Feds' contract with Pfizer for Paxlovid has some surprises

Feds' contract with Pfizer for Paxlovid has some surprises

9:25am Feb 02, 2022
Paxlovid tablets are packaged at a Pfizer factory in Italy.
Paxlovid tablets are packaged at a Pfizer factory in Italy.
Pfizer
  • Paxlovid tablets are packaged at a Pfizer factory in Italy.

    Paxlovid tablets are packaged at a Pfizer factory in Italy.

    Pfizer

  • A lab technician at a Pfizer factory in Germany inspects Paxlovid tablets as they move through the manufacturing process.

    A lab technician at a Pfizer factory in Germany inspects Paxlovid tablets as they move through the manufacturing process.

    Pfizer

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contract includes a buyback clause, meaning that in the event that Paxlovid's emergency use authorization needs to be withdrawn, Pfizer would buy back unexpired treatment courses from the federal government.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.

Copyright 2022 NPR. To see more, visit https://www.npr.org.

Transcript

TAMARA KEITH, HOST:

Doctors are counting on Pfizer's antiviral pill Paxlovid to help keep COVID patients out of the hospital. And despite the government spending billions of dollars for 20 million courses of the drug, Paxlovid is hard to come by. Why?

Well, NPR's pharmaceuticals correspondent Sydney Lupkin has obtained a copy of the federal government's Paxlovid contract, and she is here to talk about what's in it. Hello, Sydney.

SYDNEY LUPKIN, BYLINE: Hello.

KEITH: What does the contract tell us about when to expect more Paxlovid to become available?

LUPKIN: It tells us deliveries were always expected to start slowly and that production would inch up and then really get going by summer. For instance, in December, the government was expecting only enough Paxlovid to treat 50,000 people. In March, the contract said there would be enough for another 400,000. And then in August, Pfizer is expected to deliver enough Paxlovid for another 3 million people.

Now, I have to say that since this contract was signed, Pfizer and the government have moved up the delivery targets and doubled the order to 20 million treatment courses. So Pfizer declined to comment on the contract or the schedule. And I haven't seen the new schedule, but it would compress the timeline I just talked about. That said, even though this may not be the complete picture, it's a lot more than we knew about the vaccine delivery timelines a year ago.

KEITH: Right, and - though we also just said it's still hard for sick people to get their hands on the drug right now.

LUPKIN: That's right. As I'm sure some listeners have experienced, the supply is still really tight. The government has distributed about a quarter million courses so far. But Paxlovid production should pick up speed pretty soon.

KEITH: Yeah. And this contract does give you unique insight here. What else is in it? Do we know, for instance, if the government got a good deal?

LUPKIN: So it comes out to $530 for a five-day course of Paxlovid. That's obviously a lot more expensive than the $20 per dose of the Pfizer-BioNTech vaccine. But the United States did get a better deal in some ways. Here's Robin Feldman, a professor at the University of California Hastings College of the Law.

ROBIN FELDMAN: I think this contract reflects a change in the national mood across time. So with vaccines and some treatments on the shelves, the nation is less panicked.

LUPKIN: And that means the government had a stronger negotiating position and appears to have won some concessions. There's a clause saying Pfizer will buy back unexpired Paxlovid if, for some reason, the FDA revokes authorization. And there's also something called a most favored nation clause. That means that if one of a handful of wealthy countries, such as Japan or Germany, gets a lower price on Paxlovid, the United States can push Pfizer for the same price.

KEITH: Have you seen that in any other contracts like this one?

LUPKIN: So it's unusual in a drug contract. A clause like that was also in the Sanofi COVID vaccine contract, but you don't see it too often. James Love is the director of Knowledge Ecology International, a nonprofit public interest group.

JAMES LOVE: The U.S. gets the option to purchase the product at the lowest price. We've been asking for that about 12 times a year to be put into NIH contracts, for example.

LUPKIN: And they haven't been too successful. The argument has always been, the industry will just never go for it. So Love was shocked the government got this clause into the Paxlovid deal. However, the Paxlovid most favored nation clause is limited, so it's only a few countries. So if, for instance, Belgium gets a better price, it doesn't count.

KEITH: So how does that compare to Pfizer's vaccine contract?

LUPKIN: So it's almost the polar opposite of the pricing clause of the original Pfizer vaccine contract. That contract says the vaccine price, $20 per dose, can't be used as a reference price for future purchases. It gave Pfizer more room to raise the price in the future.

But, of course, there's a trade-off. The United States is also paying more money for Paxlovid than the vaccine despite getting a much smaller supply.

KEITH: That was NPR pharmaceuticals correspondent Sydney Lupkin. Thank you, Sydney.

LUPKIN: You bet. Transcript provided by NPR, Copyright NPR.

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