[Ip-health] NYT on soaring costs of vaccination

Judit Rius Judit.Rius at newyork.msf.org
Thu Jul 3 13:08:56 PDT 2014


Dear all,

An important article on vaccine prices (in the US), with a focus on 
Prevnar. 

The MSF Access Campaign is also increasingly working on vaccine prices in 
developing countries: http://www.msfaccess.org/our-work/vaccines


Link and full text below of the New York Times article:
http://www.nytimes.com/2014/07/03/health/Vaccine-Costs-Soaring-Paying-Till-It-Hurts.html?_r=0

The Price of Prevention: Vaccine Costs Are Soaring
By ELISABETH ROSENTHAL
JULY 2, 2014 
SAN ANTONIO — There is little that Dr. Lindsay Irvin has not done for the 
children’s vaccines in her office refrigerator: She remortgaged her home 
to afford their rising prices. She packed them in ice chests and moved 
them when her office flooded this year. She pays a company to monitor the 
fridge in case the temperature rises.

“The security company can call me any time of the day or night so I can go 
save my vaccines,” said Dr. Irvin, a pediatrician. Those in the 
refrigerator recently cost $70,000, she said — “more than I paid for four 
years of medical school.”

Vaccination prices have gone from single digits to sometimes triple digits 
in the last two decades, creating dilemmas for doctors and their patients 
as well as straining public health budgets. Here in San Antonio and 
elsewhere, some doctors have stopped offering immunizations because they 
say they cannot afford to buy these potentially lifesaving preventive 
treatments that insurers often reimburse poorly, sometimes even at a loss.
Childhood immunizations are so vital to public health that the Affordable 
Care Act mandates their coverage at no out-of-pocket cost and they are 
generally required for school entry. Once a loss leader for manufacturers, 
because they are often more expensive to produce than conventional drugs, 
vaccines now can be very profitable.

Old vaccines have been reformulated with higher costs. New ones have 
entered the market at once-unthinkable prices. Together, since 1986, they 
have pushed up the average cost to fully vaccinate a child with private 
insurance to the age of 18 to $2,192 from $100, according to data from the 
Centers for Disease Control and Prevention. Even with deep discounts, the 
costs for the federal government, which buys half of all vaccines for the 
nation’s children, have increased 15-fold during that period. The most 
expensive shot for young children in Dr. Irvin’s refrigerator is Prevnar 
13, which prevents diseases caused by pneumococcal bacteria, from ear 
infections to pneumonia.

Like many vaccines, Prevnar requires multiple jabs. Each shot is priced at 
$136, and every child in the United States is required to get four doses 
before entering school. Pfizer, the sole manufacturer, had revenues of 
nearly $4 billion from its Prevnar vaccine line last year, about double 
what it made from high-profile drugs like Lipitor and Viagra, which now 
face generic competitors.
Michael Haydock, an analyst at the London-based consulting firm 
Datamonitor Healthcare, said no vaccine had ever been such a big seller. 
“It’s expensive in part because it’s a very effective vaccine,” he said. 
“And also because they’re exploiting their monopoly.”

That does not sit well with many doctors. Even though the vaccine has not 
changed, the price of the current version, Prevnar 13 (it protects against 
13 strains), has gone up an average of 6 percent each year since it was 
approved by the Food and Drug Administration in 2010.

“You have to make back your investment and pay your shareholders, but at 
what point do you say, ‘Look, you’ve had your steak, gravy and potatoes 
and this is enough?’ ” said Dr. Steven Black, a vaccine expert at 
Cincinnati Children’s Hospital who served on the government committee that 
recommended all children get Prevnar 7, an earlier version of the vaccine.

Continue reading the main story
To deal with the rising prices, some doctors, who say they lose money on 
every vaccination, reserve their shots for longstanding patients. A survey 
of family-practice doctors, who along with pediatricians are among the 
lowest-earning physicians, found that about one-third were considering 
giving up immunizations because of the expense. Another survey found that 
40 percent do not offer at least some required childhood immunizations.

That is why Breanna Farris, a San Antonio mother, had to call 10 
pediatricians in April before she found Dr. Irvin to vaccinate her son, 
Traven, who is entering kindergarten this fall. The family’s usual doctors 
do not offer vaccinations, and referred Ms. Farris to local pharmacies 
(which do not vaccinate children) or the city health clinic (which would 
not take Traven’s insurance).

“I was like, ‘Where should I go?’ ” Ms. Farris said. “They say vaccines 
are covered, but that isn’t really true if doctors aren’t giving them.”

Business Decisions

To many pediatricians, not providing vaccines is as unthinkable as a baker 
not selling bread. Before they became widely available in the mid-20th 
century, tens of thousands of American children died each year from 
diseases like polio, whooping cough and diphtheria. “It’s up there with 
finding fire and the invention of the wheel,” said Dr. Irvin, 51, of 
vaccines.

Vaccines work by stimulating the body to develop immunity to a particular 
disease. The process involves injecting a molecule under the skin that 
mimics the virus or bacteria to prime the immune system to attack the real 
thing when it arrives. Vaccines can contain a fragment of the pathogen or 
a weakened version that can teach the immune system to recognize a germ, 
without itself causing the disease.

The earliest vaccines were not patented, in part because the law at the 
time held that natural products could not be so protected. And vaccines 
like polio were developed through a large infusion of government and 
foundation funds, not by a company. Even when commercialized by the 1960s, 
vaccines were made by small specialty manufacturers, instead of big 
pharmaceutical firms, since producing them involved particular challenges: 
using live organisms, some of them dangerous. Indeed, huge liability 
payouts and aggressive mergers had, by the 1990s, meant that more than 
half of the country’s vaccine makers had closed down. With low retail 
prices, no one regarded vaccine making as a lucrative business.

When he started his pediatric practice in 1982 in San Antonio, Dr. Michael 
Ozer remembers, he charged $22 for a 2-month well-child checkup, with $8 
added on for the polio vaccine and another $8 for the vaccine against 
diphtheria, pertussis and tetanus. “And I’m sure we were making money on 
it,” he said.

But one by one, various barriers eroded: Drug manufacturers discovered new 
ways to protect their products, like patenting the manufacturing process. 
The number of vaccine patent applications rose tenfold in the 1990s to 
more than 10,000. In 1988, the federal government set up the Vaccine 
Injury Compensation Program, effectively shielding manufacturers and 
doctors.
And the acceptable list price for drugs was rising. Vaccines, which 
families often used to pay for out of pocket, are now typically covered by 
insurance, and patients often do not notice the prices.

There are, of course, some good reasons vaccines like Prevnar are more 
expensive than previous offerings. Vaccine trials, which once included 
thousands of volunteers, must now include tens, if not hundreds of 
thousands of people, as fears about side effects like autism have grown, 
even though many studies have concluded that such worries are unfounded. 
Some of the newer vaccines are complicated to manufacture.
Prevnar, for example, involves attaching a piece of a dangerous 
bacterium’s outer layer to a protein that renders it better able to 
provoke a protective immune reaction in babies. And because it covers 13 
strains of the disease, it is in some ways 13 vaccines in one.

Pfizer maintains that Prevnar’s prices are justified because of its 
investment in “one of the most complex biologic products ever developed 
and manufactured,” said Sally Beatty, a company spokeswoman. She noted 
that it takes five years and costs $600 million to build a vaccine 
manufacturing site, and that one batch of Prevnar 13 takes two years to 
create, with more than 500 quality control tests. Development of the first 
Prevnar vaccine took 14 years, Ms. Beatty said, from the initiation of 
research to licensing. (That work occurred before Pfizer acquired the 
Prevnar brand in 2009 when it bought Wyeth Laboratories, which had in turn 
acquired it from smaller companies.)

“It’s a risky business developing vaccines, so you can explain — if not 
necessarily justify — the higher costs of vaccination,” said Dr. Alan 
Hinman, a former head of the immunization division of the C.D.C. and now a 
senior scientist at the Task Force for Global Health in Georgia. “A more 
difficult question is, after the research and development costs are 
recouped, why don’t prices come down?”

For a 2-month well-child checkup in 2014, Dr. Ozer charges $115. And the 
vaccine charges have grown to $725, for which insurers like Blue 
Cross/Blue Shield reimburse $613.79.

Cost vs. Benefit

For most prescription medicines, the crucial hurdle to marketing is to win 
Food and Drug Administration approval. But for vaccines, the prize is the 
imprimatur of the federal Advisory Committee on Immunization Practices. 
Once a shot is on the committee’s schedule as mandatory, everychild has to 
get it before entering school and insurers have to cover it, at least 
nominally. (Many states require home-schooled children to be vaccinated as 
well.) “We have to give it to every kid, so it’s a golden ticket,” Dr. 
Irvin said.

That requirement is a powerful incentive: Last year, Ms. Farris’s older 
child, Lenna, missed the first week of school as Ms. Farris, then new to 
Texas, searched for a provider willing to vaccinate the girl. Desperate, 
Ms. Farris took her daughter to a public health clinic and lied, saying 
she had no insurance. She found Dr. Irvin to immunize her son only this 
year.
The value of that “school mandate” is also apparent in the pricing. When 
Singapore’s national vaccine advisory group evaluated Prevnar 7 for 
mandated use, its price was about $80, said Karen Tyo, a researcher from 
Brandeis University, who was advising the government. After the government 
included it in the required national schedule, “the price jumped 
immediately” to about $120, she said. “Nothing had changed,” she noted. 
“It didn’t make any sense.”

To evaluate new vaccines for inclusion on mandated lists, national vaccine 
panels assess a vaccine’s cost benefit ratio. (F.D.A. approval requires 
that companies show vaccines are “safe and effective.” Cost is not 
considered.) Will the cost of buying and administering the vaccine result 
in a substantial payback for patients and society at large? That is a 
complicated, often nebulous, calculation.

Even before the advent of Prevnar, children under 5 rarely died of 
pneumococcal illness — about 200 in the United States annually, according 
to the C.D.C. So, in urging countries to adopt Prevnar 13, Pfizer produced 
extensive studies emphasizing the vaccine’s broad indirect benefits, such 
as reductions in a parent’s lost work time as well as the fact that the 
grandparent of an immunized baby is less likely to contract the disease. 
The company also factored in the ear infections Prevnar might prevent in 
children, even though most of those could be treated with antibiotics.

For example, one Pfizer study concluded that in the United States in 2009, 
Prevnar prevented 2.3 million cases of pneumococcal disease, 5,056 deaths 
of all ages and saved $965 million in direct costs and $2.7 billion in 
societal costs.

But when Prevnar 7 was first evaluated in 2000 for universal vaccination 
of children in the United States, the vaccine advisory committee concluded 
it was not likely to be cost effective, said Dr. Black, who was on the 
panel. In a study around that time, Dr. Black and colleagues concluded 
that the vaccine would result in cost saving for society only if each dose 
was priced at $46. It entered the market, though, at $58 a shot.
The committee decided to approve it anyway because it would save a few 
families from the tragedy of an infant’s death; the vaccine later proved 
more effective than the study had anticipated.

Most other developed countries demand better cost-effectiveness numbers 
before approval and can use that to negotiate for discounts, said Anthony 
Newall, a health economist at the University of New South Wales in 
Australia.

The Swiss Agency for Therapeutic Products pays $101, a price that has not 
changed over time. In Britain, the small private health care market sells 
prefilled syringes of Prevnar 13 for an average of $82 at pharmacies; the 
National Health Service pays even less, experts say. Prefilled syringes 
cost an average of $136 in the United States, and even the C.D.C. — which 
buys vaccines for the Medicaid program at a discount — pays $112.84.

Other countries have also diverged from the United States in how they 
deploy Prevnar 13, generally giving only three shots instead of four. 
Studies have shown that the protection is almost as good, particularly 
against the serious forms of the disease. “There’s virtually no benefit,” 
Dr. Black said. “We’re basically paying an extra $100-plus per child for 
nothing.”
The Vaccine Market

Every week or two, Dr. Irvin sits down at her computer to buy vaccines. 
With more than 3,000 patients in her practice, she estimates that it would 
cost her $70,860 a month to be fully stocked with vaccines for any patient 
who walked in the door. Instead, she buys sparingly for scheduled 
appointments and looks for manufacturers’ bargains.

Online, there are back-to-school sales, closeout sales on last year’s 
models and discounts for early booking. Dr. Irvin buys vaccines for polio, 
whooping cough, tetanus and hemophilus meningitis from Sanofi-Pasteur on a 
site called the Vaccine Shoppe. “I feel like I’m going to a boutique,” she 
commented while completing a recent purchase.

Because Dr. Irvin belongs to a purchasing cooperative of Texas 
pediatricians, the prices are often discounted 5 to 10 percent from the 
list price. But rates often fluctuate: On the Merck website, she noticed 
that the price of the vaccine against human papillomavirus had gone up 
from the previous week. She decided to buy vials rather than prefilled 
syringes because she would save about $1.50 a dose on a price of $132.46 a 
shot. “That’s make or break it,” she noted.
Likewise she buys vials, rather than syringes, for the measles, mumps, 
rubella vaccine to lower the cost to $51.20 a dose. In 2002, the same 
vaccine was $27.70 for private doctors. Because some companies, like 
Pfizer, require that each physician sign a legal agreement not to disclose 
the price he or she paid, there is little informed shopping. “I was kind 
of aghast, I didn’t think it could be legal, but it is,” said Dr. Gary L. 
Freed, a pediatrician at the University of Michigan School of Public 
Health who has studied vaccine purchases. “And it’s certainly a very 
inefficient market since it means physicians don’t have information to 
bargain.”

The result is much like that in other aspects of American medicine: Huge 
price variations for the same item or service. Large group practices that 
have purchasing clout with drug makers and insurers may make a profit from 
providing vaccines, while solo practices, like Dr. Irvin’s, can incur 
losses. Some doctors pay three times as much as others in the same city, 
Dr. Freed’s studies have found. One large practice was yielding $39 per 
dose of Prevnar, while 11 percent of practices were losing money on it.

Private insurers pay doctors a median of $145 for Prevnar, according to 
data compiled by Athena Health. Dr. Jeffrey J. Cain, the board chairman of 
the American Academy of Family Physicians, noted that reimbursement from 
insurers runs between 40 and 100 percent of the vaccine’s purchase cost, 
which often does not allow for overhead such as insurance, storage and the 
computer record-keeping systems required by the federal government.

Dr. Irvin says she loses money every time she gives a shot.

A Wide World of Prices

It is not clear how much Pfizer is profiting from Prevnar in the United 
States. But one measure is to look at the price at which Pfizer sells 
Prevnar for use in the poorest countries through a World Health 
Organization initiative: $3.30 a dose. Even at those prices, “I do not 
think pharmaceutical manufacturers are losing money,” said Dr. Hinman, the 
former C.D.C. official.

Since Pfizer bought Wyeth Pharmaceuticals and acquired Prevnar, its most 
visible research efforts have involved studies to prove its value. Company 
scientists have shown, for example, that Prevnar 13 is more cost effective 
than Synflorix, a competing vaccine made by GlaxoSmithKline that is far 
cheaper, but is effective against only 10 strains. It is not available in 
the United States.

This year, Pfizer submitted a new study to the C.D.C. showing that Prevnar 
13 is effective in preventing pneumonia in people over 65, and is hoping 
that the vaccination committee will recommend it for all Americans over 
50. People in that age group typically get a different type of vaccine 
against pneumococcal bacteria that has been around for decades and is only 
$30, but is not effective in babies.

Dr. Hinman said Prevnar 13 is a “really good vaccine” that is probably 
more effective than the older version, and he himself hopes to get it once 
it is available. But in 2012, when Pfizer tried to get Prevnar 13 
recommended for use in adults in Britain, the Joint Committee on 
Vaccination and Immunization said no because of the cost. If the United 
States recommends it for use in all healthy adults, analysts say it will 
mean an additional $1 billion in annual sales for Pfizer.

The C.D.C., which declined an interview for this article, must walk a 
delicate line pressing drug companies to modulate prices: When there is 
one manufacturer, as with Prevnar 13, the company could raise charges or 
slow production, creating disastrous shortages.

“What leverage does the C.D.C. have really?” Dr. Freed asked. “They’re in 
a terrible bind and it will only get worse as prices rise.”
Meanwhile, Dr. Irvin feels the pressure as other doctors stop offering 
shots, and parents like Ms. Farris go searching.

Clark Petty, who runs a public immunization clinic in San Antonio, said 
his store of vaccines from the C.D.C. are meant for the poor and people 
without insurance. Patients with private insurance must pay full list 
price and an administration fee and would have to apply for reimbursement 
themselves.

The family practice doctor downstairs in Dr. Irvin’s office building has 
stopped immunizing children. A local obstetrician recently told her in 
tears that she cannot afford to give pregnant patients a shot recommended 
to boost the mother’s immunity to whooping cough, protection that is 
transferred to her unborn baby for the first months of after birth.

Nationally less than 10 percent of pregnant women are getting this 
recommended shot. Though there are many reasons women go unvaccinated, 
studies show that patients are far less likely to get a vaccine if their 
doctors do not offer it. And the consequences can be grave: Last year, two 
babies, each a month old, died of whooping cough here in San Antonio. 
Their mothers had not been vaccinated during pregnancy.


Judit Rius Sanjuan
U.S. Manager & Legal Policy Adviser, Access Campaign
Medecins Sans Frontieres/ Doctors Without Borders (MSF)
333 7th Avenue, 2nd Floor
New York, NY 10001 USA
Office: +1 212 655 3762 // Mobile: +1 917 331 9077
Email: judit.rius at newyork.msf.org // Twitter: juditrius


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