Not only have mega-large drug companies declined to refund $1.4bn in advance payments from poor countries for now-cancelled Covid-19 doses, but separately, Johnson & Johnson is demanding additional payment for unwanted shots, according to confidential documents obtained by The New York Times.
As global demand for the jabs dries up, the programme responsible for vaccinating the world’s poor has been trying to negotiate its way out of deals with pharmaceutical companies for shots it no longer needs.
Gavi, the international immunisation organisation that bought the vaccines on behalf of the global Covid vaccination programme Covax, has said little publicly about the costs of cancelling the orders. But financial documents show the organisation has been trying to stanch the financial damage. And if it cannot strike a more favourable agreement with J&J, it could have to pay still more.
Gavi is a Geneva-based NGO that uses funds from donors, including the US Government and the Bill and Melinda Gates Foundation, to provide childhood immunisations to lower-income nations. Early in the pandemic, it was charged with buying Covid vaccinations for the developing world – armed with one of the largest-ever mobilisations of humanitarian funding – and began negotiations with the vaccine makers.
Those negotiations went badly from the start. The companies initially shut the organisation out of the market, prioritising high-income countries that could pay more to lock up the first doses. Gavi eventually reached deals with nine manufacturers.
But the vaccines did not begin to reach developing countries in significant numbers until late 2021. By the time Gavi had a steady flow of supply, demand had begun to decline: countries with frail health systems struggled to deliver the shots, and the dominance of the milder Omicron variant sapped people’s motivation to be vaccinated. Now, Covax is winding down far short of the World Health Organisation’s goal of vaccinating 70% of the population of each country.
The vaccine makers have brought in more than $13bn from the shots that have been distributed through Covax. Under the contracts, the companies are not obligated to return the pre-payments Gavi gave them to reserve vaccines that were ultimately cancelled.
But in light of how many vaccine doses Gavi has had to cancel, some public health experts have criticised the companies’ actions.
Covid vaccine manufacturers “have a special responsibility” because their products are a societal good and most were developed with public funding, said Thomas Frieden, chief executive of the global health non-profit Resolve to Save Lives and a former director of the United States Centre for Disease Control and Prevention (CDC).
“That’s a lot of money that could do a lot of good,” he said.
He added that other large global health programmes have budgets roughly equal to the amount the vaccine makers are holding on to. “The entire polio eradication effort costs about $1bn a year, and that’s a huge infrastructure,” he said.
Gavi has reached settlements with Moderna, the Serum Institute of India and several Chinese manufacturers to cancel unneeded doses, surrendering $700m in prepayments, the documents show.
Another drug company, Novavax, is refusing to refund another $700m in advance payments for shots it never delivered.
Gavi and J&J are locked in a bitter dispute over payment for shots that Gavi told the company months ago it would not need, but which the company produced anyway. J&J is now demanding that Gavi pay an additional, undisclosed amount for them.
Gavi had an indirect supply relationship with Pfizer; the Biden administration purchased 1bn shots from it to donate through Covax. The US last year revised its deal with the company, converting an order for 400m doses into future options. The company said it did not charge any fees to change 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 drug companies have earned from cancelled vaccines.
The documents say the manufacturers collectively made $13.8bn in revenue on the vaccines distributed through Covax. Almost 1.9bn doses have now been shipped, to 146 countries. More than half were bought directly by Gavi and the rest were 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, according to the documents.
In a deal to cancel more than 200m doses reached late last year, Gavi agreed to allow Moderna to keep an advance payment it had made. In exchange, Gavi was released from having to make any additional payments for the doses, meaning they were cancelled at a cost “substantially lower” than expected, according to the documents. Moderna also issued Gavi a credit for $58m for future products, which is good until 2030.
Gavi also made concessions to exit its deal with the Serum Institute of India. Gavi cancelled 145m doses by allowing the company to keep money Gavi had paid in advance, to cover the cost of materials already procured.
Serum also gave Gavi a credit note of an undisclosed amount that the organisation can use to procure the many routine immunisations it buys from Serum each year.
Moderna and Serum declined to comment on the terms.
Gavi and J&J, however, are at odds over 150m Covid vaccine doses that Gavi ordered but has been trying to cancel for months.
Gavi had been expecting a significant share of those doses to be distributed by the end of 2021, but J&J had delivered fewer than 4m doses by then. (Gavi’s contract with the company did not require it to finish deliveries by that deadline.) When the company was finally ready to ramp up its deliveries last year, demand had plummeted.
Gavi’s administrators alerted the company by mid-2022 that they would not need those doses and asked it to stop making new shots for Covax, show the documents.
J&J nevertheless continued to make the shots and sought to deliver them by late 2022. Now, as stipulated in the contract, the company wants Gavi to make additional payment and accept the vaccines.
Gavi has proposed the dispute go to mediation, but the company has “until now refused to engage in meaningful negotiations”, the documents say. Some of the disputed vaccines have expiration dates as early as mid-2023.
Jake Sargent, a spokesman for J&J, said the company had made the ordered doses available to Covax and kept Gavi informed about production details.
In negotiations with Novavax, Gavi is seeking a refund for $700m it spent on advance payments for shots.
Gavi had been expecting Novavax deliveries to begin as soon as summer 2021, but the company bungled its vaccine production. As a consequence, Gavi did not proceed with placing the orders for the vaccines it had originally reserved. Novavax said this was a breach of contract and cancelled the deal, keeping the $700m.
The dispute is unresolved. In a statement, the company said it is hoping to negotiate a new deal to supply its vaccine to Gavi.
Some of the vaccine contracts into which Gavi entered were completely fulfilled. In one case, AstraZeneca issued Gavi a refund when final production costs were lower than expected.
Had some vaccine manufacturers not been willing to renegotiate their contracts with Gavi, the costs to the organisation could have been much higher. Gavi would have been on the hook for $2.3bn for the doses it wanted to cancel, the documents show, but it saved $1.6bn by exiting those contracts.
A spokesman for Gavi, Olly Cann, said the organisation had made no new payments related to cancelled doses. He said the surrendered advance payments represented a fraction of what Gavi would have paid for finished doses.
Dr Seth Berkley, Gavi’s chief executive, declined to comment, but in an interview in December about the future of the global Covid vaccination programme, he said Gavi was paying less per dose than what it had initially planned for vaccine purchases and substantially less than high-income countries paid for their shots.
Donations for Covid shots substantially inflated Gavi’s budget, and the lost prepayments for cancelled vaccines do not threaten its regular childhood-vaccination work.
The contracts that Gavi has been trying to downsize were negotiated in the uncertain early months of the pandemic, in some cases before the vaccines had been shown to work.
Wealthy countries, who ordered many more doses than they needed, have tried to offload their own surpluses on to Covax, which has struggled to absorb them.
Gavi is sitting on a stockpile of vaccines and expects millions more in donations from high-income countries seeking to shed their own oversupply. The organisation anticipates a maximum demand of 450m doses this year – half of what Covax shipped in 2022.
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