The Fragility of the U.S. Vaccine Supply
http://www.100md.com
《新英格兰医药杂志》
Vaccines have eradicated smallpox, eliminated major outbreaks of diseases, and prevented thousands of deaths annually. This success can be attributed to a private vaccine industry that has produced many important new vaccines and to an aggressive public health program that annually immunizes more than three quarters of children and more than half of all adults in the United States.1,2 The successes are now threatened by systemic problems in the development, purchase, and distribution of vaccines.
The Vaccine-Supply Industry
The number of companies that produce vaccines for the United States has declined markedly since the 1960s. Today only five companies produce all routine vaccines for this market, and for each of eight of these vaccines — including the measles, mumps, and rubella (MMR); diphtheria, pertussis, and tetanus (DPT); and polio vaccines — there is only one supplier.3 Should one of these suppliers cease production, it could take years to have a replacement vaccine licensed and publicly available.4
The dearth of suppliers has decreased the availability of vaccines. In 2001–2002, the United States had shortages of 8 of the 11 recommended childhood vaccines: DPT, MMR, varicella, and pneumococcal conjugate vaccines. In 2004, the country again had a shortage of pneumococcal conjugate vaccine, prompting the Centers for Disease Control and Prevention (CDC) to recommend suspension of the third and fourth doses.5 Although there are many reasons for vaccine shortages, the absence of competitors with sufficient capacity to compensate for these shortfalls has been an important factor.
Why So Few Vaccine Suppliers?
Several explanations for the small number of vaccine suppliers seem plausible. Developing a new vaccine is costly and risky. It can cost $700 million to bring a new vaccine from concept to market.3 Phase 3 trials for pneumococcal vaccines and Haemophilus influenzae type b vaccine required tens of thousands of subjects.6 Some observers have suggested that the licensure requirements of the Food and Drug Administration (FDA) are excessively stringent and unnecessarily limit the entry of new suppliers into the market.7,8 Unlike pharmaceutical manufacturers, vaccine producers must obtain a license in advance to produce a vaccine at a particular site, and the FDA encourages creation of commercial production capacity before the license is granted, a stipulation that puts the company at substantial financial risk.9
Vaccine suppliers also face increasingly stringent regulation of production. Suppliers undergo frequent FDA inspections of their production facilities, individual product batches require separate approval for release, and slight modifications to production processes or even the packaging of products may trigger expensive product reviews. The FDA requires frequent upgrades of vaccine production to reflect state-of-the-art manufacturing processes. In the mid-1990s, the FDA implemented Team Biologics, a new inspection process that imposed new record-keeping and administrative requirements. This regulatory approach is likely to increase the costs of producing vaccines, add to the uncertainty of rewards for investment in research and development and in production capacity, and discourage the entry of new suppliers.
In other industries, economies of scale and the development of more efficient production processes might be expected to decrease costs over time. The complexity of production and FDA-mandated upgrades of production processes limit such cost savings for vaccines.9
Despite intensive regulation of quality, vaccine companies are vulnerable to product-liability lawsuits. A surge of lawsuits in the 1980s resulted in a serious concern about the supply of DPT and other vaccines. In response, Congress passed the National Childhood Vaccine Injury Act of 1986, which established a no-fault program to compensate victims of vaccine-related adverse events. This program successfully protected vaccine suppliers from litigation until recently, when a series of lawsuits that were filed regarding a vaccine preservative, thimerosal, renewed the industry's concern about liability.
Pharmaceutical companies cannot justify investment in vaccines if their risk-adjusted returns on investment are low, and vaccine profitability appears to be relatively low.10 The prices of childhood vaccines have remained flat for two decades, the result of federal price caps and the federal government's exercise of its considerable purchasing power. The cost of immunizing children has risen dramatically in recent years because of a few new high-priced vaccines, such as the varicella and pneumococcal conjugate vaccines, rather than because of a general increase in the prices of vaccines.3
Potential market entrants face additional barriers. As with drugs, the FDA does not accept data from foreign clinical trials for licensure of a vaccine in the United States. Therefore, the supplier must repeat comprehensive clinical trials in the United States.
Immunization Coverage
Even though most children and adults have private insurance that covers immunization, 11 million children and 59 million adults have private insurance that excludes immunization.3 Even patients who have coverage for immunization often face substantial copayments, deductibles, or both. There is a general trend toward increased sharing of the cost of vaccines with patients.11 Twenty years ago, when full immunization of a child cost little, vaccine coverage and cost sharing were perhaps not critical to access. Today, when the recommended four doses of pneumococcal conjugate vaccine cost more than $240, the financial burden on many families is substantial.
Vaccines for Children, an entitlement program established in 1993, now provides free vaccines to 10 million American children. But the program excludes children who are underinsured (except for American Indians, Alaskan Natives, and children who are vaccinated at federally qualified health centers). And although Vaccines for Children covers children through the State Children's Health Insurance Program in some states, it does not cover children through stand-alone state programs, such as California's. Fourteen states address this gap by purchasing vaccines from Vaccines for Children and providing them to all children, although budget pressures are forcing states to curtail coverage for immunizations. Coverage for adults is more limited. Medicare pays for vaccination for influenza, pneumococcus, and hepatitis B, but people between the ages of 18 and 64 years have no safety-net program similar to the children's program, so 89 million adults in this age range have no coverage for vaccines.3
Insurance coverage that is fragmented complicates the physician's task of determining eligibility and can create uncertainty about receiving payment. The demands on physicians — purchasing and storing vaccines, determining what the patient's immunization needs are, explaining vaccine safety to parents, monitoring adverse affects, and reporting to immunization registries12 — are increasing but are not typically reflected in the fees that physicians charge. For years, Medicare has assumed that administering vaccines does not increase a physician's workload, and many public and private payers benchmark their fees to Medicare's rates. Private insurers often pay a provider fee that barely covers providers' vaccine costs.13,14 Consequently, private physicians sometimes choose not to immunize patients and instead to refer them to public clinics.15,16 These referrals can adversely affect care by reducing the rates of immunization, separating immunization from the patient's other care, scattering patient records, and placing stress on public health resources designed for the truly disadvantaged.
What Can Be Done?
In response to recurrent shortages of vaccines for children and adults since 2001, a number of proposals for reform have been advanced. These include expanding stockpiles of vaccines; establishing better communication among the CDC, manufacturers, the FDA, and states regarding potential disruptions in supplies; streamlining the FDA's regulatory process, including its review of new vaccine applications; strengthening the Vaccine Injury Compensation Program; requiring that manufacturers notify the U.S. government of an intention to withdraw a product; harmonizing international standards for vaccine licensure; removing price caps for vaccines; making vaccines from Vaccines for Children available at all public clinics, rather than just at federally qualified health centers; and creating incentives for vaccine production and development.17,18
Far-reaching structural changes have also been proposed, such as extending the mandate for Vaccines for Children to underinsured children and adults, providing for universal coverage through a federal purchase program, providing for direct control of vaccine production by the government through an approach similar to that used by the military, and mandating universal insurance coverage of immunization. Most proposals would increase government intervention in the vaccine market with the goal of stabilizing supplies through direct control. But they also run the risk of discouraging the development of vaccines and entry into this market by companies that are wary of federal regulation. The other approach is a federal mandate that insurers must cover immunizations, which would increase coverage of underinsured children. But if insurers increase premiums to cover the higher expected expenditure, families may lose or drop insurance coverage altogether.
The Institute of Medicine Report
An alternative that was proposed in the 2003 Institute of Medicine (IOM) report Financing Vaccines in the 21st Century attempts to find a balance that limits governmental intervention while ensuring market stability.3 The IOM report identified the large and growing government share of the vaccine market (55 percent of childhood vaccines) as a key disincentive for investment and market entry. It consequently recommended elimination of the Vaccines for Children program in order to remove the government from the business of directly purchasing vaccines. Because research and development are driven by anticipated profits,19 the IOM report recommended that the government subsidize the costs of vaccines to further stimulate private investment in the field.
The IOM study committee proposed a subsidy mechanism coupled with a requirement that all public and private insurers cover the vaccines eligible for the subsidy. It targets the subsidy to vaccines that are most beneficial to society by varying the amount of the subsidy according to the level of benefit.
How the Subsidy Would Work
The administration of vaccines often results in both health benefits and cost savings. By preventing disease, the use of vaccines can achieve reductions in the costs of treating disease that far exceed the costs of immunization. For potential vaccines that are not yet available, the CDC would conduct a study to determine the total value of the vaccine to society. Some percentage of this total value would become the subsidy amount. The IOM committee did not specify the percentage; it would have to be established legislatively in advance. Its determination would be based on two important principles. First, the subsidy should be high enough to stimulate significant investment in the vaccine. Second, the subsidy should not be allowed to vary in response to fiscal pressures — the industry must have full confidence that the subsidy will be there once the vaccine is released. The feasibility of basing subsidies on calculations of social benefit was examined by McGuire, who used published estimates of social benefits for potential vaccines, such as vaccines against Streptococcus pneumoniae and cytomegalovirus, to determine prices that would be high enough to create a desirable level of research and development but low enough to ensure substantial public benefit once a vaccine has been developed.20 Calculated prices range from current price levels to about twice the amount of current levels, depending on the degree of incentive for research and development that is provided.
Although subsidies that are calculated in this manner may result in substantially higher prices for vaccines, such prices are warranted, in the IOM committee's view, because of the important benefits of vaccines to society and their potential for undervaluation by the market. Vaccines have strong spillover effects — for instance, since they prevent the spread of contagious diseases, they benefit those who are not vaccinated as well as those who are. Consequently, some people will avoid the cost and inconvenience of getting vaccinated and rely on others to maintain community protection. Such products tend to be underused unless the government promotes them. Thus, subsidization has a clear economic rationale.
To address problems in the supply of existing vaccines, the plan would also apply to these vaccines, with some modification. If there is a substantial difference between current prices and the subsidies that are calculated on the basis of social benefit, the subsidy amount can be limited in some way — for example, by restricting the amount the subsidy would be allowed to increase per year.
Even with substantial subsidies, ensuring universal immunization will probably require a federal mandate that calls on both public and private insurers to provide all beneficiaries with full coverage for immunization. Relying on a mandate for insurers prevents immunization from being separated from other health care services. The IOM report recommended that such a mandate be funded and that insurers receive a subsidy of 100 percent for the vaccines they provide to their members. Patients without insurance would receive vouchers that could be taken to a provider of their choice to receive immunization.
A benefit of this approach is that the financial burden on physicians would be reduced. Since almost everyone would be covered (the IOM proposal excludes only healthy adults between the ages of 18 and 64 years, a group that rarely needs vaccines), determinations of eligibility would be greatly simplified, and providers' fees would be subsidized.
The IOM committee did not estimate the cost of its proposal. This will depend on the number of vaccines that are developed and that qualify for the subsidy, the social value of those vaccines, and the percentage of social value used to calculate the subsidy.
Practical and Political Challenges
Implementing any major reform entails practical and political challenges. Enacting the IOM's proposals would require regulatory changes and amendments to established law in a number of areas, including the Employee Retirement Income Security Act (ERISA), the Public Health Act, Medicare, Medicaid, and the State Children's Health Insurance Program. The proposal would also increase federal funding, even after accounting for the savings in expenditures for illness that is prevented.
A key technical consideration in the IOM's proposal is how to determine a subsidy amount in advance on the basis of the calculation of the benefit to society. Methods for valuing medical interventions are now widely used and published in major refereed journals.21,22,23 Basing payments on such an approach would require that an authoritative body make certain decisions about which techniques to use, which benefits to include, and which values to assign to them.
The IOM's recommendations have generated initial apprehension among stakeholders.24 Public health advocates have expressed concern about the prospect of replacing the Vaccines for Children program with an approach that has no precedent. For the CDC, there is a risk of losing the direct access to physicians participating in Vaccines for Children that is important for the agency's surveillance and efforts at quality control of vaccines.25 These concerns may be addressed by having the CDC administer the proposed voucher program, which is designed to give the uninsured access to vaccines in private physicians' offices. The insurance industry is concerned that the subsidy may gradually evaporate, leaving an unfunded mandate. Vaccine companies worry that the subsidy-setting process will be politically manipulated and reduced to government price setting. There may also be some concern that this system, if successful, could lead to greater government intervention in pharmaceutical pricing.
These concerns point to the need for strong legislative protections, such as a congressionally determined percentage of the total social benefit that would be used to set the subsidy for each vaccine, independently of evaluations of the net social benefit, and a scope that is limited to vaccines. However, inaction also has costs — recurring shortages, missed opportunities for vaccine innovation, perpetuation of a fragmented financing system for vaccines, and increased financial burdens on public health departments.
Incremental reforms can improve the current system, but structural changes are needed to ensure a stable vaccine supply in the long term. It may take repeated disruptions in the supply of vaccines to create political momentum for change of this magnitude.
Source Information
From the Department of Economics, Duke University, Durham, N.C. (F.A.S.); the Children's Outcomes Research Program, University of Colorado School of Medicine, and Children's Hospital, Denver (S.B.); and the Department of Health Policy, George Washington University Medical Center (S.R.), and the Division of Behavioral and Social Sciences and Education and the Institute of Medicine, the National Academies (R.A.C., R.B.G.) — both in Washington, D.C.
References
National, state, and urban area vaccination coverage levels among children aged 19-35 months -- United States, 2001. MMWR Morb Mortal Wkly Rep 2002;51:664-666.
Influenza and pneumococcal vaccination levels among persons aged > or = 65 years -- United States, 2001. MMWR Morb Mortal Wkly Rep 2002;51:1019-1024.
Institute of Medicine. Financing vaccines in the 21st century: assuring access and availability. Washington, D.C.: National Academies Press, 2003.
Sing M, Willian MK. Supplying vaccines: an overview of the market and regulatory context. In: Pauly M, Robinson CA, Sepe S, Sing M, Willian MK, eds. Supplying vaccine: an economic analysis of critical issues. Amsterdam: IOS Press, 1996:45-99.
Updated recommendations on the use of pneumococcal conjugate vaccine: suspension of recommendation for third and fourth dose. MMWR Morb Mortal Wkly Rep 2004;53:177-178.
Foulkes MA, Ellenberg SS. Vaccine efficacy and safety evaluation. In: The Jordan report: accelerated development of vaccines 2002. Bethesda, Md.: National Institutes of Allergy and Infectious Diseases, 2002:50-6.
Carpenter DP. The political economy of FDA drug review: processing, politics, and lessons for policy. Health Aff (Millwood) 2004;23:52-63.
Wiktorowicz ME. Emergent patterns in the regulation of pharmaceuticals: institutions and interests in the United States, Canada, Britain, and France. J Health Polit Policy Law 2003;28:615-658.
Grabowski HG, Vernon JM. The search for new vaccines: the effects of the Vaccines for Children Program. Washington, D.C.: AEI Press, 1997.
Kremer M, Snyder CM. Why are drugs more profitable than vaccines? Working paper no. W9833. Cambridge, Mass.: National Bureau of Economic Research, July 2003.
Holahan J, Wang M. Changes in health care coverage 2000-2001. Washington, D.C.: Henry J. Kaiser Family Foundation, March 2003.
Fontanesi J, De Guire M, Holcomb K, Sawyer MH. The cost to immunize during well-child visits. Am J Med Qual 2001;16:196-201.
Glazner JE, Steiner JF, Haas KJ, Renfrew B, Deutchman M, Berman S. Is reimbursement for childhood immunizations adequate? Evidence from two rural areas in Colorado. Public Health Rep 2001;116:219-225.
Freed GL, Davis MM, Andreae MC, Bass S, Weinblatt H. Reimbursement for Prevnar: a modern-day version of Hercules and the Hydra. Pediatrics 2003;2:399-400.
Zimmerman RK, Medsger AR, Ricci EM, Raymund M, Mieczkowski TA, Grufferman S. Impact of free vaccine and insurance status on physician referral of children to public vaccine clinics. JAMA 1997;278:996-1000.
Lieu TA, Smith MD, Newacheck PW, Langthorn D, Venkatesh P, Herradora R. Health insurance and preventive care sources of children at public immunization clinics. Pediatrics 1994;93:373-378.
Childhood vaccines: ensuring an adequate supply poses continuing challenges. Washington, D.C.: General Accounting Office, September 2002. (GAO-02-987.)
Santoli JM, Peter G, Arvin AM, et al. Strengthening the supply of routinely recommended vaccines in the United States: recommendations from the National Vaccine Advisory Committee. JAMA 2003;290:3122-3128.
Finkelstein A. Static and dynamic effects of health policy: evidence from the vaccine industry. Q J Econ 2004;119:527-564.
McGuire TG. Setting prices for new vaccines (in advance). Int J Health Care Finance Econ 2003;3:207-24.
Sloan FA, ed. Valuing health care: costs, benefits, and effectiveness of pharmaceuticals and other medical technologies. New York: Cambridge University Press, 1995.
Ekwueme DU, Strebel PM, Hadler SC, Meltzer MI, Allen JW, Livengood JR. Economic evaluation of the use of diphtheria, tetanus, and acellular pertussis vaccine or diphtheria, tetanus, and whole-cell pertussis vaccine in the United States, 1997. Arch Pediatr Adolesc Med 2000;154:797-803.
Jacobs RJ, Meyerhoff AS. Comparative cost effectiveness of varicella, hepatitis A, and pneumococcal conjugate vaccines. Prev Med 2001;33:639-645.
Hinman AR, Gellin BG, National Vaccine Advisory Committee. Institute of Medicine report on financing vaccines in the 21st century: National Vaccine Advisory Committee/National Vaccine Program Office follow-up. (Accessed November 10, 2004, at http://www.hhs.gov/nvpo/nvac/NVAC-IOM100604.htm.)
Orenstein W. Protecting our kids: what is causing the current shortage in childhood vaccines? Hearing before the Senate Committee on Governmental Affairs (June 6). Washington, D.C.: Government Printing Office, 2002.(Frank A. Sloan, Ph.D., St)
The Vaccine-Supply Industry
The number of companies that produce vaccines for the United States has declined markedly since the 1960s. Today only five companies produce all routine vaccines for this market, and for each of eight of these vaccines — including the measles, mumps, and rubella (MMR); diphtheria, pertussis, and tetanus (DPT); and polio vaccines — there is only one supplier.3 Should one of these suppliers cease production, it could take years to have a replacement vaccine licensed and publicly available.4
The dearth of suppliers has decreased the availability of vaccines. In 2001–2002, the United States had shortages of 8 of the 11 recommended childhood vaccines: DPT, MMR, varicella, and pneumococcal conjugate vaccines. In 2004, the country again had a shortage of pneumococcal conjugate vaccine, prompting the Centers for Disease Control and Prevention (CDC) to recommend suspension of the third and fourth doses.5 Although there are many reasons for vaccine shortages, the absence of competitors with sufficient capacity to compensate for these shortfalls has been an important factor.
Why So Few Vaccine Suppliers?
Several explanations for the small number of vaccine suppliers seem plausible. Developing a new vaccine is costly and risky. It can cost $700 million to bring a new vaccine from concept to market.3 Phase 3 trials for pneumococcal vaccines and Haemophilus influenzae type b vaccine required tens of thousands of subjects.6 Some observers have suggested that the licensure requirements of the Food and Drug Administration (FDA) are excessively stringent and unnecessarily limit the entry of new suppliers into the market.7,8 Unlike pharmaceutical manufacturers, vaccine producers must obtain a license in advance to produce a vaccine at a particular site, and the FDA encourages creation of commercial production capacity before the license is granted, a stipulation that puts the company at substantial financial risk.9
Vaccine suppliers also face increasingly stringent regulation of production. Suppliers undergo frequent FDA inspections of their production facilities, individual product batches require separate approval for release, and slight modifications to production processes or even the packaging of products may trigger expensive product reviews. The FDA requires frequent upgrades of vaccine production to reflect state-of-the-art manufacturing processes. In the mid-1990s, the FDA implemented Team Biologics, a new inspection process that imposed new record-keeping and administrative requirements. This regulatory approach is likely to increase the costs of producing vaccines, add to the uncertainty of rewards for investment in research and development and in production capacity, and discourage the entry of new suppliers.
In other industries, economies of scale and the development of more efficient production processes might be expected to decrease costs over time. The complexity of production and FDA-mandated upgrades of production processes limit such cost savings for vaccines.9
Despite intensive regulation of quality, vaccine companies are vulnerable to product-liability lawsuits. A surge of lawsuits in the 1980s resulted in a serious concern about the supply of DPT and other vaccines. In response, Congress passed the National Childhood Vaccine Injury Act of 1986, which established a no-fault program to compensate victims of vaccine-related adverse events. This program successfully protected vaccine suppliers from litigation until recently, when a series of lawsuits that were filed regarding a vaccine preservative, thimerosal, renewed the industry's concern about liability.
Pharmaceutical companies cannot justify investment in vaccines if their risk-adjusted returns on investment are low, and vaccine profitability appears to be relatively low.10 The prices of childhood vaccines have remained flat for two decades, the result of federal price caps and the federal government's exercise of its considerable purchasing power. The cost of immunizing children has risen dramatically in recent years because of a few new high-priced vaccines, such as the varicella and pneumococcal conjugate vaccines, rather than because of a general increase in the prices of vaccines.3
Potential market entrants face additional barriers. As with drugs, the FDA does not accept data from foreign clinical trials for licensure of a vaccine in the United States. Therefore, the supplier must repeat comprehensive clinical trials in the United States.
Immunization Coverage
Even though most children and adults have private insurance that covers immunization, 11 million children and 59 million adults have private insurance that excludes immunization.3 Even patients who have coverage for immunization often face substantial copayments, deductibles, or both. There is a general trend toward increased sharing of the cost of vaccines with patients.11 Twenty years ago, when full immunization of a child cost little, vaccine coverage and cost sharing were perhaps not critical to access. Today, when the recommended four doses of pneumococcal conjugate vaccine cost more than $240, the financial burden on many families is substantial.
Vaccines for Children, an entitlement program established in 1993, now provides free vaccines to 10 million American children. But the program excludes children who are underinsured (except for American Indians, Alaskan Natives, and children who are vaccinated at federally qualified health centers). And although Vaccines for Children covers children through the State Children's Health Insurance Program in some states, it does not cover children through stand-alone state programs, such as California's. Fourteen states address this gap by purchasing vaccines from Vaccines for Children and providing them to all children, although budget pressures are forcing states to curtail coverage for immunizations. Coverage for adults is more limited. Medicare pays for vaccination for influenza, pneumococcus, and hepatitis B, but people between the ages of 18 and 64 years have no safety-net program similar to the children's program, so 89 million adults in this age range have no coverage for vaccines.3
Insurance coverage that is fragmented complicates the physician's task of determining eligibility and can create uncertainty about receiving payment. The demands on physicians — purchasing and storing vaccines, determining what the patient's immunization needs are, explaining vaccine safety to parents, monitoring adverse affects, and reporting to immunization registries12 — are increasing but are not typically reflected in the fees that physicians charge. For years, Medicare has assumed that administering vaccines does not increase a physician's workload, and many public and private payers benchmark their fees to Medicare's rates. Private insurers often pay a provider fee that barely covers providers' vaccine costs.13,14 Consequently, private physicians sometimes choose not to immunize patients and instead to refer them to public clinics.15,16 These referrals can adversely affect care by reducing the rates of immunization, separating immunization from the patient's other care, scattering patient records, and placing stress on public health resources designed for the truly disadvantaged.
What Can Be Done?
In response to recurrent shortages of vaccines for children and adults since 2001, a number of proposals for reform have been advanced. These include expanding stockpiles of vaccines; establishing better communication among the CDC, manufacturers, the FDA, and states regarding potential disruptions in supplies; streamlining the FDA's regulatory process, including its review of new vaccine applications; strengthening the Vaccine Injury Compensation Program; requiring that manufacturers notify the U.S. government of an intention to withdraw a product; harmonizing international standards for vaccine licensure; removing price caps for vaccines; making vaccines from Vaccines for Children available at all public clinics, rather than just at federally qualified health centers; and creating incentives for vaccine production and development.17,18
Far-reaching structural changes have also been proposed, such as extending the mandate for Vaccines for Children to underinsured children and adults, providing for universal coverage through a federal purchase program, providing for direct control of vaccine production by the government through an approach similar to that used by the military, and mandating universal insurance coverage of immunization. Most proposals would increase government intervention in the vaccine market with the goal of stabilizing supplies through direct control. But they also run the risk of discouraging the development of vaccines and entry into this market by companies that are wary of federal regulation. The other approach is a federal mandate that insurers must cover immunizations, which would increase coverage of underinsured children. But if insurers increase premiums to cover the higher expected expenditure, families may lose or drop insurance coverage altogether.
The Institute of Medicine Report
An alternative that was proposed in the 2003 Institute of Medicine (IOM) report Financing Vaccines in the 21st Century attempts to find a balance that limits governmental intervention while ensuring market stability.3 The IOM report identified the large and growing government share of the vaccine market (55 percent of childhood vaccines) as a key disincentive for investment and market entry. It consequently recommended elimination of the Vaccines for Children program in order to remove the government from the business of directly purchasing vaccines. Because research and development are driven by anticipated profits,19 the IOM report recommended that the government subsidize the costs of vaccines to further stimulate private investment in the field.
The IOM study committee proposed a subsidy mechanism coupled with a requirement that all public and private insurers cover the vaccines eligible for the subsidy. It targets the subsidy to vaccines that are most beneficial to society by varying the amount of the subsidy according to the level of benefit.
How the Subsidy Would Work
The administration of vaccines often results in both health benefits and cost savings. By preventing disease, the use of vaccines can achieve reductions in the costs of treating disease that far exceed the costs of immunization. For potential vaccines that are not yet available, the CDC would conduct a study to determine the total value of the vaccine to society. Some percentage of this total value would become the subsidy amount. The IOM committee did not specify the percentage; it would have to be established legislatively in advance. Its determination would be based on two important principles. First, the subsidy should be high enough to stimulate significant investment in the vaccine. Second, the subsidy should not be allowed to vary in response to fiscal pressures — the industry must have full confidence that the subsidy will be there once the vaccine is released. The feasibility of basing subsidies on calculations of social benefit was examined by McGuire, who used published estimates of social benefits for potential vaccines, such as vaccines against Streptococcus pneumoniae and cytomegalovirus, to determine prices that would be high enough to create a desirable level of research and development but low enough to ensure substantial public benefit once a vaccine has been developed.20 Calculated prices range from current price levels to about twice the amount of current levels, depending on the degree of incentive for research and development that is provided.
Although subsidies that are calculated in this manner may result in substantially higher prices for vaccines, such prices are warranted, in the IOM committee's view, because of the important benefits of vaccines to society and their potential for undervaluation by the market. Vaccines have strong spillover effects — for instance, since they prevent the spread of contagious diseases, they benefit those who are not vaccinated as well as those who are. Consequently, some people will avoid the cost and inconvenience of getting vaccinated and rely on others to maintain community protection. Such products tend to be underused unless the government promotes them. Thus, subsidization has a clear economic rationale.
To address problems in the supply of existing vaccines, the plan would also apply to these vaccines, with some modification. If there is a substantial difference between current prices and the subsidies that are calculated on the basis of social benefit, the subsidy amount can be limited in some way — for example, by restricting the amount the subsidy would be allowed to increase per year.
Even with substantial subsidies, ensuring universal immunization will probably require a federal mandate that calls on both public and private insurers to provide all beneficiaries with full coverage for immunization. Relying on a mandate for insurers prevents immunization from being separated from other health care services. The IOM report recommended that such a mandate be funded and that insurers receive a subsidy of 100 percent for the vaccines they provide to their members. Patients without insurance would receive vouchers that could be taken to a provider of their choice to receive immunization.
A benefit of this approach is that the financial burden on physicians would be reduced. Since almost everyone would be covered (the IOM proposal excludes only healthy adults between the ages of 18 and 64 years, a group that rarely needs vaccines), determinations of eligibility would be greatly simplified, and providers' fees would be subsidized.
The IOM committee did not estimate the cost of its proposal. This will depend on the number of vaccines that are developed and that qualify for the subsidy, the social value of those vaccines, and the percentage of social value used to calculate the subsidy.
Practical and Political Challenges
Implementing any major reform entails practical and political challenges. Enacting the IOM's proposals would require regulatory changes and amendments to established law in a number of areas, including the Employee Retirement Income Security Act (ERISA), the Public Health Act, Medicare, Medicaid, and the State Children's Health Insurance Program. The proposal would also increase federal funding, even after accounting for the savings in expenditures for illness that is prevented.
A key technical consideration in the IOM's proposal is how to determine a subsidy amount in advance on the basis of the calculation of the benefit to society. Methods for valuing medical interventions are now widely used and published in major refereed journals.21,22,23 Basing payments on such an approach would require that an authoritative body make certain decisions about which techniques to use, which benefits to include, and which values to assign to them.
The IOM's recommendations have generated initial apprehension among stakeholders.24 Public health advocates have expressed concern about the prospect of replacing the Vaccines for Children program with an approach that has no precedent. For the CDC, there is a risk of losing the direct access to physicians participating in Vaccines for Children that is important for the agency's surveillance and efforts at quality control of vaccines.25 These concerns may be addressed by having the CDC administer the proposed voucher program, which is designed to give the uninsured access to vaccines in private physicians' offices. The insurance industry is concerned that the subsidy may gradually evaporate, leaving an unfunded mandate. Vaccine companies worry that the subsidy-setting process will be politically manipulated and reduced to government price setting. There may also be some concern that this system, if successful, could lead to greater government intervention in pharmaceutical pricing.
These concerns point to the need for strong legislative protections, such as a congressionally determined percentage of the total social benefit that would be used to set the subsidy for each vaccine, independently of evaluations of the net social benefit, and a scope that is limited to vaccines. However, inaction also has costs — recurring shortages, missed opportunities for vaccine innovation, perpetuation of a fragmented financing system for vaccines, and increased financial burdens on public health departments.
Incremental reforms can improve the current system, but structural changes are needed to ensure a stable vaccine supply in the long term. It may take repeated disruptions in the supply of vaccines to create political momentum for change of this magnitude.
Source Information
From the Department of Economics, Duke University, Durham, N.C. (F.A.S.); the Children's Outcomes Research Program, University of Colorado School of Medicine, and Children's Hospital, Denver (S.B.); and the Department of Health Policy, George Washington University Medical Center (S.R.), and the Division of Behavioral and Social Sciences and Education and the Institute of Medicine, the National Academies (R.A.C., R.B.G.) — both in Washington, D.C.
References
National, state, and urban area vaccination coverage levels among children aged 19-35 months -- United States, 2001. MMWR Morb Mortal Wkly Rep 2002;51:664-666.
Influenza and pneumococcal vaccination levels among persons aged > or = 65 years -- United States, 2001. MMWR Morb Mortal Wkly Rep 2002;51:1019-1024.
Institute of Medicine. Financing vaccines in the 21st century: assuring access and availability. Washington, D.C.: National Academies Press, 2003.
Sing M, Willian MK. Supplying vaccines: an overview of the market and regulatory context. In: Pauly M, Robinson CA, Sepe S, Sing M, Willian MK, eds. Supplying vaccine: an economic analysis of critical issues. Amsterdam: IOS Press, 1996:45-99.
Updated recommendations on the use of pneumococcal conjugate vaccine: suspension of recommendation for third and fourth dose. MMWR Morb Mortal Wkly Rep 2004;53:177-178.
Foulkes MA, Ellenberg SS. Vaccine efficacy and safety evaluation. In: The Jordan report: accelerated development of vaccines 2002. Bethesda, Md.: National Institutes of Allergy and Infectious Diseases, 2002:50-6.
Carpenter DP. The political economy of FDA drug review: processing, politics, and lessons for policy. Health Aff (Millwood) 2004;23:52-63.
Wiktorowicz ME. Emergent patterns in the regulation of pharmaceuticals: institutions and interests in the United States, Canada, Britain, and France. J Health Polit Policy Law 2003;28:615-658.
Grabowski HG, Vernon JM. The search for new vaccines: the effects of the Vaccines for Children Program. Washington, D.C.: AEI Press, 1997.
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