US should buy these vaccines before they exist
By PETER B. BACH AND MARK TRUSHEIM | Bloomberg Opinion | Published: March 18, 2020
• Stars and Stripes is making this story and other coverage of the coronavirus pandemic available free of charge. See other stories here, and sign up for our daily coronavirus newsletter here. And please consider supporting our journalism with a subscription.The $8.3 billion spending bill that President Donald Trump signed last week to address the coronavirus crisis contains a provision that could be costly: When a vaccine for the virus becomes available, the law says, the government can spend no more than a “fair and reasonable” price for it. But it does not require the drugmaker to accept such a payment.
The law includes a pricing mechanism, but it relies in part on comparisons with other vaccine prices, and these vary widely: Medicare reimburses about $56 for Sanofi’s influenza vaccine, $500 per course for Merck’s human papilloma vaccine, and $5,000 per injection for Amgen’s melanoma vaccine.
Inevitably, then, when an effective, desperately needed vaccine is ready, we can expect a pricing standoff. To avoid this, the government should buy vaccines now, even before they’re invented. This would guarantee a good price for the government, and it would benefit drugmakers by ensuring a market for their products.
Our government routinely procures items that are not yet designed and built. Engines for fighter jets are purchased when they are sketches on paper, as are federal office buildings. Vaccines needed for the developing world are sometimes pre-purchased through advanced market commitments. In all cases the contracts specify minimum requirements for the ultimate product.
It’s easy to imagine the profile for a COVID-19 vaccine. First, it would need to be effective enough to curtail spread. Early vaccines rarely work on everyone, but even modest effectiveness would provide large benefits to public health. And while the immunity conferred by a vaccine can wane, what’s needed most immediately is near-term protection. Expected side effects should be rare, and monitoring for severe ones should be required.
We would also need this vaccine to be produced at population scale within a year. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, has said this is a scientifically achievable timeline. Production, distribution, outreach and delivery would all be part of a staged contract.
Using these specifications, the government would solicit bids, and each responding vaccine developer would propose the price it would charge for developing and delivering a vaccine, either alone or with partners. Because any one vaccine is unlikely to be perfect or perfectly supplied, we should select three or more winners.
The alternative is to wait for the U.S. pharmaceutical industry to develop a vaccine on its own, relying on existing market mechanisms to protect against the usual risks of drug development. The first of these is the risk inherent in investing money and time on a drug that may turn out not to be effective. Vaccine science mitigates this threat. The Coalition for Epidemic Preparedness Innovations has already developed eight promising vaccine candidates against COVID-19. And 25 companies are ready to work on a vaccine.
The second uncertainty is whether there will turn out to be a market for the products that drugmakers create. The government contract approach we propose mitigates that possibility.
Both of us know from experience the problems that arise when unaffordability keeps an essential medical treatment out of reach. We helped develop the subscription model that Louisiana and the state of Washington use to finance expensive drugs to treat hepatitis C: The states pay a flat fee in return for as many courses of treatment as they need.
The federal government could follow a similar “Netflix financing” model to pay a single price to vaccinate the population against the coronavirus.
We don’t know how much such a contract will cost. But asking for bids will lead companies to put forward their best prices. The winners will make money (including by selling their vaccines overseas) while showing off their scientific prowess and the important role they play in public health. And the federal government can make sure everyone in the U.S. is protected against COVID-19.
Peter B. Bach, a physician, directs the Drug Pricing Lab at Memorial Sloan Kettering Cancer Center in New York. Mark Trusheim is a visiting scientist at the MIT Sloan School of Management.