Moderna (MRNA) CEO Stéphane Bancel sparred with Sen. Bernie Sanders over the company's decision to raise its COVID-19 vaccine price Wednesday as the company prepares to enter the commercial market after the public health emergency is declared over in May.
Sanders, who chairs the Senate Health, Education, Labor and Pensions (HELP) committee, noted that the company received significant funding from the U.S. government to develop its vaccine yet is now charging the government multiple times more than during the pandemic — including for the Department of Veterans Affairs, Indian Health Services and Medicare and Medicaid.
“And here is the thank you that the taxpayers of this country received from Moderna for that huge investment," Sanders said.
“So all of us who are concerned about the deficit, the national debt – billions more goes to Moderna," he added.
Moderna is raising the dose price from around $26 for the government during the pandemic to $130 per dose when it enters the commercial market later this year. Rival Pfizer (PFE) has also set a similar price for its vaccine, but notably did not rely on government funding for its development.
Sanders said the move is evidence of corporate greed, as the hundreds of millions of doses purchased by the U.S. government filled the coffers of companies like Moderna, Pfizer (PFE) and Johnson & Johnson (JNJ). A staff report from Sanders' team found these companies, along with other pharmaceutical giants, made record profits last year. Pfizer also brought in $100 billion in revenue for the first time in its history last year, with net income totaling $31.4 billion.
But Bancel told the committee that there are several complex factors that are contributing to the increased price. Still, after several rounds of questioning, Bancel acknowledged that Moderna is still negotiating with insurers and various government agencies on the final price, so it could be different from $130.
When asked by Sanders if the company would consider "substantially charging less" for consumers considering the taxpayer funding of the vaccine's development, Bancel balked, pointing to production costs and uncertainty of what demand for the vaccine will be this fall.
"You have complexity, but you have money for stock buybacks by the billions, and you guys became billionaires, that doesn't seem too complex to me," Sanders said.
Bancel defended the move to raise prices saying that there was no discussion, when it first received $1.7 billion from the Biomedical Advanced Research and Development Authority (BARDA), part of the Health and Human Services Department, to develop the vaccine, about the commercial market, and the price it has chosen includes additional costs it is incurring as a result of moving away from a government-controlled system.
The company expects increased costs as it takes over distribution from the government — even if it uses large distributors like McKesson, Cardinal, and AmerisourceBergen, as the government did during the pandemic.
"During the pandemic, we only shipped trucks to three warehouses in the U.S., when the CDC was taking the responsibility and the cost of getting the vaccines to the hospitals and the pharmacies," Bancel said.
Moderna also expects added costs from shifting from a 10-dose vial to single doses or pre-filled syringes, as requested by pharmacies and doctors, according to Bancel.
In addition, the company expects a 90% decrease in demand with an uncertain forecast for doses in the fall, compared to the millions of doses ordered by the government which helped guarantee revenue. It also will incur costs of unused or expired doses, which is currently borne by the government.
All those factored into the price increase, Bancel said.
The company has said taxpayers will not pay out-of-pocket costs for the vaccines. But lawmakers pointed out that there could still be a cost of administration for government agencies — a point Bancel said he was not sure about — and the list price borne by government agencies is still a charge to taxpayers.
In addition, insurers bearing the cost of administration and the list price could contribute to higher premiums, lawmakers said.
"Some of us have a hard time understanding how a company that made $21 billion in profit...now comes before the public and says, 'Oh by the way, we want to quadruple prices,'" Sanders said.
Bancel said that, as in any other industry, "When you get a very large volume, you get a very big discount. That's actually what we did."
Capitalism or greed?
With the loss of the large-volume government orders for its sole commercial product, the company is facing a steep reduction in revenue for 2023.
"This year, if we get 30 or 50 (million doses purchased), that would be great. Actually this year, if you look at analysts' consensus, the company might be at a loss this year," Bancel said.
During his testimony Wednesday, Bancel tried to turn the argument of wasted taxpayer dollars around on the government, pointing to the loss of taxpayer money from the government's purchases of doses in the recent booster cycle. Of the 160 million doses ordered, only 50 million have been used.
"So the true cost to the taxpayer was more than $26," Bancel said.
Other lawmakers on the Senate committee either questioned or supported the business case Moderna was trying to make for its increased vaccine prices.
Sen. Tammy Baldwin asked if Bancel's performance and pay package is tied to the vaccine's price, and if Moderna having spent billions on stock buybacks paired with a lower stock price than during the peak of the pandemic is pressuring the company to raise the price.
Bancel claimed that neither his performance nor the company's stock price play a role in the pricing of the vaccine. He also pointed to other vaccines that are more than $200, saying he believes the company found a middle ground price.
Sen. Mitt Romney (R-UT) spent his allotted minutes defending the idea of the risk that Moderna and its team took in raising capital from the markets to help further fund the development of the vaccine — a total of $3.8 billion.
"I recall understanding that at one point you indicated to your family that you thought there was a 5% chance it would work. So if I'm an investor, putting $3.8 billion in an enterprise that has a 5% chance of working, I got to expect that if it does work, I'm going to make an awful lot of money. Now, I've heard people say, 'Well, that's corporate greed.' Yeah, that's kind of how it works," Romney said.
Sen. Mike Braun (R-IN), meanwhile, said the industry operates "like an unregulated utility. You don't embrace competition, you don't embrace transparency."
Final price TBD
For now, the company has said it is still in negotiations and is waiting on the Food and Drug Administration to determine which formula will be used for the fall booster season. That will be what the company focuses on producing through the summer — and predicting how much to make.
"We're trying to guess the volume that is needed, which is the manufacturing challenge we have — especially as a small company, we don't do the filling in the vials ourselves, we have to contract that to outside companies," Bancel said.
"That is part of the cost of running a seasonal respiratory vaccine franchise," he added.
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