Healthcare made Biden’s Chief of Staff rich. Will Biden curb Big Pharma’s price-gouging?
Since the early days of the pandemic, the federal government has been pre-purchasing Covid vaccines at an average cost of around $20 per dose (around $29 per dose for the bivalent boosters) to ensure public access to vaccination at no cost. However, with Congress no longer willing to fund Covid treatment, the Biden administration has indicated that it intends to end the Covid public health emergency in May, and more or less hand over control of Covid prevention to the healthcare industry. As Lily Meyersohn put it recently in an excellent American Prospect piece, “Americans had two years to enjoy the vaccine as a public good; now, they are being transferred to the exploitative private-sector healthcare system.”
This winter, Pfizer and Moderna have shared plans for a nearly 400% price hike on Covid vaccines, up to a commercial price of over $100 a dose. Presumably, this is due to the US government’s exit as the major buyer, a role that essentially guaranteed pharmaceuticals’ production and revenue targets for the past three years. Now unable to rely on public largesse, it seems like pharma companies are set to cut production and hike prices of the Covid vaccines. The effect of these hikes will be felt deeply across the country; for the uninsured who are now going to be denied public vaccine access, floated commercial prices would likely be prohibitively expensive. Even insured Americans may face higher premiums as insurance companies pass off the increased cost of vaccines to consumers. The companies’ proposals are a recipe for disaster. With emergency Covid funding slowly coming to a halt, the threat of a steep vaccine cost hike could further limit access to vaccination and subsequent boosters at a time when uptake is already lagging.
So how did we get here? When the US government subsidized the development and manufacturing of these vaccines through early investments in research and development and advance purchasing agreements, the provisions written into many contracts didn’t guarantee the government strong control over the use of the intellectual property. Though every Covid vaccine in the U.S. market relies to varying degrees on past federal research and spending, the absence of clear licensing and pricing provisions in the agreements means the government now has little control over the vaccines—public goods that they invested enormous sums of taxpayer dollars into. The Moderna vaccine specifically was co-developed with National Institutes of Health researchers, and the company received billions of federal dollars for research and development before the government’s advanced purchasing agreements.
We’re still in the midst of a public health crisis, with hundreds of Americans dying from Covid every day. It was a grave error to weaken the government’s hand early on in the pandemic, and leaving necessary and in-demand healthcare resources to profit-driven Big Pharma would unfortunately continue that pattern.
That’s not to say there isn’t mounting public pressure on both pharma companies and the White House to take action. Senator Sanders, as Chair of the Health, Education, Labor and Pensions Committee, sent a letter to the CEO of Moderna taking offense at the prospective cost to Medicare, Medicaid, and other government programs, as well as the likely increase of private health insurance premiums. So did Senators Warren and Welch.
The federal government has spent billions of dollars over decades supporting the research that led to the development of these lifesaving vaccines. This investment was to protect the health of Americans in the midst of a deadly pandemic, not to line the pockets of executives in corporate pharma. The administration needs to act to make sure that continues to be the goal.
What can the White House do about it?
A better-functioning federal government could circumvent this potential crisis in vaccine affordability by continuing to buy vaccine supply in advance at lower prices, and offering them to the public at no cost. But the chances of Congress allocating more funding for vaccine purchases look very slim.
When it comes to curbing corporate greed, the Biden administration is historically more comfortable with carrots than with sticks. (See the emphasis on rewarding companies for voluntarily cooperating with criminal investigations in the Justice Department’s revisions to its corporate crimes enforcement policies, for example.) In this case, the unwillingness across both the Trump and Biden administrations to prod Big Pharma by asserting its rights to Covid treatments that government researchers helped develop and taxpayers helped fund has come back to bite, as the sticks the administration is left with are far more pointed that the ones initially cast aside.
The pointiest stick in the government’s arsenal may be its so-called “march-in rights.” Under the 1980 Bayh-Dole Act, private companies that develop technologies with government funding can obtain patents on that technology, but the government retains a few important rights to that technology. One key retention is a license to use that technology, e.g. the government could manufacture doses of the Moderna-NIH vaccine, if it had the money. Another is that the government retains “march-in rights,” which, if used, allow a federal agency to grant the license to that technology to another applicant under specific circumstances. In the case of massive vaccine price-hikes, the most likely circumstance is if the vaccine’s price tag makes it inaccessible for millions of Americans, compelling the government to act to “alleviate health or safety needs which are not reasonably satisfied” by the pharmaceutical companies’ pricing scheme, and the distributional inequity it causes.
No federal agency has ever made use of its march-in rights. But even the believable threat of their use could be a potentially powerful deterrent to price-gouging. Back in summer 2020, the government narrowed the circumstances under which it could use its march-in rights for COVID-19 drugs, a move which we find considerably irresponsible; why give away your tools to fight corporate abuses, unless you’re worried that you’d be compelled to use them? But march-in rights could still be used on the Moderna-NIH vaccine at the minimum.
Last fall, Health and Human Services Secretary Xavier Becerra told reporters asking about march-in rights that “we will continue to explore every option we have,” and “we’ve never taken anything off the table. And we will work on every one of those aspects of lowering drug prices.” This was a smart move. But it has to be backed up by a real willingness to take action on the public’s behalf.
Moderna seems to be following Pfizer’s lead in indicating that it will raise vaccine prices by around 400% on the commercial market. Instead of a profit-seeking race to the top, government intervention to keep the cost of the Moderna vaccine low would presumably increase demand for the Moderna vaccine and decrease demand for the expensive Pfizer vaccine, causing Pfizer in turn to lower prices. Anyone worrying that the companies wouldn’t be turning an adequate profit should relax; they’ll be just fine. They’ve been turning an extraordinary profit the past few years, while spending tens of billions of dollars on stock buybacks to enrich their shareholders, and perpetuating unequal global vaccine distribution because rich countries are willing to pay more for shots.
But without the federal government’s intervention, these corporations’ preoccupation with profitability will become the main driving force shaping our public health policy, with massive consequences for people’s lives. Their greed amidst this ongoing public health crisis is a powerful argument for pandemic drugs being kept out of commercial markets altogether. (See “The Problem With Relying on Profit-Driven Models to Produce Pandemic Drugs” for a strong academic argument outlining the public health costs of relying on profit-driven markets for pandemic response.)
At the state level, developing public pharmaceutical manufacturing capacity is a promising option. Democracy Policy Network and its collaborators’ December 2022 State Public Pharma Policy Toolkit outlines how investment in public pharma would increase supply and decrease costs for the public. Though much of this would likely be up to state governments, there are intersections with federal agencies: the Veterans Health Administration and the USPS could play potentially significant roles in informing the shape of a future public pharmaceutical distribution network.
Fundamentally, President Biden needs to come out ahead of this vaccine price-hike and vocally condemn such profiteering. He has limited tools at his disposal with Congress—though march-in rights are a significant one—but the bully pulpit is all his.
With Jeffrey Zients, who made at least some of his many millions from corporate profiteering in the healthcare sector, as Biden’s new Chief of Staff, we’re concerned that pandemic profiteering might get quietly kicked under the rug. There’s little in Zients’ history that suggests he will push and support Biden to condemn vaccine price-gouging, and insist upon equitable and accessible vaccinations for Americans. Zients’s time as Covid czar in the first year of Biden’s presidency demonstrated that he considers the economy (as dictated by Big Business, not labor standards or workplace safety or anything like that) a higher-order priority than public health. Angering Big Pharma execs with legal but unprecedented moves, like using march-in rights, doesn’t seem like it’s in the Zients playbook. But it should be in Biden’s moving forward.
Bigger-picture, it’s dismal that fights over federal spending will likely be such a massive time-suck this coming year, from the looming debt ceiling crisis to the painful prospects for budget negotiations this coming fall. Pandemic drug procurement is a clear example of how many lives are dependent on government spending commitments. Biden should be vocal about the harm done to the people when public health measures become a bargaining chip in congressional negotiations and a way for a couple corporations to make billions.
Lastly, to keep up our periodic newsletter tradition of highlighting a particularly striking example of the revolving door between government and industry, we present to you the case of Roberto Perli. Perli was an officer and senior staff member at the Federal Reserve Board helping craft federal monetary policy between 2001 and 2010, before spending the last dozen-odd years as a Fed watcher at market research firm Cornerstone Macro, which was recently acquired by investment bank Piper Sandler. He’s now been appointed as a top official at the Federal Reserve Bank of New York. Odds are, he’ll spin the revolving door again in a few years and move back to Wall Street for a time, and then perhaps return to the Fed as a policymaker sometime after that! This revolving door shows no sign of slowing down.