Novavax and Inovio COVID-19 Vaccine Contracts Limit Prices Companies Can Charge for Their Products

One of the main objections to march-in rights and reasonable pricing clauses is the repeated assertion by NIH leadership that pharmaceutical companies would never agree to a partnership with the federal government that involves price constraints. This argument defies logic for an industry where R&D assets and even the companies themselves are bought and sold at the right prices. More recently, there are the examples of pricing constraints in the Operation Warp Speed contracts, including contracts with Novavax, Inovio and Sanofi.

Both a contract between the Army and Inovio Pharmaceuticals (“Inovio”) for Inovio’s vaccine delivery technology and the letter contract between the Army and Novavax for the development and production of Novavax’s vaccine candidate limit the price the companies can charge for their products. The Inovio contract ensures that DoD gets the best price for its vaccine delivery technology. As KEI has previously noted, the Sanofi vaccine R&D and purchase agreement with the United States mandates that the U.S. is given the best price for any member of the G7 (Canada, France, Germany, Italy, Japan, and the United Kingdom) or Switzerland. The Novavax vaccine letter contract also has a best price requirement, but applied to sales in the U.S.

The Novavax Letter Contract

The Novavax letter contract, which Knowledge Ecology International recently obtained from the Army in response to FOIA litigation, states as follows:

The Contractor shall maintain a most favored customer provision for the product once authorized or licensed by the FDA, such that the Contractor shall not give any entity a better price than the DoD for a period of five (5) years from the award of this contract, limited to customers in the U.S. and purchases made in the U.S to include sale prices as compared to commercial clients with respect to quantity, location of delivery, fundamental differences in deliverable formulation, and material differences in terms and conditions for commercial contracts.

Stated otherwise, the contract prohibits Novavax from selling its vaccine at a price lower than what the Department of Defense paid for it, for a five-year period.

The Inovio Contract

The Inovio contract contains a similar clause, not limited to U.S. customers, and for a six-year period:

ARTICLE 9. Most Favored Customer
A. For a period of six (6) years from the Effective Date, Awardee agrees that it shall not offer, sell or otherwise provide the production model of the Prototype to any entity at a price lower than that offered to the DoD.

KEI’s blog about the Sanofi COVID-19 vaccine contract