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Is the U.S. government paying twice for coronavirus vaccine?

COVID-19 vaccine development continues to be the subject of political jostling, with President Trump contradicting top U.S. health officials regarding timeline and efficacy. The Centers for Disease Control and Prevention say they expect to distribute vaccines publicly at no cost to the patient. But what will the government pay, and how much could drug companies profit? Paul Solman reports.

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  • Judy Woodruff:

    The president is again contradicting some of his own top health officials about the timing of a vaccine and effectiveness of masks.

    Yesterday, as we said, CDC Director Robert Redfield gave — told, rather, a Senate committee that he believed a vaccine would not be widely available to most Americans before the middle of next year. People at higher risk or medical workers or first responders are likely to get it sooner.

    But he said greater mask use was the most essential way to protect Americans.

  • Robert Redfield:

    I might even go so far as to say that this face mask is more guaranteed to protect me against COVID than when I take the COVID vaccine, because the immunogenicity may be 70 percent. And if I don't get an immune response, the vaccine is not going to protect me.

    This face mask will.

  • Judy Woodruff:

    Hours later, the president rejected what Redfield and other scientists have said. He insisted that 100 million doses of vaccines would be widely distributed before the end of this year.

    But, today, the head of Moderna, which is a vaccine manufacturer, said that his company would likely not distribute its vaccine widely before next summer.

    President Trump also downplayed the use of masks once again and disputed Redfield.

  • President Donald Trump:

    I think he made a mistake when he said that. It's just incorrect information.

    I mean, I think there's a lot of problems with masks. No, vaccine is much more effective than the mask. But, no, the mask is not as important as the vaccine. That mask perhaps helps.

  • Judy Woodruff:

    All of this comes as the CDC announced that it expects to distribute vaccines to the public at no out-of-pocket cost to the patient.

    But there are significant questions and criticisms about what the government's going to pay for vaccines with taxpayer money and whether companies should be able to profit from it.

    Economics correspondent Paul Solman dives into part of the story for our series Making Sense.

  • Paul Solman:

    A newsreel from 1955 on the polio vaccine.

  • Narrator:

    An historic victory over a dread disease.

  • Paul Solman:

    The vaccine's inventor, Dr. Jonas Salk, literally gave it away.

  • Man:

    Who owns the patent on this vaccine?

  • Jonas Salk:

    The people, I would say. There is no patent. Could you patent the sun?

    (LAUGHTER)

  • Paul Solman:

    Sixty-five years later, Pope Francis thinks the COVID-19 vaccine should follow the polio precedent.

  • Pope Francis (through translator):

    It would be a scandal if our economic system, supported by public funds, contributes only to companies, instead of the common good.

  • Paul Solman:

    No question public funds are driving the huge COVID vaccine effort.

  • President Donald Trump:

    It's called Operation Warp Speed. That means big and it means fast.

  • Paul Solman:

    But looming over Operation Warp Speed is a huge question: How much is the public, through the government, paying private companies?

  • Osaremen Okolo:

    There is no reason that private pharmaceutical companies should be profiteering off of a pandemic.

  • Paul Solman:

    Osaremen Okolo is the chief health policy aide for Illinois Democrat Jan Schakowsky.

  • Rep. Jan Schakowsky, D-Ill.:

    Yes or no, will you sell your vaccine at cost, so that we can verify you aren't making a profit?

  • Paul Solman:

    Merck's vaccine has received $38 million in government funding.

    Julie Gerberding is executive vice president.

  • Julie Gerberding:

    No, we will not be selling vaccine at cost, although it's very premature for us, since we're a long way from really understanding the cost basis of what will end up.

  • Rep. Jan Schakowsky:

    So, Dr. Hoge, yes or no?

  • Paul Solman:

    Stephen Hoge is president of Moderna, which, by some measures, has gotten nearly $1.5 billion in federal funding, all the money it's put into the vaccine, and will get another $1.5 if it succeeds.

  • Stephen Hoge:

    We will not sell it at cost, no ma'am.

  • Paul Solman:

    Which is why health policy wonks like Okolo are up in arms.

  • Osaremen Okolo:

    There should be no reason that pharma companies should be having exclusive licenses to charge whatever they want, to control distribution of these drugs, to control the price and access, not only in the United States, but across the world.

  • Paul Solman:

    Charge whatever they want to a U.S. government desperate for a vaccine, any vaccine, running a tab that we taxpayers will ultimately pick up.

  • David Mitchell:

    I have an incurable blood cancer called multiple myeloma.

  • Paul Solman:

    Longtime public health advocate David Mitchell is founder of Patients For Affordable Drugs.

  • David Mitchell:

    My doctors have me on a four-drug combination that carries a list price of $900,000 a year.

    So, I care deeply about vaccines that will be affordable, because, if you have a blood cancer, and if you're taking chemotherapy, both of which I am, then the risk of very bad outcome from COVID-19 is high.

    So, I want a vaccine real bad.

  • Paul Solman:

    But if it's a vaccine we already subsidized, is the government, and, therefore, we taxpayers, really going to have to pay again?

  • David Mitchell:

    The White House says that we have pumped $12 billion to these drug companies for Operation Warp Speed. We are effectively underwriting R&D, clinical trials, standing up production capability, and even producing, paying to produce the drugs.

  • Paul Solman:

    Just consider Moderna's contract, $3 billion to immunize 50 million Americans.

    Not to personalize this too much, but I have paid 10 dollars for every member of my family already to develop the Moderna vaccine. And so has every other American, right?

  • Peter Maybarduk:

    That's correct. But only about one in six Americans would get those initial doses.

  • Paul Solman:

    Peter Maybarduk of the Ralph Nader nonprofit Public Citizen.

    How much is it going to cost for every American to get immunized?

  • Peter Maybarduk:

    It'd be about $10 billion total U.S. government investment. The U.S. government has options to purchase hundreds of millions of more doses from Moderna, up to 250 million people.

  • Paul Solman:

    So that's something like $40 from the U.S. government to Moderna for every American who gets immunized. Doesn't sound so bad.

  • Peter Maybarduk:

    But that's not really the point here. The U.S. government appears to co-own this vaccine. It can insist on reasonable pricing and conditions. And if you look at comparable vaccines, AstraZeneca will charge no more than $8 per person. The price really could be quite a bit lower.

  • Paul Solman:

    But who knows for how long these prices will hold when the pandemic ends? And we might still need an annual COVID shot that we might have to pay for out of pocket.

  • Elisabeth Rosenthal:

    We are really over a barrel if these kind of guarantees aren't written into the initial contracts.

  • Paul Solman:

    And thus the simple question, says health journalist Dr. Elisabeth Rosenthal:

  • Elisabeth Rosenthal:

    Why are we paying or something that the government itself largely developed? Government institutions created the platforms for many of these new really innovative vaccines.

    And we are now paying, through BARDA, through the Defense Department program, to ramp up production, manufacturing, distribution. So, haven't we paid already?

  • Paul Solman:

    And, as a result, in the case of Moderna, enriching its private investors by public investment that has literally tripled the company's stock value?

    OK, sure, drug companies will profit, but — and this is where the argument changes direction — why is that a problem?

  • Evan Seigerman:

    You want vaccines to be somewhat profitable, because you want manufacturers to be incented to make them.

  • Paul Solman:

    Stock analyst Evan Seigerman puts the time-honored case for profits succinctly.

  • Evan Seigerman:

    It is important that they are allowed to make some sort of a profit, so that they will continue to invest in research and development, in manufacturing, and, of course, distribution.

  • Adam Mossoff:

    We can treat viruses, the scourge of humanity.

  • Paul Solman:

    Look, the stakes are life and death, says Adam Mossoff, a free market enthusiast at George Mason University.

    The companies need profits, he says.

  • Adam Mossoff:

    If they're going to continue doing more R&D into new drugs and new medical treatments that have made modern life a veritable miracle, by any historical standards.

    I mean, what were just death sentences 10, 20 years ago, cancer, diabetes, hepatitis, are now manageable day-to-day conditions thanks to the types of investments and the thousands, millions of labor hours put in by researchers and scientists in the biopharmaceutical industry.

  • Paul Solman:

    But our skeptics don't buy the profit motive story.

  • Elisabeth Rosenthal:

    Some of the money we spend is plowed back into development, and that's hugely useful.

    But, also, we should look at what pharmaceutical companies are spending for marketing, for promotion.

  • Paul Solman:

    Which, for the 10 largest U.S.-based prescription drug companies, is actually almost as much as R&D spending. Add in profits and it's far more.

  • Elisabeth Rosenthal:

    I joke that it used to be that a Nobel Prize was motivation enough. But all of our drugmakers are now publicly traded, mostly or privately owned, for-profit companies. So that's where we are.

  • Paul Solman:

    But to health economist Katherine Baicker, where we are with regard to COVID vaccine pricing is OK, even with the huge government subsidies, at least for now.

  • Katherine Baicker:

    I don't think we can count on the government to be responsible for all of the refinement that we need for all medicines, because it just requires a lot of ingenuity. And the incentives that we have in the private market are what drives a lot of innovation.

  • Paul Solman:

    And invites a lot of competition.

  • Evan Seigerman:

    You want people to be encouraged to make vaccines. If you have more than one manufacturer, the price is likely to go down.

  • Paul Solman:

    Remember, says Baicker:

  • Katherine Baicker:

    These vaccines are worth trillions of dollars to the world. There's so much value to be created that there's room for there to be economic gain to the people who invested in the medicine, whether that's private sector or public, as well as much greater benefits to the public, in the form of improved health and resumed economic activity.

  • Paul Solman:

    As long as people take it, and it doesn't become prohibitively expensive down the line.

    For the "PBS NewsHour," Paul Solman.

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