by Eric Sagonowsky | Feb 23, 2021 12:09pm
On an earnings call earlier this month, Chief Financial Officer Frank D’Amelio said that “obviously,” the company is “going to get more on price” after the “pandemic pricing environment.” He was speaking in response to Bank of America Merrill Lynch analyst Jason Zemansky, who asked the management team about how profit margins for the program could change over time.
In short, D’Amelio explained that Pfizer expects its COVID vaccine margins to improve. Under one pandemic supply deal, Pfizer is charging the U.S. $19.50 per dose, D’Amelio said, which is “not a normal price like we typically get for a vaccine—$150, $175 per dose. So, pandemic pricing.”
As a specific for-instance, a dose of Pfizer’s pneumococcal vaccine Prevnar 13 costs more than $200 on the private market in the U.S., according to Centers for Disease Control and Prevention data.
Pfizer has said it expects $15 billion from its COVID-19 vaccine this year, but if the company charges higher prices after the pandemic, it could continue to reap significant sales from the product in the years to come, particularly if routine boosters are needed as variants arise.
Even as Pfizer uses “pandemic pricing” during the crisis, the company is also paying for materials, labor, factory overhead, shipping, distribution costs and more to deliver doses, D’Amelio said. With all of its costs, “you come out with the high 20s in terms of that as a percentage of revenue,” the CFO said.
Moving into the future, after the pandemic period, Pfizer is “going to get more on price,” and will increase output at its factories, driving production costs per unit lower, the CFO said. In all, D’Amelio said there’s a “significant opportunity for those margins to improve once we get beyond the pandemic environment that we’re in.”
Bernstein analyst Ronny Gal picked up on the comments and highlighted a recent report in Germany’s Sueddeutsche Zeitung in a Monday note to clients. The publication reports that Pfizer and BioNTech approached European officials seeking €54 per dose, or €27 billion for 500 million doses, last summer.
While officials negotiated the price down to €15.50 per dose, Gal suspects that all of the developments indicate a “first hint” of Pfizer’s thoughts on “post-epidemic pricing.” The deal, in addition to other European supply pacts, was large enough to be “at least partially … for post-pandemic use,” Gal figured.
A Pfizer representative said in a statement these are “extraordinary times, and our pricing reflects that.”
“During the pandemic, we priced our vaccine consistent with the urgent global health emergency we are facing to ensure widespread vaccination for all countries,” he added. During government supply negotiations, the company considers volume and equitable distribution aims, he said, and has a “tiered pricing approach that enables poorer countries to pay less.”
“Moving forward, we will continue to take a thoughtful approach to pricing, balancing a number of factors—including the value of the vaccine based on the growing evidence base, and access, affordability, and sustainability considerations,” he added.
In initial deals with the U.S. government, Pfizer and BioNTech’s vaccine costs $19.50 per dose, compared with $15 for Moderna’s shot, $16 for Novavax’s program, $10 for Johnson & Johnson’s vaccine and $4 for AstraZeneca’s. Pfizer didn’t take any government development funds for its shot, while other players received various amounts of assistance, and Pfizer was the first to reach the market.
The drugmaker isn’t alone in viewing vaccine pricing differently during the pandemic and afterward. Johnson & Johnson and AstraZeneca have each pledged to sell their vaccines on not-for-profit basis during the pandemic.
Editor’s note: This story was updated with a statement from Pfizer.