Pfizer Federal Contract for Paxlovid: Gunshots
The United States spends about $530 for every 5-day course of Pfizer’s COVID-19 pill, Paxlovid. But the contract for the first 10 million doses would allow the government to get a lower price if one of the few other wealthy countries got a better deal on the drug.
It’s part of a purchase deal that appears to be more favorable to the federal government as a whole compared to COVID-19 vaccine contracts, says Robin Feldmanprofessor at the University of California Hastings College of the Law, who focuses on the pharmaceutical industry and drug policy.
“I think this contract reflects a change in the national mood over time,” she said. “So with vaccines and some treatments on the shelves, the nation is less panicked. U.S. government officials feel less cornered, more able to negotiate.”
The contract includes a buyout clause, which means that if Paxlovid’s emergency use authorization is withdrawn, Pfizer would buy back unexpired treatment courses from the federal government.
Federal government secures price match guarantee
The contract also has what is known as most favored nation pricing. It’s a bit like buying a product from a store with a price-match guarantee, like Target or Best Buy. If one of the other six rich countries, such as Japan or Germany, gets a lower price for Paxlovid, the United States can push the government to get the same price.
“Getting a most favored nation clause is great for a buyer,” Feldman said. “Because a buyer can make an early deal, secure a flow of product, and not have to worry about being ripped off on the price. Because the price can come down over time.”
(“Most-Favoured Nation” may also sound familiar, as the Trump administration has offered to test it to gradually reduce the price of a few dozen drugs in Medicare Part B over seven years. The Centers for Medicare and Medicaid Later canceled the planciting concerns about access issues and the COVID-19 pandemic.)
NPR was awarded the Paxlovid contract after filing a public records request.
James Love, director of global public interest advocacy group Knowledge Ecology International, was shocked to see this price clause in the Paxlovid contract obtained by NPR. He says the government often can’t even get that kind of clause when they get paid to research a drug.
“Here they say, ‘Well, we haven’t even paid for the R&D, but we still want the benchmark price,'” he says. “And they got it.”
In contrast, Pfizer’s vaccine contract explicitly states that its price per dose – about $20 – cannot be used as a benchmark price, allowing the company to charge more money later: “This price shall not be used as the basis for pricing under separate government contracts between Pfizer and HHS, the Department of Defense, or any other government department or agency under most-favoured-customer, most-favoured-nation, or any other program-specific contract or condition.”
However, the most-favoured-nation clause in the Paxlovid contract is extremely limited, Feldman says.
“Canada, France, Germany, Italy, Japan, UK. That’s it,” she says. “If Pfizer sells drugs cheaper in Belgium, that doesn’t help us at all.”
Since the government pays Paxlovid as each additional order is released and delivered, it could negotiate a lower Paxlovid price anytime between now and September, when the contract stipulates that final doses should be released as part of the contract.
Paxlovid production expected to increase by spring
The initial contract, dated November 17, 2021, establishes a product release schedule with most doses coming in the spring and summer of 2022. Indeed, more than half are expected in the last two months of the 10-month contract period.
This shows how Pfizer continues to ramp up production of Paxlovid. In December, it only planned to publish 50,000 courses. But in March, it expected 400,000. And in September, it expected to release 3.25 million courses.
Since signing this contract, Pfizer and the government have raised production targets and doubled the order to 20 million cures. Thus, the 10 million treatments that were to be delivered by September should arrive by the end of June. The additional 10 million treatments are due by the end of September.
The Biden administration did not respond to questions from NPR about what impact this will have on the initial release schedule.
Pfizer declined to comment on contract details, but said it began rolling out its Paxlovid supply chain and manufacturing readiness in early 2021.
“We are constantly looking to improve our processes, lead times and expand the supply chain, including expanding our internal and external network, raw material production and tablet manufacturing capacity,” the spokesperson said. Pfizer, Steven Danehy, to NPR in an email. “Thanks to this work, we have already increased our 2022 [global] projection of 50 million courses to 120 million – of course our work is never done. But we have never and will never sacrifice product quality or patient safety to ensure opportunity. We are confident in our ability to supply Paxlovid.”
According to federal data, Pfizer appears to be pretty much on track to meet its targets. So far, the government has been able to distribute 265,000 Paxlovid courses.