by Öner Tulum, William Lazonick, Ken Jacobson, and Ellen Chappelka
Nine months after the US Food and Drug Administration (FDA) granted emergency use authorization (EUA) to the first of the four COVID vaccines now enjoying EUA in North America, Europe, or both, the United States government controls sufficient supply to fully vaccinate every resident of the country who wishes to be protected from the disease. One quarter of US residents ages 12 and over still have not received even one shot. Republican politicians have exacerbated vaccine hesitancy among their constituents, while among demographic groups African Americans are under-vaccinated. At the same time, the poorer countries have been largely denied access to a vaccine supply, resulting in extremely low vaccination rates and very high mortality rates, exacerbated by high morbidity rates.
Mutations of the virus that render it more contagious have sparked debate in those nations that have privileged access to the COVID vaccines about whether, for ongoing immunity, two shots will suffice. Should people in, for example, the United States receive booster shots while most of the world’s population is waiting for even a first dose to become available? The FDA’s recent decision to grant boosters EUA only for people 65 and older or for those at heightened risk of infection was based on inconclusive evidence that a BioNTech/Pfizer booster would provide the general US population with added protection. In making this ruling, the FDA tacitly accepted the “vaccine nationalist” assumption that residents of the United States have a claim on the BioNTech/Pfizer vaccine before anyone else.
The development of the COVID vaccines has been a global phenomenon, raising the “control” question of the power underpinning vaccine nationalism. The following table shows the nations in which the developers of the leading COVID vaccines are based and the number of countries in which the vaccines had been approved as of mid-September 2021.
As supplies of approved COVID vaccines have become available in 2021, we have witnessed extreme nationalism in their procurement, with the United States in the forefront of those countries claiming access to available doses. With 4.2% of the world’s population, the United States has controlled about 15% of the mRNA and AVV vaccine doses administered globally, with BioNTech/Pfizer’s making up 57%, Moderna’s 39%, and Janssen/Johnson & Johnson’s 4% of doses administered in the United States. The UK and EU account for about 25% of these vaccines. With less than 0.9% of the world’s population, the United Kingdom has controlled 7% of the Oxford/AstraZeneca doses. Of the vaccinations in the EU member nations , about 73% have been BioNTech/Pfizer doses.
We should note that the pharma companies that control the marketing of the three COVID vaccines approved for use in the United States are all US-based corporations—Pfizer, Moderna, and Johnson & Johnson (J&J)—while AstraZeneca is based in the United Kingdom. In awarding procurement contracts, the business corporations marketing the vaccines appear to have given priority to the nations where they are headquartered. The national bases of three of the four developers of the vaccine are in Europe—BioNTech in Germany, Janssen in the Netherlands, and Oxford University in the United Kingdom.
In this post, we will provide basic information on the collaborations involved in developing, manufacturing, and delivering these four COVID vaccines. Our forthcoming series of posts on the operation and performance of the companies that control the supply of COVID vaccines should alert lawmakers to the need to scrutinize the business models of corporations that control the marketing, and hence delivery, of these critical medicines. In particular, they should be concerned with the accessibility and affordability of the approved COVID vaccines.
Moderna is the only one of the four companies named above that is a vaccine developer that controls the marketing of its vaccine. As a young pharmaceutical company—its COVID vaccine is its first commercial product—Moderna is almost completely dependent for production of the vaccine on a 124-year-old Swiss company, Lonza. To date, the Moderna vaccines for the United States have been manufactured in a New Hampshire biologics plant, acquired by Lonza about three decades ago, which is conveniently located about 80 miles from Moderna’s corporate headquarters and research labs in Massachusetts. Lonza is also manufacturing the Moderna vaccine in Switzerland. In May 2020, Moderna and Lonza signed a ten-year contract for the manufacture of the COVID vaccine and other products.
BioNTech, which like Moderna developed its COVID vaccine on an mRNA technology platform, was already partnering with Pfizer for access to its manufacturing and marketing capability before the pandemic struck. Pfizer is one of only four global Big Pharma corporations—defined as companies integrating drug development, manufacturing, and marketing—that had vaccine-manufacturing capabilities coming into the pandemic. The others are US-based Merck, UK-based GlaxoSmithKline (GSK), and France-based Sanofi.
Janssen Pharmaceuticals, which as an independent Belgium-based company dates back to 1933, has been a wholly owned research-and-development division of J&J since 1961. J&J’s capability to develop the COVID vaccine came from its acquisition a decade ago of the Dutch company Crucell, which it made part of Janssen Pharmaceuticals and, in 2014, renamed Janssen Vaccines. Even though J&J is an integrated Big Pharma company, it does not possess in-house vaccine-manufacturing facilities and therefore, like Moderna and AstraZeneca, has been compelled to turn to “contract development and manufacturing organizations” (CDMOs) to produce the vaccine doses.
The Oxford vaccine is unique among the four we are discussing in having been developed in a university laboratory rather than at a business firm. In early 2020 Oxford University, in consultation with the UK government, sought a pharma company that could manufacture and market its vaccine candidate. It was unable to strike a deal with the only UK-based drug maker with its own vaccine-manufacturing facilities, GSK, which was already engaged with Sanofi in their still-unsuccessful collaboration on a COVID vaccine candidate. Of the four Big Pharma companies that possessed vaccine-manufacturing facilities, that left only Merck as a possible partner. Oxford, however, rejected a partnership bid by Merck, in part because Merck is US-based and in part because it would not agree to Oxford’s condition that the vaccine be sold at cost. AstraZeneca agreed to forgo profit, giving Oxford and the UK government a Big Pharma collaborator based in the United Kingdom. The national connection has enabled the United Kingdom to benefit from privileged access to the Oxford vaccine.
Related to AstraZeneca’s willingness to forgo profit on its COVID vaccine sales during the pandemic is the fact that the UK-based company is much less “financialized” than Merck. A core indicator of financialization is the practice of corporations’ repurchasing their stock, which exists in the United Kingdom but is far more virulent in the United States. In doing large-scale stock buybacks, senior executives allocate corporate cash to give manipulative boosts to the company’s stock price. In the decade 2011-2020, companies in the S&P 500 Index did $5.4 trillion in buybacks that absorbed 57% of their combined profits. That was in addition to $4.2 trillion in dividend payments, equal to another 42% of profits.
In the 2000s, AstraZeneca resembled a US-based company in this regard, but from 2013, when the company recruited Pascal Soriot as its CEO, it stopped doing buybacks. As a forthcoming study by Öner Tulum, Antonio Andreoni, and William Lazonick shows, AstraZeneca has since transitioned from a mode of resource allocation marked by financialization, in which distributing cash to shareholders is favored over retaining it for internal investment, to a mode that prioritizes investing the company’s cash resources in its product pipeline, thereby making innovation a possibility.
AstraZeneca’s move from financialization to innovation stands in sharp contrast to the strategic orientation that had been adopted by Pfizer, J&J, and Merck, which for the decade 2010-2019 ranked #7, #11, and #18 respectively among all US industrial corporations in the value of stock buybacks executed. Over the ten years, Pfizer spent $77 billion on buybacks, equal to 60% of its profits, plus another 55% of profits on dividends; J&J $62 billion on buybacks, equal to 49% of profits, plus another 62% of profits on dividends; and Merck $46 billion on buybacks, equal to 81% of profits, plus another 92% of profits on dividends.
Since 2019, however, Pfizer has done no buybacks as, like AstraZeneca, it has recognized the need to mobilize its financial resources to invest in its product pipeline. With the patents expiring on its major revenue-generating drugs, Pfizer apparently realized that its position as an independent company could be in jeopardy if it did not retain a portion of its profits to invest in its own drug innovation. In January 2020, Pfizer committed to doing no buybacks that year, and it did so again in January 2021 although it has increased its dividend in 2019, 2020, and 2021.
Meanwhile, the company is enjoying a profit bonanza from the COVID vaccine, with net income from the first six months of 2021 at $10.4 billion, up from $6.8 billion and $8.9 billion for the same periods in 2020 and 2019, respectively. Pfizer’s revenues from BNT162b2—the name of the BioNTech COVID vaccine—were $11.3 billion for the first half of 2021, representing 34% of Pfizer’s total sales for the period and accounting for 80% of the increase in the company’s revenues compared with the first six months of 2020. Since July 2021, Pfizer has been aggressive in advocating the use of BNT162b2 as boosters and, more recently, the vaccination of children ages five to eleven.
What can the world expect from these four companies, which control the production and delivery of the leading COVID vaccines, except those of Chinese and Russian origin? In our upcoming posts for the INET-AIR CVP Project, we will analyze the specific characteristics of the different business models that underpin the development, manufacturing and/or delivery of each of the four vaccines under discussion; we will evaluate the significance of the business model chosen by a corporation that controls the production and delivery of an approved COVID vaccine; and we will explain why the performance of a business model of a major corporation matters to the public under any circumstances. Finally, we will look at how the involvement of Moderna, BioNTech, Pfizer, J&J, and AstraZeneca in supplying the world with COVID vaccines may affect the continuing evolution within those companies of the relation between innovation and financialization.