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2
Origins and Rationale of
Immunization Policy
The national immunization system is the culmination of public health
legislation and traditions dating to the early 1800s, which include the par-
ticipation of state and federal governments as well as the private sector.
The immunization system today benefits from substantial government
support, including federal support for basic research and development
(R&D) through the National Institutes of Health (NIH); federal and state
funding for public health outreach, infrastructure development, and vac-
cine purchase; and regulation of the quality of vaccines through the Food
and Drug Administration (FDA) (see Table 2-1~.
Government also supports vaccination in some special ways. For ex-
ample, state governments mandate and enforce immunization through
school entry requirements, and a few WIC agencies ask parents to pick up
food stamps more frequently until their children are up to date on immu-
nizations. With the passage of the Vaccines for Children (VFC) program
in 1993, Congress enacted a major new federal health care entitlement.
This program guarantees federally purchased vaccines to more than 10
million children nationwide (Wood, 2003~. More than 14 states now have
universal immunization programs that provide all or most vaccines to
every child in the state, regardless of insurance coverage (Freed and
Cowan, 2002~. (State financing systems are listed in Table 3-3 in Chapter 3.)
iEligible populations include children in Medicaid, uninsured children aged 18 and un-
der, Native Americans and Alaska Natives, and all children vaccinated in federally qualified
health centers (FQHCs).
39
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FINANCING VACCINES IN THE 21ST CENTURY
TABLE 2-1 Government Roles in Immunization
Government Role Functions Agency/Program
Supporting R&D
Regulating safety
Promoting, monitoring,
and enforcing
. . ..
mmumzarlon
Purchasing vaccines
Promoting and
regulating adequate
vaccine supply
Basic research programs,
support of clinical trials
Vaccine approval
Safety monitoring
Recommending the
vaccine schedule
Monitoring
Enforcement
Direct federal purchase
Grants to states
State purchase
Stockpiles
Coordination
Protecting suppliers from
liability
Government production
NIH, National Institute for
Allergy and Infectious
Disease (NIAID)
FDA Center for Biologics
Evaluation and Research
(CBER)
CDC Vaccine Adverse Events
Reporting System (VAERS),
CDC Vaccine Safety
DataLink
Advisory Committee on
Immunization Practices
(ACIP)
CDC disease surveillance,
CDC National
Immunization Survey (NIS),
CDC grantee reporting and
evaluation process,
registries
State school entry laws, state
nursing home requirements,
state child day care
requirements, travel
requirements
VFC, Veterans
Administration
Department of Defense/
CHAMPUS
CDC Section 317 grants to
states
State employee coverage,
universal purchase
programs, other state
purchases
National stockpile program
Linking producers, state
health officials, providers,
CDC
National Vaccine Injury
Compensation Fund
Massachusetts vaccine
production program
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ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
TABLE 2-1 Continued
41
Government Role Functions
Agency/Program
Infrastructure Direct investment in and States, CDC Section 317
development
Regulating insurance
coverage
operation of public health grants to states
delivery systems
Setting reimbursement
rates for vaccines and
administration fees
Supporting registry
development
Supporting state universal
purchase programs
Establishing physician
participation in
Medicaid/VFC
Medicare Resource-Based
Relative Value Scale
(RBRVS) rates, state
Medicaid programs
CDC Section 317 program
CDC
CDC
VFC maintenance-of-effort CDC/states
law
State insurance requirements States
The federal government uses its substantial purchasing power to negotiate
discounted vaccine prices for these federal and state programs. Between
VFC, the Veterans Administration, the Department of Defense, and state
governments, the public sector purchases the majority of vaccines sold in
the United States.
This deep public involvement in the national immunization system is
based in part on the public-good properties and spillover effects that char-
acterize vaccines (see Box 2-1~. Because of these properties, the enormous
benefits of vaccines are likely to be undervalued by society, and both the
rates of immunization by the public sector and the levels of private in-
vestment in new vaccine R&D are likely to be lower than desirable with-
out additional incentives. At the same time, these properties of vaccines
make the case for public support of immunization very strong. This sup-
port is reflected in federal and state programs designed to encourage im-
munization, such as VFC and CDC Section 317 grants to states. It also
includes inducements to industry, through the patent system, to invest in
production and research. Government policy regarding stimulation of
vaccine R&D, however, is inconsistent. While the government encourages
such investment through the patent system, it also discourages that same
investment by using its purchasing leverage, its legislative power, and
the imposition of price caps to secure substantial price discounts for exist-
. .
1ng vaccines.
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FINANCING VACCINES IN THE 21ST CENTURY
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ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
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FINANCING VACCINES IN THE 21ST CENTURY
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ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
45
The compelling public interest in a strong and effective vaccine sys-
tem has been well served by the national immunization system. But the
assumptions and traditions guiding immunization policy have changed,
and the worsening economic landscape has put additional pressure on
the system. It is unlikely that this system can effectively serve the public
in the future without undergoing substantial change. As context for the
remainder of the report, this chapter examines the legislative origins of
the current system, explains the shared federal and state responsibility for
financing of vaccine purchases and the shared public and private respon-
sibility for immunization coverage, describes public and private immuni-
zation delivery systems, reviews private vaccine production, and summa-
rizes the process used for setting national vaccine policy.
LEGISLATIVE HISTORY OF VACCINE POLICY
The historical roots of the current U.S. immunization system reside in
a federal-state-private-sector partnership that has evolved through a se-
ries of responses to infectious disease crises.2 Although the scale of effort
has expanded significantly over the past 50 years, the federal
government's role remained relatively unchanged from the mid-1950s to
the early 1990s.
The earliest federal legislation pertaining to vaccines was the Virus
Serums and Toxins Act, passed by Congress in 1902 "to regulate the sale
of viruses, serums, toxins, and analogues productions..." in interstate and
foreign commerce. The laboratory of the Public Health Service was subse-
quently authorized to conduct inspections and to ensure the safety of vac-
cine products. The regulatory authority for both of these functions was
eventually transferred to NIH in 1948 and in 1972 was transferred again
to FDA.
In addition to its regulatory and licensing role, the federal govern-
ment has provided financial support to state and local health departments
for maternal and child health programs since the 1920s (Orenstein et al.,
1999~. These programs, funded by block grants authorized under Title V
of the Social Security Act, represent a federal-state partnership that has
been in place for more than 60 years. Title V embedded immunization
services into a comprehensive safety net system for children and their
2Much of the descriptive information in this section is taken from Johnson et al. (2000~. See
also Fee and Brown (2002) and Lumpkin and Richards (2002) for discussions of the history
and future of public health. Orenstein et al. (1999) provide a good overview of the immuni-
zation system.
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FINANCING VACCINES IN THE 21ST CENTURY
mothers. When the polio vaccine was licensed, Congress quickly passed
the Poliomyelitis Immunization Assistance Act of 1955 to expedite the
state purchase of vaccine for susceptible children and pregnant women
by circumventing the ponderous Maternal and Child Health grant pro-
cess. A total of $53.6 million was appropriated in 1956 and 1957 for state
purchase of vaccines (Freeman and Robbins, 1991~.
The successful effort to halt polio epidemics stimulated interest in
identifying opportunities to prevent other childhood diseases. In the early
1960s, the Kennedy Administration launched the Immunization Assis-
tance Act of 1962, which provided federal support to state and local im-
munization programs using oral polio vaccines, as well as diphtheria, per-
tussis, and tetanus (DPT) vaccines. The legislation established a federal
presence in the financing of childhood vaccines but not direct purchase.
Beginning in 1965, substantial changes occurred in federal immuniza-
tion policy that continued over the next decade. The first bulk purchases
of vaccines under a federal contract occurred in fiscal year 1966, when the
federal government purchased polio and measles vaccines under consoli-
dated contracts and provided them in lieu of financial grants to state and
local public health agencies. The purpose of this policy change was to
offset the costs incurred by state and local public health agencies, since
the bulk purchase of vaccines under a federal contract led to substantial
price reductions. Additional vaccines, including the rubella and combined
measles-mumps-rubella (MMR) vaccines, were added to the federal vac-
cine contract between 1969 and 1975. Even as late as 1982, however, diph-
theria and tetanus toxoids and whole-cell pertussis (DTP) vaccines were
not being purchased under the federal contract because their prices were
low, and limited savings could be achieved by bulk purchases. In addi-
tion, Congress enacted Section 317 of the Public Health Service Act in
1972 to provide grants to state and local governments for immunization
infrastructure development and vaccine purchases.
By the late 1980s, childhood immunization rates had achieved record
highs. Nevertheless, measles outbreaks occurred in several parts of the
United States during 1989 and 1990, catching public health officials off
guard. The outbreaks resulted in over 55,000 cases of measles, 130 deaths,
11,000 hospitalizations and 44,000 hospital days, and an estimated $150
million in direct medical costs (Shalala, 1993~. The traditional shared fed-
eral-state responsibility for infectious disease control was challenged by
the variability of state efforts and the inability of states to marshal suffi-
cient funding to respond to the outbreaks. Increased federal funds be-
came available to fill the gaps, and the Department of Health and Human
Services (DHHS) undertook a study of federal and state acquisition and
reimbursement policies for vaccines (Kelly et al., 1993~. The study identi-
fied systematic barriers to access as the key limiting factor for immuniza-
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ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
47
lion rates and suggested the elimination of fragmentation and conflicting
rules among government programs.
In 1994, the VFC program was launched as part of national health
care reform efforts during the Clinton Administration. The centerpiece of
the program is an entitlement that provides free vaccines to children aged
18 and younger who are uninsured, Alaska Native or Native American,
or who eligible for Medicaid, or receive their vaccines in a federally quali-
fied health center (FQHC). A key goal of the program is to enable children
receiving public assistance to be immunized within their medical home
rather than in a public health clinic. The result has been a massive shift of
safety net immunizations from approximately 3,300 public clinics to well
over 40,000 private providers. This program has also expanded the public
share of vaccine purchases from roughly 35 percent to 52-55 percent of all
childhood vaccines (Orenstein, 2002a). Under the program, CDC negoti-
ates the prices of vaccines, which are then ordered by the states at the
federal contract price.
Today the federal government is active in virtually every aspect of
immunization from basic research to the purchase of vaccines (Schwartz
and Orenstein, 2001~. The National Institute of Allergy and Infectious Dis-
eases (NIAID) within NIH supports basic research and clinical trials.
Safety and efficacy are regulated by FDA's Center for Biologics Evalua-
tion and Research (CBER), which reviews new vaccine applications; re-
views clinical trials; and licenses new vaccines, production facilities, and
each lot of vaccine that is produced. Postrelease safety is monitored
through the CDC Vaccine Adverse Event Reporting System (VAERS) and
the Vaccine Safety DataLink (VSD). VSD is a CDC program in which eight
health maintenance organizations (HMOs) across the United States com-
bine data on immunizations so that potential rare adverse events that may
be associated with some vaccines can be identified and evaluated.
CDC also monitors immunization rates through its annual National
Immunization Survey, conducts ongoing disease surveillance, and moni-
tors state and metropolitan grantees. CDC negotiates federal contracts for
the public purchase of vaccines for the VFC program and state purchase,
which account for more than half of childhood vaccines sold in the United
States. CDC also determines Section 317 funding to state grantees, main-
tains the national vaccine stockpile, and supports state immunization pro-
gram offices.
SHARED FEDERAL AND STATE
RESPONSIBILITY FOR FINANCING
Despite the deep federal involvement in immunization, states and lo-
calities retain primary responsibility for providing public health services,
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FINANCING VACCINES IN THE 21ST CENTURY
including the maintenance of a public health infrastructure. States develop
and fund a public vaccine delivery system including facilities, equip-
ment, drugs and supplies, health professionals, and administration that
provides a broad safety net for the underserved. States are largely respon-
sible for enforcement of immunization through school entry, nursing
home, and day care laws. Many states maintain or are developing a state-
wide registry to track both immunization status and eligibility. States also
enforce mandates for state-regulated health insurance plans, although this
responsibility excludes self-insured employer plans that are exempt un-
der the Employee Retirement and Income Security Act (ERISA). In addi-
tion, states conduct continuous outbreak surveillance, maintain registries,
pay providers, carry out planning activities, forecast vaccine demand, and
perform public outreach.
States rely heavily on federal assistance to maintain this delivery in-
frastructure. The Section 317 program provides grants to states for both
vaccine purchase and infrastructure. The national immunization system
has historically been based on an assumption of shared federal and state
responsibility for immunization financing. Over the last decade, however,
the state role in financing immunization has waned. Today, fewer than
half of the states contribute more than 10 percent of government vaccine
expenditures, and only 10 states contribute more than half (Federal Funds
Information for States, 2002; Freed and Cowan, 2002~. The erosion of the
state role accelerated with the passage of the VFC program. VFC was
intended to enhance, but not supplant, state funding for immunization;
between the introduction of VFC in 1994 and 2002, however, state spend-
ing on immunization lagged well behind federal spending. States contrib-
uted an estimated $340 million to immunization in fiscal year 2000, of
which $109 million was for vaccine purchase (IOM, 2000a).
VFC funding has increased substantially. Many states have allowed
these new federal dollars to partially replace (or crowd out) state funds in
meeting the state's vaccine needs (Academy for Health Services Research
and Health Policy [AHSRHP], 2001~. This crowd-out is a natural result of
the structure of VFC and state funding streams: as a federal entitlement
program, VFC has assured funding, whereas state funding depends upon
the discretionary legislative process. The current fiscal crisis in most states
exacerbates the pressure for crowd-out.
Despite the general trend toward diminished state support of vaccine
purchase, some states have increased their immunization budgets. Start-
ing in the early 1990s, a handful of states established universal purchase
programs that use state funds to purchase vaccines for all citizens, regard-
less of insurance status. Fourteen states now have such programs, al-
though several have excluded the most expensive vaccines. Given the cur-
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ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
49
rent economic outlook for many states, the expansion of universal pur-
chase programs is unlikely (National Health Policy Forum, 2001~.
The long-standing assumption that the federal government and the
states will share responsibility for financing of vaccine purchases appears
to be challenged, then, by the trends of the past decade. An erosion of
shared federal and state responsibility has two potential downsides. First,
it reduces the ability of federal and state agencies to distribute the burden
of increasing vaccine expenditures and respond to sudden needs or bud-
get shortfalls. Second, the key historical assumption that public health is a
state and local activity derives from the need for flexibility and local
knowledge and special conditions that defy a one-size-fits-all federal ap-
proach. This is particularly true for vaccines because of local conditions
that could foster outbreaks, the need for coordinated and interdiscipli-
nary community responses, and concerns regarding public acceptance and
enforcement. To the extent that federal vaccine purchasing could limit
local flexibility, it might be considered detrimental to public health. In
practice, however, increasingly federalized financing for vaccines may
have enabled states to focus their resources away from vaccine purchase
and toward infrastructure, surveillance, and targeted immunization cam-
paigns. States continue to perform the public health and administrative
functions associated with immunization (Freed and Cowan, 2002~.
SHARED PUBLIC AND PRIVATE
RESPONSIBILITY FOR COVERAGE
Prior to the last several decades, employer-based private insurance
provided limited coverage for preventive services, including immuniza-
tion. Until recently, the public sector played a highly active role in immu-
nization, particularly during the early polio vaccination campaign of the
1950s. Coverage of preventive services increased, however, with the
growth of HMOs, which have traditionally emphasized such services.
Eventually, the private sector assumed responsibility for immunizing
more than half of the population, and the public role became focused al-
most exclusively on the safety net function that is, providing basic health
services for underserved and disadvantaged populations. The introduc-
tion of the VFC program in 1994 did not fundamentally change this rela-
tionship. In fact, a key assumption of the VFC program was that the pri-
vate sector would continue to share the burden more or less equally with
the public sector, and the law included a maintenance-of-effort provision
that required private insurers to maintain the childhood immunization
benefits they had in place before VFC. In addition, 27 states have imposed
separate immunization coverage mandates on state-regulated insurance
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FINANCING VACCINES IN THE 21ST CENTURY
source of payment. In addition, problems in the timing of vaccine release
and VFC contract negotiations may leave providers with gaps in invento-
ries that result in missed opportunities and high costs associated with
patient recall programs. Also, since VFC does not cover clinician fees for
administering vaccines, those fees remain even more fragmented than
vaccine purchase. These issues contribute to a high rate of referrals of
patients to the public sector, even with VFC (Zimmerman et al., 1997~.
PRIVATE VACCINE PRODUCTION
Government is not merely a purchaser of vaccines; it works closely
with the vaccine industry in several ways. The government supports ba-
sic vaccine research through NIH, enforces patent laws that influence the
profitability of the industry, regulates the production of vaccines through
the FDA, recommends vaccines for the childhood and adult schedules
(thereby determining market size and funding streams), and negotiates
contracts for more than half of the childhood vaccines purchased in the
United States. Massachusetts and Michigan have even engaged in vaccine
production. In Box 2-2, public-private collaboration in the supply of vac-
cines is illustrated through the history of the DTaP vaccine.
The industry-government relationship has for the most part been
highly collaborative and constructive, despite normal tensions between a
regulator and a regulated entity. Examples of issues that have created
tensions include the need for protection from lawsuits over vaccine in-
jury, which resulted in the adoption of the National Vaccine Injury Com-
pensation Program; the removal of thimerosal (a mercury-based preser-
vative) from recommended vaccines; the passage of VFC, which resulted
in a larger public share of vaccine purchases and lower average prices; the
introduction of the FDA's Team Biologics regulatory regime, which in-
creased the burden of regulatory compliance for producers; the higher
industry pricing model for new vaccines, such as varicella and pneumo-
coccal conjugate; unprecedented vaccine shortages; and the increasing
burden of proof required for vaccine approval and entry into the U.S.
market.
While industry-government conflicts are typically resolved amicably,
the changing landscape could exacerbate future conflicts. Given the lim-
ited number of vaccine producers left in the market and the risk of even
further exit (see Chapter 5), the government has little leverage or room for
negotiation on key issues. The increasing number of recommended vac-
cines and higher prices of new vaccines, along with the changing cost-
benefit profiles of newer and combination vaccines, tend to elevate eco-
nomic considerations and politicize vaccine policy. Most important, these
issues increasingly involve government policies that are at cross-purposes.
For example, a key approach for alleviating the fragility of supply-
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ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
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FINANCING VACCINES IN THE 21ST CENTURY
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ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
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FINANCING VACCINES IN THE 21ST CENTURY
reducing barriers to entry for foreign producers conflicts with desires to
protect the quality of the vaccine supply and to assure safety for the
diverse U.S. population.
Despite some recent interest in the development of government pro-
duction or government-owned, contract-operated production (often re-
ferred to as "GoCo") of vaccines (IOM, 2001; NVAC, 2003), a broad con-
sensus has emerged that only a thriving private vaccine industry has the
production and R&D capacity to meet the nation's growing vaccine needs
(IOM, 2000a). A diminished role for private industry could result in peri-
odic shortages, total loss of supply of certain vaccines, price instability,
and decreased investment in R&D.
' 1
THE SETTING OF NATIONAL VACCINE POLICY
The vaccine enterprise has experienced unprecedented turmoil and
change in areas ranging from pricing and shortages to globalization and
technological developments. Thus, the validity of key assumptions that
have guided national vaccine policy to date is eroding. Vaccine policy has
been essentially static, operating as if these changes have not occurred.
New policies and strategies are necessary to guide the national immuni-
zation effort over the coming decades. How will this guidance emerge,
and is the current planning apparatus up to the task?
Planning authority for vaccine policy resides in numerous agencies
and independent bodies that have separate areas of responsibility. Con-
flicts can emerge among the objectives, plans, and regulatory decisions of
these different entities. Looking to the future, questions of vaccine policy
include which vaccines will be developed and produced, how safe and
effective they will be, who should receive them, how much they are likely
to be worth, how much they will cost, who should pay for them, and how
they will be supplied to the public. Such questions are addressed in an
uncoordinated fashion by multiple agencies with very different perspec-
tives:
· National Institute of Allergy and Infectious Diseases (NIAID). NIAID is
the NIH institute responsible for establishing basic research funding pri-
orities for immunization, which in turn influence the development of fu-
ture vaccines. Private industry also plays an independent role in vaccine
development, bringing vaccines from basic research to commercial devel-
opment according to its assessment of which vaccines represent the most
viable markets.
· Food and Drug Administration (FDA). The FDA influences which
vaccines come to market, the timing of releases of new vaccines, and the
competitive structure of the industry. Moreover, through its impact on
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ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
57
regulatory and production costs, the FDA indirectly influences prices and
company returns on investment, which affect vaccine supplies and inno-
vation. The FDA's broad regulatory influence hinges on two key policy
levers the standards it sets for efficacy and safety, and the manufactur-
ing and administrative costs of compliance.
· National Immunization Program (NIP). The NIP is the entity within
CDC responsible for developing and implementing public health policy
regarding vaccines. Its roles include negotiating federal vaccine contracts,
providing grants and assistance to states, conducting immunization sur-
veillance, studying vaccine safety, and coordinating public health pro-
grams nationally.
· Advisory Committee for Immunization Practices (ACIP). ACIP is an
advisory committee that determines which vaccines will be recommended
for inclusion in the schedule of recommended vaccines. The schedule in-
fluences the accepted national standards of care for immunization. In ad-
dition, ACIP determines which vaccines will be included in the VFC en-
titlement. ACIP recommendations resulted in a virtual doubling of federal
expenditures on vaccines (from $500 million to $1 billion) with the ap-
proval of the pneumococcal conjugate vaccine.
· National Vaccine Program Office (NVPO). NVPO is an office within
DHHS that conducts strategic planning for the NIP and provides liaison
with the major immunization stakeholders, including other federal agen-
cies, states and municipalities, providers, manufacturers, and consumers.
While charged with performing a centralized planning and coordination
role, NVPO has yet to demonstrate its ability to reconcile the competing
interests both within and outside the government, perhaps because of in-
adequate resources.
· National Vaccine Advisory Committee (NVAC). NVAC is an advisory
committee to NVPO on matters of research, availability, safety and effec-
tiveness, and public health associated with vaccines.
ACIP currently plays the pivotal role in this regulatory scheme, a role
that bridges the supply side of the market (the industry and the FDA,
which regulates it) and the demand side (the market for vaccines); the
government programs that pay for vaccines; and CDC, which negotiates
their prices and fosters public access (see Figure 2-1~.
ACIP not only makes recommendations for the use of vaccines by
children and adults but also determines whether a vaccine will be pro-
vided free to children through the VFC program. ACIP also has substan-
tial influence on sources of payment since it controls billions of federal
entitlement dollars. It is sometimes criticized for creating unfunded man-
dates to state and private insurers without sufficient consideration of the
consequences for these stakeholders (France, 2000~.
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SUPPLY
R&D
Production
Safety and Efficacy
Availability
Marketing and
Distribution
FINANCING VACCINES IN THE 21ST CENTURY
Advisory Committee
on Immunization
Practices
\ (ACIP)
/
FIGURE 2-1 Central role of ACIP in vaccine policy.
DEMAND
Public and Private
Purchasing
Providers
Payment Systems
Pricing
Access
The recommendation process begins with FDA approval for licensure
of a new vaccine product. ACIP then begins considering whether and
under what circumstances the vaccine should be recommended for use by
the public. The American Academy of Pediatrics (AAP), through its Com-
mittee on Infectious Diseases (also known as the Redbook Committee),
coordinates closely with ACIP in order to provide direction to the AAP
professional membership that is consistent with ACIP's recommenda-
tions. The American Academy of Family Physicians (AAFP) also coordi-
nates its recommendations with ACIP. The recommendations of both the
AAP and the AAFP become standards across the medical community.
ACIP is a 15-member panel of experts appointed to 4-year terms by
the DHHS Secretary (CDC, 2001a). Appointees must undergo a thorough
conflict and bias review to determine their eligibility. ACIP includes sci-
entific and medical experts in relevant fields of medicine and biology, as
well as a consumer representative. The committee also has 19 nonvoting
liaison members, who represent medical professional societies and other
key groups, and 8 ax-officio members representing other federal agencies.
Nonvoting members may participate in workgroup meetings, where a
great deal of the actual work of ACIP is conducted. They may also be
allowed to vote in specific cases designated by the ACIP executive secre-
tary, such as when conflicts of interest exclude voting members. The com-
mittee is staffed by CDC; the executive secretary, who coordinates the
committee, is a member of the CDC staff. ACIP holds three regular meet-
ings each year, plus meetings of emergency consultation workgroups
when necessary.
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ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
59
Issues considered by ACIP in making its recommendations include
safety, efficacy, cost-effectiveness, feasibility, and risk-benefit ratios. Back-
ground work leading to the committee's recommendations is conducted
by ad hoc workgroups, which can include voting and nonvoting mem-
bers and CDC staff. Consultants and vaccine company representatives
may provide data and technical assistance. The last step in the recommen-
dation process is approval by the CDC director and publication in CDC's
Morbidity and Mortality Weekly Report. ACIP reviews each recommenda-
tion at 5-year intervals to assess the need for changes. In addition to its
full recommendations, ACIP can make permissive recommendations in
the form of suggestions for the use of vaccines when the committee can-
not clearly define the group at risk for the disease the vaccine is designed
to prevent.
ACIP does more than simply make recommendations; it wields power
beyond its mission, design, or authority. By default, it plays a pivotal role
in vaccine policy by determining the market for vaccines, influencing
prices, and setting a benchmark of sorts for the cost-benefit threshold for
new vaccines. But this is a role for which ACIP may not be particularly
well suited because it is not structured to perform such a broad public
policy function. ACIP exhibits two principal limitations in this regard.
1. Lack of authority beyond CDC. ACIP is influential, but its statutory
reach is limited. For example, its planning horizon for new vaccines is
limited because it cannot anticipate the timing of FDA approvals. As soon
as a vaccine has been approved by FDA, however, a 90-day clock starts
ticking; and once it runs out, states are required to provide approved vac-
cines through Medicaid. In contrast, in the overall VFC program, vaccines
need be provided only once a federal contract price has been negotiated.
If ACIP is able to approve a new vaccine within this window and further
approve its inclusion in VFC, CDC must still negotiate a contract before
the vaccine will be covered by VFC. An expensive vaccine, such as pneu-
mococcal conjugate, can create a burden for states, which must purchase
the vaccine directly and must do so without benefit of the discounted
federal contract price. State legislative action may also be required to se-
cure additional funding for vaccines. If state funding is delayed, some
private providers may need to purchase the vaccine at high prices and
without assurance of compensation. In the case of pneumococcal conju-
gate vaccine, ACIP delayed publication of its recommendation until a
price could be negotiated with the manufacturer; as a result, states and
providers were financially responsible for vaccine purchases (Fairbrother
and Haidery, 2002~.
Private insurers may also face difficulties in paying for new vaccines
not included in their annual budgets or premium calculations. They may
choose to defer coverage until the next contract period or provide cover-
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FINANCING VACCINES IN THE 21ST CENTURY
age at a loss. Provider groups that are globally capitated by health plans
may face the same problem but with fewer resources to enable them to
provide the vaccines at a loss (IOM, 2003a).
For vaccines included in the VFC program, only a few state Medicaid
programs will reimburse private clinicians for the use of privately pur-
chased vaccine that is available under the federal contract, even in the
case of shortages when publicly purchased vaccine may not be available.
However, most Medicaid programs will reimburse clinicians for needed
vaccine for which no federal contract price exists (e.g., tetanus-diphteria,
adult pneumococcal, meningococcal), although others will not (Freed and
Cowan, 2002~.
To address these problems, AAP has recommended closer coordina-
tion of licensing, approval, and purchasing, with a target of 60 days after
licensure for establishment of public and private price. AAP has also rec-
ommended that the federal government provide emergency funds with
fixed annual appropriations to buy newly licensed vaccines for public pro-
grams in the interim between a recommendation by ACIP, AAP, and
AAFP and incorporation of the expenditures in the regular budget cycle.
Once ACIP has issued a new vaccine recommendation and the fed-
eral contract for that vaccine has been negotiated, states must begin pro-
viding the vaccine through the VFC program. States may want to provide
the newly recommended vaccine to non-VFC-eligible children for whom
they provide other recommended vaccines. Doing so is becoming increas-
ingly difficult, however, because of the high prices of recently recom-
mended vaccines (Freed and Cowan, 2002~.
The issuance of a new recommendation can be particularly problem-
atic financially if the recommendation is released (and the federal con-
tract negotiated) after federal and/or state funding decisions have already
been made. Even when recommendations are anticipated before funding
decisions have been made, these decisions are based on projections of
need and uptake, which may not be accurate. Several states have noted,
for example, that the annual federal funding decisions did not adequately
account for the rapid uptake of pneumococcal conjugate by providers in
the funding awards to states (Freed and Cowan, 2002~.
2. Needfor appropriate economic decision-making expertise, data, and crite-
ria. Studies on the cost-effectiveness of vaccines imply that vaccines rep-
resent one of the best investments in public health. But vaccines are not
inherently cost-beneficial; their cost-effectiveness depends on the price
charged Jacobs and Meyerhoff, 2001~. In the existing system, ACIP has
the responsibility for determining whether it is in the interests of the na-
tion to utilize and pay for a vaccine, based on its cost and benefit to soci-
ety. Cost-effectiveness is considered, but ACIP usually assesses the data
without advance knowledge of the federal contract price or the costs of
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ORIGINS AND RATIONALE OF IMMUNIZATION POLICY
61
production. In the case of pneumococcal conjugate vaccine, cost-effective-
ness studies reviewed by ACIP underestimated the actual price. In the
context of supply shortages, industry exit, and disincentives to innovate,
ACIP's limited consideration of cost may represent an overly narrow per-
spective. Furthermore, the composition of the committee infectious dis-
ease experts, physicians, and public health officials may be ill suited to
such economic analysis.
As a result, ACIP may be poorly equipped to deal with vaccines that
are likely to emerge in the future. Vaccines are increasingly being intro-
duced at higher prices. Also, there is a trend toward vaccines that target
conditions other than contagious diseases and thus do not possess the
traditional spillover effects characteristic of the majority of vaccines that
prevent highly contagious diseases. Some new vaccines may have less-
favorable cost-benefit profiles, and new combination vaccines may have
costs and benefits not captured in traditional cost-benefit analysis. For
example, lacobs and Meyerhoff (2001) argue that the ACIP decision on
pneumococcal conjugate vaccine did not meet conventional standards for
cost-effectiveness. Regardless of whether this assessment is correct, it sig-
nals a major change in thinking about vaccines that will likely require
new models of assessment and regulation.
FINDINGS
· Government is deeply involved in the immunization enterprise, a
role that reflects the public-good and spillover characteristics of vaccines.
· Government policy toward vaccine R&D is inconsistent: it both
promotes and discourages the development of new vaccines.
· While states continue to take principal responsibility for immuni-
zation infrastructure and delivery, it can no longer be assumed that they
will share responsibility for vaccine purchase with the federal govern-
ment.
· It cannot be assumed that private insurers will continue to share
responsibility for covering immunizations.
· The assumption of a stable supply of vaccines produced by a
healthy private sector can no longer be made.
· The current approaches to vaccine prioritization and immuniza-
tion system planning are inadequate, as currently structured, to deal with
the changing nature of vaccines and vaccine economics.
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Representative terms from entire chapter:
federal contract
