How much will drug manufacturers charge for Covid-19 vaccines? Questions about prices arise.

Covid-19 vaccines are poised to become big business. Its potential to generate staggering revenue has already added billions of dollars to the market value of drug makers like Pfizer and Moderna.

That promise is also drawing scrutiny in Washington.

Rising prescription drug costs are one of the few problems where Democrats and Republicans can find common ground. That’s a risk for pharmaceutical companies, and one that weighs on their share prices.

The Covid-19 pandemic silenced the discussion about the price of drugs in Washington. But signs that the problem could be revived came last week just as Pfizer (ticker: PFE) and AstraZeneca (AZN) revealed promising data about their vaccines.

How drug makers play right now could affect companies’ long-term value. A misstep in the price of the vaccine could reignite an urge to limit drug prices.

“We will continue to push this issue and demand oversight as much as possible,” says Rep. Jan Schakowsky, an Illinois Democrat. She has pressured companies that got government aid for research and development not to make a profit on their vaccines. “They make claims about how much money they are spending on research and development, how much everything costs, and there is no documentation of that.”

At a hearing Tuesday, he asked pharmaceutical executives if they would commit to selling their vaccines at cost.

“We won’t sell it at cost, no, ma’am,” said Dr. Stephen Hoge, president of Moderna (MRNA), whose vaccine is being developed in collaboration with the National Institutes of Health, and which received up to $ 483 million. in funding from another federal agency.

(MRK) ‘s representative at the hearing echoed Dr. Hoge, while executives at Johnson & Johnson (JNJ) and AstraZeneca (AZN) said they would not make a profit on at least some sales of their Covid-19 vaccines.

But, the congresswoman says Barron’s “We have seen time and time again that the big pharmaceutical companies have taken advantage of the situations.”

The day after the subcommittee hearing, Pfizer and its partner BioNTech (BNTX), who are alone among the top developers of Covid-19 vaccines for not taking federal funds, announced an agreement to sell 100 million doses of the vaccine to the US government $ 1.95 billion, effectively setting a price for the vaccine at $ 19.50 per dose. The vaccine will likely be distributed as a two-dose regimen, which will cost the government $ 39 per patient. (Pfizer will receive nothing if the vaccine is not approved.)

The price was higher than some analysts expected. In June, Pfizer CEO Albert Bourla said a price would be in the range of “the other vaccines already on the market.” Mizuho analyst Vamil Divan said the vaccine would cost $ 15, depending on the price range the government pays for flu vaccines.

Neither the government nor Pfizer have said how it got to the price of $ 19.50. “That should be part of the national discussion,” says Dr. Steven Pearson, president of the Institute for Clinical and Economic Review, an influential group that makes drug price recommendations. “What is your approach, your paradigm for thinking about what is a fair price?”

In an interview with MarketWatch, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said he does not object to companies making profits from their Covid-19 vaccines.

If the price of $ 19.50 per serving is sustained, sales could be huge. Pfizer says it expects to make more than 1.3 trillion doses by the end of 2021, which could mean $ 25 trillion in sales. After BioNTech gets half, Pfizer’s take would be nearly $ 13 billion, about the same amount as Lipitor, its best-selling drug of all time, sold in its best year. As for earnings, Pfizer has said it plans to win one, though its cost base is unknown. The company says it plans to spend $ 1 billion to develop and manufacture the vaccine this year, but has not made estimates for 2021.

Still, it’s unclear how long a sales boom would last. “We just don’t know how well a competitor is going to enter a market, and I think, most importantly, how does this pandemic unfold?” Divan de Mizuho says. If people need regular booster shots to maintain their protection, the vaccine could generate a regular income for years to come. If not, sales could run out in a couple of years.

Divan compared the situation to what happened half a decade ago, when Gilead Sciences (GILD) introduced a new generation of hepatitis C antivirals. Gilead sold $ 13.9 billion of its hepatitis C antiviral Harvoni in 2015 and eliminated the disease. effective way. By 2019, Harvoni’s sales had dropped to $ 643 million.

The revenue that Pfizer and other Covid-19 vaccine developers can earn amid a pandemic and recession will certainly attract attention. How companies price their vaccines could determine what will happen next.

“I think everyone realizes there is a lot of attention on them right now,” says Divan. “They are trying to do the right thing with regard to prices, but part of that is also that they don’t want to climb … when things generally settle down on the price side.”

Write to Josh Nathan-Kazis at [email protected]