No Such Thing as Free Vaccines, But Plenty of Bad Press for Pharma

- October 20th, 2016

It’s been a rough few months for pharma, with companies like Mylan and Valeant taken to task over product pricing. The next pharmaceutical giant to join them in this media spotlight? Pfizer.

It’s been a rough few months for pharma, with companies like Mylan (NASDAQ:MYL) and Valeant (NYSE:VRX, TSX:VRX) taken to task over product pricing. The next pharmaceutical giant to join them in this media spotlight? Pfizer (NYSE:PFE). The company recently offered one million free pneumonia vaccines to Doctors Without Borders. Sounds like a great PR move, right? Not when Jason Cone, executive director of the non-profit, turned the donation down.
In a post published on Medium, Cone explains that Doctors Without Borders has been negotiating with Pfizer and GlaxoSmithKline (NYSE:GSK, LON:GSK), the only two producers of the pneumonia vaccine, for years, trying to get the pharmaceutical giants to lower the price. But with a monopoly on the market, Cone alleges, the pair have been able to keep prices “artificially high.”
“Since 2009,” he writes, “the two companies have earned $36 billion on this vaccine alone.”
Pneumonia is the world’s deadliest disease among children, killing close to one million kids each year. Yet the vaccine is too costly for most developing nations to afford, or for humanitarian organizations like Doctors Without Borders to distribute.

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Nevertheless, Cone believes that accepting the donation would have undercut his organization’s longer term effort to get these companies to lower their prices. “By giving the pneumonia vaccine away for free,” he writes, “pharmaceutical corporations can use this as justification for why prices remain high for others.
“Donations of medical products,” he concludes, “may appear to be good ‘quick fixes,’ but they are not the answer to increasingly high vaccine prices charged by pharmaceutical giants like Pfizer or GSK.”
Sally Beatty, spokesperson for Pfizer, disagrees. She told The Atlantic that “Pfizer is committed to making vaccines available to as many people as possible,” and criticized Cone’s stance: “to suggest that donations are not valuable defies logic.”
But Cone is not the only one who thinks so. He joins a growing conversation about drug pricing, one that has come into the spotlight thanks to the American presidential election. Both candidates have vowed to take on price-gouging by pharmaceutical companies, which has made some investors anxious. In fact, tweets from Democratic nominee Hillary Clinton about Turing and Mylan’s price hikes triggered two significant drops in biotech and pharmaceutical stocks.
Cone’s post ends by acknowledging GSK’s recent price cuts and calling on Pfizer’s CEO to do the same: “Mr. Read, I hope to hear soon from you that Pfizer is reducing the price of the vaccine for the millions of children who still need it.”
That call to action has many shareholders sitting up and taking notice. Prevnar 13, the pneumonia vaccine, is one of Pfizer’s blockbuster products and brings in significant revenue: $6.245 billion last year. Undoubtedly, it’s part of the reason why Pfizer was able to return $13.1 billion to shareholders in 2015.
But negative publicity is also bad for business, as the examples of Valeant, Turing and Mylan prove. These companies have caved under public pressure, offering up cheaper generics, lowering prices or forcing their CEO to resign in the wake of pricing scandals. Mylan and Valeant, both public companies, saw their stock plummet.
Pfizer isn’t giving in just yet. Asked if the company would lower their prices, Beatty was evasive: “We are actively exploring a number of new options to enable greater access to our pneumococcal vaccine.”

Don’t forget to follow us @INN_LifeScience for real-time news updates.
Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.
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