Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 183
7
Recommendations
The national immunization system, and the Vaccines for Children
(VFC) program in particular, has been highly successful to date. But the
system has yet to attain national immunization goals for children, and
new challenges now threaten the accomplishments that have been made.
Policy makers today face daunting challenges related to persistent dis-
parities, missed opportunities in the administration of vaccines, recent
vaccine shortages, higher costs of new vaccines, and the growing frag-
mentation and complexity of public and private financing and delivery of
vaccines.
Developing a social policy for vaccine pricing and procurement re-
quires consideration of multiple objectives, each of which sends different
signals to the pharmaceutical industry, purchasers, providers, and the
public. Different incentive structures influence the trade-offs involved
among different purchasing or pricing strategies. To achieve high immu-
nization rates, for example, government agencies frequently strive to re-
duce financial barriers that inhibit the demand for or administration of
vaccines. This goal has led to a pricing policy that seeks to limit public
expenditures, in some cases through forceful negotiation of public prices
for new vaccine products and through administrative and legislative price
caps on certain older vaccines (Miller, 2002~. Similarly, public insurers,
such as Medicaid and Medicare, have limited the vaccine administration
fees paid to physicians and other health care providers.
Assuring access to vaccines is therefore only one objective that shapes
vaccine procurement policy. In recent years, several reports have directed
attention to the effect of government pricing and purchasing practices on
183
OCR for page 184
184
FINANCING VACCINES IN THE 21ST CENTURY
the vaccine market and supply system (GAO, 2002; NVAC, 2003~. Some
observers have indicated that current government purchasing policies are
inadequate because the growing scope of the public-sector market and
price controls discourages investments in vaccine development and pro-
duction capacity (Miller, 2002; Rappuoli et al., 2002~.
The challenge now is to develop financial strategies that can achieve
multiple objectives rather than perpetuating incremental approaches that
satisfy some limited interests at the expense of others. The objectives to be
pursued include supplying vaccines to the children and adults who need
them, compensating the industries that produce vaccines at rates that re-
flect the social benefits of vaccines and also encourage the development of
new vaccine products, and allowing the government greater discretion in
determining the level of investment it is prepared to make in procuring
new vaccines compared with other areas of disease prevention and treat-
ment. The committee determined that achieving the dual objectives of as-
suring high rates of immunization and encouraging innovation requires a
rethinking of the current policies and practices by which federal and state
agencies recommend, purchase, and administer vaccines. Incremental re-
forms may help resolve a short-term crisis or strengthen an isolated com-
ponent of this dynamic and interactive system, but piecemeal approaches
will do little to foster a coherent strategy that can align national health
policy goals with the desired outcomes. Even the VFC entitlement, which
has been credited with achieving substantial gains in immunization rates,
is now struggling with budgetary and contracting delays and eligibility
requirements that interfere with its ability to provide a reliable and sus-
tainable safety net for a growing number of new and expensive vaccine
products. Mandating coverage for vaccines within all insurance plans
without providing some mechanism for insurers, employers, and indi-
viduals to recover escalating costs could lead to high numbers of unin-
sured persons; it could also lead some individuals either to pay higher
fees (in the form of premiums or deductibles) to obtain coverage or to
forego vaccination. Such issues require close attention to the ways in
which the immunization burden is shared between the public and private
health sectors during periods of escalating health care costs.
In framing its recommendations, the committee focused its analysis
on the seven alternative approaches described in Chapter 6. Each ap-
iA series of improvements in the financing of childhood vaccines announced by President
Bush as part of the fiscal year 2004 budget (U.S. Department of Health and Human Services,
2003) occurred after the final meeting of this committee and were not considered during its
deliberations. Although these budgetary proposals address some of the committee's con-
cerns, they are short-term solutions that do not resolve key systemic problems addressed by
the committee's proposed financing strategy.
OCR for page 185
RECOMMENDATIONS
185
proach was considered in terms of its impact on the twin goals outlined
earlier in this report: (1) assuring access to current vaccines for all chil-
dren and adults and (2) assuring the availability of future vaccines by
encouraging private investment in the continued production of current
vaccines, as well as the development of new vaccine products. In addi-
tion, the committee sought to design a strategy that would maintain a
reasonable budget for vaccine purchases for children and adults in the
public and private health sectors.
RECOMMENDATIONS
Chapter 6 describes the advantages and disadvantages of seven alterna-
tive vaccine finance strategies that represent a broad menu of choices for
policy makers. Although each approach has advantages and disadvantages,
the committee ultimately adopted one of these seven strategies as its princi-
pal recommendation, supported by two additional recommendations.
Recommendation 1: The committee recommends the implementa-
tion of a new insurance mandate, combined with a government sub-
sidy and voucher plan, for vaccines recommended by the Advisory
Committee on Immunization Practices (ACIP).
The proposed plan, referred to as the vaccine payment system, consists
of five core components that should be considered an integrated strategy
for achieving the key objectives of access and availability of vaccines:
· Federal legislation would be required to establish a vaccination
coverage mandate for all public and private health plans. This mandate
would apply to both state-regulated insurance plans and self-funded em-
ployer plans (which are exempt from state regulation under the Employee
Retirement Income Security Act [ERISA]), as well as Medicare, Medicaid,
the State Children's Health Insurance Program (SCHIP), and government
health plans for military personnel and civilian employees. The mandate
would provide vaccine benefits for all insured children; adults aged 65
and older; and certain designated populations, such as adults aged 18-64
who have certain health disorders that place them at higher risk for vac-
cine-preventable disease.
· The federal government would create a new federal subsidy to re-
imburse public and private health plans and providers for mandated vac-
cine costs and associated vaccine administration fees.
· The federal government would also create a voucher system for
vaccines and vaccine administration fees for designated uninsured popu-
lations.
OCR for page 186
186
FINANCING VACCINES IN THE 21ST CENTURY
· The insurance mandate, subsidy, and voucher would apply princi-
pally to vaccines that have substantial spillover effects as a result of their
ability to prevent highly contagious diseases. Vaccines without substan-
tial spillover effects, such as therapeutic vaccines, would be considered
for inclusion only in cases of exceptional societal benefit.
· The amount of the subsidy and voucher would be determined both
for vaccines currently on the immunization schedule and for vaccines that
are not yet available. The subsidy for new vaccines would be based on an
estimate of their societal benefit. The subsidy for vaccines already in use
would be based on a formula that takes into account both current market
price and their calculated societal benefit. The mandate would not apply
to vaccines that are priced above the subsidy amount.
Major Features. A government-funded insurance mandate for immu-
nization represents a reformulation of a universal vaccine purchase pro-
gram and would assure that clinically appropriate immunization services
would become a basic and required feature of all public and private health
insurance plans. This strategy changes the role of government from one of
buying vaccines to one of assuring immunization by providing a fixed
subsidy that is adequate to reimburse both vaccine costs and administra-
tion fees for public and private insurers and clinicians. As a universal
program, the government vaccine subsidy is extended to all persons
within the designated populations. As a payment reimbursement pro-
gram, it sustains the role of government in subsidizing the cost of immu-
nization and enhances incentives for investment in vaccine products, but
it reduces the impact of government purchases on the vaccine market rela-
tive to other approaches (such as a universal purchase policy).
The prospect of a guaranteed public subsidy for selected vaccines
would provide economic incentives that would encourage manufacturers
to invest in the clinical trial, licensing, and production processes neces-
sary to move a vaccine product from the early stage of discovery to its use
in routine medical care. Reducing the financial uncertainties associated
with these processes would stimulate the market and encourage the de-
velopment of new and effective vaccine products.
At the same time, the federal subsidy for vaccines would not provide
a blank check for a new vaccine product. The process of establishing a
predetermined subsidy for vaccines not yet marketed would offer incen-
tives for reliable and innovative vaccine product development, while also
encouraging efficiency and competition in the production process. Spe-
cific features of the recommended strategy are reviewed below, followed
by a discussion of its advantages, disadvantages, and implementation is-
sues. Figure 7-1 illustrates the process proposed by the committee.
OCR for page 187
RECOMMENDATIONS
187
Mandate Requirements. If vaccines are to continue to be offered within
settings for routine medical care, it is essential for all health plans that
cover basic health care services to include all vaccines recommended for
their enrolled populations. The proposed mandate would extend to popu-
lations registered for services through contractual agreements with pub-
lic health clinics. It would reduce the current administrative burden asso-
ciated with screening for eligibility and the missed opportunities related
to time-consuming referrals of underinsured populations to public health
settings both of which create inefficiencies within the health care system
and reduce immunization rates. The proposed mandate would also re-
duce the variations existing among states that have adopted universal
purchase, enhanced VFC, and VFC-only policies.
Because most health plans already cover childhood vaccines, the in-
clusion of vaccine benefits would not be unduly burdensome for most
insurance plans and their purchasers. Nor would the mandate add an
extra burden to government health plans such as Medicaid, SCHIP, or
Medicare, which already cover recommended vaccines. The burden of the
mandate would fall most heavily on insurers that do not currently pro-
vide vaccine benefits because they would have to develop new programs
to do so.
Legislative action would be required to implement the proposed man-
date and to authorize reimbursement payments. Such legislation should
include both ERISA and ERISA-exempt plans to achieve a universal stan-
dard of vaccine coverage in all private health plans. Additional regula-
tory action would be required to ensure that the mandate applied to those
vaccines designated as high priority primarily on the basis of their
spillover effects.
The Subsidy Plan. The committee recommends that the government
replace existing vaccine purchase programs with an insurance mandate
funded by a new federal finance plan that includes a subsidy, reimburse-
ment, and voucher arrangement. The subsidy amount for each vaccine in
the program would be derived from a calculation of the societal benefit of
the vaccine. The funded mandate would have the following features:
· All health insurers (both public and private) would purchase rec-
ommended vaccines for children and adults or delegate that responsibil-
ity to their participating providers.
· Insurers would be required to furnish recommended vaccines to
their providers or reimburse their providers at least the purchase price
they paid, up to the federal subsidy amount.
OCR for page 188
188
.p °B
4, ~
C.}
¢!
¢ ~-~
s
g o
m>-m ~ ~
.m o
~ ~ ~ ~ .
¢-O ~
m ~ ~
~5 _
~ _
a
o
~¢ ~
· C)
o
.$
.>
~0
PA ~ $.$ ~
~ ~ ~ ~ .O
O ~
s:g
. ~ ~
t004 ~
~ Id
·s =0
..
~ ....
B
o
out
.~
V)
V)
au
o
5-
._,
V)
V)
o
au
au
·—l
au
v)
o
o
OCR for page 189
189
,~ ~ O ~ ~ ~ D ~ ~ ~
~ ~ ~ ~ ~ it, , ~ ' ~ ~ =~
Ares :~;~S ~
OCR for page 190
190
FINANCING VACCINES IN THE 21ST CENTURY
· Insurers would bill the federal government for the vaccines pur-
chased or reimbursed. The government would reimburse all public and
private health plans for vaccine purchases and administration fees
through a central billing office located within the U.S. Department of
Health and Human Services. The payment office would ensure that fed-
eral reimbursement fees were consistent with the level of subsidy and
that the vaccines fell within the coverage mandates established by ACIP
under recommendation 2 below.
The Value of the Subsidy. Using a subsidy rather than an administered
price has certain key advantages. The subsidy would shift discussion
away from the costs of production (which are not known) and price, and
focus attention on the societal benefits of selected vaccine products. Thus,
when policy makers determined health budgets for vaccines, they could
compare the benefits of one product against those of another in terms of
the public health goals they wished to achieve. The subsidy approach
would also encourage policy makers to ask whether existing resources
are adequate to achieve immunization goals. Second, the subsidy ap-
proach would make more transparent the implicit assumptions that al-
ready guide vaccine recommendations and purchasing negotiations.
Third, a subsidy strategy could cause the vaccine industry to become more
productive by creating incentives to invest in vaccines that have higher
societal benefits than others. Finally, the subsidy approach would offer
companies greater certitude that their investments in the development
and production of vaccines having significant societal benefits will be ad-
equately compensated.
If instead of a subsidy approach the government purchased all vac-
cines for a negotiated price, there would be no market basis for determin-
ing an appropriate price in the long run, and prices could become subject
to political influence. The subsidy approach preserves some aspects of the
market. It uses a formula method for setting the subsidy that is constant
across all vaccines and is less subject to political manipulation. As a result,
it reduces the uncertainty regarding future government-set prices that
constrains industry investment in R&D.
The prospect of a guaranteed market for selected vaccines would pro-
duce incentives for manufacturers to invest in the clinical trial, licensing,
and production processes that are necessary to move a vaccine product
from the early stage of discovery to its use in routine medical care. In the
past, private investments in vaccine production have been influenced not
only by the regulatory costs of bringing a new product to market but also
by uncertainties about the size of the public market and the discounts to
be negotiated by the government.
Therefore, the Secretary of Health and Human Services should estab-
OCR for page 191
RECOMMENDATIONS
191
fish a fixed dollar subsidy that the government is willing to support based
on an assessment of each vaccine's efficacy and value, and guarantee that
the government will be willing to pay that subsidy as soon as one or more
vaccines are available for use. The committee offers the following guide-
lines for determining the formula to be used in setting the subsidy amount:
· ACIP (or some other independent advisory body) should conduct
an analysis to determine the monetary value to society of each vaccine.
Definitions and estimates of societal benefit should be comprehensive and
include a broad range of costs that extend beyond direct health care sav-
ings, such as longevity, quality of life, and reductions in caregiver bur-
den. Societal benefit, as defined by this committee, is a measure of the
total benefits provided by a vaccine, including both private benefits ac-
cruing to individuals who are immunized and benefits to others from a
reduced likelihood of contracting a disease. Box 7-1 describes a generic
process for calculating the societal benefit of a vaccine.
· Vaccines traditionally have been recognized as having substantial
spillover effects since immunization protects not just the individual, but
also others in society, from contagious diseases. This is not equally true of
all vaccines, however. For example, tetanus vaccine, while highly benefi-
cial, is mainly a private good. Tetanus is not easily transmitted and there-
fore does not substantially affect the health of others. Some new vaccines
currently in development, such as therapeutic cancer vaccines, share this
characteristic. The subsidy should apply principally only to vaccines that
have strong spillover effects, that is, vaccines that protect against highly
contagious infectious diseases and meet other criteria established by ACIP
(see recommendation 2 below).
· The federal subsidy should be some percentage (no more than 100
percent) of the monetary value of the societal benefit of the vaccines that
meet these criteria. This percentage should be based on a formula that is
applied consistently across all such vaccines for some fixed period of
years. A subsidy of less than 100 percent of societal benefit is justified in
that some of that benefit accrues to the individual receiving a vaccine. On
the other hand, low subsidies coupled with a mandate for vaccine ben-
efits could lead to higher numbers of uninsured persons.
· The fixed-price subsidy would function as an incentive for successful
development of future vaccines. An incentive, though smaller, may also
be desirable to maintain producer interest in currently licensed vaccines
and to encourage improvements in their manufacture, efficacy, safety,
storage, and administration. The subsidy for currently licensed vaccines
would be set in a different manner. The committee is not prepared to
recommend a specific formula but advises that the subsidy be based on
recent private-sector prices, be no higher than the calculated societal
OCR for page 192
92
FINANCING VACCINES IN THE 21ST CENTURY
OCR for page 193
RECOMMENDATIONS
193
benefit, and include an annual adjustment based on inflation and signifi-
cant production cost factors (such as changes in regulatory requirements).
· Under the proposed approach, the federal subsidy includes a clini-
cian fee for the administration of vaccines. The committee suggests that
the Centers for Medicare and Medicaid Services (CMS) determine differ-
ential clinician fees for childhood and adult vaccines, as well as for other
significant cost-related categories, through the Resource-Based Relative
Value Scale (RBRVS) process, and that these rates be included in the total
amount of the subsidy.
The Voucher Plan. Under the proposed strategy, uninsured children
and high-risk adults would be enrolled within a national vaccination
voucher program. The committee considered two options for the voucher
payment. Under one option, each child and adult would be provided with
an electronic card certifying, for each specified vaccine, the amount the
clinician will be reimbursed for the vaccine cost and administration fee.
The voucher card would be presented to the clinician, who would bill the
government for those amounts. The creation of a central or community-
based registry for vouchers and immunization records would allow clini-
cians to update records and assist in the replacement of lost cards. This
option would create an administrative expense for the government but
would relieve the physician of the burden of verifying eligibility at the
point of service. This approach would also reduce missed opportunities
and referrals and encourage greater participation by physicians in the
national immunization system. The eligibility determination component
could be tied to existing programs, such as Medicaid, to reduce the ad-
ministrative burden.
A second option is to allow each clinician to bill the government for
reimbursement of uninsured persons without requiring individual docu-
mentation. The central billing office would determine eligibility and draw
the reimbursement from the appropriate fund (e.g., if the patient were
insured, the payment to that insurer would be debited). This approach
would be feasible under a universal coverage approach, since the govern-
ment would ultimately pay every claim. It would be more problematic for
the adult component of the committee's proposal, which applies only to
the high-risk subset of the adult population.
Advantages. The committee's proposed strategy has several clear ad-
vantages. It would:
· Improve incentives for the development of new vaccines by pro-
viding manufacturers with assurance of adequate pricing and returns for
those vaccines that confer substantial public benefit.
OCR for page 200
200
FINANCING VACCINES IN THE 21ST CENTURY
benefit assessment, and vaccine manufacturing. The representation of
these perspectives is essential to inform ACIP decision making with re-
spect to the impact of vaccine price and coverage on population groups,
providers, payers, and other key stakeholders. At the same time, it is im-
portant to maintain the independence and balance that have traditionally
guided ACIP recommendation procedures through a rigorous and trans-
parent conflict and bias screening process for voting members. Current
employees or agents of firms within the insurance and vaccine manufac-
turing industries should not participate as voting members, although ac-
cess to their expertise is necessary to inform committee deliberations.
With respect to general vaccine recommendations, ACIP should con-
tinue its present practice of recommending current and new vaccines for
universal or selected populations within the immunization schedule.
These determinations should be based on a vaccine's efficacy, safety, cost-
effectiveness (reflecting current price information), feasibility, supply, and
other considerations.
With regard to mandate and subsidy determinations, ACIP should
carry out an additional process to determine whether a vaccine has suffi-
cient spillover effects to warrant its inclusion in the new insurance man-
date and subsidy category. The mandate determination for new vaccines
would require a judgment about the extent to which a vaccine offers soci-
etal benefits beyond its value to the vaccinated individual. An important
criterion in determining societal benefits should be the extent to which
immunization conveys herd immunity, whereby immunization of some
individuals offers protection to others who have not been vaccinated or
have insufficient immunity to prevent transmission. The mandate would
apply principally to vaccines with substantial spillover effects. However,
other vaccines, such as therapeutic vaccines, would be considered for in-
clusion in cases of exceptional societal benefit, particularly when dispari-
ties in immunization rates between insured and uninsured persons per-
sisted for a substantial time after licensure of the vaccine.
Once a vaccine had been selected for inclusion under the insurance
mandate as discussed in recommendation 1 above, ACIP would calculate
the monetary value of the federal subsidy for reimbursement to public
and private insurers. This calculation would be based on a methodology
that would assign values to such factors as reduced health expenditures,
enhanced quality of life, and increased labor productivity.
The mandate and subsidy process would apply to both current and
future vaccines. Future vaccines should receive primary consideration to
stimulate the development of new vaccine products. Current ACIP-
recommended vaccine components, such as tetanus, could be "grand-
fathered" into the mandate and subsidy category to avoid confusion and
disruptions to the current vaccine schedule and immunization system.
OCR for page 201
RECOMMENDATIONS
201
Staff support for these new functions and the redesigned ACIP would
require expansion of the supporting responsibilities of the National Vac-
cine Policy Office and the National Immunization Program within CDC.
Table 7-2 illustrates the existing ACIP procedure and contrasts it with
the new, enhanced procedure that is recommended by the committee. The
existing procedure is represented by blocks A and B (current). ACIP de-
cides whether to recommend each vaccine for universal use (block A) or
use by a targeted subset of the population (block B). Its recommendations
are based on a range of factors, including cost-effectiveness. ACIP also
makes permissive recommendations, which means that providers should
use their judgment in deciding whether to vaccinate based on individual
patients' risk factors. A separate vote determines whether the vaccine will
be included in the VFC entitlement program.
Under the committee's proposed procedure blocks A and B (new)-
ACIP would continue to make Tier 1 recommendations. But in addition to
considering a vaccine's cost-effectiveness, ACIP would conduct (or com-
mission) an analysis to calculate the monetary value of the societal benefit
of the vaccine, providing a pricing benchmark to be included among the
factors considered by ACIP in determining its recommendation. Also,
ACIP would no longer vote on inclusion in the VFC entitlement program
since the new system would replace that program.
If a vaccine received a Tier 1 recommendation, ACIP would make a
separate Tier 2 determination as to whether the vaccine should be in-
cluded in the mandate and subsidy categories (blocks C and D). A new
vaccine might be recommended for addition to the schedule (Tier 1) but
not be included in the government mandate and subsidy program be-
cause it lacked significant spillover effects so that its benefits accrue pri-
marily to the individual rather than to society as a whole (an example
would be a vaccine that prevents diabetes or cancer). Individual health
care providers could still purchase and administer the vaccine, and health
plans could voluntarily include it as a benefit. But health plans would not
be required to include the vaccine in their benefits package, and a govern-
ment subsidy would not be available to reimburse the cost of the vaccine
to health care providers. A vaccine might also receive a restricted recom-
mendation to the mandate and subsidy program, for example, limiting a
high-priced or less cost-effective vaccine to selected high-risk populations
(block D).
Under the committee's proposed approach, ACIP would also consider
future vaccines that were not yet available but could be beneficial to the
public's health. Such vaccines would bypass the usual schedule recom-
mendation process (until they had actually been developed and licensed)
and go directly to the Tier 2 mandate recommendation process. Vaccines
OCR for page 202
202
V)
o
o
u
H
¢
o
be
_'
V)
V)
o
o
5-
¢
En
~~! m~; 1 m;O ~ 1 ~
~ R ~ ~ ¢ ~ ~ ~
3 ~ ~ ~ 3, ~ j ~ ~ 1 ~ ~ o ~ ~ ~ A' ~ i
. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
~ .- .-
OCR for page 203
RECOMMENDATIONS
203
currently recommended would be included automatically i.e., grancr-
fathered in the mandate and subsidy program.
Once an existing or future vaccine had been recommended for the
mandate and subsidy program, ACIP would determine and publish a sub-
sidy amount (blocks E and F) that the government would agree to pro-
vide as described in recommendation 1.
Recommendation 3: As part of the implementation of recommen-
dations 1 and 2, the National Vaccine Program Office should con-
vene a series of stakeholder deliberations on the administrative,
technical, and legislative issues associated with a shift from vaccine
purchase to a vaccine mandate, subsidy, and voucher finance strat-
egy. In addition, the Centers for Disease Control and Prevention
(CDC) should sponsor a postimplementation evaluation study (in 5
years, for example). CDC should also initiate a research program
aimed at improving the measurement of the societal value of vac-
cines, addressing methodological challenges, and providing a basis
for comparing the impact of different measurement approaches in
achieving national immunization goals.
Recommendations 1 and 2 represent a significant departure from cur-
rent law and practice. A change of this magnitude is warranted to address
the fundamental and systemic problems that confront the national immu-
nization system. Piecemeal changes are unlikely to solve these problems.
Incremental reforms also are incapable of achieving an appropriate bal-
ance between access and availability in vaccine financing.
In formulating its recommendations, the committee has sketched the
broad outlines of long-term strategic reforms. These recommendations do
not address all aspects of the shift from the existing vaccine purchase pro-
grams to a mandate, subsidy, and voucher plan; nor do they incorporate
the comprehensive legislative agenda that would be necessary to achieve
these reforms. A major national debate and examination of the
committee's proposals among diverse stakeholders is necessary prior to
full implementation of these recommendations,
The magnitude and complexity of the mandate, voucher, and subsidy
recommendations presented above are significant, and the recommenda-
tions would be difficult to implement. A financing strategy designed both
to achieve higher levels of access to vaccines and to encourage the process
of innovation would introduce a greater level of administrative complex-
ity into the national immunization system. The National Vaccine Program
Office, in collaboration with CDC, should foster a sustained dialogue re-
garding the best methods for estimating the societal value of new vac-
cines and for achieving a balance between access and innovation through
vaccine financing strategies.
OCR for page 204
204
FINANCING VACCINES IN THE 21ST CENTURY
The committee recommends that the National Vaccine Program Office
convene a series of regional and national meetings on vaccine finance as
part of the implementation process. These meetings should highlight ar-
eas of administrative uncertainty (such as the treatment of therapeutic
vaccines or the handling of copayments under an insurance mandate for
vaccines) and methodological challenges (such as the treatment of labor
market activity in the assessment of social value), as well as identify strat-
egies that can inform the implementation of the recommended vaccine
mandate, subsidy, and voucher system. The meetings should include rep-
resentation from all sectors affected by the proposed shifts in policies and
practices: public health agencies, health insurers (both public and private),
health care providers, employers, industry, and consumers.
Implementation Plan. The deliberations convened by the National
Vaccine Program Office could examine more fully the administrative com-
plexity of individual components of the committee's recommendations
and explore strategies that could help reduce areas of uncertainty or po-
tential unintended consequences. These deliberations should address how
the proposed arrangements might be implemented through a staged roll-
out that would be informed by further data and analysis. Topics to be
addressed within these discussions include the following:
What populations should be included in the vaccine payment plan ? The fed-
eral vaccine payment plan is envisioned primarily as a means of address-
ing the immunization needs of young children, older adults, and high-
risk adults between the ages of 18 and 65. The inclusion of other
populations such as all adolescents (under age 21) and all adults, re-
gardless of their health condition should be considered as well. The ini-
tial purpose of the expanded coverage is to target public finance toward
those who are currently underserved. A second goal, which supports the
proposal for universal coverage of all children and adults, is to reduce the
current fragmentation in vaccine coverage that leads to gaps and admin-
istrative burdens in determining eligibility and to foster efficiency in pro-
viding access to vaccines that are delivered primarily in private health
care settings. The means by which vaccines would be delivered to and
reimbursed for different groups might differ by age, employment circum-
stances, and access to health care services.
How would the insurance mandate and subsidy system operate? The insur-
ance mandate would apply to all public and private insurers, including
Medicaid, SCHIP, Medicare, and other public insurance (such as
CHAMPUS) and public health programs (such as that of the Indian Health
Service), as well as both state-regulated insurance plans and self-funded
employer plans (which are exempt from state regulation under the Em-
ployee Retirement Income Security Act [ERISA]~. The mandate would
OCR for page 205
RECOMMENDATIONS
205
extend to all insured persons within these health plans. The voucher sys-
tem would provide access to vaccines for all uninsured people in these
categories. For most public programs, current program funding for vac-
cine purchases and vaccine administration would be replaced by the vac-
cine payment system dollars. For example, vaccines administered through
Medicaid and SCHIP would no longer be funded through those programs'
federal-state matching funds but through the new centralized vaccine
system. In contrast, Medicare would be included in the mandate but
would pay for immunizations through its own program funds for pur-
poses of administrative efficiency.
How should societal value be calculated? The committee defines the soci-
etal value of a vaccine as its total benefits, including both the private ben-
efits to the person receiving it and the benefits to others. Using this ap-
proach, a monetary value is assigned to all benefits associated with a new
vaccine that can be determined and measured (for example, future medi-
cal costs that are averted, as well as additional life-years and enhanced
quality of life). The sum of these values represents the vaccine's societal
benefit. As noted above in the discussion of disadvantages, this calcula-
tion involves certain technical challenges. Developing a consistent meth-
odology and making assumptions explicit for all vaccines would be of
value in the decision-making process not only for vaccines but in other
spheres of health care as well.
The committee recognizes that the subsidy amount for vaccines would
be sensitive to key assumptions about what should be included in societal
benefit calculations. Cost-effectiveness analyses (CEAs) and cost-benefit
analyses (CBAs) have been conducted on vaccines and in other areas of
medicine for decades, utilizing a range of methodologies. The costs and
benefits included in these studies, and the methodologies for measuring
them and incorporating them into the analyses, vary widely from study
to study and involve some fundamental disagreements about what should
and should not be included.
In 1993, a nonfederal panel of experts in CEA and CBA the Panel on
Cost-Effectiveness in Health and Medicine was convened by the U.S.
Public Health Service to consider issues related to the definition and mea-
surement of costs, benefits, and levels of effectiveness in CEA and CBA
studies. The panel's report, which was released in 1996 (Gold et al., 1996),
enumerates a wide range of issues on which disagreements exist regard-
ing the design of these studies. The list of issues on which further consen-
sus needs to be achieved includes the following: Should costs include only
health care costs for the drug and "related" medical services? Should costs
include all changes in subsequent medical costs, including the additional
health care costs of patients who will now live longer? Should they in-
clude future consumption of any good or service? If so, should future
OCR for page 206
206
FINANCING VACCINES IN THE 21ST CENTURY
productivity or work effort be netted out of that amount? Which time and
labor costs to patients and employers should be included time spent
seeking care, absenteeism, withdrawal from the labor force due to the
employee's own health or the need to address problems of family mem-
bers? Should loss of productivity of coworkers due to team efforts, fric-
tion costs associated with temporary substitution of workers with less
firm- and task-specific skills, and shifts in on-thejob productivity be in-
cluded? If such time or labor market effects are included, which wage
rates should be used? Should market wages be adjusted for gender, racial,
and ethnic disparities? How should time costs be valued for children, the
disabled, or the retired, who have no wage to use as a benchmark? This is
only a partial list of the issues raised by the panel.
The mandate and subsidy approach recommended by the committee
requires that benefits and costs be calculated to determine the total soci-
etal benefit, which becomes the basis for a monetary subsidy. To establish
vaccine subsidy amounts in a consistent manner, it is essential that a stan-
dard methodology for measuring costs and benefits be established and
followed. Currently, every CEA or CBA study incorporates assumptions,
either implicitly or explicitly, regarding each of these issues. While con-
sistency within the literature may be increasing, there is still substantial
variation in the assumptions applied. The Panel on Cost-Effectiveness in
Health and Medicine established the notion that each analysis should for-
mulate a "reference case" using a common set of assumptions on some of
these key issues, but the panel stopped short of recommending what the
standard assumptions should be. To establish a consistent approach to
the determination of societal benefit across the range of current and fu-
ture vaccines, these assumptions will have to be made and be applied
consistently.
The committee envisions that ACIP or some other independent body,
or an office within CDC, would make these determinations, with expert
guidance from leading researchers in the field of CEA and CBA. Some of
these decisions may be controversial, such as the methodologies used to
assign monetary value to life-years or improvements in quality of life,
especially among different age or disability groups, and differences be-
tween the social and individual valuations of preventive versus critical
care. Decisions regarding the methodologies that should be employed are
too technical for this committee to have addressed them in this report. But
the committee does suggest that in resolving these issues, the determin-
ing body strongly weight current accepted practice among leading, main-
stream practitioners in the field of medical CEA and CBA, rather than rely
on novel approaches and measurement methodologies. In addition, rec-
ognizing that the field is evolving, this body should consider changes in
assumptions, the inclusion of additional economic variables, and changes
OCR for page 207
RECOMMENDATIONS
207
in measurement methodologies over time. As changes in the standard
methodology were adopted, however, they would have to be incorpo-
rated retroactively into all studies to maintain consistency across all vac-
cines.
How would the calculated societal benefit be used to determine the subsidy
amount? For not-yet-licensed vaccines, the creation of a predetermined
subsidy is intended to be an incentive to stimulate private-sector invest-
ment in vaccine development. Determining the amount of the subsidy
would require a calculation of the societal benefit of each future vaccine,
but the value of the subsidy would not necessarily equal the full value of
the societal benefit. While the subsidy should not exceed the societal value
of the vaccine product, it should also not be so low that it fails to serve as
an adequate incentive for research and development. Different ap-
proaches might be considered, such as adopting a fixed standard (for ex-
ample, 90 percent of the societal value) or limiting the range of new vac-
cine prices to some multiple of current prices.
How would the subsidy for current vaccines be determined ? For current or
newly licensed vaccines, the subsidy calculation would require consider-
ation of both the societal value of the vaccine product and recent market
prices. Some vaccines might receive a subsidy significantly higher than
current prices if judged to be undervalued in terms of their societal ben-
efit. Adjustments in the value of the subsidy might also be warranted to
account for inflation, as well as changes in the costs of production or regu-
latory compliance.
Who would administer the subsidy and voucher system? The vaccine pay-
ment system is designed to serve multiple objectives: to address the vac-
cine needs of vulnerable populations, to assure a reliable supply of cur-
rent and future vaccines by diversifying the vaccine purchasing market,
and to relieve clinicians of the administrative burden of determining indi-
vidual eligibility for vaccines. Ideally, one federal agency within DHHS
would be responsible for administering both the subsidy and the voucher
system, as well as regulating compliance with the insurance mandate for
vaccine coverage. Certain responsibilities might be delegated to state
agencies (in such areas as insurance regulation and administration of the
voucher plan), but a central coordinating strategy would be required to
assure consistent eligibility criteria and practices throughout the states.
How would the proposed mandate treat deductibles and copayments ? While
many states have mandated first-dollar coverage for vaccines, immuniza-
tion costs might apply toward the general deductible that is customary
practice for health plans. While many current vaccines are inexpensive,
significant price increases can be expected in the future. Cost sharing
could encourage consumers to shop for efficient providers and help con-
trol inflationary pressures; however, it could adversely affect immuniza-
OCR for page 208
208
FINANCING VACCINES IN THE 21ST CENTURY
lion rates should financial factors become burdensome for the consumer.
The extent to which cost sharing should be included in the vaccine pay-
ment plan would require further consideration in the implementation pro-
cess.
Evaluation Plan. The positive and negative effects of replacing cur-
rent safety net programs with the proposed government-funded mandate
cannot be predicted with any degree of certainty. The VFC entitlement
and Section 317 vaccine purchase program have been productive tools in
improving immunization levels within the public sector. These programs
have a history of strong bipartisan support and effective delivery of vac-
cines for disadvantaged populations, especially during difficult fiscal
times, but are associated with disruptions in supply and a decrease in the
number of vaccine manufacturers. Similarly, state-supported vaccine pur-
chase programs are often the foundation for safety net immunization ef-
forts in certain jurisdictions. Strategies need to be developed to assure
that the payment system advocated here will at least sustain, and ideally
improve, current immunization rates among disadvantaged populations.
Given the uncertainties associated with the introduction of a new vaccine
payment system, an evaluation study should be designed as part of the
system's implementation.
In addition, the committee recommends that CDC organize an evalu-
ation study 5 years following implementation to inform the new vaccine
mandate, subsidy, and voucher system. Evaluation criteria should include
the system's effects on government expenditures, access to vaccines within
disadvantaged populations, and innovation within the vaccine industry.
Its findings would form the basis for midcourse corrections in program
design. Specifically, this study should include an analysis of the impact of
the mandate and subsidy in two distinct areas: access to vaccines and the
availability of the vaccine supply.
In the first area, data should be gathered on how the payment system
affects the delivery of vaccines to selected population groups (insured,
uninsured, and underinsured), age cohorts (young children and high-risk
adults), and geographic settings (rural and urban), possibly through dem-
onstration studies aimed at identifying key challenges involved in the
implementation process in selected states. The costs of implementation,
outreach, education, reimbursement, and oversight should be measured
to determine how to gain greater efficiencies in administering the pro-
gram.
In the second area, the impact of the diversified market and predeter-
mined subsidy plan should be examined in light of their relationship to
OCR for page 209
RECOMMENDATIONS
209
private investments in the production and licensing of new vaccine prod-
ucts. The evaluation study should consider the assumptions that guide
the calculations of societal benefit, as well as other data that influence the
level of vaccine subsidy and voucher payments.
Demonstration projects are often used to test a new approach prior to
full implementation. In this case, however, it would be difficult or impos-
sible to conduct a demonstration that could address a change in the struc-
ture of the national vaccine market, which is a central feature of the
committee's proposal. Major programs are often implemented without
empirical evidence indicating that they will succeed (as was indeed the
case with VFC, Medicare, and Medicaid); rather, to the extent that such
evidence is available, it typically only supports the need for the program.
Research Agenda. CDC should develop an ongoing research pro-
gram to examine interactions among vaccine finance strategies, immuni-
zation rates in the public and private health sectors, and the pace of inno-
vation in the vaccine industry. Addressing many of the issues raised in
this report will require further understanding of the ways in which basic
market forces interact with access to and the delivery of vaccines to chil-
dren, adolescents, and adults. Limited data are available to support rigor-
ous examination of such empirical questions as the relationship of insur-
ance benefits to immunization status. More funding is needed to support
research studies that can monitor the extent to which pricing, supply,
mandates, and other health policy and health finance factors influence the
performance and outcomes of immunization efforts. Suggested topics for
an initial set of research studies include the following:
· The numbers and characteristics of children and adults having pub-
lic or private insurance benefits that include immunization and the types
of restrictions on their immunization benefits.
· The impact of insurance status (both public and private) and cost-
sharing arrangements on the timing and setting of vaccine administration
and immunization status.
· The impact of alternative vaccine payment arrangements on clini-
cian behavior and referral rates for immunization.
· The effect of full or partial subsidies on the supply and delivery of
childhood and adult vaccines.
· The relationship between vaccine prices and supplier investments
in research and development.
· The relationship between U.S. and global vaccine production, sup-
ply, regulation, and prices.
OCR for page 210
210
FINANCING VACCINES IN THE 21ST CENTURY
FINAL OBSERVATIONS
The findings, alternative strategies, and recommendations set forth in
this report provide a strategic blueprint to guide the nation's public and
private health sectors in adapting to foreseeable changes in vaccine devel-
opment in the decades ahead. The public and private partnership that
supports the immunization of children and adults in the United States
requires vigilance and flexibility in assuring that the social benefits of vac-
cines will continue to be available to all, regardless of ability to pay or
health care setting. Assuring access and sustaining incentives that con-
tribute to the availability of safe and effective vaccines are the twin goals
that must guide vaccine finance strategies in the 21st century.
Representative terms from entire chapter:
health plans
