The old myth of the huge Big Pharma vaccine profits – it’s the subject of so many memes, tropes, and outright lies from the anti-vaccine activists. These vaccine deniers, who not only lack knowledge of science but also of basic corporate finance, believe that every Big Pharma CEO relies on vaccines for their next bonus check, which they use to buy their new Ferrari to show off to imaginary vaccine-injured children.
I am not naive – public corporations have an obligation to their shareholders and employees to maximize profits. That’s capitalism, I suppose.
But where this trope goes off the rails is when you realize that vaccine profits would be eclipsed by medical industry profits if Big Pharma simply stopped producing vaccines – mass epidemics would mean that hospitals would be filled with patients, just look at the COVID-19 pandemic. It’s ironic that the anti-vaxxers claim that Big Pharma’s greed gives us vaccines, but if they were truly greedy they’d be out of the vaccine business.
This article is not going to be as much science as I usually do – it’s going to focus on finance and accounting. Yes, I’m a finance and accounting geek as much as I am a science aficionado.
Myths about vaccine profits
The vaccine deniers pollute the internet with their screeds about the Big Pharma vaccine profits. You’ve probably seen memes about Dr. Paul Offit, one of the world’s leading experts on vaccines, where it’s claimed that Dr. Offit earns money from vaccine makers because he was involved in the development of the rotavirus vaccine – they claim that this makes him biased about vaccines. Since most scientists have deep-seated ethics and morals, and can’t be bought at any price, this claim has always been laughable.
The anti-vaxxers love using childish ad hominem personal attacks – I don’t know how many times I’ve seen the silly imprimatur, “Dr. Paul Proffit,” in anti-vaccine articles, comments, and memes. Seriously, that’s how they are going to “prove” that vaccines are a Big Pharma conspiracy? Does a 3rd-grade playground taunt have any value in the discussion about vaccine profits?
Of course, you can find whole threads of tedious commentary about Big Pharma vaccine profits on any typical anti-vaccine forum. One of the more illogical claims is that “maybe vax (sic) companies see vaccines as more of an investment? Break mostly even on what the vaccines cost to make and sell, but make a bank load of money on treating all the chronic problems they cause!”
This is the corollary to the old trope that Big Pharma makes more money on selling cancer “treatment” while hiding amazing cancer “cures” in a secret vault in a cave under the Greenland ice sheet. Well, now that this ice sheet is melting as a result of human stupidity about climate change, I guess that secret will be out.
This “making money from chronic problems” from vaccines would be a business strategy that would incite hysterical laughter in any Big Pharma boardroom. The only “chronic problems” that would give Big Pharma big profits would be eliminating vaccines across the world leading to the return of epidemics of infectious diseases not seen in 50 years.
Remember, vaccines don’t cause chronic problems. They prevent it. The safety and effectiveness of vaccines are settled science.
These claims from these anti-vaccine zealots betray not only their lack of sophisticated scientific knowledge but also their lack of knowledge of business finance. To be honest, finance can be as complicated and challenging as immunology – most anti-vaxxers understand neither.
Are vaccines really profitable?
It would be difficult for me to actually claim that vaccines are not highly profitable. They are an important source of both income and profit to the handful of nearly 20,000 pharmaceutical companies that manufacture and market vaccines.
But here are some facts that might temper your expectations that vaccines are that valuable:
- Just to give some perspective, the US Government Accounting Office estimated (pdf) that the worldwide revenues of the pharmaceutical industry would be around US$775 billion in 2015. A private consulting firm, EvaluatePharma, estimates (pdf) that those worldwide revenues might hit US$1.06 trillion in 2022. Yes, those are huge numbers, making the pharmaceutical industry one of the largest business segments in the world.
- EvaluatePharma also estimates that the medical device business (which are non-pharmaceutical products that are used in medicine, everything from syringes to scalpels to diabetic supplies) will generate approximately US$405 billion in revenue, growing to US$585 billion in 2024.
- Together, these two segments, pharmaceuticals, and devices which I have called “Big Medical” in the past are responsible for over US$1.2 trillion in revenue in 2017.
- It is estimated that the total worldwide vaccine market is around US$40 billion. That’s a huge number, sure. But let’s be honest, it’s only 3.3% of the total medical market. In the parlance of corporate finance, that’s “rounding error.”
Let’s look at that US$24 billion in worldwide vaccine revenues more carefully. All of the numbers below are in billions of US dollars and were estimated based upon Vaccines: Expert Consult (page 41).
So vaccines generate about US$17.5 billion in EBITDA, which is about 43.7% of revenue (see Note 1). Most non-vaccine pharmaceuticals would generate about US$11.1 billion in net profit from the same revenue or 46.3%. Thus, vaccines produce around a 5% lower profit percentage than do other pharmaceuticals.
This lower profit for vaccines is because non-vaccine pharmaceuticals have a lower cost of goods as a result of fewer returns due to spoilage and change in antigens (like from flu season to flu season).
Regular pharmaceutical products rarely change from year to year, so something manufactured in 2018 can be sold in 2019 as long as it still has shelf life remaining. Moreover, distribution is a lot more expensive for vaccines, because they need to be shipped more carefully (which is much more expensive) to prevent spoilage. For example, the COVID-19 mRNA vaccines have to be kept cold, making distribution more complicated and expensive.
Analysis of Big Pharma vaccine profits
Still, US$17.5 billion in EBITDA sounds like a boatload of cash, but let’s see what happens to that boatload of money.
- Every new drug, irrespective of whether it’s a vaccine or a new treatment for erectile dysfunction, averages around US$2.8 billion from discovery to regulatory approval (although other analyses show a cost of US$3.8 to 11 billion). This includes the whole process to fully develop each, depending on the drug and the market. But despite what some believe about Big Pharma, discovering a new drug is not a slam dunk to print cash for the bottom line. For example, for many drugs, only around 12% gain final approval from the FDA, so the vast majority of drugs that enter clinical trials end up as failures. This also debunks the myth that the FDA is in the pocket of Big Pharma because it appears that the FDA isn’t participating in the myth.
- Since Big Pharma funds its own R&D, it has to pay for both its successes and its failures. The average pharmaceutical company spends about 17% of REVENUES (not profit) on R&D (pdf). So out of the US$40.0 billion in Big Pharma vaccine revenue, about US$6.8 billion is removed from the net profit for R&D expenses (which are not counted in the administrative expenses for this exercise) – so that US$40.0 billion in vaccine revenues ends up being “only” US$2.2 billion in true profits.
- One of the mistakes made by individuals with no experience in business finance involves two falsehoods. First, they assume that risk capital, the money to finance operations, including R&D, is free. And it is freely available. But it’s not. Second, they fail to understand that Big Pharma needs to finance future R&D operations from its own cash reserves (or borrow at high rates). So, Big Pharma not only has to pay for the R&D for the drugs that are now on the market but also needs cash for future R&D programs.
When all is said and done, that US$40 billion Big Pharma vaccine revenue becomes around US$2.2 billion in net vaccine profits. Once again, I know we would all like to have a few billion sitting around to fund our lives, but in terms of Big Pharma as a whole, it’s really not much.
It may actually be quite a bit less because I’m ignoring things like the cost of risk capital (even though Big Pharma is mostly self-funded, it’s not always so, and if that capital could make more money invested in gold or something, it’s a lost opportunity).
Given this level of profit, and spread over 50 or so vaccines, it’s hard to imagine that Big Pharma executives are sitting in that Boardroom laughing at how they’re printing cash and storing gold bars because of vaccines.
The 2018 revenue of the top 3 drugs sold worldwide, Humira, Eliquis, and Revlimid are equivalent to all of the vaccines. In other words, if I were a Big Pharma exec, I’d look at vaccines as rounding errors on our income statement and balance sheet.
Are vaccines a good business strategy?
Going back to the laughing, unethical Big Pharma executives sitting in their boardroom, are they really conspiring to push vaccines on us, because it makes so much money? Or, as we saw above, would investing in another kind of medication make more money? Or would they make more money not even selling vaccines?
Let’s take an example of just one infectious disease, measles. According to the CDC, one hospitalization for a serious measles complication costs more than US$142 thousand. A typical cost breakdown of hospital billing indicates that pharmaceuticals and other consumables (syringes, IVs, saline, etc.) are around 35-40% of the total cost to the patient (see Note 2).
So, just one serious case of measles, Big Pharma could get up to US$56,000 per patient. How much is one dose of the MMR vaccine to prevent measles? Oh yeah, it’s about US$21.22 per dose.
Let’s assume that Big Pharma ended the production of all vaccines today because the evil Big Pharma execs wanted rapidly increase their profits. According to the CDC (pdf), there are about 4 million births in the USA every year. Starting today, those 4 million children annually will not be vaccinated, and the vaccine deniers will be dancing in the streets.
Let’s look at the hospitalization rate for those 4 million children for every single vaccine-preventable disease (see Notes 3 and 4):
Of course, this is an imaginary scenario where everyone stops vaccinating because the anti-vaxxers win the day. Despite the fear, uncertainty, and doubt pushed by them, the overall vaccination rate remains in the low to mid 90% range.
But let’s get back to this imaginary scenario where we stop vaccines. Outbreaks, epidemics, and pandemics would soon occur within the first 1-2 years after we end vaccination. Based on information developed by the CDC and others, the total worldwide economic burden if we suddenly ended vaccines would exceed US$50 billion (and this ignores flu pandemics that might suddenly ravish the pediatric population).
If we stick with the estimate that about 40% of the cost of hospitalizations will fall to Big Pharma, then they would make about $20 billion a year, worldwide, from not vaccinating. But remember, most vaccines are given, at most, 2-3 times, so, long-term, the revenues derived from vaccines are rather flat, unless new diseases are prevented. But, the revenues from the diseases themselves repeat every single year, and possibly multiple times per child.
And most of the products used to treat these diseases don’t require the research and capital investment that vaccines require. In other words, the income derived from vaccine-preventable diseases would be more profitable than vaccines.
If we really believe that Big Pharma executives are greedy sociopaths looking for more money, then we have to carry that description to its logical end. They would be ending vaccines tomorrow. Maybe today, if it’s not too late.
But there’s more about vaccine profits
Actually, there are other issues that become problematic if we suddenly had this size of an epidemic. For example, the number of ICU beds per capita has dropped by 75% since the 1960s partially as a result of the reduction in numbers of children with infectious diseases. See the irony there?
If we suddenly stopped vaccinating because Big Pharma wanted to make billions of more profits, our hospitals would be overwhelmed. And guess who’s making money then? Big Mortuary. Because children will die at much higher rates than in the 1950s because we couldn’t handle it.
And I’m ignoring all of the other burdens to modern countries if this happened. Parents who are unable to work. Long-term healthcare costs for children who are seriously injured by these diseases. Emotional stress. Overwhelmed hospitals that can’t treat other chronic conditions. Even countries that have superior healthcare systems would collapse under the strain.
So, all of you people at Age of lying about Autism (see Note 5), how much money are YOU receiving from Big Pharma to create the illusion that vaccines are dangerous? Because, now I have uncovered the real goal of Big Pharma – get rid of vaccines. Yes, obviously anti-vaxxers are the real shills for Big Pharma. How unethical can they be, sacrificing the lives and health of children for a few dollars from Big Pharma?
And I haven’t gotten to Big Iron Lung who has waited 60 years for the chance to get back into the game. I bet they’ve been investing in shills to push lies about polio vaccines.
I’m not naive. I know that pharmaceutical companies manufacture vaccines because they are able to make a decent profit, the goal of any corporation. But the profits are used not to buy gold bars to give as gifts to executives (or to pay me), but most of it is plowed into future generations of better drugs and devices.
They are not trying to harm humanity, because if they were ruthlessly profit motivated, like the narrative pushed by the science-denying anti-vaccine crowd, Big Pharma would close down vaccine research and manufacturing, and wait a year for huge epidemics.
Is Big Pharma perfect? Hell no, and I’ve said it before.
But vaccines save lives. And Big Pharma makes sure that happens. And they make that happen, despite the better profit scenario of not making one single vaccine. Because vaccine profits aren’t quite what the anti-vaxxers believe.
COVID-19 vaccine profits
Although many pharmaceutical companies across the world are in the race to develop a vaccine, only a handful “won” that race. The preliminary results show that they are safe and effective, so the hundreds of other vaccine candidates probably won’t ever make it into people’s arms.
These companies did receive a lot of money from governments to support their R&D, manufacturing, and distribution. However, they are negotiating prices for the vaccine with governments (who are purchasing the vaccine for their citizens usually). The prices, depending on the manufacturer and the particular government, seem to range from about US$2.15 to US$15. These are fairly low prices for vaccines because a lot of the cost has been subsidized.
The profits, if any, for these vaccines can be substantial because so many people are going to be vaccinated. In the USA alone, over 200 million vaccinations (probably a lot more because some vaccines require two doses), can mean a lot of money even if the profit per vaccine is only US$1-2. Compare this to the MMR vaccine – probably only 10 million doses are sold in the USA every year.
For a small company like Moderna, whose whole corporate strategy is development of mRNA vaccines and its COVID-19 vaccine is the first one approved by the FDA, this could be a profit windfall. For the other large pharmaceutical companies, part of the reasons for pushing their vaccines is public relations.
However, we will know more about how these COVID-19 vaccine profits impact the income of Big Pharma when they publish financial statements later this year.
- EBITDA is an accounting measurement that is commonly used to determine the profitability of a business. It is sometimes called, “net profits,” but that term has been deprecated. The reason that interest, taxes, depreciation, and amortization are not included is that EBITDA is a good measuring stick for the cash flow and potential profitability. But the actual profits must include those line items.
- Determining cost breakdowns of hospital bills is a complex, bewildering, and frustrating process. So, I estimated it based on several hospital bill breakdowns I found on the internet, including a personal one (for way too much money). I promise to revise these estimates if I can find actually good information .somewhere. In addition, if there was a range of estimates, I used a mean, or, better still, original data from the source.
- The data for this chart was adapted from a CDC study of the Vaccines for Children Program, which I have discussed previously. It only includes data for vaccines on the current schedule for babies and infants – it does not include other vaccines such as for HPV and meningitis. The estimates use the CDC estimate of 4 million live births per year in the USA. The data does not include other costs, like lost income for caretakers, pre-hospitalization costs (which are listed in the CDC study), or death. Big Mortuary would surely profit from the 40,000 deaths a year that would suddenly be added to the cost of eliminating vaccines.
- Flu data was adapted from here and here.
- I will no longer link to anti-vaccine websites. They should not profit from the popularity of this blog. If you want to see what the anti-vaxxers are saying about anything, you can use Google or Bing (snort) to search for it. Fair warning, Google has downgraded the search results for anti-vaxxers.
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- Dayan GH, Ortega-Sánchez IR, LeBaron CW, Quinlisk MP; Iowa Measles Response Team. The cost of containing one case of measles: the economic impact on the public health infrastructure–Iowa, 2004. Pediatrics. 2005 Jul;116(1):e1-4. PubMed PMID: 15995008.
- Rennels MB, Meissner HC; Committee on Infectious Diseases. Technical report: Reduction of the influenza burden in children.Pediatrics. 2002 Dec;110(6):e80. Review. PubMed PMID: 12456947.
- Whitney CG, Zhou F, Singleton J, Schuchat A; Centers for Disease Control and Prevention (CDC). Benefits from immunization during the vaccines for children program era – United States, 1994-2013. MMWR Morb Mortal Wkly Rep. 2014 Apr 25;63(16):352-5. PubMed PMID: 24759657.
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