When global public health authorities first noted cases of COVID-19 outside of China in January 2020, one of the first questions the public began to ask is when will a vaccine be available to treat a virus that, at the time of writing, has infected over 55 million people and killed over 1 million. An ancillary, but no less important, question also centered around which country has the best infrastructure to provide a vaccine to the greatest global public health crisis of this century.

While governments and laboratories across the world are seeking to produce a vaccine, it should surprise nobody who understands the structure of the American pharmaceutical industry that the leading candidates are all produced by American companies in American laboratories.

Despite this, pharmaceutical companies are still routinely criticized for having too much money. Without the significant revenue American pharmaceutical companies such as Pfizer, Moderna, and Johnson and Johnson have generated and later invested into research and development, the vaccine candidates simply would be as close to receiving emergency regulatory approval as they are today.

Currently, the United States leads the world with four COVID-19 vaccine candidates in Phase 3 clinical trials, the last stage before regulatory approval. The United Kingdom is the only other western country with a vaccine candidate in Phase 3 trials, but their research has been dependent on a $1.2 billion investment from the U.S. Department of Health and Human Services. The British Government was only able to invest $80 million to support the program.

Vaccine research in the United States, on the other hand, has largely been funded without government assistance and dependent on generated revenue and investments in research and development. Pfizer did not receive investment from the U.S. government’s Operation Warp Speed, and Johnson and Johnson only sought investment to assist in the manufacturing and distribution of the vaccine, not research.

The pharmaceutical industry is currently a risk-significant reward industry meaning companies undertake significant financial risk when developing products but can expect big rewards if they are successful. In the United States, it takes about 12 years it takes for an experimental drug to go from conception to FDA approval. Additionally, its estimated that pharmaceutical companies invest about $985 billion into new developing new drugs, despite only having a 14% chance that the FDA will allow the product to be sold.  

The significant risk pharmaceutical companies undertake is can be seen most notably in the failure of Torcetrapib, a drug that was being developed by Pfizer as a treatment for heart disease. Back in 2006, Pfizer was forced to halt the development of Torcetrapib during phase III clinical trials that involved over 15,000 people. The failure occurred despite Pfizer investing over $800 million into the drug and years of research and development.

To deal with the significant risk and ensure the continued development of drugs, pharmaceutical companies are forced to generate substantial levels of revenue that not only funds research and development but also subsidizes the significant number of drugs that will fail. In 2019, for example, Pfizer reported $51.8 billion in revenue while Johnson and Johnson reported generating $82 billion in the same year. Moderna reported less revenue in 2019, $66.4 million, but stated it ended the third quarter of 2020 with “$3.1 billion in cash, cash equivalents, and investments” and had “received approximately $400 million of consumer deposits as of July 31, 2020.”

While pharmaceutical companies certainly generate significant revenues, they also invest sizable amounts of capital in developing their products and ensuring their safety. This is the case with the COVID-19 vaccine that has dominated research and development departments across the country since the end of 2019. Between September 2019 and September 2020 Pfizer, for example, reported spending $9.03 billion on Research and Development while Moderna spent $493 billion on Research and Development in 2019. Johnson and Johnson reported spending $11.35 billion on research and development in the same year.

The significant investments in research and development that pharmaceutical companies have made in recent years would not have been possible without the sizable revenues they have been able to raise. Without the billions of dollars earned, these companies would not only be unable to produce a viable COVID vaccine candidate, but they would also have been unable to produce the thousands of life-saving vaccines that people rely on to live long and healthy lives. Without these revenues, vaccine development would be dependent on taxpayer money, as is the case with the University of Oxford study.

Simply put, American pharmaceutical companies have shown to have the financial capacity to independently develop a vaccine without assistance from the federal government. Having vaccines that are not dependent on government support is hugely important for taxpayers given they will be the ones left paying for any potential failure and will unlikely see any of the profit a COVID vaccine will generate for foreign manufacturers. As the COVID-19 pandemic rages on, American pharmaceutical companies have been at the forefront of developing vaccines that will return global society to a sense of normalcy, something that has been absent since early 2020. It is the American pharmaceutical companies that have led the fight because of the significant revenues they generated and the investments that allowed them to conduct groundbreaking research and development.