Vaccine makers kept $1.4 billion in prepayments for canceled covid vaccines for the world’s poor

As global demand for Covid-19 vaccines dries up, the program responsible for vaccinating the world’s poor has been negotiating urgently to try to get out of deals with pharmaceutical companies for vaccines it no longer needs.

So far, drug companies have refused to refund $1.4 billion in advance payments for now-canceled doses, according to confidential documents obtained by The New York Times.

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 Gavi’s financial documents show the organization has been trying to stop the financial damage. If you can’t reach a more favorable deal with another company, Johnson & Johnson, you may have to pay even more.

Gavi is a Geneva-based non-governmental organization that uses funds from donors, including the US government and the Bill & Melinda Gates Foundation, to provide childhood immunizations to low-income countries. At the start of the pandemic, he was tasked with buying Covid vaccines for the developing world, armed with one of the largest humanitarian fundraisers in history, and began negotiations with vaccine manufacturers.

Those negotiations went wrong at first. Initially, the companies excluded the organization from the market, prioritizing high-income countries that could pay more to secure the first doses. Gavi eventually reached agreements with nine manufacturers.

But the shots didn’t start reaching developing countries in significant numbers until mid-2022. By the time Gavi had a steady stream of supply, demand had started to wane: countries with fragile health systems struggled to administer the shots, and the prevalence of the milder variant of Omicron undermined people’s motivation to get vaccinated. Now, Covax is liquidating well below its goal of vaccinating 70 percent of the population in each country.

Vaccine manufacturers have raised more than $13 billion from the injections that have been distributed through Covax. Under the contracts, the companies are not required to return the prepayments that Gavi gave them to reserve vaccines that were ultimately cancelled.

But in light of the number of vaccine doses Gavi has had to cancel, some public health experts criticized the companies’ actions.

Covid vaccine makers “have a special responsibility” because their products are a social good and most were developed with public funds, said Thomas Frieden, executive director of the nonprofit global health organization Resolve to Save Lives and former director of the US Centers for Health. Control and Prevention of Diseases.

“That’s a lot of money that could do a lot of good,” he said.

He added that other large global health programs have budgets roughly equal to the amount kept by vaccine makers. “The whole polio eradication effort costs about a billion dollars a year, and that’s a huge infrastructure,” he said.

Gavi struck deals with Moderna, the Serum Institute of India and several Chinese manufacturers to write off unnecessary doses, handing over $700 million in advance payments, the documents show.

Another pharmaceutical company, Novavax, is refusing to refund another $700 million in advance payments for injections it never delivered.

Gavi and Johnson & Johnson are locked in a bitter dispute over payment for injections that Gavi told the company months ago he wouldn’t need, but the company produced anyway. Johnson & Johnson is now demanding that Gavi pay an additional, undisclosed amount for them.

Gavi had an indirect supply relationship with Pfizer; the Biden administration bought a billion shots from him to donate through Covax. United States last year reviewed his deal with the company, converting an order for 400 million doses into future options. The company said it did not charge any fees for changing the 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 pharmaceutical companies have made from canceled vaccines.

The documents say the manufacturers collectively earned $13.8 billion in revenue from the vaccines that were distributed through Covax. Almost 1.9 billion doses have already been shipped to 146 countries. More than half were purchased directly by Gavi and the rest were donated by high-income countries.

Gavi’s deals with Moderna and Serum took into account that manufacturers had already incurred costs such as raw materials, according to the documents.

In an agreement to cancel more than 200 million doses reached late last year, Gavi agreed to let Moderna keep an advance payment it had made. In exchange, Gavi was released from having to make additional payments for the doses, meaning they were paid off at “substantially less” cost than expected, according to the documents. Moderna also issued Gavi a $58 million credit for future products, which is good through 2030.

Gavi also made concessions to get out of his deal with the Serum Institute of India. Gavi canceled 145 million doses by allowing the company to keep money Gavi had paid in advance to cover the cost of materials that had already been purchased. Serum also gave Gavi a credit note for an undisclosed amount that the organization can use to purchase the many routine vaccines he buys from Serum each year.

Moderna and Serum declined to comment on the terms.

Gavi and Johnson & Johnson are at odds over 150 million doses of Covid vaccines that Gavi 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 had delivered less than 4 million doses then. (Gavi’s contract with the company did not require him to finish deliveries before that deadline.) When the company was finally ready to ramp up its deliveries last year, demand had plummeted.

Gavi’s administrators alerted 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.

However, Johnson & Johnson continued to make the shots and tried to deliver them by the end of 2022, according to the documents. Now, as stipulated in the contract, the company wants Gavi to make an additional payment and accept the vaccines.

Gavi has proposed that the dispute go to mediation, but the company has “so far refused to enter into meaningful negotiations,” the documents say. Some of the disputed vaccines have expiration dates in 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 $700 million it spent on prepayments for injections.

Gavi had been expecting Deliveries of Novavax will start as soon as summer 2021, but the company failed in its vaccine production. As a consequence, Gavi did not proceed with the orders for the vaccines that he had originally reserved. Novavax said this was a breach of contract and canceled the dealkeeping the $700 million.

The dispute is unresolved. In a statement, the company said it hopes to negotiate a new deal to supply Gavi with its vaccine.

Some of the vaccine contracts that Gavi signed were fully fulfilled. In one case, AstraZeneca issued a refund to Gavi when final production costs were lower than expected.

If some vaccine manufacturers had not been willing to renegotiate their contracts with Gavi, the costs to the organization could have been much higher. Gavi would have had to pay $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.

A Gavi spokesman, Olly Cann, said the organization had made no new payments related to the canceled doses. He said the advance payments provided represented a fraction of what Gavi would have paid for the finished doses.

Dr. Seth Berkley, CEO of Gavi, declined to comment for this article. But in an interview in December about the future of the global covid vaccination programme, he said Gavi was paying less per dose than he had initially planned for vaccine purchases and substantially less than what high-income countries were paying. for their vaccinations.

Donations for covid vaccines substantially inflated Gavi’s budget, and missed advance payments from canceled covid vaccines do not threaten their regular work vaccinating children.

The contracts that Gavi has been trying to reduce were negotiated in the uncertain first months of the pandemic, in some cases before the vaccines were proven to work.

“In a pandemic, I would like to err by buying too many doses, rather than err by not having enough doses, particularly given the fact that countries felt there were not enough doses at first.” said Dr. Berkley.

Rich countries, which ordered far more doses than they needed, have tried to offload their own surpluses onto Covax, which has had trouble absorbing them.

Covax began deliveries to developing countries in 2021, but the initial pace was glacial. When the program finally had vaccines, the shots challenges presented that weak health systems were ill-equipped to manage.

Frustrated by erratic supplies, some public health agencies did little to create demand for the vaccines, while a tide of misinformation discouraged people from seeking them out. Sub-Saharan Africa remains the world’s least vaccinated region, but reported covid death rates in the region have been comparatively low, which has further eroded interest in shots.

“We have so many offers for donations, but we don’t accept them, because we don’t want them to expire here,” said Dr. Andrew Mulwa, who oversees the Covid response at the Kenyan Ministry of Health. “We ask ourselves, do we need to continue spending money administering covid-19 vaccines when we have other glaring disparities?”

Gavi has a stockpile of vaccines and expects millions more in donations from high-income countries seeking to shed their own gluts. The organization anticipates a peak demand of 450 million doses this year, half of what Covax shipped in 2022.