Financing Vaccines in the 21st Century Assuring Access and Availability (2004) / Chapter Skim
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5 Vaccine Supply
5 Vaccine Supply
Pages 107-144
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From page 107... ...
Nonetheless, the vaccine supply today is surprisingly fragile. lust how fragile it is was brought to national attention by severe vaccine shortages in 2001 and 2002, which affected 8 of the 11 routine childhood vaccines.
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From page 108... ...
The remainder of the market grew at an annual rate of only about 1 percent (Mercer Management Consulting, 2002~. In the United States, 72 percent of the growth in revenues in the early l990s resulted from the introduction of new vaccine products and 10 percent from the increase in the measles-mumps-rubella (MMR)
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From page 109... ...
European multinationals typically produce hundreds of millions of doses, while American companies produce tens of millions of doses (Mercer Management Consulting, 1995~. This disparity in volume has resulted in higher average production costs in the United States than in Europe.
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From page 110... ...
Bioport Corporation anthrax vaccine adsorbed cholera vaccine diphtheria and tetanus toxoids and pertussis vaccine adsorbed diphtheria and tetanus toxoids adsorbed diphtheria toxoid adsorbed haemophilus b conjugate vaccine haemophilus b conjugate vaccine haemophilus b conjugate vaccine and hepatitis B (recombinant) vaccine haemophilus B vaccine haemophilus vaccine hepatitis B vaccine hepatitis-A vaccine, inactivated hepatitis-B vaccine influenza virus vaccine influenza virus vaccine influenza virus vaccine measles and mumps virus vaccine live measles and rubella virus vaccine live measles virus vaccine live measles, mumps, and rubella .
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From page 111... ...
typhoid vaccine 1952 Merck & Co. varicella virus vaccine live 1995 Bioport Corporation (Michigan anthrax vaccine adsorbed 1970 Department of Public Health)
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From page 112... ...
vaccine Aventis (Aventis Pasteur) France diphtheria and tetanus toxoids and pertussis vaccine adsorbed 1978 Aventis (Aventis Pasteur)
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From page 113... ...
GlaxoSmithKline (Smith Kline Beecham Biologicals) France France France Japan tetanus toxoid tetanus toxoid adsorbed yellow fever vaccine acellular pertussis vaccine concentrate Japan Japanese encephalitis virus vacine inactivated Netherlands BCG vaccine South Korea hepatitis-B vaccine Switzerland tetanus toxoid adsorbed Switzerland typhoid vaccine live oral 1978 1978 1978 1991 1992 1989 1988 1970 1989 UK diphtheria and tetanus toxoids 1997 and acellular pertussis vaccine adsorbed GlaxoSmithKline (Smith UK hepatitis AInactivated and 2001 Kline Beecham Biologicals)
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From page 114... ...
Once a vaccine has been approved, the production process involves high fixed costs relative to variable costs. Fixed production costs, exclusive of up-front R&D and sales labor, represent 60 percent of total production costs for vaccines (Mercer Management Consulting, 2002~.
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From page 116... ...
The principal exceptions to this revenue picture relate to two fairly new vaccines varicella and pneumococcal conjugatewhich are priced higher than earlier vaccines. RESEARCH AND DEVELOPMENT In 2000, the leading global vaccine companies spent about $750 million on R&D (Mercer Management Consulting, 2002~.
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From page 117... ...
Vaccines in the pipeline, including recombinant vaccines for HIV, herpes simplex, diabetes, and infertility (see Box 5-2) , are increasingly complex (Mercer Management Consulting, 2002~.
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From page 118... ...
was founded in part to respond to the need for vaccines in developing countries. GAVI is also interested in improving technologies for administering vaccines in the difficult environments commonly found within developing countries.
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From page 119... ...
Push programs involve the use of public resources to support research, whereas pull programs reward the developer after a project has been successfully completed. The most important push strategy is funding of vaccine research by NIH, which is responsible for approximately one-third of all vaccine research funding (Arnould and DeBrock, 2002~.
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From page 120... ...
Further, as with pharmaceuticals, an increasingly stringent process for clinical trials and FDA approval can reduce the effective patent life of a vaccine product.3 The patent system also has economic limitations. 2Patents may sometimes be awarded for different vaccine products that are close substitutes, as is sometimes the case with pharmaceutical products.
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From page 121... ...
These declines have continued in recent years. By 1996, a total of eight firms and laboratories were producing recommended childhood vaccines for the U.S.
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From page 122... ...
What is more troubling is the effect of economic factors on the withdrawal of vaccine products that are viewed as unprofitable or yield low returns relative to the production of pharmaceutical products. In some cases, demand for older vaccines is not strong enough to warrant continued production.4 Another reason for exit arises when the costs of vaccine operation and regulatory compliance are too great to support more than one producer.
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From page 123... ...
tetanus toxoid influenza virus vaccine influeza virus vaccine diphtheria and tetanus toxoiuds and pertussis vaccine adsorbed 6-valent pneumococcal vaccine diphtheria and tetanus toxoids diphtheria and tetanus toxoids and pertussis vaccine adsorbed diphtheria and tetanus toxoids gas gangrene polyvalent cholera vaccine diphtheria and tetanus toxoids and pertussis vaccine diphtheria toxoid adsorbed poliomyelitis vaccine adenovirus vaccine polyvalent bacterial antigens adenovirus and influenza vaccines combined aluminum phosphate adsorbed Polio vaccine, live, oral Type 1 Polio vaccine, live, oral Type 2 Polio vaccine, live, oral Type 3 BCG vaccine continued
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From page 124... ...
United States typhus vaccine Wyeth (Lederle Laboratories) United States diphtheria and tetanus toxoids and pertussis vaccine adsorbed Wyeth (Wyeth Laboratories)
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From page 125... ...
VACCINE SUPPLY 125 the 1980s as a result of growing concern about liability exposure. In response, Congress passed the National Childhood Vaccine Injury Act in 1986, a no-fault damage award system designed to compensate victims who experienced adverse consequences from vaccine products, as well as to protect companies from litigation that might disrupt the production of vaccines with social benefits.
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From page 126... ...
Longer-term concerns include the potential for the exercise of market power by the remaining firms and the potential for the total loss of supply of a vaccine product. Industry observers have consistently issued warnings about the threats posed by the sole-supplier situation and the potential for supply interruptions given the existence of single producers of many vaccines, including 10 of the 15 recommended childhood vaccines (DeBrock and Grabowski, 1985; Arnould and DeBrock, 1993~.
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From page 127... ...
Measles-mumps-rubella (MMR) Tetanus toxoid Tetanus-diphtheriaa Inactivated poliovirus Varicella (chickenpox)
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From page 128... ...
Federal contracts for several vaccines are subject to price caps that have held price increases to no more than the rate of inflation since 1994. The price cap has been cited in particular as the major obstacle to the negotiation of a government contract for the tetanus toxoid vaccine.
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From page 130... ...
For example, GlaxoSmithKline recently received approval for its DTaP-IPV-Hepatitis B combination. The initial list price of this new vaccine is only a few dollars higher than the sum of the prices of the separate vaccines, but the long-term pricing strategy for such new combinations is not yet clear.
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From page 131... ...
This practice has resulted in FFS vaccine prices as low as $0.01 per dose. SHORTAGES Over the past 20 years, the nation has experienced two major periods of vaccine supply shortages.
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From page 132... ...
indicates that the Wyeth pullout from manufacturing the tetanus vaccine may have been related to a June 2000 issue with the FDA concerning acellular pertussis vaccine.
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From page 133... ...
. There were delays in adult influenza vaccine in the two previous seasons, and severe shortages of tetanus toxoid affected the availability of doses for adult boosters and emergency use.
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From page 134... ...
134 m O ~ o o ~ I + ~ 1 ~ I 1 I 11~ Al id!
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From page 135... ...
With only four suppliers for all universal childhood vaccines and monopoly suppliers of four of those vaccines, the United States remains highly vulnerable to disruptions in manufacturer production. Vaccine shortages appear to result from specific and apparently unrelated causes rather than a single overriding factor (GAO, 2002; NVAC, 2003)
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From page 136... ...
and quality control issues at Parkdale and Wyeth. 2000-2001 flu season Vaccine production was delayed; only two-thirds 2001-2002 of the supply was available by October.
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From page 137... ...
There is also evidence that other developed countries, while not experiencing the critical shortages of the United States, are characterized by capacity constraints that could lead to shortages (Mercer Management Consulting, 2002~. Some have sought a relationship between vaccine pricing and shortages (Orenstein, 2002c)
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From page 138... ...
Examples of such changes include the switch from OPV to IPV, the elimination of thimerosal from certain vaccines, and the future replacement of individual and exisiting combination vaccines with new combinations. CDC CONTRACTING Each year, CDC negotiates a federal contract for the purchase of ACIPrecommended childhood vaccines.
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From page 139... ...
Clinicians typically pay high prices to distributors, but they are able to make small purchases when needed and benefit from business relationships with local distributors (Mercer Management Consulting, 1995~. In contrast with childhood vaccines, the public sector purchases a very limited share of adult vaccines.
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From page 140... ...
For example, NVAC has held numerous discussions of and recently released a report on vaccine supply (NVAC, 2003~. The Council of the IOM also issued a statement in 2001 calling for the creation of a national vaccine authority to address this problem (IOM, 2001~.
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From page 141... ...
Implementing this recommendation would accelerate approval of new and competitive vaccines in the case of shortages and also reduce the total cost of bringing a vaccine to market. Regulation FDA product and facility regulations are important to the safety of the vaccine supply and the viability of the industry.
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From page 142... ...
· The risks and costs to manufacturers associated with vaccine production have increased. Key factors include regulation, removal of the preservative thimerosal, and an increase in vaccine injury lawsuits.
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From page 143... ...
· Vaccine company investments in R&D on new vaccines are sensitive to prices and expected returns on investment. Ensuring socially desirable levels of R&D may necessitate prices that are substantially higher than current prices for most routine childhood vaccines.
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