Posted: 15 Dec. 2020 10 min. read

The cost and value of COVID-19 vaccines: What we know and what we don’t know

By Brian Corvino, managing director, and Joe Coppola, managing director, Deloitte Consulting LLP

On December 11th, the Food and Drug Administration (FDA) authorized the first emergency use for a COVID-19 vaccine. Approvals for additional vaccines are expected to follow. As the distribution process begins, many questions remain. How much will the vaccine cost today and in the future? Who will pay? And which vaccines will offer the best value in terms of effectiveness, possible side effects, and accessibility?

As our colleagues Laks Pernenkil and Joe Lewis noted in a recent blog, several pharmaceutical companies produced hundreds of millions of doses so that they could quickly ramp-up distribution if FDA approval was granted. While some companies might never have their vaccine approved, the federal government has already invested more than $12 billion into their research and development costs.1 (Other countries have made similar deals with manufacturers.) Federal dollars will also be used to cover manufacturing and distribution, at least for a while. States will likely need cover some distribution costs. 

The federal government intends to make FDA-approved COVID-19 vaccines available to every American—with no out-of-pocket costs.2 But what should we expect after the first wave of vaccines is administered? How will manufacturers set their pricing? What will Medicare and Medicaid, private health plans, and consumers be willing to pay? How many pharmaceutical companies are likely to be producing COVID-19 vaccines two or three years from now?

During a pandemic, having multiple companies distributing vaccines could help ensure there is enough supply to quickly vaccinate a large percentage of the population. Even if the vaccine reduces or stops the spread of COVID-19 in some countries, the disease probably won’t disappear. People will likely need to get regular, annual vaccinations for COVID-19 given that little is known about the durability of the antibodies people generate after receiving a vaccine. Once government subsidies end, we expect vaccine manufacturers will compete on the price, availability, and efficacy of their vaccines just as they do for other products.

Here’s what we know…

The Coronavirus Aid, Relief, and Economic Security (CARES) Act requires public and private health plans to cover the cost of any FDA-approved COVID-19 vaccine recommended by the Advisory Committee on Immunization Practices (ACIP) as a preventive service. Clinicians and other people who administer the vaccine will be reimbursed through Medicare, Medicaid, or private insurance coverage. The cost of vaccinating the uninsured will be covered by a fund managed by the Health Resources and Services Administration (HRSA), which has already been covering the cost of care for uninsured COVID-19 patients.

The Centers for Medicare and Medicaid Services (CMS) said it would pay $28.39 to administer a single-dose vaccine, and $45.33 for vaccinations that require a booster.3 In a prepared statement, CMS Administrator Seema Verma estimated the cost of inoculating all Medicare beneficiaries would be about $2.6 billion, which will come from the Medicare Trust Fund. Another $175 million will likely be needed to cover vaccinations for the uninsured.4

Rules from the Departments of Labor and Treasury require most commercial health plans and self-funded employers to make the vaccine available at no cost to beneficiaries.5 At this point, however, it isn’t clear when health plans and employers might see claims for vaccines and/or administration. 

…and here’s what we don’t know

  • How will value be assessed? The value of a vaccine that significantly reduces infection rates is undeniable. However, each vaccine is likely to have different attributes, and consumers, employers, clinicians, and health plans might all assess value differently. Efficacy, tolerability, side-effects, accessibility, trust, and name-recognition of the vaccine manufacturer are among the factors that are likely to be considered. Moreover, how value is assessed could change over time. A one-dose vaccine, for example, might be perceived as having more value than a two-dose regimen. In addition, some consumers might have access to different vaccines through various distribution channels. A vaccine that is available through a pharmacy chain, for example, might have more value for some people than a vaccine that is available through a hospital system or a public health clinic.
  • Who will pay for it (and how might that change over time)? At least initially, the cost of the vaccine, and costs to administer it, will be funded by the federal government. But what happens as we enter the next phase of the pandemic? Once the vaccine becomes commercialized, will it be part of health benefit packages? If so, when will that start? The federal government, for example, might opt to purchase large amounts of the vaccine and continue to provide it at no cost to vulnerable populations because of the obvious public health benefit. And if health plans cover the cost of the vaccine one or two years from now, how much will they pay for it. Will those costs be in incorporated into premiums?
  • Will the vaccine be considered a medical or pharmacy benefit? The answer to this question has implications not only for COVID-19 vaccines, but also for future vaccines. This could determine how money flows through the value chain, how entities in the value chain get paid, and who pays.6 Higher-priced vaccines typically are processed through the medical benefit of a health plan. For example, Medicare Part B and Medicare Advantage plans cover the seasonal flu vaccine under a medical benefit, but they use a pharmacy benefit for most other vaccines. Rather than reducing list prices, some companies might opt to negotiate rebates with pharmacy benefit managers (PBMs) if the vaccine is covered under the pharmacy benefit.
  • Which vaccines will be left standing? It’s unknown how many vaccine manufacturers will compete against each other, or for how long. Currently, there are 13 companies developing front-running vaccine candidates.7 Companies that have a competitive edge—in terms of efficacy, side effects or distribution costs—might revisit their pricing strategy. Less-competitive vaccines, by contrast, could be pushed out by market dynamics. Companies that have the most effective vaccines could wind up with a large, global customer base where even a small margin translates to large overall returns.
  • How will manufacturers determine post-pandemic pricing? If the vaccine is perceived as too expensive, manufacturers could face a backlash if the public thinks they are trying to capitalize on a global health emergency. Setting prices too high for a COVID-19 vaccine could trigger scrutiny over drug prices more broadly, perhaps accelerating legislation or executive orders to address pricing.8 But pharmaceutical companies will likely need to price it high enough to generate revenue and encourage investors to back future research and development. If vaccine profits are not high enough, investment dollars could migrate to areas where profits would likely be higher. Given that COVID-19 is a global issue, competition will be on a global scale.9 This could mean pricing strategies could vary by country.
  • How will vaccine hesitancy be addressed? In an August blog, our colleagues Sarah Thomas and Greg Szwartz noted that 25% to 50% of Americans have said they would be hesitant to get a COVID-19 vaccination due to concerns about safety and the unprecedented speed of development. They suggested that governments, businesses, and other stakeholders develop strategies that provide accurate information to people in creative, effective, and ethical ways. Increased use of virtual health could be an important education tool and could also be used to assess vaccine eligibility and identify people who would benefit most from a vaccine. 

We are in the earliest stages of an effort to vaccinate the world against a virus. Preventing and reducing COVID-19 infections will save lives, reduce suffering, and help our economies recover. We expect the questions we raised above will be answered in the weeks and months ahead. 


1.        COVID-19 Vaccine: The taxpayers’ gamble, CBS News/60 Minutes Overtime, November 13, 2020

2.        Frequently asked questions about COVID-19 vaccination, CDC, December 3, 2020

3.        Medicare COVID-19 vaccine shot payment, CMS, December 3, 2020

4.        From the factory to frontlines: The Operation Warp Speed Strategy for Distributing a COVID-19 vaccine, HHS fact sheet

5.        Fourth COVID-19 interim final rule with comment period, CMS, October 28, 2020

6.        Navigating the world of vaccine billing, Pharmacy Times, June 24, 2020

7.        The coronavirus vaccine frontrunners are advancing quickly, BiopharmaDive, December 2, 2020

8.        How much will a COVID-19 vaccine cost, Forbes, November 17, 2020

9.        COVID-19 vaccines are chance at salvation, financial and beyond, for drug makers, New York Times, October 13, 2020

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