Knowledge Ecology International conducted a review of contracts entered into by the US government concerning COVID-19-related treatments, diagnostics, vaccines, and other countermeasure-related technologies, regarding reference pricing clauses in the agreements.
Of the 104 contracts reviewed, it is difficult to say for certain how often such clauses are used, because of the extensive redactions. We do know that the Paxlovid contract reference pricing provision is only public because the DOD made an initial mistake in releasing the contact without the clause redacted, and later tried, unsuccessfully, to have it redacted.
Of the contracts where we could find such a clause, two contained “Most Favored Nation” pricing clauses, and five contained “Most Favored Customer” clauses. While our review included contracts entered into by both the Department of Defense (DOD) and the Department of Health and Human Services (HHS), only DOD contracts contained the “Favored” pricing clauses. The contracts reviewed by KEI were obtained via Freedom of Information Act, and as noted, many contained significant redactions.
Below is an overview of those contracts and the reference pricing clauses therein.
Contracts Containing “Most Favored Nation” Pricing Clauses
DOD-Pfizer Contract
W58P0522C0001
Date: November 17, 2021
The DOD-Pfizer contract for Paxlovid, an oral therapeutic treatment for COVID-19, contains a “Most Favored Nation” pricing clause in section H.7. It states,
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.
DOD-Sanofi Contract
W15QKN1691002
Date: December 18, 2020
The DOD-Sanofi contract for the development of a COVID-19 vaccine contains a “Most Favored Nation” pricing clause in section 5.1. It states,
5.1 Most Favored Nation Clause
(i) Due to the exceptional and unprecedented nature of the COVID-19 threat to global public health and in recognition of the long historical partnership between the U.S. Government and Sanofi Pasteur working on global pandemic solutions, as well as the investments made towards the development of a safe and effective vaccine against COVID-19, Sanofi Pasteur agrees that it will not sell any COVID-19 vaccine licensed under this Agreement to any nation that is a member of the Group of Seven plus Switzerland (“Covered Nation”) at a price that is more favorable than those set forth in this Project Agreement.
(ii) If, at any time prior to December 31, 2021, Sanofi Pasteur enters into any agreement with a Covered Nation to sell COVID-19 vaccine doses at a price lower than the price currently paid by the U.S. Government, as specified in Milestone 5.8, for the same COVID-19 vaccine doses, Sanofi Pasteur shall provide notice within 30 days to the U.S. Government and the U.S. Government may elect, at its discretion, to receive the benefit of this provision and receive COVID-19 vaccine doses at that lower price.
(iii) Upon any such election by the U.S. Government, this Project Agreement shall be deemed to have been amended and modified such that, from the date on which the more favorable pricing was first provided to any Covered Nation (the “Amended Pricing Effective Date”), the U.S. Government will receive that lower price for all orders of COVID-19 vaccine doses following that Amended Pricing Effective Date.
(iv) Additionally, Sanofi Pasteur will provide a credit, expressed as a cost share, towards future U.S. Government payments made under this Project Agreement in the amount that the U.S. Government paid above the more favorable pricing for any purchases of COVID-19 vaccine doses placed prior to the Amended Pricing Effective Date. In the event the credit exceeds the remaining payments due Sanofi Pasteur under this Project Agreement, the parties agree to negotiate how best to protect the Government’s interest as part of the Close-out Procedures specified in Section 2.05 of Other Transaction Agreement number W15QKN-16-9- 1002.
(v) 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 Sanofi Pasteur product.
Contracts Containing “Most Favored Customer” Pricing Clauses
DOD-ANP Technologies Contract
W911QY20D0019:
Date: June 2, 2020
The DOD-ANP Technologies contract for a COVID-19 diagnostic contains a “Most Favored Customer” pricing clause in section H. Special Contract Requirements. It states,
MOST FAVORED CUSTOMER
H.1 Most Favored Customer
A. Awardee agrees that during the term of this contract and for a period of 5 years thereafter, that it shall not offer, sell or otherwise provide the production model of the CLIN 0001 end items (for the avoidance of doubt, CLIN 0001 end items in this clause shall mean a finished good of like material, like quality, to be used in a similar applications, and shall not include more general products to any entity at a price lower than that offered to the DoD. In the event that Awardee sells the production model at a lower unit price than that price sold to the DoD, Awardee shall immediately notify the Contracting Officer in writing of the lower price. For prior purchases, the Awardee shall reimburse the DoD, the difference between the lower price sold to the other customer(s) and the price sold to the DoD multiplied by the number of items sold. Such reimbursement shall occur within thirty days (30) of the Awardee discovering that the lower price was given to another customer. Notwithstanding the foregoing, the Parties may agree to apply the difference in price paid by the other customer(s) and DoD into additional quantities required by the DoD.
B. If Awardee develops a like product (commercialized version or derivative of the production model) with similar capability and intended application, but at a lower unit price (“Like Product””) regardless of quantity, Awardee shall make the DoD aware of that similar product and the technical and price differences between that product and the DoD Product. Such notification shall be made to the Contracting Officer in writing, of which email is an acceptable form, within thirty (30) days of such offering. Awardee agrees that no entity shall receive a lower price for any Like Product than the DoD for like purchase quantities
DOD-AstraZeneca Contract
W911QY2190001
Date: October 9, 2020
The DOD-AstraZeneca contract for a COVID-19 therapeutic contains a “Most Favored Customer” pricing clause in Article 9. It states,
ARTICLE 9. Most Favored Customer
A. In the event that the Parties agree to a follow-on production pursuant to 10 U.S.C. § 2371b, Awardee agrees that it shall sell to the U.S. Government the first million doses of AZD7442 at a price of [REDACTED]. Any additional doses will be sold to the U.S. Government at a price to be negotiated and agreed by the Parties.
B. If Awardee develops a like product (commercialized version or derivative of the production model of the Prototype) with similar capability and intended application, but at a lower unit price (“Like Product”) regardless of quantity, Awardee shall make the U.S. Government aware of that similar product and the technical and price differences between that product and the Prototype. Such notification shall be made to the OTAO in writing, of which email is an acceptable form, within [REDACTED] of such offering.
DOD-Inovio Pharmaceuticals Contract
W911QY2090016
Date: June 22, 2020
The DOD-Inovio contract for vaccine delivery technology for COVID-19 contains a “Most Favored Customer” pricing clause in Article 9. It is wholly redacted, and states,
ARTICLE 9. Most Favored Customer
[REDACTED under (b) (4) exemption]
DOD-Novavax Contract
W911QY20C0077
Date: June 4, 2020
The DOD-Novavax contract for a COVID-19 vaccine contains a “Most Favored Customer” pricing clause in a paragraph following Section B – Supplies or Services and Prices. It states,
The Contractor shall maintain a most favored customer provision for the product once authorized or licensed by the FDA, such that the Contractor shall not give any entity a better price than the DoD for a period of five (5) years from the award of this contract, limited to customers in the U.S. and purchases made in the U.S to include sale prices as compared to commercial clients with respect to quantity, location of delivery, fundamental differences in deliverable formulation, and material differences in terms and conditions for commercial contracts.
DOD-Rigel Pharmaceuticals Contract
W911QY-21-9-0018
Date: January 29, 2021
The DOD-Rigel contract for a COVID-19 therapeutic contains a “Most Favored Customer” pricing clause in Article 20. It states,
ARTICLE 20. Most Favored Customer.
A. In the event that the Parties agree to a follow-on production agreement pursuant to 10 U.S.C. 2371b, Awardee agrees that it shall sell to the U.S. Government up to [REDACTED] treatment courses of TAVALISSE at a price not greater than [REDACTED]. Any additional treatment course will be sold to the U.S. Government at a price to be negotiated and agreed by the Parties.
B. If Awardee develops a like product (commercialized version or derivative of the production model of the Prototype) with similar capability and intended application, but at a lower unit price (“Like Product”) regardless of quantity, Awardee shall make the DoD aware of that similar product and the technical and price differences between that product and the Prototype. Such notification shall be made to the OTAO in writing, of which email is an acceptable form, within thirty (30) days of such offering.