Within 24 hours most babies born in the U.S.
get their first vaccination for hepatitis B. Over
the next two years that infant will receive more than two dozen
vaccinations to protect them against everything from measles, mumps
and rubella to the flu. Vaccines
are one of the biggest successes in modern medicine.
They save up to 3 million people worldwide every year and protect
millions more from disability and suffering.
But the bar to create new vaccines is now higher than ever.
Developing a vaccine is expensive and it can take a long time. From
research and discovery to product development it can cost up to a
billion dollars to make one vaccine and that process can last up to
15 years.
Overall revenue of the pharmaceutical industry worldwide is over a
trillion dollars while the vaccine market is only about 37 billion
dollars. Which begs the question, who is making money developing
vaccines? How much do they cost to produce?
And why are so many parents afraid to have their children vaccinated?
The genesis of modern day vaccines began in 1796 when an English
doctor took on smallpox.
Dr. Edward Jenner observed that milkmaids who suffered the mild
disease a cow pox never contracted smallpox.
Jenner did an experiment.
He took material extracted from a cowpox sore on the hand of a
milkmaid and inoculated it into the arm of an eight-year-old boy.
The precursor to the smallpox vaccination was born.
Despite Jenner's discovery the 20th century saw smallpox wipe out an
estimated 300 million people worldwide.
Tens of thousands of children also died in the U.S. each
year from diseases like whooping cough, diphtheria and polio.
Since their mass introduction following World War Two vaccines have
saved millions of lives. Vaccines and have
been one of the greatest public health success stories the world has
seen. You know after clean water vaccines have saved more lives over
the last century than any other intervention.
Historically vaccines were produced at a low price and sold at a low
profit margin.
They were so low that many companies stopped producing them. In
the 1960s more than two dozen companies produced vaccines. Those
two dozen companies dwindled to just a handful after Novartis sold
its vaccine business to GlaxoSmithKline in 2014.
There are other players in the space but the four big drug companies
that now dominate the market are Pfizer, Merck, Sanofi Pasteur and
GlaxoSmithKline. Pfizer had vaccine sales of just over six billion
dollars in 2018.
Overall revenue with the company in 2018 was more than 50 billion
dollars. Pfizer is best known for making Viagra and Lipitor but the
company's best selling product in terms of sales is a vaccine called
Prevnar 13 which protects against pneumonia and meningitis.
In 2014 the U.S.
Centers for Disease Control and Prevention recommended that adults 65
and older get immunized.
That sent profits soaring Prevnar made five point eight billion
dollars in 2018 making it Pfizer's top selling products.
The second is Merck.
In 2018 Merck had vaccine sales of over 7 billion dollars.
Merck's top selling vaccine Gardasil fights HPV the most common
sexually transmitted infection in the U.S.
that can sometimes cause cancer.
The third vaccine maker is French drugmaker Sanofi.
Its vaccine division Sanofi Pasteur's two top selling vaccines are a
polio vaccine for emerging economies and a seasonal flu shot.
Total vaccine sales were almost 6 billion dollars in 2018.
And fourth is GlaxoSmithKline.
GlaxoSmithKline sold 770 million doses of vaccines around the world
in 2018 and had vaccine sales of over 7 billion dollars.
GlaxoSmithKline and Pfizer did not immediately respond to a request
for comment on their vaccine divisions.
People get sick take a drug to help them get better.
Healthy people take a vaccine to protect them from getting sick in
the first place.
A vaccine works by triggering the body's immune system to fight a
disease. Molecules from pathogen are injected into the body.
The immune system recognizes the hostile intruder produces antibodies
and remembers them for the future.
There are enormous about a risk of investment with vaccines that
generally goes beyond that for a drug. Compared
to a drug vaccines are tough to make.
To start the vaccine manufacturing and research process is an
extraordinarily complex process.
When you start back in basic research our scientists are really
understanding those underlying mechanisms of protection and really
trying to decipher what the best approach is for a vaccine.
Broadly speaking there are two main types of vaccines.
The first is a preventive vaccine like a flu shot or a measles
vaccine. It can prevent a disease you might get in the future.
The second is a therapeutic vaccine that is given to people after the
infection occurs.
It stimulates your immune system to fight back.
The vaccine process starts in the lab where researchers gather data
and test for safety.
Clinical development is a three phase process where trials are
conducted in the lab on animals and later with large groups of
people. The cost of overall development vs a typical vaccine is
generally over a billion dollars or euros to develop. Live
vaccines are difficult too manufacture and closely regulated by the
FDA for quality control.
Safeguards are put in place to protect children and adults during
testing. Following clinical trials the vaccine moves to the
manufacturing stage.
The lead time to build or establish a manufacturing facility that can
make a vaccine products is usually at least three years.
It could be as long as five years. In
the early 1990s Merck started their HPV research program.
The vaccine they developed Gardasil was approved in 2006 but it
wasn't until 2018 that the FDA approved Gardasil 9 for men and
women between 27 and 45 years of age.
The original HPV program was a quadrivalent vaccine where we actually
studied the four most common strains of HPV.
Over time we've evolved that work into a nine valent program.
Since 2006 more than 300 million doses of Gardasil and Gardasil nine
have been distributed worldwide with nearly 14 million people in the
U.S. including teens infected with HPV every year.
That's good news for today's kids.
Vaccines like the flu shot often deal in high volume and low margins.
But there are a few big factors that have actually been driving the
price of vaccines higher in recent years.
Selling a vaccine like Shingrix for the shingles or Gardasil is where
a company can hit much higher margins.
Gardasil nine cost between 400 and 500 dollars for a three dose
vaccination series and Gardasil 9 reached over three billion dollars
in sales in 2018.
With the patent not expiring until 2028 in the U.S.
it could reach billions more, according to analysts.
The price of vaccines is also on the rise because of upgrades to
older vaccines.
In 2001 the MMR vaccine made by Merck sold for 28 dollars a dose.
The 2019 version of the same vaccine sold for seventy five dollars a
dose a separate MMR vaccine that also includes chickenpox sells for
over two hundred dollars.
And like most vaccines the MMR requires multiple doses that can
significantly increase the costs.
Patents actually don't play nearly as big a role as you might think
when it comes to vaccination pricing. With
drugs patent protection is everything. When
a product like Viagra or Lipitor loses patent protection in the U.S.
sales can decline as much as 70 or 80 percent the following quarter.
Vaccines are very different.
Vaccines can have as many as 15 to 20 components that present complex
technical challenges and require multiple patents.
They also require large scale manufacturing facilities with the
ability to produce vaccines in large volume.
In the US, there are no generic or bio similar vaccines currently available.
There are other manufacturers largely based in India and China
who do produce other typical childhood vaccines like polio, measles.
But often their production volumes are directed to their countries
rather than the US.
Essentially, when a big pharma company loses its patent or a combination of patents,
that doesn't mean the market is suddenly flooded with generic competitors.
All four companies saw double-digit gains in vaccine sales in the first quarter of 2019.
And with Merck, vaccine sales saw almost double the percentage growth
of their pharmaceutical sales in 2018.
Every year, 85 percent of the world's children receive vaccines to
protect them against tuberculosis, polio and measles.
Despite this, more than 3 million people die from vaccine-preventable deaths each year.
Even in the U.S., about 100,000 young children have not received vaccinations for any
of the 14 diseases that were recommended.
The U.S. government provides free vaccinations but some families may lack
access to health clinics or don't understand their importance.
People with compromised immune systems could get sick if they receive a vaccination.
And a few are intentionally not vaccinating their children.
In fact, parents in 17 states could opt out of vaccinating their kids
for personal or philosophical reasons.
Over the past decade, the number of Americans who consider vaccines, for
things like polio and measles to be vital to public health, has fallen by 10 percent.
Reported cases of measles is up more than 30 percent worldwide since 2016.
And as of May 2019, there are over 700 cases of measles from 23 states.
The largest number of cases reported in the U.S. since Measles was eliminated in 2000.
In April, New York City Mayor Bill de Blasio ordered mandatory
vaccinations after more than 250 people mostly members of an ultra
orthodox Jewish community contracted the disease.
Some people in the community chose not to vaccinate their children
after they were targeted by anti-vaccination groups.
Today, we are declaring a public health emergency effective immediately.
This will mandate vaccines for people living in the affected area.
Dr. Joseph Kaplovitz, a doctor and Borough Park, Brooklyn said
vaccination rates in the ultra-Orthodox community dropped after
anti-vaccination pamphlets were distributed in the community.
He had a head-to-toe rash. Had very high fever.
It was actually a three month old and they had a sibling that did contract the measles as well.
Those pamphlets say that vaccines are made from ingredients that
include human cells from aborted fetuses, rabbit brain, and monkey kidney.
Even more alarming health officials have condemned measles
parties where parents are gathering unvaccinated children with kids
suffering from the measles in order to infect them. So
they don't understand that a kid with the measles can have a
complication of pneumonia.
They don't understand that there is something called encephalitis with measles that could cause brain damage.
We are seeing these diseases that we have eradicated now are starting to make a comeback.
Limiting an outbreak from a vaccine-preventable disease requires herd immunity.
Basically, if enough people are vaccinated the bugs can't
catch hold and spread through the community protecting those who are unable to get vaccinated.
Merck is the sole supplier of the measles vaccine in the U.S..
The company said that they increased production of the vaccine in the
U.S. to meet an uptick in demand.
U.S. sales of MMR and chickenpox vaccines rose around 10 percent to
$343 million in the first quarter of 2019.
Much of the increase came from sales to private clinics which pay more
than the government for vaccines.
One time consuming and costly element is tracking the infected person
and every person they came into contact with.
A measles outbreak in Washington State in January 2019 prompted the
governor to declare a state of emergency. Of
74 cases reported 60 people who contracted the disease were not vaccinated.
State and local health departments spent more than 1.6 million dollars to quarantine and treat the sick.
And it's not just public health departments that rack up multi-million dollar bills.
In 2017, an unvaccinated 6-year-old boy in Oregon who cut his head and
got tetanus spent two months in the hospital and racked up more than
$800 thousand in medical bills.
Globally some countries are making big gains.
Vaccination rates in Australia climbed after the government
instituted a policy depriving families of a child benefit payment if
their children were not vaccinated.
Cervical cancer there could be eliminated in the next two decades
thanks to vaccination efforts targeting the HPV infection.
In poor countries with severely underfunded health budgets, external
donors and governments often provide critical funding for vaccine
programs. The Bill and Melinda Gates Foundation donated more than 10
billion dollars to help organizations with the aim to increase access
to immunization.
Bill Gates says the gamble is paying off on a couple different levels.
When you take these vaccines get them to be very inexpensive by making
big volume commitments have that right relationship with the private
sector get the delivery system.
So they're really getting the coverage out there.
We feel there's been over a 20 to 1 return.
So if you just look at the economic benefits that's a pretty strong
number compared to anything else.
The numbers that you ran through were if you had put that money into
an S&P 500 and reinvested the dividends you'd come up with something
like 17 billion dollars but you think it's 200 billion dollars.
Here yeah.
But critics argue that the pharmaceutical industry has neglected
disease in poor countries and has invested too little in research and
development in those areas.
There are about 37 million people living with HIV in 2019 and nearly
one million people die for the disease every year.
Two thirds of people living with HIV reside in sub-Saharan Africa.
A lot of big pharma has dropped out of HIV vaccine research.
It's not a surprise that the companies will produce vaccines for
which they have a perceived market their businesses, they're going to
be less interested in investing these billions of dollars.
You don't always get a hit.
You're not always successful.
Vaccines were not available in more than 11,000 people died during an
Ebola outbreak in West Africa in 2014.
The vaccine for Ebola languished for a long time at work could have
been done sooner and we might have avoided some of the problems that
we've had. Since
April 2019, a
new Ebola outbreak in the eastern Democratic Republic of Congo has
killed more than 1,000 people.
An experimental vaccine has been deployed with some success. GAVI
a public-private health partnership set up by the Bill and Melinda
Gates Foundation has been working with the vaccine industry to help
accelerate the development of experimental Ebola vaccines.
What was really helpful was to be able to give a signal to say if the
vaccine industry really accelerates the development of these vaccines
we will help procure it and build the stockpile.
So where does future growth come from?
With many children in the developed world already vaccinated
something the vaccine industry could turn to older adults.
New advisories are out on which vaccines adults and children need to
stay healthy.
A federal panel recommending a new vaccine for shingles U.S.
has about a million cases of shingles each year mostly affecting
seniors. In 2018 the CDC recommended everyone over age 50 get the
Shingrix vaccine produced by GlaxoSmithKline. The demand not
only boosted sales but experts say the demand exceeded supplies.
GlaxoSmithKline reported one billion dollars in sales of the vaccine
in 2018.
Clinical trials have also started for the first universal flu vaccine
something that has eluded scientists for decades.
Other factors driving growth in the vaccine industry are the
expansions of immunization programs in newly industrialized countries
like China. 70
percent of GlaxoSmithKline vaccines go to emerging markets
vaccines. Vaccines in the research and development pipeline more than
tripled between 2005 and 2015. And
with newer and more expensive vaccines becoming available the market
value of vaccines could rise to 100 billion dollars by 2025.
Although they typically have lower margins vaccines are consistent
stream of revenue for drug companies and with only a handful of
competitors. Vaccine makers face few challengers on the horizon.