WASHINGTON — The CEO of Moderna on Wednesday defended the company’s decision to drastically increase the price of its COVID-19 vaccine later this year, arguing that an expected drop in demand, changes to its distribution process and the overall benefit of the vaccine warrant the higher cost.
That decision was met with bipartisan condemnation from U.S. senators on the Health, Education, Labor and Pensions Committee. Many criticized the decision before noting the federal government invested nearly $2 billion in Moderna’s development of the vaccine as well as providing a collaboration with the National Institutes of Health.
CEO Stéphane Bancel pledged during the hearing that even with the price increasing from less than $30 to about $130 a dose, Moderna would develop a system to provide uninsured or underinsured Americans with the COVID-19 vaccine and boosters at no cost.
Bancel, however, was unable to answer numerous questions from U.S. lawmakers about how the process would work in practice, indicating the company was still working out the broad parameters as well as the details.
Bancel annoyed several members on the panel when he declined to say directly if Moderna would negotiate the new price with the federal government to reduce the cost to taxpayers for COVID-19 vaccines provided through Medicare, Medicaid, or the Veterans Affairs health care system.
Bancel also declined to say if people in the United States would pay less for the vaccine than those in other countries, whose governments didn’t invest in its development.
“The price will depend on the value in each country,” Bancel said. “The cost of health care is different in each country.”
Baldwin questions motives
Wisconsin Democratic Sen. Tammy Baldwin questioned if Moderna’s decision to increase the price of its COVID-19 vaccine was linked to Bancel receiving a recent performance review in which the board said he “underperformed the company’s target for sales income generated by the COVID-19 vaccine.”
Baldwin said the decision to increase the price of the vaccine “appears tied to the impact of your personal performance assessment on your bonus and how much you would stand to gain personally from increasing the price of the COVID vaccine.”
Bancel contended the two were not linked, saying the price of the vaccine is determined by the value of the product and how much money can be saved in the long term through reduced hospital stays. He noted the cost of a high-dose flu vaccine for the elderly costs about $90 and the pneumonia vaccine costs about $240.
Baldwin also asked about Moderna’s stock buybacks, which totaled $3.3 billion in 2022 and more than $800 million in 2021.
“You are one of the, if not the, largest shareholders in Moderna,” Baldwin told Bancel. “Yet, despite spending significantly to buy back stock over the last two years, Moderna’s share price has actually declined. If you had not spent nearly $5 billion on buybacks when your stock was at the highest price it’s ever been, do you think you would be under less pressure to raise the price of COVID vaccine now?”
Bancel declined any connection, saying the vaccine’s “price is not linked to the company’s performance. The price is linked to the value of the product, to the patient and to the impact on the patient. That’s how we set the price.”
Bancel said Moderna believes the price it charged the U.S. government for the COVID-19 vaccine throughout the last couple of years represents a discount, in part because the company wanted to return the investment it got from the U.S. government to develop the vaccine, and in part because the federal government was purchasing in bulk.
Braun: ‘preposterous’ increase
Indiana Republican Sen. Mike Braun told Bancel that Moderna’s price increase “is indicative of a much bigger problem facing health care” and expressed frustration that some facets of the health care industry operate like an unregulated utility by not embracing competition or transparency.
Braun challenged Bancel for saying that one of the reasons the price is going up is to account for Moderna moving from the pandemic model, where it distributed the vaccine to the U.S. government through three Centers for Disease Control and Prevention warehouses, to a regular distribution process where it will need to get the vaccine to thousands of locations throughout the country.
“A 400% price increase is preposterous, especially when you’ve been given all this government largess,” Braun said.
Bancel testified Moderna is trying to figure out how it could best set up the new distribution network, noting the company has never had a commercial product.
Christopher Morten, associate clinical professor of law at Columbia Law School, said during his testimony on a second panel that Moderna’s COVID-19 vaccine costs just $3 to make. He also criticized the price increase decision, saying Moderna benefited significantly from U.S. taxpayer investment.
“Mr. Bancel claims the value of these vaccines justifies Moderna’s proposed price increase. But his testimony ignored a key question — who created that value?” Morten said. “It was the U.S. government, the American taxpayer that spent billions. It was government scientists that toiled alongside Moderna’s.”
Moderna wasn’t the primary inventor of the three key scientific features of the vaccine, with the federal government providing the company with the specific mRNA sequence used in the vaccine, according to Morten.
The U.S. government also designed and ran the early clinical trials and provided Moderna with money and resources to expand its manufacturing, he said.
“To be clear, Moderna’s scientists and engineers made many contributions of their own, as did many academic scientists. These people and their work deserve credit and celebration too,” Morten said. “But Moderna cannot claim the vaccine’s value for itself.”