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U.S. Markets for Vaccines: Characteristics, Case Studies, and Controversies
By Ernst R. Berndt, Rena N. Denoncourt, and
Anjli C. Warner
AEI Press, May 2009
Click here to view this press release as an Adobe Acrobat PDF.
Media inquiries: Véronique Rodman
202.862.4870 (vrodman@aei.org)
FOR IMMEDIATE RELEASE: May 1, 2009
There is intense interest among scholars and the public about the risks, benefits, and pricing of pharmaceuticals--but relatively little attention has been devoted to vaccine markets and the political, economic, and regulatory factors that influence their development. Studies of vaccines have suffered from a one-dimensional focus on pricing and access, paying scant attention to the crucial question of how vaccines are developed and brought to market. In U.S. Markets for Vaccines: Characteristics, Case Studies, and Controversies (AEI Press, May 2009) MIT researchers Ernst R. Berndt, Rena N. Denoncourt, and Anjli C. Warner fill this void by examining the unique mix of economic, political, and regulatory forces that shape markets for vaccines. The authors investigate the key business drivers and challenges of these markets, the complex interactions among their important stakeholders, and the emerging opportunities for growth.
Drawing on a series of fascinating case studies, Berndt, Denocourt and Warner explore the striking differences between the drug and vaccine markets and delineate numerous complex issues in a technically sophisticated yet approachable manner. Among the issues they discuss are:
- The role of intellectual property protection in developing vaccines
- Essential features of preclinical and clinical development (including clinical success rates, development times, and costs)
- Manufacturing and costs
- Public-private interactions in drug vaccine development
- The unique challenges of vaccine distribution
- Marketing, product differentiation, and pricing
The challenges involved in obtaining regulatory approval from the U.S. Food and Drug Administration (FDA) and earning a spot on the Centers for Disease Control and Prevention's (CDC) list of vaccination schedules for pediatric and adult populations
Berndt, Denoncourt, and Warner explore the economic underpinnings of the very different markets for vaccines, traditional drugs, and "biologics" created through biotechnology. To illustrate the changing dynamics of different vaccine submarkets, the authors present four case studies of vaccines, based on extensive interviews with various private-sector vaccine manufacturers and consultants, the CDC, Blue Cross Blue Shield of Massachusetts, academia, industry trade organizations, medical associations, and physician groups.
The first study looks at the traditional pediatric combination vaccine for prevention of diphtheria, tetanus, and pertussis. It documents the competition and product differentiation that has occurred in a mature but still changing product space, where innovation has led to new formulations that increase convenience, variety, and safety--even as the number of competitors has dwindled.
The second case study highlights the logistical challenges facing five competing influenza vaccine manufacturers that must coordinate yearly with the FDA, the CDC, and international organizations to manufacture, distribute, and administer updated vaccine formulations. Although product differentiation is limited in this segment of the vaccine market (only injectible and intranasal versions are available), innovation takes the form of new manufacturing methods that make upgrades faster and more feasible--a capability that could be particularly valuable in the event of an avian flu pandemic.
The third study examines Prevnar, a vaccine designed to prevent invasive pneumococcal disease in children under age six. Commercially very successful, Prevnar has become the first "blockbuster" vaccine, gaining more than $1 billion in annual sales. Prevnar has had a profound impact on vaccine markets, because, unlike earlier vaccines, it is priced considerably higher than its cost offset.
Finally, the authors investigate Zostavax, a chicken pox and shingles vaccine that exemplifies the challenges of marketing a vaccine to both children and adult populations. The case of Zostavax also illustrates the importance of post-launch surveillance. Close monitoring of the chicken pox vaccine has resulted in important changes to the CDC-recommended number of immunizations, thereby significantly affecting the size of the potential market.
The final chapter of U.S. Markets for Vaccines addresses a very controversial issue--the debate about whether the combination measles, mumps, and rubella (MMR) vaccine causes autism. This debate has pitted the scientific integrity of vaccine manufacturers and public health policymakers against the claims of patient advocacy groups, personal injury lawyers, and politicians. The authors discuss the history of this enduring dispute and examine the recent events that will likely lead to critical decisions in U.S. and UK courts within the coming year.
Ernst R. Berndt is the Louis E. Seley Professor in Applied Economics at the MIT Sloan School of Management and a member of the affiliated faculty of the Harvard-MIT Division of Health Sciences and Technology.
Rena N. Denoncourt is program manager at Alnylam Pharmaceuticals in Cambridge, Massachusetts.
Anjli C. Warner is a senior associate for business analysis and information at Amgen, Thousand Oaks, California.
The research was carried out while Denoncourt and Warner were MBA students at the MIT Sloan School.
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