The Biden administration plans to stop paying for Covid vaccines and treatments, shifting the financial burden to consumers as the pandemic relief fund dries up. The move is likely to generate additional revenue for Covid’s biggest stocks.
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Until now, the US government has been footing the bill for Covid vaccines and drugs, which is likely to boost vaccination numbers. But with businesses reopening, mask mandates long in the dust and the Covid relief fund nearly full, the White House is looking to push the cost of Covid vaccines and drugs back to consumers.
To facilitate the transition, the Department of Health and Human Services will hold a meeting on August 30 with stakeholders. The list undoubtedly includes vaccine manufacturers Pfizer (PFE), BioNTech (BNTX), Johnson and Johnson (JNJ) and Novavax (NVAX), as well as the creators of treatments Gilead Sciences (GET GOLD) and Merck (MRK).
In the early dealings of today’s stock market, however, Covid shares were mixed on the news. Shares of Pfizer, J&J and Gilead rose more than 1%. Shares of Novavax fell 2.1%. Shares of Moderna and BioNTech moved in opposite directions by a small fraction.
Covid Stocks: How to Approach the Upcoming Shift
Transfer of payments to users it will likely take months, according to the Wall Street Journal.
This month’s meeting is expected to lay the groundwork for insurance reimbursement and coverage, as well as address access for the underinsured and uninsured.
It will also mark a key shift as Covid turns the corner from a pandemic requiring the use of emergency tools to an endemic. It will also affect products only authorized for emergency use and not fully approved.
It should be noted that Medicare and Medicaid do not cover emergency use products. This includes Novavax and J&J’s Covid vaccines and the antivirals Paxlovid and Lagevrio from Pfizer and Merck respectively. Also, Pfizer and BioNTech’s Covid vaccine, Comirnaty, is only approved for people aged 12 and over. Moderna’s shot has full approval for adults only.
But companies are also likely to increase the prices of their products once they hit the market. This can lead to higher insurance premiums to offset the costs.
Billions in revenue are at stake
The impact on stocks from Covid could be huge.
As of the second quarter, companies that make Covid vaccines and treatments currently in use in the US have generated nearly $91 billion in collective sales worldwide since the start of the pandemic, according to an analysis of earnings reports by Investor’s Business Daily.
Undisputed market leader is Comirnaty of Pfizer and BioNTech. Since the first authorization in December 2020, the companies have reported over $59 billion in vaccine sales. Pfizer also sells the antiviral pill Paxlovid, which has brought in nearly $9.7 billion. Moderna’s sales are north of $28 billion.
And that’s before adjusting their prices. As costs shift to consumers, companies may increase how much they charge for Covid vaccines and treatments.
Analysts following Covid stocks, however, expect Pfizer and Moderna’s sales to decline in 2023. Much of that will depend on the upcoming round of boosters that the companies hope to update for omicron’s newer BA4 and BA5 subvariants. and how the US is dealing with the upcoming transition to consumer-facing sales.
Follow Alison Gatlin on Twitter at @IBD_AGatlin.
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