Report on the United States Vaccine Industry

margin to recapture development costs. Prices should now reflect the costs of production,
distribution, sales and marketing, and administrative overheads. These products are analogous
to ethical pharmaceuticals whose patents have expired, and now must compete with generic
equivalents. The difference is, however, that there are no generic vaccines.
Basic pediatric vaccines are generally sold by national suppliers who enjoy privileged
relationships in their home markets. It is very difficult for global suppliers to penetrate these
markets. Licensing is difficult to obtain and market access is limited even if a license is
granted. Prices are often so low that building market share can be prohibitively expensive.
Many developing nations have bought the rights to produce basic pediatric vaccines in their
home markets and sell them at only a few cents per dose. UNICEF is also a major purchaser
and distributor of these vaccines - also at extremely low prices.
Proprietary products (Hib, Hep B and quite recently Hep A and Varicella) have been licensed
within the last 10 years and have considerable investments in intellectual capital that are yet to
be fully recovered. These products often have patents which protect the intellectual capital
from being copied, and their cost structures require the payment of royalties to developers
(generally biotech firms or academic research centers). The prices for proprietary products are
generally higher than basic vaccines, reflecting royalty payments and the need to recapture
research and development costs. These products are growing rapidly as new markets are
entered and public awareness grows.
Exhibit 3 shows the segmentation of the $1 billion basic pediatric vaccine market. The contrast
in the distribution between volume and revenues across markets is striking. UNICEF and local
producers account for less than 20 percent of revenue but almost two-thirds of doses. In
contrast, the U.S. market accounts for more than 30 percent of revenue but less than 2 percent
of doses.
Exhibit 3
1992 Worldwide Vaccine Market
- Basic Pediatric Vaccines -
Revenue Volume Average Price
100% $1,002 MM 3,640 MM Doses
UNICEF (6%)
Local Producers " UNICEF $.07
(11%r). (23%)
80% Major Producerul "_
Government Tender
(15%)
60%.. Local Producers $.07
Major Producerul (42%)
OEC"
(36%)
40%::. - Major Producers/ $.18
0 [ Government Tender
20% U.S. ". - (23%)
(32% ) -_U:. S.44 (BCGrrT)
(1% Other Majoru/OECO (11%) $1.18 (OPV/DTP/MMR)
$6.51

Mercer Management Consulting Page 8