US sets global benchmark for COVID-19 vaccine price at around the cost of a flu shot

(Reuters) - The U.S. government has set a benchmark for COVID-19 vaccine pricing in a $2 billion deal announced on Wednesday with Pfizer Inc and German biotech BioNTech SE that will likely pressure other manufacturers to set similar prices, industry analysts told Reuters.

The deal, which is contingent on an approvable product, secures enough vaccine to inoculate 50 million Americans for about $40 a person, or about the cost of annual flu shots, and is the first to provide a direct window into likely pricing of successful COVID-19 vaccines.

It also allows for some drugmakers to profit from their efforts to protect people from the virus that has killed some 620,000 people worldwide, almost a quarter of those in the United States.

Unlike other vaccine deals signed by the government, Pfizer and BioNTech will not collect a payment until their vaccine proves to be safe and effective in a large pivotal clinical trial expected to start this month.

The U.S. and other governments have previously struck deals to support COVID-19 vaccine development, some of which included guaranteed deliveries of doses. But this is the first deal to outline a specific price for finished products.

 “The average price for a flu vaccine is around $40,” said Peter Pitts, president and co-founder of the Center for Medicine in the Public Interest. “It looks good with that comparison. It’s well within the ballpark of reasonableness.”

So far, the other major experimental vaccines have all displayed relatively similar data on safety and efficacy, suggesting that no one drugmaker would be able to charge dramatically more than its peers, said Mizuho biotechnology analyst Vamil Divan.

The U.S. government agreed to purchase 100 million doses of the Pfizer/BioNTech vaccine at a price that amounts to $39 for what is likely to be a two-dose course of treatment, or $19.50 per dose.

Health experts believe effective vaccines are needed to break the pandemic that has battered economies worldwide. But they would need to be available to billions of people, and drugmakers are under considerable pressure to avoid making big profits during a global health crisis.

At $40 per person, “manufacturers will certainly generate profits” and gross margins could be in the range of 60% to 80% in some geographic areas, said SVB Leerink analyst Geoffrey Porges. Gross margins do not include research and development costs, which Pfizer has said could run as high as $1 billion for its vaccine.

Still, analysts and pricing experts said the price tag is on par with other common vaccines and a good deal for governments, given the desperate need.

The deal “would provide important benchmarks for COVID vaccine pricing,” Porges said, adding that vaccine makers are likely to aim for a single price around the word.

Pfizer, Moderna Inc and Merck & Co have all said they plan to sell their vaccines at a profit.

Governments and non-profits are in a race to secure supply from companies with promising COVID-19 vaccine candidates, although there are no guarantees any will ultimately succeed.

Last week, Johnson & Johnson told Reuters it is in talks for vaccine deals with the European Union, Japan and the Bill and Melinda Gates Foundation.

Some drugmakers, including J&J, have announced plans to price their vaccines on a not-for-profit basis while the pandemic is ongoing, although J&J has not provided specifics on pricing.

AstraZeneca Plc agreed to provide the United States 300 million doses of the vaccine it is developing with Oxford University researchers in exchange for $1.2 billion in upfront funding.

Although the cost per dose comes out to around $4 - far less than what Pfizer and BioNTech would receive - AstraZeneca can use some of that funding to offset research and development costs even if its vaccine ultimately fails.