[Senate Hearing 118-190]
[From the U.S. Government Publishing Office]
S. Hrg. 118-190
TAXPAYERS PAID BILLIONS FOR IT:
SO WHY WOULD MODERNA
CONSIDER QUADRUPLING THE PRICE
OF THE COVID VACCINE?
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HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING THE MODERNA CONSIDERING QUADRUPLING THE PRICE
OF THE COVID VACCINE
__________
MARCH 22, 2023
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
54-463 PDF WASHINGTON : 2024
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
BERNIE SANDERS (I), Vermont, Chairman
PATTY MURRAY, Washington
ROBERT P. CASEY, JR., Pennsylvania BILL CASSIDY, M.D., Louisiana,
TAMMY BALDWIN, Wisconsin Ranking Member
CHRISTOPHER S. MURPHY, Connecticut RAND PAUL, Kentucky
TIM KAINE, Virginia SUSAN M. COLLINS, Maine
MAGGIE HASSAN, New Hampshire LISA MURKOWSKI, Alaska
TINA SMITH, Minnesota MIKE BRAUN, Indiana
BEN RAY LUJAN, New Mexico ROGER MARSHALL, M.D., Kansas
JOHN HICKENLOOPER, Colorado MITT ROMNEY, Utah
ED MARKEY, Massachusetts TOMMY TUBERVILLE, Alabama
MARKWAYNE MULLIN, Oklahoma
TED BUDD, North Carolina
Warren Gunnels, Majority Staff Director
Bill Dauster, Majority Deputy Staff Director
Amanda Lincoln, Minority Staff Director
Danielle Janowski, Minority Deputy Staff Director
C O N T E N T S
----------
STATEMENTS
WEDNESDAY, MARCH 22, 2023
Page
Committee Members
Sanders, Hon. Bernie, Chairman, Committee on Health, Education,
Labor, and Pensions, Opening statement......................... 1
Cassidy, Hon. Bill, Ranking Member, U.S. Senator from the State
of Louisiana, Opening statement................................ 3
Witness--Panel I
Bancel, Stephane, M.B.A., M.Eng., M.S.c., Chief Executive Officer
and Director, Moderna, Inc., Cambridge, MA..................... 6
Prepared statement........................................... 8
Witnesses--Panel II
Morten, Christopher J., Ph.D., J.D., Associate Clinical Professor
of Law, Columbia Law School, New York, NY...................... 47
Prepared statement........................................... 50
Summary statement............................................ 98
Sarpatwari, Ameet, Ph.D., J.D., Assistant Professor of Medicine,
Harvard Medical School, Boston, MA............................. 99
Prepared statement........................................... 101
Summary statement............................................ 110
Garthwaite, Craig, Ph.D., M.P.P., Herman Smith Research Professor
in Hospital and Health Services Management, Kellogg School of
Management, Northwestern University, Evanston, IL.............. 110
Prepared statement........................................... 112
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.
Sanders, Hon. Bernie:
Kaiser Permanente, Prepared Statement........................ 135
NIH Letter................................................... 137
Cassidy, Hon. Bill:
Submitting on behalf of Sen. Rand Paul, links to six Peer
Reviewed Papers From the Journal of Vaccine, and the Annals
of Medicine................................................ 138
Marshall, Hon. Roger:
Bayh Dole op-ed, Our Law Helps Patients Get New Drugs Sooner. 139
Democrats proposed price controls for prescription drugs
could mean postponing a cure for Alzheimer's disease by
decades.................................................... 140
TAXPAYERS PAID BILLIONS FOR IT:
SO WHY WOULD MODERNA
CONSIDER QUADRUPLING THE PRICE
OF THE COVID VACCINE?
----------
Wednesday, March 22, 2023
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m., in room
216, Hart Senate Office Building, Hon. Bernard Sanders,
Chairman of the Committee, presiding.
Present: Senators Sanders [presiding], Murray, Casey,
Baldwin, Murphy, Kaine, Hassan, Smith, Lujan, Hickenlooper,
Cassidy, Paul, Collins, Braun, Marshall, Romney, Tuberville,
and Mullin.
OPENING STATEMENT OF SENATOR SANDERS
The Chair. The Senate Committee on Health, Education,
Labor, and Pensions will come to order. Let me begin by
thanking Mr. Bancel, the CEO of the Moderna, for being with us
today, and all the other panelists who will be joining us. Mr.
Bancel very early on agreed to be here voluntarily, and I
appreciate that very much.
I also want to take this opportunity, so there is no
confusion, to congratulate Moderna, Pfizer, other companies,
and the great scientists at the National Institute of Health,
and other Federal agencies for their extraordinary work in
rapidly producing COVID vaccines that have saved millions of
lives.
We should be grateful to all those in Government and in the
private sector who worked so hard to save lives. This hearing,
to my mind, is about several enormously important and
interrelated issues that are on the minds of the American
people. In the pharmaceutical industry today, we are looking at
an unprecedented level of corporate greed, and that is
certainly true with Moderna.
Today, according to a recent survey, 37 percent of the
American people could not afford the prescription drugs their
doctors prescribe. Got that? Over one-third of the American
people can't fill their prescription drugs that the doctors
prescribe.
Meanwhile, 10 major pharmaceutical companies made over $100
billion in profit in 2021, 137 percent increase from the
previous year. In these same corporations, the 50 top
executives made over $1.9 billion in total compensation in 2021
and are in line to receive billions more in golden parachutes
once they leave their companies.
In other words, all over this country, in Vermont and in
every state represented here, people are getting sicker and, in
some cases, dying because they cannot afford the outrageous
cost of prescription drugs while these companies make huge
profits and their executives become billionaires.
Furthermore, and many Americans don't know this, the
taxpayers of our Country have spent many tens of billions of
dollars over the past decade to research and to develop
lifesaving medicine. And in my view, that is a good investment.
Yet, despite that huge amounts of money and the vitally
important work done by the National Institute of Health
scientists, the citizens of the United States pay far more for
prescription drugs than do the people of any other country on
Earth, in some cases, 10 times more for the same exact drug.
Unbelievably, there are important lifesaving drugs on the
market today that literally cost hundreds of thousands of
dollars, cancer drugs and other types of drugs. And my simple
question is, what does a lifesaving drug mean for a person who
cannot afford that drug? You have all the great drugs out there
in the world, but if you can't afford it, what does it mean?
Now, in terms of Moderna, the focus of our attention this
morning, let us be clear, the NIH and other Federal agencies
worked with Moderna to research, develop, and distribute the
COVID vaccine that so many of our people have effectively used.
While Moderna may wish to rewrite history, it is widely
acknowledged that both Moderna and the NIH created this vaccine
together.
According to a letter I received from the NIH on March
17th, and which has been distributed to all Members of the
Committee, three scientists at the NIH, ``are co-inventors''
and ``of this vaccine'' who are ``integral members of a
collaborative team of scientists working to design and produce
the vaccine.''
In other words, this vaccine would not exist without NIH's
partnership and expertise, and the substantial investment of
the taxpayers of this country. As a matter of public record,
U.S. taxpayers spent $12 billion on the research, development,
and procurement of the NIH, Moderna COVID vaccine.
Here is the thank you that the taxpayers of this country
received from Moderna for that huge investment. They are
thanking the taxpayers of the United States by proposing to
quadruple the price of the COVID vaccine to as much as $130
once the Government's stockpile runs out, at a time when it
costs less than $3 to manufacture the vaccine--$3 to
manufacture it, $130 on the market.
What this means is that Moderna will be charging Medicare,
Medicaid, the VA, the Department of Defense, the Indian Health
Service, and insurance plans, private insurance plans on the
Affordable Care Act, billions of dollars more for the COVID
vaccine. So, all of us who are concerned about the deficit, the
national debt, billions more goes to Moderna.
Meanwhile, Moderna has already made $21 billion in profits
off the COVID vaccine during the pandemic, and four of
Moderna's executives and investors collectively became more
than $10 billion wealthier as a result of the massive taxpayer
investment into that corporation. As soon as Moderna started to
receive billions of dollars from the Federal Government, Mr.
Bancel literally became a billionaire overnight and is now
worth over $4 billion.
He was also able to secure a golden parachute for himself,
worth another $926 million after he leaves the company. But
let's be clear, Mr. Bancel is not alone. One of Moderna's co-
founders, Noubar Afeyan, is now worth $1.8 billion. And another
co-founder, Mr. Langer is now worth $1.7 billion.
One of the founding investors in Moderna, Tim Springer, is
now worth $2.2 billion. None of these four individuals were
billionaires before the taxpayers of our Country funded the
COVID-19 vaccine. This type of profiteering and excessive CEO
compensation is exactly what the American people, whether they
are Republicans, Democrats, or Independents, are sick and tired
of.
That is why this morning I will be asking Moderna and Mr.
Bancel to reconsider their decision to quadruple the price of
this vaccine and not raise the price at all. Let me mention
that after this hearing was announced, Moderna pledge that its,
``vaccines and boosters will continue to be available at no
cost for the vast majority of people in the United States''
through the creation of a patient assistance program.
That is good news. The bad news is that most patient
assistance programs are poorly designed and extremely
difficult. And I will be asking. Mr. Bancel to make certain
that this patient assistance program is simple, non-
bureaucratic, and in fact gets out to the people who need it.
Let me pose, if I might, a moral question that we ask to
rarely, but that I hope that this Committee will address in the
months in front of us, and that is above and beyond the COVID
vaccine, should people in our Country and around the world get
sicker and sometimes die because they cannot afford the
outrageous prices that the drug companies are charging?
Is it morally acceptable to say, I have a drug here that
can cure you, save your life, but I am sorry, you can't afford
the $50,000 that it costs. Is that the moral values of the
United States of America? And I would contrast that attitude
that we see today from Moderna and virtually all the other drug
companies with what Jonas Salk said when he invented the polio
vaccine that had such a profound impact--and you know what he
got for inventing the polio vaccine?
He got nothing and he was proud of it. He gave a gift to
the world that saved God knows how many lives. So, I think we
need to do some moral thinking about the role of the drug
companies in our society, and I hope this Committee will get
into that.
With that, let me give the mic over to Senator Cassidy.
OPENING STATEMENT OF SENATOR CASSIDY
Senator Cassidy. Thank you, Chair Sanders. You know, I am a
physician. I worked for over two decades in a hospital for the
uninsured and those poorly insured on Medicaid, so I am very
familiar with this issue.
We share the concerns, Americans pay too much for
prescription drugs and the medicines we depend upon. So today
we are asking questions of Mr. Bancel, what price does Moderna
plan to charge when the vaccine goes to the commercial market,
and how did the company arrive at that price?
Why is it different than the price that the Government
charged--that the Government was charged? Now Moderna announced
recently it will provide the vaccine at no cost to patients.
How will the company implement this? They are fair questions
and hopefully at the end of this hearing we will have a better
understanding of these issues.
But I am also--let's just kind of think about the process
here. The title is, taxpayers paid billions for it, so why
would Moderna consider quadrupling the price of the COVID
vaccine. Now, frankly, this presumes guilt in its title before
we have learned. I am a physician.
I don't leap to a diagnosis before I take a careful history
and physical. This is more like a show trial and a public
shaming than a fact-finding mission. And it should be the goal
of this Committee to first fact find before we attempt to hold
someone guilty.
The Chair speaks of corporate greed in the context of over
1 million Americans who tragically died during the pandemic. I
don't see the link. I just don't. The vaccine was available. As
soon as it was available, it was implemented and lives began to
be saved. It is hard to say that corporate greed was implicated
before the vaccine was actually passed.
It is important for us not to allow rhetoric to distort our
analysis of the situation. This should be a fact-finding
hearing. I do see a link between millions of lives saved
because of the quick development of a vaccine made here in the
United States. COVID-19 cost the U.S. economy an estimated $26
billion dollars a day between 2020 and 2021.
In this light, a study by the International Monetary Fund
shows that Operation Warp Speed and the taxpayer dollars spent
to support the vaccines would have paid for itself had it cut
the duration of the pandemic by 12 hours. By 12 hours. We got a
bargain here. An expensive bargain?
No, a cheap bargain relative to that which it costs us
every day. And considering that the initial estimates for the
development of a vaccine were 3 to 10 years, thanks to
Operation Warp Speed, private industry, American capitalism,
things that we had done as a Committee on a bipartisan basis to
give tools to FDA and BARDA, the world leading COVID vaccines
were developed and distributed in less than 1 year, and
taxpayer returns on investment were incalculable.
Now, it is easy to criticize and decry capitalism, but it
is the reason that we developed multiple world leading vaccines
in 10 months and is a reason that hundreds of thousands, if not
millions of Americans are still alive today. This would not be
had it not been for this process and for these vaccines. But
cost is an issue.
Let's just not paper over that. I can criticize the
process, but I agree, cost is an issue. And during my decades
treating the uninsured, I had patients who could not afford the
drugs prescribed. And my nurse and I would sit on the phone for
sometimes hours with insurance companies trying to get the
authorization so that they could get their drugs.
But I have also seen when a drug has not been invented, so
to speak, where there are no other options. When there was a
death sentence or a life of chronic disease, because a medicine
to treat the chronic illness or condition did not exist.
Then, maybe a few years later, maybe many years later, I
would be with a different patient in a different exam room with
the same diagnosis, but now that drug had been invented and a
formerly fatal disease was now treatable and a relic of the
past. Why? Because in the interim, treatment was developed for
their condition.
Now, it is easy to put the COVID vaccine as one of the
success stories, but it happened over 10 months. At first, we
had no way to prevent, 10 months later, there it was. It seems
like we in this Committee need to keep the bigger picture in
mind. We have got an ecosystem of innovation that is leading to
lives being saved.
There are people in this room who would not be alive today
were it not for capitalism interfacing with the pharmaceutical
and medical device industry that allows you to be alive today.
And a crowd this size, that is absolutely the case.
Now we can disturb that ecosystem and assume there is no
harm, but there are literally lives, future lives at stake. And
so, for decades, this Committee has passed legislation knowing
that at one point we would have to ask companies to step up and
do something quickly and put everything aside.
Moderna was one of those companies. We authorized grant
funding. We set the groundwork for public, private
partnerships. We stood up new institutions, all with the
purpose that if something like a pandemic happened, something
would be quickly developed. Well, when we did it in 2020,
Moderna responded to their credit.
I am not defending any salaries, I am not defending any
profit. What I am defending and pointing out is the great
benefit our Country and the world received from this technology
that was translated out of the lab into clinical practice.
Now, others did not make the same choice as Moderna, and I
will say, it is important that through this hearing and
otherwise that we do not send a hostile signal to future
prospective partners that if you do something and you do it
well and you profit after it happens, we may come right back at
you.
You saved a million lives, but hey, buddy, we don't like
your management decisions. We are coming back at you. That
would mean a future company would not work closely with the
Government. They would run away from that quick response. Now
there are legitimate policy questions to ask how Moderna will
price their vaccine post-commercialization. We are interested
in that.
We have never been in this situation before where a company
has taken the reins back from the Federal Government after the
Federal Government controlled distribution of the product. But
this is not the time to discuss eliminating intellectual
property rights or destroying business models of those whom our
Country will need to respond to the next pandemic and to
develop the next life changing cure.
We can't live in a fantasy world and pretend that what we
do in this Committee will not affect those future decisions. I
want people to know that this Committee is doing whatever it
can to encourage cures for cancer, Alzheimer's, ALS, and other
devastating disease. And if they do, and if a private company
does it, they shall be rewarded.
Lives depend upon it. Senator Sanders, we have pledged to
work together, but I will say that if the purpose of the
hearing is to demonize capitalism, we should not hate the
thought of a person or a company making a profit, that we lose
sight of the ideas and accomplishments that their profit is
rewarded.
We can't be a country that encourages citizens and
companies to succeed and step up and make a difference and then
shames them when they do. If we want to consider real policies
that work to lower the cost Americans pay for medicines. Let's
work together. Thanks, and I look forward to hearing from our
witness.
The Chair. Thank you very much, Senator Cassidy. We will
now turn to our witness. Mr. Stephane Bancel is the Chief
Executive Officer of Moderna. Mr. Bancel, thank you very much
for being with us. You may proceed with your testimony.
STATEMENT OF STEPHANE BANCEL, M.B.A., M.ENG., M.S.C., CHIEF
EXECUTIVE OFFICER AND DIRECTOR, MODERNA, INC., CAMBRIDGE, MA
Mr. Bancel. Chairman Sanders, Ranking Member Cassidy,
distinguished Members of the Committee, good morning. My name
is Stephane Bancel, and I am the CEO of Moderna. While I speak
with an accent, I lead a company that is an American success
story.
After losing money for 10 years, Moderna created a vaccine
that helped end the pandemic. We were able to move quickly
because of a decade of private investment in our mRNA platform
and because of a decision in 2016 to build a manufacturing
plant in Massachusetts.
We made these investments before most people had heard of
mRNA. Over Christmas break 2019, I read about an outbreak of
pneumonia like illness in Wuhan, China. I immediately reached
out to the U.S. Government because I believed our mRNA
technology could make a difference. Two days after Chinese
scientists put the genetic sequence online, our team created
mRNA 1273 of COVID vaccine.
As we were shut down in March, we moved faster. Every day
brought new pressure as case counts and deaths rose in the
country and around the world. I am so grateful for all teams
who worked relentlessly, including Saturdays and Sundays,
locked down from home, and from our lab and our factory.
In the spring of 2020, we worked through Operation Warp
Speed to develop a vaccine faster than we could have done
alone. The U.S. Government gave us and four other vaccine
companies funding to accelerate clinical trials. We thank our
partners in the Federal Government for their support.
We built our mRNA platform before the pandemic with $3.8
billion of private investments. In mid-2020, we raised an
additional $1.3 billion from shareholders for manufacturing
scale up for the pandemic.
In November, I received the long-awaited news, the results
of our phase 3 study showed that our vaccine was 94 percent
effective at preventing COVID. I literally cried tears of joy
and relief. We had that complete in 10 months what would
normally take 10 years. After a decade of building our mRNA
platform, we are changing the future of medicine.
Vaccine brought relief in our hospital system, put children
and teachers back in classrooms, reopened our economy, and made
it safe to reconnect in-person. We are under no obligation to
do so, but recognizing the U.S. Government's investments, our
company decided to provide the Government a discount versus the
other mRNA vaccine.
While the Government provided $1.7 billion in grant
funding, Moderna returned at $2.9 billion. The U.S. vaccination
program is responsible for an estimated $5 trillion of economic
value, prevention of 18 million hospitalization in this
country, and 3 million American lives saved.
Innovations like our vaccine can only happen in America.
The public private, partnership of Operation Warp Speed enabled
a world leading response to a crippling pandemic. We at
Moderna, along with the people of this country and the people
of the world, owe the U.S. Government a debt of gratitude.
Let me now address the transition from pandemic to endemic.
First, we are committed to ensuring anyone who wants a vaccine
can get one without the price being a barrier. Until now, the
U.S. Government has purchased and distributed the vaccine.
Now, Moderna, a small company, must ensure that anyone who
wants a vaccine can get one at a location convenient to them.
With this role comes increased complexity and increased risk.
In the pandemic market with one customer, the U.S. Government.
In the endemic market, we are going to have 10,000
customers. In the pandemic markets, the U.S. Government took
the risk for wasted doses. In the endemic market, Moderna will
take that risk and that cost. In the pandemic markets, we only
had to deliver to three CDC warehouses.
In the endemic market, we are going to have to manage
logistic to deliver to 60,000 pharmacies, doctors' office, and
hospitals. In a pandemic market, we had 1 vial with 10 doses in
there. In the endemic market, where the market requires a
single dose vial, or even better prefilled syringe.
On top of all this, we are expecting 90, 9-0, reduction in
demand. As you can see, we are losing economies of scale. We
must deal with supply chain complexity. And we must assume the
wasted risk and costs that the U.S. Government used to assume.
So, what's next for Moderna?
This year, we are investing $4.5 billion in R&D. We are
working hard on developing medicines to treat cancer, cystic
fibrosis, multiple sclerosis, and very--all very important
diseases. Thank you for your opportunity to share our story and
perspective.
[The prepared statement of Mr. Bancel follows:]
prepared statement of stephane bancel
Chairman Sanders, Ranking Member Cassidy, and distinguished Members
of the Committee, thank you for the opportunity to appear before you
today. My name is Stephane Bancel, and I am CEO of Moderna, Inc.
(``Moderna'').
I was born and raised in Marseilles, France, where my formative
years were shaped by Jesuit teachings. Jesuit values--the continuous
pursuit of excellence, service of the greater good, and social
responsibility--have informed my life and leadership of Moderna. I grew
up with a keen interest in math, science, and computers, and dreamed of
a career in STEM. I first moved to the U.S. in 1994 when I received a
need-based scholarship that allowed me to study biochemical engineering
in graduate school at the University of Minnesota. I returned to the
U.S. in 1998 to go to business school. My experiences as an immigrant
and an entrepreneur have taught me the importance of diversity of
people and ideas. These values are central at Moderna, where our
mission is to deliver the greatest possible impact to people through
mRNA medicines.
Moderna is built around the promise of medicines (vaccines or
therapeutics) that leverage mRNA technology. Unlike DNA, mRNA molecules
move out of a cell's nucleus. Each mRNA molecule contains instructions
to produce a specific protein with a distinct function in the body.
mRNA thus plays a central role in all biological processes, including
in human health and diseases. Our approach fundamentally differs from
traditional approaches to medicine; we are a platform company, not a
traditional biopharmaceutical company. Rather than introduce a protein
or chemical into the body, we send tailored mRNA into cells to instruct
them to produce specific proteins. Our mRNA technology is highly
adaptable; our platform is uniquely suited to tackle global health's
biggest challenges with speed, scale, and flexibility.
We are not a big pharmaceutical company, but we are growing based
on these scientific ideas. Since our founding in 2010, we have grown to
approximately 4,000 employees globally, including around 3,200 in the
U.S. This year alone, we plan to hire 2,000 new employees, around 1,600
of whom will be based in the U.S. To deliver the greatest possible
impact to people through mRNA medicines, we are rapidly expanding and
investing in people, science, and manufacturing.
Moderna's Beginnings: An American Success Story
While I speak with an accent, I lead a company that is a true
American success story.
In 2011, a Moderna co-founder shared preliminary data that showed
how mRNA technology could work and asked my opinion. I told him that
what he was showing me was not possible, that mRNA could never make
human medicines. He then asked what it would mean for medicine if the
technology could work. I told him that, if we could get medicinal mRNA
technology to work, we could make medicines that had previously been
unimaginable. In other words, it would transform the future of
healthcare.
I spent weeks debating whether to take the role of Moderna's CEO.
My wife asked me what the chances were that Moderna would receive Food
and Drug Administration (``FDA'') approval for a product. I told her
the chance of success was around 5 percent. But the more I thought
about it, the more I became convinced that I had to do it. The
technology could, on paper at the time, change medicine forever. It
could help treat children with rare genetic diseases for which there
was no hope of treatment with traditional pharmaceutical and
biotechnology approaches. It could help the millions of people with
heart disease and could produce vaccines for infectious diseases. And
over time, it could work on many other diseases, maybe even cancer, an
illness that has touched my life as it has so many others, perhaps even
yours.
In 2011, I resigned from my job as CEO of a well-established global
company with 6,000 employees and took a significant pay cut to become
Moderna's CEO and its second team member. I took a risk on an untested
medical technology when the rate of failure in the pharmaceutical
industry is around 90 percent. I knew I had to give the company and the
technology my best shot because the consequences for the health of so
many people were on the line.
When we started operations in 2011, we only had about $2 million in
funding--enough to get us through our first 6 months. I hired the first
few scientists, secured lab and office space, bought machines from a
company that had gone bankrupt to save money, and moved us into our
office and lab over a weekend. I watched Moderna double in size
repeatedly during my first several years on the job. Over the next
decade, there were many encouraging signs around the potential of our
mRNA platform. But there were many setbacks as well; while we tested
several mRNA applications in clinical trials, we were unable to bring a
commercial product to market. We lost money every year from our
founding until 2021.
Year after year, even when we were losing money, I bought Moderna
stock with money my wife and I had saved because I believed in the
company. About half of my Moderna shares I purchased as an investor,
separate from my CEO compensation. I traveled the world raising money
in exchange for shares to keep the dream of mRNA medicines alive.
With support from investors and strategic collaborators, we
invested heavily in research and development for our mRNA platform. We
built our mRNA platform and funded it through private investment. We
took risks and made large investments to develop our corporate
infrastructure, including over $100 million beginning in 2016 to
construct our Norwood, MA manufacturing facility. Norwood, an
integrated plant capable of full-scale development production, was
operational by summer 2018, well before the COVID-19 pandemic.
The early investments we made in our manufacturing capabilities
prepared us to rapidly scale our production when the COVID-19 pandemic
hit. We did this without support from the Federal Government and before
turning a profit. Over the years, we have partnered with the U.S.
Government when pressing global health crises have emerged--like Zika
and COVID-19--to develop specific medicines enabled by our privately
funded mRNA platform.
Clinical Development of our COVID-19 Vaccine
Over Christmas break 2019, I read about an outbreak of pneumonia-
like illness in Wuhan, China. I reached out to the U.S. Government
because I believed our mRNA technology could make a positive impact. In
parallel, I directed my team to begin leveraging our proprietary mRNA
platform that we had invested in for 10 years.
We started working on our vaccine as soon as Chinese scientists
posted the virus' genetic sequence online. Our mRNA platform and prior
work on coronaviruses enabled us to develop our COVID-19 vaccine in a
matter of days. We did all this work before the first case was reported
in the U.S. and months before the World Health Organization (``WHO'')
declared a global pandemic. We did this because we felt a
responsibility to do what we could to address the human suffering.
Through my prior work on infectious disease outbreaks, I saw how
viruses can grow exponentially. I knew every day and every hour
mattered in the fight against COVID-19.
On March 11, 2020, the WHO declared COVID-19 a global pandemic. As
the world shut down, we continued our work. Each day brought new
pressures as we saw case counts and death tolls rise. Our team worked
tirelessly, in our homes, lab, and wherever we could. We worked long
hours every day, including weekends. My executive team and I worried a
lot about how we were going to keep such a pace for a year.
We started Phase 1 clinical trials in March 2020. The first patient
received our vaccine in Seattle just 2 months after COVID-19's genetic
sequence became available. By way of comparison, this process took 20
months for the SARS vaccine. We were able to move 10 times faster
because of our decade of investments in our mRNA platform and our
decision years ago to invest in our Norwood manufacturing plant. We
received emergency use authorization from the FDA on December 15, 2020.
At each step in the process, we were proud to partner with the Federal
Government, through Operation Warp Speed, to answer the call and
deliver an effective vaccine.
We worked at an extraordinary pace to bring our vaccine to people
as quickly as possible. However, we made sure to slow down when
circumstances required. For example, recognizing COVID-19's
disproportionate impact on people of color, we slowed enrollment in our
Phase 3 clinical trial to ensure diverse representation following
discussions with the U.S. Government. This effort enrolled 11,000
people of color in our trial, or 37 percent of our study population.
This was a tremendous outcome when you consider that historically, only
6 percent of all clinical trial participants in the U.S. are people of
color. We built a diverse study population to ensure that the outcomes
reflected the country's population and to help build public trust in
our vaccine.
As our team continued our round-the-clock work on our vaccine,
COVID-19 was taking its toll on society. Our hospitals were overrun
with sick patients, people were dying alone, and essential workers
risked their lives every day to stock food on store shelves and keep us
safe. The experiences of our team in those dark days of the pandemic
mirrored the rest of the world. We were separated from our families,
our children went to school on Zoom, and we suffered the loss of loved
ones without being able to say goodbye. Feeling the pain of our fellow
citizens gave us the energy and motivation to keep working at an
accelerated pace; we knew every hour we worked would get us closer to
saving lives. The U.S. Government teams also did a remarkable job in
those difficult times, and we at Moderna are grateful for their
efforts.
Finally, on a Sunday in November 2020 while I was working from
home, I received long-awaited news: the results of our Phase 3 clinical
trials showed that our vaccine was 94.1 percent effective at preventing
symptomatic COVID-19. When I finished the video conference, I called to
my wife and daughters, and we hugged and cried tears of joy and relief.
Our accomplishment started to sink in: we had achieved in 10 months
what would normally take 10 years. After 10 years of building our mRNA
platform, we had developed a tool that would save lives today and
change medicine for the future.
Collaboration with BARDA
As outlined in previous sections, we built our mRNA platform and
funded it through private investment, including $3.8 billion before the
pandemic. We have partnered with the U.S. Government when pressing
global health crises have emerged--like Zika and COVID-19--to develop
specific medicines built from our mRNA technology platform.
The U.S. Government gave us $1.7 billion in funding to accelerate
clinical trials for our COVID-19 vaccine at the scale and speed it
required through grants from the Biomedical Advanced Research and
Development Authority (``BARDA''). This was particularly important for
us because we are a small company and, unlike big pharmaceutical
companies, could not self-fund robust clinical trials.
Grant funding and advance purchase orders from the U.S. Government
allowed us to accelerate development of our COVID-19 vaccine and
enabled us to deliver our vaccine to the public at a speed we could not
have accomplished on our own. We at Moderna, along with the people of
this country and the world more broadly, owe the U.S. Government a debt
of gratitude for its important investment.
We were under no obligation to do so but, recognizing the U.S.
government's investment in the later stages, we provided the government
a discount versus the other mRNA vaccine. While the government provided
$1.7 billion in funding, we returned $2.9 billion.
Innovations like our vaccine can only happen in America. We thank
our partners in the Federal Government for their support and the vote
of confidence they cast for our mRNA technology.
Scaling up the Manufacturing of the COVID-19 Vaccines
At the same time, while working through all of the challenges of
the clinical trials, we were preparing for manufacturing so that we
would be ready to supply quickly in the event that our vaccine was
successful in clinical trials. We needed to scale up our manufacturing
capacity exponentially. In our 10 years of business before the
pandemic, we had never produced more than 100,000 product doses per
year across our entire pipeline portfolio. By late January 2020, I
became convinced that COVID-19 would be a pandemic like the 1918
Spanish Flu. I challenged Moderna's head of manufacturing to come up
with a plan to produce a billion doses for distribution in 2021, a
daunting 10,000 times more doses than we had produced ever before.
Given the magnitude of the required manufacturing scale-up and the
risk of doing so before we knew if our vaccine worked, we solicited
outside funding. In May 2020, when our positive Phase 1 clinical trial
data went public, our board approved raising $1.3 billion through the
capital market (NASDAQ). These private funds raised through the sale of
new shares enabled us to hire new employees, buy new equipment and raw
materials, set up facilities that met rigorous FDA standards, and
establish protocols and processes to keep our employees safe while
producing our vaccine in the midst of a global pandemic.
Facilitated by the early investments in our mRNA platform and
manufacturing facility, we delivered 300 million doses of our vaccine
to the U.S. Government in 2021. Our team knew that each dose we
produced represented an additional life protected. Vaccines brought
relief to our overwhelmed hospital system, put children and teachers
back in classrooms, reopened our economy, and made it safe to re-build
in-person social networks.
While much progress has been made, it remains a top priority for us
to continue supporting efforts to fight COVID-19 and advancing the most
efficacious vaccine. To date, our COVID-19 vaccine has been distributed
to more than 70 countries and has helped protect the lives of hundreds
of millions of people around the world. We partnered with Gavi's
Vaccine Alliance to distribute more than 170 million doses to low-and
middle-income countries. However, as demand shifted, Gavi asked to be
released from its purchase commitment, which we did. When doses were
declined, we recognized write-downs of approximately $1 billion in non-
standard costs. \1\ Notwithstanding this loss, we have offered Gavi up
to 100 million more doses in 2023 at our lowest-tier price. \2\
\1\ See Moderna 2023 Proxy Statement (March 15, 2023), https://
d18rn0p25nwr6d.cloudfront.net/CIK-0001682852/a3589eb3-e49a-4135-a05c-
746fe30f466a.pdf.
\2\ See Moderna Announces Update to 2022 Supply Agreement with
Gavi that Secures Access to Updated Variant-Specific COVID-19 Vaccines
for Low-and Middle-Income Countries (Oct. 17, 2022), http://
investors.modernatx.com/news/news-details/2022/Moderna-Announces-
Update-to-2022-Supply-Agreement-with-Gavi-that-Secures-Access-to-
Updated-Variant-Specific-COVID-19-Vaccines-for-Low-and-Middle-Income-
Countries/.
Our Commitment to Vaccine Access
A lot will change for our company as we step into the shoes of the
U.S. Government to ensure that everyone who wants a vaccine has access
in a convenient location. One thing that will not change is our
commitment to delivering the greatest possible impact to people through
our mRNA medicines.
We are committed to ensuring anyone who wants a vaccine can get
one, without price posing a barrier. Our vaccine will continue to be
available at no out-of-pocket cost to insured people. For the uninsured
(or underinsured), our free drug program will ensure access by
providing COVID-19 vaccines at no cost.
We remain steadfast in our commitment to protecting as many people
as possible across the world. To that end, we are building a
manufacturing facility in Kenya capable of producing up to 500 million
vaccine doses per year. Through this facility we hope to ensure
sustainable access to transformative mRNA medicines in Africa and
positively impact public health.
Our Approach to Pricing
We are committed to pricing that reflects the impact our vaccine
has on patients and healthcare systems. This impact includes lives
saved and hospitalizations avoided. The U.S. vaccination program is
responsible for an estimated $5 trillion in societal economic value.
\3\ The Commonwealth Fund estimates that the U.S. vaccination program
prevented 18.5 million additional hospitalizations and 3.2 million
COVID-19 deaths. \4\
---------------------------------------------------------------------------
\3\ Noam Kirson et al., The Societal Economic Value of COVID-19
Vaccines in the United States, Journal of Medical Economics (Jan. 20,
2022), https://www.tandfonline.com/doi/pdf/10.1080/
13696998.2022.2026118.
\4\ Meagan C. Fitzpatrick et al., Two Years of U.S. COVID-19
Vaccine Have Prevented Millions of Hospitalizations and Deaths (Dec.
13, 2022), http://www.commonwealthfund.org/blog/2022/two-years-covid-
vaccines-prevented-millions-deaths-hospitalizations.
In addition to helping protect the lives of millions of people
around the world, our COVID-19 vaccine has also dramatically lessened
the pandemic's economic burdens. For example, according to a study
published at the end of 2021, COVID-19 vaccines had already saved the
U.S. economy approximately $438 billion. \5\
---------------------------------------------------------------------------
\5\ Anusuya Chatterjee et al., Economic Savings in America: A
Story of Public-Private Partnership in Rapid COVID-19 Vaccine
Development and Deployment, Heartland Forward (Dec. 18, 2021), https://
heartlandforward.org/wp-content/uploads/2021/12/Economic-Savings-in-
America-7.pdf.
As the pandemic has ended and we move to an endemic phase, the U.S.
Government will wind down its role as the sole purchaser and
distributor of COVID-19 vaccines. We will be offering our vaccine as a
commercial product for the first time. Some people may be asking--why
does this matter? During the pandemic, we had guaranteed sales to one
customer (the U.S. government); moving forward, we are expecting to
work with about 10,000 customers. Challenges of endemic distribution
---------------------------------------------------------------------------
include:
Assuming the cost of producing vaccines that we may
not be able to sell given uncertainty in demand for fall of
2023, both in the U.S. and globally;
Distributing to approximately 60,000 pharmacies,
doctors' offices, and hospitals throughout the country, rather
than three warehouses;
Transitioning from 10 dose vials to single dose vials
or pre-filled syringes;
Providing some customers with a ``right of return''
in which we give them back their money for some purchased
product if they can't sell it; and
Moving from a single 500 million dose contract with
the government to a commercial market with demand for perhaps
30-50 million doses, creating more than a 90 percent volume
decrease.
Notwithstanding these challenges, we are committed to a fair price,
which will be similar to other vaccines. Notably, our price will be
less than two times the cost of enhanced flu vaccines, \6\ whereas
COVID-19 causes three times as many deaths as the flu. \7\
---------------------------------------------------------------------------
\6\ The CVS list price for enhanced flu vaccines is $95. See CVS
Minute Clinic Price List, available at https://www.cvs.com/
minuteclinic/services/price-lists.
\7\ Sarah Zhang, The `End' of COVID Is Still Far Worse Than We
Imagined, The Atlantic (Sept. 22, 2022), https://www.theatlantic.com/
health/archive/2022/09/covid-pandemic-end-worse-than-flu/671514/.
---------------------------------------------------------------------------
Looking Ahead to the Next Decade and Beyond
We have worked tirelessly to build the industry's leading mRNA
platform. We did this while losing money for over 10 years so we could
make mRNA medicines a reality for the world. This work allowed us to
play a leading role in the fight against COVID-19. The success of our
COVID-19 vaccine is funding more research to continue transforming the
future of medicine, including for cancer and cystic fibrosis.
In 2023, we will invest $4.5 billion in research and development.
We are committed to this investment even though analysts expect Moderna
to report a loss in 2023. And last year our research and development
investment was $3.3 billion--almost 40 percent of our net revenues,
which is about twice the pharmaceutical industry standard. \8\ We
continue to make these significant research and development investments
even as we face declining profits.
---------------------------------------------------------------------------
\8\ The U.S. government's twenty-year average shows that
pharmaceutical companies have invested 19 percent of their net revenue
into research and development. Congressional Budget Office, Research
and Development in the Pharmaceutical Industry, at 5 (Apr. 2021),
https://www.cbo.gov/system/files/2021-04/57025-Rx-RnD.pdf.
Our commitment to broad research and development is illustrated by
our development pipeline. We are working to address a wide range of
diseases and conditions, including infectious diseases, immuno-
oncology, rare diseases, autoimmune diseases, and cardiovascular
diseases. We have 48 therapeutic and vaccine candidates in development.
We are in dialog with the WHO and the Coalition for Epidemic
Preparedness Innovations (``CEPI'') to develop 15 vaccines against
priority pathogens that pose a threat to public health. Moderna's
clinical portfolio already includes vaccines targeting COVID-19, HIV,
Nipah, and Zika. Moderna's expanded global health strategy will advance
---------------------------------------------------------------------------
programs against the remaining pathogens by 2025.
We are working on personalized cancer vaccines, treatments for
cystic fibrosis, and a cytomegalovirus (``CMV'') vaccine, in addition
to the tools to fight future pandemics. Our personalized vaccine for
melanoma, a cancer that is expected to kill 8,000 people in the U.S.
this year, has the potential to transform outcomes for high-risk
resected melanoma patients. Results from a recent Phase 2 clinical
trial show that when combined with Merck's KEYTRUDA cancer drug, our
vaccine reduced the risk of cancer recurrence and death by 44 percent.
In partnership with Vertex, we are developing an mRNA therapeutic to
treat the underlying cause of cystic fibrosis, a rare genetic disease
that causes degeneration of lung function and often death, for which
there is no cure. Addressing the root cause of cystic fibrosis with an
mRNA medicine could profoundly improve quality of life for the
approximately 5,000 people who live with the disease and do not respond
to existing treatments.
For ultra rare diseases--those that impact fewer than 100 people
globally--we understand that the cost of therapeutics can put treatment
out of reach for many patients. We are committed to considering patient
access in our pricing decisions. In the case of Crigler-Najjar Syndrome
Type 1 (``CN-1''), rather than commercialize the product, in September
2021, we committed to making the intellectual property available for
free through a partnership with the Institute for Life changing
Medicines at the University of Pennsylvania. Through this partnership,
we have committed to providing the medicine for free for pre-clinical
and clinical testing. If the medicine receives regulatory approval, we
will supply the medicine to families for free forever.
Commitment to Our Community
At Moderna we care deeply--about our patients, our employees, the
environment, and our communities. We recognize that we have an
opportunity to change medicine for all, and we will continue to make
corporate responsibility a critical part of who we are and what we do.
Last year we launched the Moderna Charitable Foundation (``Moderna
Foundation'' or ``the Foundation''). We are proud to extend our social
impact and support the causes our employees care most about as we work
relentlessly to improve human health with our mRNA technology.
The Moderna Foundation's work reflects our continued commitment to
communities impacted by COVID-19. The Foundation provides grants to
local and global organizations, makes event-driven philanthropic gifts,
and matches employee gifts to certain organizations. Our grant program
provides financial support to organizations that focus on healthcare
quality and access, mental health, STEM education, food insecurity, and
child development.
Conclusion
We at Moderna are grateful for the actions you and your colleagues
have taken to support and fund efforts to combat the COVID-19 pandemic.
Thank you, and I look forward to your questions.
______
The Chair. Mr. Bancel, thank you very much for your
testimony. You sent us a, I think it is a nine-page, single
spaced document longer than your testimony. We appreciate that.
But in these nine pages, as I read it, you do not mention the
National Institute of Health, the NIH once, nor the research
that they did.
As I mentioned earlier, according to a letter I recently
received from the NIH, distributed to all Members, what the NIH
says is that three scientists at the NIH, ``are co-inventors
and were integral members of a collaborative team of scientists
working to design and produce it.''
That is the scientists at the NIH, not to mention the many
billions of dollars the Federal Government that came to Moderna
in order to produce the vaccine and do the clinical trials. How
come--in your judgment, what role did the NIH play in co-
authoring and developing this vaccine?
Mr. Bancel. Thank you, Mr. Chairman. Let me start by saying
that we have a lot of respect, great respect for the NIH team.
And we believe what the NIH was for this country and for the
world is really important within science that industry might
not fund.
What happened when the sequence came online is our team at
Moderna, were working on the technology, but the way one needs
to think about Moderna is like an operating system. What we
spent 10 years doing is developing all the tools to make
products----
The Chair. I don't mean to be rude, but isn't it absolutely
true that the NIH was also doing that, had done research for
many years on that same area?
Mr. Bancel. What is correct, sir, Mr. Chairman, is that the
NIH has worked on the virus and on the protein. So, what our
team did is develop the mRNA molecule. What the NIH did, which
was a great confirmation, is they designed the same protein,
then our team did, in parallel, but the design of the mRNA
vaccine was done by our team. This is our technology.
The Chair. The NIH considers themselves to be co-authors of
the vaccine. Do you disagree?
Mr. Bancel. Our team have been working through that
discussion for quite a while. We have agreed to disagree. The
team is following U.S. IP law, which is very important. And
what we have done to close the matter is we actually have
decided to abandon that patent. We have abandoned that patent.
The NIH is aware of it and we are moving on because we
cannot agree on what happened. The mRNA molecule was designed
by the Moderna team. That is our technology.
The Chair. Mr. Bancel, in terms of the role that the U.S.
Government and taxpayers of this country had in terms of the
success of Moderna, let me read to you a quote from Boston
Magazine, June 4th, 2020.
The quote says, ``the U.S. Government announced that it was
funding Moderna with nearly half a billion dollars. The news
sent Moderna's stock price so high that Bancel became a
billionaire overnight.'' Comment?
Mr. Bancel. What the Government has done through Operation
Warp Speed was a moment that can only happen in America. We
were facing a virus. This was the common enemy. This did not
come out of Europe or other Governments.
What the U.S. Government did was say, we need to fund six
different companies, six different technologies to be able to
get at least one or two vaccine working. That was really what
the Government did----
The Chair. I don't mean to interrupt you. I just don't have
a lot of time. Everybody else is going to want to ask the
question. But here's the point, it was announced that the
Federal Government would put money into Moderna and you
became--the stock market soared. You became a multi-billionaire
overnight.
It is hard for me not to believe that the Federal
Government played a major role in the development of this drug.
But here is the main point. I don't want to talk about what
happened 3 years ago. We are here today.
You are a multi-billionaire. Other people, top executives
in your company are multibillionaires, all developed as a
result of the vaccine. And now we have a situation where you
are proposing to quadruple the price of the new--of the vaccine
once the Government stockpile runs out.
That will mean that not only, and we will talk about later
on the patient assistance program, but in terms of Government,
in terms of Medicare and Medicaid, other Government agencies,
taxpayers are going to have to spend substantially more money.
My question to you is, given the fact that you have made
billions of dollars, that your company has made huge profits on
behalf of the taxpayers of this country, will you reconsider
your decision to quadruple the price of the vaccine?
Mr. Bancel. Chairman Sanders, what we have to do is to deal
with a complexity I described, and I am happy to go into more
detail for this hearing. This is not the same product. We used
to have ten doses in each vial. Now we are going to have--every
vial will have a different dose. This is not the same----
The Chair. I understand it, but quadrupling the price is
huge, and I will hope--I would hope very much that you will
reconsider that decision. It is going to cost the taxpayers of
this country billions of dollars. That is something you can do.
Mr. Bancel. The volume we had during the pandemic gave us
the economies of scale we won't have anymore. That is what is
different.
The Chair. Okay.
Senator Cassidy.
Senator Cassidy. I defer to Senator Paul.
Senator Paul. Mr. Bancel, Moderna recently paid NIH $400
million. Do you believe it creates a conflict of interest for
the Government employees who are making money now off of the
vaccine to also be dictating the policy about how many times we
have to take the vaccine?
Mr. Bancel. Good morning, Senator. Indeed, we recently
made, before Christmas last year, a $400 million payment to the
NIH for an old patent that they had developed not related to
COVID, but useful in the development of a COVID vaccine, to pay
them for their work. It is for the U.S. Government to assess
how that money should be----
Senator Paul. Do you think it creates a conflict of
interest for the same people deciding the policy of how often
we have to take the vaccine to also be making money the more
times we take the vaccine, yes or no?
Mr. Bancel. This is for the Government to decide, Senator.
Senator Paul. You have no opinion on whether or not it
creates a conflict of interest. Is there a higher interest or a
higher incidence of myocarditis among adolescent males 16 to 24
after taking your vaccine?
Mr. Bancel. Thank you for the question, Senator. First, let
me say we care deeply about safety and we are working closely
with the CDC and the FDA----
Senator Paul. It is pretty much a yes or no. Is there a
higher incidence of myocarditis among boys, 16 to 24, after
they take your vaccine?
Mr. Bancel. Data have shown actually--I have seen sorry
from the CDC actually showing that there is less myocarditis
for people to get the vaccine versus who get COVID infection.
Senator Paul. You are saying that for ages 16 to 24, among
males who take the COVID vaccine, their risk of myocarditis is
less than people who get the disease.
Mr. Bancel. That is my understanding, Senator.
Senator Paul. That is not true. And I would like to enter
into the record six peer reviewed papers from the Journal of
Vaccine, the Annals of Medicine that say the complete opposite
of what you say.
I also spoke with your President just last week, and he
readily acknowledged in private that, yes, there is an
increased risk of myocarditis. The fact that you can't say it
in public is quite disturbing. Do you think it is
scientifically sound to mandate three vaccines for adolescent
boys?
Mr. Bancel. This is for the public health leaders to
decide.
Senator Paul. You have been advocating for it. You have
been interviewed and you have been advocating for boosters. Do
you know when the myocarditis is most common among these
adolescent boys?
After the second dose. When I spoke with the President, he
readily acknowledged in private, yes, that maybe there ought to
be a discussion whether we ought to have one vaccine versus two
versus three.
If 90 percent of the myocarditis comes after the second
dose, why don't we have a rational discussion about one? Marty
Makary, a physician from Johns Hopkins, has said exactly the
same thing. It has been discussed. And yet we have this
ridiculous notion from the CDC. So, the CDC says, and I will
ask you this question, let's start it as a question.
Your 16-year-old has had COVID. Your 16-year-old gets
better and now has recovered from COVID. You vaccinate them and
they get myocarditis. Are you going to give them two more
vaccines, your child, give them two more vaccines?
Mr. Bancel. I am not a clinician. I would have to discuss--
--
Senator Paul. You have children.
Mr. Bancel. I do.
Senator Paul. Have you vaccinated your children?
Mr. Bancel. I have.
Senator Paul. How many times?
Mr. Bancel. Three or four times.
Senator Paul. Three or four times. So, the CDC recommends
this, and you are obviously someone who is self-interested in
the outcome here--but the CDC says that if you are a 15, 16-
year-old, gets COVID, recovers, takes a vaccine and gets
myocarditis, is hospitalized with elevated heart enzymes, and
is very sick.
The CDC says, as soon as he gets better, vaccinate him
again. Do you know how many American parents think that is a
rational, reasonable thing to do? Do you know how many
countries don't do this for children?
Sweden doesn't offer the vaccine for kids under 12 unless
they are at risk for severe disease. And I agree with that. I
am not saying never on any of this. I think it is a very
reasonable position to say kids at risk or have some diseases,
that there may be a reason for vaccinating some children.
Finland doesn't recommend it for under 12 months and Norway
also. England as well. France, Poland, Germany, Switzerland all
vaccinate 12 and up. So, we have got half the world who have
looked at these studies.
There is a study in Israel of thousands of patients, and
yet you sit here and act as if you have never heard of
myocarditis and you don't think it is an increased risk for
young adolescent males when all of the studies who isolate out
people by age have found that, yes, there is an increased risk
after taking your vaccine. Pfizer, too, but worse with Moderna.
Mr. Bancel. There is an increased risk, and that is always
comparing it to somebody who gets COVID.
Senator Paul. Well, that is also not true either, but there
is an increased risk of getting it. But even when they compare
it to the disease, there are many papers out there who do show
that there is more of a risk of mercados after vaccination. So,
you have to weigh the risk and balances.
You are right, you are going to make less money, because
you are going to try--they are already trying. The CDC has got
it on their schedules. They are going to try to force all the
kids in America to do this through school. But guess what,
parents aren't going to do it. They have seen that COVID is not
deadly in children. And you are right, it has become less
deadly over time.
Your market is going down, so you aren't going to make as
much money. I am all for you making money in an honest way, but
I don't like the idea that the people making the decisions in
Government are also receiving money and are now conflicted in
their interest.
The Chair. Thank you, Senator Paul.
Senator Casey.
Senator Casey. Mr. Chairman, thanks very much. Mr. Bancel,
great to be with you and thanks for your testimony. I wanted to
get right to the heart of the matter that we are exploring
today, among other issues, and that is the question of price.
But I wanted to start with, by way of a predicate, that we
are certainly grateful for the work of Moderna and the other
companies working in concert with the Federal Government, both
Federal appropriations, as well as agencies like NIH and others
to develop these vaccines in short order and to be able to
provide the benefit, as you outlined in your testimony, to save
millions of lives.
We are grateful for that. We are also grateful for the
ongoing work that is done every day to save lives. I wanted to
explore, though, this question of this partnership between not
only Modena, but other entities in the Federal Government that
you might call it a public, private partnership. I would argue
that partnership, which yielded such great benefits for our
Country and the world, should not be extinguished because the
pandemic is over.
I would argue there are ongoing obligations, and I think
even practical reasons to continue that kind of partnership,
maybe in a different form, maybe with different outcomes and
different dynamics, as you have outlined on page nine of your
testimony, when you go from the earlier version of a
partnership to commercial application of the vaccine.
But I would ask you this, and I noted in your testimony on
page one, you said in the second paragraph about the Jesuit
teachings. I went to a Jesuit high school in college. I am
somewhat familiar with these teachings.
You said, ``Jesuit values, a continuous pursuit of
excellence. Service of the greater good, No. 2. And third,
social responsibility, you say have informed my life and
leadership of Moderna.''
I want to juxtapose those values, which I think are
commendable, and I think they are--we hope they are American
values as well. Next to this, what I would argue is an ongoing
obligation to have this partnership.
Shouldn't there be an ongoing obligation with regard to a
product that was developed in partnership with the Federal
Government to ensure that it remains both inexpensive and
accessible? Don't you believe that is your obligation and
Moderna's obligation?
Mr. Bancel. Thank you, Senator, and good morning. So first,
thank you for the kind words that you shared about our teams
and all the other companies, and the Government personnel was--
helped fight this pandemic.
First, on access. As I shared in my testimony and in a
written one, we care deeply about access and we are working
hard with our team and IP to spend more time on that topic, I
know it is important for the Chairman as well, to make sure
that people that are uninsured or underinsured have access to
the vaccine.
We want to make sure that cost and out of pocket cash is
not a barrier to access to vaccine. And on the topic of price,
it is important, as we move into the endemic market, that we
price to value of a vaccine. What value does it bring in terms
of healthcare dollars? As you know, vaccines are one of the
best investments we can make with healthcare dollars in terms
of a return.
This has been documented for many, many years because it is
better to prevent disease than to have to pay the cost of
somebody being hospitalized, and that is a very expensive cost,
without even adding the economic burden, obviously. So that is
very important. If you look at the interesting comparator is
flu.
The CVS price of a high dose flu vaccine use for the
elderly is around $95 in this country. If you look at the
COVID, they are 2 to 3 times more hospitalization right now of
COVID. So, when you look at the price in that range seems to
make sense, because it is a value that has been assigned
already to flu over years. And you can look at the other
vaccine, pneumonia, the CVS price of the vaccine is around
$250.
Senator Casey. I would ask you this, just by way of follow-
up, and I realize that you are making that comparison with flu
vaccine, but for a lot of my constituents, most of my
constituents, no matter what their insurance status is, the
cost of prescription drugs is like a bag of rocks on their
shoulder every single day.
What may not seem like a lot of money to you or a lot of
other people, $130, $150, or whatever the number ends up, is a
lot of money. And I would ask you, and I will ask you for the
record in writing, to ensure that anyone can get a vaccine,
they won't have to apply through some tedious process and then
wait for approval, or apply for some kind of reimbursement, or
have to drive a long distance.
That, I believe, is your obligation as a company. And I
know I am out of time, but we will ask that in writing. Thank
you.
The Chair. You can answer that, Mr. Bancel, if you would
like.
Mr. Bancel. Yes, Senator. And I am happy to spend time
later on the topic, on the access program. We want to make sure
we have a simple program that is in multi-language. We are also
trying to learn from what is not working from current programs
done by larger companies.
For example, we want to make sure we can partner with rural
of community hospitals, potentially homeless shelters, to make
it much easier. So, I am happy to spend more time on that
topic. It is very important.
The Chair. Thank you.
Senator Cassidy.
Senator Cassidy. Yes, I will allow Senator Romney to go
next.
Senator Romney. Thank you. Senator Cassidy. Thank you, Mr.
Chairman. I am one of those Americans who is concerned about
the fact that Americans tend to pay a lot more for drugs than
do people in other countries, and have looked for ways to see
if we couldn't have some kind of global recognition of the
prices that are available in other countries and limiting our
drug prices to those that may be consistent with a basket of
other countries that purchase and honor our patents.
That being said, I reject the idea of a, if you will, an ex
post facto effort on the part of some to say, oh, we provided
some money in research, a lot of money in research to Moderna,
and therefore we want to take the ownership of this product.
That would simply be unfair and contrary to our system of law.
I would also note that the U.S. investment in Moderna's
effort, I would comprise a portion that went to research and
fast tracking the vaccine versus actually purchasing vaccine
that was being manufactured by Moderna.
The latter was the great bulk of what the U.S. Government
invested, if you will--and actually the wrong word is invested.
We purchased a lot of product from Moderna. I am glad we did. I
would also note this, which is this is a global demonstration
that the world can look at as to the comparison between
socialism and capitalism.
Free enterprise created vaccines that saved millions of
lives. And the history of Moderna, I think, is pretty
interesting. You indicated the company started 10 years before
COVID, 10 years. It had no products during that time, no
revenues at all. The investment you said, if I get it right,
was $3.8 billion.
That meant individuals responsible for investing money put
$3.8 billion into a new technology that might or might not
work. I recall--understand that at one point you indicated to
your family that you thought there was a 5 percent chance it
would work, this technology would work.
If I am an investor putting $3.8 billion in an enterprise
that has a 5 percent chance of working, I got to expect that if
it does work, I am going to make an awful lot of money. Now, I
have heard people say, well, that is corporate greed.
Yes, that is kind of how the free enterprise system works,
which is people who start enterprises say, I am going to take a
huge risk, invest my life savings, my career, and if it works,
I get a huge return. If it doesn't, I lose it all. There are
right now in our Country, hundreds of startup businesses with--
trying to develop drugs that will cure diseases.
I happen to know that because I invested in some in my
prior life. I lost my money in every single one. Studied them
as well as we could, we lost our money. That is the nature of
it. But we thought if it works, we are going to really get a
huge return for ourselves and for our investors.
I don't know how much money is the right amount of money,
but the idea that somehow corporate greed has just been
invented in America is absurd. It has been there for the
beginning of free enterprise individuals investing, hoping that
if it succeeds, they will do very well financially,
extraordinarily well.
I want to applaud the example we have--by the way, the
socialist countries, China, and Russia and Northern Europe, did
they come up with a vaccine that saved lives? No, no, they
didn't. Pfizer got technology from a German company, free
enterprise company, Moderna, and saved lives.
It is a stark demonstration of the comparison between free
enterprise and socialism. And free enterprise works, and
socialism doesn't, when it comes to saving our lives. Now, I
look at the technology which you are proposing to continue to
develop in other areas, and I guess I want to ask, what are the
kinds of things that you are working on now? What are the
prospects that you believe for some of these to make a real
difference in saving lives or improving lives? Is this a one-
off technology man?
mRNA, which is something which is really just effective for
vaccines or does it have broader application? And what will you
do with the money that the company is making? By the way, I
noted that you are a billionaire now. Did the company pay you a
salary of billions of dollars?
Mr. Bancel. No, Senator.
Senator Romney. You are a billionaire because the stock
that you got when you started the company, you kept some of it
I presume, that stock is now worth a lot of money because your
technology has been proven to actually work. Is it going to
work beyond vaccines, and what kinds of things are you working
on?
Mr. Bancel. Thank you, Senator. So, we are very excited
because this is a platform that we have worked on for 10 years.
We shared just before Christmas exciting data in cancer, which
we are very excited because of course, all of us have been
touched or are being touched right now by cancer.
We show a 44 percent reduction in recurrence of disease for
melanoma cancer or deaths. We are working very quickly to get
this with the FDA, in a phase 3 study this year.
We are also working with our partners at Merck to try
this--and we are going to want to explore as many tumor type as
we can to see where can we help people, because if we--if that
results translate to have a tumor type, which we believe should
happen--we have to be careful and of course, wait for the
clinical data.
That could be helpful to a lot of people. We are still
working on rare genetic disease. One of the reasons I got
excited about Moderna in the early days is, I have children----
The Chair. I am sorry. Senator Romney's speech on socialism
took up the bulk of the time. We have to go to Senator Murray
right now.
Senator Romney. As did our Chairman.
Senator Murray. Thank you very much, Mr. Chairman, for
holding this hearing. Mr. Bancel, welcome to the Committee. I
understand that shifting from a single Federal contract to a
multilayered payer market is adding complexity to distribution
claims.
But we are talking about a vaccine that taxpayers invested
$12 billion in, a vaccine that was once $15, and now you are
planning, of course, to price it at $130, despite the fact that
it just costs about $3 to make.
That, as we know, that cost is going to get passed on to
consumers, whether it is through higher premiums or higher
administration fees. So, I want to know, what is your answer to
this Committee and really to the public about the need for such
a drastic quadrupling of the cost?
Mr. Bancel. Thank you, Senator, for the question. So first,
just to be precise some numbers. The U.S. Government invested
$1.7 billion in the vaccine development. The rest of the amount
that you mentioned was actually purchase of products, not
investment in the development.
As I said in my oral testimony, we decided, and this was
because of us--this was not asked of us by the Government. We
in the letter I wrote to the Government when we started
discussing about procuring the vaccine in September 2020, we
proposed with the discount. It was not asked of us.
We discussed we were bold and we said if the vaccine
works--in September 2020, we had no idea. The phase 3 came in
November, the data. So, if the vaccine works, we think it is
our responsibility to return the capital to taxpayers.
We returned, as I mentioned, $2.9 billion in discount
versus the other vaccine that the Government procured. So,
despite the vaccine having three times more mRNA in it out of
microgram, versus the other one was 30 microgram, we discounted
our product to return $2.9 billion to the U.S. taxpayer.
We felt that was the right thing to do to say thank you for
Government. In addition, the Government got $5 trillion of
economic value, $18 million hospitalizations less, the impact
on humans and the cost of it, and three millions lives saved.
In the endemic setting, the challenge that we have is, as I
mentioned in my opening testimony, the wastage we are going to
have to take care of. So first we have to make more product
than we think we will sell because we cannot have patients
going to pharmacies and having no supply.
This is a very hard business, very complex because it is a
seasonal product. The FDA currently plans to tell us they think
late May, early June, what they want in a vial. We are going to
spend the whole summer making as much as we can. And what we
know is the forecast is going to be wrong.
The forecasts are always wrong. And so, the question, to
protect people, we need to make more than we think is going to
be needed. That is waste. We are going to have to pay for it.
What happened in the fall of 2022, which I think is an
important way to think about it. The U.S. Government purchased
160 million doses.
To the last number I got from CDC, around 50 million doses
got in the arms. But the Government bought everything. So, the
difference, 110 million doses might go to waste in the garbage.
Saying that the cost of a vaccine before was $20, I don't
think is the right way to do because it is not a cost to the
U.S. taxpayer. The U.S. taxpayer pays for everything. If you do
the math, it is around $80 the cost in the fall of 2022, still
with five products in the vial----
Senator Murray. Okay. Well, I understand that. And I just
have a minute here left. I want to ask some questions. You are
talking about having a vaccine accessible to the uninsured.
What I am concerned about is people hear $130, and they just
don't get it because they think it is expensive. How are you
going to make sure people know that you do have this program to
help the uninsured?
Mr. Bancel. Thank you for the question. And I care deeply
about access and protecting people. That is why we started the
company, is to help protect people. We will advertise it and
communicate about it as we get into the fall.
As you know, as of today, the Government is still in charge
of vaccine distribution, so we don't want to confuse things for
the U.S. consumer. But as we get closer to the fall, we will
make sure we get the word out.
As I mentioned, we want to work with rural hospitals,
community hospital, homeless shelters because I really believe
there is a better way to give access to people that are
uninsured. We have heard loud and clear that the system set up
by big companies is too complicated. Too much paperwork, takes
too much time----
Senator Murray. Okay, I just want a commitment that you are
going to make sure the public understands that there is a way
to get this if you are uninsured, correct?
Mr. Bancel. Senator, we are going to work really hard to
make sure that the public understand the process.
Senator Murray. Okay. And my final question really is about
the COVID-19 vaccine trials that excluded pregnant populations,
which left moms and their doctors with very little information
to guide them. It caused a lot of confusion. And we know that
pregnant patients with COVID are at greater risk if they are
infected.
Last week, actually, the CDC released some new data showing
that 40 percent increase in maternal deaths compared with 2020.
And a recent GAO report found that COVID-19 related deaths
accounted for this increase.
Can you just talk to us about your decision to exclude
pregnant patients from trials?
Mr. Bancel. Yes. Thank you. That is a very important
question that I care deeply about having children. The
challenge really in 2020, and the guidelines from the FDA, is
to be very careful, which you understand that in clinical
trials the safety of a participant is the No. 1 priority.
There was a lot we didn't know about the safety of a
vaccine until November 2020. Except for the pediatric setting.
We did those studies much later, which was parents having the
ability to have a vaccine for children because we wanted the
FDA to go slow to understand the safety.
Senator Murray. I am getting gaveled. Can you just tell me
that you will include a pregnant patient in continuing trials?
Mr. Bancel. Yes, Senator, we want to include pregnant
women, and also pediatric for the children.
The Chair. Senator Cassidy
Senator Cassidy. I will defer to Senator Tuberville.
Senator Tuberville. Thank you, Senator Cassidy, Chairman.
Mr. Bancel, thanks for being here today. Thank you for what you
did for my State of Alabama, our Country, and the world. And to
your employees. Sometimes we overlook the people who actually
do the big work. But thanks for being here today and answering
these questions. I hope my Alabama accent and your French
accent get along here pretty well.
Mr. Bancel. I am sure it would.
Senator Tuberville. Yes. I understand that Moderna was
founded in 2010 in Cambridge, Massachusetts, and you have been
the CEO since October 2011. And I also understand that you are
from France originally. Could you speak about why Moderna was
founded in the U.S. instead of somewhere else in the EU?
Mr. Bancel. That is a great question, Senator. There is no
better country than this country for science and
entrepreneurship. People are willing to take a risk. As Senator
Romney mentioned, much more capital is available to take risk.
We started in the U.S. because the core technology was
initially from Harvard Labs and then MIT labs, like you have
seen a lot of those stories.
A great VC firm from Boston where only those health care
work. Very innovative, very risky type of work, but that could
change the world. And that is one reason I decided to join the
team that was being formed to start this enterprise. You need
to know, when I was--talked about the idea of using mRNA to
treat people, I first looked at them and say, are you kidding
me?
This will never work. But the more I spent time thinking
about it, looking at the data, talking to experts--as Senator
Romney said, I had to tell my wife, it was a 5 percent chance
of working. She is not a scientist and she was asking, how
risky is it?
But because if it was going to work, it was going to be a
new platform, it was going to be a new way to make medicine.
And that is why I took that risk with my career, is to say, it
might fail me. I will have to find another job.
It is going to be Okay. But I have to try to make this work
because it could save so many people. Of course, we never
thought there would be a pandemic in our lifetime. But while
working on infectious disease vaccine--we are running 13
clinical trials right now, which is one of the largest number
in the industry, as I mentioned, working with cancer, genetic
disease, heart disease, the team is working on an autoimmune
disease. It is still in a lab but is coming soon.
This is a really--it is a platform. For 100 plus years of
the pharma industry has been an analog industry where every
drug is different, we have to agree on everything. This is a
platform that is going to enable so many medicines in helping
people. And as we saw during the pandemic, because it is a
platform, we can go much faster to the clinic, much faster to
approval, so we can help save lives.
Senator Tuberville. Thank you. Kind of reminds me of my
former profession which was a coach, and I used to tell my
players, this country owes you nothing but an opportunity, and
you came here, took the opportunity, and made a success out of
it, so I want to thank you for that.
Again, a lot of people I want to thank for that. We are
hearing a lot today about how much the Government spent on
vaccine development and how much risk pharmaceutical companies
took themselves.
I wasn't here in the Senate when Operation Warp Speed was
getting started, but I do recall hearing a lot of criticism on
the other side of the aisle about whether partnering with
pharmaceutical companies like this was a good idea and whether
we would get any successful vaccines.
Seems like it worked out pretty well for all of us. Can you
speak about Operation Warp Speed and how it brought the
vaccines to patients, and what the overall impact of our health
care system and overall deaths would have been without this
investment?
Mr. Bancel. Thank you, Senator. I think the world owes so
much gratitude to the U.S. Government and to Operation Warp
Speed.
I think the idea to say, we have no idea which technology
is going to work, we are fighting this enemy, the virus, but we
don't know which technology is going to work, so let's bet on
three technologies.
Protein technology, very mature, but much slower.
Adenovirus technology. And the mRNA technology. And to do it
even better, the Government said, let's not bet on one company.
Let's bet on two companies per technology versus the six-
company portfolio, two in the portfolio to hedge for risk.
Then Congress, and I want to really thank Members of
Congress for the budget that was appropriated to bother to be
able to fund this work, allowed this. This did not happen in
Europe.
This did not happen in Asia or anywhere else. This country
helped change the course of this pandemic through the public,
private partnership, which is why when the Government called
for help, we raised our hand.
We made the 10 years' worth of investments in science and
technology platform available. Say, we are going to make the
technology available. We make the plant available. We delayed
products. We have commercial products, including for--cancer,
that have been delayed because we prioritize our resources to
the pandemic because it was the right thing to do for the
country.
Senator Tuberville. Thank you. And I would just like to
make this statement, we did a lot of research on this, and the
U.S. taxpayer paid $30 billion for the successful vaccines and
received $1.15 trillion in direct benefit back from that $38
billion. Pretty good investment to me. Thank you very much.
The Chair. Thank you, Senator.
Senator Smith.
Senator Smith. Thank you, Mr. Chairman. And thank you, Mr.
Bancel, for being with us today. So, I want to start by just
saying that the COVID-19 vaccine is safe and effective in
preventing hospitalizations and deaths from COVID-19, and the
process for developing and distributing this vaccine is a
tribute to the innovation in the technology and the
perseverance of the scientists and researchers and
manufacturers, and also the Federal, state, tribal, and local
agencies that delivered shots into arms.
I include Moderna in that group. I mean, it is also
critical that Americans continue to have access to these
vaccines. Now, we are not talking economic theory today, but I
want to say I am a capitalist. I went to business school. I
started my own business, though I did not make as much money as
you have made, Mr. Bancel.
I understand the concepts of return on investment and risk
reward. But it is difficult for me to accept that the profits
that you are reaping on the backs of American taxpayers are
necessary or reasonable.
It feels like a bonanza to me. So, I want to just
understand a little bit about what is going to happen next. You
tell us that you expect the Moderna--expect Moderna to offer
its vaccine at a list price of about $130, up from $26.23.
Yet it is extremely confusing for Americans to understand
what the price is that they will actually pay. It feels a
little bit like a lottery and too often we lose rather than
win. So, if a Minnesotan gets their insurance through Medicare,
their vaccine will be free thanks to the Inflation Reduction
Act.
Will Moderna negotiate with Medicare on the price, or will
you demand $130 sort of take it or leave it?
Mr. Bancel. Good morning. Thank you, Senator, for the
question. So indeed, and maybe I should start there, regardless
of insurability status of people in this country, where you are
insured by a company, insured for Government program, or
uninsured, we want that this is a no out-of-pocket costs for
the American people.
That is really, really important to us, which is why, as I
shared, that we already set up that program for the uninsured.
For people that are insured, it is through the law, because it
is a vaccine, there would be no co-pay. And we will make sure
for the summer that the American people are aware, if you are
insured or uninsured, there would be no co-pay. We can work----
Senator Smith. But some--I am sorry, but somebody will be
paying. And what I am trying to understand with Medicare or
Indian Health or veterans, the Veterans Administration, will
you negotiate with the Federal Government of those agencies
beyond $130, or is that the price sort of take it or leave it?
Mr. Bancel. Like it is usually traditionally in the
industry or teams, and those discussions are happening as we
speak. We will be discussing with all those agencies following
the law----
Senator Smith. Okay. So, you will be negotiating----
Mr. Bancel [continuing]. And the process--yes.
Senator Smith. Then thanks to the Affordable Care Act,
Americans who receive their health insurance through private
insurance or through the exchanges will also get a vaccine for
free. Do you expect that you will be negotiating with those
insurance companies or the PBMs or others on the ultimate
price?
Because, again, even though it is free to--it might be free
to those folks based on their insurance, somebody is going to
pay. And that could, of course, contribute to increased rates
for everybody.
Mr. Bancel. That is a very important question, Senator. So
first, one piece that is important for the vaccine is if you
look at the vaccine in that price range, and that is why we
looked at it very carefully, the cost savings in some
hospitalization costs that year for people who will not get the
vaccine ending up in hospital is a tremendous return.
The cost is estimated to be in several hundreds of dollar
for the direct cost of hospitalization and medical costs, not
even talking economic impact and things like that. And so, the
benefit to the health care system is going to be in the
reduction of health care spend in hospitals.
Senator Smith. Yes, that is--I, of course, understand that.
The question, though, is still whether or not there is--I am
hearing you say that you expect to be negotiating on what the
ultimate price is. And I want to just note, Mr. Chairman, that
thanks to the Affordable Care Act and the Inflation Reduction
Act, Americans will be not paying a cost for this, but there
still is a cost to the system, to taxpayers.
Now, let me ask you one last question just the minute I
have left. So, if I am uninsured and I go to my local pharmacy,
and I need--I want to get the vaccine, I hear you saying that
you don't have all the details worked out yet on what that will
be like, but what would that be like for that American?
I mean, are they going to be asked to pay something upfront
and then try to figure out the paperwork for reimbursement
later, for example.
Mr. Bancel. Thank you for our question, Senator. We want to
make it as easy as possible. What would be really bad, I think
we can agree on this point, if somebody walks into a pharmacy
and decide they don't want the vaccine.
We want those people who want to be vaccinated to have
access to the vaccine. So, where we are trying to work with a
team is on all the learnings of the other programs that
sometimes don't work so well. Which is why I am a big proponent
with our teams of having those discussions as we speak, to
think about those people, what are they associated to. Is it a
rural community hospital?
Then, is there a way for Moderna to do a partnership with a
hospital so that people will go to that hospital. If the
hospital is certified, they are uninsured, those individuals
don't have to do the paperwork.
We are trying to work on things like these because we want
people who want to be vaccinated to get access to vaccine. We
care deeply about that.
Senator Smith. Thank you, Mr. Chairman. Thank you.
The Chair. Point of privilege, if I might. Do I understand,
in response to Senator Smith, that you are in fact prepared to
negotiate a $130 price with Medicare, Medicaid, and other
Federal agencies?
Mr. Bancel. Senator, our teams are going and having
discussions with all the different customers. As I said, we
used to have one customer, the U.S. Government. We have ten
thousands now. So, our teams, as we speak----
The Chair. But you have a Federal Government, which is
basically one. Are you prepared to negotiate that price with
the Federal Government?
Mr. Bancel. Yes, different agencies work differently, so we
are working with all of those.
The Chair. Senator Cassidy.
Senator Cassidy. I will defer to Senator Braun.
Senator Braun. Thank you, Mr. Chairman. Thank you, Ranking
Member. This is indicative of a much bigger problem facing
health care. You are one small part of it which looms huge
because everyone sooner or later ends up with a prescription,
even a vaccination now and then.
The issue that most of us are confronted with, if you don't
own a health care business, is that--I listened carefully to
Senator Sanders' opening remarks. You can probably take those
as being representative of anyone that wrestles with the health
care system that does not own a business in the system.
It has gotten to be such a huge part of our GDP, unlike
anywhere else in the world. So, you get into something extra
normal like we have just gone through, it raises all kinds of
issues. And I have been the Senator most outspoken on I think
you run like an unregulated utility across the board. You don't
embrace competition.
You don't embrace transparency. And you are a small part of
it. Hospitals now have gotten up to where they are close to 35
to 40 percent of the health care dollar, and that is even
harder to find out how much things cost, how it is working.
If you are in the business of free enterprise, which I
think many on our side make excuses for, and that means no
barriers to entry, that means full transparency, full
competition, and don't try to business with the Federal
Government and then want more from it when you are not
performing well in the first place.
Let's look at a narrow issue here. You are claiming that
you need more because of the cost of distribution. Well, in any
other field, and I did it for 37 years, it is very simple. You
have a network of distributors, dealers.
You don't have PBMs in there that make it confusing. You
need an MBA to look at that flow chart. When are you going to
start making it easy for all of us to see what things cost, and
then not look to Government when they were part of this
formulation in terms of how we got the vaccination, and then
want more from it.
You are involved in a taxpayer--you are involved in a
lawsuit where you have got two smaller companies, Abutus and
Genevant, that are making a claim that you had a patent
infringement.
I am hearing that not only here, but patent tweaking,
patent infringements when it comes to where we spend even more
money on biologics and biosimilars. Point being, whether it is
the Government paying for it or the private sector, it is a
broken system and you need to get better at it or you are going
to get solutions in the long run that you don't like.
Your distribution system, why is it something that you
sound like you have got to recreate it? Where has it been up to
this point? How do you describe your flu vaccines? Why do you
need this much money? A 400 percent price increase is
preposterous, especially when you have been given all this
Government largesse that is even going to protect you from
these lawsuits.
What is the nature of your current distribution system to
where you can't just put this into it, and why is this that
much different from what you have done for years in
distributing a flu vaccine? Because it looks like we are headed
more to where this is going to be like the flu than it is going
to be something extra normal.
Mr. Bancel. Thank you, Senator, for your question. So just
to clarify, we do not have a flu vaccine on the market yet. We
have one in clinical study. We should have a phase 3 data soon
and hopefully----
Senator Braun. You may not have one on the market, but
there is a distribution network for them from your competitors,
why wouldn't you be able to get into that? Why do you have to
justify creating a new distribution network? No one would ever
do that.
Mr. Bancel. Indeed, Senator. We are going to use--but we
have to set up a distribution network. I am not saying that we
are going to be the only warehouses like other companies do.
We are going to work with companies, but we have to set up
those contracts. During the pandemic, we only shipped trucks to
three warehouses in the U.S., when the CDC was taking the
responsibility and the cost of getting the vaccine to
hospitals, pharmacies----
Senator Braun. Is the Government requiring you to do
something different here that would cause you to use a
different network--what do McKesson and Cardinal and the others
do? There is a network to get this stuff to pharmacies already
in the places they need to go. Why can't you blend it into
that? Keep the costs down. Be a little entrepreneurial in what
you are doing.
Mr. Bancel. It is part of a solution we are going to be
doing, Senator, as we are going to use existing networks. But
we have to set up everything because we never had a commercial
product before. We just have to go, which we are doing right
now, through all the contracting and negotiating of all those
rights and so on, to set up the distribution capability so that
we can get the vaccines to pharmacies----
Senator Braun. I ran out of time. You cannot, as well as
the rest of the industry, including hospitals, have the best of
both worlds where you want Government to be in there helping
you when it is tough, and to where for the private side, most
of us are not happy with the fact that we are lucky if your
health insurance plan only goes up 5 to 10 percent, which
incorporates hospitals, pharma, and maybe the Darth Vader of it
all, the insurance business. Something has got to give or you
are going to get more Government involved in health care. Thank
you.
The Chair. Senator Hickenlooper.
Senator Hickenlooper. Thank you, Mr. Chairman. Mr. Bancel,
thank you for coming in and testifying before us. It really is
a remarkable, if you look at the arc of what happened, and you
look at it, actually take it all the way back to when Moderna
was founded in 2010 and you came on board in 2011.
I look at so many moments of risk and how many times, I
don't want to alarm anyone, but the company could be at risk.
Your margins were so thin you didn't have sufficient money to
invest.
I think the notion of what the Federal Government did
during a time of crisis, where we made, I think a decision
baked in wisdom to pursue six different solutions. Talk about
multiple working hypotheses.
In your case, the Federal Government, BARDA provided, I
think it was $1.7 billion, in your statement, you said. And
that was money that really was, after the earlier investments,
which were largely in research and those are public, private
partnerships that have--that money is invested.
We do that. The Government does that in all different
levels. In this case, the $1.7 billion, you actually returned
$2.9 billion, $2.8 billion?--$2.9 billion. What was part of
your motivation in that?
Mr. Bancel. Thank you, Senator, for the comments and for
the question. It is actually quite simple. As we were
starting--so there is really two moments during the pandemic,
in the partnership with the Government. First, focus on the
vaccine development and accelerate it. That is what the BARDA
funding provided.
Then we started to discuss with the Government toward the
end of the summer of 2020 about purchasing vaccine in case the
FDA would approve them. And as we sat to have those
discussions, we had to discuss with a board.
It became very clear, like family discussion at the board
meeting, that we had to find a way to give the money back to
the U.S. Government because we all felt very grateful that
thanks to that funding, we were able to accelerate the vaccine.
I believe more that I would have got the vaccine approved
without the funding, but it would not have been by the end of a
year.
Americans' life would have been impacted by that delay
without the support. And so, when we looked at, we were like,
if we are going to get the vaccine to work, we should provide a
discount.
The board said in 5 minutes, and that is what I put in my
letter that I sent to the Government in our first discussions
for procurement.
Senator Hickenlooper. Well, it would be an interesting
calculation, look at how many lives were saved by accelerating
that process with that $1.7 billion, and was paid back, almost
not quite doubled, but certainly more than just paying it back.
I am sympathetic to some of the issues as you look at
pricing going forward, that this is something that needs to be
kept at a cold temperature. You are going from one customer to
thousands of customers.
You are looking at a 90 percent or 95 percent reduction in
what you are producing, so all your manufacturing is going to
have to be reconfigured. I am not an expert in pharmaceutical,
so I can't address that, but I think it is a complex issue that
we need to spend more time looking at.
In these kinds of public, private partnerships, we want to
get to the alignment of interests. And I guess my question is,
you can comment on that, but I also--what do you think, going
forward, how can we do a better job of creating these public,
private partnerships so that both sides feel they know exactly
what they are getting and what is--there is an alignment of
that self-interest.
Mr. Bancel. Thank you, Senator. Actually, the way we think
about the price during the pandemic was actually a discount. We
are talking here today about an increase in price. But if you
think about what happens in any of our industry, when you get
to a very large volume, you get a very big discount.
That is actually what we do. With $500 million, all there
from the U.S. Government. This year if we get 30, 50, that
would be great. Actually, this year, if you look at any
consensus, the company might be at a loss this year.
Senator Hickenlooper. I know, and then you made the--I get
it and I am sympathetic to that. I am not sure all the other
Senators are sympathetic as I am, but we will have the
discussions. But I do want to get, because I have only got 40
seconds left and maybe we will get an extra 20 seconds, what
would be--what would you suggest in terms of going forward, in
terms of improving public, private partnerships?
Mr. Bancel. Thank you, Senator. I think making sure that
the terms are clear. As you know, in enterprise, we are making
decisions every day. And what we are trying to do is to
allocate our resources to the best projects that we can do.
I think being clear about what are the rules and making
sure that the rules don't change later, that is what is really
important. And when we discussed about the BARDA funding, there
was no discussion about commercial pricing.
The focus was, accelerate the study, get the vaccine to
American people to save lives. And as you said, this was a
great return for U.S. taxpayers.
Senator Hickenlooper. No, again, I think it is--you can't
measure the success and the savings. I haven't added it up to
figure out that discount, how much savings that was and the
benefit to the economy, you do mention--you did mention in your
remarks, it is just, it is a remarkable story. So anyway, I
feel gratitude that you were there and able to step up and play
such an important role in addressing really the worst medical
crisis of certainly my lifetime.
The Chair. Senator Cassidy.
Senator Cassidy. Well first, I want to pass my Ranking
Member seat right now to Senator Mullin, while I walk across
and ask in another Committee, and then I will defer to Senator
Marshall for questions.
Senator Marshall. All right. Thank you, Senator Cassidy.
Thank you, Chairman. I want to, first of all, submit for the
record a couple of Op-Eds, the first one written by a Senator
from Democrat--Democrat from Indiana, and my hero, Bob Dole
from Kansas.
This is an editorial just talking about Bayh-Dole law,
which encourages and has been so successful, encourages Federal
Government to work with the private sector.
Also, an Op-Ed that I wrote, goodness mine was in 2022,
about how fixing prices kills innovation. So, we will submit
both of those for the record if it is Okay, Mr. Chairman.
[The following information can be found on page 139 in
Additional Material:]
Senator Marshall. Well, Mr. Chairman, let the record show
that you and I agree on something again. This is my goal. Every
one of these hearings is for you and me to agree on something.
And I agree that charging Americans $130 for this vaccine is
outrageous. But where we always disagree is the cure. How do we
get there?
I know one of your biggest concerns is the cost of insulin,
as it has been mine. And I presented this graph that shows what
the cost of insulin has done as competition is being introduced
in the market.
With two biosimilars coming on board now, the cost, and I
checked with one of my pharmacies back home, the amount supply
of insulin, $400 6 months ago, now a biosimilar for $120. And I
am not satisfied. And I also want to point out, though, this
big difference between the gross cost, the list price versus
the net cost and how pharmacy benefit managers work in that
margin for their rebates is something we need to tackle yet as
well.
Okay, let's go to the next graph here, Charlotte. Again,
this is what happens in America when we have innovation and
competition that the U.S. leads the world in access to miracle
drugs. And we will go to this last one as well, just showing
how certainly the Americans paying too much for medicines, but
at least we have access to these miracle drugs.
I would ask everybody, which miracle drugs do you want to
give up? Which one of these would you give up? Would you give
up Car T-cell therapy, the miracle cures we have in cancer,
which ones would we give up?
We got to be careful we don't throw the baby out with the
bathwater, if you will. Mr. Bancel you guys have been working
on mRNA technology, I think, since at least 2010, 2011, and you
had a lot of patents you issued. Were most of those patents in
that era around mRNA development, vaccine development?
Mr. Bancel. Good morning, Senator. Thanks for the question.
Yes, the company only works on mRNA because we believe if we
invest in the platform and improve it, we can do more
application of more medicine across therapeutic areas. So, it
is mRNA focused.
Senator Marshall. Right. I bet you expected when you
invented this vaccine, you would come to Congress and get a
hero's welcome, that you get a Nobel Prize even for this. You
had no idea that you were going to be castigated because of
your success as well. So that is--the two sides of this coin
that we are concerned about. I want to back up to your time
with your previous company, Biomerieux.
Mr. Bancel. Yes, Biomerieux.
Senator Marshall. At that time, the Wuhan laboratory, the
BSL-4, biosafety level 4 lab was being made, and your
predecessor had something to do with that. Did you keep track
of the Wuhan lab being--going up? And were you concerned about
it?
Mr. Bancel. That is all--Biomerieux had no involvement with
the Wuhan lab. I was aware, of course, because Biomerieux is
the leading company in infectious disease diagnostic. I was
aware there was a new high security lab being built in China,
but I had zero involvement. My company had zero involvement.
Senator Marshall. Okay. This is a pretty complex question.
Is Moderna or did Moderna executives have agreements with
organizations in China, including the Wuhan Institute of
Virology or with Eco Health? And if so, what are the terms and
does Moderna owe any of those people any moneys?
Mr. Bancel. We never had any agreements with Chinese labs
or Wuhan labs, Senator.
Senator Marshall. Or Eco Health?
Mr. Bancel. I am not aware of that lab.
Senator Marshall. Okay. Were you aware in September 2019
when the Wuhan lab and the Chinese took down their DNA lab
bank, were you aware of that pretty much in sequence when that
occurred?
Mr. Bancel. I was not, Senator.
Senator Marshall. Okay. In September 2019 is when that
occurred. In December 2019, you took your mRNA corona vaccine
candidates to the University of North Carolina at Chapel Hill
to work with Senator Ralph--not Senator--Dr. Ralph Baric as
well. What was the impetus to do that?
Mr. Bancel. Thank you for the question, Senator. It was
actually a vaccine for candidates against MERS, the Middle East
Respiratory Syndrome, which is of the corona family, but of
course, not SARS-CoV-2. It is a different one.
Senator Marshall. You had no idea that what was exploding
in China already, probably since September?
Mr. Bancel. No, I was made aware of a first time, as I said
during my testimony, at the Christmas break by reading the
newspaper. There was a little article saying there was
pneumonia like symptom cases that were really in Wuhan, which
is why I directly contacted the NIH at that time to say, are
you aware about this?
Because we had been working together on the coronavirus, as
you mentioned, because we believe that the highest risk of
pandemic----
Senator Marshall. You never worked with China, never worked
with WV.
Mr. Bancel. At Moderna? No, sir.
Senator Marshall. What about not in Moderna?
Mr. Bancel. When I was running Biomerieux, we had a team in
China. The company was in 40 plus countries. So, we were
selling product in China, yes, sir.
Senator Marshall. Okay. Thank you so much.
The Chair. Thank you.
Senator Baldwin.
Senator Baldwin. Thank you, Mr. Chairman. This week, I am
proud to once again introduce my bipartisan Fair Drug Pricing
Act with my colleague, Senator Braun. This would require drug
companies to provide transparency and justification report when
they increase the price of a drug above a certain threshold, or
when the drug costs more than the median household income in
the U.S.
Today's hearing demonstrates exactly why we need more
transparency. While big drug companies have taken in record
profits, more than one-quarter of Americans struggle to pay for
their prescription medications.
These same Americans are the taxpayers who are footing the
bill for research and drug development that companies like
Moderna are benefiting from. Researchers have estimated that
prior to the pandemic, the Federal Government and taxpayers
invested more than $337 million in mRNA vaccine technology and
development.
Mr. Bancel, I didn't read your mention of those numbers in
your written testimony. I believe that when drug manufacturers
significantly increase the price of their drugs, that they
should have to provide information to the public that justifies
these increases, including research and development
expenditures derived from Federal funds.
My bill, the Fair Drug Pricing Act, also requires that
companies provide information on all stock-based performance
metrics used to determine executive compensation associated
with price increases or high initial launch prices.
Mr. Bancel, your stock compensation is, I understand, based
on performance metrics set by your board. And last year it's
reported that you earned salary and stock compensation worth
nearly $400 million.
This is despite the fact that your board apparently found
that you actually underperformed the company's target for sales
income generated by the COVID-19 vaccine. So, I want to ask,
the decision to increase the price of the vaccine is--it
appears tied to the impact of your personal performance
assessment on your bonus and how much you would stand to gain
personally from increasing the price of the COVID vaccine.
Can you talk about how much of that decision to increase
the price is related, as I just suggested.
Mr. Bancel. Thank you, Senator, for the question. It is not
related. When we look at price, we look at value for any
product. We look at what is the value of a product to the
health care system, how much money can be saved.
That is how the price is determined. And that is why, as I
mentioned initially, if you look at the price, the cost of a
flu vaccine at CVS, it's on $95 for a high dose flu vaccine
used for the elderly.
Given there is 2 to 3 times more hospitalization of COVID
versus flu, that was one of the metrics we looked at as looking
at price. The other one, as you might be aware of, the cost of
a pneumonia vaccine is around $250. So that is kind of how we
looked at that price.
Senator Baldwin. Well, let me ask you another question.
Moderna's most recent annual report stated that the company
repurchased $3.3 billion worth of stock in 2022 and over $800
million in 2021 to, ``return capital to shareholders.'' Mr.
Bancel, you are one of, if not the largest shareholder in
Moderna.
Yet despite spending significantly to buy back stock over
the last 2 years, Moderna's share price has actually declined.
If you had not spent nearly $5 billion on buybacks when your
stock was at the highest price it has ever been, do you think
you would be under less pressure to raise the price of the
COVID vaccine now?
Mr. Bancel. Thank you, sir. So, the price is not linked to
the company's performance. The price is linked to the value of
a product, to the patient, and to the impact on the patient.
That's how we set the price. I yield back.
Senator Baldwin. Thank you. I yield back.
The Chair. Senator Mullin.
Senator Mullin. Thank you, Chairman. The Government
overshot the number of vaccines needed in 2022 by over 100
doses. What were the challenges of estimating the number of
doses needed for 2023, and how does that impact your cost?
Mr. Bancel. Thank you, Senator, for the question. That is
sort of a very complex issue with this transition from the
pandemic to endemic. I have never managed a company going from
pandemic to pandemic, and it has not happened since, of course,
the pandemic flu of 1918. And so, we are trying to guess how
much volume is needed, which is a manufacturing challenge we
have, especially as a small company. We do not do with filling
in the vials ourselves.
We have to contract out to outside companies. And what we
are trying to do is to not undershoot it, because as I said
earlier, we care deeply about having enough products available
for patients when somebody walks into a pharmacy.
We know by design we are going to have to over make
products and we are going to have to take the returns and
destroy them at the end of a season. But that is part of a cost
of running a seasonal respiratory vaccine franchise, which is
why it is necessary for us to increase the cost versus the
discount that we had during the pandemic, where the Government
took all of our risk, managed the waste.
Senator Mullin. Buying the unused doses, you have to factor
that back into the cost because you had to repurchase them and
then dispose of them correctly. Is that correct?
Mr. Bancel. We have to do two things, and that is correct.
One is we have to pack more than we need to make sure it is
available across the country when needed.
If you think about just the supply chain and distribution,
we need much more to make sure you have everywhere at any time.
Then there is the returns, which is if a pharmacy gets more
than they thought they needed, they will return it to us and
then we have to, of course, incur that cost obviously.
Senator Mullin. What will need to change within your
company to accommodate the demand for single bottle versus
prefilled syringes rather than ten those files that were
purchased by the Federal Government?
Mr. Bancel. We have to move to single dose vial because
that is what the pharmacists and the doctors want. And we
understand that. That is what the commercial market needs,
because it is simpler, there is less wastage. Somebody walks
in----
Senator Mullin. You have to factor that into the cost too?
Is that cheaper to do ten at a time versus one at a time?
Mr. Bancel. Exactly. It is much more expensive to do ten
because just if you look at the cost of a glass of vial--you
need ten vials versus just one right, and then you use a lot of
capacity and----
Senator Mullin. I am talking about per dose though.
Mr. Bancel. Yes. And then you use a lot of capacity as the
manufacturer. So, while the number of doses go down, the number
of vials goes up.
Senator Mullin. Right. Pfizer has also noted that they are
going to intend to increase the price of their vaccine to $130
per dose. How does the market competition factor into changing
cost?
Mr. Bancel. We look at value and price. And of course, like
in any market, we want to be competitive as an enterprise and
so we look at that as well.
But the key driver, as I was sharing with Senator a minute
ago, is really value, which is what is the value of a vaccine
in terms of health care costs, and then how can we create a
product to extract some value for the company but leave some
value in the health care system?
We want to make sure that there is a lot of value left for
Medicare and the payers.
Senator Mullin. Your company decided to take funding as
part of the Operation Warp Speed. Can you discuss how Moderna
chose to take the loan from HHS and the difference in business
structure between you and other manufacturers?
Mr. Bancel. Thank you, Senator. So, we decided to take the
loan from BARDA, because it will accelerate the vaccine
development. If you go back in time, those discussions were
happening in January--end of January, February, March, until
April grant, and whether the company we wanted to insure is a
vaccine going to clinical trial as fast as possible.
At the time, Moderna was losing money, and so if we had
developed the vaccine without Government funding, the
development would have been much slower because we would not
have been able to take a similar financial risk that we took
thanks to the Government money like making product ahead of a
study. And so that is why we decided to take the money because
we felt it was going to save lives.
Senator Mullin. Thank you. With that, I yield back.
The Chair. Senator Cassidy.
Senator Cassidy. Thank you, sir. I am going to lead into my
first question, kind of repeating some of the things I said in
my opening statement. For decades, this Committee has passed
legislation knowing that we would have to ask companies to step
up at perhaps a pandemic time and do exactly what Moderna did
during this time.
Others didn't make the same choices of Moderna to
collaborate with the Government. So, the question is, if we
send a hostile signal to future and prospective partners that
Moderna is now being singled out for its decision to work more
closely with the Government, what signal would that send to
that future prospective partner?
Now related to that, there are folks who have spoken of
marched-in, where the intellectual property which has been
developed by Moderna or Pfizer or another, would be, if you
will, marched in by the Federal Government and shared worldwide
to those who had no role in its development.
What would that do to the willingness of a future
prospective partner to work in a public, private partnership
with the Federal Government to find a solution as hastily as it
had to be found?
Mr. Bancel. Thank you, Senator. So first, let me say, we
were very proud to partner with the U.S. Government. And when
the call came, we raised our hand and we said, of course we
will help and do our best work.
I think what is key for any enterprise, not only in the
pharmaceutical industry but across different fields, is to know
what is going to happen. Companies needs to plan based on what
our hypothesis or how we are going to work together during the
crisis and also after the crises.
I think what we need as industry is clear rules that do not
change. So, for example, during the BARDA discussions, there
was no discussion on commercial price. It was assumed, never
discussed, to the best of my knowledge----
Senator Cassidy. I have limited time. So, the question is,
if the Government were to exercise its march-in rights and take
the IP from the company and distribute it worldwide without
compensation for the company, what would that do to--what can
you imagine it would do to a company, a future company's
willingness to work with the Federal Government in a public,
private partnership?
Mr. Bancel. I always say that it will really impact the
willingness of those companies to partner with the Government.
And I think patients will suffer.
Senator Cassidy. Okay. Now, let me ask you in your--it is a
different question, different set. In your patient assistance
program, while I assume that will also apply to the short-term
limited duration programs, because to be clear, under current
U.S. law, if you are commercially insured, if you are federally
or state insured through Medicaid, Medicare, etcetera, you
don't have to pay for this vaccine, at least as the patient.
You are paying indirectly through premiums, but you are not
paying directly. And you are going to make through your patient
assistance program available for the uninsured. Two questions
about that.
Will that also include limited--a limited, short term,
limited duration policies which do not--are not under the
Federal mandate to provide vaccines at no cost? That is a
question. I don't know if you know that.
Mr. Bancel. I don't know the answer, but I would make a
note to follow-up with my team and make sure we follow back
with you after.
Senator Cassidy. Please. And I would ask that those folks
be afforded the same as the uninsured, because effectively for
vaccine, they are uninsured. Second, as regards the vaccine
itself, will your patient assistance program also include the
administration fee?
Mr. Bancel. This is something we have to look into----
Senator Cassidy. I will say for the uninsured, just as a
doc who treated the uninsured, it is not just the cost of the
vaccine, it is the administration fee. And obviously, that is
something you can limit. You can make it an x amount of
dollars. It doesn't have to be astronomical. But we--but I
agree with Senator Sanders.
We want that PAP to be something that works for patients
and is not just kind of like, oh, yes, we have it, but no one
can use it. Now, I also want to clarify a couple other things.
It was suggested that the IRA is what has resulted in the
coverage of the COVID vaccine, but indeed that was the CARES
Act, just to make that clear.
I also want to make something else clear, that there has
been a lot of discussion about pharmaceutical costs, but this
has nothing to do with the cost of a drug. The cost of a drug
is related to pharmacy benefit managers. It is related to the
initial price of the of drugs. It is related to scarcity, you
name it.
But that is a separate topic from this. And I look forward,
Mr. Chairman, to that future discussion in which we do discuss
the high cost of pharmaceuticals, but that is a separate issue
from this vaccine. And I think I wanted to make that clear
because it was not perhaps not as clear as it could be. And
with that, I yield.
The Chair. Thank you, Senator Cassidy.
Senator Hassan.
Senator Hassan. Thank you very much, Mr. Chairman and
Ranking Member Cassidy, for this hearing. Mr. Bancel, thank you
for being here. I want to follow-up a little bit on what
Senator Cassidy was just trying to get at.
Moderna has said that his patient assistance program will
provide low cost and no cost COVID-19 vaccines to the uninsured
and underinsured. This program cannot simply be a public
relations exercise that provides cover for the company to hike
prices on families seeking COVID-19 vaccines.
How quickly, after the launch of its patient assistance
program, will Moderna start providing publicly available data
on the number of individuals it has covered and typical out-of-
pocket costs under the program?
Mr. Bancel. Thank you, Senator, for that question. We care
deeply about patient access, and so I will work with a team to
figure out what is the right frequency for sharing that data.
But we want to find ways for people to get access to a vaccine.
We still have 250 people dying every day of COVID in this
country. And we have a tool, so we want to make them available.
Senator Hassan. I understand that. Congress and the public
are going to need information so that as you all proceed, if
you are still planning to hike the price, that we can make sure
that really the uninsured and underinsured are getting
meaningful access to this in a timely way.
Another piece of this is that uninsured individuals seeking
COVID-19 vaccines are going to need to be able to access this
program that you have, and they shouldn't have to fill out
pages of forms with fine print in order to get access to your
patient assistance program. So how long will the application
for your program be, and how much documentation will you
require from applicants?
Mr. Bancel. Thank you, Senator. We have heard that feedback
as we have talked to patients, to doctors, to Members of
Congress.
The team is working diligently to figure out how do we use
technology to make it simpler, how do we make sure we have
access to enough languages so it's easy for people who are not
English as a first language. And also, we are trying to be
creative, as we have done over the history of a company.
For example, of our partnerships we can do directly between
Moderna and the rural hospital or community hospital in your
state, and of course, across the country. Whereas we do a
partnership, the doctors agree that they will certify that the
people will get a vaccine that we send to them for free, will
be uninsured so that individuals don't have to all do the form.
We are trying to figure out all those mechanisms to make it
easier for people, including we are also working, for example,
with homeless shelters for the same thing.
Senator Hassan. I think that is really important. I think
it is also going to be important that you all release the
application for your patient assistance program before its
launch so that the public can see what you are requiring from
uninsured families. And just a note on the rural issue, one of
the other things to be aware of, of course, is that a lot of
rural communities don't have uniform access to high-speed
internet, right.
We need to have processes that are meaningful for people
who don't have that kind of access. I also just want to talk
about the impact of the price increase on vaccine uptake. The
fact remains that hiking prices and requiring families to fill
out forms will likely decrease vaccine uptake and set back the
public health effort to combat COVID-19.
What are your plans to quantify and publicly disclose the
consequences of your price hike for vaccine uptake among the
uninsured and underinsured?
Mr. Bancel. Thank you, Senator, for the question. So, I
will work with my team and we are very happy to follow-up with
your office in terms of what would be all disclosure moving
forward. The plan is still being work on.
What we want to make sure is that the plan is set up and
announced way ahead of a vaccine availability in the fall so
that somebody was uninsured has access at the same time as
somebody who was insured.
Senator Hassan. Well, I understand that. But I also think
it is going to be really important for us to see what the
uptake looks like in light of these increases, because I think
all of us who have constituents, family and friends who deal
with access to lifesaving medications, every time there is some
sort of bureaucratic hurdle, as well as every time there is a
cost hurdle, there is an impact on uptake.
Moderna needs to kind of own its public health
responsibility and disclose the effects of its price hikes so
that the public and Congress can hold the company accountable,
if the price hike discourages millions of Americans from
getting vaccines.
I know you want to work on that, too, but this--we really
are going to need data here, and I am looking forward to seeing
the company produce it. Thank you.
Mr. Bancel. Thank you, Senator.
The Chair. Thank you.
Senator Markey.
Senator Markey. Thank you, Mr. Chairman, very much.
Welcome, sir. In the dark days of 2020, it was the partnership
between the Federal Government and state Government research
centers and companies like Moderna that made it possible for us
to make a huge medical breakthrough.
It was places like the National Institutes of Health and
health systems, and companies, communities, and getting people
vaccinated, that was the real triumph. People young and old at
every income got their shots for free. We helped to lift the
weight off of hospitals and brought the innovation of Cambridge
to community health centers in communities around the world.
But now the list price of COVID vaccines may more than
quadruple, and the cost of high drug prices is that families
may need to pay higher health care premiums, health care
providers may struggle to afford doses for their patients, and
uninsured people may not get vaccinated at all. And even one
person not getting vaccinated because they can't afford is a
health system failure.
Biopharmaceutical innovation can cure disease, extend
lives, and epidemics, and they should be praised for that. But
the real power of that innovation comes from guaranteeing that
every community, no matter of their income or zip code, has
access. So, during the height of the crisis, it cost about $26
per patient for the Federal Government to vaccinate an
individual.
For a family of four, that is $104. The price you are now
talking about of $130 times four for a family of four brings
that price out to $520 for a family of four, up from $104. So,
you can see why we are so concerned. That is a huge price
increase. It is clearly going to be limiting access for many
people in our society. And so, my question to you is, do you
have a way of lowering that price even further?
Have you finished all of your calculations? Because just by
pricing it at that level, our Country is going to see millions
of people unable to be able to afford it. And if they can
afford it, it is only because insurance premiums are going to
be going up for them and for Americans across the country. Can
you lower it any further?
Mr. Bancel. Thank you, Senator, for your question. So let
me start with access. Because of how things are set up in the
country, people that are insured, will have no out of pocket.
People that are not insured, we are currently working on the
program and want to make sure it is as easy as possible to
access it so that people who are not insured also have access
to a vaccine at no cost.
That is very, very important to us. The big unknown for us
as we move forward is the unknown and the complexity. We do not
know what volume will be required in the fall of 2023. We do
not know how much wastage there will be in the country. If you
look at the fall of 2022, I think this is interesting data to
think about and reflect upon.
U.S. Government bought 160 million doses, 50 only million
went into arms. So, the true cost to the U.S. taxpayer was way
above $26 because they paid for all the doses that ended up
going to waste.
This does not include the costs of distribution, which now
we are going to have to bear. So over time we would have to see
where things stabilize in terms of volume----
Senator Markey. I appreciate that. It is only that as time
goes on, identifying where the waste is becomes easier and
easier because of experience. So obviously that was an absolute
rush that we were in.
But as time goes on, you get better in terms of
efficiencies in logistics and making sure that the number of
people who we think are going to be wanted are matched up
within a logistical system that gets it to them.
I guess what I would say to you is that it is important to
be looking at additional efficiencies, additional ways you can
lower this price, because it is going to be critical to making
Americans feel they can afford it. And following on that,
Moderna announced that you have develop a potential cancer
treatment for melanoma using mRNA technology, which is an
exciting development in cancer treatment.
But Merck's cancer drug list price is $175,000, $175,000.
And it generated $21 billion in revenue while patients skip
treatment or take on significant medical debt. So, Mr. Bancel,
how can you use your role to ensure that the cancer drugs you
are developing are affordable for people who are going to need
them?
Mr. Bancel. Thank you, Senator, for your question. That is
something we will look into it as time goes by, closer to
launch. At this time, our focus is to start the phase 3 study
as fast as we can, because we believe, as you said, the data is
very encouraging. 44 percent reduction of recurrence of disease
or melanoma or deaths.
It is a big impact on patients. And as we get closer to
launch, we will have to figure out--we have to even invent how
to manufacture those drugs. Because unlike the vaccine which we
make in larger batches, this is an individualized medicine.
We make a different one for you or for me if we have
cancer, because we have to adapt to the general disease. So, we
will have to figure all those things out.
Senator Markey. A drug that is unaffordable is a
hallucination to ordinary people in our Country. So, it has to
be made more affordable. Thank you, Mr. Chairman.
The Chair. Senator Lujan.
Senator Lujan. Thank you, Mr. Chairman. And Mr. Bancel,
thank you for being with us today. We have heard a lot of
numbers thrown around today. So, my goal here is to try to shed
some light on that one and see if we can clear some things up.
I have a series of yes or no questions for you, sir. Before the
COVID vaccine, Moderna had never had a vaccine approved. Is
that correct?
Mr. Bancel. That is correct, Senator.
Senator Lujan. Yes or no, BARDA provided Moderna $1.7
million to support clinical trials related to COVID vaccine?
Mr. Bancel. That is correct, Senator.
Senator Lujan. Yes or no, the Federal Government promised
and provided $10 billion in guaranteed advance purchase orders
if Moderna successfully developed a vaccine?
Mr. Bancel. That discussion happened later, Senator. It was
different from the BARDA discussion.
Senator Lujan. That sounds like a long way of saying yes.
Is the answer to that question, yes, or no?
Mr. Bancel. Can you repeat the question, please, sir?
Senator Lujan. Yes or no, the Federal Government promised
and provided $10 billion in guaranteed advance purchase orders
if Moderna successfully developed a vaccine?
Mr. Bancel. It was actually in tranche, Senator. It was not
$10 billion at the beginning. The Government started by
ordering 100 million and had the rights to----
Senator Lujan. We can have a disagreement there. I think if
I go back and look at the facts here, the Federal Government
guaranteed $10 billion. We can--if you would like some time to
clear that up, I can submit a question to the record. Yes or
no, that deal allowed Moderna to secure early supplies of
component parts to speed up production.
Mr. Bancel. Actually no, Senator. We had to raise capital
in the public market in May 2020, $1.3 billion----
Senator Lujan. Will getting a $10 billion guarantee help
you raise more money from the market?
Mr. Bancel. We do not have that guarantee--the purchase
agreement----
Senator Lujan. Okay. I am going to move on. I appreciate
that. So, you disagree with the question that I asked?
Mr. Bancel. Yes.
Senator Lujan. Okay. Despite the Federal Government
investing early and heavily in Moderna, the Federal Government
has been repeatedly asked to increase its payment per dose. Yes
or no, the Federal Government most recently bought boosters
from Moderna at about $26?
Mr. Bancel. I think that is correct, sir.
Senator Lujan. For the record, the $26 price represents a
73 percent increase in the price per dose compared to the last
purchase the general Government made in June 2021 when it was
$16.52 per dose.
Mr. Bancel. This is because of a discount. As I mentioned,
we provided a discount for the initial purchase, equivalent to
$2.9 billion that of discount to reimburse BARDA. It is why the
initial price in 2020 was much lower.
Senator Lujan. I appreciate you sharing that response, Mr.
Bancel. I have heard it a few times today. Pharmaceutical
companies set the price. There has been a whole conversation
about this. There is a low price and there is a lowest price,
and then there is a broken price, and then there is a discount
price.
But you still make money. So, I would like to have another
hearing maybe on that, Mr. Chairman, so that we understand
indeed what the lowest price is, because if there is a low
price and then there is a discount offered, the company agrees
to negotiation to offer the discounted price, and I am certain
you are still making money on that.
Now, that may be my bias and my very elementary
understanding of a very complex, industrial complex here. But
nonetheless, I would like to move on there and very much
appreciate your explanation of the discount and pointed that to
the $26 and $16.52.
While the huge purchaser, like the Federal Government,
likely received a discount for bulk, what you just described,
smaller purchasers were still paying a higher price. Is that
correct?
Mr. Bancel. That is correct, sir.
Senator Lujan. They were paying $37 per dose or $32 to $37
per dose. Does that sound correct?
Mr. Bancel. Which customer, Senator?
Senator Lujan. The volume purchasers.
Mr. Bancel. Outside the U.S. you mean? Because in the U.S.,
we had only one customer, the U.S. Outside the U.S. It depends
on volume, yes.
Senator Lujan. Yet Moderna announced that it plans to sell
the vaccine in commercial market from $110 to $130, which is a
400 percent increase. Is that correct?
Mr. Bancel. That is a price where we tend to sell it at.
Senator Lujan. There is still about 30 percent of Americans
that Moderna estimates will still need a shot. That is a lot of
people. And in 2002, yes or no, Mr. Bancel, Moderna matched the
$3.3 billion it spent on research and development with $3.3
billion in stock buyback.
Mr. Bancel. In 2022. Yes, it is correct, Senator.
Senator Lujan. Now, Jamie Dimon, who is the CEO of Chase,
some of you may know who he is. He once described stock
buybacks as one of the last uses of excess capital,
particularly after investing in growth. I am trying to
understand the statements that have been put forth by Moderna
here.
According to your last call earning, you have $18 billion
cash on hand and you plan to only spend $4.5 billion on
additional R&D over the next year. For a company that has never
had a commercial drug product before the COVID vaccine, that is
a lot of profit.
Where I will conclude here, Mr. Chairman, is I support
people doing well and profits in this regard. This was a
national pandemic, and I am sorry, people are still getting
sick and dying from COVID. That is real. Whether people want to
admit that or not, that is a real. This just seems--it is hard
for me to understand here.
The cash you are sitting on, your projections, looking at
what the U.S. Government did, not just with investment, but
accelerated treatment when it came to attention to approving a
drug that was going to save people's lives. And I appreciate
every one that was responsible for this. I am just having a
hard time with this. Thank you, Mr. Chairman.
The Chair. Thank you, Senator Lujan. I am going to ask some
additional questions, then give the mic over to Senator
Cassidy.
The issue we are really discussing today, and Senator Lujan
raised it, I think significantly, is some of us have a hard
time understanding how a company that made $21 billion in
profit, a company that enabled you and your associates to
become multi-billionaires, a company that would not have
developed this vaccine without the help of the taxpayers of
this country, now comes before the public and says, oh, by the
way, we want to quadruple prices, which will mean that the
deficit goes up, the taxes go up because of the increased
expense that Medicare and Medicaid and VA have to pay.
I concur with Senator Lujan about that issue. I want to ask
you, earlier, in response to Senator Smith, you talked about
negotiating prices. Am I hearing from you that in fact you are
prepared not to charge $130 for a vaccine to the U.S.
Government, but less than that? Is that what I hear?
Mr. Bancel. What I am saying, Mr. Chairman, is there is a
list price. It depends if it is a single dose product or
prefilled syringe product. There is a list price are on the
$130. And then with the different customers, they are going to
be discussions.
The Chair. But that is an issue that many have raised. We
have no transparency in pricing. It is a totally insane
situation. Everybody pays a different price. The U.S.
Government helped you develop that vaccine. It is a huge
consumer. Are you prepared to substantially charge less for the
vaccine to the U.S. Government and our agencies?
Mr. Bancel. Given the situation at hand, Mr. Chairman, we
have no idea of a volume that will be needed this year. We have
very increased complexity.
The Chair. You have complexity, but you have money for
stock buybacks by the billions and you guys became
billionaires. That doesn't seem too complex to me. Let me ask
you this question at least. The United States pays, the people
in our Country pay the highest prices in the world for
prescription drugs in general, something this Committee will
work on. Will you at least tell us today that the price you are
charging for the vaccine will be lower than what other
countries around the world are paying? Or once again, we are
going to pay the highest prices?
Mr. Bancel. Mr. Chairman, the price will depend on the
value in each country. The cost of health care is different in
each country.
The Chair. That is not the answer. That is a whole, all
right--I am asking you a simple question. Your vaccine was
developed with the help of the U.S. Government. I am asking you
whether or not we are going to continue to pay the highest
prices in the world for that vaccine.
I understand everything is complex, but I also understand
you have money for stock buybacks and exorbitant compensation
packages for yourself. Will you at least tell the taxpayers of
this country that the price we pay for the vaccine will be less
than other countries?
Mr. Bancel. I cannot say that the price would be lower than
in other countries.
The Chair. All right. Let me ask you this. When you talk
about value, it is an interesting philosophical concept. In
your judgment, what does value mean to a woman who lost her
husband because the family cannot afford the price, the
outrageous price of a prescription drug? Is that a value that
we should consider or is it only--is that a value that we
should consider?
Mr. Bancel. We believe in access, Mr. Chairman. And as I
said, our products, we are going to work really hard for the
uninsured, that they are available for no cost.
The Chair. I understand. I may be asking you a broader
question than just Moderna. Senator Markey mentioned Pfizer
having a cancer drug for $175,000, I believe is what he said.
All right, what do you----
Mr. Bancel. That is another company.
The Chair. That is another company, of course, I know that.
But I am asking you, your statement, is--you talk about value
and the value is, well, we have helped the economy and we have
done all these things. True enough. But what about the value of
the human lives that are lost or the suffering while companies
make billions and people can't afford the price? Is that not a
value to be considered?
Mr. Bancel. Of course, Mr. Chairman. We need to work
together, industry and the Governments, and all the players in
the health care system to figure out how do we make sure the
products are available. I completely agree with you. We work
hard to make medicine and to do science to help people, so I
agree with you.
The Chair. Well, you raise an interesting question. Okay,
that is--and Senator Cassidy and Senator Romney kind of talked
about it. Now, tell me this, and this is kind of a value issue
that I think we should really get into as a nation. Jonas
Salk--you are familiar with Jonas Salk.
Invented the polio vaccine. Did not make billions for his
invention. In fact, he gave it away. And he said, I am so proud
to have created this vaccine just to save lives. Alexander
Fleming developed penicillin. A huge advance for medicine,
saved millions of lives. Frederick Banting sold his
intellectual property for $1 for insulin.
What do you think about those guys and those scientists who
say what, our function in life is to create wonderful drugs
that will ease human suffering and save lives, not to become
excessively rich. Do you think they were crazy?
Mr. Bancel. I think what they did was very noble. I think
what we have to do is to invest in new technology. If we do not
have a technology when the pandemic happened, there would have
been no Moderna vaccine, Mr. Chairman.
The Chair. Look, we all agree that we need the technology.
But what I am asking you and some of my friends here are
saying, is that the only thing that motivates you is to become
a billionaire.
Mr. Bancel. That is not true.
The Chair. All right. But then can we have a science where
people get paid well? I have no problem with Moderna making
money. What you are hearing here, massive cash paybacks.
You are becoming a multi-billionaire. Do we--should we
develop a counterculture, perhaps, which says your motive is
not just making billions, but developing all of the drugs we
need for the terrible diseases that this world faces?
Mr. Bancel. That is what we are doing, Mr. Chairman. That
is why Moderna is a different company. Our No. 1 investment
this year in R&D. As I mentioned, the $4.5 billion.
The Chair. How much do you put in stock buybacks?
Mr. Bancel. Sorry?
The Chair. How much do you provide in stock buybacks?
Mr. Bancel. We have not decided yet as well. The number of
a stock buyback that is still open is $2.8 billion, I think.
Our No. 1 priority is R&D. If we could invest more in R&D, we
would. The challenge we have is phase 3 studies takes time to
happen, Mr. Chairman.
The Chair. Let me ask you this. And again, I am not--I am
directing it to you, but it really applies to the whole
industry. If we were to say to you, if the Government were to
say to you, look, we are interested in cures in cancer,
obviously, diabetes, all the other--Alzheimer's, all the other
terrible illnesses we face.
We are prepared to make sure that your company makes a good
profit. Maybe you don't become a multi-billionaire, but you
make a good profit. And if you develop a cure for that
particular disease, you are going to make money on it, but we
are going to take the intellectual property and make it
available to the whole world so that people all over the world
at a very reasonable price will be able to benefit from that
discovery.
You make money, the world benefits. Everybody affords it.
What do you think about that concept?
Mr. Bancel. What is really hard in this industry, Mr.
Chairman, is the very risk of failure. Most drugs fail. 90
percent of drugs in clinical trial fail, as you are aware. And
that is what makes it really, really hard. What we want to do
is to get access. Let me share a couple examples.
We are working on having a plant in Kenya to help a low-
income country. There is an example of a rare disease called
Crigler-Najjar. It is a very small, 100, 200 kids. We couldn't
find a way to do it or it will be too expensive.
The Chair. But if we said to you, we are going to cover,
you are not going to fail, you will be compensated. We are
willing to pay you good money. You are going to get rich. Maybe
not a multi-billionaire.
You will do very, very well. We will cover the risk. But if
you succeed, that formulation is going to be available to
people all over the world so that they can get that drug. We
cover the risk. What do you think about that?
Mr. Bancel. I will have to look into the details, Mr.
Chairman, because, again, the risk is--I don't know how you
manage the risk. I mean, are you suggesting in that thought
process that the Government will pay all of R&D--?
The Chair. That is exactly what I am suggesting.
Mr. Bancel. Okay.
The Chair. That is the deal. We are going to cover the R&D.
You succeed, you are going to make profit, but the product goes
all over to the world so that people can afford it.
Mr. Bancel. I think we have to understand the details to
have an opinion.
The Chair. Senator Markey made the point that I think
millions of people appreciate, you can come up with all the
great drugs in the world, we appreciate that, but if people
can't access them, they go broke or they go bankrupt hoping to
buy them, it doesn't mean anything to those people.
Certainly, by the way, we are talking about America, the
wealthiest country on earth. What about Africa and poor people
around the world? Should they die because they cannot afford
that prescription drug?
Senator Cassidy.
Senator Cassidy. I will be very short. One, I applaud those
like Banting, and Best, and others like Maurice Hilleman, who
developed vaccine and made them generally available. But I also
want to quote in 1962 on a Senate hearing on drug development
and the role of patents, Dr. Vannevar Bush, who is kind of
famous for his role in the development of science in the United
States.
At the time, he was the former head of the U.S. Office of
Scientific Research and Development. He also led the first
National Research and Development Council and contributed to
the Manhattan Project. And he lamented that Fleming, when he
discovered penicillin, didn't seek a patent, saying that if he
had, we would have had penicillin 10 years earlier than we
finally got it.
I say that because I learned, having emerged from a
hospital for the uninsured, that there is an ecosystem of
investors. And when you are a startup with really no assets,
there are investors who invested in your company, as Senator
Romney said, maybe taking a loss, but maybe winning big.
They could have invested in anything else, but they
invested in you. And they did it because they anticipated a
return. Some of them got it. Some of them did not. That they
invested in a startup that failed, they lost their money. So, I
say that because it isn't just so much the company that is
established.
They may be a legitimate beast. But we are speaking about a
company starting. I have learned that there is an ecosystem and
they cannot get money unless that investor can see a return on
that which he has put forward. No need to comment. With that, I
yield.
The Chair. Thank you very much. And Mr. Bancel, thank you
very much for being with us this morning. We appreciate it.
Mr. Bancel. Thank you, Mr. Chairman.
The Chair. Now we are going to call our next panel. Our
first witness will be Dr. Christopher Morten. Our next witness
will be Dr. Ameet Sarpatwari. And our third witness will be Dr.
Craig Garthwaite.
Let me thank all of our witnesses for being with us and for
your patience. We appreciate your being here. Let's begin with
Dr. Christopher Morten, who is an Associate Clinical Professor
of Law at Columbia Law School.
Dr. Morten is trained as an Organic Chemist and Lawyer. He
is a leading expert on equitable access to medicine. Dr.
Morten, thanks for being here.
STATEMENT OF CHRISTOPHER J. MORTEN, PH.D., J.D., ASSOCIATE
CLINICAL PROFESSOR OF LAW, COLUMBIA LAW SCHOOL, NEW YORK, NY
Dr. Morten. Chairman Sanders, Ranking Member Cassidy, and
distinguished Members, thank you for this hearing and for
inviting me to testify. mRNA based COVID vaccines are among the
most important inventions of my lifetime.
They have saved millions of lives. For 2 years, we, the
people of the United States, had free access to these vaccines
because our Government purchased large quantities at affordable
prices and distributed them for free. But that, sadly is
changing. The U.S. Government will leave Americans on our own
to foot the bill.
Moderna has proposed massive price increases, from $20 or
$30 a dose to $110 or even $130, though each dose costs less
than $3 to make. Moderna's proposed price increases will mean
that people who need boosters won't get them. More people will
get sick and die. Higher vaccine prices hurt us all. Higher
prices mean higher insurance costs, including higher Medicare
premiums.
Mr. Bancel claims the value of these vaccines justifies
Moderna's proposed price increases. But his testimony ignored a
key question, who created that value? It was the U.S.
Government, the American taxpayer, that spent billions. It was
Government scientists that toiled alongside Moderna's.
To quote Moncef Slaoui, former head of Operation Warp Speed
and a Moderna board member, the U.S. Government, ``held Moderna
by the hand on a daily basis Moderna is not the primary
inventor of any of the three key scientific features of the NIH
Moderna vaccine that Moderna itself has identified as critical
to its value.
We gave Moderna the specific mRNA sequence used in the
vaccine. We designed and ran Moderna's early clinical trials.
We gave Moderna money and resources to expand its
manufacturing.
The National Institutes of Health was so integral that it
aptly named the vaccine, the NIH-Moderna vaccine, built on over
a decade of pioneering research into coronaviruses at NIH. Yet
Moderna has repeatedly exaggerated its own contributions and
downplayed or even erased essential Government support at
almost every stage.
For example, Moderna's lawyers intentionally omitted NIH
scientists as inventors of a key patent application, the same
NIH scientists who sent Moderna the vaccine's precise mRNA
sequence. To quote NIH, ``omitting NIH inventors from the
principal patent application deprives nature of a co-ownership
interest.''
Mr. Bancel just confirmed a moment ago that Moderna
abandoned that patent application rather than share control
with NIH. To be clear, Moderna's scientists and engineers made
many contributions of their own, as did many academic
scientists. These people and their work deserve credit and
celebration, too.
But Moderna cannot claim the vaccine's value for itself.
And the American people, the most important creators of the
value of this vaccine, deserve a voice in the debate over the
company's prices. To quote Senator Casey, ``our partnership
should not be extinguished just because we think the pandemic
is over.''
To justify price increases, Moderna also points to $4.5
billion in R&D commitments this year. But $4.5 billion is
easily doable for this company. In 2021 and 2022, Moderna made
over $20 billion in profits. The company has been so
spectacularly successful that many of its executives and early
investors became billionaires, including Mr. Bancel.
As I speak right now, Mr. Bancel's net worth is reportedly
about $4.7 billion, meaning he might be rich enough to fund
Moderna's entire 2023 R&D expenditure out of his own pocket. In
2022, Moderna spent $3.3 billion on stock buybacks to enrich
Mr. Bancel and other shareholders.
That is as much as the company spent on R&D last year.
Moderna's price increases are unjustifiable. If we let them
happen, we set a terrible policy precedent. Other companies
will double down on Moderna's playbook, extract billions in
private profits from public science and public money, leave
Americans with higher costs, inaccessible technologies, and
poorer health.
I urge Moderna, do not raise your prices. Your vaccine is
clearly profitable at $20 a dose. And if Moderna insists on
higher prices, our leaders should act. I will make two
recommendations now, and I present more in my written
testimony.
First, Congress and the White House should work together to
resume bulk purchases of COVID vaccines. Continue to use the
buying power of the American people and provide vaccines free
of charge to everyone.
Second, NIH and other scientific agencies must cut harder
bargains with their industry partners so that we the people get
access to the next generation of medical products that our
money creates and that we need to survive and thrive. Thank
you.
[The prepared statement of Dr. Morten follows:]
prepared statement of christopher morten
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
______
[summary statement of christopher morten]
The NIH-Moderna vaccine is in many ways an incredible success
story: A public-private partnership developed and deployed an
innovative new vaccine in record time. Millions of deaths and
hospitalizations were averted. Moderna and its investors made tens of
billions of dollars.
For 2 years, we, the people of the United States, had free access
to this vaccine, because our government purchased large quantities at
affordable prices and distributed them for free. That, sadly, is
changing--and the story of the NIH-Moderna vaccine may turn to failure.
The U.S. Government plans to leave Americans on their own to figure
out how to pay for booster shots. Moderna proposes massive price
increases, from $20-$30 per dose to $110 or even $130, though each
costs less than $3 to make. Moderna's proposed increases would likely
cause some people who need boosters to forego them. More Americans
would get sick and die.
Moderna pledges a patient assistance program, but these programs
are complicated and inevitably miss people--especially those most
likely to need assistance. Even with a patient assistance program,
higher vaccine prices would hurt us all through higher systemic costs.
Moderna has given us reason to take its pledges skeptically. As I
show in my testimony, Moderna broke its past pledge not to enforce
patents while the pandemic continues, and, just this month, Mr. Bancel
made false statements when defending Moderna's proposed price
increases.
Moderna's proposed price increases are indefensible. Moderna cannot
reasonably claim the value of the NIH-Moderna vaccine for itself. Much,
and arguably most, of the vaccine's value is traceable to the American
public and our tax dollars. Americans should be deeply proud of our
collective contributions, which included not just enormous and
unprecedented direct financial support of Moderna but also innovative,
prescient scientific research conducted by NIH and NIH-funded
university researchers years before COVID-19 emerged.
My testimony summarizes the scientific history of three key
features of the NIH-Moderna vaccine--three features that Moderna's own
scientists have identified as essential to the vaccine's success. U.S.
Government and government-funded academic researchers can proudly claim
to have invented two of these three features. Moderna lacks a strong
claim to have invented any of these three features--though that has not
stopped Moderna from exaggerating its own role or omitting NIH
scientists from an important patent application.
To be sure, Moderna's scientists and engineers have made many other
meaningful contributions to other features of the vaccine. They deserve
celebration, even as the company's executives deserve criticism.
The U.S. Government and Moderna were once close partners. Moncef
Slaoui, former head of Operation Warp Speed, said the government ``held
Moderna by the hand on a daily basis.'' We had a bargain--perhaps
unwritten, but a bargain nonetheless. In my view, Moderna's new plan to
quadruple prices for the American public breaks that partnership and
that bargain. It sets a troubling precedent. Other powerful companies
will double down on Moderna's playbook: Exploit public science and
public money to extract billions in private profit; leave us all with
higher costs, inaccessible technologies, poorer health.
If Moderna insists on higher prices, I urge our leaders to act,
including the Members of this Committee. I'll make two recommendations
here. (I present more in my written testimony.)
1. Congress and the White House should work together to resume bulk
purchases of COVID vaccines. Leverage the buying power of the American
people. Provide affordable vaccines to all.
2. NIH and other scientific agencies must cut harder bargains with
pharma industry partners--with explicit, legally binding commitments to
shared control--so that the public gets access to the next generation
of medical products that our money creates and that we need to survive
and thrive.
______
The Chair. Thank you very much. Our next witness is Dr.
Ameet Sarpatwari, who is an Assistant Professor of Medicine at
Harvard Medical School. He is an Epidemiologist and a Lawyer.
He is an expert on the role of public investment in driving new
medical breakthroughs. Doctor, thanks very much for being with
us.
STATEMENT OF AMEET SARPATWARI, PH.D., J.D., ASSISTANT PROFESSOR
OF MEDICINE, HARVARD MEDICAL SCHOOL, BOSTON, MA
Dr. Sarpatwari. Chairman Sanders, Ranking Member Cassidy,
and distinguished Members of the Senate HELP Committee, thank
you for the opportunity to testify. I urge you today to
strongly condemn and swiftly act to prevent Moderna's attempt
to quadruple the price of the NIH Moderna vaccine, which would
fill the company's coffers with unmerited public funds and
severely threaten public health.
The reasons why, centered on the extraordinary role the
Federal Government played in Moderna's success, and the
substantial barrier to access that this price increase would
have. Building on $337 million in pre-pandemic funding of
research directly contributing to key investments in mRNA
vaccines, the Federal Government made a series of unprecedented
investments in multiple pharmaceutical companies to develop a
vaccine under Operation Warp Speed.
Moderna was one of the largest beneficiaries, receiving
over $2 billion to support clinical trials of the NIH Moderna
vaccine, $1.5 billion in an advanced market purchase for a then
unapproved product, and over $50 million to scale up
manufacturing. In this respect, the Federal Government turned
traditional therapeutic development on its head.
The brunt of the risk, for which we reward pharmaceutical
companies the ability to charge monopoly like pricing, was
borne by taxpayers. Moderna's benefits from the Federal
Government didn't end there.
NIH scientists co-developed the mRNA sequence encoding the
vaccines immunogen and independently developed the vaccine
spike protein. Moderna was also granted broad immunity against
patent infringement for use of other patented technologies,
which the company has cited as a defense in ongoing litigation.
Through these Federal Government contributions, Moderna, a
company that had never brought a product to market, was able to
secure emergency use authorization of the NIH Moderna vaccine,
benefiting handsomely from its use.
Moderna earned $37 billion in revenue in 2021 and 2022, $20
billion of which was profit. Despite these riches, Moderna has
at every turn sought to enrich itself further at the expense of
Americans and the global South.
In the U.S., Moderna has already denied the pivotal
contributions of the Federal Government in the development of
the NIH Moderna vaccine and broken its pledge not to enforce
its patents during the pandemic.
In October 2021, as the pandemic raged globally, Moderna
was supplying its doses almost exclusively to wealthy nations,
more so than any other manufacturer. Moderna's price increase
is an escalation in this troubling pattern of behavior and a
step too far.
It cannot be justified based on the value of the vaccine
which was created on the backs of taxpayers and with the
central contributions of NIH scientists. It also cannot be
justified on the need for research and development.
Moderna had ample funds for this. Flush with money, it
maximized short term profit. In 2022, Moderna spent more on
stock buybacks than it did on research and development.
Moderna's offer of a patient assistance program is no solution.
These programs are often complicated with applications that
take considerable time to complete and frequent changes in
eligibility, as well as onerous income documentation
requirements.
We have received no details of this patient assistance
program to date. Given these barriers, it is likely that many
Americans will miss booster shots and this will result in more
infections and more deaths, particularly among vulnerable
populations. The public will also still bear the full cost of
an unconscionable price increase.
Now is the time to say enough. The Federal Government
should resume purchasing doses for all Americans, leveraging
its purchasing power to obtain a fair price. Such an act would
not threaten innovation or the willingness of companies to race
for a cure in a subsequent pandemic.
Instead, it would demonstrate a dual commitment to allow
pharmaceutical companies to profit handsomely for their efforts
under reduced risk, and to ensure reasonable access to
Americans in a time of crisis. Thank you.
[The prepared statement of Dr. Sarpatwari follows:]
prepared statement of ameet sarpatwari
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
______
[summary statement of ameet sarpatwari]
Moderna's proposed 400 percent price increase of the NIH-Moderna
vaccine, from $26 to $110-130 per dose, is unjustified. Although the
vaccine has saved countless lives, Moderna is not entitled to extract
its full value, which was created on the backs of taxpayers. Public
funding, research and development, and knowledge played a large role in
the vaccine's commercialization. In addition to $337 million in pre-
pandemic funding of research development that directly contributed to
key inventions in mRNA vaccines, the Federal Government provided
Moderna with over $2 billion to support clinical trials, $1.5 billion
in an advanced market commitment to purchase a still unapproved
vaccine, and protection to use others' patents critical for vaccine
development. For this unprecedented ``de-risking,'' Moderna owes
Americans affordable access to the NIH-Moderna vaccine.
The argument that the revenue derived from the proposed price
increase is needed to support research and development is also weak.
Moderna had ample funds for this purpose. Over the last 2 years,
Moderna reported $37 billion in revenue, a staggering $20 billion of
which was profit. Yet, in 2022, Moderna spent more on stock buy backs
than on research and development.
Despite record profits, Moderna has repeatedly sought further
enrichment at the expense of not only Americans but also low-income
countries. In the U.S., Moderna has already implemented price
increases, denied critical contributions of the Federal Government in
the development of the NIH-Moderna vaccine, and broke its pledge not to
enforce its patents during the pandemic. Globally, as the pandemic
raged in the global south, Moderna was supplying its doses almost
exclusively to wealthy nations, more so than any other vaccine
manufacturer. Moderna's proposed price increase is an escalation in
this troubling pattern of behavior.
Were it to be implemented, the four fold price increase of the NIH-
Moderna vaccine would severely harm public health and financially
strain payers. Even with Moderna's still non-detailed patient
assistance plan for under-and uninsured people, there would be far
fewer vaccinations. This would increase the number of infections and
deaths from SARScoV-2 and provide more opportunities for the virus to
mutate. Additionally, if just 50 percent of American adults receive
done dose of a booster under the new price, payers would spend more
than the total cost of the U.S. purchasing vaccines for everyone at its
current price.
Now is the time to say enough. The Federal government should
continue placing public pressure on Moderna and resume purchasing doses
for all Americans, leveraging its purchasing power to obtain a fair
price. Such an act would not threaten innovation or the willingness of
companies to race for a cure in a subsequent pandemic. Instead, it
would demonstrate a dual commitment to allow pharmaceutical companies
to profit handsomely from their efforts under reduced risk and to
ensure reasonable access to Americans in times of crisis.
______
The Chair. Thank you very much. Our next panelist was
invited by Senator Cassidy, who is now voting, but I am happy
to introduce him.
Dr. Craig Garthwaite is the Herman Smith Research Professor
in Hospital and Health Services at Northwestern University. Is
an applied Economist whose research examines the business of
health care? Dr. Garthwaite, thanks a lot for being with us.
STATEMENT OF CRAIG GARTHWAITE, PH.D., M.P.P., HERMAN SMITH
RESEARCH PROFESSOR IN HOSPITAL AND HEALTH SERVICES MANAGEMENT,
KELLOGG SCHOOL OF MANAGEMENT, NORTHWESTERN UNIVERSITY,
EVANSTON, IL
Dr. Garthwaite. Thank you, Chairman Sanders, Ranking Member
Cassidy, and Members of the Committee for inviting me to
testify today. Today's hearing is about Moderna's decision to
raise prices for its COVID vaccine and some Members of the
Committee's desire to push back on that increase.
While potentially well-intentioned, the Government's
attempts to stop this price increase could impact drug
development well beyond both Moderna and the COVID-19 pandemic.
When the Government provided what is undisputedly a large
amount of funding to member Moderna, it did so without
regulatory conditions on future pricing.
It is inappropriate to now attempt to relitigate that
question after refusing to accept the funding. To put it quite
simply, the correct time for Government officials to discuss
price restrictions with Moderna was before they finalized the
funding agreement.
Facing such potential restrictions on future profits,
Moderna could have weighed its options and made the optimal
choice for its investors, who we will note, already provided $3
billion in private capital at that point.
We chose not to walk down that road, likely because we knew
it would delay the process of getting the lifesaving vaccine,
we so desired. That was a policy choice and one we should abide
by.
Moderna, perhaps ultimately naively, trusted the Government
would honor its commitments and not try to enact ex-post
modifications to the funding agreements. Notably, Pfizer had a
different view, and Pfizer CEO, I would also note, was not in
attendance today.
Trust of that nature, trust in the Government is critical
to our overall system for drug development. And for that
reason, why we gather today to ostensibly discuss vaccine
pricing, we are actually having a far broader conversation
about how economic markets can continue to provide new
innovations for patients.
Such markets are essential to discovering novel
pharmaceutical products. In those markets, we provide firms
making large investments in drug development with a time
limited period where they can profit from these successful
innovations. In this way, we tradeoff some reduction in access
today from higher prices for the incentives for firms to invest
in future products.
These incentives are critical drivers of innovation that
provide access to patients who might otherwise be left without
any treatments for horrendous medical conditions. Over the past
several decades, the world has enjoyed tremendous benefits from
this free market system of drug development.
Patients with diagnoses that previously amounted to death
sentences have been completely cured or now have entirely
manageable chronic conditions. Despite this progress, many
other patients struggle with serious unmet medical conditions,
and many others die every year because treatments simply do not
exist for their condition yet.
In debates about pharmaceutical pricing, access to
medications for these individuals is all too often left
unmentioned when we discuss the morality of drug pricing and
access. These patients depend on firms being willing to
continue to invest in future innovations.
After all, few of our existing treatments came to market
without meaningful private investment. Firms make such
investments when they believe there are clear and identifiable
rules that govern how they will earn potential returns with
successful innovations and a trustworthy regulatory state to
enforce those rules.
Historically, the U.S. Government has admirably served in
this trustworthy role, but I fear private firms watching these
hearings, along with other recent policy actions and statements
regarding Government price regulations and margin rates, are
beginning to doubt the future wisdom of this trust.
Understanding the potentially broader ramifications of a
loss in trust in Government does require acknowledging the
incontrovertible fact that new pharmaceutical products are
developed in an expensive ecosystem where private firms invest
large amounts of fixed and sunk capital with little certainty
of a profitable return.
While there may be some limited anecdotal evidence of
altruistic individuals giving up profits solely to benefit
society, these examples are unfortunately exceedingly rare.
Hoping such altruistic funding will emerge from the ether is
simply not a strategy for drug development.
Instead, we must accept the reality that the private firms
crucial to drug development can only attract the capital they
need if they can generate a risk adjusted return for their
investors that is sufficiently attractive compared to other
non-pharmaceutical investments. And most of these investments
ultimately fail.
Firms can withstand these failures because a small number
of large successful investments support a larger number of
failed projects. If firms believe that policymakers will
ultimately expropriate the gains from investments that are
deemed too successful, they will not invest in the first place
and we will get fewer products.
As much as we may not like it, this is true even when it
means allowing firms to capture large windfalls from products
that generate massive amounts of value for society. And if we
choose to ignore this fact in favor of specious arguments and
grandstanding about pharmaceutical greed, we will clearly
forfeit access to future medical innovations.
That said, our goal is not to provide firms with unlimited
returns on their investment. We must aim to balance the
incentives necessary to attract private capital with the
ability of patients to access the resulting medical
innovations, and I provide numerous suggestions to that end in
my written testimony.
Regardless of the choices that we make, it is critical that
we understand that if we decrease spending on health care--on
pharmaceuticals, we will get fewer products. That might be
acceptable. We might want less innovation and lower prices. But
that is the debate we should have.
We should be debating how much innovation are we willing to
give up, not falling for promises that we will have lower
spending and the same level or more prices. Thank you, Senator
Sanders and Senator Cassidy.
[The prepared statement of Dr. Garthwaite follows:]
prepared statement of craig garthwaite
In contrast to all other developed countries, the United States
relies more heavily on private markets to finance and provide
healthcare goods and services. While this is a source of consternation
for some, using economic markets for healthcare is not a policy
accident and instead represents the many advantages provided by market-
based healthcare. A large and diverse country such as the United States
reflects a wide variety of preferences and meaningful differences in
the willingness to pay for quality. In this setting, the central
planning inherent to regulated prices is unlikely to maximize health
and welfare, and an economic market is the superior method of
allocating goods and services. This is even more true once we consider
the wide variety of economic actors that take part in the development
of innovative new healthcare products and services. It is hard to
imagine that the Federal Government, or frankly any other plausible
actor, would have enough omniscience to balance these forces more
efficiently than a market. Therefore, despite many contentions to the
contrary, a market-based system remains the best available mechanism
for providing the appropriate incentives for long term welfare
maximization.
Nowhere is the benefit of economic markets for healthcare clearer
than in the development of novel pharmaceutical products. Over the past
several decades, the world has benefited from remarkable progress in
the ability to address a wide range of medical conditions using
pharmaceutical innovations. Patients with medical conditions that
previously amounted to death sentences have either been completely
cured or now live with manageable chronic conditions, those suffering
from a multitude of cancers have seen their lives meaningfully
extended, and cardiovascular mortality has remarkable declined.
Few, if any, of these advancements came to market without the
involvement of private firms investing capital in a market-based
setting. This demonstrates the centrality of private markets and
capital to our system of drug development. Given this fact, our
policies should focus on how best to support and organize efficient
markets for drug development and commercialization. Such markets
require, among other features, a clear and identifiable set of rules
governing how firms will earn potential returns from successful
innovations and a trustworthy regulatory state to enforce those rules.
Today's hearing focuses on the question of whether Moderna, a
private firm that received unconditional government funding, should be
able to charge a market price for its product. While this topic is
important, it is imperative we also understand that such discussions
have the potential to impact more meaningful questions about optimal
drug development. In particular, we must be aware that private firms
and their investors are watching hearings such as these to better
understand the degree to which they can continue to place their trust
in the explicit and implicit contracts that have historically served as
the foundation of their investments in drug development. Therefore,
attempts by the government to change the rules of the game mid-stream
for Moderna (or other firms) will likely have far reaching consequences
that impact health and welfare long into the future.
Understanding the potentially broader ramifications of today's
hearing requires acknowledging the basic and incontrovertible fact that
new pharmaceutical products are developed in an expensive and risky
ecosystem that involves a variety of institutions and firms. Each type
of firm plays a different role along the complex path from early stage
research to proof of concept to clinical trials and ultimately, if
successful, to commercialization. The variety of organizations at each
step of this process are motivated by different goals and each provides
their own unique contribution to this development process. Therefore,
optimal policies must carefully understand and respect the incentives
of these firms.
While early-stage research is more often funded by public actors
(i.e. governments or nonprofit organizations), this is only the first
step in the long path from bench to bedside. Navigating the rest of
this path requires private firms to invest large amounts of fixed and
sunk capital with little certainty of a profitable return. Firms are
willing to make these investments based on risk adjusted models of the
profitability of their investments--models that require making strong
predictions and assumptions about market conditions many years in the
future.
These private firms can only attract the capital required for drug
development if they can generate a return for their investors that is
sufficiently attractive compared to other non-pharmaceutical investment
options. This is the fundamental economic reality at the center of the
drug development process. If we choose to ignore this fact in favor
specious arguments and grandstanding about pharmaceutical greed, it is
incontrovertible that we will forfeit access to some future medical
innovations--which will likely decrease health and welfare.
While uncertainty around the scientific and commercial prospects of
potential products makes all pharmaceutical investments inherently
risky, we should strive to reduce additional uncertainty stemming from
the policy environment. This is particularly true for policies that
alter the rules of the game only after firms make their large, fixed,
and sunk investments to develop new products. Sunk investments are
expenditures that cannot be recouped by firms after they are made. For
example, once a firm spends money to run a clinical trial it is unable
to get that money back if the trial fails or the product is not
commercially successful. To avoid being stuck in unprofitable
situations, before making such an investment firms must be careful and
diligent in attempting to predict how the market might subsequently
evolve.
If firms believe policymakers will expropriate the gains from
investments that are deemed ``too successful,'' they will almost
certainly be less willing to make the same portfolio of investments as
they make today. We must always remember that it is this portfolio
approach, where a small number of large successful investments support
a larger number of failed projects, that serves as the foundation of
drug development. If we desire to have firms to continue to willingly
make the large capital investments necessary to promote health and
economic welfare, we must sustain a system where firms trust that the
government will be a reliable counter party that establishes the rules
of the game and then abides by those rules. This is true even when it
means allowing firms to capture large windfalls from products that
generate massive amounts of value and health for society.
The potential for sowing distrust in the process exists across a
wide variety of dimensions. Consider the question of whether or not
Moderna should be constrained from raising the price of SPIKEVAX (i.e.
its vaccine for Covid-19). It is clear and undisputed that Moderna
benefited from extensive government financial support in the
development of this vaccine through Operation Warp Speed (OWS). It is
also clear that this was part of an agreement our government made with
this private firm where we provided zero cost of capital funds. In
return, Moderna was expected to work as quickly as possible to develop
a vaccine that would address the negative health and economic effects
from the pandemic. It was a proverbial win-win situation. Moderna would
only earn large profits for its investors if they could develop a
workable vaccine. Society would get such a vaccine more quickly than if
we relied solely on the provision of private capital in remarkably
uncertain times.
We provided these public funds to decrease a private firm's risk of
product development and increase the speed of these products to
patients. Absent government support, it is unclear whether private
capital markets would have provided a similar amount of investment on a
similarly short timeframe. When these transfers occurred in early 2020,
private firms faced risks from developing vaccines along two
dimensions. First, they faced commercial risk, i.e. the possibility
that by the time a vaccine was developed and manufactured in sufficient
quantities the pandemic would be ``over'' and demand for the product
would be quite low (or at least lower than would have been necessary to
justify investing in the vaccine in the first place). This is a common
concern of firms reacting to a novel pandemic with an uncertain
duration. To address this first type of risk, the U.S. Government (and
other governments around the world) offered firms funding in the form
of advanced market commitments (AMCs). These commitments guaranteed
purchases of specific amounts of vaccine if the product was proven to
be successful--purchases that would occur even if the pandemic ``burned
itself out'' and demand for the vaccines was low.
The second form of funding was for clinical trials. This type of
funding was intended to shield firms such as Moderna from scientific
risk about whether its product would actually succeed in clinical
trials. In this case there was meaningful scientific risk because mRNA
vaccines had never been developed. As a result, Moderna faced risk
related to both this entire scientific approach to vaccine development
as well as to their specific approach to this vaccine. In this
particular case, this scientific risk was compounded by additional
manufacturing risk related to a desire to have large amounts of product
available as soon as possible--which required expending resources on
manufacturing assets before it was even known whether mRNA would prove
successful as a means of developing a vaccine of this nature.
Moderna accepted such funds to quickly move forward and develop a
vaccine. \1\ Absent such funding it is unlikely Moderna would have been
willing to move as quickly as they ultimately did. For example, it
likely would have followed the more traditional and deliberate
development path of waiting until each trial was over before initiating
the next stage of development. It is certainly unlikely it would have
built the manufacturing scale necessary to quickly serve the entire
market before it knew whether its product actually worked.
---------------------------------------------------------------------------
\1\ Notably, Pfizer (the other firm successful at developing an
mRNA based Covid-19 vaccine) did not accept funding to shield it from
scientific risk. Perhaps they feared that there were unstated strings
attached to such funding--a belief that might seem prescient given
their CEO is not testifying today despite announcing a similarly large
price increase.
This swift approach was exactly our goal as a nation. It is my
understanding from publicly available documents and news coverage that
there were no constraints placed on Moderna about the future pricing of
its product if it accepted these funds. \2\ If the government did not
desire for this to be the case, then they had the opportunity to
address this issue at the time. Of course, that likely would have
slowed down the process of vaccine development, which was our priority
and appears to have been deemed an unacceptable cost in 2020.
---------------------------------------------------------------------------
\2\ It is possible that such constraints exist in parts of the
contract that have not been disclosed, but I have not seen any evidence
of this fact.
Therefore, Moderna entered into an agreement with the U.S.
Government to accept the funds and develop the project with the
reasonable expectation that at some point they would be able to charge
a higher market price for the product than what they would initially
charge the government. In understanding the decision facing Moderna's
leadership at this time, it is important to consider that while the
government paid for much of the scientific activity related to
SPIKEVAX, this product would never have been possible without the
meaningful private capital used to develop all of Moderna's existing
infrastructure, including, but not limited to, its platform for
developing mRNA vaccines. Moderna had previously raised over $2 billion
dollars in private capital from investors who were, in 2020, still
seeking a profitable return on these investments. \3\, \4\ Moderna was
also a publicly traded firm with a responsibility to maximize long term
shareholder value. If faced with a future constraint on pricing as a
condition for receiving government funds, Moderna's leadership would
have evaluated that option against raising additional private capital
that would have initially been costlier but would not have included
such restrictions on future prices (and the resulting profits).
Moderna's leadership accepted the government funding with the belief
they could trust the government to be a reliable counter party that
would not try and impose ex post conditions that were not present in
the original funding agreement. \5\
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\3\ https://news.crunchbase.com/startups/with-flagship-behind-it-
moderna-quickly-scaled-from-startup-to-world-changing-biotech/.
\4\ https://www.science.org/content/article/mysterious-2-billion-
biotech-revealing-secrets-behind-its-new-drugs-and-vaccines.
\5\ It is my understanding that this initial funding agreement did
contain a large number of restrictions on how funds could be used, so
it seems even more reasonable that firm believed it would represent a
complete set of future constraints.
Moderna lived up to its end of the deal by providing a vaccine in a
timeline that beat most expectations. \6\ As a result, we were able to
limit the negative health effects for individuals who became infected
with SARS-COV-2 and governments felt comfortable reopening the economy.
The question is whether the government will now live up to its end of
the bargain or will instead attempt to change the terms of the deal
they offered by instituting ex post controls on the pricing of
SPIKEVAX. This includes attempts to shame Moderna for undertaking the
actions that we should have rationally expected from a for-profit
publicly traded firm. It would be unfortunate if Moderna's trust in the
government ultimately proved to be niave. However, this hearing and the
broader commentary around Moderna's actions since developing a world-
saving vaccine casts reasonable doubt on the U.S. Government as a
reliable counter party for drug development--a reliability that has
always served as a fundamental building block of innovation. This could
have direct impacts on the willingness of firms to engage with the
government in the case of another pandemic and broader indirect effects
if firms lose more general trust in the government.
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\6\ https://www.wsj.com/articles/moderna-says-its-covid-19-
vaccine-was-94-5-effective-in-latest-trial-11605528008.
The potential broader loss of trust is only exacerbated by recent
commentary and policy proposals regarding expansions to price setting
power for pharmaceuticals granted to the Center for Medicare and
Medicaid Services (CMS) as part of the Inflation Reduction Act (IRA).
The already passed legislation will decrease investments in particular
types of products likely to be affected by government mandated prices
in the future. Perhaps more concerning, President Biden and other
policymakers are already attempting to expand the scope of the IRA
before it has been implemented or its impacts have been evaluated.
Suggesting a desire to shrink the time period before negotiation to
only 5 years would further chill investments. \7\ Even the suggestion
of meaningful uncertainty of this nature around the value of potential
investments will likely cause firms to pull back capital they might
otherwise have invested.
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\7\ https://www.biopharmadive.com/news/biden-2024-budget-proposal-
drug-prices/644674/.
A degradation of trust in government institutions is not an
abstract concern. A fundamental tenet of investments in new
pharmaceutical products is that a robust, fair, and trustworthy
regulatory state will enforce existing market rules and regulations.
Beyond the methods of determining market prices, these regulations
include those surrounding valuable institutions such as patents and
other forms of intellectual property protection. Firms require these
government provided protections because the very heart of the
innovative process for new drugs represents a market failure that must
be addressed. The failure results from the fact that the scientific
advancements generated by firms in the development of innovative
pharmaceutical products are essentially a public good, i.e. the
knowledge generated by these investments is effectively non-rival and
non-excludable protection. Firms require these government provided
protections because the very heart of the innovative process for new
drugs represents a market failure that must be addressed. The failure
results from the fact that the scientific advancements generated by
firms in the development of innovative pharmaceutical products are
essentially a public good, i.e. the knowledge generated by these
investments is effectively non-rival and non-excludable. \8\ Rational
firms realize that, absent some form of government intervention, they
will be unlikely to capture the value generated by the large
investments necessary to bring a product to market. This results in an
economic phenomenon known as ``hold up'' whereby firms, absent some
form of intellectual property protection to protect their eventual
returns are unwilling to make value-creating investments in the first
place.
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\8\ The degree to which this is fully a public good depends on how
much information can be gleaned from the actual product, the regulatory
filings, and the published research. For example, small molecule
products can be more easily reverse-engineered and therefore absent
intellectual property protections are relatively easier to copy.
Biologic products, however, have a more complex production process and
therefore copying the technology is easier than making the product de
novo but harder than for a small molecule product.
To address this initial market failure, governments offer various
forms of intellectual property protection. Through patents or other
forms of market exclusivity, governments arm firms with time-limited
periods of enhanced market power that allow them to capture the value
created by their innovative products. During this time period, the high
prices curtail some access to valuable medicines. \9\ However, this
reduced access today is deliberately traded off against the development
of new products in the future. These new products provide access to
patients for whom there would otherwise be no treatment--a situation
could be seen as a more severe access problem than patient access
restrictions due to higher prices. After all, prices can always be
negotiated downward while there is no amount of negotiation that will
grant access to treatments that don't currently exist. Such treatments
will only come from new investments in technologies that will improve
patient health.
---------------------------------------------------------------------------
\9\ The amount of reduced access is complicated by the presence of
health insurance which mitigates the output restrictions by lower
prices (Lakdawalla and Sood, 2013).
In this way, policies governing drug development exemplify the old
adage that there is no proverbial ``free lunch.'' Instead, policies
governing the development of pharmaceutical products involve trading
off the static inefficiency of reduced access to products today in
order to create the dynamic efficiency of the increased development of
new products in the future. The goal is in balancing the magnitudes of
these two effects. To the extent the value created by the new products
exceeds the welfare losses created by the high prices (and resulting
decreased quantity sold), the periods of market exclusivity are
welfare-enhancing. Importantly, this could be true even if the prices
today are quite high. \10\ In fact, for some products treating small
patient populations the only thing that will induce an optimal level of
private investment may in fact be very high prices per patient.
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\10\ This is particularly true because the impact of high prices
on quantity is far more complicated in a world of widely available
health insurance. Those who are insured may not suffer as much
decreased access as they would in a market without third party payment.
However, those for whom drugs do not exist certainly will not access a
treatment at any price.
This tradeoff is a root cause of much of the controversy for
prescription drugs because the reduced access today involves some
number of readily identifiable individuals who are unable to access
existing and potentially life-saving medications because of price. \11\
Unsurprisingly, this particular form of a lack of access garners large
amounts of press and political attention. However, it is always
critical to remember a perhaps far greater access problem for patients
suffering from conditions for which no treatment options exist at all.
For these individuals, there is no price at which a treatment is
available. These patients will gain access in the future only as a
result of the dynamic incentives created by intellectual property
protection. As we consider the optimality of policies governing the
pharmaceutical market, we must balance the oft-discussed need for
access to existing products with the less-discussed lack of access from
the absence of effective treatments.
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\11\ Garthwaite, Craig, and Benedic Ippolito. 2019. ``Drug pricing
conversations must take the cost of innovation into consideration.''
STAT. January 11.
To be clear, it is perfectly acceptable to make reasoned and
considered alterations to our existing regulatory frameworks. However,
we should do so with careful deliberation and respect for the
underlying economic facts. We must be honest and recognize that such
changes will result in a lower level of investment in innovation,
however, we may be willing to forgo such innovation in return for lower
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prices. That is the a debate that we should be having.
Regardless of the policy we pick, it is critical that we make large
changes before firms sink capital at risk into drug development. If
instead, we attempt to expropriate the value of successful products
from the firms that invested to create them we will ultimately chill
some amount of future investment.
Making changes to the explicit and implicit contracts that
currently govern the drug development process will have long run
impacts on future innovations. For example, some activists and
policymakers have put forward theories that the government, by virtue
of its investments in basic scientific research, have broad abilities
to seize intellectual property. Putting aside whether such ``march-in''
rights actually exist in response to high prices (which is a legal
question beyond my expertise) it is clear that such rights have never
been exercised in that way in the modern biopharmaceutical market.
Therefore, this would represent a fundamental shift in the beliefs of
firms about the value of intellectual property--beliefs that serve as
the foundation of modern drug development. This would have widespread
ramifications on how people and firms engage with government-funded
science and the ability of such public investments in basic science to
improve the availability of treatments in the market. It is hard to
imagine that firms making decisions about commercializing products
using NIH-funded basic science will not look at commentary by
policymakers about Moderna's pricing as further increasing the
potential risk to their future profits from tools such as march-in
rights.
That said, the time period where firms are granted market power
over their innovations must be time-limited. Our goal is not to provide
firms with unending returns on their investments but to balance the
incentives necessary to attract private capital to these markets with
access to medical innovations. Striking this balance requires the
government to establish clear and firm rules about how long such a time
period will last and then ensure we have strong and robust competition
when periods of market exclusivity expire.
In my testimony below I provide details on policy solutions that
will facilitate competition for products as their intellectual property
expires--an area that is a critical component of our system. When
considering optimal policies to promote competition and generic (or
biosimilar) entry, it is important to remember that our goal is to
decide on the preferred degree of intellectual property protection
required to encourage the desired level and type of future innovation.
After setting these parameters, it is incumbent on regulators to
monitor and enforce these systems. This includes providing the
necessary structures for strong competition between therapeutic
substitutes during periods of exclusivity and the development of robust
generic competition beginning immediately at the end of the exclusivity
period.
Ultimately, firms will attempt to optimally respond to any
incentives governments create--and therefore a well-functioning
healthcare market requires policies that embrace economic reality
rather than hope for a preferred outcome. In particular, we must ensure
that our policy infrastructure matches the existing economic conditions
created by the more complex and expensive medications we are currently
developing. Much of the successful infrastructure that we have built
over time for post-exclusivity competition was designed for the small
molecule generic market. Small molecule generic products are exact
bioequivalent copies of approved innovative medicines. As a result, we
as a society are often more comfortable with competition promoting
regulations such as automatic substitution that swiftly and effectively
move almost the entire market to generic products after patent
expiration. Large molecule (or biologic) products, however, are too
complicated to create exact copies and therefore ``generic''
competitors come to market as ``biosimilars''--a designation that means
they are not automatically substituted. \12\ This introduces important
nuance for how we think about competition and entry after patent
expiration. It also leads to an inherently more complex patenting
environment that makes questions about entry timing more difficult.
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\12\ While there is a pathway for biosimilars to be labeled as
interchangeable, this greatly increases the costs of development and to
date has been rarely used by new entrants.
For example, biologic products are more often used to treat a wider
variety of conditions and indications than many historical small
molecule products. These broader uses for a product are socially
valuable and are developed based on meaningful investments by firms in
clinical trial evidence. As a society we must support the use of
existing products for as many conditions as is appropriate. However, we
must also develop and enforce policies that promote competition at the
indication level which balances incentives for developing new uses for
existing drugs with the need for time limitations for market power over
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a firm's initial innovations.
Firms should be rewarded for making the investments necessary to
prove their products would be clinically effective against additional
indications. However, as a society we must balance these additional
financial rewards for firms with our desire to support competition in
the market. Specifically, we must be wary that new indications could be
exploited to thwart potential entry into the market by new firms
attempting to market a generic version to treat only the original
indications. If this were to occur, an innovative firm could capture an
inappropriately large amount of the economic surplus created by the
ability of their product to treat the original medical condition (as
opposed to value created by the new indication).
To address this concern, one area where we require greater clarity,
guidance, and potentially legislation is around the ability of new
entrants to implement a so-called ``skinny label'' strategy. Under such
a strategy, firms could introduce generic or biosimilar competitors to
the market for single indications that are not protected by patents or
FDA exclusivity. However, the new entrant would be prohibited from
marketing this product for any indications that were still protected by
a patent. As I discuss below, it is imperative we create a clear and
appropriate pathway for competitors to enter at the indication level
even if patents exist for other indications.
Emerging questions around skinny labels and market entry are
examples of the inherent complexities created by the more sophisticated
products and processes involved in modern drug development. These
complexities also result in a wide array of patents for the same
product. While many cite the existence of such a large number of
patents as prima facie evidence of ``gaming'' and anti-competitive
behavior by firms, the story is actually more complicated. Increasingly
complex pharmaceutical products likely give rise to a far more
complicated patenting environment. Given the sophistication of
production methods and the increasing ability of products to be used
for a variety of indications, successful products are now surrounded by
meaningfully large patent estates. There is no question that this makes
it harder for potential competitors to enter. There is, however, an
open question as to whether large numbers of patents represent the
large amount of intellectual property required to develop these types
of products or a deliberate strategy by firms to deter entry. Of
course, there is no single broad answer to this question and any policy
solutions must respect the nuance of intellectual property protection
and the resulting incentives in this area. That said, I outline several
policy solutions below intended to both increase the rigor of patent
review (and therefore the strength of the resulting patents) and better
regulate the process of generic and biosimilar entry.
Beyond questions around patents and labeling strategies, it is also
clear that the lack of bioequivalent ``generic'' products for biologics
creates difficulties for market entry. In particular, the lack of an
exact, substitutable copy (an interchangeable biologic) creates some
hesitancy for physicians to move patients off of existing reference
products on which the patient is medically stable. This hesitancy
likely results from the fact that achieving medical stability is often
a process that can take many months or years of identifying the correct
medication and dose for the patient. As a result, biosimilar entrants
are often competing for only a portion of the existing market (either
patients who are not medically stable or newly diagnosed patients who
have not yet started a treatment regime). As I discuss below, this
inability to rapidly access the entire market, combined with features
of our existing pricing and rebate system can make it difficult (or
impossible) for biosimilar firms to enter and gain meaningful market
share. In particular, an existing system where firms often make rebates
contingent (all or in part) on competitors not being ``on formulary''
can meaningfully benefit incumbents at the expense of new market
entrants. \13\ Such formulary contracts that ``reference a rival
product'' could dissuade entry and artificially extend the incumbent's
market position for particular types of biologic products. In the same
way that rules around generic entry differ for small and large molecule
products, it may be necessary to create different regulations for how
formularies are constructed for biologic products.
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\13\ It is important to note that the source of such exclusionary
contracts is unclear. It is quite possible, and even likely, that firms
are encouraged by PBMs to make an offer that would grant them the
entire market. This could be optimal for each PBM even if it is not
optimal for the entire market.
In addition to concerns about formulary placement, our existing
system of physician reimbursement for many biologic products creates
incentives for physicians to continue to use more expensive products.
This is particularly true under Medicare Part B but also pervades
portions of the commercial market--where reimbursements often follow
the structure (but not the absolute level) of Medicare payments.
Reforms to Medicare Part B reimbursements could both promote entry and
decrease artificial incentives to increase prices in the private
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market--both of which should be policy goals.
Finally, the difficulties for competitive markets created by more
complex products are not limited to biologics. While we traditionally
believe the small molecule generic market works well, this is primarily
true with the more common large markets with numerous patients
available to multiple firms. The success of the system supporting
generic entry is far less clear when the size of the market is small
and therefore struggles to support multiple competitors. In such cases,
single firms can acquire all existing rights to market a drug, raise
prices, and still face little entry because there are insufficient
incentives for new firms to enter. In this way, the generic market
would function as if a firm continued to enjoy some form of
intellectual property protection. While this problem is limited to a
relatively small number of products today, an increase in ``precision
medicine'' where even small molecule products can be targeted at very
small populations means this concern will only grow in prominence over
time. Therefore, it is important to address these questions today
before they become a dominant market feature with powerful political
supporters.
As you can see, my testimony today focuses on promoting competition
in pharmaceutical markets--with a particular focus on competition after
regulatory exclusivity. That said, it is always important to remember
that the goal of government policy in this area is to balance the
incentives for innovation with a patient's access to value-creating
products. Others have proposed more drastic exercises of government
power in order to simply reduce prices today. This is often driven by
inappropriate promises that these price decreases will come without
cost. However, that is not the case. When considering the potential
patient access benefits of such proposals to artificially reduce
prices, we must be comprehensive in our analysis and consider both the
degree of improved access today and the ability of the market to
continue to provide access in the future to patients who currently lack
existing treatments.
I understand it is tempting to cave to the crass political calculus
that purports to increase access in a visible way today and obscures
the potential long-term costs of such decisions. After all, once we
observe the magnitude of those costs most elected officials making
these decisions will have moved on to other careers. But the goal of
policy is to carefully weigh those future costs and not believe snake
oil promises that expropriating value from firms today can cure all of
our ills with no side effects. In the testimony below I provide more
details about policies that will balance these various forces to
ideally enhance health and economic welfare.
I. The Tradeoff Between Access and Innovation in the Modern
Pharmaceutical Market
It is not surprising that attention to high healthcare prices has
focused so heavily on the pharmaceutical sector. \14\ Patented
prescription drugs are sold for many multiples of the marginal cost of
production and, as a result, firms appear to simply be profiteering at
the expense of patients. Complaints that high prices are primarily
about corporate greed ignore that they are the result of deliberate
government policies intended to provide the necessary incentives for
the continued development of innovative products. By granting
intellectual property protection, governments allow innovative firms to
earn positive economic profits for a period of time without facing the
threat of competition that would result from the immediate entry of a
firm making an identical product. Economic research suggests this
profit incentive matters and consistently documents that pharmaceutical
R&D responds to expected market size. Pretending this is not the case
ignores reality and will only lead to inefficient, value-destroying
policies.
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\14\ In thinking about this attention, we should note that
pharmaceuticals make up at most 20 percent of healthcare spending.
While the logic of trading off some amount of access today in order
to gain access tomorrow is clear, the parameters of the length and
breadth of this tradeoff are policy decisions for which there is no
definitive economic answer. These policy parameters reflect the
relative value society places on lost access today and potential
welfare gains from future innovation. They also reflect the degree to
which high prices today may not lead to a correspondingly large
reduction in access because of the market-expanding features of health
insurance. \15\
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\15\ It should be noted that these high drug costs could impact
premiums and the ability to buy insurance. Heavily insured markets can
create an incentive for higher drug prices and could result in
decreasing welfare in situations where insurance is sold for generic
and branded products as a bundle.
Understanding the nature of the tradeoff and determining the
appropriate policy parameters in the contemporary market requires
understanding a bit more about the modern pharmaceutical development
process. New products come to market through the partnership of a
variety of actors in the value chain. This includes basic science done
for understanding the nature of disease, early stage pre-clinical
research to develop a proof of concept, and then an arduous process of
navigating the regulatory process to prove that a product is ultimately
safe and efficacious. Each stage of this process represents meaningful
risk and firms will only undertake each successive step in the
development process if the expected net returns are sufficiently
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attractive compared to the next best use of the invested funds.
I.A. Basic Science Research and the National Institutes of Health
Certainly, the development process begins with basic science
research--a meaningful portion of which is financed by government
entities such as the National Institutes of Health (NIH) as well a
variety of other non-profit organizations. This means many expensive
products on the market rely to some degree on knowledge generated as a
result of government funding. For example, one study found that all of
the 210 products approved from 2010-2016 relied to some degree on
research funded by an NIH grant. \16\ This fact has led many activists
and policymakers to contend that the NIH is ``responsible'' for
bringing these products to market and therefore should be required to
demand price concessions as part of their patenting activity. \17\ Some
have gone as far as to say that the NIH should exercise its ``march-in
rights'' and seize the patents of products which are deemed to have
prices that are too high. \18\. While such policies might lend
themselves to attractive slogans and sound bites, the reality is far
more complicated than is often discussed.
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\16\ E. Galkina Cleary, J. Beierlein, N. Surjit Khanuja, L.
McNamee, F. D. Ledley, ``Contribution of NIH funding to new drug
approvals 2010-2016,'' Procedures of the National Academy of Sciences,
March 2018, 115(10).
\17\ L. Zhou, ``The new bipartisan Senate bill aimed at making Big
Pharma lower drug prices, explained,'' VOX, July 31, 2019.
\18\ M. Mezher, ``Lawmakers Urge HHS to Exercise 'March-in' Rights
to Fight Higher Drug Costs,'' RAPS.org, January 11, 2016.
Understanding the pitfalls of proposals to strengthen the role of
the NIH in pricing requires thinking more carefully about the
government's role in drug development in the first place. At a broad
level, advances in basic science that improve the understanding of how
diseases work or the mechanisms of action driving the efficacy of
potential products are relatively hard to successfully protect with our
existing intellectual property tools. As a result, firms worry they
will be unable to appropriate the value of investments in developing
novel advances in basic science. In effect, despite various
intellectual property protection regimes, investments in basic science
still suffer from many of the public good-related market failures that
would plague an entirely unrestricted pharmaceutical market. Firms that
do not reasonably believe they can profit from investments will not
make them, and as a result there is a fear that basic science research
will be under-provided. Given its lack of profit incentives, the NIH is
ideally situated to solve this public goods problem by stepping into
the market and funding the basic science that otherwise would not
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occur.
That said, without significant additional investments in drug
development, this government-funded basic science research would not
result in treatments that address unmet needs in the market and
increase economic welfare. In the current market, these additional
investments are provided by private firms that undertake additional
research and development to commercialize the NIH-funded basic science.
The appropriate economic framework for understanding these government
investments in basic science is one where this research is a complement
to rather than a substitute for research funded by private risk
capital. When you consider government funding as a complement to
private research, it becomes clear that our goal should be to attract
as many private firms as possible to leverage these NIH investments in
basic science. This would provide the most ``bang for the buck'' for
our government dollars. Currently, this is accomplished by placing
relatively few constraints on partnerships between the NIH and private
firms. Given the benefits to society from moving basic science from the
bench to the bedside--this policy of few constraints should remain.
I.B. The Decentralization of Early Stage Drug Development
Proponents of strict price regulation point to the fact that the
savings from such efforts could be redirected back to the NIH and
offset any expected decline in innovation. This belief, however,
ignores the current assets and activities of the NIH--which is to
evaluate and fund basic science and not undertake drug development and
commercialization activities. While there are a small number of
examples of the NIH taking part in more advanced stages of drug
development, these are certainly the exception rather than the rule--as
would be expected given the purpose of the NIH is to solve the public
goods problem for basic science research. To move into a primary drug
development role, the NIH would need to transform into something that
more closely resembles a private firm. It is not simply a question of
providing more funding for the NIH's current system, but transforming
in many ways the purpose and activities of the current NIH.
While it is possible the NIH could complete this transformation,
this would mean it is no longer primarily solving the public goods
problem of basic science and instead would attempt to determine which
potential opportunities to commercialize this science should come to
market. This effectively involves introducing more central planning to
the development of new products where a single firm is undertaking both
basic science and drug development activities. In considering the
wisdom of such a strategic shift, we should consider that it would run
counter to the recent decisions of the major players in the private
market. In recent years, large pharmaceutical firms are decreasing the
degree to which they singularly dictate the path of research through
internally funded R&D programs. Instead, the world of biotech drug
development involves large numbers of small startups that are
increasingly funded by venture capital firms. The most promising and
successful of these firms are generally acquired by the larger market
participants that then guide the product through the FDA approval
process and handle the post approval sales and marketing strategies.
The fact that so much early stage innovation is done by small
private firms that do not ultimately commercialize the product has led
many to claim that regulators have the freedom to decrease prices
without harming innovation. After all, since the firms currently
selling the product didn't actually undertake the costly investments in
early stage R&D, those early innovative activities are not driven by
the eventual profits of these more established firms. This couldn't be
further from the truth. The ultimate goal of the providers of private
risk capital for early stage firms (e.g. venture capital investors) is
a profitable ``exit'' for their funds. This traditionally happens in
the form of an acquisition, though increasingly we are also seeing
early stage biotechnology firms going public through an initial public
offering (although this trend has reversed in recent years given
existing market conditions). The financial terms of these eventual
exits are dictated by the potential revenues of the product in the
market and thus would be affected by regulated prices that decrease
average returns.
In this way, the access and innovation tradeoff is perhaps even
greater in the modern world of venture capital backed early stage drug
development. This private funding is inherently mercenary in nature and
in search of the highest returns. If potential returns from biotech
investments fall, investors will simply redirect their funds from the
pharmaceutical sector toward the next best option. \19\ In this way,
policies which decrease the potential profits will lower investments in
early stage investments and the resulting increase in profits. While we
might think that the NIH could step into the role of venture capital
firms and provide funding to early stage biotech firms, there is little
evidence they would be effective at this role. At a minimum, we must
acknowledge that it is a vastly different enterprise than they are
currently engaged in and therefore requires more than simply additional
funding for their current activities.
---------------------------------------------------------------------------
\19\ While it is true that there are a number of venture capital
firms that focus entirely on the biopharmaceutical sector, they are
primarily investing other people's funds and those investors are
targeting areas of the economy that provide the greatest returns.
Again, we may find it optimal to limit the flow of innovation in
exchange for greater access to the smaller number of products. However,
this must be a reasoned calculation and not one based on the false
belief that the efforts of even a better-funded NIH or the better
angels of a scientist's nature will somehow fill the void vacated by
the venture capitalists. This reasoned choice must consider the overall
value created by innovation over the long term compared to the
relatively short period of exclusivity where access is diminished
because of high prices but is certainly not reduced to zero.
II. The Role of Government in Limiting Welfare Losses During Period of
Market Exclusivity
For the reasons discussed above, determining the parameters of the
access and innovation tradeoff is difficult. That said, there is
clearly a role for the government in attempting to limit (to the extent
possible) the loss of welfare that occurs during periods of market
exclusivity. This can be done both by ensuring the existence of robust
competition among therapeutic substitutes and supporting the operation
of well-functioning insurance markets. There are four areas where the
government could do more in these areas: (1) promoting competition at
the indication level when products can treat multiple conditions; (2)
supporting a robust system for evaluating patents; (3) creating a
modern infrastructure for regulating competition between biosimilars
and reference products; and (4) developing strong incentives for price
competition between products in government insurance programs.
II.A. Promoting Competition at the Indication Level when Multiple
Indications are Present
When products are able to treat multiple conditions the time period
for the market entry of competing generic or biosimilar products can
become muddled. Innovative products often contain various types of
patents and exclusivity related to the underlying molecule, its
production, and its method of use. Even in the situation where all of
these are valid, it can be difficult for firms to navigate this large
set of patents (a concern that I also discuss in the following
section).
We want to provide the incentives for firms to find multiple uses
for existing products. After all, society has already invested
meaningful resources to show that such products are safe and provide
efficacy in at least one condition. This includes both clinical trial
evidence but also valuable real world evidence about safety from
patient populations that are often much larger than those in the
original trials.
That said, we also do not want these additional indications to
shield firms from appropriate generic competition for the original uses
of these drugs. For this reason, existing regulations allow generic
firms to enter with a ``skinny label'' that only allows them to market
the product for indications that no longer have patent protection or
other forms of exclusivity. However, existing regulations also require
that the label for a generic product matches the existing reference
product's label. Recently, a Federal court ruled that certain
information that is required to be on the label could be viewed as an
inducement to infringe on the reference products method of use patents.
\20\
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\20\ https://www.supremecourt.gov/DocketPDF/22/22-37/222237/
20220429174452402-Scanned%20Application.pdf.
This ruling creates an untenable tension in current law where we
want generic firms to enter with a skinny label, but existing
regulatory requirements could apparently require such firms to include
information on their label that would result in them infringing on some
of the patents held by the manufacturers of the reference products.
Regardless of future court decisions in this area, it is imperative
that Congress consider future legislation that offers a clear path to
market for generic firms at the indication level.
II.B. Negotiations Over Patent Infringement
Market exclusivity is governed by a variety of governmental
institutions. Central to this system are the intellectual property
protections provided by patents. Patents offer protection for firms
developing novel products. During the time period of patent protection,
firms are safe from competition arising from a new entrant selling an
exact copy of their innovative product. After patents expire, the
intention is for other firms to swiftly enter the market and sell
copies of the patented product, with the resulting competition lowering
prices and increasing access.
Obviously, there is a clear role for government involvement in this
area. After all, the initial granting of patents and other forms of
intellectual property protection is solely a government action.
Governments also regulate the challenges to such patents and the
process by which competitors enter the market as exclusivity expires.
Potential entrants observe the rules created by governments and
weigh the potential costs and benefits of attempting to enter into
competition with a branded product. Increasingly, this includes
navigating a myriad of patents related to the underlying pharmaceutical
product, the various uses of the product, and its production process.
Given the requirement that patents be narrow and specific to a
particular invention, modern complex products are often covered by a
wide range of patents. Critics claim this large number of patents
reflects an attempt by innovative firms to create a ``patent thicket''
that raises the costs of entry. These critics believe that rather than
reflecting intellectual property, the large number of patents is solely
intended to create a costly entry barrier that decreases the number of
potential entrants and extends the length of market exclusivity. Given
this concern, some critics have gone as far as to suggest that each
branded product should be limited to a single patent. \21\
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\21\ R. Feldman, ``One-and-done' for new drugs could cut patent
thickets and boost generic competition,'' STAT News, Feb 11, 2019.
While it is surely true that some firms engage in such a
``thicketing'' strategy to deter entry, the mere existence of even a
very large number of patents is not, on its own, evidence of a
nefarious strategy. As the complexity of the production process
increases, it is reasonable to assume that these processes will also
involve the creation of important and necessary intellectual property.
All else held equal, this would result in a greater number of patents
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per product.
Beyond the complexity of production, pharmaceutical products are
increasingly used to treat multiple conditions. Discovering potential
new uses for these existing drugs requires additional expenditures on
scientific discovery and clinical trials. The incentives to invest in
those activities stems from the ability to appropriate some of the
value created. Given there are great benefits to society from firms
developing new uses for existing products, we should encourage firms to
investigate whether products which have already been determined to be
safe could be used for additional indications. A system that limits the
number of patents that can exist for a product would diminish the
financial incentives for firms to invest resources to determine these
new uses.
That said, the existence of large numbers of patents creates a more
difficult path for generic and biosimilar entry. The heart of this
concern, however, should not be about the number of patents pertaining
to a particular product but instead about the underlying validity of
those patents. Ultimately, this is a question about the efficacy and
rigor of the patent approval process undertaken by the Patent and
Trademark Office (PTO). If the PTO is granting a large number of
relatively weak patents to firms that are deterring entry, this is
something that should be addressed directly. It could be that this is
the result of the growth in demand for patents on potential new
innovations outstripping the resources available to the PTO. Academic
research has shown that resource constraints affect the accuracy of
patent examiners, with more time-constrained examiners issuing patents
that were more likely to be later invalidated. \22\ Rather than making
sweeping rules about the number of patents, policymakers should more
directly examine increased resources in an efficiently run PTO.
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\22\ Frakes MD, Wasserman MF. Investing in Ex Ante Regulation:
Evidence from Pharmaceutical Patent Examination. National Bureau of
Economic Research; 2020.
One potential model to provide greater resources for the PTO is a
process similar to the Prescription Drug User Fee Act (PDUFA) which
provides vital additional resources to the FDA that flex with the level
of regulatory demand. It is possible that pharmaceutical patents could
be assessed additional fees that could be used to increase resources in
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this area.
The large number of patents creates a further concern about
negotiations between branded firms and potential entrants about the
timing and manner of entry. Under our existing system, an economically
meaningful fraction of generic entrants come to the market by
challenging some of the underlying patents of the branded product.
Given the potential cost and complexity of these lawsuits, these firms
often settle on a negotiated date of entry. These negotiated dates are
invariably before the formal end of every related patent but after the
date indicated by the earliest patent affecting the product in
question. There are valid concerns that such negotiations are a ruse to
extend the exclusivity period for branded firms. Effectively, the
concern is that the brand and potential entrant are colluding to split
the surplus resulting from the lack of competition. Such concerns are
correctly heightened when branded firms transfer something of value to
the potential entrant. While the oft-discussed Actavis decision stops
firms from transferring money in exchange for delayed entry, that has
not eliminated concerns that settlements detailing entry could be a
source of concern.
That said, such settlements are an expected result of a system
where we rely on potential entrants to use ``Paragraph IV'' challenges
to effectively police the validity of patents granted by the PTO.
Litigation is costly, uncertain, and distracting to the main business
activities of firms. For this reason, firms in all markets often
attempt to settle lawsuits out of court rather than taking them to
trial. Rather than attempt to cast all settlements as attempts to
manipulate the market, I would encourage policymakers to revisit the
policies that govern such challenges. Over time, Paragraph IV
challenges under Hatch-Waxman have become a very common feature of the
entry of new products. Even unmeritorious challenges are expensive for
the system. It is possible that various features of the market,
including but not limited to the 180 day exclusivity for the first-to-
file generic firm and the 30 month stay for patent challenges, may be
an inefficient means of policing and operating an intellectual property
protection system.
One potential avenue to consider is the Reforming Evergreening and
Manipulation that Extends Drug Years (REMEDY) Act of 2019. This
proposed act would eliminate the 30-month delay for generic entry that
is automatically triggered when a patent is challenged. Importantly,
this would only apply to patents that are not the main product patent.
Without the automatic 30 day stay, a generic firm would be free to
enter ``at risk,'' i.e. if they are later found to be infringing on a
valid patent they would owe damages to the patent holder. The economic
incentives here would result in firms only entering when they believe
that the patent is truly weak, i.e. firms would be unlikely to enter at
risk against strong patents because they would be afraid of having to
pay damages. In that way this would eliminate the protections for weak
patents that are currently created by automatic 30 month stay.
II.C. Biosimilar Adoption and Rebates
While rebates serve a vital function in drug price negotiations,
there are also situations where the structure of the rebate contract
can potentially create a barrier to entry for new competing products.
For example, rebate contracts sometimes reference rival products,
particularly with respect to a rival's placement on the formulary.
Depending on the economic context, such rival-referencing contracts
could be either anti-competitive or pro-competitive. For example, a
manufacturer may offer larger rebates if its product is the only one in
a therapeutic area on the preferred tiers of the formulary. If there
are many potential products that are competitors for the entire market,
such a contract could be efficient. In fact, these types of contracts
are at the heart of the PBM strategy. In describing his strategy, the
Chief Medical Officer of Express Scripts said, ``So we went to the
companies, and we told them, we're going to be pitting you all against
each other. Who is going to give use the best price? If you give us the
best price, we will move the market share to you. We will move it
effectively. We'll exclude the other products.'' \23\ Since 2012, there
has been marked growth in the use of these exclusion lists.
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\23\ Wehrwein, Peter. 2015. ``A Conversation with Steve Miller,
MD: Come in and Talk With Us, Pharma.'' Managed Care. April 5.
In situations where manufacturers are competing for access to the
PBM's entire patient population, these types of contracts can be pro-
competitive, leading to large discounts and increased welfare. However,
for some types of products, large portions of the market are not truly
contestable, i.e., the PBM will not be able to effectively move a
fraction of the patients to the low-price product. For example,
patients who are currently using a biologic product may be unlikely to
be willing to switch to a competing biosimilar at almost any price. In
addition, PBMs might find that payers would not be happy with
strategies that forced their patients to move across biologic products
in this manner. \24\
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\24\ Plan sponsors are not simply looking for the lowest cost
plan, but instead the plan that best balances costs and benefits for
their customers or employees.
In a situation where a new entrant cannot effectively compete
rapidly for a large fraction of patients, a rebate contract for the
incumbent product that is contingent on the absence of the rival
entrant on the formulary can serve as an almost impenetrable barrier to
entry. This situation is sometimes referred to as a rebate ``wall'' or
``trap.'' Effectively, the new entrant finds that it cannot offer the
PBM a large enough rebate on its products (which represent a relatively
small share of sales) to overcome the lost rebate dollars from the
incumbent (which represents a majority of the market). In such a
situation, the new entrant would find it quite hard to ever gain
meaningful market share. Perhaps more concerning, realizing the
existence of these rival-referencing contracts, potential biosimilar
manufacturers may never choose to attempt to create products in the
first place. Concerns about the use of rebates in this manner have been
raised by many individuals, including FDA Chairman Scott Gottleib and
the CEO of Novartis Vas Narasimhan. \25\, \26\ They are also the
subject of antitrust litigation between reference products and
biosimilar firms, which is winding its way through the court system and
should provide additional guidance about the legality of these
---------------------------------------------------------------------------
practices. \27\, \28\
\25\ Liu, Yanchun. 2018. ``FDA chief says pharmas use rebates to
block biosimilar competition.'' MarketWatch. July 19.
\26\ Narasimhan, Vas. 2018. ``Novartis CEO: How To Create Cheaper
Alternatives To The Most Expensive Drugs.'' Forbes. April 12.
\27\ Biosimilars Council. 2018. ``Brief Of The Biosimilars Council
As Amicus Curiae In Opposition To Defendants' Motion To Dismiss.''
Civil Action No. 2:17-cv-04180-JCJ. United States District Court For
The Eastern District Of Pennsylvania, January 26. Accessed March 4,
2019. https://www.accessiblemeds.org/sites/default/files/2018-01/AAM-
Amicus-Brief-Pfizer-vs-J%26J-1-26-18.pdf.
\28\ United States District Court for the Eastern District of
Pennsylvania. 2017. ``Complaint, Case 2:17-cv-04180-JCJ.'' September
20. Accessed March 4, 2019. https://www.courtlistener.com/recap/
gov.uscourts.paed.534730.1.0.pdf.
Given the potential for the rebates contingent on rival products to
block potential entrants, regulators should consider more careful
oversight and monitoring of rebate contracts that reference rivals. In
situations where a large portion of the market is not contestable by
the new entrant--for example, in the case of the first biosimilar
entering against a reference product--it may be advisable for
regulators to create additional restrictions on the ability of rebate
contracts to reference the position of rival products on the formulary.
In particular it may be necessary to consider separate rules or tests
for contracts and rebates based on whether patients are treatment-niave
or medically stable on a particular biologic product or biologic
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products.
In considering why government intervention may be necessary to
address these contract structures, it is important to note that even if
exclusive contracts limit entry and raise market wide prices, each PBM
may have an incentive to demand a bid from a manufacturer for exclusive
formulary placement. This could maximize the rebate for the PBM and
allow for a more competitive PBM and/or health insurance product. Any
individual PBM would benefit from such a contract and may not be able
to influence the individual entry decision for any particular product.
This could result in a ``tragedy of the commons'' problem that might be
best solved by government action.
II.D. Creating Stronger Incentives for Negotiation in Government
Programs
Supporting a competitive market for prescription drugs is made even
more complicated by the heavy role of government in the procurement of
healthcare for vulnerable populations such as the indigent, elderly,
and disabled. Given the fact that healthcare is a unique product for
which society places particular value on an individual's ability to
access services regardless of their ability to pay, the U.S. has
developed a series of social insurance and transfer programs to help
vulnerable populations access care. Over time these programs have
grown, and public spending now accounts for just over half of all
healthcare spending in the United States--a fact that makes healthcare
markets distinct from the rest of the economy.
Given the economically meaningful role of the public sector in the
healthcare market, the ability to maintain a competitive market
inherently relies, at least in part, on government policies and
regulations. Ultimately, healthcare is our Nation's most meaningful
public-private partnership. This has become even more apparent as the
United States increasingly relies on private firms for the provision of
publicly funded social insurance benefits. This includes the Medicare
Advantage program, Medicaid Managed Care, and the Affordable Care Act--
which I've previously noted is perhaps the most conservative, market-
based approach to the provision of health insurance for such a large
number of low-income individuals. \29\ Private firms are being used to
provide these services because, at their core, they have the strong
incentive to respond to consumer demand in a quest to maximize profits.
These incentives allocate resources in ways that increase welfare. It
is unlikely that a government entity could achieve a similar result,
and therefore optimal healthcare policy harnesses market forces while
maintaining no illusions about the motivations of the firms it employs
to efficiently provide goods and services.
\29\ Garthwaite, Craig. 2017. ``Why replacing Obamacare is so
hard: It's fundamentally conservative.'' The Washington Post. July 10.
However, successfully managing these public-private partnerships
requires establishing rules that enhance rather than inhibit
competition. While the existing Medicare Part D program involves a
large amount of price negotiation, there are still many drugs paid for
by Medicare that effectively involve no direct price negotiation by a
payer and instead attempt indirectly benefit from private market
negotiations. These drugs are administered by providers and covered
under the Medicare Part B benefit. Rather than use private firms to
directly negotiate prices for these products, Medicare operates under a
``buy and bill'' system. Physicians purchase these drugs and then are
reimbursed a fixed percentage above the average sales price (ASP) of
the product--a price measure intended to account for rebates paid by
manufacturers to payers. The purpose of this reimbursement system is to
provide doctors with simplicity and predictability of reimbursement.
These attractive features, however, come at a meaningful cost for the
entire system, as the Part B procurement rules increase prices for the
public and private markets while also shifting share at the margin to
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more expensive treatment options.
In order to understand the widespread effects of Part B, consider
the motivations of a pharmaceutical manufacturer negotiating with PBMs
and payers to determine its optimal price. Given that these firms are
attempting to maximize profits, they set prices that are expected to
earn the greatest profits. Once those profit-maximizing prices are set,
higher prices will, by definition, decrease the firm's total profits.
This occurs because the increased margin will not make up for the lost
quantity (and related profits) that comes from a greater use of prior
authorization, step therapy, increased cost sharing, or other
utilization management tools.
By linking public and private prices, the Part B purchasing rule
distorts the optimal pricing decision in the private market. Firms are
willing to increase private prices, and suffer declining profits in the
private market, because they know they can make up those lost profits
and more from the public market. In addition, because they know that
physicians earn more money from administering a higher-priced drug,
they have an additional incentive related to Part B for raising prices.
The combination of these factors means that the Part B procurement
rules create the incentives for firms to offer fewer discounts in the
private market, resulting in a higher ASP and greater profits from the
public market. As a result, the current Part B rules for purchasing
physician-administered drugs result in higher prices in both the public
and the private markets. These incentives increase with Medicare's
market share in each drug--a larger Medicare market means the
potentially higher reimbursement from the public payers is more
important for determining profits than the lost sales in the private
market. Given the age and disease profile of Part B enrollees, there
are a large number of high-cost drugs for which Medicare has a
meaningfully large market.
As we look for policy solutions to address the lack of competition
created by the Part B reimbursement rules, we must confront two areas
of concern. Part B can cause higher prices both because physicians have
an incentive to prescribe higher priced drugs (because they earn more
for administering such products) and because manufacturers have an
incentive to raise private prices to influence the public market. In
attempting to address physician incentives, we must be careful not to
create perverse incentives to inappropriately prescribe lower-cost
drugs. We also must be careful about creating a situation where it is
no longer economically viable for physicians to practice in particular
areas or in particular organizational forms. For example, attempts to
reform the Part B procurement rules that switch to simply paying
physicians a flat fee for each administered drug ignore the fact that
physicians can face meaningful inventory costs for stocking and
maintaining a large volume of high-cost drugs. Many of these costs are
likely a function of the acquisition cost of the product. These costs
could be particularly acute for small practices, which may lack
sufficient liquidity to maintain sufficient stock of medications and
may make prescription choices to limit these costs. At the extreme,
this could push further consolidation of the provider market.
Congress should consider policies that adopt a vendor model for the
distribution of physician-administered drugs that would transform that
market from the existing ``buy and bill'' system to one where
physicians have little financial incentive to prescribe particular
medications. The details of such a fundamental shift in the market are
important and must be worked out. In doing so, Congress should
investigate why previous attempts to establish a similar model under
the Competitive Acquisition Program (CAP) did not successfully attract
vendors and providers. Certainly, part of this failure results from the
fact that many providers are currently dependent on the revenues they
earn from the buy-and-bill system. Thus, any successful reform must
figure out a way to attract those physicians and other providers into
the system. In addition, such a program would need to be sufficiently
attractive to vendors to attract entrants to the market. This would
likely require empowering vendors with the ability to walk away from
particular drugs in order to secure greater discounts. This may limit
the access of Medicare patients to some products, but we must be honest
and adamant that some degree of reduced access is a necessary part of
any true price negotiation process.
While there are many details to work out in this area, I would
strongly encourage policymakers to follow the policy lead of Part D and
find ways to utilize private-sector vendors to negotiate lower prices
for Part B, rather than accepting this portion of Medicare as being a
price taker. Failing to do so will continue to perpetuate a policy that
increases spending across the system.
III. The Role of Government in Supporting a Robust Small Molecule
Generic Market
As discussed above, the access-innovation tradeoff involves
granting firms a time-limited period of market exclusivity. At the
conclusion of this period, it is in the best interest of society for
products to be sold in a robust and competitive market. Our existing
system of follow-on competition has largely worked well since the
passage of the Hatch-Waxman Act in 1984. However, the complexity of the
modern drug market has created a new set of challenges for this
previously well-functioning process.
Markets for generic small molecule products are intended to have
fierce price competition facilitated by the automatic substitution of
prescriptions toward less-expensive generic products. In a well-
functioning generic market, firms compete primarily on price and
therefore profits are determined by a firm's ability to manufacture
products at the lowest marginal cost. This fierce price competition
means that successful entrants must be able to produce enough to reach
the minimum efficient scale (MES) of their production process. Absent
sufficient quantity, entrants realize they will find themselves at a
perpetual cost disadvantage to incumbent firms and therefore will
rationally decline to enter the market. For sufficiently small markets,
there is only enough demand for a single manufacturer to reach MES--and
the incumbent firm is a natural monopolist that maintains meaningful
pricing power.
In recent years, several firms appear to have recognized the
pricing power available to ANDA holders for generic products with
sufficiently small potential markets. This was perhaps best personified
by the pricing strategies of Turing Pharmaceuticals, but aspects of
this strategy have been implemented by other firms and thoroughly
documented in several media outlets. \30\ The ability for these firms
to charge monopoly prices for generic products is not the result of the
above-discussed tradeoff between access today and innovation tomorrow -
society has long since paid for the innovation from any of these
products. Instead, the high prices represent firms taking advantage of
a market failure created by the small patient population. While large
pharmaceutical firms were historically either unwilling to exploit this
pricing power or unaware of this financial strategy, the practice of
firms charging high prices without fear of entry in small generic
markets is now widespread throughout the industry (albeit the strategy
is typically employed by smaller firms with fewer invested assets in
the industry). If Congress hopes that for-profit firms will simply
avoid this pricing strategy going forward, they will be sorely
mistaken. Instead, solutions to market failures for small-market
generics will need to come either from firms being harmed by this
practice or through government action.
---------------------------------------------------------------------------
\30\ Hopkins, Jared S., and Andrew Martin. 2018. ``These New
Pharma Bros Are Wreaking Havoc on Prescription Drug Prices.''
Bloomberg. April 6. Pollack, Andrew. 2015. ``Drug Goes From $13.50 a
Tablet to $750, Overnight.'' The New York Times. September 20. Rockoff,
Jonathan D., and Ed Silverman. 2015. ``Pharmaceutical Companies Buy
Rivals' Drugs, Then Jack Up the Prices.'' The Wall Street Journal.
April 26.
For some of these products, private firms are stepping forward with
market-based solutions. Specifically, a consortium of hospitals led by
Intermountain Healthcare has created CivicaRx--a joint venture designed
to address the high prices charged for many generics that are
administered in a hospital setting. \31\ For products administered in
the inpatient hospital setting, providers are unable to pass the
increased costs along to patients or payers and have therefore decided
to vertically integrate and manufacture the products themselves.
---------------------------------------------------------------------------
\31\ Abelson, Reed, and Katie Thomas. 2018. ``Fed Up With Drug
Companies, Hospitals Decide to Start Their Own.'' The New York Times.
January 18.
While vertical integration in this setting is an efficient response
by hospitals in response to a market failure in their supplier market,
CivicaRx will likely not find it valuable to undertake the
manufacturing of products that are sold directly to patients through
retail or specialty pharmacies or administered in an outpatient
setting. Those products do not impact the financial health of the
hospitals involved in the joint venture. Therefore, solutions for these
other products must come from new government policies that either
reduce the number of natural monopoly markets or use economic tools to
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more directly intervene in the natural monopoly markets that remain.
If high fixed entry costs make it difficult for multiple firms to
profitably produce small-market generics, one potential policy solution
is to lower these fixed costs. This would decrease the quantity
required for a new entrant to reach MES and compete with the incumbent
manufacturer. In recent years, the FDA has been focused on programs to
accomplish this goal. For example, there have been efforts to
streamline and harmonize the generic application process across
developed countries. \32\ There have also been attempts to increase the
speed and efficiency of the ANDA process, which would decrease barriers
to entry and potentially increase the number of markets that could
support multiple firms. \33\
---------------------------------------------------------------------------
\32\ Gottlieb, Scott. 2018. ``Advancing Toward the Goal of Global
Approval for Generic Drugs: FDA Proposes Critical First Steps to
Harmonize the Global Scientific and Technical Standards for Generic
Drugs.'' FDA. October 18.
\33\ Elvidge, Suzanne. 2018. ``FDA sets another record in 2018 for
generic drug approvals.'' BioPharma Dive. October 12.
I would encourage the FDA to continue to evaluate the approval
process to look for additional efficiencies that would decrease entry
costs. However, even the most efficient process for entering a generic
market will require some expenditures to demonstrate the safety and
bioequivalence of the product--and this will always represent a
meaningful fixed-cost investment. Therefore, another potential solution
to promote entry is to attempt to increase the size of some generic
markets. While this can't be accomplished within any geographic
boundary (i.e., we are unlikely to uncover more patients with these
types of conditions), I would encourage Congress and regulators to
consider a broader system of importation across developed countries
with similar safety and regulatory systems (i.e., the countries the FDA
is currently empowered to turn to in the case of drug shortages).
Aggregating demand across these markets would increase total quantity
and the number of products that could successfully be produced by
multiple manufacturers. Some have argued the FDA could implement this
strategy today by considering generic products with large price hikes
to be a situation of shortage. \34\ However, it is likely that
congressional investigation and debate are needed before we implement
such an important change to the sourcing of generic medications.
---------------------------------------------------------------------------
\34\ Greene, Jeremy A., Gerard Anderson, and Joshua M. Sharfstein.
2016. ``Role of the FDA in Affordability of Off-Patent
Pharmaceuticals.'' JAMA 315 (5): 461-462. doi:10.1001/jama.2015.18720.
Even after efforts to decrease costs and increase market sizes,
there likely will remain some markets that still cannot support
multiple firms. In this case, further regulations are likely necessary
to reach an efficient outcome. Senator Elizabeth Warren has previously
proposed that the government step in to manufacture generic drugs when
products have small market sizes and large drug price increases. \35\ I
understand and appreciate the motivation for Senator Warren's proposal
and think that it is a potentially viable policy option for addressing
this particular market failure, i.e., the lack of competition in
markets for generic products without sufficient size to support
multiple firms.
---------------------------------------------------------------------------
\35\ Warren, Elizabeth. 2018. ``It's time to let the government
manufacture generic drugs.'' The Washington Post. December 17.
However, I fear that a government entity will likely fail at being
an efficient producer of these products--after all, this is not an
enterprise in which they specialize. As a result, the marginal costs of
a government producer would likely be higher than for a private firm
with experience in drug production. Before the government undertakes
such a new and complicated economic activity, I would propose a
private-sector solution in which Congress empowers the FDA to provide a
new form of market exclusivity for generic products with market sizes
---------------------------------------------------------------------------
that do not support multiple competitors.
The exact specifics of such an exclusivity would need to be worked
out, but a first step would be for Congress to ask the FTC to examine
how many potential patients are necessary for a market to support
multiple generic firms. While most generic prescriptions are likely for
molecules that can support multiple competitors, there are potentially
a large number of molecules with small patient populations that can't
support multiple manufacturers. For example, there has been an increase
in the number of exits by ANDA holders in recent years, with many firms
citing a lack of profitability. The median generic market currently has
only two manufacturers, and approximately 40 percent have a single
manufacturer--which likely is the result of limited market potential
for these molecules. \36\ That said, the current number of firms
participating in the market in equilibrium does not provide sufficient
information to understand whether the market could ultimately support
multiple firms. After all, it is the threat of entry and not actual
entry that disciplines profits. Inferring the number of firms that a
particular generic market could support based on the number of current
firms could be particularly problematic given the ongoing allegation of
collusion in this market. \37\ Therefore, it is important for
economists at the FTC to determine the exact market size and structure
that would indicate that the market for the generic product is a
natural monopoly where the incumbent firms possesses significant
pricing power. Ideally this investigation would incorporate the
potential market-expanding policies of decreasing entry costs and
potentially increasing the market size to include some limited foreign
markets.
\36\ Berndt, Ernst R., Rena M. Conti, and Stephen J. Murphy. 2017.
``The Landscape of U.S. Generic Prescription Drug Markets, 2004-2016.''
NBER Working Paper No. 23640.
\37\ Silverman, Ed. 2019. ``Here's how prosecutors say generic
drug makers schemed to fix prices.'' STAT. February 19.
After establishing the market characteristics likely to lead to
natural monopolies, I would propose the FDA be required to undertake a
request for proposal (RFP) process for those markets. Under this RFP
process, any private firm could apply for the rights to be the
exclusive manufacturer of a natural monopoly generic medicine at a
certain fixed percentage above manufacturing costs. As part of this RFP
process, firms would compete on the amount of margin they would require
to serve the market. The winning firm would possess the exclusive
rights to sell the drug at this regulated price for a time period
sufficient to recover the fixed costs of entry. At that time, the FDA
would have the option of re-auctioning off the market exclusivity. In
order to ensure the efficient operation of this process, it may also be
necessary for the FDA to set a maximum percentage that they will accept
before they will turn to a non-profit or government supplier for the
product. This will limit any ability of firms to collude to divide up
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the markets they choose to enter.
I would encourage Congress to immediately investigate solutions in
the area of small-market generics, as this problem will only grow in
importance. Recent scientific advances have allowed for an increasing
personalization of medicine. Along with co-authors, I have documented
the rising share of clinical trials involving a patient-specific
biomarker to determine either efficacy or safety. \38\ Almost by
definition, personalized medicine will involve products with limited
patient populations, and for many of these products we should be
worried about whether robust generic or biosimilar competition will
ever emerge. \39\ Therefore, while the problem of small-market generics
is not a dominant feature of today's market, it will only grow in
importance. It will likely be far easier to address the problem now
than it will be when the number of powerful interests manufacturing
such products increases.
---------------------------------------------------------------------------
\38\ Chandra, Amitabh, Craig Garthwaite, and Ariel Dora Stern.
2018. ``Characterizing the Drug Development Pipeline for Precision
Medicines.'' NBER Working Paper No. 24026.
\39\ The problem of competition for precision medicine will be
further complicated in situations where the patented product is a
biologic product.
______
The Chair. Thank you very much. Let me begin by asking Dr.
Morten and Dr. Sarpatwari their assessment of Mr. Bancel's
remarks. Dr. Morten.
Dr. Morten. Thank you, Senator. There is a lot in Mr.
Bancel's remarks. I might start with his claim that the U.S.
Government has already been repaid somehow by Moderna for its
contributions to the NIH Moderna vaccine.
I think I heard Mr. Bancel say that we have already
received something like $2.9 billion in benefit from the
company. He describes it as a discount that was granted to the
American public back in 2020 and 2021 when we were purchasing
hundreds of millions of doses. This is revisionist history.
This is sort of a new telling that Moderna has come up
with, I think since this Committee called this hearing. At the
time that we cut these deals, these were negotiated prices
between a buyer and a seller.
Moderna sold its doses for about $20 a dose similar to what
Pfizer sold its doses for similar to what Moderna sold its own
product for overseas. And so, to view it as a discount I think
is artificial and very much post-hoc----
The Chair. Thank you. Let me go to Dr. Sarpatwari. Mic----
Dr. Sarpatwari. Thank you. I would also like to touch upon
the issue of the discount. I don't believe it was a discount in
return for the Government's contribution to drug development.
Moderna was a smaller company. It was a company in which if
invested in, then there was more risk. The actual guarantee
that Moderna got was a guaranteed purchase, even if the product
was unapproved. That differs from other purchases under
Operation Warp Speed.
Mr. Bancel has at times attempted to justify the price
increase on the grounds of increased costs. It seems to me a
little bit improbable that 100-fold increase cost would be
there with distribution systems that already exist.
But that is not really what irks me so much. What irks me
is that at times he justifies it on the basis of cost. At times
he justifies it on the basis of value. He can't have his cake
and eat it, too. I think that what we are seeing here is the
privatization of gain and the socialization of risk, which is
not a sustainable way to operate.
The Chair. I want to ask both of you, pick up on a point
that Dr. Garthwaite and many others have made. In the world
right now and in our Country, there are people who are
suffering and dying because they cannot afford the high cost of
prescription drugs.
That is true in the United States. It is certainly true in
poor countries around the world. Correct me if I am wrong, but
there are probably millions of people dying of preventable,
curable diseases simply because the price of medicine is too
high. In your judgment, is there another model out there?
That addresses the issue of making sure that when a drug is
developed, a lifesaving drug, its goal is not just to make huge
profits for the drug company, but to make it accessible to
people all over the world.
What am I missing in saying that there is something cruel
and immoral of people dying and suffering in America and all
over the world who cannot afford medicine, which often costs,
as in the case of this vaccine, a few dollars to produce,
really cheap.
What do you think about the morality, and give me
alternatives to saying, hey, I got to make billions, I don't
care if you die. Is there another model that will create the
drugs--Dr. Garthwaite talked about the need to create new
drugs.
We all want to do that. It is not the only model to say,
the only way to do it is to make millions of people die. Is
there another model out there? Who wants to take a response--
Dr. Morten?
Dr. Morten. Sure, I will start. Senator, that is a truly
essential question I think in this moment. I will respectfully
disagree with my colleague, Professor Garthwaite. I think he
said something like, if we decrease spending, we will get fewer
products. It suggests a kind of a zero-sum game.
I think that is a false tradeoff. I think there are
genuinely transformative options available. The NIH Moderna
vaccine proves this. The NIH Moderna vaccine is not a story of
the triumph of the free market, is the story of the triumph of
public science and public, private partnership.
We have incredible resources at the NIH and other
scientific agencies. We can unleash these. We can do public
sector, pharmaceutical R&D, development, manufacturing, and we
can cut better deals with industry when they come to NIH and
other agencies to take some of our great technology to market.
The Chair. Dr. Sarpatwari. What is your thought?
Dr. Sarpatwari. There definitely are other models the rest
of the world use them. So, one model that I am thinking about
is just to actually gauge the value of the product and base the
price off of that.
Two-thirds of drugs that have been approved in one past
year that we took a look at were actually rated by health
technology assessment committees as offering no greater value
than what exists today. So, what we need to do is not treat
innovation as a blank word. Innovation needs to mean clinically
meaningful.
In that case, when something is clinically meaningful, I
think we do owe--we do owe manufacturers a good profit on their
development. And I think that in those cases, we need to make
sure that insurance is there to make sure that millions of
Americans can afford these therapies.
I do see it as a moral failure, and I think that we do have
an obligation that we are failing the American people.
The Chair. Dr. Garthwaite, I used your name. You can
respond. Do you see any other model, any other choice other
than saying you are going to become a billionaire but people
can't afford your product? Is there another model to get this
science and innovation to people who need it all over the
world?
Dr. Garthwaite. We could certainly have the NIH increase
its funding of drugs. I know right now the NIH doesn't actually
bring drugs to market. They do early stage development. As my
colleague Dr. Morten pointed out, the NIH did partner with
Moderna. But they did however much we want to sort of downplay
Moderna's role here, there was $3 billion spent on getting a
platform up and running for them.
There is a role for the private market to work together. I
will note, though, that the NIH currently spends a mere
fraction of what the private capital markets supply to drug
developers, something in the order of like one-fourth of what
the private market has.
You would have to have the Government step in and then the
Government be--able to allocate that capital in a way
Government has never shown it is able to do.
The Chair. But if the result was, taking your point, if the
result was that we took that product after the companies made
their fair share of profits and provided it to the world,
everybody in this country at an affordable rate, don't you
think from a social and moral perspective, that would be a huge
step forward.
Dr. Garthwaite. I believe I was pretty clear in my
testimony that we could have had that conversation with Moderna
before we gave----
The Chair. I am not talking about Moderna.
Dr. Garthwaite. We can have a conversation with anyone
beforehand, Senator, but you want to come back now after you
give people money with no restrictions and then relitigate the
deal, and that means people won't trust the Government anymore.
The Chair. Okay.
Dr. Garthwaite. That matters. And I think it should matter
to you.
The Chair. Okay.
Senator Cassidy.
Senator Cassidy. Yes. Before I start, Senator Paul asked I
submit these documents for the record. I ask unanimous consent
that these documents related to myocarditis associated with the
COVID-19 vaccine be entered into the record.
The Chair. Without objection.
[The following information can be found on page 138 in
Additional Material:]
Senator Cassidy. Okay, gentlemen, I have now learned in
academia, you better have a beard.
[Laughter.]
Senator Cassidy. That is the one thing that seems to unite
you all. It is interesting--I will start with you, Mr.
Garthwaite. I actually think that the Federal Government
actually copied best practices from the private sector in the
development of the vaccine. I spoke to some people once
involved with angel investing in venture capital, etcetera.
They find a clinical problem. They find the researcher that
has done the best work. They work backward and fund that
researcher, and that researcher on that problem identified as
essential, think ALS, which they are currently doing, then
develops a product from which the investors make a return,
which is essentially what we did with the COVID vaccine.
We got an issue, who can do the work? We are going to fund
you. Then we are going to bring it forward. Is that a fair
statement?
Dr. Garthwaite. Yes, I think--in many ways you can think of
it operating like a venture capital or an angel investing firm
where we had like a very specific target we needed to hit, and
the Government could be the venture capitalist for that.
As the world gets more complicated, as we think about
different pathways for treating diseases and different
diseases, I just question whether the Government is going to be
a good venture capitalist, given all of the other----
Senator Cassidy. I accept that. You don't have to argue
that with me, brother.
Dr. Garthwaite. I was worried for a second but----
Senator Cassidy. Not at all. Dr. Morten, Dr. Sarpatwari,
you are--when I read your testimony, you are trying to build a
case that the Government has a right to march in or to dictate
a price.
Did they or did they not collaborate effectively or
efficiently or whatever on the development of the science,
etcetera? But that really goes beyond passes, if you will, the
point that Dr. Garthwaite makes and what the CEO of Moderna
made.
If you are going to negotiate some limitation on the price
when we commercialize, then do it beforehand. Don't come back
afterwards and ask to negotiate. Do it beforehand. That is just
really the crux of the matter.
When I read your testimonies, it seems as if you are
building a rationale to circumvent that crux. Dr. Morten, I
will start with you. And your thoughts--be brief because I have
got limited time.
Dr. Morten. Yes, thanks, Senator. I think it is regrettably
true that in 2020, the U.S. Government, the Trump
administration, did not extract from Moderna a clear
contractual obligation to share control with NIH or to set
affordable prices. But it is clear from the record that NIH and
Moderna were partners. They had an understanding----
Senator Cassidy. But that is beside the point. Well, that
is--so sorry, and I don't mean because your testimony is all
about that, but that is really beside the point. They did not
negotiate before. And so--I have limited time. I am sorry. Dr.
Sarpatwari--I am sorry if I am not getting your name correct. I
apologize.
Dr. Sarpatwari. Sarpatwari----
Senator Cassidy. Sarpatwari.
Dr. Sarpatwari. Thanks for the question, Senator. I agree
that we need to do a better job upstream in negotiating
contracts that would have avoided difficulty in this case. But
I think there was an understood agreement here that in turn,
for all the late-stage de-risking that was done, that a more--
Americans would have affordable access to this.
Senator Cassidy. No, you can't say that it is not
affordable if there is going to be no out-of-pocket exposure
for someone despite their coverage.
Dr. Sarpatwari. Affordable in two ways, I think is slightly
what I mean. So first of all, we know----
Senator Cassidy. By the way, I am sorry to interrupt--that
unspoken agreement, probably should have been put on paper. I
am not going to argue with that we need to have affordable
drugs, but to come back and say it was unspoken is really a
wish. It is not something which you can take to a court.
By the way, we can also argue whether the Trump
administration failed. I was there and feces were hitting the
fan and we were trying to get things done as rapidly as
possible. And it is very easy to 2020 retrospectively look at
things. But anyway, go back to your point. I am sorry.
Dr. Sarpatwari. Sure. And so, in terms of affordable, we
need to look at the patients who are going to fall through the
cracks through the patient assistance programs, which happen.
Senator Cassidy. Now you are presuming, because it has
happened with other PAPs, it is going to happen with this one.
Dr. Sarpatwari. Yes, I am.
Senator Cassidy. But the testimony is that they are already
working with advocates for the homeless in order to make sure
the homeless who are often drug addled and cannot fill out
paperwork, can get it completed, that sort of thing. So, you
are prejudging guilt, if you will.
Dr. Sarpatwari. No, I don't think so. I am making an
educated assessment based on a vast amount of evidence about
these programs. I think second, when we talk about affordable,
we need to think about what public payers are paying for these
products because that will limit, in the case of Medicaid, what
it can spend in other places. And in the case of Medicare, that
is going to result in higher premiums.
Senator Cassidy. Well, there is two things about that. And
by the way, if we want to talk about capping block granting,
the states are doing a per capita cap on state Medicaid
program. Right now, they have kind of an unlimited budget.
Obviously that is a problem for the FISC. Dr. Garthwaite,
there has been kind of a sense of, is there a new paradigm by
which we could bring things to market? By the way, I hope I got
your name correctly, too.
Senator Cassidy. Can we bring things to market with a new
paradigm? But I am told that prior to 2019--prior to the
passage of Bayh-Dole, only 5 percent of basic research was
being translated to clinical practice.
By Bayh-Dole, which basically said to universities, NIH has
funded your research, but the university is going to now own
the license to the patent. And you can work with private
industry if you wish.
That was catalytic to dramatically increase the
translational research of the basic science that NIH was
funding. Is that a fair interpretation of history?
Dr. Garthwaite. Yes. I mean, I think we have a pretty clear
sense that we are now able to commercialize things from what we
often refer to as the bench to the bedside.
That basic science done sort of at universities, of which a
lot of my colleagues who are much smarter than me do, is great,
but it is only great when it comes to patient welfare to the
extent it turns into a drug you can take. And so, Bayh-Dole
provides a mechanism by which we can commercialize that
science, yes.
Senator Cassidy. Basically, at that point, we waived the
white flag and we said to depend upon a Federal Government
basic science researcher, and that is not what she or he is
interested in, to commercialize or translate the science is not
going to happen.
Dr. Garthwaite. Well, it is just a capital question, right.
All of this is about, like who is going to pay for those next
steps and who is going to make the choices about what we select
to move forward.
Where there is this difference in what is good science and
what could be a good product. Venture capital is a really good
job of taking things out of universities and figuring out what
we should commercialize going forward.
Senator Cassidy. In which case they get to set a price,
which we may not like, but nonetheless, that is part of the
deal.
Dr. Garthwaite. Yes, I would rather they set price on a
drug that exists than have people like my mother-in-law and
others who have died of cancer because there is no treatment
that exists for them.
Senator Cassidy. With that, I yield.
The Chair. Okay. Let me thank our witnesses. Good
discussion. Would like to go on further. I got to vote. Senator
Cassidy has another engagement. So, this is the end of our
hearing today. And thank you again. And we thank Dr. Bancel--
Mr. Bancel, once more.
For any Senators who wish to ask additional questions,
questions for the record will be due in 10 business days, April
5th by 5.00 p.m.
I ask unanimous consent to enter the record a statement
from a stakeholder group about the cost of COVID vaccines, as
well as a letter from the NIH about its inventorship of the
COVID vaccine and evidence about public funding of Moderna.
[The following information can be found on page 135 in
Additional Material:]
The Chair. The Committee stands adjourned.
------
ADDITIONAL MATERIAL
prepared statement of kaiser permanente
Chairman Sanders, Ranking Member Cassidy, and distinguished Members
of the Committee, thank you for the opportunity to provide a statement
for the record on behalf of Kaiser Permanente. \1\ As the largest
private, integrated health care system in the United States, Kaiser
Permanente provides pharmacy services and coverage to over 12.6 million
people. \2\ Our integrated model of care combines both a health plan
and a care delivery system. Because payer, direct purchasing, pharmacy,
and provider operations are all part of the Kaiser Permanente system,
we have a unique perspective on drug prices and pharmacy benefits. Our
mission for pharmacy, and all the services we provide, is to deliver
high-quality, affordable care and to improve the health of our members
and the communities we serve.
---------------------------------------------------------------------------
\1\ Kaiser Permanente comprises Kaiser Foundation Health Plan,
Inc., one of the Nation's largest not-for-profit health plans, and its
health plan subsidiaries outside California and Hawaii; the not-for-
profit Kaiser Foundation Hospitals, which operates 39 hospitals and
over 700 other clinical facilities; and Permanente the Medical Groups,
self-governed physician group practices that exclusively contract with
Kaiser Foundation Health Plan and its health plan subsidiaries to meet
the health needs of Kaiser Permanente's members. As the largest private
integrated health care delivery system in the United States, Kaiser
Permanente delivers care to more than 12.6 million members in eight
states and the District of Columbia. We are committed to providing
high-quality, affordable care and improving the health of our members
and the communities we serve. https://www.wsj.com/articles/moderna-
considers-price-of-110-130-for-covid-19-vaccine-11673289609.
\2\ Within our footprint, we maintain a primarily internalized
pharmacy system, including over 550 outpatient, hospital, infusion,
specialty, and mail order pharmacy sites, staffed by over 14,000
pharmacy personnel. Kaiser Permanente spends approximately $10 billion
annually on pharmaceuticals. Our Permanente Medical Group (PMG)
physicians and other authorized practitioners prescribe, and our
pharmacies, dispense over 90 million prescriptions annually. https://
apnews.com/article/science-health-business-covid-medicare-
1a5d65356ebc7b5bc76524ae99deb55e.
Kaiser Permanente greatly appreciates the Committee's attention to
drug prices--and particularly troubling reports that drug manufacturers
plan to increase the price of their COVID-19 vaccines nearly 400
percent as the country transitions these products to commercial
markets. We have long been deeply concerned about the crippling burden
high drug prices impose on our members and our ability to carry out our
mission as a nonprofit organization. As the country emerges from a
pandemic, manufacturers are proposing significant unjustified increases
to the price of these COVID-19 vaccines, placing further pressure on
---------------------------------------------------------------------------
health care costs and affordability.
As COVID-19 variants continue to emerge, vaccines will likely
continue to play a crucial role in curbing deaths and serious illness.
Therefore, these vaccines must be affordable and accessible for
everyone. Kaiser Permanente understands that commercialization of
COVID-19 vaccines is appropriate, but it must be done thoughtfully and
methodically, with enough lead time to transition all necessary
arrangements, including contracting with manufacturers and making
distribution arrangements. However, given manufacturers' recent pricing
announcements, we are concerned that commercialization is simply
becoming a process for those manufacturers to extract excessive profits
at the expense of the rest of the health care system.
Reports indicate manufacturers intend to charge up to $130 per
dose, which is 5 times the current price paid by the Federal
Government. These vaccines received substantial financial investment
and other support from the Federal Government, including initial
investments of $10 billion in taxpayer dollars to accelerate the
development, manufacturing, and distribution of COVID-19 vaccines,
therapeutics, and diagnostics. In the summer of 2020 alone, $1.95
billion went to Pfizer for the government to purchase and deliver 100
million doses, \3\ and $2.4 billion went to Moderna for research,
manufacturing, and the government purchase of 100 million doses. \4\,
\5\, \6\ Since then, billions more have been spent on advance-purchase
agreements. By making up-front investments, the Federal Government took
on the risk of vaccine development, thereby removing the bulk of
financial risk from manufacturers as they developed their products.
---------------------------------------------------------------------------
\3\ https://www.pfizer.com/news/press-release/press-release-
detail/pfizer-and-biontech-announce-agreement-us-government-600.
\4\ https://investors.modernatx.com/news/news-details/2020/
Moderna-Announces-Award-from-U.S.-Government-Agency-BARDA-for-up-to-
483-Million-to-Accelerate-Development-of-mRNA-Vaccine-mRNA-1273-
Against-Novel-Coronavirus/default.aspx.
\5\ https://endpts.com/moderna-begins-first-us-pivotal-covid-19-
vaccine-study-lands-472m-more-from-barda/.
\6\ https://www.reuters.com/article/us-moderna-stocks/moderna-
shares-jump-on-1-5-billion-u-s-contract-for-covid-19-vaccine-
idUSKCN2581SW.
Manufacturers have already recouped their investments in bringing
these vaccines to market; in fact, they have made billions of dollars
on their COVID-19 vaccines. In 2021, Pfizer's COVID-19 vaccine, known
as Comirnaty, became the highest revenue-generating drug ever in a
single year, generating $36.8 billion in sales. \7\ In 2022, their
vaccine generated $37.8 billion in sales. \8\ Moderna, the other
leading COVID-19 vaccine manufacturer in the United States, generated
approximately $18.4 billion in revenue for their vaccine, known as
Spikevax, in 2022. \9\
---------------------------------------------------------------------------
\7\ https://www.fiercepharma.com/special-reports/top-20-drugs-
worldwide-sales-2021#c9635227-c325-40d3-8595-efd3a8db5181.
\8\ https://billion.html.
\9\ https://www.fiercepharma.com/pharma/moderna-covid-vax-scarfed-
sales-184b-2022-company-says.
Given the significant taxpayer investment and profitability already
experienced by these companies, it is unreasonable to accept price
increases up to 400 percent over the price paid by the Federal
Government during the pandemic. According to analysts, Pfizer's
proposed price hikes could add around $2.5-$3 billion in annual
revenue. \10\ Moderna expects to reach at least $5 billion in sales in
2023. \11\
---------------------------------------------------------------------------
\10\ https://www.reuters.com/business/healthcare-pharmaceuticals/
pfizer-covid-vaccine-price-hike-seen-giving-revenue-boost-years-2022-
10-921/.
\11\ https://www.fiercepharma.com/pharma/moderna-covid-vax-
scarfed-sales-184b-2022-company-says.
Windfall pricing such as this will negatively impact consumers and
add costs to the already strained health care system. Public and
private payers will continue to cover the price of the vaccine with no
cost-sharing for most patients with coverage, but the cost will still
be borne by those payers. Manufacturers should not abuse policies that
require $0 cost-sharing by shifting the substantial financial
liabilities to the health system, taxpayers, and employers and
individuals who pay the cost of health coverage. When a drug or vaccine
that received substantial taxpayer funding for development is priced
egregiously high, the government should use every tool it has to recoup
its investment and ensure the health system and public directly benefit
---------------------------------------------------------------------------
and don't have to pay for the same innovation twice.
It is inevitable that these price gouging practices will
disproportionately impact uninsured individuals. Pharmaceutical
manufacturers may announce patient assistance programs promising
uninsured individuals access to ``no-cost'' vaccines. However, these
programs will not result in sufficient vaccine uptake if individuals
are required to navigate a complex application or reimbursement
process. Uninsured individuals need easy access to vaccines without
navigating bureaucratic obstacles. Moreover, while patient assistance
programs may appear to be a step in the right direction, they will be
nothing more than a fig leaf attempting to hide a gross injustice if
nothing is done to address the unacceptably high list price.
When the government and industry partner to develop critical public
health products, with substantial research support and financial risk
mitigation by the government, it is fundamentally inappropriate for
manufacturers to price their products to simply maximize profits, just
as it is inappropriate for retailers to freely raise prices on basic
necessities during a period of emergency. The prices paid directly by
the government clearly demonstrate adequate profitability at much lower
prices, even as demand has waned. At Kaiser Permanente, we are
committed to ensuring everyone has affordable access to life-saving
vaccines; however, we cannot ignore the significant burden astronomical
list prices place on the health system, taxpayers, and patients. We
call on manufacturers to do their part and reconsider their egregious
prices.
Thank you for considering our perspective on these important
issues. We look forward to working with you to advance meaningful
solutions.
______
National Institutes of Health,
Bethesda, MD.
March 17, 2023
Hon. Bernie Sanders, Chairman,
U.S. Senate Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC.
Dear Chairman Sanders:
I am writing to provide additional information regarding the
scientific contributions of the National Institutes of Health (NIH),
and specifically scientists at the National Institute of Allergy and
Infectious Diseases (NIAID) Vaccine Research Center (VRC), that were
made to the development of Moderna's mRNA-1273 vaccine against COVID-
19. Below are several facts relevant to NIH's determination that Drs.
Barney Graham, Kizzmekia Corbett, and John Mascola (VRC scientists at
the time this work was done) are co-inventors of certain disputed
patent applications. NIH has communicated these and additional details
of NIH's contributions to Moderna on multiple occasions.
VRC and Moderna had collaborated since 2016 on a variety of
projects including HIV, RSV, HMPV, HPIV3, Zika, MERS-CoV, and Nipah
vaccines. This collaboration was formalized under agreements focused on
prototype pathogen vaccine development for coronaviruses and
paramyxoviruses using MERS-CoV and Nipah as the prototypes for those
pathogens. The parties regularly meet to discuss collaborative
projects.
Longstanding NIAID support for intramural and extramural research
enabled the development of versatile vaccine platforms and the use of
structural biology tools including cryo-electron microscopy to design
specific proteins--called immunogens--that powerfully stimulate the
immune system. Prior to the COVID-19 pandemic, scientists at the NIAID
VRC and their academic collaborators made the critical scientific
discovery of how to mutationally stabilize--in a highly immunogenic
form--viral proteins that coronaviruses use to infect human cells. This
strategy facilitated the design of vaccine candidates that generate
robust protective immune responses. As soon as the sequence of SARS-
CoV-2 was made available in early January 2020, NIAID VRC researchers
rapidly generated a stabilized SARS-CoV-2 spike protein for use in
COVID-19 vaccine development. This crucial breakthrough in structure-
based vaccine design led to the development of safe and effective
COVID-19 vaccine candidates, several of which are now authorized or
approved by the FDA, and built across a range of vaccine platforms
including the highly successful mRNA platform.
Moderna has publicly discussed the collaboration between the NIAID
VRC and Moderna on COVID-19 vaccine development. On January 23, 2020,
Moderna issued a press release announcing a ``new collaboration to
develop an mRNA vaccine against the novel coronavirus'' and stating
that ``The Vaccine Research Center (VRC) of the National Institute of
Allergy and Infectious Diseases (NIAID), part of NIH, collaborated with
Moderna to design the vaccine.'' \1\ On June 15, 2020, Mr. Bancel noted
in an interview with Bloomberg Business that VRC and Moderna had co-
developed mRNA-1273. \2\ In the interview Mr. Bancel states ``so what
we did is we. the NIAID team, they spent a few days looking at the
genetic sequence of a virus online, they read some 3-D modeling to
understand the structure of the protein of the virus and then we
jointly decided with NIAID what vaccine we were going to design, that
took three days. And we never had access to a virus, physically. It was
all information on computers.''
\1\ Press Release: Moderna Announces Funding Award from CEPI to
Accelerate Development of Messenger RNA (mRNA) Vaccine Against Novel
Coronavirus (Jan. 23, 2020), https://s29.q4cdn.com/435878511/files/
doc--news/2020/01/23/moderna-announces-funding-award-cepi-accelerate-
development.pdf.
\2\ Leadership Live With David Rubenstein: Moderna CEO Stephane
Bancel, BLOOMBERG (June 15, 2020, 8:42 PM), https://www.bloomberg.com/
news/videos/2020-06-16/leadership-live-with-david-rubenstein-moderna-
ceo-stephane-bancel-video. See video beginning at the 9:30 time point.
Based on this and other information, NIH and VRC scientists
emphatically believe that they were integral members of a collaborative
team of scientists working to design and produce the mRNA-based SARS-
---------------------------------------------------------------------------
CoV-2 vaccine now known as mRNA-1273.
Further, through sustained support for fundamental research
underlying the vaccine concepts and the establishment and utilization
of an extensive clinical trials network, NIAID helped advance the
development of six candidate COVID-19 vaccines. In addition to making
available the technology that enabled the development of COVID-19
vaccines, NIAID supported the Phase 3 clinical trials for three
vaccines that were made available for use in the United States,
including the mRNA-1273 vaccine that was developed through a
collaboration between the NIAID VRC and Moderna, Inc. This support
included provision of U.S. Government funds to clinical trial sites;
contribution of clinical trial design, harmonization, infrastructure,
and management; and delivery of in-kind resources to support the rapid
assessment of these vaccine candidates.
Sustained research investments by NIH over decades prior to the
emergence of SARS-CoV-2 up until today have allowed, and continue to
allow, for the unprecedented pace of COVID-19 vaccine development.
Sincerely,
Tara A. Schwetz, Ph.D.
Acting Principal Deputy Director,
National Institutes of Health
______
links to information submitted by senator paul
Vaccine Safety Datalink, October 2022: https://www.acpjournals.org/
doi/full/10.7326/M22-2274.
Vaccine Safety Datalink, January 2023:https://
www.sciencedirect.com/science/article/pii/S0264410X22015419.
Review article: Knudsen and Prasad, December 2022:https://
onlinelibrary.wiley.com/doi/10.1111/eci.13947.
Israeli study, May 2021: https://www.sciencedirect.com/science/
article/pii/S0264410X21006824.
Vaccine Safety Datalink, August 2021: https://stacks.cdc.gov/view/
cdc/109493.
Vaccine Safety Datalink, October 2021: https://stacks.cdc.gov/view/
cdc/110921.
______
The Washington Post
Our Law Helps Patients Get New Drugs Sooner
by: birch bayh and bob dole
April 11, 2002
As co-authors of the Bayh-Dole Act of 1980, we must comment on the
March 27 op-ed article by Peter Arno and Michael Davis about this law.
Government alone has never developed the new advances in medicines
and technology that become commercial products. For that, our country
relies on the private sector. The purpose of our act was to spur the
interaction between public and private research so that patients would
receive the benefits of innovative science sooner.
For every $1 spent in government research on a project, at least
$10 of industry development will be needed to bring a product to
market. Moreover, the rare government-funded inventions that become
products are typically five to 7 years away from being commercial
products when private industry gets involved. This is because almost
all universities and government labs are conducting early stage
research.
Bayh-Dole did not intend that government set prices on resulting
products. The law makes no reference to a reasonable price that should
be dictated by the government. This omission was intentional; the
primary purpose of the act was to entice the private sector to seek
public-private research collaboration rather than focusing on its own
proprietary research.
The article also mischaracterized the rights retained by the
government under Bayh-Dole. The ability of the government to revoke a
license granted under the act is not contingent on the pricing of a
resulting product or tied to the profitability of a company that has
commercialized a product that results in part from government-funded
research. The law instructs the government to revoke such licenses only
when the private industry collaborator has not successfully
commercialized the invention as a product.
The law we passed is about encouraging a partnership that spurs
advances to help Americans. We are proud to say it's working.
The writers are, respectively, a former Democratic Senator from
Indiana and a former Republican Senator from Kansas.
______
Democrat's Proposed Price Controls for Prescription Drugs Could Mean
Postponing a Cure for Alzheimer's Disease by Decades
by: u.s. senator roger marshall, m.d.
FOX News
August 6, 2022
We are entering the most exciting time of biomedical innovation and
advancement in American history. Our growing understanding of human
genetics and the promise of personalized medicine will advance the race
to cure cancer and treat or prevent Alzheimer's disease. However, this
progress will be erased if Congress passes government drug price
controls, which will end the promise of innovation and prevent patients
from seeing the benefits of the next generation of cures.
Americans enjoy unprecedented access to new, novel treatments. Of
the 460 new medicines approved globally since 2012, 85 percent are
available to Americans compared to just 59 percent in U.K. and 44
percent in Canada. Of the 123 new life-saving cancer drugs, 93 percent
are available in the U.S. compared to just 69 percent in the U.K. and
59 percent in Canada. It's baked in that, in order for government price
controls to work, these countries must deny and ration care to their
citizens.
Our system thrives on access and innovation. Government bureaucrats
don't get to decide whether we have access to medicine. The market
provides solutions, and Americans freely utilize them.
Of course, no system is perfect. Our health system needs real
reforms, not feel-good gestures that create more long-term problems,
and net no true savings on drug prices.
Democrat proposals typically just shift costs around so that they
can mask who pays for what. For example, the Affordable Care Act hasn't
reduced health spending, it just shifted more costs of health care to
taxpayers and raised the cost of insurance for people who are insured
through their employer. Moreover, the latest reconciliation bill raids
Medicare ``savings'' from the price control provision to pay for ACA
subsidies for wealthy individuals.
Under this same proposal, we would see at least 15 percent fewer
drugs developed and brought to market in the next 17 years. Do you want
to accept delaying the cure for Alzheimer's disease by a decade or
more? In a few days, Democrats are going to force us to accept, that
instead of breakthrough medicines, we'll just have to settle for end-
of-life care.
There are more than 6 million Americans living with Alzheimer's. We
all know and love someone impacted by this relentless disease. It's
estimated to cost our health system $321 billion this year, and by
2050, it will exceed $1 trillion. Of the total costs spent for seniors
with Alzheimer's, barely 10 percent is spent on prescription drugs.
Everything else is hospital and long-term care. Without many of these
medicines, we would be spending much more on hospitalizations, and be
living shorter, worse quality lives. So what is the human value, let
alone the monetary value of such a cure?
While it's politically easy to demonize pharmaceutical companies,
Democrats need to remember that this industry bailed us out of the
pandemic, developed miracle gene therapies that put terminal cancers in
complete remission, and cured Hepatitis C. This industry did all of
this and more because we allow them to fail and try again. None of the
above happened overnight. It was decades in the making.
There are basic economics on why we're first and best in this
industry. First, this industry spends more on R&D--it totaled $120
billion just last year. It's a long game though, often taking 15 years
to see that investment make it to the pharmacy counter. But 90 percent
ultimately fail.
All of that money is spent at great risk--investors don't know what
will work and what won't. If the Federal Government eliminates
incentives to make a risky investment, R&D spending will dwindle.
Look at the EU: once that governing body took control of the
pharmaceutical industry, venture capital, patent registrations, and
other key factors that demonstrate a strong industry, declined
significantly. Meanwhile, the U.S. continues to grow with proof by the
numbers and at our local pharmacy.
The pain for us is at the pharmacy with increasing out-of-pocket
costs. Unlike other health care categories, retail prescription drugs
account for only 8 percent of our Nation's health spending. While list
prices have grown less than inflation, drug price negotiators have
pocketed more discounts, but are forcing patients to pay more out-of-
pocket. In fact, these kickbacks for the middlemen have exceeded 50
percent of the list price for many prescription drugs. Those kickbacks
must go to patients and we need a solution to this shortcoming in our
system.
Republicans have solutions. I joined Senator Michael Crapo, R-Idaho
and my colleagues in introducing the Lower Costs, More Cures Act, which
includes more than 20 policies to address shortcomings in drug pricing.
Just like the new laws the Ensuring Innovation Act and the ACT for ALS,
which we helped author and support, which helped drive down drug
prices, this legislation promotes competition, innovation, and safe
more efficient paths toward approval for novel treatments.
There is common ground on making medicines more affordable for
Americans, on preserving our R&D pipeline for future cures, and on the
president's goal of curing cancer. However, progress will never be made
if the will and the incentive to innovate is decimated.
Republican Roger Marshall, M.D., represents Kansas in the U.S.
Senate. Previously he was the Congressman for Kansas' 1st District.
Prior to Congress, Dr. Marshall was a practicing obstetrician and
gynecologist in Great Bend, Kansas. He received his M.D. at the
University of Kansas School Of Medicine in 1987.
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[Whereupon, at 12:54 p.m., the hearing was adjourned.]
[all]