Report on the United States Vaccine Industry

Summary of Conclusions
Mercer's study resulted in two overarching conclusions:
Conclusion 1: The vaccine industry's supply structure is undergoing
rapid changes.
Three significant trends are driving changes in the vaccine industry's structure. The
first trend is the increasing cost of bringing new vaccines to market. These costs
include investments in research and development and the costs of obtaining PLA
(Product License Application) and ELA (Establishment License Application) licenses
to sell new vaccines. The forces driving the higher costs of new vaccines are
discussed in the body of this report.
The high cost of vaccine development motivates suppliers to sell products on a more
global level than was once thought necessary. It is no longer economical to develop
products for just the U.S. market which makes up less than 5 percent of the world's
population. Selling vaccines to global markets helps recover the costs of
development across a much larger revenue base. Accessing new foreign markets can
be difficult and expensive. Many vaccine suppliers have formed alliances and
partnerships to help them penetrate global markets.
The second trend driving the changes is the growing need for combination (combo)
vaccines. Combo vaccines allow several different vaccines to be administered in a
single dose. This helps health professionals immunize children in accordance with
the standard vaccination schedule by overcoming parental resistance to multiple
injections in a single office visit. For suppliers, combo vaccines result in some
expansion in market demand as immunization levels rise, but essentially they simply
replace sales of predecessor vaccines that were administered separately.
For basic pediatric vaccines, most countries are served by local suppliers who enjoy
favorable status with local health care purchasers. Combo vaccines are an
opportunity for global suppliers to break these traditional relationships and penetrate
previously closed markets. Many vaccine suppliers do not, however, have access to
the technology for the full range of vaccines utilized in a combo. Suppliers with
limited product lines need to find partners who can provide access to the missing
vaccines.
As an example, the State of Michigan has experienced declining sales of DTP while
Tetramune (DTP-Hib) has gained market share, even though DTP is free to Michigan
residents. Local suppliers of DTP and other basic pediatric vaccines in the industrial
world face declining business and possible extinction as new combo vaccines
obsolesce historically focused strategies, unless they begin to build relationships with
global suppliers as Michigan has done with SmithKline Beecham.

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