Report on the United States Vaccine Industry

Vaccine Pricing Conclusions

Average childhood vaccine prices grew significantly in the 1980s, but have been flat and, in
many cases, have been declining in the 1990s. The primary drivers of this decline are the
intense competition in many new vaccine markets, some pricing restraint by suppliers of
traditional monopoly products, and commodity pricing on DTP. Increases in government
purchases at significantly discounted prices and the emergence and growth of large private
market HMO buyers with substantial purchasing power have also contributed to downward
pressure on prices.
Drawing broader conclusions from price data, however, is difficult because the trends are
dependent on the time periods chosen. For instance, taking a 20-year perspective, instead of the
10- or 5-year periods discussed in this report, would likely generate different results. Because
Merck took a voluntary price cut on MMR in the early 1970s, the compound annual growth rate
in price from its introduction 20 years ago to the present is lower than inflation over that period.
And because the price of DTP was very low for the period of the 1970s and into the 1980s, its
growth rate in price from the early 1970s to the present is much lower than during the last
decade.
One possible conclusion is that these pricing trends have been associated with a consolidation
of the market. Exhibit 17 tracks the number of licensees and actual marketers of MMR, OPV,
and DTP at various points in time over the last 20 years. MMR and OPV have clear monopoly
positions, so it is not surprising that these are the only two products that have been able to
generate some price gains over the last five years. At the same time, in 1975 and 1982 there
were many more suppliers of vaccines in the U.S. than there are today. It is likely that the
prices during those periods were simply too low to support the level of competition typical of
the 1970s, or to support the R&D investment necessary to remain viable.
Exhibit 17
U.S. Basic Pediatric Vaccines Competitive Environment
1975 1982 1985 1992 1994
MMR Components
* # of licensees 6 2 2 2 2
* # of marketers 6 1 1 1 1
* Market leader Merck Merck Merck Merck Merck
MMR Components
* # of licensees 2 1 1 1 1
* # of marketers 2 1 1 1 1
* Market leader Lederie Lederle Lederle Lederle Lederle
MMR Components
* # of licensees 7 5 4 4 3
* # of marketers 7 5 4 2 3
* Market leader Lederte/ Lederte/ Lederle/ Lederle/ Connaught
Merrell Connaught Connaught Connaught

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