Report on the United States Vaccine Industry

For example, in most industries, production costs are continuously reduced through small
changes in the manufacturing process. For vaccines, however, virtually any change to
production requires relicensing of the plant by the FDA. The relicensing process requires an
extensive filing of information (an ELA) and often results in the plant being shut down for an
extended time period. In some cases, changes to the production process require a new set of
clinical trials. The cost of relicensing can be prohibitive. It may be more economical to
continue operating an inefficient plant until a major manufacturing overhaul is required.
Despite these cost disadvantages, OPV is still a very high margin product in the U.S. OPV's
enormous price premium in the private market is the result of both high costs and high margins
- the latter reflecting the lack of competition.
It is ironic that the need for government regulation to control vaccine prices is a direct result of
government regulations that cause high prices. The licensing of a second and third OPV
supplier would very likely create downward pressure on OPV prices, and without government
control of industry prices which discourages private investment. Given the wide use of OPV
elsewhere in the world, it does not seen plausible that there is only one safe OPV producer for
the U.S. market.
Summary
Barriers to free market competition in the U.S. vaccine industry affect the flow of product
across U.S. borders and restrict international competition. Although these barriers are
understandable, in aggregate they have led to an inefficient industry and a high level of
government control. Consequently, prices of vaccines in the U.S. are the highest in the world,
and yet investment in new vaccines is being discouraged. There is a need for industry/
government partnership to examine the situation broadly and holistically so as to determine
how best to address a diverse set of needs. No one doubts the importance of ensuring that all
vaccines administered in the U.S. are safe and effective. The challenge is to be sure that other
needs are not compromised in the process.
In discussions of vaccine policy, it is important to recognize that each vaccine has unique
factors which may require different conclusions and policy options. For example, MMR has
very high prices and is a monopoly, just like OPV. However, no foreign competitor has a
strain of mumps vaccine considered safe enough for the U.S. market. MMR is a monopoly due
to Merck's good fortune of having a safer vaccine, not regulation.
Additionally, vaccines differ by the length of time since discovery, their competitive structure,
their pricing level and history, the size of discount provided on the federal contract, and their
prospects for replacement in the near future by a superior strain or form. Each of these factors
bears consideration in the creation of appropriate policy.

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