Coronavirus - profits from vaccines

Yahoo Finance says: Pfizer, Moderna expect billions in profits from COVID vaccines. That's a scandal

Why is it a scandal? The author Michael Hiltzik says:

"The companies stand to earn billions of dollars in profits from their COVID vaccines this year, according to investment analysts' projections. Since it's unlikely that the vaccines will provide 100% cures or eradicate the virus causing the disease, there will be more profits in later years.

While no one is saying that the companies should collect no profit at all from the COVID vaccine, that leaves open the question of how much is enough?

I’ve written already  about the stranglehold that Pfizer and Moderna have maintained on the manufacturing of their COVID vaccines, even though American taxpayers have paid billions of dollars for the basic research and early development of the technology.

Although the vaccine is to be delivered free to Americans, the government is paying what looks like top-dollar for the drugs. Pfizer's government contract for 100 million doses sets the unit price at about $20 per dose. Moderna's two contracts for 100 million doses each are set at about $15 per dose.

The actual production cost is much less. Pfizer's profit margin on its vaccine will be 60%-80%, Geoffrey Porges of SVB Leerink has estimated.

That's plainly excessive for a product with a guaranteed worldwide demand, especially one based heavily on government investment."

Firstly, Hiltzik is wrong about Pfizer receiving billions of dollars of government money for the research and development of the vaccine. Pfizer paid it from its own pocket. "Pfizer, with its German partner BioNTech, will be given $1.95 billion for 100 million doses, but received no federal funding for the research and development of their vaccine" (link).

Also, the author fails to consider the question more broadly, which he seems to believe is irrelevant. How much profit from a successful drug does a drug developer need to offset losses from developing drugs that do not make it to market? It takes a huge amount of money to develop a drug and then test it in clinical trials. If the drug doesn’t make it to market, and hence generate enough revenue to offset the sunk costs, then the company has a huge loss. Indeed, the number of losses easily outnumber the number of successes. So huge profit margins on a successful drug are to a large extent eaten up by losses on unsuccessful drugs.

The author seems to believe that a drug company should make only a small profit margin, e.g. similar to a grocery story, on its successful products, while absorbing huge losses on its unsuccessful products. He  regards each drug in isolation, having little or no concern about the unsuccessful ones. Unlike a drug developer, a grocery store can make do on a small profit margin on most sales because it doesn’t have the burden of losses to offset or overcome that a drug developer does. 

Coronavirus -- vaccine effectiveness

"Hopes are soaring that a Covid vaccine is within reach, following news that an interim analysis has shown Pfizer/BioNTech’s candidate to have 90% efficacy in protecting people from transmission of the virus in global trials.

This article was amended on 18 November 2020 to clarify that results of vaccine trials at this stage refer to “efficacy” – the performance of an intervention under ideal and controlled circumstances – not “effectiveness”, which describes performance under real-world conditions" (The Guardian).

"In Moderna's trial, 15,000 study participants were given a placebo, which is a shot of saline that has no effect. Over several months, 90 of those people developed Covid-19. Another 15,000 participants were given the vaccine, and five of them developed Covid-19" (CNN). 

News reports from other sources are very similar. 

Okay, so 90% or 95% effectiveness or “efficacy” means that of the people who got the vaccine, 90% or 95% of them did not get Covid-19. This doesn’t answer the question of how many of them were enough exposed to the coronavirus to get Covid-19. If the people in the clinical trials wore masks, washed hands often, and minimized social contact, then it should not be surprising if effectiveness falls when people who get vaccinated during the big roll-out are not so precautious. Of course, effective rates depend on the degree of presence of the virus, and herd immunity will be reached eventually.

I heard a doctor say on television that he expects effective rates will fall as the vaccine is more widely distributed. He wasn’t clear about why.

Both vaccines are type mRNA. There are many articles on the Internet about this, such as this one.

Coronavirus - herd immunity

Herd immunity "is a form of indirect protection from infectious disease that occurs when a large percentage of a population has become immune to an infection, whether through previous infections or vaccination, thereby providing a measure of protection for individuals who are not immune. In a population in which a large proportion of individuals possess immunity, such people being unlikely to contribute to disease transmission, chains of infection are more likely to be disrupted, which either stops or slows the spread of disease. The greater the proportion of immune individuals in a community, the smaller the probability that non-immune individuals will come into contact with an infectious individual, helping to shield non-immune individuals from infection" (Wikipedia).

It's clear that herd immunity is effective when the already-immune portion of the herd is high, but has little effect when the already-immune portion of the herd is very low.  Amid all the panic, herd immunity has received little attention during the ongoing coronavirus pandemic. Given the newness of the virus, SARS-CoV-2, and no vaccine for it, the already-immune portion of any country's population is very low.

In this interview Professor Knut Wittkowski relies heavily on the idea of herd immunity to combat the coronavirus. He may be correct, but I didn't share his confidence. First, the already-immune portion of people is very low. Without vaccination, many, many people would have to become infected -- in a non-controlled way unlike vaccination -- to reach the critical mass for herd immunity to have much effect. Second, it seems he relied too much on mortality rates from the flu. The range of annual flu deaths is wide. He predicted the number of deaths in the USA will be in the low end of that range. Deaths from the SARS-CoV-2 being one cause already are near the high end of that range and will exceed it. Wittkowski emphasizes children becoming immune via exposure to SARS-CoV-2 without it being fatal (or even sickening). However, children ages 0-14 are only about 19% of the USA's population, with ages 0-18 about 24%. In summary, the downside of non-immune people being exposed to SARS-CoV-2 seems risky. He also relies on isolating the elderly, but there are many elderly living among the general population, not in nursing homes or assisted care residences. Of course, non-immune people avoiding exposure to the virus does not require the sort of massive lock-downs that have been implemented by governments.

These two articles #1, #2 reach the same conclusion about how lethal the virus is. The lack of a vaccine is likewise a weighty factor.

One country, Sweden, has relied on a herd immunity approach and no strict lock-down. Its neighbors Denmark, Finland, and Norway have kept reported infections and deaths lower, especially deaths (link). This article addresses Sweden's case somewhat favorably. This article addresses Sweden's case more negatively.