Report on the United States Vaccine Industry

It is premature to draw any conclusions about this data. First, the mix of vaccines varies by
market; the U.S. buys a proportionately larger percentage of the more expensive vaccines.
Second, the costs and regulatory requirements differ significantly across markets. Moreover, in
developing countries, producers are sometimes subsidized by local governments. Third,
UNICEF relies on the fact that many suppliers have tremendous overcapacity and the that
marginal cost of vaccines is extremely low. No supplier could exist solely on its UNICEF
volume, but at the margin, it contributes profit to the suppliers' bottom line.
Major Vaccine Suppliers and Economic Motivations
When measured by volume of doses the three major U.S. suppliers are minor producers of
vaccines, primarily serving only the U.S. market. In the vaccine industry, which has large
economies of scale in production and whose product development costs are amortized over
cumulative volume sold, being a low volume producer results in a significant cost
disadvantage. Exhibit 4 illustrates the dosage volume of the world's major vaccine suppliers.
Exhibit 4
1992 Major Worldwide Vaccine Suppliers
- Adult/Pediatric Doses -
600 560 MM S MM
600 so m
Doses400
MM 300 mm
i~i196MM
100 ou sou ou
0
Conneught Ledesr Merck S Pastwur Selvo Hoechst Medeva
U.S. Merleux
U.S.-Based European-Based
S= Basic Pediatric doses
U.S. suppliers have not exported more aggressively primarily because prices around the world
are generally lower than in the U.S. and separate licensing is required for each country. The
clinical trials used for one country are rarely applicable to another and the procedures for
obtaining licenses are highly specific to each country's regulatory authority. Although the
intent of licensing is similar around the world (to ensure safety and efficacy), the present
system is costly and discourages vaccine suppliers from obtaining multiple licenses.
Harmonizing the licensing application among countries with common regulatory requirements
and universal standards for clinical trials would lead to a more competitive and efficient
industry.
A U.S. supplier must decide how much of the market it wishes to serve when designing and
constructing its plant. Once a plant has been built to serve a certain level of demand, it is
difficult and costly to resize the plant for a larger market. Resizing a plant requires a time

consuming and costly plant relicensing process. Because larger plants can employ more cost
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