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Why are there so few vaccine suppliers?

February 7, 2012 in Contagious Disease, Pharmaceuticals, Regulation, Supply of Medical Services, Vaccinations | No comments

In many cases, only a handful of suppliers produce vaccines for a given disease.  In fact, for several vaccine types the U.S. has fewer suppliers than countries with a smaller market and a higher level of government purchase.

One reason for this finding could be strict government regulation.  All vaccines must be approved by the FDA.  Further, the CDC provides guidelines to physicians regarding who should get which vaccines.  The CDC also is a large purchaser of vaccines.  Thus, at first glance, it seems that government regulation may be causing industry consolidation in the vaccine market.

A paper by Danzon and Pereira, however, finds this not to be the case.  They find that the likelihood a supplier exits from a particular vaccine market is not effected by whether the CDC is a purchaser of the vaccine, the amount of vaccine the CDC purchases, or the CDC price at the time the firm exits.

The authors propose that the large economies of scale in vaccine production are the cause of the lack of competition in the vaccine market.

“The vaccine industry is characterized by large fixed costs of initial vaccine development as well as substantial ‘semifixed’ costs of producing an individual batch (a process that may take 6 to 18 months) but low marginal costs of producing an additional dose, up to the batch limit, and low storability. If there are multiple competing suppliers with large sunk costs and low marginal costs, competition may drive the price low enough that it is relatively unattractive for multiple firms to remain in the market and for new firms to enter.”

Further, the demand for vaccines is price sensitive.  Insurers (public and private) typically pay physicians and hospitals a fixed payment per vaccine administered.  Increases in vaccine costs come directly from the provider’s bottom line.

Some observers may point to the 2004-2005 influenza vaccine shortage and claim that government regulation had to cause this shortage.  The authors note that although several suppliers did exit the market before the shortage years, “…this cannot be blamed on government purchase and price controls, as less than 20 percent of the flu vaccine is publicly purchased.”

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H1N1: Do I have it? Do I need a vaccine?

October 20, 2009 in Contagious Disease, Public Health | No comments

Two weeks ago, the U.S. government released its H1N1 vaccine to the public.  Many people have had a number of questions about whether or not they should get the vaccine.  The CDC website has a list of Key Facts and a Q&A section that is helpful.  

There are five major groups who should have priority of getting the vaccine:

  • pregnant women,
  • people who live with or provide care for infants younger than 6 months (e.g., parents, siblings, and day care providers),
  • health care and emergency medical services personnel,
  • people 6 months through 24 years of age, and,
  • people 25 years through 64 years of age who have certain medical conditions that put them at higher risk for influenza-related complications.

There are a number of people who should NOT get the vaccine.

  • People who have a severe allergy to chicken eggs.
  • People who have had a severe reaction to an influenza vaccination.
  • People who developed Guillain-Barré syndrome (GBS) within 6 weeks of getting an influenza vaccine previously.
  • Children younger than 6 months of age (influenza vaccine is not approved for this age group), and
  • People who have a moderate-to-severe illness with a fever (they should wait until they recover to get vaccinated.)

The H1N1 vaccine is prepared using the same method as used for the seasonal flu.  However, because the H1N1 vaccine was developed too late, it could not be added to the seasonal flu vaccine.  Thus there are two flu shots available now, one for the seasonal flu and one for H1N1. 

If you think you have the H1N1 illness, you can use this self assessment tool to verify whether or not you should see a doctor.

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