In a 2021 earnings call with stockholders, Pfizer’s Chief Financial Officer Frank D’Amelio revealed that the company was utilizing charging $19.50 per COVID-19 vaccine dose, anticipating a $15 billion profit in 2021.
Improved Profit Margins
D’Amelio stated that there would be room for improved profit margins once the pandemic situation was behind us.
500 Percent Price Hike
Fast forward to today, and Pfizer and Moderna have taken this notion to heart, as they have recently increased their COVID-19 shot prices by a staggering 500 percent.
While this quadrupling in pricing from two years ago has raised concerns, it is essential to look more closely into the reasons behind this increase and what it means for the general public.
Buried in the twelfth paragraph of a recent Associated Press story was the revelation that the list price for a dose of the updated COVID-19 vaccine now ranges from $120 to $130, as stated by the manufacturers.
This significant price hike has largely flown under the media’s radar, but some voices have criticized this move.
One example is Kathryn Edwards, a Vanderbilt University School of Medicine professor, who called the price increase “pretty awful.”
Exploring the Pricing Problem
While the public’s dissatisfaction with the increased vaccine pricing is evident, it would be good to first address the fundamental question of what Pfizer should charge for its vaccine.
Price vs. Value
To understand this, consider Warren Buffett’s famous quote: “Price is what you pay; value is what you get.”
This quote articulates that price and value are distinct concepts, with value being subjective and not solely dependent on production costs.
In a free market, the prices of products and services are determined through the interactions of buyers and sellers. However, vaccines operate under different rules, where government intervention plays a significant role.
Most consumers do not directly pay for COVID-19 vaccines; third-party entities such as public or private insurance cover the costs. Governments may also purchase vaccines directly from manufacturers at negotiated prices.
Pfizer’s dominant position in the vaccine market is noteworthy, as most competing vaccine manufacturers have faced regulatory barriers, limiting their market presence.
The End of Coercion
In 2021 and 2022, governments worldwide pressured individuals to get vaccinated through various mandates, contributing to a surge in demand for Pfizer’s product. However, this era of coercion has largely come to an end.
The reduced influence of government coercion has led to a noticeable decrease in demand for COVID-19 vaccines. A recent CNN survey found that only 25 percent of U.S. adults plan to get the updated vaccine.
Aware of the dwindling demand, Pfizer and Moderna have raised their vaccine prices. This decision reflects market dynamics and their pursuit of profitability.
The Role of Government
The complexity of the vaccine pricing issue stems from the government’s heavy involvement throughout the pandemic.
Governments determined who could produce vaccines, were deeply engaged in pricing and distribution, and used coercion to ensure vaccine compliance.
The U.S. appears to pay substantially more for vaccines than European countries. A fact that suggests Americans are already overpaying for COVID-19 shots.
The situation reflects the concept of crony capitalism, where government and big business cooperate to serve their interests, which may not align with those of consumers or taxpayers.
Explaining the Price Hike
Crony capitalism’s existence explains the vaccine’s new price tag. It highlights the challenge of understanding the economic dynamics driving this increase.
A Lesson From Economics
This situation serves as a poignant reminder of a fundamental lesson in economics.
Free markets typically lead to efficient resource allocation and lower consumer prices, while government-managed systems produce the opposite outcome.
The sudden 500 percent price increase in COVID-19 shots offered by Pfizer and Moderna highlights the complexities of a market heavily influenced by government interventions.
The future of vaccine pricing remains uncertain, but this situation reiterates the need for a deeper understanding of the intricate dynamics between pharmaceutical companies, governments, and the free market.
The post Vaccine Costs Surge: Pfizer Faces Criticism of 500% Price Hike first appeared on Back Edge News.
Featured Image Credit: Shutterstock / Rohane Hamilton. The people shown in the images are for illustrative purposes only, not the actual people featured in the story.