The Art of Knowing When (Not) to Partner
Pfizer and the Trump Administration
“When you get money from someone, that always comes with strings. They want to see how we are growing to progress, what types of moves you are going to do. They want reports. I didn’t want to have any of that. Also, I wanted to keep Pfizer out of politics.”
- Pfizer CEO Albert Bourla
It was a bold move for Pfizer’s CEO: rejecting a multi-billion dollar partnership proposal from the US government to help fund Pfizer’s Covid-19 vaccine. Each of the other pharmaceutical companies that the Trump Administration approached - including some of Pfizer’s top competitors - agreed to partner. Some inside Pfizer must have questioned the decision to pass on the Trump Administration’s offer. Would Pfizer shareholders revolt if - after refusing funding from the US government - Pfizer failed to develop a vaccine? What if Pfizer’s competitors, flush with funds from the feds, developed a vaccine first? Would President Trump attack Pfizer publicly rejecting a partnership intended to save American lives?
The most important question in building partnerships comes at the outset - should we partner? That is why it is useful to examine Pfizer’s decision to decline partnering with the Trump Administration. As you will see below, in the midst of the largest health crisis in a hundred years, Pfizer maintained a laser-like focus on their objective - find a vaccine. And Pfizer likely evaluated whether to partner with the Trump Administration through that lens.
Operation Warp Speed’s public-private partnerships
Some basics on Operation Warp Speed:
created in March by the US Congress
forges public-private partnerships that can accelerate approval of a Covid-19 vaccine and/or therapeutics.
acts like a $10B venture fund (later increased to $18B) run by the US government that provides capital for R&D to private firms seeking to stop Covid-19.
invested in six drug manufacturers pursuing a few different scientific approaches to addressing Covid-19.
allocated funding towards three basic stages: drug development, manufacturing and delivery.
Like a smart investor, the Operation Warp Speed team viewed diversification as the best path to stopping Covid-19. They sought to decrease reliance on any single scientific approach or any single company by allocating funds across multiple firms pursuing a few potential solutions. The following firms struck agreements with Operation Warp Speed (more details here):
Moderna: $2.4B
GlaxoSmithKline's (GSK) + Sanofi: $2B
AstraZeneca: $1.2B
Regeneron: $1.6B
Johnson & Johnson: $456M
Eli Lilly: $375M
Pfizer takes a different path
Pfizer’s CEO, a PhD. and former veterinarian, put science above business or politics. His public statements in October included these sentences:
“I wanted to liberate the scientists from any bureaucracy.”
“If it fails, it goes to our pocket. At the end of the day it’s only money. But that will not break the company. Although it will be painful because we are investing $1.5B in covid research.
Pfizer’s terms with Operation Warp Speed were different from the agreements the other drug manufacturers struck with Operation Warp Speed. The US government paid nothing upfront to Pfizer. The agreement with Pfizer is a fairly standard seller-buyer relationship that kicked-in only if Pfizer successfully developed a vaccine.
The US government’s deal with Pfizer stipulated that, in the event that Pfizer successfully produced a vaccine approved by the FDA, the US would buy 100M vaccine doses from Pfizer for $19.50 each.
Why decline funding from the US government? From reporting by the NYTimes, Pfizer declined funding for three reasons:
Pfizer didn’t need money - Pfizer’s net income in 2019 was $16.2B
Pfizer didn’t want government oversight slowing drug development
Pfizer was weary of exposure to politics
The outcome of Pfizer’s decision
In short, Pfizer was the first drug manufacturer to develop an approved Covid-19 vaccine. We cannot know whether oversight from the US government slowed drug development by drug manufacturers that partnered with Operation Warp Speed. But what is clear is that even though Pfizer opted not to partner with the Trump Administration, the Administration still tried to take credit for Pfizer’s scientific breakthrough. See Vice-President Pence’s tweet:
Take-aways
Clear decisions on whether to partner flow directly from clear company objectives.
Pfizer’s team likely asked themselves a simple question: how will federal funding help us achieve the objective of finding a vaccine? Without a compelling answer, Pfizer opted to decline funding from the Trump Administration.
Not every organization has the “luxury” of a global crisis that dictates a singular priority for the organization. But every team deserves clarity from their leadership on what the highest priorities are. If you find yourself operating without this clarity, stop and ask. If you find yourself in an organization that does not support someone asking “what are we trying to accomplish?” then begin your search for a new employer.
Incentives may not be needed if two organizations are 100% aligned around a goal.
A partnership is about pursuing and achieving a shared objective. Pfizer recognized that they wanted to achieve the exact same outcome as the Trump Administration. Given this, there was no need to structure incentives. When objectives are fully aligned between partners, there’s often no need to draft a legal agreement or structure financial incentives.
The other drug manufacturers faced a different set of circumstances. Moderna is a tiny fraction of the size of Pfizer and must have seen big upside in partnering with the Trump Administration. AstraZeneca is a UK-based company and may have seen the opportunity to strengthen relationships with US government officials and raise its brand name among Americans.
Don’t take on a partner if all you need is a customer.
Pfizer understood the difference between a partner and a customer. They wanted compensation if they produced a vaccine. They did not see what benefit the Trump Administration could bring their ability to develop a Covid-19 vaccine.
Thank you scientists and frontline workers.
As I write this I can’t help but reflect on the fact that one year ago I was unfamiliar with the term “coronavirus” and the thought of wearing a mask in public was laughable. But just ten months after the Covid-19 outbreak we have multiple vaccines approved and now being administered. I am so incredibly grateful to the scientists at Pfizer and so many other companies and government agencies who came together and worked so hard to make this possible. 2020 has been such a painful year for so many. Yet we end the year with such a hopeful lesson about our collective ability to overcome whatever challenges we face.
Footnote 1 : Pfizer’s partnership with BioNTech - the write-up above does not cover the fact that Pfizer’s vaccine was discovered in partnership with a boutique European pharmaceutical company called BioNTech. The story of BioNTech is a reminder that global giants often turn to small, nimble teams for innovation. You can reach more about BioNTech in this NYTimes piece.
Footnote 2: Vaccine Buyer Controversy - The Pfizer agreement with the US government has generated much press coverage because reporting by the NYTimes revealed that Pfizer inquired last summer if the US government wanted to lock-in more than 100M doses in the event Pfizer discovered a vaccine. The US government declined this offer. With headlines like “Trump Administration Passed on Chance to Secure More of Pfizer Vaccine,” the optics are terrible for the US government. But I’m not sure that is fair (and to be clear, I’m very rarely sympathetic to the Trump Administration). As noted above, Operation Warp Speed sought to diversify their funding across multiple companies. Committing more funds to Pfizer was likely seen by Operation Warp Speed as counter to their diversification strategy. You can read more here.
Timeline
July 7th - Pfizer & Operation Warp Speed reach agreement on the terms outlined above
November 9th - Pfizer announces that their clinical trials show their covid vaccine is 95% effective
The Trump Administration seizes upon Pfizer’s announcement as a sign of the success of Operation Warp Speed; see the tweet below from Vice-President Pence
November 21 - President Trump remarks: “Pfizer and others were way ahead on vaccines, you wouldn’t have a vaccine if it wasn’t me for another four years”
December 14 - first vaccinations using Pfizer are conducted in the United States
December 15 - reports indicate that Pfizer and the Trump Administration are negotiating over the Trump Administration purchasing more vaccine doses.
Sources:
https://podcasts.google.com/feed/aHR0cHM6Ly9yc3MuYXJ0MTkuY29tL3RoZS1kYWlseQ/episode/Z2lkOi8vYXJ0MTktZXBpc29kZS1sb2NhdG9yL1YwL0d4cjB6alVLcmpkSTcwTkM5c2J3OFJ5dDMxQ0FWNUlvMi1nUEdHRjJaTzA?sa=X&ved=0CAUQkfYCahcKEwjYwJHW5tbtAhUAAAAAHQAAAAAQAw&hl=en
https://www.politifact.com/article/2020/nov/19/pfizer-moderna-covid-19-vaccines-and-operation-war/
https://www.hhs.gov/coronavirus/explaining-operation-warp-speed/index.html
https://www.nytimes.com/2020/12/07/us/politics/trump-pfizer-coronavirus-vaccine.html