THE OUTLOOK FOR HEALTH CARE IN 2023:

What you need to know about the forces reshaping our industry.

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September 12, 2022

The US is about to end Covid-19 vaccine and treatment coverage. What does this mean?

Daily Briefing

    The Biden administration recently announced plans to transition Covid-19 vaccine coverage to the commercial market—with some treatments are already making the transition. But many experts have voiced concern that decreased access to vaccines and treatment could put the United States further behind in its Covid response.

    Covid-19 vaccines and treatments will transition to the commercial market in 2023

    Earlier this month, HHS announced that health providers will be responsible for covering Covid-19 vaccines and treatments as early as January 2023.

    Once federal purchases end, distributors in the commercial market will purchase vaccines and distribute them to health care facilities, including hospitals, physician's offices, and pharmacies.

    Throughout the pandemic, the federal government has covered Covid-19 vaccines and some treatments at no cost. During that time, the government purchased a surplus number of vaccines to ensure equitable access. However, many of the doses went unused—a waste private purchasers will likely not tolerate, Axios reports.

    Once the federal government stops purchasing and distributing vaccines, vaccine makers will have to work with the commercial market to determine how many vaccine doses they need to manufacture and at what cost.

    Since so many doses have gone unused, there will be added pressure to align vaccine supply and demand to mitigate waste, which could have a negative impact on Pfizer-BioNTech and Moderna's profits, Axios reports.

    While it is possible the vaccine makers could negotiate higher payment rates per dose to make up for the decline in sales, many experts are skeptical that the commercial market will agree to higher prices.

    "These companies, for one, are not going to get paid for wasted doses, which they are now. Two, the idea that the commercial market is going to accept how much the government was paying per shot—I think that's an ambitious goal for Pfizer and Moderna," said Raymond James analyst Chris Meekins.

    According to Healthcare Distribution Alliance CEO Chip Davis, because of the cost pressure placed on the system, distribution centers often only have a "just-in-time" inventory. Typically, they rely on past purchasing patterns to determine how much inventory to buy.

    In the private sector, pricing "will become an issue for an entity that thus far hasn't been that directly involved, which is insurers and commercial plans," Davis said.

    Ultimately, cost pressures will not be limited to vaccines. For instance, many experts think insurers will place restrictions on who can access Paxlovid—a move that could significantly reduce the drug's sales.

    "Plans will look at which Americans are most likely to need it based on the higher cost Pfizer has chosen to charge for this drug," Meekins said. "So many Americans may not have the same access they would have had if the government had continued buying in bulk."

    What does this mean for Americans?

    According to Bloomberg Intelligence's (BI) Sam Fazeli, this change could make it harder for individuals facing the highest risk of serious infections to access vaccines and treatments.

    For instance, "[t]he roughly 8% of the US population that has no health insurance will be worst hit," Fazeli said. These individuals face a higher risk of infection because they typically work in jobs that regularly expose them to the virus, he noted. In addition, this population has higher rates of obesity and other health issues, which make them more susceptible to severe infections.

    "Even those with health insurance will have to fund some of the cost out of pocket, which is a problem at a time when cost of living is rising fast," Fazeli said. "So it is very likely that the percentage of eligible people who roll up their sleeves for yet another booster shot will be even lower than the 34% of eligible people who got their fourth shot."

    So far, roughly 110 million Americans—less than half of fully vaccinated individuals—have received a booster dose, which has been available to all adults since November 2021.

    "Even if there is a big new wave of infections, unless disease severity is proving to be worse, I don't think people will be more driven to take a booster," Fazeli added.

    A recent survey from BI found that 50% of respondents said that they were not willing to pay for a vaccine, and just 30% said they would be willing to pay more than $25, according to Fazeli.

    Ultimately, if fewer Americans receive their shots than last spring, "there is a substantial risk that the U.S. will fall further behind the rest of the world where the shots are free," Fazeli said. "That could mean far more infections in the U.S., if not hospitalizations and deaths," he added. (Jarvis/Fazeli, Bloomberg/Washington Post, 9/9; Owens, Axios, 9/9)

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