As global demand for Covid-19 vaccines wanes, the program responsible for vaccinating the world’s poor has urgently negotiated to try to exit its deals with drug companies for vaccines that are no longer needed.
According to confidential documents obtained by The New York Times, drug companies have so far refused to refund $1.4 billion in advance for now-cancelled doses.
Gavi, the international immunization organization that bought the vaccines on behalf of the global Covid immunization program Covax, has said little publicly about the cost of canceling the orders. But Gavi’s financial documents show the organization has been trying to contain the financial damage. If it can’t strike a more favorable deal with another company, Johnson & Johnson, it could have to pay even more.
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 countries. At the start of the pandemic, it was tasked with buying Covid vaccines for the developing world – armed with one of the largest humanitarian mobilizations ever – and entered into negotiations with vaccine manufacturers.
These negotiations initially went poorly. The companies initially shut the organization out of the market, prioritizing high-income countries that could pay more to secure the first doses. Gavi eventually struck deals with nine manufacturers.
But the shots didn’t reach developing countries in significant numbers until mid-2022. By the time Gavi had a steady flow of supply, demand began to wane: countries with weak health systems struggled to get the vaccines out, and the dominance of the milder Omicron variant weakened people’s motivation to get vaccinated. Now is Covax Transact far from its goal of vaccinating 70 percent of every country’s population.
Vaccine makers have raked in more than $13 billion from shots distributed through Covax. Under the contracts, the companies are not required to refund the advance payments Gavi gave them for reservations of vaccines that were ultimately cancelled.
But given the many doses of vaccine Gavi has had to cancel, some public health experts have criticized the companies’ actions.
Covid vaccine makers “have a special responsibility” because their products are a social good and most were developed with public funds, said Thomas Frieden, executive director of global health organization Resolve to Save Lives and former director of the United States Centers for Disease Control and prevention.
“That’s a lot of money that could do a lot of good,” he said.
He added that other major global health programs have budgets roughly equal to the amount vaccine manufacturers are sticking to. “The entire effort to eradicate polio costs about $1 billion a year, and that’s a huge infrastructure,” he said.
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Gavi has reached agreements with Moderna, the Serum Institute of India and several Chinese manufacturers to cancel unneeded doses and give up $700 million in upfront payments, the documents show.
Another drug company, Novavax, is refusing to reimburse another $700 million in upfront payments for syringes that were never delivered.
Gavi and Johnson & Johnson are embroiled in a bitter dispute over payment for recordings that Gavi told the company months ago they didn’t need, but which the company produced anyway. Johnson & Johnson is now demanding that Gavi pay an additional, undisclosed amount for her.
Gavi had an indirect supply relationship with Pfizer; The Biden administration bought a billion recordings of it to donate through Covax. The United States last year revised his deal with the company to convert an order for 400 million doses into future options. The company said it doesn’t charge for changing the order.
The terms of Gavi’s deals were kept secret because they were with private companies. There has been no public accounting of how much pharmaceutical companies have made from canceled vaccines.
The documents state that the vaccines sold through Covax brought manufacturers a combined $13.8 billion in revenue. Almost 1.9 billion cans have now been shipped to 146 countries. More than half was purchased directly from Gavi and the rest was donated by high-income countries.
Gavi’s comparisons with Moderna and Serum take into account that the manufacturers have already incurred costs for raw materials, for example, the documents say.
In a deal to cancel more than 200 million doses finalized late last year, Gavi agreed to allow Moderna to keep an upfront payment made. In exchange, Gavi was released from back payments for the cans, meaning they were canceled at a “substantially lower” price than expected, according to the documents. Moderna has also given Gavi a $58 million credit for future products, valid through 2030.
Gavi also made concessions to end his deal with Serum Institute of India. Gavi canceled 145 million doses by allowing the company to keep money Gavi had paid in advance to cover the cost of materials already sourced. Serum also gave Gavi a credit for an undisclosed amount that the organization can use to fund the many routine vaccinations she buys from Serum each year.
Moderna and Serum declined to comment on the terms.
Gavi and Johnson & Johnson are at odds over 150 million doses of Covid vaccine which Gavi has ordered but has been trying to cancel for months.
Gavi had expected a significant portion of those doses to be distributed by the end of 2021, but Johnson & Johnson did less than 4 million doses delivered then. (Gavi’s contract with the company did not require shipments to be completed by that date.) By the time the company was finally ready to ramp up shipments last year, demand had fallen sharply.
Gavi administrators warned the company by mid-2022 that they would not need those cans and told it not to take new shots for Covax, the documents show.
Johnson & Johnson nevertheless continued to make the recordings and attempted to deliver them by the end of 2022, according to the documents. Now, as stipulated in the contract, the company wants Gavi to make a back payment and accept the vaccines.
Gavi has proposed mediating the dispute, but the company “has so far refused to participate in meaningful negotiations,” the documents say. Some of the controversial vaccines have an expiration date as early as mid-2023.
Jake Sargent, a spokesman for Johnson & Johnson, said the company provided Covax with the cans it ordered and kept Gavi updated on production details.
In negotiations with Novavax, Gavi is seeking a refund of $700 million it spent on recording prepayments.
It had been Gavi expect Novavax’s deliveries are slated to begin as early as summer 2021, but the company has botched its vaccine production. As a result, Gavi has not placed the orders for the vaccines originally reserved. Novavax said this was a breach of contract and canceled the dealkeep the $700 million.
The dispute is unresolved. In a statement, the company said it hopes to negotiate a new contract to supply its vaccine to Gavi.
Some of the vaccine contracts signed by Gavi have been fully honored. In one case, AstraZeneca gave Gavi a refund when the final production costs were lower than expected.
Had some vaccine manufacturers not been willing to renegotiate their contracts with Gavi, the cost to the organization would have been much higher. Gavi would have had $2.3 billion on the hook for the doses it wanted to cancel, the documents show, but it saved $1.6 billion by terminating those contracts.
A Gavi spokesman, Olly Cann, said the organization had not made any new payments related to canceled doses. He said the upfront payments posted represented a fraction of what Gavi would have paid for finished cans.
dr Gavi chief executive Seth Berkley declined to comment on the article. But in a December interview on the future of the global Covid vaccination program, he said Gavi was paying less per dose than originally planned to buy vaccines and significantly less than high-income countries for their shots.
Donations for Covid vaccinations have significantly inflated Gavi’s budget and the lost advance payments for canceled Covid vaccines are not jeopardizing regular child vaccination work.
The contracts, which Gavi has been trying to scale down, were negotiated in the uncertain early months of the pandemic, in some cases before the vaccines had been shown to be working.
“In a pandemic, I would make the mistake of buying too many cans rather than making the mistake of not having enough cans, especially given that countries felt there weren’t enough cans to begin with.” said dr berkley
Wealthy countries that ordered many more doses than they needed have tried to offload their own surpluses to Covax, which has had trouble absorbing them.
Covax began shipping to developing countries in 2021, but the early pace was frigid. When the program finally had vaccines, the shots challenges that weak health systems were ill-equipped to deal with it.
Frustrated by the erratic supply, some public health officials did little to increase demand for the vaccines, while a spate of misinformation discouraged people from searching for them. Sub-Saharan Africa remains the least vaccinated region in the world but has reported Covid death rates in the region were comparatively small which further eroded interest in the recordings.
“We have so many offers of donations, but we don’t take them because we don’t want them to expire here,” said Dr. Andrew Mulwa who is overseeing the Covid response at the Kenya Ministry of Health. “We wonder if we have to continue to spend money administering Covid-19 vaccines when we have other glaring differences?”
Sitting on a stash of vaccines, Gavi awaits millions more in donations from high-income countries trying to reduce their own oversupply. The organization anticipates peak demand this year of 450 million cans — half of what Covax shipped in 2022.
