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$1.4 Billion Kept in Prepayments for Canceled Covid Shots


$1.4 Billion Kept in Prepayments for Canceled Covid Shots
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Vaccine Makers Kept $1.4 Billion in Prepayments for Canceled Covid Shots for the World’s Poor. Drug companies have declined to refund $1.4 billion in advance payments for now-canceled doses. Gavi, the international immunization organization, bought the shots on behalf of the global Covid vaccination program, Covax, and has been trying to stanch the financial damage.

Gavi is a Geneva-based non-governmental organization that uses funds from donors such as the US government and the Bill and Melinda Gates Foundation to provide childhood immunizations to lower-income nations.

The Problem

At the start of the pandemic, Gavi was charged with buying Covid vaccinations for the developing world and began negotiations with vaccine makers.

However, the companies initially prioritized high-income countries, and the shots did not reach developing countries in significant numbers until late 2021. By then, demand had begun to decline, with countries with frail health systems struggling to deliver the shots and the milder Omicron variant sapping people’s motivation to be vaccinated. Covax has fallen short of the World Health Organization's goal of vaccinating 70 percent of the population of each country.

Under the contracts, the vaccine makers are not obligated to return the prepayments Gavi gave them to reserve vaccines that were ultimately canceled. However, some public health experts criticized the companies’ actions, stating that Covid vaccine manufacturers “have a special responsibility” because their products are a societal good and most were developed with public funding.

Thomas Frieden, the CEO of the global health nonprofit Resolve to Save Lives and a former director of the US Centers for Disease Control and Prevention, stated that the $1.4 billion could do a lot of good and that other large global health programs have budgets roughly equal to the amount the vaccine makers are holding onto.

The Dispute

The drug companies have declined to refund $1.4 billion in advance payments for now-canceled doses. According to confidential documents from The New York Times, Gavi has reached settlements with Moderna, the Serum Institute of India, and several Chinese manufacturers to cancel unneeded doses, surrendering $700 million in prepayments.

Another drug company, Novavax, refuses to refund another $700 million in advance payments for shots it never delivered. Johnson & Johnson is demanding additional payment for unwanted shots and is locked in a dispute with Gavi over payment for shots that Gavi told the company months ago it would not need but which Johnson & Johnson produced anyway.

Gavi had an indirect supply relationship with Pfizer, and the Biden administration purchased a billion shots from Pfizer to donate through Covax. Last year, the US revised its deal with Pfizer, converting an order for 400 million doses into future options, and the company said it did not charge any fees to change the order.

Confidentiality and Controversy

The terms of Gavi’s deals with the vaccine makers were kept secret because they were with private companies, and there has been no public accounting of how much drug companies have earned from canceled vaccines. The vaccine makers collectively made $13.8 billion in revenue on the vaccines distributed through Covax. Almost 1.9 billion doses have now been shipped to 146 countries, with over half purchased directly by Gavi and the rest donated by high-income countries.

Gavi's settlements with Moderna and Serum took into account that the manufacturers had already incurred costs such as those for raw ingredients. However, some experts believe that the vaccine makers should return the prepayments for canceled doses, especially considering that their products are a societal good and most were developed with public funding.

The $1.4 billion could do a lot of good and is roughly equal to the budgets of other large global health programs. The vaccine makers' actions are criticized, and Gavi is still locked in a dispute with Johnson & Johnson regarding overpayment.

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