During the past fifty years, the number of pharmaceutical companies making vaccines has decreased dramatically, and those that still make vaccines have reduced resources to make new ones. Pharmaceutical companies are gradually abandoning vaccines because the research, development, testing, and manufacture of vaccines are expensive and because the market to sell vaccines is much smaller than the market for other drug products. Congressional action could assure both a steady supply of existing vaccines and the promise of vaccines for the future.

Pharmaceutical companies are businesses, not public health agencies; they are not obligated to make vaccines. Events during the past fifty years have made the manufacture of vaccines more expensive and their sale less profitable. What follows here are case studies of two important vaccines, one for polio and the other for influenza, and the factors that either encouraged or discouraged their production.

Polio vaccine, 1955.

In mid-1953, the National Foundation for Infantile Paralysis (the March of Dimes) was ready to test Jonas Salk’s polio vaccine. Made by treating live polio virus with formaldehyde, the Salk vaccine was initially tested in 161 children in and around Pittsburgh. 1 When it was time to determine whether Salk’s vaccine worked in a field trial involving hundreds of thousands of children, Basil O’Connor, the foundation’s director, turned to the two largest vaccine makers in the United States: Eli Lilly of Indianapolis and Parke Davis of Detroit. 2 O’Connor realized that only pharmaceutical companies had the expertise, facilities, experience, and skill required to make that much vaccine. After the field trial proved successful—and the polio vaccine was ready to be sold to the public—three more pharmaceutical companies entered the field: Pitman-Moore of Zionville, Indiana; Wyeth Laboratories of Marietta, Pennsylvania; and Cutter Laboratories of Berkeley, California. 3 Between 1955 and 1962, physicians and public health agencies administered 400 million doses of polio vaccine across the United States, and the incidence of polio decreased by 90 percent. 4

Influenza vaccine, 2003–2005.

The commitment by five pharmaceutical companies to make polio vaccines in 1955 stands in sharp contrast to companies’ lack of commitment to making influenza vaccines today. For 2003–04, drug companies made eighty-three million doses of influenza vaccine for the United States: forty-eight million doses were made by Aventis in Swiftwater, Pennsylvania, and thirty-five million doses, by Chiron in Liverpool, England. 5 Because the influenza epidemic of 2003–04 started early and because cases were particularly severe, the media broadcast stories daily of those who were hospitalized for and died of the disease. Demand for the flu vaccine quickly exceeded supply, and many people who wanted and needed the vaccine could not get it.

The flu vaccine shortage was repeated a year later. For 2004–05, Aventis made fifty-five million doses and Chiron made forty-eight million. But because of a manufacturing error, British regulatory authorities prohibited the sale of Chiron’s vaccine. As a consequence, about thirty million fewer doses of influenza vaccine were available for 2004–05 than the year before. The U.S. Centers for Disease Control and Prevention (CDC), the U.S. Food and Drug Administration (FDA), and drug companies were all blamed for their inefficiencies, and during the presidential debate on 13 October 2004 between George W. Bush and John Kerry, each candidate accused the other of failing to provide the nation with needed influenza vaccine.

The flu vaccine shortages of 2003–2005 are just one example of what has been a steady, unrelenting series of vaccine shortages. 6 Since 1998, nine of twelve vaccines routinely recommended for young children have been in short supply: specifically, vaccines to prevent measles, mumps, rubella (German measles), varicella (chickenpox), tetanus, diphtheria, whooping cough (pertussis), influenza, and pneumococcal disease. All of these shortages have caused children to miss vaccines that they needed, and some children never caught up when the shortages were over.

Factors That Discourage Vaccine Making

Recent vaccine shortages are not coincidental, nor do they represent short-lived, easily fixable problems in the vaccine industry. Rather, several market forces explain why pharmaceutical companies are gradually abandoning vaccines.

Small market for vaccines compared with drugs.

Vaccines are used at most several times in a lifetime; drugs are often used every day. Therefore, the market for drugs is much greater than the market for vaccines. For example, the conjugate pneumococcal vaccine for children (Prevnar), the highest-revenue-generating vaccine, has annual gross U.S. sales of about $1 billion. But markets for cholesterol-lowering agents; hair-loss products; potency drugs; and drugs for heart disease, obesity, or neurological problems are often $7 billion per drug or more. (Annual revenues for Lipitor, a cholesterol-lowering agent, are greater than revenues for the entire worldwide vaccine industry.) 7

Because of the large private market for drugs, many companies compete to make similar products; however, no other company has made a pneumococcal vaccine for children. Of the twelve vaccines routinely recommended for infants and young children, seven are made by one company, and only one is made by more than two companies.

Effect of mergers.

During the past fifty years, companies devoted solely or primarily to manufacturing vaccines (such as Lederle and Praxis) have been acquired by other pharmaceutical companies; the number of companies making vaccines has decreased from twenty-six in 1967 to seventeen in 1980 and to five in 2004 (GlaxoSmithKline, Sanofi-Aventis, Merck, Wyeth, and Chiron). 8 Previously, among companies that made vaccines only, resources for development of one vaccine would compete with resources for the development of another. Now, because of mergers, vaccines compete for resources with drugs and most often lose.

To determine where they should invest research and development (R&D) dollars, pharmaceutical companies evaluate a product’s potential to contribute to their bottom line. Among the four large companies still making vaccines (Chiron accounts for less than 1 percent of the worldwide vaccine industry), none has revenue from vaccines that exceeds 10 percent of total revenue. 9 All four companies could stop making vaccines tomorrow without much impact on their bottom lines. In 2002, Wyeth stopped making its combination diphtheria–tetanus–acellular pertussis (DTaP) and influenza vaccines. The decision had little impact on shareholders but a major impact on stakeholders; it precipitated vaccine shortages and vaccine rationing for both DTaP and influenza vaccines. 10

Dramatic reduction in the private vaccine market.

In 1955, after the field trial of Jonas Salk’s polio vaccine found it to be safe and effective, a large private market was available to sell the polio vaccine. Today the largest single U.S. purchaser of vaccines is the federal government through the Vaccines for Children (VFC) program. This program—launched in 1994 to provide vaccines to all uninsured and some underinsured children in the United States—purchases 55–60 percent of all vaccines. 11 As a large single purchaser, the federal government creates a functional cap on vaccine prices and, more importantly, has contributed to shrinking the private market—a market consisting almost entirely of insurance companies.

Low or inconsistent insurance reimbursements.

In 1995 the FDA licensed a vaccine to prevent chickenpox (varicella). The varicella vaccine was the first vaccine to be licensed and recommended in a private market dominated by insurance companies. Many insurance companies initially refused to reimburse doctors for the vaccine, and some reimbursed doctors below the cost of the vaccine. As a consequence, doctors bought large quantities of varicella vaccine out of their own pockets without a clear understanding of whether and at what level they would be reimbursed. Predictably, within one year of licensure, only about 10 percent of children recommended by the CDC to receive varicella vaccine got it.

Lack of infrastructure support.

In 1955 doctors bought the polio vaccine for $1.50 per dose and sold it to their patients for $5. In the late 1970s doctors bought the combination measles-mumps-rubella vaccines for $25 per dose and sold them for $75. Because people paid for vaccines out of their own pockets, doctors could depend on reimbursements that offset the enormous infrastructure required to purchase, store, administer, and record vaccines.

Reimbursements for the polio vaccine fifty years ago are at variance with reimbursements for the influenza vaccine today. In 2004 the CDC changed its recommendation for the influenza vaccine; it recommended that all children ages 6–23 months, and all family members living in the home of children less than two years of age, receive a flu vaccine. 12 The CDC’s recommendation was difficult to implement. Doctors had to create an infrastructure within their practices that included hiring receptionists to schedule appointments and hiring nurses to administer a yearly, seasonal vaccine. But reimbursements by insurance companies for vaccines, including “administration fees,” were about 5–10 percent above the cost of the vaccine, compared with a 300 percent markup for vaccines when the private market consisted of direct out-of-pocket payments. By refusing to pay for the infrastructure required to administer vaccines, the federal government and insurance companies are asking doctors to pay for the infrastructure themselves. As a consequence, doctors often view new vaccines, or expanded recommendations for existing vaccines, as yet another burden to be borne by their practices.

Public buy-in versus public buy-out.

On 31 May 1954 a Gallup poll showed that more Americans knew about the field trial of Jonas Salk’s polio vaccine than knew the full name of the U.S. president, Dwight David Eisenhower. 13 This was because more Americans participated in the funding, development, and testing of the polio vaccine than in the nomination and election of the president. The March of Dimes increased awareness of polio and anticipation of a polio vaccine through celebrity spokespersons; “poster” children; and short, poignant films shown in movie theaters across the country. As a consequence, before the vaccine’s licensure, Americans understood the horrors of polio and were anxious to prevent the disease.

The March of Dimes was successful because polio was a dramatic disease. But many diseases potentially preventable by vaccines today are also dramatic. For example, respiratory syncytial virus (RSV) causes pneumonia, croup, and lower respiratory tract infections; as many as 90,000 children are hospitalized for and 5,000 killed every year by RSV. Group A streptococcus causes rheumatic fever and severe skin infections; cytomegalovirus causes mental retardation, impaired vision, hearing loss, and cerebral palsy; adenovirus and parainfluenza virus cause severe pneumonia; and enteroviruses, herpesviruses, and arboviruses (like West Nile virus) cause meningitis. All of these infections routinely cause children and adults in the United States and throughout the world to be hospitalized and to die. Although the technology is available to prevent much of this suffering, most people are unaware of the names of these specific diseases or of the possibility for their prevention.

The public buy-in to the introduction of a polio vaccine in 1955 has, fifty years later, been replaced by a public buy-out of vaccines. Groups opposing vaccines have proliferated, and many people see information campaigns about new vaccines as just more hype to increase pharmaceutical companies’ revenues.

Regulatory issues: moving from relative to absolute safety.

The cost to develop and make many vaccines is greater than that to make most drugs, because products given to healthy people are often held to higher standards of safety than those given to people who are sick. In 1998 the FDA licensed a vaccine to prevent rotavirus, a common cause of fever, vomiting, and diarrhea in young children. 14 After the vaccine had been on the market for one year—and was given to about one million children—the CDC detected a rare adverse event: About one of every 10,000 children who received the vaccine developed intussusception, a blockage of the intestine. 15 As a consequence, the rotavirus vaccine was withdrawn.

Before it was licensed, the rotavirus vaccine had been given to about 11,000 children in placebo-controlled prospective studies. Because intussusception was very rare, studies performed prior to licensure were not big enough to determine that rotavirus vaccine caused the condition. Following the withdrawal of the rotavirus vaccine in 1999, children have continued to be hospitalized for and killed by rotavirus. Although many more children would have been helped by a rotavirus vaccine than hurt by it, the current culture does not allow for any serious side effects from a vaccine. As a consequence, pharmaceutical companies are now asked to disprove even very rare adverse effects prior to licensure. Two companies, Merck and GlaxoSmithKline, are now testing rotavirus vaccines in pre-licensure trials that include more than 140,000 children. The cost of these two large trials is about $400 million. The added financial burden of now disproving rare adverse events before licensure is another disincentive to making vaccines.

Product liability.

Vaccines were the first group of medical products that were nearly eliminated by lawsuits. In 1974 a British researcher published a paper claiming that the pertussis vaccine caused permanent brain damage in twenty-two children. 16 Stories that pertussis vaccine harmed children soon appeared in the United States, and personal-injury lawyers sued vaccine makers. American lawyers claimed that the pertussis vaccine caused epilepsy, mental retardation, learning disorders, unexplained coma, Reye’s syndrome (the sudden onset of coma later found to be associated with aspirin), and sudden infant death syndrome (SIDS, unexplained death in the first year of life later found to be associated with sleep position). By 1987, 800 lawsuits totaling more than $21 million were filed, and new claims were filed every week. To meet the demand for increased liability insurance, and to pay for legal fees and settlements, the cost of the pertussis vaccine increased from $0.17 per dose to $11.00 per dose. 17

By the late 1980s and early 1990s many investigators had examined the question raised by the British researcher and found that the pertussis vaccine did not cause permanent brain damage. 18 The researcher’s hypothesis was wrong, but the damage was done. The number of companies making pertussis vaccine for U.S. children decreased from four (Wyeth, Connaught, Sclavo, and Lederle) to one (Lederle). 19 In the mid-1980s a lawsuit against Lederle claiming that pertussis vaccine caused paralysis in a young boy ended with an award of $1.13 million. 20 This award was equivalent to more than half of the entire pertussis vaccine market. Although there was no scientific evidence to support the claim, pharmaceutical companies looked at this situation and decided to leave the vaccine business. 21

Threatened by a return to the prevaccine era—when hundreds of thousands of children were routinely hospitalized for, permanently harmed by, or killed by vaccine-preventable diseases—the U.S. government stepped forward. In 1986 Congress passed the National Childhood Vaccine Injury Act (NCVIA), which included the National Vaccine Injury Compensation Program (NVICP), designed to protect companies from lawsuits not supported by scientific evidence. The program was funded by a federal excise tax on every dose of vaccine.

In many ways, the NVICP was a model system to prevent abuses by personal-injury lawyers. Scientists, epidemiologists, virologists, microbiologists, clinicians, and statisticians reviewed scientific studies and recommended to the courts which problems were caused by vaccines and which coincidentally followed vaccines. If a child suffered a reaction caused by a vaccine, the program was designed to compensate the family for medical expenses and damages quickly, generously, and fairly. Because of the NVICP, manufacturers remained in the vaccine business and the number of lawsuits against vaccine makers declined substantially.

Unfortunately, three important weaknesses in the NVICP discourage vaccine makers. First, if dissatisfied with the outcome, people can always opt out of the NVICP and take their case to a jury. Parents claiming that their children were harmed by thimerosal (an ethylmercury-containing preservative in some vaccines) have sued vaccine makers; about 300 separate lawsuits are now pending in U.S. courts. Although four large epidemiologic studies found that children receiving thimerosal-containing vaccines were not at increased risk for the neurological problems claimed, plaintiffs’ lawyers are pressuring pharmaceutical companies for a large settlement. 22

Second, the NVICP does not cover all vaccines—only those routinely recommended for all children. For example, the Lyme vaccine, licensed by the FDA in 1998, was not covered by the program. After licensure, many people claimed that the Lyme vaccine caused chronic arthritis as well as muscle pain, headaches, forgetfulness, memory loss, paralysis, and fatigue. Although two large epidemiologic studies found no evidence that the vaccine caused chronic disease, Glaxo Smith-Kline was spending millions of dollars defending its product. 23 Further, the media raised fears that the Lyme vaccine caused permanent harm. Predictably, sales decreased, and the vaccine was taken off the market in 2002. Now, people at risk for Lyme infection can only hope that they are not among those permanently harmed by the disease.

Third, the NVICP does not include the unborn child when the mother is immunized. For example, very young infants are occasionally infected by a bacterium called group B streptococcus (GBS). GBS infects the bloodstream, the brain, and the spinal cord. Every year, about 2,000 U.S. babies are infected with GBS and 100 die; more newborns die from GBS than any other infectious disease. Unfortunately, most vaccines in the United States and the world are not given until one or two months of age—too late to prevent GBS infections. Therefore, the most effective strategy to prevent GBS would be to immunize pregnant women. Researchers have already shown that a GBS vaccine given to pregnant women would work to protect newborns. 24 However, because of concerns about litigation following immunization of pregnant women, no pharmaceutical company is willing to make a GBS vaccine or any vaccine that would include maternal immunization.

Finally, in addition to weaknesses in the federal compensation program, pharmaceutical companies have abandoned lower-revenue products such as vaccines because liability insurance has dramatically increased the cost of making all medical products.

Factors That Would Encourage Vaccine Making

The CDC and the IOM have recognized the importance of finding ways to finance vaccines for the twenty-first century. 25 We discuss several possible solutions below.

Increase payments for vaccines.

Pharmaceutical companies could be encouraged to make vaccines if the federal government provided more assurances that the VFC entitlement program was robust, allowed for a mechanism to increase the fixed price of certain vaccines, offered tax breaks to companies that chose to make vaccines, and supported more testing centers (such as the Vaccine Evaluation and Testing Units [VETUs]) for commercial vaccines prior to licensure. Further, the burden of assuming the cost of creating and maintaining an infrastructure for vaccines by health care professionals could be supported by adequate administration fees through both the VFC program and private insurers.

Decrease costs of making vaccines.

The cost of making vaccines for pharmaceutical companies could be reduced by strengthening weaknesses in the NVICP—specifically, disallowing opt-out of the program when scientific studies do not support a claim; covering all vaccines; covering the unborn child when a vaccine is given to a pregnant woman; and indemnifying academic medical centers (AMCs) that test vaccines prior to licensure.

The cost of making vaccines could also be reduced by encouraging public-private partnerships for vaccine R&D. The first and best example of a public-private partnership was that between the National Foundation for Infantile Paralysis and polio vaccine manufacturers in the 1950s. Between 1938 and 1962 the foundation raised $630 million; $70 million was spent on research. The amount of money spent by the March of Dimes to understand one disease—ten times more than spent on polio research by the National Institutes of Health during the same period—was unprecedented. 26 By paying for research that determined how to make a polio vaccine and by paying for a large clinical trial that showed that the vaccine worked and was safe, the foundation took the risk out of vaccine R&D. Further evidence for this model for vaccine development is found today in the relationship between the Gates Foundation and pharmaceutical companies for the development of AIDS and malaria vaccines.

Vaccines are difficult and expensive to make and, because they are used once or at most several times during one’s life, have revenues that are dramatically less than products that are used every day. As a consequence, many pharmaceutical companies have abandoned vaccines in favor of drugs. However, the technology is in hand to prevent many infections that routinely hospitalize and kill people in the United States and the world. By increasing funding for vaccines through the VFC program; by offering tax breaks to companies that develop less profitable but life-saving products; by supporting clinical testing centers for commercial vaccines; by strengthening protection against litigation unsupported by scientific evidence; and by ensuring that health care professionals are reimbursed for the infrastructure required to administer vaccines, Congress has the power to protect a product that is vital to our nation’s health.

Paul Offit ( [email protected] ) is chief of the Division of Infectious Diseases and director of the Vaccine Education Center at the Children’s Hospital of Philadelphia. He is also a professor of pediatrics at the University of Pennsylvania School of Medicine in Philadelphia. The author thanks Edgar Marcuse for his contributions to this paper.

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