Covid vaccine manufacturers withheld advance payments for canceled vaccinations for poor nations
As global demand for Covid-19 vaccines dries up, the program responsible for vaccinating the world’s poor is urgently negotiating to try to exit its deals with pharmaceutical companies for injections it no longer needs.
According to confidential documents obtained by The New York Times, drug companies have so far refused to refund $1.4 billion in prepaid doses that have now been canceled.
Gavi, the international immunization organization that bought the vaccines on behalf of the global Covid vaccination program, Covax, has said little publicly about the costs of canceling orders. But financial documents from Gavi show that the organization was trying to stem the financial damage. If it can’t negotiate a better deal with another company, Johnson & Johnson, it could have to pay even more.
Gavi is a Geneva-based non-governmental organization that uses funding from donors, including the US government and the Bill and Melinda Gates Foundation, to provide vaccinations for children in low-income countries. At the start of the pandemic, he was charged with buying Covid vaccines for developing countries – armed with one of the largest humanitarian funds ever mobilized – and began negotiations with vaccine manufacturers.
Those negotiations went badly at the start. Companies initially shut the organization out of the market, favoring high-income countries that could pay more to lock in the first doses. Gavi eventually signed contracts with nine manufacturers.
However, until mid-2022, these injections did not start arriving in developing countries in significant numbers. At a time when Gavi had a steady flow of supply, demand began to decline: countries with weak health systems struggled to supply the vaccine, and the dominance of the milder Omicron variant reduced people’s motivation to vaccinate. Now, Covax is winding well short of its goal of vaccinating 70 percent of each country’s population.
Vaccine manufacturers have earned more than $13 billion from injections distributed through Covax. Under the contracts, the companies are not required to return the advances Gavi gave them for back-up vaccines that were eventually cancelled.
But in light of how many doses of the vaccine Gavi had to cancel, some public health experts criticized the companies’ actions.
Covid vaccine makers “have a special responsibility” because their products are a public good and most were developed with public funding, said Thomas Frieden, executive director of the global health nonprofit Resolve to Save Lives and former director of the US Centers for Disease Control and Prevention.
“That’s a lot of money that could do a lot of good,” he said.
He added that other major global health programs have budgets roughly equal to the amount held by vaccine manufacturers. “The whole effort to eradicate polio costs about a billion dollars a year, and that’s a huge infrastructure,” he said.
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Gavi reached a settlement with Moderna, the Serum Institute of India and several Chinese manufacturers to cancel unnecessary doses, handing over $700 million upfront, the documents show.
Another pharmaceutical company, Novavax, is refusing to return an additional $700 million in advance payments for injections it never delivered.
Gavi and Johnson & Johnson are in a bitter dispute over payment for recordings that Gavi told the company months ago they wouldn’t need, but which the company produced anyway. Johnson & Johnson is now demanding that Gavi pay an additional, undisclosed sum to them.
Gavi had an indirect supply relationship with Pfizer; The Biden administration bought a billion injections from him for donation through Covax. United States last year revised his agreement with the company, converting the order for 400 million doses into future options. The company said it does not charge any fees to change an order.
The terms of Gavi’s deals were kept secret because they were with private companies. There has been no public accounting of how much the pharmaceutical companies made from the canceled vaccines.
The documents show that the manufacturers collectively earned $13.8 billion in revenue from the vaccines distributed through Covax. Almost 1.9 billion doses were shipped to 146 countries. More than half was purchased directly by Gavi, with the remainder donated by high-income countries.
Gavi’s settlements with Moderna and Serum took into account that manufacturers already had costs such as those for raw materials, according to the documents.
In a deal to cancel more than 200 million doses reached late last year, Gavi agreed to let Moderna keep the advance payment it had made. In exchange, Gavi was relieved of any additional payments for the doses, meaning they were canceled at a cost “significantly lower” than expected, according to the documents. Moderna also issued Gavi a $58 million credit for future products, valid until 2030.
Gavi also made concessions to get out of the contract with the Serum Institute of India. Gavi canceled 145 million doses, allowing the company to keep the money it had paid Gavi in advance, to cover the cost of materials that had already been procured. Serum also gave Gavi approval for an undisclosed amount that the organization can use to purchase many of the routine immunizations it buys from Serum each year.
Moderna and Serum declined to comment on the terms.
Gavi and Johnson & Johnson are at loggerheads over 150 million doses of Covid vaccine that Gavi has ordered but has been trying to cancel for months.
Gavi expected a significant portion of those doses to be distributed by the end of 2021, but Johnson & Johnson less than 4 million doses delivered until then. (Gavi’s contract with the company did not require deliveries to be completed by that deadline.) When the company was finally ready to increase its shipments last year, demand fell.
Gavi’s administrators warned the company in mid-2022 that they would not need those doses and asked it to stop making new injections for Covax, according to the documents.
Johnson & Johnson continued to make the shots nonetheless and aimed to deliver them by the end of 2022, according to the documents. Now, as stated in the contract, the company wants Gavi to pay extra and accept the vaccines.
Gavi has suggested that the dispute go through mediation, but the company has “so far refused to engage in meaningful negotiations,” the documents said. Some of the disputed vaccines have an expiration date as early as mid-2023.
Jake Sargent, a spokesman for Johnson & Johnson, said the company made the ordered doses available to Covax and kept Gavi informed of production details.
In negotiations with Novavax, Gavi is seeking a refund of the $700 million it spent on recording advances.
Gavi was expecting Deliveries of Novavax should begin as early as the summer of 2021, but the company made a mistake in the production of the vaccine. As a result, Gavi did not proceed with the vaccine orders it had originally booked. Novavax said it was a breach of contract and canceled the dealretaining $700 million.
The dispute is unsettled. In a statement, the company said it hopes to negotiate a new supply agreement for its vaccine to Gavi.
Some of the vaccine contracts entered into by Gavi have been fully fulfilled. In one case, AstraZeneca refunded Gavi when final production costs were lower than expected.
Had some vaccine manufacturers been unwilling to renegotiate their contracts with Gavi, the costs to the organization could have been much higher. Gavi would have been on the hook for $2.3 billion for the doses he wanted to cancel, the documents show, but he saved $1.6 billion by getting out of those contracts.
Gavi spokesman Olly Cann said the organization had not made any new payments in relation to the canceled doses. He said the advances given represented a fraction of what Gavi would have paid for finished doses.
dr. Seth Berkley, Gavi’s CEO, declined to comment for this article. But in an interview in December about the future of the global Covid vaccination program, he said Gavi was paying less per dose than what he initially planned to buy the vaccine and significantly less than high-income countries were paying for their injections.
Donations for Covid vaccines have significantly inflated Gavi’s budget, and lost advance payments for canceled Covid vaccines do not jeopardize his regular work on vaccinating children.
The contracts Gavi was trying to cut were made in the uncertain early months of the pandemic, in some cases before vaccines were shown to work.
“In a pandemic, I would want to make the mistake of buying too many doses, rather than making the mistake of not having enough doses, especially given the fact that countries thought there weren’t enough doses to begin with.” said Dr. Berkley.
Rich countries, which ordered far more doses than they needed, tried to offload their own surpluses to Covax, which had difficulty absorbing them.
Covax began shipping to developing countries in 2021, but the early pace has been glacial. When the program finally had vaccines, injections challenges presented that weak health systems were ill-equipped to manage.
Frustrated by the erratic supply, some public health agencies have done little to create demand for vaccines, while a tide of misinformation has discouraged people from seeking them. Sub-Saharan Africa remains the least vaccinated region in the world, but the region’s Covid death rate has been recorded were relatively low, which further damaged the interest in the recordings.
“We have so many offers of donations but we don’t take them because we don’t want them to expire here,” said Dr Andrew Mulwa, who oversees the Covid response at Kenya’s Ministry of Health. “We wonder if we should continue to spend money on vaccination against Covid-19 when we have other obvious differences?”
Gavi is stockpiling the vaccine and expects millions more in donations from high-income countries that want to get rid of their own oversupply. The organization predicts peak demand of 450 million doses this year — half of what Covax delivered in 2022.