Economics of vaccines

Last updated
The struggle to get access to vaccine in the 2013-2016 Ebola epidemic was primarily socio-economic, not technical Ebola Outbreak Map (ongoing).png
The struggle to get access to vaccine in the 2013-2016 Ebola epidemic was primarily socio-economic, not technical

Vaccine development and production is economically complex and prone to market failure. Development is unprofitable in rich and poor countries, and is done with public funding. Production is concentrated in the hands of a small number of powerful companies which acquire key legal monopolies and make very large profits.

Contents

Many of the diseases most demanding a vaccine, including HIV, malaria and tuberculosis, exist principally in poor countries. Pharmaceutical firms and biotechnology companies have little incentive to develop vaccines for these diseases because there is little revenue potential. Even in more affluent countries, financial returns are usually minimal and the financial and other risks are great. [1] Most vaccine development to date has therefore relied on "push" funding by government, universities and non-profit organizations. [2] In almost all cases, pharmaceuticals including vaccines are developed with public funding, but profits and control of price and availability are legally accorded to private companies. [3] Proposed solutions include requiring results from publicly-funded research to be public-domain. [4] Past efforts along these lines have failed by regulatory capture. [5]

In contrast to research and development, the vaccine production market, even for out-of-patent vaccines, is highly concentrated. 80% of global production is in the hand of five large companies, which hold key patents. [6] [7] This reduces competition and allows high, uncompetitive prices, often more than 100 times the cost of production. [8] [9]

Many vaccines have been highly cost-effective and beneficial for public health. [10] Vaccine effort that is beneficial to society is vastly in excess of that which is beneficial to vaccine producers. [11] The number of vaccines actually administered has risen dramatically in recent decades. [12]

Market concentration

While vaccine research and development is done by many small companies, [7] large-scale vaccine manufacturing is done by an oligopoly of big manufacturers. [7] [5] [13] A March 2020 New York Times article described the political effects of this market structure: "government and international health organizations know that any vaccine developed in a lab will ultimately be manufactured by large pharmaceutical firms. At this critical juncture with coronavirus, no health expert would publicly criticize drug companies, but privately they complain that pharma is a major speed bump in developing lifesaving vaccines." [5]

Concentration and monopolization of the manufacture of specific drugs has also led to supply shortages, and significant healthcare costs for employing people to track down hard-to-get drugs. [14]

This oligopoly power allows [13] vaccine manufacturers to engage in price discrimination, and vaccine prices are often two orders of magnitude (~100x) higher than the manufacturer's stated manufacturing costs, as of 2015. Sales agreements often require that the buyer keeps the price secret and agrees to other non-competitive restrictions; the exact nature and extent of this problem is hard to characterize, due to agreements being secret. [8] [9] Price secrecy also disadvantages vaccine purchasers in price negotiations. It also makes market analysis difficult and hinders efforts to improve affordability. [8]

The first decade of the 2000s saw a large number of mergers and acquisitions, and as of 2010, 80% of the global vaccine market was in the hands of five multinationals: GlaxoSmithKline, Sanofi Pasteur, Pfizer, Merck, and Novartis. [6] Of these, Novartis does not focus on vaccine development. [15] Patents on key manufacturing processes help maintain this oligopoly. [16] [17]

National vaccine-manufacturing facilities

Some countries have set up local manufacturing facilities, especially during the COVID-19 pandemic. Sometimes the government simply gives a private company money to set up a privately-owned vaccination facility locally; sometimes the facility is partly controlled or owned by the government. Facilities that produce less than 100 million doses per year face diseconomies of scale, increasing the costs of vaccines. Sequential stages in the production of a vaccine dose may also be done in different facilities and shipped across borders. [18]

In 2017, the UK had draft plans to build a national facility, later called the UK Vaccine Manufacturing Innovation Centre (VMIC). Plans came to involve industry partners including Merck and Johnson and Johnson. The facility was delayed by negotiations between industry funders and, which did not end until the country was well into the pandemic. It was originally slated to cost the government £66m. [19] The facility was expanded and built in a rush during the pandemic, and eventually cost the government £200 million; by December of 2021, the government was trying to sell off its share (it was still trying ot sell it nearly a year later). The decision was widely criticized. It was suggested that the government not sell, or at least retain the ability to commandeer production. [20] [21]

Ghana built a US$122 vaccine manufacturing facility using funding from the International Finance Corporation of the World Bank Group, working with a consortium of three Ghanaian pharmaceutical companies. It was planned to start shipping vaccines in 2024. [22]

Italy planned a public-private vaccine production facility. Canada built a publicly-owned production facility, which at 24 million doses per year is not expected to be cost-competitive with larger commercial facilities. [18]

Epidemic response

In the past, the market power of pharmaceutical companies has delayed responses to epidemics. Manufacturers have successfully negotiated favourable terms, including market guarantees and indemnification, from governments, as a condition of manufacturing vaccines. This has delayed responses to some epidemics by months, and prevented responses to other pandemics entirely. [5] Some intellectual property issues also hinder vaccine development for epidemic preparedness, as in the case of rVSV-ZEBOV. [23]

Market incentives

There is also no business incentive for pharmaceutical companies to test vaccines that are only of use to poor people. [24] Vaccines developed for rich countries may also have short expiry dates, and requirements that they be refrigerated until they are injected and given in multiple shots, all of which may be very difficult in remote areas. In some cases, it has simply never been tested whether the vaccine will still be effective if the requirements are not followed (say, if it retains potency for several days unrefrigerated). [8]

In almost all cases, pharmaceuticals including vaccines are developed with public funding, but profits and control of price and availability are legally accorded to private companies. [25] The profits of large pharmaceutical companies are mostly used on dividends and share buybacks, which inflate executive pay, [26] [27] and on lobbying and advertising. [28] [27] [29] Innovation is generally bought along with the small companies that developed it, rather than produced in-house; [26] [27] [29] low percentage R&D spending is sometimes touted as an attraction to investors. [30] The financialization focus of the pharmaceutical industry, especially in the US, has been cited as an obstacle to innovation. [27]

There have been ethical issues raised with accepting donations of generally unaffordable vaccines. [17]

Demand

While the vaccine market makes up only 2-3% of the pharmaceutical market worldwide, it is growing at 10-15% per year, much faster than other pharmaceuticals (as of 2010). [6] Vaccine demand is increasing with new target population in emerging markets (partly due to international vaccine funders; [8] in 2012, UNICEF bought half of the world's vaccine doses [6] ). Vaccines are becoming the financial driver of the pharmaceutical industry, and new business models may be emerging. Vaccines are newly being marketed like pharmaceuticals. [6]

Vaccines offer new opportunities for funding from public-private partnerships (such as CEPI [5] [31] and GAVI [32] ), governments, and philanthropic donors and foundations (such as GAVI and CEPI's donors [5] [32] ). Pharmaceutical companies have representation on the boards of public-private global health funding bodies including GAVI [33] and CEPI. [34] [ example needed ] Private donors often find it easier to exert influence through public-private partnerships like GAVI than through the traditional public sector and multilateral government institutions like the WHO; PPPs also appeal to public donors. [32] Philanthropic funding means that vaccines are now rolled out to large developing markets less than 10 or 20 years after they are developed, [33] [35] during the patent validity term of the patent owner.[ citation needed ] Newer vaccines are much more expensive than older ones. [36] Lower-income countries are increasingly a profitable vaccine market. [8]

Public domain

Baker (2016) observed that the vast majority of the cost of most diagnostic, preventive and treatment procedures are patent royalties: The unit costs are almost universally a tiny fraction of the price to the consumer. Moreover, in the US "the government spends more than $30 billion a year on biomedical research through the National Institutes of Health". And researchers (individuals and organizations) routinely obtain patents on products whose development was paid for by taxpayers, per the Bayh–Dole Act of 1980. Baker claims that the US population would have better health care at lower cost if the results of that research were all placed in the public domain. [4]

Moreover, the cost of those diagnostic, preventive and treatment procedures would be lower the world over if the results of publicly-funded research were in the public domain. This would likely lead to better control of infectious diseases worldwide. That, in turn, would likely reduced the disease load in the US. [37]

Related Research Articles

<span class="mw-page-title-main">Pharmaceutical industry</span> Industry involved with discovery, development, production and marketing of drugs

The pharmaceutical industry is an industry involved in medicine that discovers, develops, produces, and markets pharmaceutical goods for use as drugs that function by being administered to patients using such medications with the goal of curing and/or preventing disease. Pharmaceutical companies may deal in "generic" medications and medical devices without the involvement of intellectual property, in "brand" materials is specifically tied to a given company's history, or in both within different contexts. The industry's has various subdivisions are all subject to a variety of laws and regulations that govern entire financial processes including the patenting, efficacy testing, safety evaluation, and marketing of these drugs. The global pharmaceuticals market produced treatments worth $1,228.45 billion in 2020, in total, and this showed a compound annual growth rate (CAGR) of 1.8% given the results of recent events.

An advance market commitment (AMC) is a promise to buy or subsidise a product if it is successfully developed. AMCs are typically offered by governments or private foundations to encourage the development of vaccines or treatments. In exchange, pharmaceutical companies commit to providing doses at a fixed price. This funding mechanism is used when the cost of research and development is too high to be worthwhile for the private sector without a guarantee of a certain quantity of purchases.

The pharmaceutical industry is one of the leading industries in the People's Republic of China, covering synthetic chemicals and drugs, prepared Chinese medicines, medical devices, apparatus and instruments, hygiene materials, packing materials, and pharmaceutical machinery. China has the second-largest pharmaceutical market in the world as of 2017 which is worth US$110 billion. China accounts for 20% of the world's population but only a small fraction of the global drug market. China's changing health-care environment is designed to extend basic health insurance to a larger portion of the population and give individuals greater access to products and services. Following the period of change, the pharmaceutical industry is expected to continue its expansion.

The pharmaceutical industry in India was valued at an estimated US$42 billion in 2021 and is estimated to reach $130 billion by 2030. India is the world's largest provider of generic medicines by volume, with a 20% share of total global pharmaceutical exports. It is also the largest vaccine supplier in the world by volume, accounting for more than 60% of all vaccines manufactured in the world. Indian pharmaceutical products are exported to various regulated markets including the US, UK, European Union and Canada.

The Campaign for Access to Essential Medicines is an international campaign started by Médecins Sans Frontières (MSF) to increase the availability of essential medicines in developing countries. MSF often has difficulties treating patients because the medicines required are too expensive or are no longer produced. Sometimes, the only drugs available are highly toxic or ineffective, and they often have to resort to inadequate testing methods to diagnose patients.

<span class="mw-page-title-main">James Love (NGO director)</span>

James Packard Love is the director of Knowledge Ecology International, formerly known as the Consumer Project on Technology, a non-governmental organization with offices in Washington, D.C., and Geneva, that works mainly on matters concerning knowledge management and governance, including intellectual property policy and practice and innovation policy, particularly as they relate to health care and access to knowledge.

The Health Impact Fund is a proposed pay-for-performance mechanism that would provide a market-based solution to problems concerning the development and distribution of medicines globally. It would incentivize the research and development of new pharmaceutical products that make substantial reductions in the global burden of disease. The Health Impact Fund is the creation of a team of researchers led by the Yale philosopher Thomas Pogge and the University of Calgary economist Aidan Hollis, and is promoted by the non-profit organization Incentives for Global Health (IGH).

Some authors advocating patent reform have proposed the use of prizes as an alternative to patents. Critics of the current patent system, such as Joseph E. Stiglitz, say that patents fail to provide incentives for innovations which are not commercially marketable. Stiglitz provides the idea of prizes instead of patents to be awarded in order to further advance solutions to global problems such as AIDS.

<span class="mw-page-title-main">GAVI</span> Global health organization

GAVI, officially Gavi, the Vaccine Alliance is a public–private global health partnership with the goal of increasing access to immunization in poor countries. In 2016, Gavi channeled more than half of total donor assistance for health, and most donor assistance for immunization, by monetary measure.

The Medicines Patent Pool (MPP) is a Unitaid-backed international organisation founded in July 2010, based in Geneva, Switzerland. Its public health driven business model aims to lower the prices of HIV, tuberculosis and hepatitis C medicines and facilitate the development of better-adapted HIV treatments through voluntary licensing and patent pooling. Its goal is to improve access to affordable and appropriate HIV, hepatitis C and tuberculosis medicines in low- and middle-income countries (LMIC). In May 2020, the MPP become an implementing partner of the WHO's Covid-19 Technology Access Pool (C-TAP).

<span class="mw-page-title-main">Novavax</span> American biotechnology company

Novavax, Inc. is an American biotechnology company based in Gaithersburg, Maryland, that develops vaccines to counter serious infectious diseases. Prior to 2020, company scientists developed experimental vaccines for influenza and respiratory syncytial virus (RSV), as well as Ebola and other emerging infectious diseases. During 2020, the company redirected its efforts to focus on development and approval of its NVX-CoV2373 vaccine for COVID-19.

<span class="mw-page-title-main">Coalition for Epidemic Preparedness Innovations</span> Public-private organization for vaccine development

The Coalition for Epidemic Preparedness Innovations (CEPI) is a foundation that takes donations from public, private, philanthropic, and civil society organisations, to finance independent research projects to develop vaccines against emerging infectious diseases (EID).

Access to medicines refers to the reasonable ability for people to get needed medicines required to achieve health. Such access is deemed to be part of the right to health as supported by international law since 1946.

Inovio Pharmaceuticals, Inc. is an American biotechnology company focused on the discovery, development, and commercialization of synthetic DNA products for treating cancers and infectious diseases. In April 2020, Inovio was among some 100 companies, academic centers, or research organizations developing a vaccine candidate for treating people infected with COVID-19, with more than 170 total vaccine candidates in development.

<span class="mw-page-title-main">Access to COVID-19 Tools Accelerator</span> G20 COVID-19 global initiative

The Access to COVID-19 Tools Accelerator, or the Global Collaboration to Accelerate the Development, Production and Equitable Access to New COVID-19 diagnostics, therapeutics and vaccines, is a G20 initiative announced by pro-tem Chair Mohammed al-Jadaan on 24 April 2020. A call to action was published simultaneously by the World Health Organization (WHO) on 24 April. As of January 2022, it was the largest international effort to achieve equitable access to COVID-19 health technologies.

<span class="mw-page-title-main">COVAX</span> Initiative to provide COVID-19 vaccines

COVID-19 Vaccines Global Access, abbreviated as COVAX, is a worldwide initiative aimed at equitable access to COVID-19 vaccines directed by the GAVI vaccine alliance, the Coalition for Epidemic Preparedness Innovations (CEPI), and the World Health Organization (WHO), alongside key delivery partner UNICEF. It is one of the four pillars of the Access to COVID-19 Tools Accelerator, an initiative begun in April 2020 by the WHO, the European Commission, and the government of France as a response to the COVID-19 pandemic. COVAX coordinates international resources to enable low-to-middle-income countries equitable access to COVID-19 tests, therapies, and vaccines. UNICEF is the key delivery partner, leveraging its experience as the largest single vaccine buyer in the world and working on the procurement of COVID-19 vaccine doses, as well as logistics, country readiness and in-country delivery.

<span class="mw-page-title-main">Deployment of COVID-19 vaccines</span> Distribution and administration of COVID-19 vaccinations

As of 12 August 2024, 13.53 billion COVID-19 vaccine doses have been administered worldwide, with 70.6 percent of the global population having received at least one dose. While 4.19 million vaccines were then being administered daily, only 22.3 percent of people in low-income countries had received at least a first vaccine by September 2022, according to official reports from national health agencies, which are collated by Our World in Data.

The TRIPS Agreement waiver is a joint intervention communication by South Africa and India to the TRIPS council of the World Trade Organization (WTO) on 2 October 2020.

Vaccine equity means ensuring that everyone in the world has equal access to vaccines. The importance of vaccine equity has been emphasized by researchers and public health experts during the COVID-19 pandemic but is relevant to other illnesses and vaccines as well. Historically, world-wide immunization campaigns have led to the eradication of smallpox and significantly reduced polio, measles, tuberculosis, diphtheria, whooping cough, and tetanus.

<span class="mw-page-title-main">Initiative for Medicines, Access, and Knowledge</span> Nonprofit organization

The Initiative for Medicines, Access, and Knowledge, known as I-MAK, is a U.S.-based global 501(c)(3) organization that advocates in the public interest for affordable access to medicines, and a medicines system that is more inclusive of patients and the public.

References

  1. ↑ Goodman JL (2005-05-04). "Statement by Jesse L. Goodman, M.D., M.P.H. Director Center for Biologics, Evaluation and Research Food and Drug Administration U.S. Department of Health and Human Services on US Influenza Vaccine Supply and Preparations for the Upcoming Influenza Season before Subcommittee on Oversight and Investigations Committee on Energy and Commerce United States House of Representatives". Archived from the original on 2008-09-21. Retrieved 2008-06-15.
  2. ↑ Olesen OF, Lonnroth A, Mulligan B (January 2009). "Human vaccine research in the European Union". Vaccine. 27 (5): 640–5. doi:10.1016/j.vaccine.2008.11.064. PMC   7115654 . PMID   19059446.
  3. ↑ Mazzucato, Mariana; Momenghalibaf, Azzi (18 March 2020). "Drug Companies Will Make a Killing From Coronavirus". The New York Times.
  4. 1 2 Dean Baker (2016), Rigged: How globalization and the rules to the modern economy were structured to make the rich richer, Center for Economic and Policy Research, Wikidata   Q100216001 .
  5. 1 2 3 4 5 6 Gerald Posner (2 March 2020). "Big Pharma May Pose an Obstacle to Vaccine Development". New York Times . Retrieved 8 March 2020. Drug companies on CEPI's scientific advisory panel, including Johnson & Johnson, Pfizer, and Japan's Takeda, pushed back. CEPI mostly capitulated in a December 2018 two-page declaration in which it jettisoned specifics but gave lip service to its founding mission of "equitable access to these vaccines for affected populations during outbreaks."
  6. 1 2 3 4 5 Kaddar, Miloud. "Global Vaccine Market Features and Trends" (PDF). World Health Organization.
  7. 1 2 3 Peter Coy (13 February 2020). "The Road to a Coronavirus Vaccine Runs Through Oslo". Bloomberg News . Retrieved 7 March 2020.
  8. 1 2 3 4 5 6 "The Right Shot: Bringing down barriers to affordable and adapted vaccines - 2nd Ed., 2015". Médecins Sans Frontières Access Campaign. 20 January 2015.
  9. 1 2 "GAVI money welcome but could it be more wisely spent?". Médecins Sans Frontières (MSF) International.
  10. ↑ Jit M, Newall AT, Beutels P (April 2013). "Key issues for estimating the impact and cost-effectiveness of seasonal influenza vaccination strategies". Human Vaccines & Immunotherapeutics. 9 (4): 834–40. doi:10.4161/hv.23637. PMC   3903903 . PMID   23357859.
  11. ↑ Kazaz, Burak; Webster, Scott; Yadav, Prashant. "Incentivizing COVID-19 Vaccine Developers to Expand Manufacturing Capacity". Center for Global Development. Retrieved 5 October 2024.
  12. ↑ Newall AT, Reyes JF, Wood JG, McIntyre P, Menzies R, Beutels P (February 2014). "Economic evaluations of implemented vaccination programmes: key methodological challenges in retrospective analyses". Vaccine. 32 (7): 759–65. doi:10.1016/j.vaccine.2013.11.067. PMID   24295806.
  13. 1 2 Patrick, Kate. "FDA commissioner decries drug industry oligopoly". Supply Chain Dive.
  14. ↑ Vaillancourt, R (May 2012). "Drug shortages: what can hospital pharmacists do?". The Canadian Journal of Hospital Pharmacy. 65 (3): 175–9. doi:10.4212/cjhp.v65i3.1138. PMC   3379822 . PMID   22783027.
  15. ↑ Stanley A. Plotkin; Adel A.F. Mahmoud; Jeremy Farrar (23 July 2015). "Establishing a Global Vaccine-Development Fund" (PDF). The New England Journal of Medicine . 373 (4): 297–300. doi: 10.1056/NEJMp1506820 . PMID   26200974.
  16. ↑ Buranyi, Stephen (4 March 2020). "How profit makes the fight for a coronavirus vaccine harder". The Guardian.
  17. 1 2 Hamblin, James (14 October 2016). "Doctors Refused a Million Free Vaccines–to Make a Statement About the Pharmaceutical Industry". The Atlantic.
  18. 1 2 Gualtieri, Mark (15 March 2021). "As Vaccine Nationalism Deepens, Governments Pay to Bring Production Home". Bajaprogofficial.com. Retrieved 5 October 2024.
  19. ↑ Field, Matthew; Boland, Hannah (21 March 2020). "UK in race for national vaccine facility after 'faffing around' on £66m project". The Telegraph. Retrieved 5 October 2024.
  20. ↑ Tatalović, Mićo (29 March 2022). "In focus: has the UK's vaccine capacity improved?". Research Professional News. Retrieved 5 October 2024.
  21. ↑ "Poll: Engineers warn sale of UK vaccine centre risks health security and industry innovation". www.thechemicalengineer.com. Retrieved 5 October 2024.
  22. ↑ Okertchiri, Jamila Akweley (30 November 2022). "National Vaccine Institute Nears Completion". DailyGuide Network. Retrieved 5 October 2024.
  23. ↑ "MSF's response to CEPI's policy regarding equitable access". Médecins Sans Frontières Access Campaign. 25 September 2018.
  24. ↑ Belluz, Julia (4 March 2020). "A guide to the vaccines and drugs that could fight coronavirus". Vox.
  25. ↑ Mazzucato, Mariana; Momenghalibaf, Azzi (18 March 2020). "Drug Companies Will Make a Killing From Coronavirus". The New York Times.
  26. 1 2 Lazonick, William; Tulum, Öner (26 February 2019). "How High Drug Prices Inflate C.E.O.s' Pay". The New York Times.
  27. 1 2 3 4 Tulum, Öner; Lazonick, William (February 2019). "FINANCIALIZED CORPORATIONS IN A NATIONAL INNOVATION SYSTEM: THE US PHARMACEUTICAL INDUSTRY" (PDF). International Journal of Political Economy.
  28. ↑ Lerner, Sharon (13 March 2020). "Big Pharma Prepares to Profit From the Coronavirus". The Intercept.
  29. 1 2 "Analysis: Large pharma companies do little new drug innovation". STAT. 10 December 2019.
  30. ↑ Vara, Vauhini. "Billions and Billions for Botox". The New Yorker.
  31. ↑ "Norway has invested 200 million euros in epidemic preparedness, but are they getting what they're paying for?". Médecins Sans Frontières Access Campaign. 7 March 2019.
  32. 1 2 3 Storeng, Katerini T. (14 September 2014). "The GAVI Alliance and the 'Gates approach' to health system strengthening". Global Public Health. 9 (8): 865–879. doi:10.1080/17441692.2014.940362. ISSN   1744-1692. PMC   4166931 . PMID   25156323.
  33. 1 2 "Pneumococcal Vaccine is Launched in Africa, But Are Donors Getting a Fair Deal from Companies?". Doctors Without Borders - USA.
  34. ↑ Røttingen, John-Arne (21 July 2017). "Coalition for Epidemic Preparedness Innovations (CEPI): Presentation to the WHO" (PDF). CEPI.
  35. ↑ MSF. "Pfizer and GSK should not get huge subsidy for pneumonia vaccine". Médecins Sans Frontières (MSF) International.
  36. ↑ "Vaccination". Doctors Without Borders - USA.
  37. ↑ See also the 2021-02-23 interview with Baker in "v:Unrigging the media and the economy".
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.