Inside the Merck / J&J COVID Deal
A quick word first
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The failed deal
Tuesday the White House announced that it had brokered a deal between Merck and Johnson & Johnson to amp up production of J&J’s one-shot COVID vaccine. The agreement could mean that there will be enough vaccine to inoculate every adult in the U.S. by the end of May—months ahead of the expected date.
We don’t have full details yet about how the Biden administration pulled this off, but we know about some of the key moves, thanks to the Washington Post which broke the story, and Tamara Keith’s follow-up reporting on National Public Radio.
As it happens, the two pharma rivals had explored a deal before President Biden took office. At that time J&J’s vaccine had gotten fast-track approvals but the company was having production problems. The reverse was true for Merck. Its efforts to develop a COVID vaccine had failed but it did have potential capacity to do manufacturing.
The companies’ complementary needs and resources looked like the promising basis of deal, but the talks between them went badly and they broke off negotiating. It isn’t clear whether the Trump White house tried to salvage a deal.
Getting the parties back to the table
Soon after the Biden inauguration, however, officials in the new administration contacted the CEOs of the two companies and pushed them to resume the negotiations. In a matter of weeks, agreement was reached. So, what changed?
Sometimes third parties can help break deadlocks even if, unlike arbitrators, they don’t have authority to compel a resolution. Specifically, effective brokers can help the parties design and implement an efficient and productive process, insuring that the right people are in the room and that they are addressing the right issues. They can also bring expertise and creativity to the table that enables them to see solutions the parties may have overlooked. Finally, if parties are reluctant to negotiate seriously out of fear of looking weak, the presence of a third party can give them cover.
All these features—process management, creativity, and face-saving—may have been at work as the White House worked with the rival companies. But other factors surely were in play, as well, specifically: muscle, resources, and the bully pulpit.
Merck and J&J are huge companies with lots of clout, but both need to be in the good graces of the government. We may learn later how much arm twisting was involved, if any. Explicit threats probably weren’t necessary. In this context, a raised eyebrow or a prolonged stare might have been clear enough to remind company leaders of possible consequences if they failed to cooperate.
In addition to that stick, the White House had a carrot, the Defense Production Act, which provided two-hundred sixty-nine million dollars to expedite getting the vaccines out faster. (The injection of new funds also provided the companies with a reason they could invoke for not having settled sooner.)
Most important, though, the Biden White House was a persuasive advocate for the greater good. Tamara Keith on NPR described a phone call between senior officials and J&J that was supposed to be 15 minutes long. Instead, it ran on to more than an hour. Keith reported that by the end of the call, “J&J knew that this was their time, their legacy. They had to think bigger, bolder.”
Biden himself underscored that sentiment when announced the deal. “As I’ve always said, this is a wartime effort and every action has been on the table, including putting together breakthrough approaches.”
Was the Biden administration’s role essential to closing a potential deal that had faltered earlier? My guess is yes. The agreement was unprecedented. Whichever company fared better remains to be seen. But there’s no doubt that the public interest was well served.
Key process issues
There are two things that I’d like to learn. First, were all the talks bilateral, with the White House talking separately with Merck and J&J, with the two companies working out the specific terms, or there also three-way meetings when everyone was at the table, in-person or virtually?
Top mediators disagree on which is the better approach. Some like to confer privately with each party to extract confidential information that they wouldn’t want their counterpart to discover. But other mediators insist on always meeting together. That way each side hears exactly the same thing from them, with no worry that behind the scenes, he or she isn’t secretly favoring one side over the other. (There are good arguments for each approach.)
I also wonder how much was Biden directly involved in these talks and what part of this work was left to his senior officials. There’d be good reason to keep him largely in the wings, on call, but only for critical moments when presidential stature was needed to elevate the discussion.
What’s clear is that this a remarkable deal was made between two long-time competitors. Its impact can be measured in thousands of lives saved. We are still losing 2,000 people each day, a rate that means close to three-quarters of a million deaths in a year.
Yes, it’s true that the J&J vaccine may not be as effective as some of the others in preventing mild COVID cases, but it is equally successful in preventing hospitalizations and deaths. This breakthrough happened because all the key parties—the companies and the White House—negotiated at their very best.
Housekeeping
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