Covid Stocks Face Their Next Challenge And There Are Billions Of Dollars At Stake

The Biden administration is planning to stop paying for Covid vaccines and treatments, shifting the financial burden to consumers as the pandemic relief fund dries up. The move is likely to generate additional revenue for the biggest Covid stocks.

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Until this point, the U.S. government has footed the bill for Covid shots and drugs, likely giving a boost to vaccination numbers. But with activities opening up, mask mandates long in the dust and the Covid relief fund close to replete, the White House is looking to punt the cost of Covid shots and drugs back to consumers.

To help ease the transition, the Department of Health and Human Services will hold a meeting on Aug. 30 with stakeholders. The list undoubtedly includes vaccine makers Pfizer (PFE), BioNTech (BNTX), Johnson & Johnson (JNJ) and Novavax (NVAX), as well as makers of treatments Gilead Sciences (GILD) and Merck (MRK).

On today’s stock market, Covid stocks were mixed on the news, however. Pfizer and J&J stocks inched more than 1% ahead to a respective 49.15 and 169.31. Shares of Moderna and Novavax lost 2.6% apiece, ending the regular session at 146.10 and 36.22, respectively. BioNTech and Gilead shares gained a fraction each. BioNTech ended the regular session at 147.92, while Gilead closed at 65.34.

Covid Stocks: How To Approach Upcoming Shift

Shifting payments to consumers is likely to take months, according to the Wall Street Journal.

The meeting this month is expected lay the groundwork for insurance reimbursement and coverage, as well as tackle access for under- and uninsured people.

It will also mark a key shift as Covid turns the corner from a pandemic requiring the use of emergency tools to an endemic. That will also have an impact on products only authorized for emergency use, rather than fully approved.

Notably, Medicare and Medicaid don’t cover emergency-use products. This includes Novavax’s and J&J’s Covid shots and antivirals Paxlovid and Lagevrio from Pfizer and Merck, respectively. Further, Pfizer and BioNTech’s Covid vaccine, Comirnaty, is only approved for people age 12 and older. Moderna’s shot only has full approval for adults.

But companies also will likely increase the prices on their products once they hit the market. This could lead to higher insurance premiums to help offset the cost.

Billions In Revenue At Stake

The impact for Covid stocks could be huge.

As of the second quarter, companies that make Covid vaccines and treatments currently used in the U.S. had generated nearly $91 billion in collective worldwide sales since the beginning of the pandemic, according to an Investor’s Business Daily analysis of earnings reports.

The undisputed leader in the market is Pfizer and BioNTech’s Comirnaty. Since the first authorization in December 2020, the companies have reported more than $59 billion in vaccine sales. Pfizer also sells the antiviral pill Paxlovid which has brought in nearly $9.7 billion. Moderna’s sales are north of $28 billion.

And that’s before adjusting their prices. As the cost shifts to consumers, the companies could boost how much they charge for Covid vaccines and treatments.

Analysts following Covid stocks, though, expect Pfizer’s and Moderna’s sales to drop off in 2023. Much of that will depend on the upcoming round of boosters, which the companies hope to update for newer B.A.4 and B.A.5 omicron subvariants, and how the U.S. deals with the upcoming transition to consumer-facing sales.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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