Vaccinating Against COVID-19 in an Endemic Setting

With the virus expectedly here to stay, how should payers prepare for the likely need to purchase and administer vaccinations regularly? How will pricing evolve post-pandemic? Will public perception of COVID factor in? Our panel looks at the landscape and analyzes likely scenarios.

It is all but certain the virus that causes COVID-19 will not be stamped out anytime soon and may never be fully eradicated. Borrowing a quote from the sports world about a worthy opponent, you cannot stop COVID-19, you can only hope to contain it, which means the virus will likely need to be managed in an endemic setting. How should payers prepare for this inevitability? What will manufacturers charge post-pandemic, and will the government or market forces drive pricing? How will efficacy and costs factor in? Will the public’s perception of COVID-19 impact payer decisions? We consulted our panel of experts to answer these questions and more. Our panelists include:

• Melissa Andel, principal, Common Health Solutions, Washington, DC
• Larry Hsu, MD, medical director, Hawaii Medical Service Association, Honolulu, HI
• Gary Owens, MD, president of Gary Owens Associates, Ocean View, DE
• David Marcus, director of employee benefits, National Railway Labor Conference, Washington, DC
• Edmund J Pezalla, MD, MPH, founder and CEO, Enlightenment Bioconsult, Hartford, CT
• William Rogers, MD, chief medical officer, Applied Policy, Washington, DC
• Norm Smith, principal payer market research consultant, Philadelphia, PA
• F Randy Vogenberg, PhD, RPh, principal, Institute for Integrated Healthcare, Greenville, SC

What should payers be doing now to prepare for the possibility that a vaccine will need to be administered in an endemic setting?

Mr Marcus: Payers should be thinking about the incremental costs that will be added and what effect those costs will have on revenue requirements. Pandemic pricing to the federal government has been relatively low. [Editor’s note: the two-dose regimen of the Pfizer and Moderna mRNA vaccine reportedly costs $39 and $32, respectively, and the single-dose Johnson & Johnson vaccine runs $10.] Pfizer
has publicly indicated that post-pandemic pricing could rise substantially, perhaps to $150 to $175 per dose. Moderna has suggested prices will rise as well.

Dr Pezalla: Preparation should include data gathering and analysis in order to make projections of demand and utilization of vaccines for the next 2 to 3 years. Now that government stocks of free medications for treating hospitalized patients have run out, payers can also calculate the cost of treating COVID patients and begin to make economic analyses regarding the financial benefits of preventing COVID infection or severe COVID infection. Putting these two analytic streams together will yield an understanding of the actual cost of COVID and the net benefit of prevention. This information may be used to plan budgets and set premium rates. It will also inform discussions regarding differences between the vaccines.

Dr Owens: Payers will need to factor in coverage of COVID-19 vaccines for a large portion of their population on an ongoing basis.  In a worst-case scenario, that may mean a repeat immunization once or even twice per year. It may also mean new vaccines will need to be developed regularly to meet the anticipated shifts in the predominant viral variants. Even using the low price that the government is currently paying, the result could be an additional $2 to $4 per member per month to the medical cost trend. If the vaccine is required by ACIP [Advisory Committee on Immunization Practices], payers will need to cover it at no out-of-pocket cost. This ends up being a nontrivial expense addition.

Of course, as Dr Pezalla noted, there are medical cost offsets from avoiding COVID related hospitalizations, complications, and long-term sequelae. But it is difficult to predict costs avoided, especially as we move from a pandemic to an endemic stage and have little data to make those actuarial projections.

Dr Hsu: I agree that the cost will not be insignificant for payers, so they need to prepare to fund the COVID vaccine in the same way they fund the seasonal flu vaccine. It also makes sense for payers to think about how this shift in funding should be communicated to the public.

Dr Rogers: There are going to be multiple purchasers. The majority will be bought by PDPs [prescription drug plans], public health entities, and government agencies such as the Department of Defense. This is exactly what occurs with the seasonal flu vaccine. Hopefully at least two companies will continue to work on the mRNA vaccine and thus, compete with one another on efficacy and price. Additionally, if an mRNA vaccine is developed overseas, the FDA can help it penetrate the US market. The more competition we have the better the price is going to be.

Mr Smith: The COVID-19 vaccine will likely become an annual exercise. It will change yearly as the strains change, similar to the flu vaccine.

Dr Vogenberg: After October 1, 2021 and for 2022, plan payments for COVID-19 vaccinations will dominate vaccine purchases—the same as happens for other routine vaccinations. Hopefully payers are already preparing. Now is the time for them to be assessing their vendors’ ability to deliver services, products, or resources for 2022.

Ms Andel: From the perspective of payers, it will be difficult to model what their potential liability would be. Are they looking at potential semi-annual or annual booster doses? There is disagreement among experts whether most healthy adults really need the third dose boost or not. It is possible that, barring the development of a variant that evades the existing vaccines, the majority of the population will be okay with two or three doses.

There is also a question of what patient demand for additional boosters will be. I doubt that those who were hesitant to vaccinate in the first place will be willing to get a third or subsequent booster dose.

Manufacturers are being hailed as heroes for developing a vaccine in record time. In that light, doesn’t it make sense that they would be able to charge more once the public health emergency is over? Or should the federal government step in and for the first time exercise “march-in rights,” whereby it asserts legal title to an invention, in this case the COVID-19 vaccine?

Ms Andel: I think there will certainly be a lot of focus on the issue, but whether or not the government can meet the legal criteria to exercise march-in rights or not is another question. These rights have never been exercised before because there is a very high legal bar to attain. Broadly, it will likely depend on the political atmosphere in Washington at that time. The government has to decide to pursue it and demonstrate that the legal test has been met, so it might be a little bit more difficult than supporters think.

Dr Owens: Exercising march-in rights will likely be met with numerous legal challenges from the developers. Government control of the price of COVID vaccines may need to involve legislative action. I don’t see a divided Congress finding a path to do this.

Mr Marcus: I don’t think the federal government will have to resort to such action. Competition, as well as emerging treatment options for COVID, will keep manufacturers from demanding outrageous prices. Still, I think the government should keep the option in play.

Dr Hsu: Vaccine manufacturers have a right to make profits, but they also have an obligation to make sure that vaccines are cost-effective. These companies were rewarded handsomely for their efforts, mainly through public funding.

Dr Rogers: I’d be reluctant to say the federal government should set the price. If it sets the price too low and the virus mutates, you do not want the modified vaccine to be made in an environment that is low profit for the pharmaceutical industry.

Dr Pezalla: Charging more after the pandemic makes sense. Keep in mind that the original price was set at a deliberately low level because the government was purchasing a massive amount. The argument is often made that we need to allow a certain level of return to encourage innovation and investment. Even if march-in rights were considered applicable, does that send the right message? Companies may be reluctant to participate in government-led programs in the future if they fear that march-in rights will be applied.

Are you saying the manufacturers should be able to charge what they want?

Dr Pezalla: No. Drug prices are set in the context of a market that has significant issues. These include asymmetry of information between consumers and manufacturers, difficulty pricing health, and budgetary constraints imposed by the tax burden of government programs and the premium cost of commercial plans.

Then what is the answer?

Dr Pezalla: Rather than a broad brush move by the government to take over vaccine pricing, some negotiation on pricing should be allowed to set a price that is within reasonable expectations. This would very likely set a price that is higher than influenza and pneumonia vaccines but lower than the shingles vaccine. HHS [United States Department of Health and Human Services] already negotiates the price of vaccines for the Vaccines for Children Program, and other entities such as the military and VA also negotiate these prices. The same approach could be applied here.

Dr Vogenberg: My bet is on normal market pressures taking over. Vaccine makers need to rethink their pricing schemes along with distribution channels for optimization of costs in-line with reasonable pricing.

Mr Smith: Full dose, adult vaccines will likely shadow price one another. As the pandemic becomes an endemic situation, vaccination against COVID will blend in with the plethora of vaccines most Americans receive, without complaint. The cost will be absorbed in the premiums set for each group. I imagine Pfizer would like to price their vaccines like their pneumonia vaccine, but it will take several years to get there.

So, the market is more likely to determine pricing, vs the government?

Mr Marcus: I think so.

Dr Hsu: Hopefully competition will temper price increases.

Dr Rogers: Yes. There are at least two vaccines which are nearly identical in terms of effectiveness. That will lead to price competition. But we have to be open to the price perhaps going up a little bit. Unlike some medications that tend to be enormously profitable, vaccines frankly have been the backwater of pharmaceutical research—there is not a lot of money to make in this area. You have to be somewhat tolerant if you want to see companies engaged to the point where they are researching better alternatives.

Efficacy and cost always factor into such decisions. For the COVID-19 vaccine, will one matter more than the other?

Mr Marcus: Given the comparable efficacy between
the mRNA methods—and assuming that effectiveness remains high—cost will be the primary driver.

Dr Owens: In the absence of any direct comparative data on effectiveness of the vaccines in the real world, I think cost will be the major market driving force. That is typically what happens for vaccine prices where there are currently competitors. Assuming they all work essentially the same, take the less expensive one.

Mr Smith: If the mRNA vaccines are interchangeable from an efficacy and safety view, cost will be the dominant factor.

I find it interesting that the J&J vaccine appears to get shorted because its reported efficacy is ~66%, compared with much higher efficacy rates for the mRNA vaccines. Yet, the J&J rate is higher than seasonal flu vaccine efficacy.

Dr Pezalla: Vaccine experts and payers may determine that the efficacy rates are either similar or that the lower rate for the J&J vaccine is acceptable. But this may not be the assessment of members of the public, providers, and elected officials. Thus, it may be scientifically valid to choose the lower cost alternative but that may turn out to be unacceptable due to public opinion. It may be easier for government entities and politicians to apply leverage to payers to cover all of the vaccines than to allow the market to block out a more expensive vaccine that is perceived as more efficacious.

So even though a vaccine might prove to be acceptable clinically, public perception could influence how much of it is purchased by payers for their members?

Dr Rogers: I think efficacy is going to matter a lot initially. People have gotten used to expecting a 95% level of effectiveness. It’s going to be at least a few years before people stop being scared of COVID-19. Thus, if mRNA boosters are developed and one shows 97% efficacy and the other 86%, the manufacturer of the more highly efficacious vaccine will be able to charge more and drive consumption.

Dr Owens: Once COVID-19 becomes endemic and the vaccine becomes a routine I think the COVID vaccine will settle where the other vaccines are—that is, patients will take whatever vaccine the provider is administering at the time.

Mr Smith:  I agree. Members are unlikely to have a choice of vaccines once the pandemic turns endemic.

Dr Pezalla: Plans will want to allow for some choice if they feel it is affordable but price is likely to be the final decision maker.

Mr Marcus: Employer group plans will have little or no say about which vaccine is made available to members.  It will come down to the economics between the manufacturers/wholesalers and the providers. Given the high rates of efficacy, providers will probably be most motivated by cost and contractual terms.

Ms Andel: An important question for payers is what value-add would a booster shot be providing to patients? Is it shoring up protection against severe disease by keeping people out of the hospital, or is it reducing the chances of a clinically mild infection in a world with endemic COVID?

Dr Vogenberg: These are challenging questions, and the debate is academic at this point. I think it’s important not to lose sight of what was accomplished. COVID-19 vaccines—which were produced in record time—are more efficacious than seasonal flu vaccine. And the pandemic forced us to adapt to different production strategies. The lessons learned will likely improve vaccine research and development, perhaps for viral diseases where no vaccine is yet available.

How important will manufacturing capability be in an endemic setting?

Mr Marcus: It will matter most in a scenario where COVID-19 cases rise well beyond expected levels. It will be interesting to see how manufacturers restructure their production resources in a post pandemic world.

Dr Pezalla: Plans typically do not want a single preferred agent so they can avoid supply shortages and allow some degree of choice. That may not matter with the COVID vaccine due to the ability to mix and match initial vaccines and boosters. Plus, as mentioned, cost may be a prevailing factor vs allowing choice.

Mr Smith: Manufacturing capacity will not be an issue in the United States, but it could be outside this country. Semi-developed nations may be sensitive to the price early entrants charge, but the last thing a country needs is a less effective vaccine that was not thoroughly peer reviewed.

Dr Owens: That’s true, but the world market is huge. Competitors will enter the market. Pfizer, Moderna, and J&J will likely post $15 billion, $18 billion, and $10 billion in sales, respectively, in 2021. That is incentive for others to get into the COVID vaccine business.

Dr Vogenberg: Competition from later entrants will keep early entrants on their toes. Speed will be important, and early entrants have an advantage in this regard.

The ACA requires certain vaccines to be administered at no cost to patients. Do you think this will apply to COVID-19 if ongoing shots are deemed beneficial?

Mr Marcus: Yes, to the extent that COVID-19 remains a threat and ongoing vaccines are necessary. I can’t imagine a situation where USPSTF [US Preventive Services Task Force] would not rate it as an A/B recommendation, and thus required per the ACA.

Dr Pezalla: If ACIP were to change guidance because COVID cases drop substantially, or the virus is contained to outbreaks in specific places, then the situation might change. This seems unlikely, however.

Mr Smith: A yearly injection will probably be needed and required to be given at no cost to the member. For payers, the key will be folding their costs to comply into an individual’s premium once the federal government stops paying.

Dr Rogers: If a yearly shot is needed, it could be that the seasonal flu and COVID vaccines will be combined. Seasonal flu may evolve toward an mRNA delivery mechanism, which has great advantages over the egg-based manufacturing process. The manufacturer that is most successful might be the one that gets it down to a single jab.

Ms Andel: But before we get there, I wonder how USPSTF’s perspective will be impacted by the disagreement we see among experts at the FDA and CDC on the need for the third booster doses, and whether that disagreement will linger with additional booster doses. It is possible that the USPSTF looks at the data and decides that an initial series of vaccinations for COVID should be covered, but additional boosters should only be paid for certain patient populations until additional data is generated.