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CHILDHOOD VACCINE UNIVERSAL PUBLIC PURCHASE COULD DRIVE MANUFACTURERS FROM MARKET; EFFECT ON NUMBER IMMUNIZED UNCERTAIN, ADVISORY CMTE. TOLD

Executive Summary

A universal public purchase program for required childhood vaccines could lead vaccine manufacturers to leave the market and would have an uncertain effect on the number of children receiving immunization, Brandeis University researcher Donald Shepard, PhD, told a meeting of the National Vaccine Advisory Committee April 21. Shepard was commissioned by the National Vaccine Program Study Office to examine the current market framework for childhood vaccines and to discuss the possible impact of different vaccine purchase arrangements. Based on his preliminary findings, Shepard warned that "existing manufacturers...might decide that it is no longer worthwhile for them" if a universal purchasing program were to be implemented, particularly if "too much pressure were put on [them]" to charge lower prices to the single purchaser. Study co-investigator Margo Levine, Clayton Environmental Consultants, noted that another potential drawback of universal purchasing is the lack of information on whether immunizations would increase. "We don't know what happens," she said. Another factor is "R&D in the private sector." Centers for Disease Control Director William Roper, MD, expressed concern at a recent hearing that U.S. R&D on childhood vaccines might decline under a universal public purchase program at a recent Senate hearing ("The Pink Sheet" April 13, T&G-3). The greatest constraint on immunization is not price or supply, Shepard concluded, but rather delivery problems. A survey of 13 "experts in vaccine delivery" identified delivery problems such as "missed opportunities" (caregivers fail to deliver needed vaccinations when the child is in the office or clinic for another reason), shortfalls in delivery, inadequate access and awareness. While price is not necessarily the major problem with providing childhood vaccines, Shepard noted that another potential corollary of universal government purchasing would be an increase in price per dose to the public sector. Shepard said the weighted average price paid by public institutions such as CDC and individual states could increase by 50%: from $6.40 per dose of the three required childhood vaccines (OPV, DTP and MMR) up to $9.60. Shepard called $9.60 a "compromise price" -- half way between the $6.40 discount price available to CDC and the states $12.73 average price currently paid by the private sector. Shepard also presented an "increased public purchase model" in which the proportion of vaccines purchased by the public sector was increased from its current level, approximately 50%, to 70%. In this model, the average price charged to the private sector per dose of the three vaccines rose from the current $12.73 to $16.90, while the public sector price remained the same at $6.40. The researcher said this model assumes that "[manufacturers] view the public part as a discount that is subsidized by the private sector" and revenue to the manufacturers "remains fixed." He pointed to Merck's childhood vaccine initiative, which was unveiled at the Senate hearing as an example of this model of increased public purchase. Merck Vaccine Division President Gordon Douglas, MD, responded to Shepard's suggestion that Merck would raise its private sector price to make up for increased discount sales to the public sector. "We did not contemplate any compensatory increase in the private market," Douglas said. Douglas is a member of the advisory committee. Shepard recommended various strategies for reducing vaccine prices by "trying to encourage competition among suppliers." These included "harmonizing U.S. and European vaccine approval standards" and encouragement of "more foreign buyers and biotech companies to enter the market." He also suggested that "one might ask the states to raise the Medicaid reimbursement for vaccinations to cover real costs." Another action might be to "consider an alternative bidding strategy" in which CDC and the states buy the same vaccine from several different suppliers instead of the current "all or nothing procurement" from one company. Aside from currently available vaccines, Shepard said the federal government and the states should be encouraged "to budget for anticipated vaccines at the same time the research is ongoing" to prevent a lag between availability of new vaccines and the budgeting of funds to pay for them.

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