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SHOTS FIRED

In the push for new vaccines, taxpayers keep paying and paying

A healthcare worker holds a vial of the Moderna COVID-19 Vaccine
Mike Segar / Reuters
Who holds the rights to the vaccine?
  • Samanth Subramanian
By Samanth Subramanian

Looking into the Future of Capitalism

Published

Over nearly two decades, a new study has found, government agencies have given at least £175 million ($248 million) to develop ChAdOx, a vaccine delivery system developed by scientists at Oxford University. Charities like the Wellcome Trust have given at least a further £53 million. As much as 99% of the total disclosed funding for ChAdOx research came from public or philanthropic money. And yet ChAdOx now sits at the heart of AstraZeneca’s Covid-19 vaccine, and the company is free to profit from it at will.

To be sure, AstraZeneca has said it will sell these vaccines at no profit to the developing world “in perpetuity,” and at no profit in the West until it decides the pandemic is over. But that could be as soon as July—after which AstraZeneca can cash in heavily on these years of publicly funded research, just as its competitors, such as Pfizer and Moderna, are already doing.

These vaccines aren’t, by any means, the only occupants of a strange category: drugs and treatments that taxpayers have paid to develop, and then pay to buy again from companies. The conversion of public subsidy into private profit feels like a rupture in the system—one that would be fixed, perhaps, if states controlled the fruits of their funding more. In so doing, they wouldn’t be dabbling in any kind of socialism, as alarm-mongers might be quick to claim. Quite the reverse, in fact; they’d be behaving like the entrepreneurial investors so lionized by capitalists.

Drug access campaigners have argued for years that, when companies capitalize on new treatments, they’re cornering the rewards of breakthroughs achieved in universities or public institutes. But ordinarily, in the world of pharmaceuticals, quantifying the contribution of publicly funded work is hard. Drug development is long and complex, and while pharma firms invest heavily as well, their spending isn’t available to track or analyze.

The Covid-19 vaccine race presents a rare opportunity. Its accelerated timeline of state support has produced a particularly egregious example of public investment turned to private profit. And its sheer visibility has made things more transparent than they otherwise are. “There were big announcements about funding, big grants being given publicly,” said Florence Rodgers, the UK national coordinator at Universities Allied for Essential Medicines (UAEM), a campaign group. “So we had an awareness of where funding was coming from.”

How taxpayers are paying twice—or more—for their vaccines

In the US, both the Pfizer and Moderna vaccines rely on older scientific breakthroughs paid for by public money and then on fresh infusions of government grants last year—from the German government in Pfizer’s case, and the US government’s Biomedical Advanced Research and Development Authority (BARDA) in Moderna’s case. Moderna has said, in fact, that it has “made clear the extent of BARDA’s 100% funding of the program” that hustled the vaccine from unapproved technology to licensed product.

In India, the Indian Council of Medical Research (ICMR), a government body, jointly owns the intellectual property behind the Covaxin vaccine, sharing it with a private company named Bharat Biotech. ICMR has refused to disclose the extent of its funding in the development of the vaccine, but it earns a 5% royalty on each sale.

All these vaccines have a market price. The US pays Pfizer around $19.50 per dose; the EU pays $14.50. The US pays Moderna around $15 a dose. The UK pays AstraZeneca around $3 a dose now, but the company plans to raise the price once this phase of the pandemic has passed in Western countries. India’s state governments pay Bharat Biotech 400 rupees ($5.71) per dose of Covaxin, but in private hospitals, citizens are paying 900 rupees or more.

It’s almost as if these states—and their citizens—are paying for these vaccines twice over: once to bankroll much, or nearly all, of the research itself, then again to buy back the products of this public-funded research. Pharma corporations benefit hugely from this model. Pfizer expects profit margins on its vaccine of between 20%-30% over an unspecified timeframe. On May 6, Moderna declared $1.7 billion in Covid-19 vaccine sales in the year’s first quarter: its first-ever profitable quarter. (Its total revenue in the same quarter in 2020—before the pandemic spread, and before the US lavished money on Moderna’s vaccine candidate—was $8 million.) Moderna didn’t announce its profits this year but, it plans to hike vaccine prices soon. So does AstraZeneca, which posted $275 million in Covid-19 vaccine sales in the quarter, and which stands to multiply that amount by selling its vaccine at a higher price.

Following the vaccine money

Rodgers, the UAEM coordinator, was part of the team of researchers who estimated the quantum of public funding in the development of the AstraZeneca vaccine. The team used a two-pronged approach. Students at Oxford filed Freedom of Information requests, asking to see the funding received by Adrian Hill and Sarah Gilbert, the two scientists at the university’s Jenner Institute. Hill and Gilbert spearheaded the development, over many years, of ChAdOx, the biotechnological platform underlying the Covid-19 vaccine.

In parallel, Rodgers’ team combed through 19 years of academic papers that dealt with ChAdOx. From the “Acknowledgements” sections of these 100-odd papers, the researchers extracted 577 mentions of funding, matching them up where possible to amounts listed in databases of public grants such as the ones maintained by UK Research and Innovation or the Bill & Melinda Gates Foundation.

The approaches yielded different results. In the Freedom of Information documents, the European Commission provided 34% of ChAdOx research funding, followed by the Wellcome Trust and the Coalition for Epidemic Preparedness Innovations (CEPI), a multilateral body that is in turn funded by governments and charities. From the papers, the team found that the UK government provided a quarter of all enumerated funds and foreign governments provided nearly 30%. Some pharma companies were mentioned in these papers as having provided funds too—Merck, GlaxoSmithKline, and HAV Vaccines among them. “We were unable to match these mentions to grant amounts,” Rodgers said.

In total, Rodgers and her colleagues identified roughly £228.5 million in public funds mentioned in the academic literature. The Freedom of Information requests listed roughly £105 million.

No one has conducted as granular an analysis of other vaccine candidates. The Moderna vaccine, for instance, is built on three crucial breakthroughs. The first, conceived by scientists at the University of Pennsylvania, enables injected RNA particles to elude the body’s immune system; the second is a minuscule sheath of fat that transports and then releases the RNA; the third is a protein present in the vaccine.

All three breakthroughs were the result of extensive public funding, particularly from the US National Institutes of Health (NIH), which poured $17.2 billion into vaccine technology research between 2000-2019. In fact, the NIH holds the patent for the vaccine protein, which is present in other mRNA vaccines apart from Moderna’s. But Moderna does not pay the NIH a license fee to use the patent, and the NIH has—for unspecified reasons—chosen not to enforce the patent. A new study by New York University researchers estimates the patent could earn the US $1.8 billion in 2021. (AstraZeneca, Moderna, and the NIH did not respond to requests for comment.)

None of these calculations are perfect. Sarai Keestra, a medical anthropologist at the London School of Hygiene & Tropical Medicine and one of Rodger’s co-authors, said that grant amounts provided by many funders mentioned in the ChAdOx literature weren’t publicly available. “And we don’t know how much private money went into this research,” Keestra said.

Similarly, in the post-research phases of drug development, pharma companies invest their own money in trials, licensing, manufacturing, marketing, and distribution. Companies like AstraZeneca or Moderna haven’t revealed how much they spent on these stages in 2020, said Adrián Alonso Ruiz, a health researcher at the Graduate Institute of International and Development Studies in Geneva. Only a few inferences can be drawn. “For instance, Moderna being a small company, it also received funding from the US to expand manufacturing capacity.” Beyond that, though, Ruiz said, “we’re hitting the same wall: a lack of transparency that doesn’t let us account for the entire value of these vaccines.”

What if the state behaved like an investor?

The question of where funds come from is a crucial one. Whenever discussions of drug patents and intellectual property arise—as they have now, for Covid-19 vaccines—pharma companies argue that slackening patent restrictions will be counter-productive. That without the revenues accruing from strict and exclusive patent regimes, companies will have no incentives to develop drugs—and no funds to conduct the research needed. But as the drive to develop Covid-19 vaccines suggests, often companies don’t fund the research needed—certainly not all of it, anyway.

This gives states leverage they ought to use, Ruiz said. “They have the powers of early investors who take risky bets.” Except, unlike venture capitalists, public funders can look not for profit but for other objectives tied to the public good: lower prices in perpetuity, or more equitable access, or wider licensing to boost vaccine supplies.

Bodies like CEPI or the NIH can exert “step-in rights” for drugs they’ve helped fund, compelling firms to make these products more widely or cheaply available. The rights are often found in contract clauses, Ruiz said. They just aren’t enforced, perhaps because the pharma world’s lobbyists are powerful and effective, but also because the structure of the industry is so entrenched it goes unquestioned. We’ve come to believe that this is the only efficient way to get drugs to market, and healthcare is so important that we’re unwilling to try to upgrade the model in bold ways.

Governments fail to re-evaluate their own roles as well, being content with disbursing money and aiding research without looking downstream, past election cycles, when the research pays off. This is a timid ideology of state function, Ruiz suggested. Instead, states should learn to see themselves as “entrepreneurial states.” The NIH, for instance, can demand that companies pay fees to license its patents, so that it can then plow that money back into further research. During crises, where the lion’s share of funding for a treatment has come from public sources—and some of the Covid-19 vaccines are prime examples—governments have even greater moral authority to press these demands. Ruiz said: “Governments need to ask for something in return, the way investors do.”

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