Report on the United States Vaccine Industry

Sales force expenditures are a function of the number of sales employees by channel (e.g.,
physicians, hospital, HMO, government sectors), the average fully loaded cost to support each
employee, and the percentage of time allocated to the vaccine business where resources are
shared. Exhibit 25 shows an example of the type of analysis Mercer conducted to estimate
sales and marketing costs for each major supplier. In all cases, the bottom-up figures fell
within the range of top-down estimates from industry experts.
Exhibit 25
Major U.S. Vaccine Sales Force Expenses
- Example -
# of Emp. Cost/Emp. % Vaccines Total Cost
Physician Reps 500-600 $120 K 20% $13 MM
Hospital Reps 200-250 $140 K 20% $6 MM
HMO/Distributors 60-70 $200 K 10% -$1 MM
Government 2-3 $250 K 100% $0.5 MM
Sales
Sales -10 $300 K 100% $3 MM
Management
Total Build-Up -~$23 M
Industry Experts $20-25 MM
Like volume-based discounts, promotional discounts vary considerably by vaccine and reflect
both the competitive environment of the product and the negotiating leverage of the buyer.
Exhibit 26 shows the results of a Mercer survey of vaccine buyers on private market
discounting used earlier in this report to estimate volume-based discounting. As would be
expected, little promotional support is provided to the channel for single-source products like
OPV and MMR, while discounts in the 25 percent range are offered to large HMOs for multisourced products such as DTP and Hib.
Exhibit 26
Major U.S. Vaccine Marketing Expenses
- Private Market Promotional Discounts -
Physician Small Large HMO Weighted
HMOIHospital Average
MMR /OPV <1% 2% 5% 3%
DTP-HibIDTaP/ 4% 10% 10% 9%
HepB
DTaPIHib 4% 10% 25% 16%
Total Build-Up $30 MM
Industry Experts $25-35 MM

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