The Mystery of Vaccine Shortage Revealed
I have come across several blog posts (here and here) about the flu vaccine shortage. Many people often question why the vaccine makers or why the government can't get this right--how hard is it to just make enough for everybody, and how many people have to die of the flu before we learn our lesson? I thought this is a good opportunity to explain why we seem to run out of flu vaccines all the time.
First of all, it takes a huge amount of effort and time to develop a vaccine. Production of the flu vaccine for the month of October has to be started in early spring; that is why when there's a shortage, supplies do not magically increase. But that doesn't explain why there are so few companies making flu vaccines and the ones that do, don't make enough to begin with. There are several reasons, most of which are related to market forces and government regulations. The bottom line is that the profit margin is simply too low in the vaccine business. The manufacturing cost has risen steadily due to government regulation and liability issues, but the price remains stubbornly low. The government, the major purchaser of the flu vaccine, uses its clout to force the price down. There is also the social perception that pharmaceutical companies shouldn't be "gouging" people during a time of need because it's immoral; any attempt to raise the price significantly will surely be met by public outcry.
Wall Street can be harsh; investors demand profits on their investments. Therefore when companies are faced with the decision of how to best invest their capital, other options like making blockbuster drugs become far more attractive than vaccines.
Why is it so costly to make vaccines?
1. Biological products like vaccines are extremely difficult to make. They are labor intensive and the risk of failure is high, compared to synthetic drugs. The vaccine production also happens in sequential steps; any disruption along the sequence means the whole lot has to be discarded and the production has to start over from step one.
2. Many companies found it hard to meet increasing government regulations on quality control and safety issues. In addition, vaccine plants are required to be updated regularly, which is also a huge cost. Most companies decided it was simply better not to upgrade their facilities and directed their resources elsewhere instead.
3. The demand for vaccines is quite irregular and unpredictable. To compound the problem, The shelf-lives of vaccines are limited; anything unsold has to be thrown away. It's difficult to anticipate how many vaccines will be needed every year and after companies had to throw out several hundred million dollars worth of vaccines just a few times, many got out of the business. Those companies that still remain find it more sensible to under-produce than to over-produce, in order to prevent waste.
Essentially, pharmaceutical companies don't have enough incentive to produce more vaccines.
So what can we do to change that?
There are several proposals to incentivize the pharmaceutical companies. Some have suggested that we can extend the patents on blockbuster drugs in exchange for vaccine supply. Some have suggested we give tax breaks for vaccine makers or simply allow them to charge more for their products. Some also propose that we make the government regulations slightly less stringent, just enough to encourage more companies to enter the fold. Many pharmaceutical companies also want the indemnification issue addressed by Congress; as of now, should a particular company step up during a time of emergency and make vaccines, that company can still be sued by people if complications arise. Potential litigation is unwelcome by anyone and Big Pharma is no exception.
As one can imagine, all of these suggestions are met with skepticism, even passionate opposition. Due to the general lack of understanding about the vaccine production process and its market, most layman scoff at the idea of "helping out the pharmaceutical companies."
Nevertheless, the lack of incentive for companies is completely real and will not go away unless something is done to change the current system. Just like everything else, this is a trade-off; what are you willing to give up for more vaccines?
(detailed and unbiased coverage on this issue appeared on PBS and the NY Times. NYT is free but signup required)
[flu][vaccine][shortage][supply][demand][profit][pharmaceutical companies][chiron]
First of all, it takes a huge amount of effort and time to develop a vaccine. Production of the flu vaccine for the month of October has to be started in early spring; that is why when there's a shortage, supplies do not magically increase. But that doesn't explain why there are so few companies making flu vaccines and the ones that do, don't make enough to begin with. There are several reasons, most of which are related to market forces and government regulations. The bottom line is that the profit margin is simply too low in the vaccine business. The manufacturing cost has risen steadily due to government regulation and liability issues, but the price remains stubbornly low. The government, the major purchaser of the flu vaccine, uses its clout to force the price down. There is also the social perception that pharmaceutical companies shouldn't be "gouging" people during a time of need because it's immoral; any attempt to raise the price significantly will surely be met by public outcry.
Wall Street can be harsh; investors demand profits on their investments. Therefore when companies are faced with the decision of how to best invest their capital, other options like making blockbuster drugs become far more attractive than vaccines.
Why is it so costly to make vaccines?
1. Biological products like vaccines are extremely difficult to make. They are labor intensive and the risk of failure is high, compared to synthetic drugs. The vaccine production also happens in sequential steps; any disruption along the sequence means the whole lot has to be discarded and the production has to start over from step one.
2. Many companies found it hard to meet increasing government regulations on quality control and safety issues. In addition, vaccine plants are required to be updated regularly, which is also a huge cost. Most companies decided it was simply better not to upgrade their facilities and directed their resources elsewhere instead.
3. The demand for vaccines is quite irregular and unpredictable. To compound the problem, The shelf-lives of vaccines are limited; anything unsold has to be thrown away. It's difficult to anticipate how many vaccines will be needed every year and after companies had to throw out several hundred million dollars worth of vaccines just a few times, many got out of the business. Those companies that still remain find it more sensible to under-produce than to over-produce, in order to prevent waste.
Essentially, pharmaceutical companies don't have enough incentive to produce more vaccines.
So what can we do to change that?
There are several proposals to incentivize the pharmaceutical companies. Some have suggested that we can extend the patents on blockbuster drugs in exchange for vaccine supply. Some have suggested we give tax breaks for vaccine makers or simply allow them to charge more for their products. Some also propose that we make the government regulations slightly less stringent, just enough to encourage more companies to enter the fold. Many pharmaceutical companies also want the indemnification issue addressed by Congress; as of now, should a particular company step up during a time of emergency and make vaccines, that company can still be sued by people if complications arise. Potential litigation is unwelcome by anyone and Big Pharma is no exception.
As one can imagine, all of these suggestions are met with skepticism, even passionate opposition. Due to the general lack of understanding about the vaccine production process and its market, most layman scoff at the idea of "helping out the pharmaceutical companies."
Nevertheless, the lack of incentive for companies is completely real and will not go away unless something is done to change the current system. Just like everything else, this is a trade-off; what are you willing to give up for more vaccines?
(detailed and unbiased coverage on this issue appeared on PBS and the NY Times. NYT is free but signup required)
[flu][vaccine][shortage][supply][demand][profit][pharmaceutical companies][chiron]
posted by Biomed Tim at 3:27 PM
5 Comments:
That was an excellent article. I seems to cover all the aspects, it's really informative. I hope more people read it and come to understand the issue, and that more people learn to write quality articles like the one I just read.
Great post.
I wrote about flu vaccination here:
http://www.healthline.com/blogs/medical_devices/2006/10/immunize-school-aged-children-for-flu.html
oops:
here...
This is just another example of how greed of Big Pharma trumps over public good.
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