Report on the United States Vaccine Industry

Market development expenses include various activities and costs, such as educational
materials, convention appearances, and journal advertising, that suppliers invest in to expand
their markets. These expenses average $5 million to $10 million per company.
Production and SG&A Costs by Product
Of the major childhood vaccines, DTP's production and SG&A (Selling, General and
Administrative) costs per dose are lowest and Hep B are highest. Exhibit 27 shows the per
dose cost of distribution, returns, sales and marketing, and administration by product layered
onto production costs. Distribution costs are lowest for multi-dose DTP and highest for singledose OPV and MMR.
In sales and marketing, DTP again has the lowest costs, with its high promotional discounts
offset by little or no sales force or market development support (given the commodity nature of
the product). MMR/OPV also have fairly low percent sales and marketing costs consistent
with their monopoly positions. Early lifecycle products like DTaP and Hep B have the highest
percent sales and marketing costs reflecting both substantial investments in sales force (as they
try to expand market penetration) and high promotional discounts to compete in multi-sourced
environments.
Exhibit 27
Major U.S Vaccine Marketing, Distribution and Production Costs
$7.00 $6.69
$0.79 Admin
so.oo ss.s4
$6.00$55
$5.00$0.65
$500 $4.31 $2.63 Sales & Mktg
$/ $4.00 $0.69 $3.70 $2.08
Dose 0.55
$3.00 $0.97 Returns
0.0 $1.93 $1.33 $0.77 Distribution
$2.00
$1.00 Production
MMR/OPV DTP Hib DTaP Hep B
/..Pediars
Lfe Cycl Estblshd New
Product Contribution
For the purpose of this report, "contribution" is calculated as the difference between net
revenue and the costs of production, distribution, returns, sales and marketing, and
administration, and is thus defined as "contribution to R&D, interest, taxes, and earnings."
Exhibit 28 shows the estimate of "contribution" per dose for the six major childhood vaccines.
"Contribution" is highest for MMR and OPV, which combine monopoly pricing leverage with

relatively low sales and marketing investment. On the other hand, "contribution" is the lowest
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