Sanofi rejects US Army request for ‘fair’ pricing for a Zika vaccine

As the US Army proceeds with plans to issue a license to Sanofi Pasteur to develop a vaccine for the Zika virus, the company last month rejected a request to maintain affordable pricing for Americans, according to an Army timeline of events that we have reviewed.

The rejection prompted anger from Senator Bernie Sanders, who has pushed the US Army to negotiate a more favorable agreement with Sanofi, which is one of the world’s largest vaccine makers and has received a $43 million US research grant. The deal, which could provide the company with another $130 million in government funds, has sparked debate about pricing for products that are discovered with US taxpayer dollars.

“It is unacceptable that Sanofi has rejected the Army’s request for fair pricing” in the US that is comparable to what other countries may be charged, Sanders told us in a statement. “American taxpayers have already spent more than $1 billion on Zika research and prevention efforts, including millions to develop this vaccine. Americans should not be forced to pay the highest prices in the world for a critical vaccine we paid to help develop.”

There is speculation that the market for such a vaccine could become lucrative, depending upon how extensively the virus travels. So the prospect of giving Sanofi an exclusive license to sell a potential blockbuster — assuming Zika does spread widely — has upset lawmakers and advocacy groups. For this reason, they want the Army to find a way to address the pricing.

Meanwhile, the Army said it is still weighing whether to grant the company an exclusive license, despite previous assertions. In a May 4 letter to Sanders, Acting Secretary of the US Army Robert Speer wrote that “the decision to grant an exclusive license to Sanofi Pasteur is not final” and is “still several months away.” Such a license may be issued this summer, according to the same Army timeline.

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Speer was responding to concerns the company will be given a monopoly and, consequently, may charge more for any forthcoming vaccine than many Americans can afford. The Army last June signed a research agreement with Sanofi to develop a Zika vaccine, and an Army spokeswoman maintained that an exclusive license must be offered to the company.

Speer, however, appears to contradict what an official in the Army’s medical technology transfer office last month wrote to Knowledge Ecology International, an advocacy group that has criticized exclusive licensing for the vaccine. In an April 24 letter, the official maintained the military intended to proceed with plans to award Sanofi an exclusive license to a pair of government patents.

The shifting Army timetable, however, may reflect a bid to forestall further negative publicity.

For several months, the topic was on a low boil as Sanders and other lawmakers, as well as patient advocacy groups such as Doctors Without Borders, pressed the Army. They have tried to persuade the Army to issue a non-exclusive license or impose requirements allowing the federal government to intervene if the company sets a price that would make the vaccine inaccessible to many Americans.

But in March, Sanders drew national attention to the issue in an op-ed in The New York Times in which he scolded the Army for a “bad deal” that may subject Americans to price gouging. He noted that Sanofi was awarded a $43 million grant from the US Biomedical Advanced Research and Development Authority, and the company has previously indicated it expects to ask BARDA for more funding.

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Last week, meanwhile, Louisiana Governor John Edwards also wrote Speer to express “serious concern” about an exclusive license, since Louisiana may be “one of the Gulf states most likely to be affected” if the virus spreads. He also warned that monopoly pricing, “without constraints, could cripple state budgets and threaten public health.”

For its part, the Army has maintained that it is trying to help solve a public health problem. There was mounting alarm last year over the spread of Zika, a mosquito-borne virus that can cause birth defects. And Speer wrote to Sanders that the Army struck a deal with Sanofi because the military lacks “sufficient” research and production capabilities to develop and manufacture a Zika vaccine.

And in that April 24 letter, the other Army official wrote the military is not in a position to enforce “affordable prices.” But one advocate, Jamie Love of Knowledge Ecology International, countered that federal law requires an exclusive license to cover an invention that has a practical application, which is defined as being made “available to the public on reasonable terms” and should be “substantially” made in the US.

Moreover, Arti Rai, the co-director of the Duke University Law School Center for Innovation Policy, believes the Army has leverage for another reason. One of two provisional patent applications was filed before the Army and Sanofi signed their deal, which is known as a CRADA, or cooperative research and development agreement. And the CRADA excluded the first provisional patent application.

As a result, the Army may not be required to offer an exclusive license, at least for that particular patent application. “My reading of the (federal statute) is that if the invention was created and federally owned before a CRADA was signed, then the Army is not obligated to give a license” to Sanofi, she explained.

But the Army may not be pushing Sanofi harder over the terms of the agreement due to concerns the company will walk away. It was only after an April 14 conversation between Sanders and Speer that the Army broached the pricing issue, according to Sanders’ office. Four days later, Sanofi rejected the notion. In his May 4 letter, Speer noted Sanofi is the “only known pharmaceutical company willing to license” the patents from the Army.

Such concerns prompted the National Institutes of Health in 1995 to remove “reasonable pricing” clauses from CRADA agreements. At the time, former NIH director Dr. Harold Varmus described such clauses as a “restraint” on new product development.

As for Sanofi, Elias Zerhouni, who heads global R&D, responded to the recent Sanders op-ed that the company will make “significant milestone and royalty payments” to the Army, which will allow the US government to “recoup its investment.” Those details have not been publicly released. A Sanofi spokeswoman told us “we can’t determine the price of a vaccine that we haven’t even made yet.”

It is worth noting that, just last week, Sanofi vowed to limit price hikes to a level at or below the medical rate of inflation in the US. The move comes not only as the company faces questions over the license for the Zika vaccine, but also pressure from lawmakers, including Sanders, who want federal authorities to investigate the company and two rivals for alleged price collusion over insulin products. Separately, some consumers filed a lawsuit.

Meanwhile, another Sanofi spokeswoman wrote us that “it’s important to note that our discussions with the US Army are ongoing and any terms of a licensing agreement are still being negotiated. Further discussions are planned.”

Similarly, a US Army spokeswoman sent us a note saying “any license agreement will not be signed unless the terms of the license application and agreement satisfy relevant law and regulations, and the government determines that the terms are in the best interest of the government and the public. The government and Sanofi Pasteur are engaged in continuing negotiation of the terms of the license agreement, so a final decision has not been made.”