The view from here:
"150 people die every year from being hit by falling coconuts. Not to worry, drug makers are developing a vaccine”. - Jim Carrey, Actor and comedian
The Business of Vaccines
During one of the panel discussions recently, a section of the audience started clapping on approval of a new hexavalent combo vaccine containing acellular pertussis (aP) by my fellow panellist. I didn't expect this reaction from the participants since it is a common knowledge now that aP vaccines are not as efficacious as the old whole-cell pertussis (wP) vaccines. In fact, for the last 3-4 years since the publication of the IAP guidelines on pertussis vaccination, there is gradual acceptance of the wP based combinations amongst both the pediatricians and key opinion leaders (KOLs). I have not heard many dissenting voices against wP vaccine during this time. And there were not many incidents of severe adverse reactions with this vaccines as feared most by the practicing people, particularly those based in metro cities. There has been gradual acceptance of wP based combinations by the practicing fraternity. As a matter of fact, the discussion on pertussis vaccine has been relegated greatly in most vaccine sessions in the recent past and hardly evokes any interest. So, I was surprised, why there is sudden focus on pertussis vaccines, and secondly, by the unanticipated response from the audience. During the past four years or so, there have been many publications supporting the superior efficacy of the wP vaccine over the aP one. One recent study published in JAMA Pediatrics earlier this year has even suggested an alternative vaccination schedule for the US children including 1 dose of wP vaccine in the schedule and found it to be highly efficacious and cost-effective. The researchers concluded that switching to a wP-priming vaccination strategy could reduce pertussis incidence by up to 95%, including 96% fewer infections in neonates.
But no prizes for guessing. A multinational company has just launched a new aP-based hexavalent product in Indian market and they want to create a buzz around the product and build a conducive environment amongst practitioners. They have already started approaching and 'priming' KOLs with attractive proposals. The co-panellist who was quite vocal about the combo, has just returned after attending a global summit on pertussis organized by the same multinational company that has introduced the hexavalent product here. I also had a feeling that some peditricians also were not feeling comfortable using wP based combination vaccines. They got a sigh of relief after getting a 'go ahead' signal from the panel. Their delight could be either getting freedom to prescribe aP vaccines without fearing the higher risks of wP vaccine, or they are now going to garner higher returns by injecting a new combo jab. The former case is based on some unfounded assumptions whereas the latter scenario raises some very serious ethical issues.
Objective of vaccination
What is the objective of vaccination? Is it to provide protection against a vaccine-preventable disease (VPD)? Or to make profits? We are giving vaccines ritually unmindful of their end results. It is viewed as a 'bread and butter' and a profit generating exercise by many. Shall we not be bothered about the impact of our interventions on our children? True, in individual practice, the safety 1overrides all other concerns. But if our actions are not determined by the recent knowledge, they may not be in the best interest of an individual. And nor in the interest of a society. In a country like India where the most of the VPDs barring few are still uncontrolled, the overriding concern should be the effectiveness of an intervention. We have not yet reached to a state where AEFIs far outnumber the actual incidence of VPDs.
The 'unholy' nexus
The other serious issue is the 'unethical' nexus between the industry and the academia. Have you noticed the sudden spurt in the sessions on varicella vaccines in different CMEs? Or now on pertussis? Are there any upsurges in the incidences of these VPDs? No, this is all industry driven. Once a new product is launched, the companies start lobbying the members of recommending bodies. The KOLs are 'air-lifted' to different parts of the country every week and paid handsomely to create not only a 'favourable environment' for their new product, but to create confusion amongst practitioners.
Another issue is the hefty margins provided to a dispensing practitioner by the companies. Certain products have significant price differences between their MRPs and the price offered to the doctor. This is another way of 'bribing' a potential prescriber. This practice starts a greedy tendency amongst practitioners and they start viewing vaccines as yet another profit generating commodity . As it is, the private sector of vaccines is poorly supervised. There is no guideline from the government to control or supervise this sector. Here comes the role of an academic body like IAP. They should intervene in this aspect too, so that the real objective of vaccination is restored. But would they care /dare to?
Most of the incoming presidents' action plans, now called as 'IAP's Action Plans' are funded by the vaccine companies. The major chunk of sponsorship money in almost all IAP's programs/CMEs comes from the vaccine industry. Every new president wants to become a chairperson of the Academy's immunization committee. And, they try to influence the functioning of these committees through their positions and status. Till quite recently, the sponsoring companies had major say not only in the selection of the panellists for a vaccine session in a conference, but also on the content of the ensuing discussion. This is another nexus that needs to be exposed and investigated.
The vaccine industry: From an unprofitable enterprise to billion dollar lucrative venture
Today, the vaccines industry has grown tremendously. According to an estimate, it's worth close to $ 24 billion, and is expected to reach $61 billion in profits by 2020.
However, it wasn’t too long ago that the vaccine industry was struggling with slim profit margins and shortages. For decades vaccines were a neglected corner of the drugs business, with old technology, little investment and abysmal profit margins. Many firms sold their vaccine divisions to concentrate on more profitable drugs. In fact, vaccines were so unprofitable that some companies stopped making them altogether. In 1967, there were 26 vaccine manufactures. That number dropped to 17 1by 1980.
There’s no easy way to develop a vaccine. Each experimental candidate has about a 6% chance of making it to market, about half the estimate for traditional drugs. Developing vaccines is getting more complex now.
Why is it so difficult to develop a new vaccine?
The reasons are many: more stringent clinical trial and manufacturing rules introduced over the last decade, costly production, and the “lowest hanging fruit” already developed. The industry says it costs between $200 and $900 million to develop a vaccine, with an estimated 70% of that dedicated to quality control. But some are skeptical that development costs are the biggest hindrance to better and faster vaccines. Altogether, a combination of high production costs, low market prices, and heavy regulation may have contributed to this scenario.
On the other hand, amid these trends, demand is rising. Even at a record pace for industry, several vaccines to protect against the Ebola virus that killed more than 11,000 people last year have been tested, but there is still no licensed product. The need and higher demand for vaccines for RSV, TB, Malaria, HIV, Staphylococcal, GBS, gram negative bacteria, Lyme disease, and many more infectious diseases are also needed.
Changing scenario
Maybe it was true at some point of time that manufacturing vaccines were unprofitable, but in today’s world, it’s all profits. Just a handful of companies — GSK, Pfizer, Merck and Sanofi Pasteur MSD — control the majority of the market, which inflates prices. Priorities are chosen based on where the money is. Companies employ “tiered pricing” dependent upon a country’s relative wealth and need. Low-income countries qualify for vaccines via GAVI, a public-private partnership that strikes voluntary pricing deals with pharma; however middle-income countries do not, meaning access can be worse than in poorer states.
it is impossible to tell how much it costs to develop a vaccine because companies are not completely transparent about R&D spending. But profit margins are hard to know, as R&D (which can take up to 15 years), manufacturing, trials to test efficacy, and distribution costs for specific vaccines and drug products are not public. Nobody knows exactly how much it costs for them to make it, because they don’t want to reveal that. They fear that they would face pressure to lower prices in the U.S., Europe, and the developing world.
What we have with vaccines is the highest profit margin pharmaceutical drug on the market. Drug companies make more money off vaccines than they do any other pharmaceutical drug, in terms of profit margin. Analysts say that the profit margin is“ between 10 to over 40% or may be even much more for some products.
Emergence of GAVI and Bill Melinda Gates Foundation
While the vaccine industry is likely more profitable now than in the 1970s or 1980s, this is the result of global market forces. Two major developments have propelled vaccine industry out from the gloom. The formation of Global Alliance for Vaccines and Immunization (GAVI) to supply subsidized vaccines to developing world and Bill and Melinda Gates Foundation (BMGF) which is dictating and controlling the vaccination scenario across the globe, more so in the developing countries. But then a couple things happened to turn the vaccine market around in recent years. Global demand, particularly in developing countries, shot up. Since 2000, the GAVI has provided vaccination for 500 million children in poor countries, preventing an estimated 7 million deaths.
The BMGF funds scientific research, including new vaccine development, and also gives significant amounts of money to institutions ranging from universities to non-governmental organizations. It is also the single largest donor to the WHO.
The BMGF, via its funding to GAVI, is now one of the world’s largest funders of vaccine programs in low-income nations. In 2015, the BMGF contributed 11% of the WHO’s entire budget. In 1999, the foundation committed $750 million over a 5-year period as seed money to launch the GAVI. Since 2000, the foundation has contributed $2.5 billion to GAVI.
BMGF and conflict of Interest
Concerns have been raised regarding the BMGF’s lack of accountability and conflicts of interest with multinational corporations. Although the BMGF spends only 5% of its annual global health budget on lobbying and advocacy, this 5%, which translates into over $100 million speaks volumes on the political power held by the foundation.
Interestingly the members of the GAVI board always include companies in the International Federation of Pharmaceutical Manufacturers, which involves GSK, Merck, Novartis, and Pfizer, among others. These types of public-private partnerships no doubt gives the BMGF considerable leverage in influencing health policy priorities in the U.S. and other countries, which creates both perceived and real conflicts of interest.
The “blockbuster” vaccines
Two “blockbuster” vaccines also hit the market: the PCVs, and HPVs. The industry grew. One estimate puts the vaccine market now at $24 billion—huge, but a mere 2 to 3% of a trillion-dollar worldwide pharmaceutical industry.
One vaccine hailed as a success story by industry is Prevnar 13. The product has generated cumulative sales of $25 billion for drug giant Pfizer since it acquired the vaccine in 2009 through its purchase of Wyeth. Last year was a sales record. Success is thanks to demand not only in the developing world, but also in wealthy countries. This is one of the world’s best selling vaccines, but only two companies sell it: Pfizer and GSK.
The dynamics of profitability
In 2013, Merck offered to sell Gardasil to GAVI for US $ 4.50, and the President of Merck Vaccines said, ‘‘The price is what we calculate to be our cost of goods. As we expand volumes, the cost per unit can go down. Our intent is to sell it to GAVI at a price that does not bring profit to Merck.” GSK made similar statements and offered Cervarix for $4.60 a dose.
Even this 'low' prices to GAVI, are unaffordable to graduating countries, once they lose GAVI subsidies. Merck and GSK claim their prices to GAVI equal their manufacturing costs; but these costs remain undisclosed. According to a recent study published in the journal, Vaccine, the manufacturing costs of Gardasil-TM for developing countries range between $0.48 and $0.59 a dose, a fraction of its alleged costs of $4.50. Because volume of Cervarix is low, its per unit costs are much higher, though at comparable volumes, its costs would be similar. Given the recovery of fixed and annual costs from sales in affluent markets, Merck’s breakeven price to GAVI could be $0.50–$0.60, not $4.50 (Source: Vaccine 2016 Nov 21;34:5984-5989). These savings could support GAVI programs to strengthen delivery and increase coverage.
Similarly, the PCV vaccines are likely to cost less than a dollar to produce (based on estimates for similar vaccines) but are typically being sold at $120-$160 per dose in wealthy countries and in private markets. High prices stand in the way of access, but they guarantee great profits: Pfizer’s revenue from this vaccine was $6.2bn in 2015 (Source: BMJ 2016 Nov 23;355:i6173).
GSK and Pfizer have previously agreed to supply their vaccines at around $3 per dose to GAVI and now also to humanitarian organisations. Though this has been applauded as an act of corporate social responsibility, the price is still more than profitable. Recently, India has decided to introduce PCV13 in its UIP from first quarter of 2017. It has struck a price of around $3.30 per dose from Pfizer with GAVI support. Considering the huge volume, the Pfizer is going to make a handsome profit even at this cost. Traditionally, the vaccine market has been based on high volumes at low prices, with relatively modest profit margins per dose, but it is now clear that drug companies have identified vaccines as the next pot of gold. Old vaccines are being reformulated and sold at higher prices, while new vaccines have entered the market at once unthinkable prices. The average cost to fully vaccinate a child through adolescence in the US rose from $100 in 1986 to $2192 in 2014 (Source: BMJ. 2016 Nov 23;355:i6173).Prices for the rest of the world follow suit. With the introduction of PCV in India's UIP, the total cost requirement for vaccines for routine immunization (RI) would be more than INR 3500 crores in 2017, more than double the 2015 total cost!
So what is the reason behind this price hike? Cynically, drug companies have the pricing power to ask whatever they think the market can bear. Even in the few instances where there are multiple vaccines, companies tend to price their products at similarly high levels; more often, they enjoy monopoly power. Furthermore, there is no real market for vaccines in the sense of an open and transparent system in which forces of supply and demand determine the best value price. Instead, the main buyers are governments and international organisations using taxpayers’ money to promote people’s health, with prices being negotiated on a case-by-case basis behind closed doors. Moreover, in contrast to the medicines market, there are no generics for vaccines to drive down prices. This gives even stronger pricing power to a small number of multinational vaccine producers. In 2014, five companies (Merck, Sanofi Pasteur, GSK, Pfizer, and Novartis) represented 70% of the $33bn and growing annual vaccine market.
As with medicines, the often cited justification for high vaccine prices is that R & D is expensive and risky. And though it certainly isn’t cheap, the actual cost of R & D of vaccines has remained a closely guarded secret. The right price for vaccines must take into account the value of their collective creation but also the fact that they are essential goods produced collectively to safeguard the vulnerable—no matter where they live.
-Vipin M. Vashishtha
BOTTOMLINE..................................................................................
The return on investment in global health is tremendous, and the biggest bang for the buck comes from vaccines. Vaccines are among the most successful and cost-effective health investments in history.
- Seth Franklin Berkley, a medical epidemiologist and the CEO of the GAVI Alliance