Pfizer announced Friday that it would lower the cost of Prevnar 13, its blockbuster pneumococcal vaccine, for humanitarian organizations like Doctors Without Borders.
In late October, Doctors Without Borders rejected Pfizer’s (NYSE:PFE) offer of one million free pneumonia vaccines. “Donations of medical products … are not the answer to increasingly high vaccine prices charged by pharmaceutical giants,” Jason Cone, executive director of the humanitarian organization, explained. “I hope to hear soon … that Pfizer is reducing the price of the vaccine for the millions of children who still need it.”
On November 11, 2016, Cone received that news.
Pfizer announced Friday that it would lower the cost of Prevnar 13, its blockbuster pneumococcal vaccine, for humanitarian organizations like Doctors Without Borders. Pneumonia remains the world’s deadliest childhood disease, killing close to one million kids each year.
The vaccine, which is only manufactured by GlaxoSmithKline (NYSE:GSK, LON:GSK) and Pfizer, has historically been too costly for most developing nations to afford, or for humanitarian organizations to distribute. For years, said groups have lobbied pharmaceutical companies requesting price reductions—and in response, they’ve received donations of free vaccines instead.
But as Cone explained in October, donations like these can work as a justification for high prices overall and come with strings attached—strings that can severely impact a humanitarian organization’s ability to provide aid.
Doctors Without Borders rejected Pfizer’s latest donation, instead calling on CEO Ian Read to reduce the vaccine’s cost. In response, the pharmaceutical giant has announced it will sell Prevnar 13 for $3.10 per dose—”the lowest prevailing global price.” Pfizer has further pledged to donate all proceeds from these sales to humanitarian groups.
The move is welcomed by the world’s vulnerable populations and aid organizations, but investors may have some questions: after all, Prevnar 13 has been one of Pfizer’s top-sellers for years. In 2015, it singlehandedly grew Pfizer’s vaccine division’s revenues by 44 percent.
How will the price reduction impact returns?
As it turns out, Prevnar 13 may not be a top-seller for much longer—even without the price reduction. Third quarter results showed sales from the vaccine are down three percent year-over-year. There was also a 16 percent drop in its revenues for Q2. While still a major earner, Prevnar 13 no longer drives Pfizer’s vaccine business growth.
As FiercePharma notes, “Prevnar has been a victim of its own success. Because of a ‘high initial capture rate’ in adults after 2014 … the company is suffering from an ‘expected decline.’”
That suggests the price reduction—which is only offered to humanitarian organizations—may have minimal impact, at least in terms of revenue. The positive press, on the other hand, could serve Pfizer’s business well. In a year when pharmaceutical companies have been decried for their pricing strategies, Pfizer’s move may win back some public opinion.
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.