BOX 5 The Economics of Vaccine Manufacturing

  • Three cost categories: variable, batch fixed, site fixed

  • Fixed-cost categories represent about 85 percent of manufacturing expense

  • Marginal cost per dose of producing additional vaccine is significantly lower than the full cost per dose of lower production volume

  • UNICEF purchases cover suppliers’ fully marginal and marginal production costs

SOURCE: Adapted from summary of Mercer study of commercial vaccinesupply, UNICEF, 1994.

some 525 million doses of EPI vaccines each year, equal to about 15 percent of the worldwide sales of these products. The fund is paying more per dose for these vaccines now than in the past, but this is due mainly to the decline in value of the U.S. dollar. In fact, over the last decade, the prices of vaccines purchased by UNICEF have remained relatively stable. Worldwide, the total production of EPI vaccines has been increasing at a steady 7 percent per annum; however, the volume of UNICEF-purchased EPI vaccines has been declining since 1990, primarily in response to rising local production of these vaccines. According to Mercer Management Consulting, local production has risen at an annual rate of 10 percent over the last 10 years. Indigenous production facilities, including many in the developing world, have become major sources of vaccine in the world. For instance, India and China together account for more than two-thirds of all local production of EPI vaccines.

An additional factor altering the landscape of the global vaccine market is the move toward self-sufficiency. About 70 percent of EPI vaccines now are purchased by the nations that use them. Countries buying their own vaccine may be motivated by any number of factors, including national pride and the desire for an inexpensive, secure supply of vaccine. Part of this trend is the result of the Vaccine Independence Initiative. Launched by the UNICEF and the U.S. Agency for International Development in 1992, the initiative is a revolving fund that helps countries purchase childhood vaccines using local currency. UNICEF then uses these monies to administer its programs in the purchasing country. The



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