How drug companies will profit from making Covid-19 vaccines

Vials and medical syringe are seen in front of Moderna logo in this illustration
Vials and medical syringe are seen in front of Moderna logo in this illustration

The world has at least two, and possibly three, Covid-19 vaccines ready to be distributed before the end of the year. In several months, millions of people will likely have received at least the first dose of a vaccine made by Pfizer, Moderna, or AstraZeneca.

While these pharmaceutical companies are filling a desperate public need, they are also corporations with shareholders expecting a return. Manufacturing coronavirus vaccines is a potentially lucrative business, but how much will these companies earn? And what will the market for Covid-19 vaccines look like in the long term?

Asking price

Unlike most drugs, vaccines aren’t big money makers. The market is smaller, with fewer players. Before Covid-19, the global market for all vaccines was about $24 billion a year—only a very small fraction of the overall pharmaceutical market, with its estimated annual revenues of more than $1 trillion. Flu vaccines, for example, are a $4 billion market with Sanofi, the largest producer, selling about $1 billion per year.


In the case of a Covid-19 vaccine, there is significant public pressure to keep the cost as low as possible in order to make vaccines accessible globally. This is why pharmaceutical companies have committed to delivering the first several millions of doses at reduced prices—from as little as $3 per dose (AstraZeneca) to $25 to $37 per dose (Moderna).

The prestige and brand benefit associated with a vaccine that ended the pandemic, although hard to quantify its economic impact, would be significant. Drugmakers are not asking for as much as they could for their vaccines, especially considering the enormous economic value attached to the end of the pandemic, because that prestige can be lost very easily if the vaccine is too expensive for people or governments to buy.

With a larger market than the flu vaccine and a smaller profit margin (at least initially), the annual revenues for the Covid-19 vaccine are projected to be $10 billion a year until the virus stops being a public health hazard, which might only be a couple of years. By comparison, pharmaceutical company Merck makes over $7 billion a year with cancer drug Keytruda alone.

This kind of public pressure to keep prices low will likely relent once enough people have been vaccinated, and the pandemic is over. We don’t yet know what the post-pandemic period will look like. It is possible the virus will continue to circulate for a few years, during which the world will continue to need doses of the vaccine. Or, immunity might last long enough, and be strong enough, to limit the circulation of the virus, therefore reducing the need for a vaccine.

While pharmaceutical companies won’t really be able to maximize their profits in the short term, they might instead be able to do so when Covid-19 is no longer causing a global pandemic but before it’s been fully eradicated. However long that post-pandemic period lasts, it will paradoxically be easier for pharmaceutical companies to negotiate higher prices for their vaccines when they aren’t as essential for the functioning of the world. A smaller requirement of doses, and a lot less public scrutiny, will help relieve the pressure to keep prices low. So, in this period, the makes of Covid-19 vaccines—regardless of their order of appearance on the market—might be able to generate better margins, and profits, even with a smaller number of doses.

Supply and demand

The vaccine candidates that have so far been announced as effective require different technologies, both to be produced, and distributed. The Pfizer vaccine, for instance, requires extremely cold storage temperatures (about -70°C, or -94°F), while the Moderna vaccine requires only very cold ones (-20°C, or -4°F)—so the latter is easier to store in hospitals, for instance.

But both need uninterrupted storage below freezing, which unavailable in large parts of the world where electricity and other necessary infrastructure are in short supply. The AstraZeneca candidate, which doesn’t have such extreme temperature requirements, might be a better option in those situations. This means not only that there is a need for multiple vaccine options, but that there will be a market for many of them.

According to Christopher Snyder, a professor of economics at Dartmouth College and a member of Accelerating Health Technologies, a group focused on the financial and economic cases for vaccine development, there is a strong business case to be made for companies to produce their vaccines, even if they are the fourth, fifth, or sixth in line.

The money invested in trials would be paid back, since even a small slice of the market that is potentially as large as the whole world can still be profitable, even for sales as low as a couple of dollars a dose. “If you have a promise of a piece of the pandemic market, and of course the post-pandemic market, you don’t have to have a large slice of that to make it worth it,” Snyder says.


There is, however, another way in which Pfizer and Moderna are likely to make money from the vaccine—and it isn’t the vaccine itself. It’s the patents on how they were made.

Patents for vaccines last 20 years (minus the time necessary to obtain approval for vaccine use), and in most cases, large producers apply for them—as they do for other drugs—all around the world, in order to prevent drug makers in other countries from producing the drug or vaccine without a license.

However, patents for vaccines aren’t always that remunerative, explains Ana Santos Rutschman, a professor at the Center for Health Law Studies of Saint Louis University.

A vaccine can have dozens of patents attached to it—the HPV vaccine, for instance, has 81, she says. These are patents that cover everything from the formula, to the method of administration, to the manufacturing process. But often, when a new vaccine comes to the market, there is little in it that hasn’t been patented already in the past. “There is not a lot of IP (intellectual property) left in vaccines,” says Santos Rutschman. Most vaccines are made in similar ways or rely on one of a few ways to trigger the immune response.

The formulas vary, of course, but in the case of Covid-19 vaccines, says Santos Rutschman, manufacturers have indicated that they won’t enforce their patents on the formula. Even if they did, after all, it is very likely the vaccine will only be useful for a couple of years.

But Moderna and Pfizer’s vaccines have an element that is far more important than the elements that make it effective specifically against Covid-19: The use of RNA messengers to trigger the immune response.

The investment of Covid-19 vaccine development has pushed forward the research on mRNA, and the vaccines are the first use of a completely new technology that might be used not only for other vaccines, but other types of treatments, too. This innovation used in of the vaccines is likely to be captured by several patents—although Santos Rutschman is careful to highlight there is no certainty over how drug companies will move on this until the information is public—and could provide licensing revenues for a longer period of time than we will need Covid-19 vaccines. “The idea is that the companies don’t care as much for the Covid-19 vaccine as for the trigger of the mechanism that makes it effective,” says Santos Rutschman.

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