David's New Book

Thursday, July 3, 2014

Vaccines - Paying the Price

In an article in the New York Times today, Elisabeth Rosenthal  does a nice job of demonstrating the rising price of vaccines and how it is affecting the ability of health care professionals to provide these essential medicines to the children who need them. She quotes a vaccine researcher at Cincinnati Children’s Hospital, Dr. Steven Black, as saying that, “You have to make back your investment and pay your shareholders, but at what point do you say, ‘Look, you’ve had your steak, gravy and potatoes and this is enough?’ ”  She then provides information from Pfizer, the maker of the most expensive vaccine, Prevnar 13 at $136 per dose for four doses per child in the US ($544 total).  They note that this is an extremely complicated vaccine that requires two years to manufacture to say nothing of the many 10s of thousands of patients that were included in the vaccine trials to prove safety and efficacy for the FDA.

I was at Wyeth when the original Prevnar 7 vaccine was being developed. IF you can get through your trials successfully, and IF your vaccine is felt to be important enough to be recommended for all children (in whatever country), you can devise a price based on a cost-benefit analysis and get that price guaranteed (almost).  The birth cohort in the US is around 4 million.  You do the calculations. When the vaccine group would present their forecasts for Prevnar, I was flabbergasted.  How could a vaccine be a billion dollar blockbuster even in the first year of sales?  But I was the only one in the room to raise his eyebrows and roll his eyes.  Everyone else, from the CEO on down was nodding his or her head in agreement. As it turns out, they were all right and I was wrong (no surprise there).  

But Rosenthal points out that the companies frequently raise their prices after the vaccine has been approved and recommended for all children and after an initial price has been agreed.  What is happening there is a constant negotiation based on new data of efficacy and other factors that might enter into the cost-benefit equation. The other thing that is happening is that the US is subsidizing the rest of the world in this regard.  As Rosenthal correctly points out, prices in the US tend to be substantially higher than those in the rest of the world. Every other country in the world has a national negotiation and sets a single price for the entire country.  Not the US.  The CDC negotiates their contract, private insurers do the same, the military might do the same – and they all end up with different prices and all are more expensive than those outside the US.

Yes, the pharmaceutical companies need to be able to provide a return to shareholders.  But why should the US provide a greater share of the profits?  Why shouldn’t this be better distributed among the entire developed world?  Until we learn some of the positive lessons from our more socialist neighbors, American consumers and taxpayers will continue to subsidize vaccines for babies in London, Brussels and Geneva.

PS – the same is true in general for drugs . . .