U.S. Markets for Vaccines
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U.S. Markets for Vaccines U.S. Markets for Vaccines Characteristics, Case Studies, and Controversies Ernst R. Berndt, Rena N. Denoncourt, and Anjli C. Warner The AEI Press Publisher for the American Enterprise Institute WASHINGTON, D.C. Distributed to the Trade by National Book Network, 15200 NBN Way, Blue Ridge Summit, PA 17214. To order call toll free 1-800-462-6420 or 1-717-794-3800. For all other inquiries please contact the AEI Press, 1150 Seventeenth Street, N.W., Washington, D.C. 20036 or call 1-800-862-5801. Library of Congress Cataloging-in-Publication Data Berndt, Ernst R. U.S. markets for vaccines : characteristics, case studies, and controversies / Ernst R. Berndt, Rena N. Denoncourt, and Anjli C. Warner. p. ; cm. Includes bibliographical references and index. ISBN-13: 978-0-8447-4280-9 ISBN-10: 0-8447-4280-5 1. Vaccines industry—United States. 2. Market surveys—United States. I. Denoncourt, Rena N. II. Warner, Anjli C. III. Title. [DNLM: 1. Vaccines—economics—United States. 2. Drug Discovery—economics—United States. 3. Drug Industry—economics—United States. QW 805 B524u 2009] HD9675.V333.U6 2009 381'.456153720973—dc22 2009006713 13 12 11 10 09 1 2 3 4 5 6 7 © 2009 by the American Enterprise Institute for Public Policy Research, Wash- ington, D.C. All rights reserved. No part of this publication may be used or repro- duced in any manner whatsoever without permission in writing from the American Enterprise Institute except in the case of brief quotations embodied in news articles, critical articles, or reviews. The views expressed in the publications of the American Enterprise Institute are those of the authors and do not neces- sarily reflect the views of the staff, advisory panels, officers, or trustees of AEI. Printed in the United States of America Contents LIST OF ILLUSTRATIONS ix ACKNOWLEDGMENTS xi INTRODUCTION 1 PART I: DIFFERENTIATING CHARACTERISTICS OF VACCINES 5 INTRODUCTION TO PART I7 1. ENVISAGING AND DEVELOPING A VACCINE 12 Intellectual Property Protection and Other Barriers to Market Entry 12 Preclinical and Clinical Development 14 2. PLANNING FOR VACCINE LAUNCH 26 Manufacturing Facility Complexity, Scale Economies, and Costs 26 Coordination with Public Health Officials and Payers 30 Distribution and Delivery Channels and Payers 32 3. ROLLING OUT THE NEW VACCINE 39 Product Liability Issues 39 Pricing, Product Differentiation, and Marketing 42 Post-Launch Surveillance 52 Industry Structure, Concentration, and Shortages 54 v vi U.S. MARKETS FOR VACCINES PART II: FOUR CASE STUDIES 61 INTRODUCTION TO PART II 63 4. DIPHTHERIA, TETANUS, AND PERTUSSIS AND RELATED COMBINATION VACCINES 66 Disease Overviews and Treatments 66 Historical Background and Currently Available Formulations 68 Evolution of More Convenient Combination Formulations 72 Rationalizing the Bundled-Product Landscape 73 Manufacturing Issues 75 Pricing and Marketing 76 Post-Launch Surveillance 76 The Long-Term Outlook for the DTP Vaccine Segment 77 5. SEASONAL INFLUENZA VACCINES 79 Influenza Disease and Its Treatments 79 Vaccine Development Timelines 80 Thimerosal Preservative Issues 84 Clinical Development: Testing for Safety and Efficacy 86 Manufacturing Developments: Egg-Based versus Cell-Based Production 87 Influenza Vaccine Distribution Issues 94 Extensive Role of Government in Flu Vaccine Supply and Demand 95 Pricing, Marketing, and Nonprice Competition 97 Post-Launch Surveillance 99 Pandemic Issues 101 Future Issues and Challenges 102 6. PREVNAR—THE SEVEN-VALENT PNEUMOCOCCAL CONJUGATE VACCINE 104 Disease Background 104 Preclinical Research and Development 105 Clinical Development: Testing for Safety and Efficacy 106 Manufacturing Issues 107 Securing a Listing on the ACIP Recommended Schedule 109 Pricing and Marketing 110 CONTENTS vii Post-Launch Surveillance 111 The Evolving Competitive Landscape 112 Emerging Challenges: Replacement Phenomena 114 Implications for the Developing World 115 Conclusion 117 7. VARICELLA ZOSTER VACCINES 118 Preclinical Research and Development 120 Clinical Development: Testing for Safety and Efficacy 121 Manufacturing Issues 123 Pricing and Marketing 124 Post-Launch Surveillance 125 Emerging Challenges and Issues 126 PART III: ONGOING AND FUTURE ISSUES IN VACCINE POLICIES AND R&D 129 INTRODUCTION TO PART III 131 8. CHALLENGES IN MAINTAINING PUBLIC TRUST IN VACCINE SAFETY 132 The Autism “Epidemic” 132 The MMR Three-in-One-Jab Panic in the United Kingdom 135 Mercury, Vaccines, and Autism 143 CONCLUSION: BEYOND THE TURNING POINT—THE EXPANDING FOCUS OF VACCINE R&D 156 APPENDIX A: ORGANIZATIONS (AND NUMBER OF INDIVIDUALS) INTERVIEWED, FEBRUARY–AUGUST 2007 161 APPENDIX B: THE THREE TRADITIONAL PHASES OF CLINICAL DEVELOPMENT FOR VACCINES: A SUMMARY 162 APPENDIX C: ADVISORY COMMITTEE ON IMMUNIZATION PRACTICES RECOMMENDED IMMUNIZATION SCHEDULES, 2009 165 APPENDIX D: CDC PEDIATRIC, ADULT, AND INFLUENZA VACCINE PRICE LISTS, 2008 176 NOTES 183 viii U.S. MARKETS FOR VACCINES REFERENCES 205 ABOUT THE AUTHORS 227 INDEX 229 List of Illustrations FIGURES 5-1 The Cell-Based Influenza Vaccine Manufacturing Process 90 5-2 Technology Shift in Influenza Vaccine Production 93 TABLES I-1 Manufacturers’ Revenues from U.S. Sales of Vaccines, Other Biologics, and Pharmaceuticals in Billions of Dollars, 2001–7 10 1-1 Estimates of Transition and Cumulative Success Probabilities for Vaccines, Biopharmaceuticals, Biotech, and Pharmaceuticals 17 1-2 Alternative Estimates of Mean Clinical Development and Approval Times, Mean Time Duration in Months 20 1-3 1996–2005 Mean Clinical Development and FDA Approval Times, Mean Time Duration in Months 22 1-4 FDA Approval Times for Innovative and Follow-On Vaccines, Mean Time Duration in Months 24 3-1 Number of Manufacturers of ACIP-Recommended Vaccines Posted on CDC Vaccine Price List, November 5, 2008 57 4-1 Selected Vaccines Licensed for Immunization and Distribution in the United States, as of October 2008 69 5-1 Thimerosal Content in Currently Manufactured U.S. Licensed Influenza Vaccines, Updated by the FDA March 14, 2008 85 5-2 Influenza Vaccine Manufacturers for the 2008–9 Influenza Season 98 7-1 Timeline of Varicella Vaccine Development 119 ix X U.S. MARKETS FOR VACCINES AC-1 Recommended Immunization Schedule for Persons Aged 0 through 6 Years—United States, 2009 166 AC-2 Recommended Immunization Schedule for Persons Aged 7 through 18 Years—United States, 2009 168 AC-3 Catch-Up Immunization Schedule for Persons Aged 4 Months through 18 Years Who Start Late or Who Are More Than 1 Month Behind—United States, 2009 170 AC-4 Recommended Adult Immunization Schedule: United States, October 2007–September 2009 172 AD-1 Pediatric/VFC Vaccine Price List, November 5, 2008 177 AD-2 Adult Vaccine Price List, November 5, 2008 179 AD-3 Influenza Vaccine Price List, November 5, 2008 181 Acknowledgments The research for this book was undertaken and initially written when Rena N. Denoncourt and Anjli C. Warner were second-year MBA students at the MIT Sloan School of Management. Particular thanks are due the numerous indi- viduals who gave us their time to engage in interviews, and who commented on drafts of the manuscript. Research support from Merck & Co. Inc. to the MIT Center for Biomedical Innovation is gratefully acknowledged, as is data support from Murray Aitken at IMS Health. We have benefited from the com- ments of Henry Grabowski at Duke University and Kenneth Kaitin at the Tufts Center for the Study of Drug Development, and from the editorial staff at the American Enterprise Institute. Any opinions and views expressed herein are those of the authors, and are not necessarily those of the research sponsor or of MIT. xi Introduction The administration of vaccines for the prevention of contagious diseases, particularly in the pediatric population, provides a classic example of what economists call consumption externalities—that is, the effects of a decision on parties not directly involved in that decision. Not only does the vaccinated infant gain immunity against the disease and thereby directly benefit from the vaccination, but the increase in that infant’s immunity and the preven- tion of his or her carrying disease strains benefit other nonvaccinated indi- viduals (such as siblings, playmates, and caretakers) by lowering their likelihood of contracting the disease. Parents are unlikely to take these indirect benefits fully into account when deciding to bear the monetary and nonmonetary costs of vaccinat- ing their children. Alternatively, knowing that most other individuals are vaccinated, an individual may decide not to bother with the inconvenience of becoming vaccinated, reckoning that the chance of getting the disease from any vaccinated individual is close to zero. Herd immunity—the rela- tive but not complete immunity in a community of people—can therefore be attained even if somewhat less than 100 percent of individuals in the community are vaccinated, since the probability of a nonvaccinated indi- vidual’s infecting others decreases as the proportion of the vaccinated population increases. Because of such positive consumption externalities associated with vac- cines to prevent contagious diseases, what economists call a market failure emerges (less consumption occurs than is efficient from a societal vantage), creating an economic rationale for some form of government policy inter- vention. For this and other reasons, governments frequently subsidize early- stage vaccine research and development, and provide many vaccines for free or at nominal price. Most schools and day care centers