During a 2021 earnings call with stockholders, Pfizer Chief Financial Officer Frank D'Amelio discussed how the company was using "Pandemic pricing" to charge $19.50 per COVID-19 vaccine dose, a product it expected to make $15 billion on in 2021.
A spokesperson for Pfizer announced the pricing is "Consistent with the value delivered." Pfizer's Pricing Problem People are unhappy about what Pfizer is charging, but it bears asking: What should Pfizer be charging for its vaccine? Warren Buffett has famously said, "Price is what you pay; value is what you get." The quote is helpful because it's a reminder that price and value are not the same thing.
In 2022, the vaccine accounted for about $38 billion of Pfizer's revenue, despite its relatively low price.
"So that's exactly the issue. We're trying to get a hold of reasonable pricing." Sanders and others are saying the US might be getting ripped off by pharmaceutical companies, but it's hardly Pfizer's fault the US appears to be lousy at negotiating prices.
Anyone familiar with Milton Friedman's observation on the four ways of spending money will hardly find it surprising that the US government isn't flinching over manufacturers tripling the price of vaccines.
The truth is, there's very little incentive for the government to keep vaccine prices low, and there may very well be unseen incentives to increase them.
Crony capitalism is neither socialist or capitalist; and though he didn't use the word crony capitalism, the economist F.A. Hayek described something like it in The Road to Serfdom, calling it "a state of affairs which can satisfy neither planners nor liberals: a sort of syndicalist or 'corporative' organization of industry, in which competition is more or less suppressed but planning is left in the hands of the independent monopolies of the separate industries." That's a pretty good description of crony capitalism-or at least one of its versions-and it helps explain why it's hard to make sense of the vaccine's new price tag.
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