Taxpayers Pay Most Of The Cost To Develop Some COVID-19 Drugs

April 06, 2020

Advocates for drug price controls say the government should not let companies set prices for COVID-19 drugs and vaccines when American taxpayers are paying most of the cost to invent those products. A review of federal procurements and company press releases shows that in some cases taxpayers are paying half or more of the cost to research, develop and make COVID-19 countermeasures.

Johnson & Johnson subsidiary Janssen Pharmaceuticals and HHS recently committed $1 billion to develop a vaccine against COVID-19, according to a company release. The company expects to initiate human clinical studies of its lead vaccine candidate by September and the first batches of vaccine might be available for emergency use authorization early next year, which is much faster than it would typically take to develop a vaccine.

Separately, Janssen and HHS are funding research on COVID-19 antivirals.

The government’s federal procurement database lists two coronavirus contracts in March to Janssen -- one for a vaccine, the other for antivirals -- that together are worth $604 million. Both of those supplement an existing work agreement that started in August of 2017, and the total value of that agreement is $689 million.

A J&J spokesperson said the company committed to roughly matching the government’s $456 million vaccine investment last month. The $148 million contract for antivirals is separate from the joint $1 billion commitment for the vaccine. It’s not clear how much the company is spending on that research.

J&J CEO Alex Gorsky said the company plans to sell the vaccine at no profit during the pandemic. J&J Chief Scientific Officer Paul Stoffels told Belgian newspaper De Tijd the company will probably sell the drug for $10 or €10. Aided by “new U.S. vaccine manufacturing capabilities,” the company expects to produce 100 million to 300 million doses of vaccine throughout next year and eventually make 1 billion doses.

The per-dose cost of influenza vaccines for the Centers for Disease Control and Prevention ranges from around $12 to $15, according to the CDC’s website. The private market pays more, typically in the $17 to $23 range and topping $30 for a couple of vaccines.

Patients For Affordable Drugs President David Mitchell said Janssen should not dictate the price of the vaccine if American taxpayers are paying as much or more than half the cost to develop it. The company should show the U.S. government how much it invested in the vaccine and how much it costs to manufacture and distribute it, then the government and the company can talk price. Mitchell is bothered by Gorsky’s caveat that the company will not profit from the vaccine only during the pandemic. Also, with a volume of 1 billion doses, the $10 per dose price seems a profitable proposition, he said. Investors seem to think so; the company’s stock increased 9% the day Gorsky announced that it has a promising vaccine.

“This is offensive on multiple levels to me,” Mitchell said.

The speed of the vaccine’s development is great news, and Mitchell said HHS should be credited for initiating the research in 2017. The Biomedical Advanced Research and Development Authority paid for the work in preparation for a pandemic virus, and the initial contract with Janssen at that time led to what is now the leading vaccine candidate against coronavirus.

“We’ve been financing the work since two-and-a-half years ago,” Mitchell said.

The federal procurement database also lists a $93 million contract with Regeneron to develop products to fight coronavirus. Regeneron had been researching 10 antibodies targeting up to 10 pathogens, starting with the influenza virus, and that agreement was expanded to cover coronavirus. So far, U.S. taxpayers are in for $137 million. Originally, the agreement called for the U.S. government to cover 80% of Regeneron’s costs to research, develop and manufacture antibodies, according to a company release from October 2017. It’s not clear whether the government is still paying 80% of costs in the extended contract.

Regeneron did not respond to questions about how much it is spending under the new agreement. -- John Wilkerson (