Report on the United States Vaccine Industry

Conclusion 2: Industry and government should seek to develop a
partnership to resolve important problems in the national interest of
better public health.
Industry and government have a strong mutual interest in the success of the vaccine
industry. Both desire a steady supply of new and improved vaccines, high levels of
immunization and stable production. These shared interests form a basis for a
partnership. The health of our children is at stake.
Historically, the relationship between industry and government has been characterized
as adversarial and parochial. Industry has focused on new product development, but
has contributed little to improving immunization levels and has not always been
responsible in setting prices for vaccines. Government has many diverse branches
that control or influence the industry, but policy is not coordinated so as to provide
comprehensive solutions to problems. Each government branch acts on its own
agenda occasionally in conflict with the agendas of other branches. Moreover, the
government has inhibited the export of vaccines by its opposition to tiered pricing, a
practice used by every major foreign supplier, and effectively deprives the U.S. of the
benefits of large volume manufacturing. Government regulation of the industry has
raised the costs of production to the highest in the world, while limiting the intensity
of competition in U.S. markets which could drive cost improvements and control
profit excesses.
Although the U.S. industry has been very successful in developing new vaccines,
immunization levels for U.S. children fall below sensible expectations and our
citizens pay the highest prices in the world for vaccines. In part, the high prices we
pay have funded a vigorous effort to develop new vaccines, but too many of these
dollars are required to pay for inefficiency and excessive regulation.
Government should recognize that in this relationship, it is the dominant partner. Its
actions can have significant positive or negative effect on industry, and it can act
unilaterally with or without industry consent. Of course industry too can act
unilaterally, but only within the boundaries set by government. Government has
responsibility to insure its actions do not deter the commercial interests of vaccine
suppliers or the development of new vaccines and are in the long term interests of
public health.
An industry/government partnership that can resolve problems comprehensively has
the potential to improve the health of our children, lower the cost of immunization,
and create high paying jobs in a growing industry that exports vaccines to a global
market. A partnership that is built on the recognition of the many shared interests
between industry and government and that is characterized by a cooperative effort to
develop creative solutions to critical issues has the opportunity to have a dramatic
effect on our nation's public health. After all, vaccines are a small percentage of our
national health care cost, but have very high economic and quality of health returns
on investment.

Mercer Management Consulting Page 4