Expert analyzes why manufacturers have gradually abandoned vaccines

May 10 2005

Recent shortages of vaccines, most recently the flu vaccine during the past winter, are not short-term glitches--they reflect long-term problems in the vaccine industry. A variety of social, legal and economic forces have caused pharmaceutical companies to withdraw their commitment to vaccines, according to pediatrician and vaccine expert Paul A. Offit, M.D., chief of Infectious Diseases at The Children's Hospital of Philadelphia.

In a commentary article in the May/June issue of Health Affairs, Dr. Offit analyzes why pharmaceutical companies have abandoned vaccines, and urges legislators to protect vaccines as a vital instrument of public health.

The number of companies making vaccines has declined from 26 in 1967, to 17 in 1980, to just five in 2004. Although some of these changes result from mergers among pharmaceutical companies, for the most part, says Dr. Offit, a series of events has made the manufacture of vaccines more expensive, and their sale less profitable.

To begin with, the market for vaccines is small compared to that for drugs. "Vaccines are used at most several times in a lifetime; drugs are often used every day," writes Dr. Offit. He cites the vaccine against pneumococcal disease in children, which has annual U.S. gross sales of about $1 billion, the highest revenue generated by a vaccine. In contrast, markets for cholesterol-lowering agents, hair loss products, potency drugs, or drugs for heart disease or obesity are often $7 billion or more per drug.

Furthermore, larger pharmaceutical companies have acquired firms that previously had vaccines as their sole or primary product. So in competing against drugs for a company's internal resources, vaccines most often lose. Among the four large pharmaceutical companies still making vaccines, says Dr. Offit, vaccines bring in 6 percent or less of their total revenue. "All four companies could stop making vaccines tomorrow without much impact on their bottom lines," he writes.

Other market forces have made vaccines less profitable. Fifty years ago, a large private market of doctors purchased polio vaccines. Today the federal government's Vaccines for Children Program is the largest single purchaser of vaccines. That program, Dr. Offit notes, creates a functional cap on vaccine prices, and also shrinks the private market--which today is mostly insurance companies.

Insurance companies, for their part, often provide low or inconsistent reimbursement to physicians for vaccines. Neither insurance companies nor the government support the infrastructure needed to schedule appointments, keep records, and hire nurses to administer vaccine shots. Broader public support for vaccines, best exemplified in the great polio vaccination campaigns of the 1950s, has declined, while anti-vaccine organizations have grown.

Finally, product liability lawsuits have sharply raised costs to vaccine manufacturers. A 1986 lawsuit claiming that pertussis vaccine caused paralysis in a child yielded a jury award of $1.1 million--more than half of the entire market for pertussis vaccine at the time. Although no scientific evidence backed the claim that pertussis vaccine caused paralysis, writes Dr. Offit, liability costs have caused pharmaceutical companies to flee the vaccine business.

The Vaccine Injury Compensation Program, which Congress authorized in 1986 to compensate families whose children were injured by vaccines, reduced some financial pressure on vaccine manufacturers. However, says Dr. Offit, flaws in this program limit its effectiveness. Families can choose to opt out of the program and proceed to a jury trial, the program does not cover all vaccines, and it does not cover effects on an unborn child when the mother is vaccinated. Fearful of litigation, no pharmaceutical company is willing to produce a vaccine known to protect newborns from a group B streptococcus infection, a disease that kills 100 U.S. newborns each year.

Dr. Offit recommends that Congress take steps to increase vaccination coverage by offering financial incentives to manufacturers and healthcare professionals. He also urges correcting weaknesses in the National Vaccine Injury Compensation Program to lower the costs of vaccine production. Finally, he proposes that public-private partnerships could improve vaccine development. One successful historical model, the March of Dimes, drew on a private national foundation that funded research and large clinical trials, and culminated in the eradication of polio in the United States.

"The technology is in hand to prevent many infections that routinely hospitalize and kill people in the United States and the world," he concludes. What is needed, he says, are social and political commitments to use that technology to its best advantage.