Big Pharma’s vaccine victory lap may be cut short. The industry’s triumph in dispensing inoculations less than a year after the discovery of the deadly coronavirus has partially vindicated the business models of groups like Pfizer, Moderna and AstraZeneca. But as governments took on much of the risk, pharma groups’ pricing will remain a target after the pandemic.
Riding to the world’s rescue is a welcome corrective for the battered pharmaceutical industry. In recent years the sector has grappled with bribery scandals and accusations of aggressive pricing, exemplified by Mylan’s decision to hike the price of anti-allergy injection EpiPen by 400%.
Drug firms have long defended their prices as the necessary reward for funding expensive and risky research. The value of global scale, meanwhile, was evident in their ability to quickly test vaccines and manufacture enough doses to inoculate a third of the world’s population next year. The promise by Johnson & Johnson and AstraZeneca to sell their treatments at cost price for the duration of the pandemic further enhances their claims to benefit society. The warm feelings extended to the stock market, where share prices of vaccine makers Johnson & Johnson, AstraZeneca and Pfizer have outperformed the MSCI World Pharma index by an average of 5% since the beginning of the year. Moderna shares are up nearly 700% in the same period.
However, the vaccines are more than just an endorsement of Big Pharma. Academic centres like the University of Oxford’s Jenner Institute and small firms such as Germany’s BioNTech played a critical role in pioneering the medical breakthroughs, helped by a mixture of public and private funding. Governments, meanwhile, helped to finance the cost of testing and manufacturing, and pre-ordered hundreds of millions of doses without knowing whether the vaccines would be effective.
Such public support has emboldened campaigners who argue governments should take a greater slice of pharma companies’ earnings, perhaps by claiming a share of new drug patents. The glow of their vaccine triumph may allow Big Pharma companies to shrug off such demands for a while. But U.S. drug prices rose 60% in the 10 years to 2018, according to the American Medical Association. Pressure to bring them down will soon return.