The Cost and Value of COVID-19 Vaccines: What we Know and What we don’t Know | Deloitte US has been saved
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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
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