[lit-ideas] Re: flu vaccine
- From: Eternitytime1@xxxxxxx
- To: lit-ideas@xxxxxxxxxxxxx
- Date: Fri, 29 Oct 2004 09:31:31 EDT
In a message dated 10/29/2004 8:22:12 AM Central Daylight Time,
aamago@xxxxxxxxxxxxx writes:
http://www.nytimes.com/2004/10/29/business/29inoculate.html
Do you have the actual article?
Andy
Hi,
Here it is:
New York Times
October 29, 2004
Vaccines Are Good Business for Drug Makers
By ANDREW POLLACK
s the nation tries to comprehend this year's shortage of flu vaccine, many
experts have explained that the vaccines business holds little allure for drug
companies, because of low prices, strict regulations and uncertain demand.
But try telling that to _Nabi_
(http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile
.asp&symb=NABI) Biopharmaceuticals, a small company in Boca Raton, Fla.,
which is testing one vaccine to protect patients in hospitals and kidney
dialysis centers from potentially fatal bacterial infections and another to
help
people quit smoking.
Or tell it to Vical, a San Diego company trying to develop an arsenal of
bioengineered vaccines for viruses like those that cause Ebola, West Nile and
SARS.
Or tell it to _Wyeth_
(http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb
=WYE) , a big drug maker whose vaccine Prevnar, used against the
pneumococcal bacteria that can cause pneumonia, meningitis and ear infections,
costs
more than $250 for the four-dose treatment given to infants. Despite the
price,
the government has recommended that all infants get the vaccine, and insurers
generally pay for it - as does the federal Vaccines for Children program for
low-income families. Prevnar, with sales expected to top $1 billion this
year, would be the world's first "blockbuster" vaccine.
Vaccines, it turns out, can make for pretty good business.
Even flu vaccines, despite challenges that include the need to reformulate
the medicine each season, are potentially more lucrative than they used to be,
with wholesale prices up fourfold since the late 90's.
"I am not one of those who think this is an industry plagued by low prices,
because it's not true," said Anthony F. Holler, chief executive of _ID
Biomedical_
(http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=IDBE)
, a
Canadian company whose excess inventory of flu shots might help augment the
American supply this winter. "I just think that people are thinking of the
business
that occurred 10, 15 years ago."
The current shortage has more to do with past government and industry
decisions, which reduced the nation's suppliers to two: _Chiron_
(http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/
nyt-com/html-companyprofile.asp&symb=CHIR) and the vaccine unit of
Sanofi-Aventis. That occurred in part because the business requires a heavy
investment, which, economists say, tends to favor having fewer, big suppliers
rather
than many smaller ones.
Now, to help prevent shortages, the government is considering steps that
include expanding the amount of flu vaccine it puts into an emergency stockpile
for childhood vaccines. This was the first year the government decided to add
flu vaccine to that stockpile. Another possibility is guaranteeing the
purchase of a certain number of flu shots each year, possibly beyond what the
industry is contemplating manufacturing. That might attract more companies to
the
business or induce existing ones to produce more than needed, providing some
cushion in case one supplier runs into problems.
As those proposals indicate, the vaccine business is as complex as the market
dynamics that drive it. That is why the medicines receiving the biggest push
from the industry are likely to be ones with a perceived market in the
United States, which spends more than half the world's drug dollars.
With American free-market forces so heavily in play, vaccines for malaria or
other diseases that mainly afflict developing countries are not likely to be
pursued except through philanthropic efforts. But with diseases that affect
Americans, the combination of new technologies, higher prices and new target
populations - adults, not children, for instance - are opening new vistas for
the business, even as the older childhood vaccines generally remain
lower-priced commodities.
"It's a tough business for older products," said R. Gordon Douglas, an
industry consultant who ran the vaccine business for 10 years at _Merck_
(http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.co
m/custom/nyt-com/html-companyprofile.asp&symb=MRK) & Company. "It's a good
business for new products."
The role played by government can be crucial to determining what vaccines get
produced, at what prices and in what quantities.
For older vaccines used to prevent childhood diseases like mumps, measles and
diphtheria, for example, more than half the doses are purchased by the
federal Vaccines for Children program. Prices are capped so they rise no
faster
than inflation. At $10 to $30 a dose, such vaccines are not a growth market,
which helps explain why there is only a single supplier for five of the eight
recommended childhood vaccines and why periodic shortages still occur.
Like many of the older childhood immunizations, flu vaccines are considered
commodities. But because most are sold through the private sector, there are
no caps on prices.
In the late 1990's four companies supplied flu vaccines but two - Wyeth and
_King Pharmaceuticals_
(http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb
=KG) - dropped out, citing low profits and heavy expenditures to meet
increasingly stringent regulatory requirements to prevent contamination.
In the same period, however, demand for flu shots was on the rise as
government health officials expanded the categories of people recommended to
receive
the vaccine. As a result of that demand and the reduction in the number of
suppliers, flu vaccine prices have quadrupled since the late 1990's, to around
$8 a dose wholesale.
That trend appeared to be attracting more companies to the field even before
the recent shortage. Chiron, for instance, acquired a British flu vaccine
company last year largely to enter the American market; it was problems at the
British plant, not a lack of profit motive, that created Chiron's shortage.
And ID Biomedical of Canada had been planning to enter the American market in
a few years, though the shortage might now speed its entry. Others, like
_Baxter International_
(http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=BA
X) , have been weighing entering the market within a few years.
Various economic arguments can be made for why the government should play a
role in promoting the use of vaccines. One is that they are among the most
cost-effective modes of medicine. Preventing a disease - often, the inoculation
lasts a lifetime - can be far less expensive than treating it once it
develops and spreads. Economists have estimated that every dollar spent on
some of
the inexpensive childhood vaccines has yielded benefits as high as $27. But
left to their own devices, individuals may not highly value vaccines because
of
the uncertainty that they themselves will ever get the disease.
Whatever the government's role, there are business obstacles for vaccines,
including a much smaller market than with drugs. Total sales of all vaccines
worldwide are around $8 billion, less than sales of _Pfizer's_
(http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/cust
om/nyt-com/html-companyprofile.asp&symb=PFE) Lipitor cholesterol-lowering
pill alone.
And because vaccines are given to healthy people, safety and liability
concerns can be greater than with drugs, which are given to sick people, who
are
willing to bear some risk of side effects to get better. Liability concerns
drove many companies out of the vaccine business before Congress enacted a law
in 1986 providing some protection to makers of childhood vaccines. Companies
say they are still vulnerable on adult vaccines and are still being sued for
the use of thimerosal, a mercury-containing preservative that has been largely
removed from pediatric vaccines.
Potential liability is also on the mind of Merck, which hopes to get approval
for a vaccine aimed at rotavirus, a cause of life-threatening diarrhea. The
company is testing it on 70,000 children - an enormous number for a clinical
trial - because the company wants to rule out a rare side effect that caused
a rotavirus vaccine by Wyeth to be pulled from the market in 1999.
Merck, which recently withdrew its painkiller Vioxx from the market and has
had several drugs fail in clinical trials, is counting three vaccines among
the most important products it expects to bring to market in the next few
years. Besides the rotavirus vaccine, there is one for human papilloma virus,
which is believed to cause cervical cancer. The third is for shingles, a
disease
of adults caused by the chickenpox virus.
As Merck's efforts indicate, many of the newer vaccines aim at adult
diseases. "In the next 15 to 20 years we're going to move from pediatric
vaccines to
adolescent vaccines and adult vaccines," said Vijay B. Samant, chief
executive of Vical.
If, as some economists argue, vaccines are underused relative to their value
to public health, then the government could have several roles.
Urging vaccination, as is done for childhood diseases, assures manufacturers
of a market. And the government can buy vaccines for a stockpile, as it is
now doing for vaccines for anthrax and smallpox.
But industry officials, like Wayne Pisano of Aventis Pasteur, the vaccine
unit of Sanofi-Aventis, say the most important factor for a healthy vaccine
business is higher prices. "You can't have high investment, high regulatory
requirements and low prices," Mr. Pisano said.
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