The U.S. immunization program is a national treasure that is too often taken for granted.

Institute of Medicine1

In many developed countries, measles, mumps, rubella, hepatitis B, Haemophilus influenzae type b, tetanus, pertussis and diphtheria have been controlled or nearly eliminated as chief causes of morbidity and mortality through the use of vaccines. Through the global use of vaccines, smallpox was eradicated, and both polio and measles might be eradicated as well. Despite these successes, economic, political and legal issues have profoundly changed the vaccine marketplace in the US and adversely affected vaccine manufacturers and, consequently, vaccine availability2. Over the past 5 years, the US has experienced critical shortages of influenza, tetanus-diphtheria, measles-mumps-rubella, pneumococcal (both adult and childhood formulations), meningococcal and other vaccines. The present US influenza vaccine shortage provides evidence that vaccine supply issues and shortages remain problematic and present a 'case study' illustrating the problems and policy changes needed to achieve a singular goal: ensuring a safe, secure and predictable supply of vaccines essential to public health.

All vaccines now distributed in the US are privately manufactured. This simple fact has tremendous implications. Manufacturers are not obligated to initiate or sustain the production of any vaccine and may withdraw from the market regardless of a vaccine's public health importance. From a business perspective, vaccines are produced 'at risk'; that is, with little assurance of a profitable, sizeable or sustainable market. Unlike drugs, 'biologics' have much more limited shelf lives, and many vaccines (such as the influenza vaccine) must be used within months of manufacture. Because vaccines sold in the US are not required to be manufactured in the US (although US regulatory standards must be met), there is concern that in an emergency (such as pandemic influenza), other nations could embargo vaccine supplies on which the US relies. In addition, all routinely administered US vaccines are manufactured by units of large pharmaceutical companies. These units are expected to contribute to corporate profitability, but only rarely can such contributions be on par with those generated by drug products, hence interest by senior leadership and shareholders is jeopardized. With the exception of influenza, most vaccines are given only one to three times in a lifetime, in contrast to a drug that may be taken daily or sometimes for life. Notably, the total global pharmaceutical market is estimated at $340 billion annually3, whereas the total global vaccine market is estimated to be $6 billion/year, which is less than the market for a single drug such as Lipitor (estimated at $10 billion/year). Approximately $1 billion of this amount is attributed to a single pediatric vaccine (Prevnar; Wyeth) and almost $2 billion is for other pediatric vaccines, leaving only $3 billion for all other vaccines3. Of all vaccine sales worldwide, 80% are accounted for by just four companies (Aventis Pasteur, GlaxoSmithKline, Merck and Wyeth)4. Countries with higher income (the US and Western Europe) generate approximately 82% of all vaccine revenues but use only 12% of all vaccine doses5. Finally, as has been noted before, vaccine sale revenues have been constant while research, development and production costs have risen substantially5.

The case of influenza vaccine

Enhanced understanding of the epidemiology of influenza and its adverse effect has led to recommendations for expanded use of this vaccine. For example, the morbidity of influenza in infants, as measured by hospitalization rates, exceeds that in the elderly, leading to this year's recommendation for the immunization of all children 6–23 months of age and of the household contacts of infants 0–6 months of age, who are too young to be immunized themselves. Each year influenza kills approximately 36,000 Americans, causes 200,000 excess hospitalizations and costs the US economy about $12 billion in direct and indirect costs. Through the ongoing efforts of the Centers for Disease Control and Prevention, the National Vaccine Advisory Committee and others, the manufacturers of influenza vaccine agreed to produce more influenza vaccine for the US than they had ever before historically produced; specifically, 100 million doses for the 2004–2005 influenza season. This compares with 85 million doses produced in 2003–2004 and 70 million in 2002–2003. The high-risk groups for which vaccine is recommended (those with an increased risk of complications, hospitalization and death) totals approximately 150 million people. Unfortunately, the loss of one manufacturer's (Chiron's) influenza vaccine production of approximately 48 million doses because of bacterial contamination resulted in a loss of almost half the doses needed in the US. Thus, the ability to protect against influenza was leveraged on the abilities of two main producers and one smaller company. Rapidly increasing the number of doses manufactured is not feasible, as injectable influenza vaccine is produced in embryonated chicken eggs, and the amount of vaccine that is produced depends on the availability of fertilized chicken eggs and the efficiency of growth of each influenza strain. Vaccine supply is therefore fixed and cannot be rapidly increased later in the year.

Why is our vaccine supply so precarious? Many studies have identified important factors that diminish pharmaceutical industry interest in the vaccine market and have contributed to their withdrawal from the US market1,5,6,7,8. Here we will briefly review three factors that have had substantial effects.

Problem 1: high costs

Substantial capital and investment costs result from vaccine research and development, clinical trials, regulatory requirements and the high costs of capital investment needed for 'biologics' manufacturing. The US Food and Drug Administration (FDA) and current good manufacturing practices processes have changed, requiring substantial plant upgrades and costs to maintain the license to manufacture and distribute vaccines in the US. Wyeth dropped out of the influenza vaccine market 2 years ago because the estimated cost to meet these regulations was $250 million. Inactivated influenza vaccine is a commodity vaccine with little to distinguish one company's product from others, so market share is determined largely by price. Faced with the choice of substantial capital investment in upgrading the physical plant to produce a commodity vaccine for which little profit was apparent or to use the same funds to invest in research and development to produce a new, unique vaccine such as Prevnar, Wyeth chose to withdraw from the commodity vaccine market. As another example, a new, live attenuated influenza vaccine (FluMist) was licensed in the US last year. The cost to bring this new vaccine to market was estimated at $1 billion. Last year, the manufacturer (MedImmune) sold fewer than 1 million doses and 4 million doses were discarded due to non-use. This year only 2 million doses were manufactured and sold at a cost of $16 per dose.

Solution

We believe government has the means to create incentives for private industry to manufacture vaccines essential to the US public health. The mechanisms include tax breaks or subsidies to encourage the building of new manufacturing plants and upgrading of existing plants; extending patent protection for intellectual property related to vaccines of public health importance; working with industry to find ways to reduce the costs of meeting US FDA regulatory and new product application costs; and allowing tiered pricing whereby vaccines can be sold at higher prices in developed countries and lower prices in underdeveloped countries, which increases the market size for US vaccine manufacturers. Government could also continue to share in the costs for new technology platform development directly or through research grants and by expanding its program of Cooperative Research and Development Agreements. Direct federal participation in developing new technology platforms with transfer to the private sector would also provide incentives. For example, continuing to advance the development of cell culture and reverse genetics techniques (and solving the intellectual property issues) to a level that would allow the faster, efficient and less costly manufacture of a larger number of influenza vaccine doses would probably increase industry interest. Alone, industry maybe hesitant to risk the hundreds of millions of dollars required to develop this technology and achieve US FDA approval. Notably, foreign countries have been willing to do many of these things, with the result that for drug manufacture, all US-based pharmaceutical companies now have substantial investments in foreign manufacturing plants.

Problem 2: markets and profits

Although it seems counterintuitive, some vaccine markets are unstable. For example, demand for influenza vaccine fluctuates from year to year. If vaccine remains unsold at the end of the season, industry must absorb the loss. In addition, the federal government is often viewed by industry as an unreliable customer. The federal government negotiates discounts on vaccines of 40–75% below list price5. Today approximately 55% of the childhood vaccine doses given in the US are purchased by the government. An estimated 15–20% of influenza vaccine is purchased by the government. Furthermore, the proportion of vaccine purchased by the government varies depending on government policies that can change with each election cycle. If industry cannot anticipate an appropriate profit, they will invest their resources elsewhere. This is exacerbated, as noted below, by the fact that markets can suddenly shift in size or disappear entirely.

Solution

The influenza vaccine market could be made more attractive to industry by increasing the demand for influenza vaccine. This could be achieved by increasing the stability and predictability of the market and by reducing the risk of overproduction. For example, government could set a target for production of 100 million doses and guarantee annual purchase of the first 20% of the vaccine produced at a negotiated fair price, as is the practice now. The next 70% of the product would be made 'at-risk' and sold privately by manufacturers. The remaining 10% of the product could also be sold privately by manufacturers; however, if it is not sold, the government would agree to buy it at a price that exceeds the costs of production but is lower than the negotiated government price. Each year the production 'targets' could be incrementally increased. This solution creates an incentive, stabilizes the market and uses the strengths of the private sector, while avoiding having the federal government be the industry's sole (and potentially unreliable) customer. Similar mechanisms can be devised for other vaccines of importance. In addition, for many vaccines, mechanisms for stockpiling could be devised, further reducing the effect of any temporary shortages or interruption in manufacture. Finally, there is a functional national childhood immunization program that includes government purchase, larger market size, stockpiling, liability protection and other incentives. It is apparent that a national adult immunization program is needed to accomplish similar goals, which will also have the effect of enlarging the market size.

Problem 3: liability exposure

Two examples illustrate why liability makes manufacturers reluctant to develop or market vaccines in the US. Both relate to the anti-vaccination movement and subsequent liability issues9. Unfounded but widespread allegations that pertussis vaccines caused sudden infant death syndrome released a flood of lawsuits against pertussis vaccine manufacturers. Predictably, many manufacturers fled the marketplace. Legislation was then enacted (the Vaccine Injury Compensation Program) that effectively shielded manufacturers from lawsuits, resulting in market stabilization. Another example was the voluntary withdrawal of the only licensed vaccine against Lyme disease from the market. GlaxoSmithKline developed an innovative, safe and effective vaccine to prevent Lyme disease, the most common human tick-borne illness in the US. Unproven allegations led to a volume of class-action litigation that resulted in the manufacturer's deciding to voluntarily withdraw the vaccine and leave the market. Two other companies in the process of developing similar vaccines immediately halted further development of their vaccines. Today there is no vaccine to protect against Lyme disease and little prospect of one in the future.

Solution

The threat of unanticipated and unmanageable litigation costs burdens new vaccine development and manufacture. Both new and established vaccines included in the Vaccine Injury Compensation Program could effectively shield manufacturers from lawsuits related to unanticipated adverse effects of a properly manufactured, safe and effective vaccine that are unrelated to manufacturer negligence. Such liability protection could eliminate much of the risk that is of concern to both big and small potential manufacturers of new vaccines, particularly for new formulations or influenza vaccines in development. More broadly, better management of liability and tort reform is essential for stimulating the market to devise and market new life- saving vaccines.

What can be done? Notably, all of the expertise in vaccine manufacture, packaging, and distribution resides solely in the private sector. Maximizing the contribution of the private industry, in healthy partnership with government, seems much more likely to be rapidly effective than trying to develop, de novo, public sector expertise. A new partnership aimed at increasing market predictability, reducing liability and increasing incentives to participate in the market is the most attractive option by far. In this regard, both 'push' and 'pull' private sector incentives are worthy of consideration. 'Push' incentives use public resources to reduce the costs and risks of an investment. Examples specific to vaccine manufacture include providing financing, tax incentives, tiered pricing and 'harmonization' of regulatory requirements. 'Pull' incentives help ensure a return or profit for a successfully developed product. Examples might include extending patent protections on intellectual property, transferable patents to other (successful) products, market guarantees, performance awards for meeting specific manufacturing targets and others4,5.

Although the federal government has done much to ensure a safe, secure and predictable vaccine supply, there is still a need for even greater safeguards. Over the past 30 years, the number of companies distributing vaccines in the US has decreased from 30 to 5 (Table 1)5. The potential for a collapse of the US vaccine industry and supply will directly affect US national security. To overcome this vulnerability, a paradigm shift is needed: the government does not rely solely on market forces to supply products deemed essential to national security, such as vaccines against agents of bioterrorism. Instead, government should partner with private industry by requesting proposals to conduct needed research and development and then guarantee purchase of needed products that meet specifications at a negotiated price. Such a partnership with the vaccine industry is urgently needed.

Table 1 Vaccine availability in the US in 2004
Full size table

Other solutions worthy of exploration include short-, mid- and long-term strategies to reduce market risk and attract more manufacturers through public-private partnerships. The US Congress must be involved and willing to take an informed and bipartisan partnership role. Another possible solution involves congressional willingness to modify the pending 'Bioshield II' legislation to allow research and development of vaccines against specific non-bioterrorism agents that nonetheless imperil the public health and national security, including pandemic influenza. The passage of Project Bioshield had the remarkable effect in spurring widespread biotechnology and private-sector interest in vaccine development. Although aimed at the development of vaccines, drugs and diagnostics to protect against bioterrorism agents, the carryover effect on other pathogens of interest will be considerable. The acquisition of other vaccines important to the public health should be approached in a similar way. It is vital to do no less to ensure the nation's security against biologic agents such as smallpox and anthrax or nature's 'bioterrorism' threats such as influenza.