EVENTS

Date:	Friday, May 8, 2009
Time:	10:00 AM -- 12:00 PM
Location:	Wohlstetter Conference Center, Twelfth Floor, AEI 1150 Seventeenth Street, N.W., Washington, D.C. 20036

WASHINGTON, MAY 8, 2009--With the threat of pandemic flu once again in the news, questions about the vitality and reliability of the vaccine industry have resurfaced in Congress and in the minds of concerned Americans. Is the industry able to respond to public health risks, or is it still beset by massive litigation, constrained prices, and regulatory policies that choked off the vaccine enterprise in the 1980s and much of the 1990s? Presenters at an AEI book forum on May 8 addressed these questions, and they generally expressed cautious optimism that the vaccine industry is experiencing a renaissance. Of late, it has successfully expanded into new therapeutic areas like pneumonia, bacterial meningitis, chickenpox, and the human papillomavirus for the prevention of cervical cancer, and it has shown promise in tackling such intractable conditions as cancer and Alzheimer's disease. But in one crucial area--flu--technology has advanced slowly, so that we face many months to create and manufacture limited supplies of vaccines for dangerous new flu viruses, such as the H1N1 "swine flu" now spreading throughout the world.

Ernst R. Berndt and Anjli C. Warner, coauthors of the newly released AEI Press book U.S. Markets for Vaccines: Characteristics, Case Studies, and Controversies, launched the discussion by outlining some of the challenges the vaccine industry has faced over the last two decades and recent indicators of growth and innovation. "Traditionally, vaccine industries have not been as profitable" as biotech and pharmaceutical enterprises, Berndt noted. This has been due to relatively weak intellectual property; exceptionally large and expensive clinical trials; government purchasing power that has forestalled value-based, competitive pricing; and organized opposition to vaccination. Berndt and Warner provided an overview of the economics and science of modern vaccine R&D. "The industry is now entering a more profitable phase," Berndt explained, as overall vaccine sales have begun to climb. New vaccines are now being priced according to cost-benefit, rather than cost-effectiveness, analyses that capture social value, not just reductions in health care costs. As a result, two vaccines in particular have reached blockbuster status with over $1 billion in annual sales.

Henry Grabowski of Duke University endorsed the authors' optimism but was worried about "fragile nature of this industry." He found it "encouraging to hear from the book [authors] that we are now approaching more value pricing for vaccines," and he suggested that the government in turn "go beyond cost-effectiveness" so that reimbursements reflect not only benefits to the healthcare system but also benefits to consumers and employers. To enhance incentives, Grabowski proposed tax credits for capital investment and late-stage research and development--two areas in which the vaccine industry falls woefully behind the biotech and pharmaceutical industry. He added that this approach has already been a "big success" for the development of orphan drugs that treat rare medical conditions.

As the discussion turned toward pandemic flu, Warner noted that the industry continues to rely on an "extremely unpredictable [and] unfortunately, not very flexible" egg-based system to supply the nation's annual flu vaccine. Even if more innovative cell-based technologies were to come on line, scale-up for a pandemic would not likely be feasible. AEI's Scott Gottlieb, a practicing physician and former deputy commissioner of the Food and Drug Administration (FDA), said that the FDA deserves credit for developing guidelines for manufacturers interested in switching to cell-based technology, but the FDA's concerns may slow the adoption of such forward-thinking technology. In terms of existing flu vaccine capacity, Gottlieb remarked that because we are "at the tail end of the production cycle" for seasonal flu vaccine, manufacturers could now switch over to H1N1 vaccine production without disrupting the seasonal flu vaccine supply. However, vaccines for H1N1 flu would probably only be available for high-risk individuals and first responders. Gottlieb concluded the discussion with a call for domestic capacity to deal with a pandemic--describing that capacity as a "strategic asset." In the event of a pandemic, he said, we should be wary that foreign suppliers would "nationalize their vaccine production facilities, and the reality is that we don't have a lot of production capacity here in the U.S."

--ELIZABETH DUPRE

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