Vaccine deal allows AstraZeneca to take up to 20% on top of costs


AstraZeneca’s confidential coronavirus vaccine deal with Oxford university allows it to make as much as 20 per cent on top of the cost of goods for manufacturing the jab, according to people with knowledge of the contract.

UK-headquartered AstraZeneca has pledged to sell the vaccine “at cost” during the pandemic, eschewing profits. It has declined to say how much the vaccine costs to make.

Observers have expressed fears over a lack of transparency around the global deals involving the supply of potential vaccines.

AstraZeneca insisted it treated the development of a vaccine as a public health emergency and not a profitmaking opportunity, saying more than $1bn of its costs incurred in the project, for example regulatory submissions and distribution, were not related to manufacturing.

The Financial Times reported this month that the drugmaker has the contractual right to declare the pandemic over as soon as July next year, paving the way for price increases, although it says it will seek expert guidance from global organisations on when it can make such a call. 

One of the people familiar with the contractual terms said the cost of goods plus up to 20 per cent formula would yield a fair return for the company because it would otherwise be producing the vaccine at a loss. AstraZeneca would incur other expenses such as distribution and infrastructure that would not be included by cost of goods on a strict definition, the person added.

That clause is valid for the period of the pandemic, the people said, after which AstraZeneca would pay a royalty of 6 per cent on sales in developed markets to the university.

But another person with direct knowledge of the contract said that without knowing the actual cost of goods, “it’s impossible to say whether AstraZeneca is actually doing something at no profit or whether it’s doing it up to the limits of what they can do”.

The person also suggested prices could vary substantially between production sites.

AstraZeneca said that “in addition to the manufacturing costs, the company is incurring costs in excess of $1bn globally that include clinical development, regulatory, distribution, pharmacovigilance and other expenses”.

“To cover these additional expenses, [we] will add an amount equivalent to a maximum of 20 per cent of the manufacturing costs to ensure there is no material impact on its finances this year while continuing efforts to provide the vaccine at no profit during the pandemic,” the company told the Financial Times.

Oxford said its partnership with AstraZeneca was designed to rapidly roll out the vaccine if it was successful and that it was supporting early, broad and equitable access during the pandemic period.

“Both partners and the company Vaccitech, a spinout company from the University of Oxford which has rights to the platform technology used to develop the vaccine, will initially operate on a not-for-profit basis as they join forces to combat the coronavirus pandemic,” it said, noting any royalties would be reinvested into the university and its medical research. 

Oxford was advised by the Bill & Melinda Gates Foundation and its global health president Trevor Mundel about partnering with vaccine manufacturers.

Bill Gates, the foundation’s co-chair, said in an interview with the FT: “We told Oxford: ‘Hey, you don’t have the full skill set. Here’s a list of people you need to consider to partner with.’ And AstraZeneca jumped in. They’ve done a great job.”

Several supply deals for the procurement of the jab have put a price tag of about $3-$4 a dose, lower than those made by competitors.

Oxford agreed to introduce a ceiling of 20 per cent in exchange for access conditions, people with knowledge of the interactions said. Another factor behind this decision was the limited amount of upfront cash payments to Oxford, one of them said.

The university had held talks for its vaccine with GlaxoSmithKline and its US rival Merck, people familiar with the matter said, although concerns about supply to the UK and emerging markets damped negotiations with the American group.


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