The United States is spending about $530 for each 5-day course of Pfizer’s COVID-19 pill, Paxlovid. But the contract for the first 10 million doses would allow the government to get a lower price if one of a handful of other wealthy countries gets a better deal on the drug.
It’s part of a purchase agreement that seems to be more favorable to the federal government overall compared to the COVID-19 vaccine contracts, says Robin Feldman, a professor at the University of California Hastings College of the Law, who focuses on the pharmaceutical industry and drug policy.
“I think this contract reflects a change in the national mood across time,” she says. “So with vaccines and some treatments on the shelves, the nation is less panicked. U.S. government officials feel less backed into a corner, more able to negotiate. “
The contract includes a buyback clause, meaning that in the event that Paxlovid’s emergency use authorization needs to be withdrawn, Pfizer would buy back unexpired treatment courses from the federal government.
Federal government gets a price match guarantee
The contract also has something called most favored nation pricing. It’s kind of like getting a product at a store with a price match guarantee, like Target or Best Buy. If one of six other wealthy countries, such as Japan or Germany, gets a lower price for Paxlovid, the U.S. can push the company for the same price.
“Getting a most favored nation clause is great for a buyer,” Feldman says. “Because a buyer can make an early deal, secure a product flow, and not have to worry that they’re being fleeced on price. Because the price may go down across time.”
(“Most favored nation” might also sound familiar because the Trump administration proposed testing it out to gradually lower a few dozen drug prices in Medicare Part B over seven years. The Centers for Medicare and Medicaid later rescinded the plan, citing concerns about access issues and the COVID-19 pandemic.)
NPR obtained the Paxlovid contract after filing a public records request.
James Love, director of global public interest advocacy group Knowledge Ecology International, was shocked to see this price clause in the Paxlovid contract obtained by NPR. He says the government often can’t even get this kind of clause when it’s paid for the research that went into a drug.
“Here they go like, ‘Well, we didn’t even pay for the R&D, but we still want the reference price,'” he says. “And they got it.”
In contrast, Pfizer’s vaccine contract explicitly says its price per dose – around $20 – cannot be used as a reference price, allowing the company to charge more money later: “This price shall not serve as the basis for pricing under any separate government contracts between Pfizer and HHS, the Department of Defense, or any other Department or agency of the Government by application of most favored customer, most favored nations, or any other contract or program specific terms.”
However, the most favored nations clause in the Paxlovid contract is extremely limited, says Feldman.
“Canada, France, Germany, Italy, Japan, the United Kingdom. That’s it,” she says. “If Pfizer sells the drugs for less to Belgium, it doesn’t help us at all.”
Since the government pays for Paxlovid as each incremental order is released and delivered, it could negotiate a lower Paxlovid price anytime between now and September, when the contract says the final doses should be released under the contract.
Paxlovid production expected to ramp up by the spring
The original contract, dated Nov. 17, 2021, lays out a product release schedule with most of the doses coming in the spring and summer of 2022. Indeed more than half are expected in the last two months of the 10-month contract period.
It shows how Pfizer is still scaling up production of Paxlovid. In December, it only expected to release 50,000 courses. But in March, it expected 400,000. And in September, it expected to release 3.25 million courses.
Since this contract was signed, Pfizer and the government have moved up the production targets and doubled the order to 20 million treatment courses. So the 10 million treatments that were slated for delivery by September are supposed to arrive by the end of June. The additional 10 million treatments are due by the end of September.
The Biden administration did not respond to NPR’s questions around how this will impact the original release schedule.
Pfizer declined to comment on the specifics in the contract, but said it started getting its Paxlovid supply chain and manufacturing preparation underway in early 2021.
“We’re constantly looking to improve our processes, timelines and expand the supply chain – including scaling up our internal and external network, raw material production and tableting capacity,” Pfizer spokesperson Steven Danehy told NPR in an email. “Through this work we have already increased our 2022 [global] projection from 50 million courses to 120 million – of course, our work is never done. But, we have never and will never sacrifice product quality or patient safety to ensure expediency. We are confident in our supply capacity for Paxlovid.”
According to federal data, Pfizer appears to be roughly on track to meet its goals. The government has been able to distribute 265,000 Paxlovid courses so far.