Are pharmaceutical firms going to profit from coronavirus vaccines?

Analysis: Western governments are striking deals with pharmaceutical giants over potential vaccine doses and also haggling over prices. But do these companies have a right to make big profits from these treatments? And what could governments do to stop that happening? Ben Chu investigates

Governments have significantly funded much of the research, arguably making private profits from these treatments unjustified (Reuters)

The UK government announced on Wednesday that it has signed an agreement with GlaxoSmithKline (GSK) and Sanofi under which the two pharmaceutical companies will provide millions of doses of their experimental coronavirus vaccines to Britain if they prove viable.

This is the fourth such agreement ministers have signed with multinational pharma companies.

The government says these deals will give the UK “the most likely chance of finding a safe and effective vaccine at the quickest speed”.

But how much profit will the pharmaceutical companies make from these agreements?

The government is not releasing any details of the financial terms of these supply deals, saying that the information is commercially sensitive.

Some pharmaceutical companies have said, when asked, that they don’t plan to make any profits.

Yet others have suggested otherwise. The US pharma company Moderna is reportedly looking into demanding $50 to $60 a dose for its own experimental vaccine, which would imply a significant profit.

So what’s really going? Do pharma companies have a right to make profits from these treatments? And what could governments do to stop it happening?

What have the pharma companies actually said?

At a hearing before the US Congress earlier this month, representatives of AstraZeneca and Johnson & Johnson pledged they would supply vaccines to the US without making a profit.

However, at the same hearing, representatives of Moderna, Pfizer and Merck said they did indeed intend to make a profit on any future vaccines.

“We will not sell it at cost,” said Stephen Hoge, president of Moderna.

The share prices of many pharma companies have performed relatively strongly in the crisis. Moderna’s stock has tripled in value since the onset of the pandemic.

That suggests that investors expect the company to make significant profits from their vaccines and treatments for coronavirus.

There’s also some evidence that investors have been putting pressure on listed pharma companies to regard the crisis as a profit-making opportunity.

In the UK Emma Walmsley, the chief executive of GSK, told the BBC in April that the company did not aim to show any “net profit” from vaccine sales.

However, she added that any surpluses would be channelled into research and development into future vaccine threats and to subsidise vaccine deliveries to developing countries.

This suggests Ms Walmsley envisages a profit on sales in rich countries but that this would be offset by supplying vaccines to poorer states at below the cost of manufacturing production.

Isn’t it obscene to make profits out of a pandemic?

Some pharma companies and their lobbyists argue that profits are necessary to incentivise future research.

But many campaigners and analysts counter that drugs companies don’t tend to invest in vaccines for infectious diseases in normal times, with the industry preferring to develop more lucrative lifestyle drugs.

Moreover, governments have significantly funded much of the coronavirus vaccine research currently taking place, arguably making private profits from these treatments unjustified.

People would be effectively paying twice – first through their taxes for the research and then to receive the treatment itself.

AstraZeneca and Johnson & Johnson are receiving US federal funds for their vaccine development efforts. And Moderna is taking $483m from the American government.

There is significant public funding for private vaccine research in the UK and Europe.

The UK government has committed £66m to fund the Oxford University vaccine project, which AstraZeneca is lined up to commercialise and manufacture.

What can governments do?

National governments could make it a strict condition of their funding of vaccine research that profits will not be permitted. This is something Democrat politicians have pushed for in the US.

A downside of this approach could be that some pharma companies would not take the funding for fear of such restrictions. Some think that’s why Pfizer turned down US state money for vaccine research.

Yet, in any case, governments have not, formally at least, chosen to make such demands of the drugs companies.

What about global cooperation?

The World Health Organisation proposed an international pool of intellectual property for all effective Covid-19 interventions, including vaccines.

Yet that has attracted little support from governments and is opposed by pharmaceutical companies

Public and private vaccine development around the world (Nature Reviews)

In the absence of global cooperation, some have called for states to explore unilateral “compulsory licences” for coronavirus treatments.

These are means (permitted under international trade law) whereby a country can override private sector patents and manufacture treatments domestically because it faces a health emergency.

Israel, Germany and Canada have made moves in this direction in the pandemic.

However, Chad Bown of the Peterson Institute for International Economics think tank in Washington thinks compulsory licencing is unlikely to work for developing countries.

“Manufacturing vaccines is high-tech manufacturing and will only be feasible in a handful of mostly rich countries. Poor countries are going to need to import it,” he says.

Where does this leave us?

A viable coronavirus vaccine is still only a hypothetical possibility rather than something that we are guaranteed to get.

But if we do get one, or several, inoculation treatments the issue of the private profits made by the companies that developed them will rapidly come into focus.

The question of profit on domestic sales will also be likely be muddied by the issue of the subsidies from wealthier governments to firms to roll the vaccine out globally, something that Ms Walmsley’s words hint at.

The governments of rich countries probably do have sufficient leverage – both legal and political – to prevent profiteering by the multinational pharmaceutical firms that operate in their jurisdictions.

The key question, though, is whether they will have the political will to exercise it.