Posted on Nov 19, 2020, 4 p.m.
Two drug companies have announced that their vaccines are highly effective at preventing COVID-19 despite there being no long term studies of said vaccines that typically take years; administration of said vaccine could be a multibillion-dollar market in America alone.
Pfizer and Moderna recently announced having an effective vaccine. Pfizer suggests that their vaccine was more than 90% effective at preventing COVID-19, and their drug must be stored at minus 94 degrees Fahrenheit, which is a substantial obstacle as standard freezers don’t reach that hyper cold sub-zero temperature. Moderna is suggesting that their vaccine is 94.5% effective and it does not require that sub-zero cold storage. However, both require 2 doses that are several weeks apart. While other vaccines are in the pipeline it appears as if these are the leaders at the moment, in what could be the first-ever successful vaccine for a coronavirus.
According to a Morgan Stanley analysis, this vaccine administration is at least an $8.5 billion revenue opportunity in America with about half of that going to retail pharmacies and $2.5 billion going to hospitals and doctor’s offices.
Chain pharmacies are positioned to be the main sites to administer this vaccine given the many locations and experience in delivering flu shots. CVS Health and Walgreens have been enlisted by the federal government to provide vaccines to seniors in nursing homes and other long term care facilities for free when they are available and recommended. Those in these facilities will be among the first to receive such a vaccine as they are the most at risk for COVID-19. These pharmacies are also enlisted in Operation Warp Speed, which is a government initiative to develop and administer such a vaccine in record time.
This administration is expected to yield $8.5 million in revenue for those that provide the shots if 80% of the American population (around 264 million people) are vaccinated according to a research note from Morgan Stanley’s managing director Ricky Goldwasser, and this revenue will be collected by retail pharmacies, schools, and institutions like clinics, hospitals and doctor’s offices.
Medicare is currently set up to pay $28.39 to providers for single-dose vaccines and $45.33 for those that require two or more doses. CVS and Walgreens could provide 30-40% of these vaccines which could increase their earnings per share between 2.5-5.3% in 2021. Walgreens could collect between $936 million and $1.5 billion in revenue and CVS could collect between $1.1- 1.7 billion in revenue depending on the percentage of Americans that they vaccinate according to Morgan Stanley analysts.
That is a lot of projected money, and while neither company would speculate on how many people they will vaccinate or how much money they will get for those vaccines CVS said that the payments will be inline with what is paid for delivering other vaccines.
Hospitals are also setting up for delivering vaccines, especially to frontline healthcare workers. According to Brain Tanquilut who is a healthcare industry analyst at Jefferies, hospitals are more likely to give shots to their employees and patients admitted to the hospital rather than the general public who could just go to a pharmacy. Fees for these vaccines will likely be embedded in a fixed payment the hospital gets for treating a patient. Even still hospitals are looking at options to overcome logistical barriers for refrigeration, trust, transportation to clinics, rural communities, and putting together a platform to address the situation along with tracking which vaccine a person gets to remind for the second dose.
But there are challenges other than these that await. We’ve never made a successful vaccine for a coronavirus before. These vaccines still need to gain approval and clearance from the US FDA in a complicated process which typically takes years such as the development of the vaccine for human papillomavirus that causes cervical cancer which took many years of work to develop, according to Professor Ian Frazer of the University of Queensland who was involved in the work.
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