Why Is Europe Paying a Lot Less Than the U.S. for COVID Vaccines?

Governments around the world want to make sure their citizens can be immunized against the coronavirus that causes COVID-19 as quickly as possible. Several governments have signed major supply deals with COVID-19 vaccine makers including AstraZeneca (AZN 0.28%), Moderna (MRNA -0.58%), and Pfizer (PFE 2.40%) along with its partner BioNTech (BNTX 0.74%).

But how much they're paying for the vaccines differs significantly. In this Motley Fool Live video recorded on Dec. 23, 2020, Healthcare and Cannabis Bureau Chief Corinne Cardina and Fool.com writer Keith Speights discuss why Europe is paying a lot less than the U.S. for COVID vaccines.

Corinne Cardina: Comparing the vaccines that are secured for the European Union to the vaccine secured for the U.S., it seems like according to some new analyses, that there is a significant difference in price. Basically, the EU is getting not just the Pfizer-BioNTech vaccine, but also the AstraZeneca-Oxford vaccine. They're getting them for cheaper.

Keith, could you explain why that would happen and why the U.S. is paying so much more? According to Bernstein Research, the EU is getting a 24% discount on the Pfizer vaccine, paying almost $15 compared to the U.S. paying almost $20. What's going on?

Keith Speights: I will say first, we really weren't supposed to know the terms of that deal. A Belgian government official inadvertently tweeted the pricing. Then subsequently when it deleted the tweet, but it was too late and so we do know that you're right. The European Union is paying about 24% less than what the U.S. is paying per dose for the Pfizer-BioNTech vaccine.

You asked the question, "Why?" Why are the Europeans -- are they just better deal-makers than we are? Maybe that's part of it. But there have been a few potential reasons floated around. I think some are better explanations than others.

For example, some have talked about that BioNTech did receive some financial assistance from the European Union. I think the European Union gave BioNTech, BioNTech by the way is a German biotech. The EU gave BioNTech a $122 million loan back in June to help develop their mRNA vaccine. Germany gave another $458 million in September. So there's one theory that maybe because of these you might even call it subsidies a little bit, that maybe that helped the European Union get a little price break and maybe, I mean, that's not far-fetched by any means.

Then I saw The Washington Post mentioned in a story that well, hey, the vaccine is manufactured in Germany, so shipping costs are lower. That would explain part of it, and that's true. However, Pfizer is also making the vaccine at its Kalamazoo, Michigan, facility, which undercuts that theory a little bit.

I think the best explanation is what Pfizer stated publicly. Pfizer said that they're using a tiered pricing formula that's based on volumes and delivery dates. If you look at the EU's order, they ordered 200 million doses initially. The U.S. initially only ordered 100 million doses. Volume discounts are common in every industry and they are used in the pharmaceutical industry too, and I think if there was one explanation that I would hang my hat on, it would be that. That the European Union is just getting a volume discount because they ordered more than the U.S. did, and that makes sense. It comes back to what you were talking about earlier, Corinne. The U.S. had its chance to order more earlier and the government did, and maybe we could have gotten a better deal from Pfizer had the U.S. increased its order quantity.

Cardina: Definitely, it's the little bit of the Costco effect there. Another thing is the US is actually getting a better deal for Moderna. The U.S. is paying $15 per dose for Moderna. The EU is paying $18 and Moderna got $4.1 billion from operations work suites. If you're getting funding from one of these countries that they've already helped you out, so you probably owe them a little bit of a discount.

Speights: Yeah. It's the old you-scratch-my-back, I'll-scratch-yours philosophy, and we are seeing that. That makes sense. I think it's a combination of things, but probably more than anything, it's that volume.