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VA ~~_~!
Committee on the Evaluation of Vaccine Purchase Financing
in the United States
Board on Health Care Services
INSTITUTE OF MEDICINE
OF THE NATIONAL ACADEMIES
THE NATIONAL ACADEMIES PRESS
Washington, D.C.
www.nap.edu
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THE NATIONAL ACADEMIES PRESS 500 Fifth Street, N.W. Washington, DC 20001
NOTICE: The project that is the subject of this report was approved by the Gov-
erning Board of the National Research Council, whose members are drawn from
the councils of the National Academy of Sciences, the National Academy of Engi-
neering, and the Institute of Medicine. The members of the committee responsible
for the report were chosen for their special competences and with regard for ap-
propriate balance.
Support for this project was provided by the Centers of Disease Control and Pre-
vention. The views presented in this report are those of the Institute of Medicine
Committee on the Evaluation of Vaccine Purchase Financing in the United States
and are not necessarily those of the funding agencies.
Library of Congress Cataloging-in-Publication Data
Financing vaccines in the 21st century: assuring access and availability /
Committee on the Evaluation of Vaccine Purchase Financing in the United
States, Board on Health Care Services.
p. ; cm.
Includes bibliographical references.
ISBN 0-309-08979-4 (pbk.) ISBN 0-309-52619-1 (PDF)
1. Vaccination United States Planning. 2. Vaccines Economic aspects-
United States. 3. Vaccination Economic aspects United States. 4.
Vaccination—Government policy United States.
[DNLM: 1. Mass Immunization economics United States. 2. Vaccines-
economics United States. WA 110 F4818 2003] I. Title: Financing vaccines in
the twenty-first century. II. Institute of Medicine (U.S.~. Committee on the
Evaluation of Vaccine Purchase Financing in the United States.
RA638.F54 2003
614.4'7 dc22
2003018817
Additional copies of this report are available from the National Academies Press,
500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202)
334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu.
For more information about the Institute of Medicine, visit the IOM home page at:
www.iom.edu.
Copyright 2004 by the National Academy of Sciences. All rights reserved.
Printed in the United States of America.
The serpent has been a symbol of long life, healing, and knowledge among almost
all cultures and religions since the beginning of recorded history. The serpent
adopted as a logotype by the Institute of Medicine is a relief carving from ancient
Greece, now held by the Staatliche Museen in Berlin.
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"I(nowing is not enough; we midst apply.
Willing is not enough; we mast do."
Goethe
... ........ .................... -. - - - -
....... ... . ......
INSTITUTE OF MEDICINE
OF THE NATIONAL ACADEMIES
Shaping the Future for Health
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THE NATIONAL ACADEMIES
Advisers to the Nation on Science, Engineering, and Medicine
The National Academy of Sciences is a private, nonprofit, self-perpetuating soci-
ety of distinguished scholars engaged in scientific and engineering research, dedi-
cated to the furtherance of science and technology and to their use for the general
welfare. Upon the authority of the charter granted to it by the Congress in 1863,
the Academy has a mandate that requires it to advise the federal government on
scientific and technical matters. Dr. Bruce M. Alberts is president of the National
Academy of Sciences.
The National Academy of Engineering was established in 1964, under the charter
of the National Academy of Sciences, as a parallel organization of outstanding
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ing the federal government. The National Academy of Engineering also sponsors
engineering programs aimed at meeting national needs, encourages education and
research, and recognizes the superior achievements of engineers. Dr. Wm. A.
Wulf is president of the National Academy of Engineering.
The Institute of Medicine was established in 1970 by the National Academy of
Sciences to secure the services of eminent members of appropriate professions in
the examination of policy matters pertaining to the health of the public. The Insti-
tute acts under the responsibility given to the National Academy of Sciences by its
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Harvey V. Fineberg is president of the Institute of Medicine.
The National Research Council was organized by the National Academy of Sci-
ences in 1916 to associate the broad community of science and technology with
the Academy's purposes of furthering knowledge and advising the federal gov-
ernment. Functioning in accordance with general policies determined by the
Academy, the Council has become the principal operating agency of both the Na-
tional Academy of Sciences and the National Academy of Engineering in provid-
ing services to the government, the public, and the scientific and engineering com-
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of Medicine. Dr. Bruce M. Alberts and Dr. Wm. A. Wulf are chair and vice chair,
respectively, of the National Research Council.
www. nationa l-academies.org
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COMMITTEE ON THE EVALUATION OF VACCINE PURCHASE
FINANCING IN THE UNITED STATES
FRANK A. SLOAN, Ph.D. (Chair), I. Alexander McMahon Professor of
Health Policy and Management, and Professor of Economics, Duke
University, Durham, North Carolina
STEVE BERMAN, M.D., Professor and Head, Section of General
Academic Pediatrics, and Director, Children's Outcomes Research
Program, University of Colorado School of Medicine and The
Children's Hospital, Denver, Colorado
DAVID CUTLER, Ph.D., Professor, Department of Economics, Harvard
University, Cambridge, Massachusetts
ERIC FRANCE, M.D., M.S.P.H., Chief of Preventive Medicine, Kaiser
Permanente-Colorado, Denver, Colorado
WILLIAM I. HALL, M.D., Chief, General Medicine/Geriatric Unit,
University of Rochester School of Medicine and Dentistry,
Rochester, New York
DAVID R. JOHNSON, M.D., M.P.H., Deputy Director and Chief
Medical Executive, Michigan Department of Community Health,
Lansing, Michigan
ALISON KEITH, Ph.D., Consultant, Health Economist, Pfizer, Inc.
(retired), Springdale, Utah
JUNE O'NEILL, Ph.D., Professor of Economics and Finance, Zicklin
School of Business, Baruch College, City University of New York,
New York, New York
MARK PAULY, Ph.D., Bendheim Professor and Chair, Health Care
Systems Department, The Wharton School, University of
Pennsylvania, Philadelphia, Pennsylvania
SARA ROSENBAUM, J.D., Hirsh Professor and Chair, Department of
Health Policy, George Washington University Medical Center,
School of Public Health and Health Services, Washington, D.C.
IRIS R. SHANNON, Ph.D., R.N., Health Consultant and Associate
Professor, Health Systems Management, Rush University, Chicago,
Illinois
Committee Staff
Rosemary Chalk, Study Director
Robert Giffin, Ph.D., Senior Program Officer
Nakia Johnson, Senior Project Assistant
Ryan Palugod, Senior Project Assistant
v
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INDEPENDENT REPORT REVIEWERS
This report has been reviewed in ciraft form by individuals chosen for their diverse
perspectives and technical expertise, in accordance with procedures approved by the National
Research Council's Report Review Committee. The purpose ofthis independent review is to
provide candid and critical comments that will assist the institution in making its published
report as sound as possible and to ensure that the report meets institutional standards for
objectivity, evidence, and responsiveness to the study charge. The review comments ant! draft
manuscript remain confidential to protect the integrity of the deliberative process. We wish to
thank the following inclividuals for their review of this report:
WILLIAM V. CORR, Executive Vice President, National Center for Tobacco-Free Kids,
Washington, D.C.
HELEN DARLING, M.A., President, Washington Business Group on Health, Washington,
D.C.
SHERRY GLIED, Ph.D., Assistant Professor of Public Health, Columbia University, New
York, NY
HENRY G. GRABOWSKI, Ph.D., Professor of Economics and Director of the Program in
Pharmaceuticals ant! Health Economics, Duke University, Durham, NC
RUTH J. KATZ, J.D., M.P.H., Associate Dean of Administration, Yale University, New
Haven, CT
TRACY LIEU, M.D., M.P.H., Associate Professor, Department of Ambulatory Care and
Prevention, Harvard University, Boston, Massachusetts
BARBARA D. MATULA, M.P.A., Consultant, Health Care Access Program, North
Carolina Medical Society Foundation, Raleigh, NC
GEORGES PETER, M.D., Director, Division of Pediatric Infectious Diseases, Rhocle
Island Hospital, Providence, RT
JEFFREY L. PRATT, M.D., Professor of Immunology, Mayo Clinic,
WILLIAM SCHAFFNER, M.D., Professor and Chairman, Department of Preventive
Medicine, Vanderbilt University, Nashville, TN
DAVID TAYLOE, JR., M.D., Goldsboro Pediatrics, Goldsboro, North Carolina
THOMAS VERNON, M.D., Executive Director, Medical, Scientific, and Public Affairs,
Merck Vaccine Division, West Point, PA
Although the reviewers listed above have provided many constructive comments and
suggestions, they were not asked to endorse the report's conclusions or recommendations, nor
clid they see the final draft of the report before its release. The review of this report was overseen
by William L. Roper, M.D., M.P.H., Dean of the School of Public Health, The University of
North Carolina at Chapel Hill, and Willard Manning, Ph.D., Professor, The University of
Chicago. Appointed by the National Research Council and the Institute of Medicine, they were
responsible for making certain that an independent examination of this report was carried out in
accordance with institutional procedures and that all review comments were carefully
considered. Responsibility for the final content of this report rests entirely with the authoring
committee and the institution.
V1
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Independent Report Reviewers
This report has been reviewed in draft form by individuals chosen for
their diverse perspectives and technical expertise, in accordance with pro-
cedures approved by the National Research Council's Report Review
Committee. The purpose of this independent review is to provide candid
and critical comments that will assist the institution in making its pub-
lished report as sound as possible and to ensure that the report meets
institutional standards for objectivity, evidence, and responsiveness to the
study charge. The review comments and draft manuscript remain confi-
dential to protect the integrity of the deliberative process. We wish to
thank the following individuals for their review of this report:
WILLIAM V. CORR, Executive Vice President, National Center for
Tobacco-Free Kids, Washington, DC
HELEN DARLING, M.A., President, Washington Business Group on
Health, Washington, DC
SHERRY GLIED, Ph.D., Assistant Professor of Public Health, Colum-
bia University, New York, NY
HENRY G. GRABOWSKI, Ph.D., Professor of Economics and Direc-
tor of the Program in Pharmaceuticals and Health Economics, Duke Uni-
versity, Durham, NC
RUTH J. KATZ, I.D., M.P.H., Associate Dean of Administration, Yale
University, New Haven, CT
TRACY LIEU, M.D., M.P.H., Associate Professor, Department of
Ambulatory Care and Prevention, Harvard University, Boston, MA
. .
v''
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vIll
INDEPENDENT REPORT REVIEWERS
BARBARA D. MATULA, M.P.A., Consultant, Health Care Access
Program, North Carolina Medical Society Foundation, Raleigh, NC
GEORGES PETER, M.D., Professor and Vice-Chair for Faculty Af-
fairs, Department of Pediatrics, Brown Medical School, Providence, RI
JEFFREY L. PLATT, M.D., Professor of Immunology, Mayo Clinic,
Rochester, MN
WILLIAM SCHAFFNER, M.D., Professor and Chairman, Depart-
ment of Preventive Medicine, Vanderbilt University, Nashville, TN
DAVID TAYLOE, OR., M.D., Goldsboro Pediatrics, Goldsboro, NC
THOMAS VERNON, M.D., Executive Director, Medical, Scientific,
and Public Affairs, Merck Vaccine Division, West Point, PA
Although the reviewers listed above have provided many construc-
tive comments and suggestions, they were not asked to endorse the
report's conclusions or recommendations, nor did they see the final draft
of the report before its release. The review of this report was overseen by
William L. Roper, M.D., M.P.H., Dean of the School of Public Health,
The University of North Carolina at Chapel Hill, and Willard Manning,
Ph.D., Professor, Department of Health Studies, The University of Chicago.
Appointed by the National Research Council and the Institute of Medi-
cine, they were responsible for making certain that an independent
examination of this report was carried out in accordance with institu-
tional procedures and that all review comments were carefully consid-
ered. Responsibility for the final content of this report rests entirely with
the authoring committee and the institution.
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Contents
EXECUTIVE SUMMARY
1 INTRODUCTION
Background, 22
Conceptual Framework for the Study, 26
Study Process, 35
Summing Up, 36
Organization of the Report, 37
2 ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
Legislative History of Vaccine Policy, 45
Shared Federal and State Responsibility for Financing, 47
Shared Public and Private Responsibility for Coverage, 49
Public and Private Delivery Systems, 51
Private Vaccine Production, 52
The Setting of National Vaccine Policy, 56
Findings, 61
3 PUBLIC AND PRIVATE INSURANCE COVERAGE
Public Insurance Coverage, 66
Private Insurance Coverage, 69
Barriers to a Well-Functioning Immunization Finance System, 73
Findings, 89
21
39
63
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x
CONTENTS
4 DELIVERY SYSTEMS 91
Delivery of Adult and Childhood Vaccines, 91
The Work of Immunizing, 94
Provider Reimbursement, 98
Barriers to a Well-Functioning Immunization Delivery System, 100
Findings, 105
5 VACCINE SUPPLY
Size and Growth of the Vaccine Market, 107
Vaccine Production, 109
Cost Structure, 111
Research and Development, 116
Industry Concentration, 121
Regulation, 126
Pricing, 127
Shortages, 131
Stockpiles, 137
CDC Contracting, 138
Barriers to a Well-Functioning Vaccine Supply System, 139
Findings, 142
6 CONCLUSIONS AND ALTERNATIVE STRATEGIES
Conclusions, 146
Alternative Strategies, 151
Weighing the Alternatives, 179
7 RECOMMENDATIONS
Recommendations, 185
Final Observations, 210
REFERENCES
GLOSSARY
APPENDICES
A Recommended Vaccine Schedules (Childhood and Adult)
B List of Contributors
C Survey of State Vaccine Finance Practices
D Overview of Commissioned Papers
E Committee and Staff Biographies
107
145
183
211
221
229
235
239
241
243
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Tables, Figures, and Boxes
TABLES
1-1 Change in Annual Morbidity from Vaccine-Preventable
Diseases: Prevaccine Baseline and 2002, 24
1-2 Benefit-Cost Ratios for Selected Vaccines, 28
1-3 Prices of Selected U.S. Vaccines: 1980 Versus 2003, 29
1-4 Vaccines for Children Program: CDC Vaccine Price List, 30
2-1 Government Roles in Immunization, 40
Insurance Coverage for Immunization by Age Group, 2000, 64
Public Immunization Funding, Fiscal Years 1999 and 2002, 66
State Vaccine Purchase Financing Systems, 70
Insurance Coverage for Immunization and Employer-Based
Market Share by Type of Insurance Plan, 71
3-5 Studies of the Impact of Insurance and Cost Sharing on
Immunization Rates, 76
3-6 Adults Considered to Be at High Risk for Influenza or
Pneumococcal Disease, 88
Proportion of Publicly Purchased Vaccines Administered in
the Private Sector, 93
Provider Payment for Vaccines and Administration Fees, 98
Studies on the Impact of Insurance on Referrals, 102
Xl
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X11
TABLES, FIGURES, AND BOXES
5-1 Domestic Producers of Vaccines for the U.S. Market, 110
5-2 Foreign Producers of Vaccines for the U.S. Market, 112
5-3 Deaths from Selected Diseases Not Yet Preventable by
Immunization, 119
Approved Vaccines Withdrawn from the U.S. Market, 123
Number of Producers of Selected Vaccines for the U.S.
Market, 2003,127
Federal and Private Prices of Vaccines Per Dose, 1983-2002,130
Vaccine Supply Status in 2001-2002,135
Vaccine Shortages and Their Causes, 136
Vaccines With and Without Supply Problems, 137
5-4
5-5
5-6
5-7
5-8
5-9
6-1 Summary of Alternative Strategies for Vaccine Purchases, 154
Legislative Impact of Committee Recommendations, 199
Proposed Redesign of ACIP Recommendations, 202
FIGURES
Cumulative vaccine cost trends, 32
2-1 Central role of ACIP in vaccine policy, 58
Insurance coverage of vaccination, children aged 0-5 (2000),65
Insurance coverage of vaccination, adults aged 18-64 (2000),65
5-1 Federal contract vaccine prices in current dollars, 134
New vaccine development and subsidy, 188
BOXES
ES-1 Charge to the IOM Committee, 3
Charge to the IOM Committee, 23
2-1 Vaccine Spillover Effects and Public Good Properties, 42
2-2 Public-Private Collaboration: The Case of DTaP Vaccine, 53
5-1 Vaccine Development and Approval, 115
5-2 Vaccines Expected to Be Developed by 2010,118
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~[ES, OG-ES, ~~ BOXES
5-3 Vaccine Supply: Me Case of DEAF' 125
5-4 Vaccine Furchasing by the Veterans Administration and the
Department of Defense' 129
6-1 SetUng Frices for Near Vaccines in Advance' 174
Calculating the Societal Benefits of Vaccines' 192
. . .
a,,,
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VA ~~.
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