Amy Maxmen is an Edward R. Murrow press fellow at the Council on Foreign Relations.
Rather than focus solely on Moderna, the government should concentrate on making this episode the last time it invests in drug and vaccine development only to see pharmaceutical companies raise health-care costs with high prices. To make treatments more accessible to Americans who underwrite them in the first place, federal research funders need to add pricing or patenting conditions to their drug-development contracts.
Coronavirus vaccines are hardly the only treatments to have been developed on the back of federally financed research. In fact, all of the 210 drugs approved by the Food and Drug Administration between 2010 and 2016 were based on research supported by the National Institutes of Health.
The Moderna case is striking because of the sums involved. Before the pandemic, NIH and other agencies invested more than $337 million in mRNA vaccine research. When the SARS-CoV-2 genetic sequence went online in 2020, NIH immunologists began working with Moderna on a vaccine. Once the company had a candidate, the government invested roughly $1.5 billion in Moderna’s studies and clinical trials.
Moderna’s vaccine, one of the most effective against covid, is a shining example of the power of public-private collaboration. Such a model could be applied to other diseases as well as to green energy technologies. How has it also become a cautionary tale? Because the government’s support came with too few strings attached.
From 2021 to 2022, Moderna earned more than $37 billion, primarily from sales of the vaccine. It’s so far been sold to the U.S. government for almost five times its estimated cost of production.
And when private insurers begin to pick up the tab, as early as this September, they will almost certainly be charged far more, said Jennifer Kates, a senior vice president at the Kaiser Family Foundation. After outcry from senators, Moderna pledged to keep the vaccine free for Americans. But if they charge insurers high prices, this still raises premiums and total health-care spending, noted Kates.
Moderna spokesperson Chris Ridley said in a statement that the company prioritizes access and that its prices are fair given their benefit to society. Pfizer, the maker of another mRNA coronavirus vaccine in the United States, has charged a comparable amount and has also suggested an increase up to $130 per dose. Ridley added that private investment was essential to their work and that Moderna “invented the mRNA sequence on which our vaccine is based.” This is a matter of dispute. Moderna recently abandoned a battle with NIH over a patent on the mRNA sequence and agreed to back-pay the agency for its use of another key patent.
To avoid messy battles in the future, the government could secure a better return on its investments upfront in several ways. It could, for example, stipulate that a company revert to science agencies a portion of its profits on a publicly funded technology so the money can be reinvested in drug discovery.
Or the government could add a condition to its grants that reins in drug prices. It could stipulate that companies developing federally funded treatments must set their prices according to the drugs’ clinical benefit, the cost of manufacturing and other factors — determined by an independent committee of experts conducting a transparent analysis. Drug pricing is notoriously opaque, and in some cases investigations have revealed firms setting prices according to the most the market will bear.
President Biden’s new drug-price bargaining scheme in the Inflation Reduction Act functions in this way. The system only needs to be expanded. The law enables Medicare to negotiate prices on drugs that have been marketed for more than nine years. But the act does nothing to rein in the extraordinary prices of new drugs and vaccines. Nor does it help some 278 million Americans who rely on commercial health insurance, veterans’ health insurance or Medicaid.
Alternatively, the government could ensure that treatments remain accessible in the United States and around the world by enforcing conditions on intellectual property that directly stems from federally funded research. Academic researchers often patent inventions and license them exclusively to companies for commercialization.
When a single company controls the supply of a treatment, it sets the cost and determines distribution. If this proved to be limiting — as it did at the peak of the pandemic — the government could revoke exclusivity and share these patents with generic manufacturers, which typically increases supplies and lowers costs.
The Trump administration might have requested any of the above conditions when it poured billions into Operation Warp Speed, but it did not.
The pharmaceutical industry warns that stipulations on government funding would stunt innovation. Craig Garthwaite, a health-care economist at Kellogg School of Management, has argued that drug companies require strong intellectual property protection to drive the massive private investments needed. Reduced access is preferable, he has written, to no new treatments.
This line of reasoning supposes that pharmaceutical companies would reject discoveries made at universities and national institutes because of the strings attached. That’s hard to imagine given that the government funds the majority of early-stage research, which is risky for private investors because most experiments do not lead to blockbuster drugs, said Aaron Kesselheim, director of a research program on therapeutics and law at Harvard.
Moderna’s hold on coronavirus vaccines might be a done deal. What the government can do now is clarify its asks on drug access from the start when awarding grants and contracts, and end the cycle of pricing showdowns.