Marking the End of an Era: The COVID-19 Vaccine Market Goes Commercial

Updated on August 26, 2023
Woman in protective suit hold test tube with positive result infected with coronavirus COVID - 19. Photo Illustration.

The federal government has acted as the sole purchaser of all COVID-19 vaccines since the vaccines received Emergency Use Authorization (EUA) from the Food and Drug Administration (FDA) in 2020, supplanting the existing system of vaccine coverage and finance to assure access for every American. That role is ending, the Biden Administration is terminating the Public Health Emergency in May, and COVID-19 vaccines will inevitably transition to a traditional public-private marketplace or “commercial market” beginning with the 2023-2024 respiratory season.

As recently indicated, commercialization could begin as early as this summer, with the timing being driven by factors that include the federal government’s existing supply of vaccines and the demand for those vaccines as the 2022-2023 respiratory season subsides, as well as increasing political disinterest and opposition to additional vaccine purchase.

U.S. COVID-19 Vaccine Supply and Demand

Today, the market predominantly consists of bivalent vaccines, which protect against both the original SARS-CoV-2 strain and the omicron variant and were authorized August 31, 2022 by the U.S. Food & Drug Administration (FDA).  The FDA no longer authorizes the monovalent mRNA COVID-19 vaccines as booster doses for individuals 12 years of age and older. The federal government’s supply will therefore depend upon its supply of the more recently developed and purchased bivalent COVID-19 vaccines. The federal governmencdc list pricet procured more than 170 million bivalent booster doses for the 2022-2023 respiratory season. 

COVID-19 vaccine demand has declined significantly over the course of the pandemic. While over 200 million Americans completed the initial two-dose series of the monovalent vaccine, less than 50 million have received the bivalent booster vaccine. Consequently, approximately 120 million publicly purchased bivalent booster doses remain unused. The original monovalent vaccines remain FDA-authorized for administration as a primary series for individuals 6 months of age and older through age 11. The government’s remaining supply of monovalent vaccine product is less clear than that of bivalent.

Despite a particularly severe season of respiratory disease and the emergence of new variants of concern, political resistance is likely to suppress further government purchase. The Biden Administration’s decision to reallocate existing funds for bivalent booster purchase drew political pushback last year. This is likely to dissuade the administration from seeking additional bulk purchase with the exception of supporting the CDC’s limited purchase of doses through the Section 317 and Vaccines for Children (VFC) programs. Congress has not shown a willingness to replenish funding for COVID-19 vaccines and that is unlikely to change.

The government’s role as the sole, monopsony purchaser of COVID-19 vaccines, therefore, has likely ended. The current government supply of bivalent boosters is unlikely to be depleted prior to the 2023-2024 respiratory season. Purchase of the next iteration of the COVID-19 vaccine as the season begins is most likely to occur through traditional routine vaccine purchase channels, both public and private.

U.S. Government Agency Transition Status

The Biden Administration has not announced a transition plan for the COVID-19 vaccine marketplace. As the administration’s COVID-19 response leaders leave the White House or shift into new roles, any guidance is likely to come from the newly elevated Administration for Strategic Preparedness and Response (ASPR). ASPR has not publicly released guidance on the commercialization of the COVID-19 vaccine since a blog post on August 30, 2022, in which it reiterated that it has always been the federal government’s intent for the COVID-19 vaccine to transition to a commercial market. The lack of further updates could be attributed to the current supply of governmentally purchased COVID-19 vaccines lasting longer than expected. In August 2022, ASPR predicted the supply could be depleted and the market could be fully commercialized as soon as January 2023, though neither has yet taken place.

Report language accompanying the recently enacted Consolidated Appropriations Act of 2023 directed ASPR to provide a briefing on the department’s transition plans, including a timeline for FDA approval, possible costs to the private market and “details about how non-Federal purchasers will compete in the market.” The ASPR is required to provide the briefing within 30 days of enactment, which occurred on December 29, 2023, and every 6 months thereafter until the transition is complete.

Food & Drug Administration

The EUAs for both the Pfizer-BioNTech COVID19 Vaccine and the Moderna COVID19 Vaccine limit the manufacturer’s scope of distribution to non-commercial channels. Specifically, in the December 8, 2022 Letter of Authorization to each manufacturer, FDA stated that each manufacturer may only distribute “either directly or through authorized distributor(s) to emergency response stakeholders as directed by the U.S. government, including the Centers for Disease Control and Prevention (CDC) and/or other designee.” As it stands, FDA has authorized Pfizer and Moderna to distribute their mono- and bivalent vaccines only to emergency response stakeholders.

Ideally, manufacturers would begin to distribute their vaccines before the federal government’s supply depletes to ensure a smooth transition from the federal to the commercial supply. This will require modification of the above EUA language for any COVID-19 vaccines to be sold through a commercial market.

On January 23, 2023, FDA publicly signaled its intent to shift the COVID-19 vaccination strategy to an annual approach similar to influenza vaccination. The new strategy would forego the primary series of vaccinations, which were followed by boosters, instead offering an annual version of the vaccine for the public regardless of their vaccination status. A process would begin each spring to select the variant likely to be dominant by the following winter, before manufacturing and distribution of vaccines commences prior to the upcoming respiratory season. The FDA signaling such an approach—nearly identical to the approach taken against influenza—reinforces the likelihood of an imminent market transition.

Biomedical Advanced Research and Development Authority

ASPR’s Biomedical Advanced Research and Development Authority (BARDA) is responsible for managing the current supply of procured vaccines and supporting research and development for next generation vaccines. As the 2023-2024 respiratory season nears, BARDA will continue to play a central role as it manages the remaining stock of COVID-19 vaccines, continues to support vaccine research and development, and deploys medical countermeasures for individuals affected by COVID-19. As new variants of COVID-19 emerge, BARDA will continue in its leadership role in leading the nation’s pandemic preparedness and response efforts and ensuring Americans receive vaccines that effectively immunize against the latest variants. As the variants and vaccines evolve, BARDA’s current stock of bivalent boosters could become outdated or expire.

Advisory Committee on Immunization Practices (ACIP)

Following the FDA’s amendment of COVID-19 Emergency Use Authorization (EUA) of COVID-19 vaccines to authorize bivalent COVID-19 vaccines as boosters for individuals who have received a monovalent primary or booster vaccination, the CDC’s Advisory Committee on Immunization Practices (ACIP) issued an interim recommendation for the use of bivalent COVID-19 vaccines as boosters. As the various emergency declarations—including the EUAs—are rescinded and next generation COVID-19 vaccines are developed, the ACIP will continue to review the vaccines and issue recommendations on their use. Because COVID-19 is already on the ACIP’s schedule, this is sufficient for purposes of activating commercial coverage requirements under the Affordable Care Act.

How will payors be impacted?


Medicare is statutorily required to cover COVID-19 vaccines without cost sharing under Part B, as amended by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In its Calendar Year 2023 Physician Fee Schedule, CMS reiterated that COVID-19 vaccine product coverage will not be required and enhanced administration fees will continue through the end of the calendar year in which the EUA declaration is terminated.

Should the EUA declaration terminate in 2023, the program would therefore assume product coverage responsibility beginning in January 2024. This may not comport with the likely fully transitioned market during the 2023-2024 season. Yet, because many products currently under EUA status, including vaccines, therapeutics and tests, would be affected by the termination of the declaration, this introduces added complexity. Given the above-described momentum favoring a transition this year, CMS may determine that vaccine product coverage should be transitioned separate and apart from the EUA declaration.

CMS has also issued guidance for Medicare Advantage plans as recently as April 2022. In the guidance, CMS advised that original Medicare will no longer pay COVID-19 vaccine administration fees on or after January 1, 2022. Further, CMS directed Medicare Advantage plans to update their contracted providers about the shift in coverage from original Medicare to Medicare Advantage plans, and to direct providers to submit claims for administering COVID-19 vaccines to the Medicare Advantage plans.


Likewise, state Medicaid programs currently pay the administration fee for COVID-19 vaccines provided by the federal government, but do not pay for the vaccines themselves. As provided by the American Rescue Plan Act of 2021 (ARP), most Medicaid beneficiaries receive coverage of the COVID-19 vaccine without cost sharing, during the period in which the ARP coverage provisions apply. ARP also establishes a 100 percent Federal Medical Assistance Percentage (FMAP) increase for state expenditures for COVID-19 vaccines and their administration “through the last day of the first quarter that begins one year after the last day” of the COVID-19 Public Health Emergency (PHE), declared pursuant to Section 319 of the Public Health Service Act.

Once the PHE is terminated and the ARP coverage period expires, first dollar coverage of COVID-19 vaccines will no longer be mandatory for most Medicaid beneficiaries. Only VFC-eligible children, adults enrolled in an Alternative Benefit Plan (ABP), and children eligible for Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services will receive mandatory first dollar coverage. Coverage of vaccines and their administration is optional for most other traditional Medicaid beneficiaries, while states that have expanded Medicaid eligibility under the Affordable Care Act are required to provide their Medicaid beneficiaries with first dollar coverage of ACIP-recommended vaccines. 

Most state Medicaid programs cover some portion of the ACIP-recommended vaccines and the administration of those vaccines for adults, and states could choose to provide first dollar coverage for COVID-19 vaccines and their administration to non-mandatory populations. For states that do cover without cost sharing ACIP-recommended vaccines and their administration, the Inflation Reduction Act (IRA) of 2022 included a provision that increases these states’ federal medical assistance percentage (FMAP) by 1 percentage point.

Private Payors

With the government acting as sole purchaser and distributor of COVID-19 vaccines since the beginning of the pandemic and PHE, private health insurers and health plans have reimbursed the administration of these products, but have not yet borne the cost of vaccine product. CMS’ operative guidance was issued through an October 2021 FAQ from the Consumer Information and Insurance Oversight (CCIIO) in which it advised that commercial plans and issuers must begin to cover ACIP-recommended COVID-19 vaccines without cost-sharing “immediately once the particular vaccine becomes authorized under an EUA or approved under a [Biologics License Application] BLA, and according to the scope of the applicable EUA or BLA” [emphasis added]. While this language will likely not require updating as the COVID-19 vaccines enter the commercial market, as discussed above, the scope of the EUAs for the COVID-19 vaccines will need to be updated.

CMS reiterated this stance in a 2022 COVID-19 toolkit for health insurance issuers and Medicare Advantage plans. In the toolkit, CMS notes that health insurance issuers are required by Section 3203 of the CARES Act to provide coverage for ACIP-recommended COVID-19 vaccines, noting specifically that issuers must cover the administration of COVID-19 vaccines immediately upon authorization or approval, “including an amendment to the applicable EUA or BLA.”

Health insurance issuers are already required to provide first dollar coverage of all ACIP-recommended vaccines under the Affordable Care Act. Once the COVID-19 vaccines are commercialized, health insurers will begin to pay for the vaccines as well as for their administration, requiring little clarification to existing CMS guidance. CMS could consider issuing guidance once the federal supply is depleted or nearing depletion, to reiterate yet again that health insurance issuers will need to absorb the cost of the vaccines. But this could also raise concerns from issuers should the market commercialize gradually, with governmentally-purchased product remaining on the market in some geographic regions while other regions are fully commercialized. 

But what about the price?

Pfizer and Moderna have both indicated they are considering a commercial list price of $110 and $130 for COVID-19 vaccines. The most recent bivalent boosters have cost the federal government $26 per dose, and the original COVID-19 vaccines cost between $15 and $16 per dose. The price increase has drawn Congressional attention and driven news stories. Senators Elizabeth Warren (D-Mass) and Peter Welch (D-Vt) co-authored a letter to Pfizer’s CEO Albert Bourla describing the increase in price on the commercial market as profiteering, and Senator Bernie Sanders (D-Vt) penned a similar letter to Moderna CEO, Stéphane Bancel.

As we and other authors have observed, the political pricing discourse has overlooked the fact that CDC will continue to receive discounted pricing for safety net programs (the Vaccines for Children Program and Section 317 immunization program), the pricing is consistent with other commercial list prices, the anticipated effect on payors and premiums is marginal, and the prices – likely already cost effective by standard economic measure – will be subject to further cost effectiveness scrutiny by the ACIP.

How will providers be impacted?

Currently, providers must enroll with the CDC as a COVID-19 vaccination provider in order to administer vaccines from the federally purchased supply. The providers are then responsible for the storage, handling, and administration of the COVID-19 vaccines themselves. While the CDC is the largest bulk purchaser of pediatric vaccines through the VFC program, entities in the commercial market, including health maintenance organizations (HMOs), independent health networks (IHNs) and group purchasing organizations (GPOs) also act as bulk buyers that distribute cheaper vaccines to physicians. As the market commercializes, these purchasers will assume this role for COVID-19 vaccines.

During the height of the COVID-19 pandemic, pediatricians were among the last groups of health care providers to receive the vaccines. This was in part because older and more vulnerable populations were prioritized over children at the time. The American Academy of Pediatrics (AAP) wrote a letter to the White House in November expressing concerns about the commercialization of the COVID-19 vaccine. The AAP’s concerns include: whether the vaccines will be deliverable in single-dose vials or pre-filled syringes, which both reduce waste and costs for pediatricians; concerns regarding low pediatric demand for the COVID-19 vaccine; the time spent by physicians in vaccine counseling; and that every step along the process is complicated for physicians: ordering, purchasing, storage, scheduling, administering, tracking, billing and inventory management. The AAP also cited concerns about the return process for governmentally-purchased vaccines that remain with providers once the vaccine enters the commercial market, and the payment process both for obtaining the vaccines and for reimbursement from insurers on the commercial market.

Adding to provider complications and likely another factor in an imminent transition, the Health Resources and Services Administration’s (HRSA) COVID-19 Uninsured Program is no longer accepting claims from providers for testing, treating, or administrating vaccines to uninsured individuals, due to a lack of funds.

Pharmacists were essential providers in the COVID-19 vaccine rollout. Established by the Biden Administration in February, 2021, the Federal Retail Pharmacy Program (FRPP) for COVID-19 Vaccination is a collaboration between the federal government, states and territories, and 21 national pharmacy partners and independent pharmacy networks across the nation that was borne out of the COVID-19 pandemic. The CDC leads the federal government’s involvement in the FRPP, and the program has delivered and administered nearly 270 million doses of the COVID-19 vaccine as of December 29, 2022. The CDC has not detailed its plans for the program and whether it will be leveraged as a part of national immunization programs going forward.