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How millions of COVID vaccines are paid for

Yahoo Finance's Editor-in-Chief Andy Serwer explains who is paying for all those millions of COVID-19 vaccines and where the money comes from.

Video Transcript

JULIE HYMAN: The talk about omicron has moderated to some extent. And certainly, the effect that we have seen in the markets has moderated to some extent. But the idea of fighting COVID-19, of course, is still very much front and center. Our editor-in-chief, Andy Serwer, wrote about that fight, and specifically, how it is being funded, in his weekend column. Very interesting sort of dissection of who is paying for the vaccines and how is that development working. What was your big takeaway as you were sort of going through all of this and where the money is coming from and flowing?

ANDY SERWER: Well, first of all, Julie, one outcome of omicron or omicron, however you want to pronounce it, has been an increase in demand for booster shots. And that seems to be paramount right now, no matter how difficult omicron proves to be, because we're sort of in the full swing of that cycle anyway, given the six months after people got their second shot. And we've seen lines down the street in many places.

But it does bring up the point of these things are all free. And sometimes we take it for granted. And of course, they're not really free. They're paid for by the US government, which is to say our tax dollars. That's the simple question. Then after that, things get a lot more complicated.

And if you look at, for instance, just the three big US players in the vaccine-- the COVID vaccine, I should say-- you've got J&J, Pfizer, and Moderna, all very different situations. But bottom line is the US government has provided many tens of billions of dollars to these companies, both in terms of research, but much more so in terms of actually pre-ordering the vaccines. That's how this has really been funded. The US government buys the vaccines from these companies. And then they're distributed free of cost to us. But there's a lot of other costs in the system as well.

BRIAN CHEUNG: Hey, Andy, it's Brian Cheung here. Now, at the same time, some people might be asking the question, well, when I got my vaccine or I signed up for my booster, the provider of the vaccine has still asked me for my insurance information. So how do the insurance companies kind of play into what you were just kind of talking about?

ANDY SERWER: Yeah, I mean, that's got to primarily be an information collecting exercise, which, as we all know, Brian, the insurance companies just seem to thrive on that. I love going to a doctor's office, and you still have to fill out a paper form. Like, what the heck is that? Maybe there's some HIPAA in there that you can't do it digitally or something. Anyway, kind of crazy. But, you know, you shouldn't have any outlay for a vaccine. Tests are another story. Usually, you don't even have an outlay there, but vaccines, you should not.

But insurance companies and hospitals-- and this is my last comment that I made to Julie-- there are other costs associated with these vaccine programs, besides just the dose itself, which is administering this as well. Again, you shouldn't be paying for that, but it's really, if a shot costs you 15 to 20-- well, costs the US government $15 to $20, there's a double cost in terms of hiring people to do it, processing the paperwork, the swabs, the hypodermics, et cetera, et cetera, that is being run through the system. Again, the government picks that up, but that has to be sort of noted through the insurance companies and the hospitals or other facilities that are providing the vaccines.

JULIE HYMAN: Wow. So it's definitely not-- it's not a straightforward formula for sure. And what does this also kind of tell us, if anything, about the broader health care system and the challenges there with rising costs?

ANDY SERWER: Yeah, I mean, obviously, you know, this is sort of a one-off to that, Julie, but, you know, it does sort of bring issues to the fore in terms of who owns the intellectual property of the vaccines, and then what sway does the government have over these companies in terms of providing vaccines to the rest of the world. Just to take two examples, Moderna and Pfizer, Pfizer went ahead and basically did all the research itself. And then the government bought vaccines, which allows Pfizer to really have much more of a secure claim over the IP.

But when it comes to Moderna, Moderna got a lot of funding from the government in the research phase. Also, and scientists at NIH worked very closely with Moderna to develop the vaccine. And right now, there's this wicked patent dispute that is just brewing right now between NIH and Moderna. And at stake are millions of dollars of revenue from Moderna going forward, but also, it's slowing down the distribution of vaccines to other parts of the world. And as we've seen with omicron, you know, it's not like the disease respects borders. I mean, everyone needs to get vaccinated around the world-- that's my take-- not just here in the United States.

JULIE HYMAN: Yes, most definitely, and that whole pathway has been very interesting. Also, everybody should check out Andy's column from the weekend. Good to see you, Andy. We'll catch up later. Andy Serwer, our editor in--