Pfizer Agrees to International Reference Pricing in US Government Contract for COVID-19 Therapeutic

Published in an article by Sydney Lupkin of NPR, the Pfizer-US government contract for the COVID-19 therapeutic Paxlovid contains terms of interest in broader drug pricing discussions.

The Pfizer contract includes a “Most Favored Nation Clause” (H.7), which provides that the U.S. is entitled to the lowest cost for Paxlovid of the G7 countries + Switzerland. The G7 includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.

This term is of particular interest because the recent Xtandi march-in petition states that it is not reasonable to charge US residents 3 to 5 times more than other high income countries for Xtandi.

Furthermore, in comments on proposed exclusive licenses by the NIH, KEI asks the NIH approximately a dozen times a year to include some type of international referencing pricing cap in the terms of licenses to NIH-owned patents.

When deciding the case of a march-in request in which the US is charged far more than other high income countries, it should thus be difficult for the NIH to say that a reference price is a non-starter in negotiations with the industry when Pfizer just signed one such contract, and Pfizer owns half of the US market for Xtandi.

A copy of the Pfizer-USG Paxlovid contract is available here. The clause in the license on most favored pricing is below:

H.7 Most Favored Nation Clause

(a) If, at any time prior to, or during, the base term and any exercised options of this contract, Contractor enters into any agreement with a Covered Nation under which the Covered Nation commits to purchase

(i) the same or a lesser volume of Product than the U.S. Government commits to purchase

(ii) at a price lower than the price the U.S. Government is obligated to pay for Product under this contract, Contractor shall provide notice of such lower price to the U.S. Government within 30 days of the execution of the Contractor-Covered Nation agreement and the U.S. Government may elect, at its discretion, to receive the benefit of this provision and purchase the Product at that lower price.

(b) Upon any such election by the U.S. Government, this contract shall be deemed to have been amended and modified such that, from the date on which the lower priced courses are first supplied or delivered to the applicable Covered Nation (the “Amended Pricing Effective Date”), the U.S. Government will receive that lower price for Product for which Contractor has not invoiced the U.S. Government following that Amended Pricing Effective Date.

(c) Any price reductions provided hereunder are not intended as an inducement or reward for any procurement or purchasing decisions by the U.S. Government of any Contractor product.

(d) For purposes of this section, “Covered Nation” shall mean a nation that is a member of the Group of Seven (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) plus Switzerland and “Product” shall the mean 5-day treatment courses of Contractor’s COVID-19 oral antiviral treatment (i.e., PF-07321332) that is the subject of this contract.

(e) The USG shall not be entitled to the price of Product purchased by a Covered Nation for purposes of donation or resale by the Covered Nation to non-governmental organizations, intergovernmental organizations, or “lower-income” or “lower middle-income countries” as those terms are defined by the World Bank as of the date of the effective date of agreement between Contractor and the Covered Nation.

(f) For clarity, if Contractor enters into an agreement with more than one nation, a multinational organization, or a multilateral organization, and a Covered Nation receives Product under such an agreement or benefits from the price under such an agreement, the Parties agree that the relevant volume for purposes of H.7.(a)(i) shall be the total Product volume specified in such agreement and not the Product volume any one Covered Nation receives.