccine patents remained unaffected
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This defused tensions, but also didn’t resolve them; to
the _Prospect_’s knowledge, no settlement has been reached. And it
didn’t lead the NIH to make the kind of decisions its co-ownership
should allow; as Maybarduk pointed out, the government does not seem
to have “exercised much leverage on price” in the intervening
months.

Experts disagree on just how much power the government has over the
vaccine’s price. But it’s clear that not much pressure it being
exerted now, making pressure from advocates hollow. Jason Silverstein,
a lecturer in the department of global health and social medicine at
Harvard Medical School and editor-in-chief of PESTE Magazine
[[link removed]], said: “What does Moderna care?
They’re winning.” After Moderna’s announcement,
PESTE disseminated graphics
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on shareholders to divest from Moderna’s stock––because that’s
“something Moderna might care about.”

Silverstein has a point. A recent study
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economists William Lazonick and Öner Tulum found that Moderna spent
$3.8 billion “on buybacks to manipulate its stock price” during
2021 and 2022––a figure that represents 20.2 percent of its total
pandemic profits for the period. They predict
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Moderna “will remain addicted to doing buybacks to manipulate its
stock price in the years to come.”

Moderna is not alone. Lazonick and Tulum found that in the last
decade, the 14 largest publicly-traded pharmaceutical companies spent
more on stock buybacks and dividends
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than on R&D. This contradicts pharma’s insistence that companies
must keep drug prices high as a “necessary cost
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to reinvest in new discoveries. Research shows that most companies
spend profits on marketing, lobbying, and political contributions, not
innovation. Large companies are “nowhere near as important to real
drug innovation
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as they say they are, with the majority of the patents they do file
going toward “me-too” drugs––modified versions of existing
medications
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are used to extend [[link removed]] patent
protections. “Breakthrough” products, like the mRNA vaccines, more
often originate through NIH-funded research efforts.

Lazonick put it bluntly
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The NIH “in effect gave Moderna the vaccine. Decades of research
[[link removed]], much of it
publicly funded, ended up in that vaccine.” Operation Warp Speed
funding also went toward advanced purchase commitments
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which helped create the vaccine’s market. And Lawson reminded me
that the company was created “whole cloth by U.S. taxpayer-funded
efforts.” (Moderna was founded in 2010, but the mRNA vaccine was its
first commercial product.)

WHAT GOVERNMENT CAN DO

Even now, Maybarduk asserts, Moderna relies on the largesse of the
government to “help protect its interests abroad, including
enforcing patent protections.” This should give the administration
the ability to push back on a unilateral price proposal, since an
expensive vaccine undermines the country’s fight against the virus.
The companies, Maybarduk said, “aren’t shy about asking the U.S.
government to weigh in in defense of their interests against other
governments. So the U.S. government shouldn’t be shy about asking
for what it needs either.”

The NIH has not tapped all of the resources it could use to enforce
its patents. For instance, the NIH already owns a number of mRNA spike
protein patents
[[link removed]] (including
technology that the U.S. licensed to the World Health Organization
and United Nations’ Medicines Patent Pool
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May). One of the NIH patents, U.S. 10,960,070, has been used by
several vaccine manufacturers. Moderna seems to be using it in every
dose of the vaccine it produces without a license from the NIH. Morten
said that if the U.S. government agrees that there is a credible claim
that Moderna is infringing on its patent, lawyers could use the threat
of patent infringement litigation to push Moderna to apply for a
license in exchange for other voluntary agreements, like a potential
price cut.

More broadly, the White House could “compel Moderna to be a better
corporate citizen,” Morten said. On a global scale, that might mean
pushing or forcing Moderna to openly share its technologies with
other countries [[link removed]].

In 2020, California passed legislation to create a public generic drug
label, called CalRx.

But the U.S. government has “a reputation for not aggressively
enforcing its [own] patent rights
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It tends to focus on early-stage research, as with this vaccine. Then
it leaves “private industry to manage intellectual property on later
stages of an invention
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For final development, pharma companies will often invest hundreds of
millions of dollars, just a portion of the overall financing of a new
drug.

In Moderna’s case, Lazonick and Tulum believe
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by retaining control of the vaccine’s marketing, the company was
able to “keep the lion’s share of the profits” after the FDA
issued an emergency use authorization. Moderna’s 10-year contract
with Lonza (a Switzerland-based contract development and manufacturing
firm) also gave it the capacity to produce vaccines without investing
in manufacturing infrastructure.

Lawson said that arrangement has become _de rigueur_. It’s “just
accepted that we need a private company to do the last mile in
bringing something to market.”

A PUBLIC OPTION

Fortunately, alternatives are beginning to emerge. In July, Alex
Sammon wrote
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the _Prospect_ that the government could create
its _own_ manufacturing capabilities. This would be tailor-made for
products like vaccines, which companies often see as low-margin and
not worth producing.

Last December, researchers Dana Brown and Tom Latkowski published
a state policy kit on public pharmaceuticals
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Brown and Latkowski argue that to date, drug pricing reform has fallen
short through its failure to change the fundamental “design” of
the wider industry
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We need a “public option,” they write, with state-owned
enterprises manufacturing generic medications to be distributed via
state or regional mechanisms. That infrastructure already exists, in
small pockets around the country. (Larger pockets, of course, exist
across the globe. In Sweden, most of the pharmaceutical sector was
nationalized in 1970; in Cuba, the sector has been public since 1960.)

Massachusetts, for example, has housed a public biopharmaceutical R&D
and manufacturing enterprise
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over a century. The facility, MassBiologics
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diphtheria vaccine and distributes products nationwide. It is the
“only non-profit, FDA-licensed manufacturer of vaccines
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country.

Efforts are picking up in other states. In 2020, California passed
legislation to create a public generic drug label
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CalRx. That apparatus moved forward in 2022, when the passage of a
second bill required the development of an insulin manufacturing
facility
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the state. Maine, meanwhile, passed legislation
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2022 to assess the feasibility
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the state producing insulin. And though Michigan doesn’t currently
have public drug manufacturing, the state produced and freely
distributed several of its own vaccines—including ones for typhoid,
diphtheria, pertussis, tetanus, rabies, and anthrax—up until 1998
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A publicly manufactured and distributed COVID vaccine is,
realistically, many years away. But these state-based models are
promising, especially considering the vaccines for other illnesses
like RSV and cancer that could be developed soon. With price disputes
likely, a substantial intervention is necessary. Without one,
Moderna’s story may be a harbinger, Morten told me, of all of the
“crises of inequitable access to come.”

Lily H. Meyersohn [[link removed]] is a
researcher at the Institute for Public Accuracy and a freelance
journalist covering health and politics. She can be reached at
@LMeyersohn.

_Used with the permission. © The American Prospect, Prospect.org,
2024. All rights reserved. Click here to support the Prospect's brand
of independent impact journalism.
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* drug prices
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* patents
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* Big Pharma
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