Click for next page ( 22


The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 21
1 Introduction This report presents the results of an evaluation of the financing of vaccine purchases. The purpose of that evaluation was to design a finance strategy that can achieve the right balance in assuring access to the social benefits of vaccines while also encouraging the availability of new and future vaccine products within the health care system. The study was prompted by the publication of an earlier Institute of Medicine (IOM) re- port, Calling the Shots (Institute of Medicine [IOM], 2000a), which exam- ined the financing of immunization infrastructure and recommended a substantial increase ($75 million) in the federal immunization grants pro- gram to support infrastructure development. In framing this new study, the Centers for Disease Control and Prevention (CDC) asked the IOM to examine what is known about current vaccine finance arrangements and to identify strategies that could resolve the basic tensions and uncertain- ties that permeate existing vaccine purchasing systems in the public and private health care sectors. The Committee on the Evaluation of Vaccine Purchase Financing in the United States was formed to conduct this study. CDC formulated the following questions as the basic framework for this study: (1) What are the roles and responsibilities of public (federal, state, and local) and private (health plans, health insurers, and purchasers) agencies and health care providers in financing the purchase of vaccines to achieve national immunization objectives for all children, adolescents, and adults in the U.S.? (a) Who is responsible for payment of costs for all vaccines for 21

OCR for page 21
22 FINANCING VACCINES IN THE 21ST CENTURY children, adolescents, and adults licensed by the Food and Drug Admin- istration (FDA) and recommended by the Advisory Committee on Immu- nization Practices (ACIP)? (b) How can public and private prices of a new vaccine be deter- mined in a rapid and fair manner to balance the need for continued in- vestment in vaccine research with the financial constraints of the health care system in the United States? (2) In working toward an appropriate balance of roles and respon- sibilities, which finance strategies best achieve national goals and best fit the service delivery mechanisms for various vaccines and/or population groups? (a) ternatives? (b) .. ----- -------I,--- I- ----r----~--~~-~~ an- --~----~-~-~~ -- sources for preventive health interventions? (3) What are the current levels of need for recommended vaccines in the child, adolescent, and adult populations for those persons who do not have health plan benefits that include immunizations or who have large co-payments and/or deductibles? (a) What changes in the level of need are anticipated in the fu- ture? (4) Which approaches could reduce the time lag and disparities that occur between new vaccine recommendations and the availability of pub- lic and private financing to implement the recommendation? (5) Will vaccine products under consideration for licensing have a significant effect on future vaccine purchase strategies in public and pri- vate health plans? (a) Why have vaccine prices increased in the past decade? (b) What lessons have been learned in other fields with finance systems that purchase medical devices or supplies from single manufac- turers? What are the public health and cost implications of these al- Unw can these .strate~ie.s be implemented given limited re- These broad study questions were translated into the charge for the IOM committee, shown in Box 1-1. BACKGROUND Vaccines are a fundamental component of primary health care ser- vices, especially for children. Building on basic research discoveries, a growing number of vaccine products are now available that provide pro- tection against once-common infectious diseases across the lifespan. The widespread use of available vaccines in the United States has led to sig- nificant declines in the mortality and morbidity rates associated with such

OCR for page 21
INTRODUCTION 23 illnesses as polio, measles, mumps, rubella, pertussis, diphtheria, small- pox, tetanus, influenza, and pneumonia (see Table 1-1~. Measurements of immunization status are frequently used as benchmarks in determining the health status of an individual child, as well as in assessing the health status of populations of children and adults (see Appendix A for the child- hood and adult immunization schedules for 2002-2003~. Current reports (Centers for Disease Control and Prevention [CDC], 2002a) indicate that 73.7 percent of all U.S. children (aged 19 to 35 months) have received the full schedule of vaccines recommended for their age group (4:3:1:3:3 series. This rate has remained relatively stable over the past 3 years. A higher percentage of children (close to or even more than 90 percent) has received a significant portion of the recommended vac- iThe 4:3:~:3:3 series, which constituted the universal recommended schedule in 2001, com- prises 4 doses of diphtheria-tetanus-acellular pertussis vaccine, 3 doses of poliovirus vaccine, 1 dose of measles-containing vaccine, 3 doses of hepatitis B vaccine, and 3 doses of haemophilus influenzue type b vaccine. Varicella and pneumococcal conjugate vaccines are measured separately.

OCR for page 21
24 FINANCING VACCINES IN THE 21ST CENTURY TABLE 1-1 Change in Annual Morbidity from Vaccine-Preventable Diseases: Prevaccine Baseline and 2002 Average Prevaccine Annual Baseline Baseline 2002 % Disease Date Cases Casesa Decrease Diphtheria 1920-1922 175,885 1 100.0 Haemophilus influence, type b and unknowns 1985 20,000 167 99.2 Measles 1958-1962 503,282 37 100.0 Mumps 1968 152,209 238 99.8 Pertussis 1922-1925 147,271 8,296 94.4 Invasive pneumococcalb 1998-1999 13,330 2,700 80 Poliomyelitis 1951-1954 16,316 0 100.0 Rubella 1966-1968 47,745 14 100.0 Congenital Rubella Syndrome 1998 823 3 99.6 Tetanus 1922-1926 1,314 22 98.3 aChildren <5 years old. bChildren <2 years old; preliminary data from CDC's Active Bacterial Core Surveillance/ Emerging Infections Program Network. NOTE: Preliminary 2002 (52-week frozen) data. SOURCES: IOM, 2000a; CDC, 2003a. cines by 24 months of age2 (CDC, 2003b), and virtually all children (about 95 percent) are adequately immunized by the time they enter school. Those who are not immunized by school age are frequently from families that have requested an exemption from immunization requirements for medical, religious, or philosophical reasons. These high rates of immunization among young children are impres- sive. By these measures, the United States has developed a successful im- munization system for children that provides significant protection against vaccine-preventable disease. Yet several fundamental concerns remain. First, the public health goal of 80 percent immunization of 2-year-old chil- dren with recommended vaccines has never been achieved. While outbreaks of vaccine-preventable disease have decreased significantly, full immuniza- tion of the young, and especially vulnerable child populations, with all 2The reported percentages are as follows: 94 percent receive 3 of the 4 recommended diphtheria-pertussis-tetanus (DPT) vaccines; 88 percent receive 3 polio vaccines; 90 percent receive 1 measles-mumps-rubella (MMR) vaccine; 93 percent receive 3 Haemophilus influenza type b (HIB) vaccines; and 89 percent receive 3 of the newer hepatitis B vaccines.

OCR for page 21
INTRODUCTION 25 recommended vaccines remains elusive. One of every four 2-year-old chil- dren in the United States is not adequately immunized. Public health offi- cials have established clear standards to strengthen immunization efforts at the national, state, and local levels. These standards, which are set forth in the report Healthy People 2010 (U.S. Department of Health and Human Services, 2000), establish a national goal of 80 percent immunization with recommended vaccines for all 2-year-old children. Second, broad disparities remain in state and local immunization rates for young children. There is substantial variation in immunization rates among states. According to data collected by the 2001 National Immunization Survey (NIS), Rhode Island had the highest level of immunization for chil- dren aged 19-35 months (81.7 percent for the 4:3:1:3:3 series). New Mexico ranked lowest for the same series (63.2 percent), a difference of more than 18 percentage points (CDC, 2002a). Significant variations also exist among urban areas and between ur- ban and state-level rates. The highest estimated rate of immunization of young children (aged 19-35 months, 4:3:1:3:3 series) in the 2001 NIS data was 79.5 percent in Jefferson County, Alabama, compared with a low rate of 57.7 percent in Detroit, Michigan a difference of 21.8 percentage points (CDC, 2002a). Similar disparities were revealed within states as well. Michigan, for example, had a state-level immunization rate of 71.7 per- cent,14 percentage points higher than the rate for the city of Detroit. Simi- larly, the state-level rate for New lersey was 73.8 percent, as compared with a rate of 58.8 percent for Newark a difference of 15 percentage points. While cities such as Boston and San Diego enjoy high immunization rates as compared with the national average of 73.7 percent for all U.S. children aged 19 to 35 months, other cities are struggling. In addition to Newark and Detroit, cities that reported low levels of immunization for young children included Washington, D.C. (68.9 percent), Baltimore (65.3 percent), Philadelphia (64.9 percent), Houston (63.0 percent), and Dallas (63.1 percent) (CDC, 2002a). Third, a significant burden of vaccine-preventable disease remains within the adult population. Adults experience the highest levels of mortality and morbidity from vaccine-preventable diseases. Influenza and pneumonia are the seventh leading cause of death in the United States, responsible for more than 65,000 deaths annually most among older adults (CDC, 2002b).3 In contrast, about 300 deaths occur each year as a result of all 3Note, however, that the majority of these deaths are among those aged 65 and above. Some percentage of these deaths are likely due to family decisions not to immunize because of extreme age or comorbidities.

OCR for page 21
26 FINANCING VACCINES IN THE 21ST CENTURY vaccine-preventable diseases among children. In addition, 48,000 pneu- monia and influenza hospitalizations occur annually among adults over age 65 (CDC, 2001a). The monetary burden of adult vaccine-preventable diseases is estimated to be greater than $10 billion per year (CDC, 2002c). The annual immunization rates for noninstitutionalized adults age 65 and older are 66 percent for influenza vaccine and 50 percent for pneumococ- cal vaccines (CDC, 2002d). The missed opportunities for immunization represented by these figures carry a high and avoidable cost for individu- als and society as a whole, especially among older adults. Finally, working-age adults with chronic illnesses have persistently low lev- els of immunization that place them at risk. Immunization rates for high-risk adults who suffer from chronic disease (e.g., heart or lung disease or dia- betes) are especially low. A national health objective for 2010 is to increase influenza and pneumococcal vaccination rates to at least 60 percent among persons at high risk for complications from these diseases.4 The Advisory Committee on Immunization Practices (ACIP) has recommended, for ex- ample, that all persons with diabetes be vaccinated. Yet recent data indi- cate that only 40 percent of persons with diabetes had received an influ- enza vaccination within the previous year, and only 21 percent had ever received a pneumococcal vaccination (CDC, 1999a). Validated immuniza- tion estimates for other recommended adult vaccines (e.g., hepatitis A, hepatitis B. tetanus, and varicella) are severely limited or nonexistent (IOM, 2000a). In addition to generally low immunization rates among adults, significant racial and ethnic disparities persist in adult immuniza- tion levels (CDC, 2002d). CONCEPTUAL FRAMEWORK FOR THE STUDY Investments in research and development throughout the 20th cen- tury have generated a growing array of vaccine products. But the achieve- ment of immunization goals requires more than the discovery of a vaccine. A complex web of financial and institutional arrangements rep- resenting a unique public and private partnership is involved in moving a vaccine from the product discovery phase, through the production and development cycle, to licensing and recommendation for general or spe- cialized use, and into the health care delivery system. This partnership is 4Data for 1999 indicate that 31.9 percent of this high-risk population had received annual influenza vaccinations, while only 17.1 percent had ever received a pneumococcal vaccina- tion (National Center for Health Statistics [NCHS], 2000~.

OCR for page 21
INTRODUCTION 27 characterized by an array of objectives and incentives that push and pull various components of the immunization process in different directions. The Societal Benefits of Vaccines The development of vaccines represents one of the top ten public health achievements of the 20th century (Orenstein, 2002a). The health benefits of vaccines, represented by the protection they confer against in- fectious disease, accrue not only to the individual who receives the vac- cines but also to other members of the community. Benefits to the com- munity accrue because immunization interrupts the transmission of infectious disease by reducing the number of persons who are capable of spreading the infection, as well as the expenses associated with treatment of the disease, especially in public health facilities. Even though some in- dividuals may not be immunized, the presence of high numbers of immu- nized persons within a community can interrupt and reduce the transmis- sion of vaccine-preventable disease, a process known as "herd immunity." Herd immunity protects those who cannot receive the vaccine because of medical conditions, those who may be too young to receive the vaccine, and those who are not vaccinated because of parental indifference or reli- gious or philosophical objections to vaccination. In addition, immuniza- tion benefits families (who are relieved of the burden of care for ill mem- bers) and employers (who must replace workers who need to care for ill dependents or who become ill themselves). The costs and benefits of individual vaccines vary with the type of disease burden and costs associated with each product and with the as- sumptions that guide the assessment of financial and social benefits. Some vaccines produce significant benefits in early childhood; others provide protection during adolescence or adult life. The benefits of some vaccines are associated with their impact on mortality due to life-threatening dis- eases (such as measles); others (such as varicella or pneumococcal conju- gate) are beneficial because they reduce the burden of illness or morbid- ity. Some vaccines are recommended for universal use; others are recommended only for certain jurisdictions or populations that have spe- cific risk characteristics. Factors such as cost, protective efficacy, disease incidence, and disease outcomes determine the value of each vaccine. Considerable research has been devoted to quantifying the specific value and effects of vaccines, for both vaccines currently available and those yet to be developed (IOM, 2000b). Comparing the benefit-cost ra- tios of different vaccines is difficult, however. Certain vaccines will rank higher than others if calculations are performed solely according to cost per life-year saved (see Table 1-2~. Ratios of vaccination benefits to costs can vary substantially, from 27:1 for diphtheria/pertussis (i.e., $27 worth

OCR for page 21
28 FINANCING VACCINES IN THE 21ST CENTURY TABLE 1-2 Benefit-Cost Ratios for Selected Vaccines Benefit-Cost Ratio Vaccine (in dollars) Source DTaP 27.00: 1 Ekwueme et al., 2000 Hib 5.4: 1 Zhou et al., 2002 MMR 23.3: 1 Zhou et al., in press Polio (inactivated polio virus [IPV]) 5.45: 1 Zhoua Perinatalhepatitis B 14.70: 1 Zhoua Varicella 5.40: 1 Lieu et al., 1994a Varicella 5.61: 1 Jacobs and Meyerhoff,2001b Varicella 4.76: 1 Jacobs and Meyerhoff,2001C Hepatitis A 1.96: 1 Jacobs and Meyerhoff, 2001 Pneumococcal conjugate 0.68: 1 Jacobs and Meyerhoff, 2001 Pneumococcal conjugate 1.1: 1 Derived by CDC from Lieu et al., 2000a (CDC, 2003c) aPersonal communication from F. Zhou, March, 2003. bBased on analysis in Huse et al., 1994. CBased on analysis in Preblud et al., 1986. NOTES: Three methods were used in the analyses: (1) Single birth cohort, using pre- and postvaccination surveillance data: DTaP, Hib, MMR, polio (IPV); (2) Single birth cohort, using vaccine efficacy: perinatal hepatitis B. vari- cella (Huse),b Varicella (Preblud),C hepatitis A, and pneumococcal conjugate; (3) Multiple cohorts, dynamic model, using vaccine efficacy: varicella (Lieu et al., 1994a) SOURCES: CDC and published reports as noted. of benefits for every $1 spent), to 13.5:1 for measles, 4.76:1 for varicella, and 0.68:1-1.1:1 for pneumococcal conjugate (CDC, 2003c) (see Table 1-2~. Such ratios can underrepresent a vaccine's value, however. Additional benefits gained from vaccines, some of which were noted above, include reductions in lost work time, enhanced productivity, increased school at- tendance, and mitigation of pain and suffering most of which have not yet become standard elements of vaccine cost-benefit analysis (Lieu et al., 2000a). It should be noted that the benefits of interest here are public health benefits and do not include special considerations associated with national emergencies. The personal and societal health benefits of vaccines form the founda- tion for their unique status in the health care system. School children are required to demonstrate proof of immunization prior to school enroll- ment. Similar requirements are frequently in place for child care centers, nursing homes, and occupational settings such as hospitals and other health care centers. These requirements essentially form a government mandate for vaccines, administered by the states but informed by the rec-

OCR for page 21
INTRODUCTION 29 ommendations of ACIP, the American Academy of Pediatrics (AAP), and the American Academy of Family Physicians (AAFP). Vaccine Pricing Trends Many vaccines with high societal benefit have traditionally been avail- able at low prices. In the 1980s, for example, vaccines such as diphtheria- tetanus-whole-cell pertussis (DTP), oral poliovirus (OPV), and measles- mumps-rubella (MMR) were frequently priced below $3 per dose and in some cases were available for pennies (see Table 1-3~. By 2000, however, the prices of newer and improved vaccines for the same diseases had risen significantly. Furthermore, recent additions to the immunization sched- ule such as varicella and pneumococcal conjugate have been priced at substantially higher levels (Table 1-4~. The four-dose series of the pneu- mococcal conjugate vaccine, for example, is priced at $235 (CDC, 2003d). As a result of these trends, the price of acquiring the full series of recommended immunizations for 2-year-old children in 2002 was $432, more than double the price of complying with the recommended series in 1999 (Davis et al., 2002) (see Figure 1-1~. And the prices of future vaccines that are in the early stages of development can be expected to be higher still. The estimated prices of the candidate vaccines reviewed in the IOM TABLE 1-3 Prices of Selected U.S. Vaccines: 1980 Versus 2003 (U.S. $ per dose) Year/Product Public Sector Private Sector 1980 Diphtheria-tetanus-whole-cell pertussis (DTP) Oral poliovirus (OPV) Measles-mumps-rubella (MMR) 2003 Diphtheria-tetanus-acellular pertussis (DTaP) Inactivated poliovirus (IPV) Measles-mumps-rubella (MMR) Varicella 0.15 0.35 2.71 11.75 8.80 15.64 41.44 0.30 1.60 7.24 19.65 22.53 34.73 58.11 SOURCES: Personal communication with B. Snyder, Centers for Disease Control and Preven- tion, 2001; CDC, 2003d.

OCR for page 21
30 FINANCING VACCINES IN THE 21ST CENTURY TABLE 1-4 Vaccines for Children Program: CDC Vaccine Price List (prices as of March 4, 2003) CDC Private- Brandname/ Cost/ Sector Vaccine Manufacturer Trade name Dose Cost/Dose DTapa,b Aventis Pasteur Tripedia(~) $11.75 to $19.65 to DAPTACEL(~) $12.75 $20.24 DTapa,b GlaxoSmithKline Infanrix(~) $11.75 to $19.65 $12.00 DTaP-Hep B-IPV GlaxoSmithKline Pediarix $32.75 $60.06 DTaP-Hibb,c Aventis Pateur TriHIBit(~) $23.40 $38.21 Aventis Pasteur IPOL(~) $8.80 $22.53 to $23.31 Hepatitis B- Merck COMVAX(~) $21.83 $43.56 Hibb,e Hepatitis A- Merck VAQTA(~) $11.15 $29.62 Pediatricb Hepatitis A- GlaxoSmithKline Havrix(~) $11.15 to $29.73 Pediatricb $11.40 Hepatitis A- Merck VAQTA(~) $17.75 $29.62 Adultb Hepatitis A- GlaxoSmithKline Havrix(~) $16.51 to $59.45 Adultb $17.75 Hepatitis A- GlaxoSmithKline Twinrix(~) $36.16 $78.67 Hepatitis B- 18 onward Hepatitis A- Hepatitis B Adultb d GlaxoSmithKline Twinrix(~) $36.16 $77.67 Hepatitis BY GlaxoSmithKline ENGERIX By) $9.00 to $24.20 Pediatric/ $9.25 Adolescent Hepatitis BY Merck RECOMBIVAXHB(~) $9.00 $23.20 Pediatric/ Adolescent

OCR for page 21
INTRODUCTION TABLE 1-4 Continued 31 CDC Private- Brandname/ Cost/ Sector Vaccine Manufacturer Trade name Dose Cost/Dose Hepatitis B- Merck RECOMBIVAX MB(~) $24.25 $59.09 2 dosed Adolescent (11-15) Hepatitis B- Merck RECOMBIVAX MB(~) $24.25 $59.09 Adultb d Hepatitis B- GlaxoSmithKline ENGERIX-B(~) $24.25 $51.73 Adultb d Hibb,d Merck PedvaxHIB(~) $8.32 $21.52 Hibb,d Wyeth/Lederle HibTITER(~) $7.33 $15.88 Hibb,d Aventis Pasteur ActHIB(~) $7.51 $21.78 Influenza Aventis Pasteur Fluzone $5.525 $6.50 MMRa,b Merck MMRII(~) $15.64 $34.73 Pneumococcal Wyeth/Lederle Prevnar(~) $45.99 $58.75 7-valentb~d (Pediatric) Rubellab,d Merck Varicellab~d Merck Meuvax II(~) $6.54 $14.24 Varivax(~) $41.44 $58.11 aVaccine cost includes $2.25/dose federal excise tax. bVaccines that do not contain thimerosal as a preservative. CVaccine cost includes $3.00/dose federal excise tax. dVaccine cost includes $0.75/dose federal excise tax. eVaccine cost includes $1.50/dose federal excise tax. SOURCE: CDC, 2003d. report Vaccines for the 21st Century (IOM, 2000b), for example, range be- tween $50 and $500 per dose. The higher prices of new vaccine products have a significant impact on federal budgets designed for the purchase of vaccines for disadvan- taged populations. Vaccine suppliers need to negotiate their prices with

OCR for page 21
32 FINANCING VACCINES IN THE 21ST CENTURY $500 - $400 - In 8 $300- ., $200- $100 - $0 - ........................................................................................................................ ~ ~ 161tl,l,l, ,,, ~ ~ 1 us ~ co a) ct. us ~ a) O 0 ~ ~ ~ ~ ~ ~ ~ ~ cat us ~ ~ ~ co ~ ~ ~ a' oo Year FIGURE l-l Cumulative vaccine cost trends. SOURCE: Davis et al., 2002. CDC, which purchases over half the volume of vaccines distributed in the United States. Parents and/or their insurance plan must also buy vac- cines for their children or themselves. As noted earlier, government estab- lishes a mandate for vaccine use and assists some, but not all, populations in gaining access to the vaccines necessary to fulfill that mandate. Negotiating on behalf of state as well as federal purchasers, CDC is in the conflicted position of both promoting the development of methods to fight disease (including the use of vaccines) and seeking to keep purchase prices as low as possible (McGuire, 2003~. CDC has used its monopsonistic purchasing power to "insist" on lower prices for new vaccines (Miller, 2002~.5 In the case of older vaccines (such as diphtheria-tetanus-acellular pertussis [DTaP] and MMR), federal price caps have been established through legislative action, most notably within the Vaccines for Children (VFC) entitlement. 5A monopsony is a market situation in which a single purchaser exerts a disproportionate influence on the market.

OCR for page 21
INTRODUCTION 33 The tension between the need to establish low prices for public pur- chases of vaccines and the need to sustain a vigorous vaccine industry is troubling. The prices paid for vaccines now will influence future invest- ments in new products insofar as the current prices affect firms' expecta- tions about profits to be derived through future prices for vaccines under development (McGuire, 2003~. Some observers have argued that present pricing policies diminish the incentives to invest in vaccine development and production capacity (Rappuoli et al., 2002~. According to this view, the social value of vaccine development is very high relative to vaccine prices, and policies that reduce profits to achieve a vaccine at lower prices are shortsighted (McGuire, 2003~. Assurance and Availability of Vaccines The development of vaccines and recognition of their social value are fundamental in constructing a successful immunization system but are not sufficient alone to assure that vaccines will be available to all who need them. Vaccines are administered to children and adults in the United States through a public and private health care system that consists of multiple components, including clinicians, insurers, health clinics, em- ployer health programs, and stand-alone immunization events that may occur in schools or other community centers. Each component plays an important role in purchasing, storing, distributing, and administering vac- cines to children and adults. Together they form a multifaceted system that is responsible for administering almost a dozen vaccines to an annual birth cohort of more than 4 million children, including more than 11,000 children who are born each day (IOM, 2000a). The immunization system also addresses the vaccination needs of adolescents and adults, a role that involves fewer vaccines, longer time periods between the administration of vaccines, and greater emphasis on targeting vaccines toward at-risk populations. The total cost of purchasing vaccines for the recommended childhood schedule for children up to age 2 is currently about $400 (this figure includes only the vaccine product cost and does not cover the vaccine administration fee commonly charged by clinicians) (CDC,2003c,d). Some individuals receive vaccines free of charge because preventive care (in- cluding immunizations) is covered by their private health care plan. Others receive vaccines without charge because they are enrolled in a government-supported Medicaid program or State Children's Health Insurance Program (SCHIP). Some insured individuals must pay for their vaccines, even though they have private insurance, if their health plan does not cover vaccines or has a deductible and/or copayments for such

OCR for page 21
34 FINANCING VACCINES IN THE 21ST CENTURY services; these individuals are referred to as the underinsured.6 Some states use state revenues to support a universal purchase arrangement that cov- ers vaccinations whether the individual has private insurance or not. For the clinicians who administer vaccines, these differences can in- volve serious financial exposure, causing some private practices to refer patients to public health clinics for immunization services. The process of determining eligibility for vaccination and the disparities involved in pay- ment arrangements are attracting increasing attention in the health care system. The complexity of the nature and scope of different purchasing arrangements and immunization practices is a major challenge to the task of examining how the costs of immunization are distributed across public and private health care systems. This study examines two key goals of the national immunization sys- tem and considers their relationship to vaccine finance arrangements: Assurance. Assuring access to vaccines for all those who need them is a fundamental goal of the public health system. Assuring access in- volves certain key considerations, such as the cost, coverage, and distri- bution of immunization resources. Over the past decade, the role of pub- lic health agencies has shifted from one of providing direct access to vaccines in public health clinics to one of assuring that vaccines are cov- ered within public and private health plans, especially those that serve disadvantaged populations. Availability. Assuring access to vaccines is of little use if the vaccine supply and delivery system is disrupted or if clinicians are not able to provide vaccines to patients because of financial considerations. There- fore, this study examines the many factors that influence the use of vac- cines in routine health care interactions. Similarly, the goal of assuring that a reliable vaccine supply system is in place requires examination of the incentives that influence investments in vaccine production and de- velopment. Over time, the interactions between the goals of assurance and avail- ability have become increasingly complex. The effort to integrate the im- munization process directly into the delivery of routine health care ser- vices has fostered the development of myriad programs and safety net services designed to assure that all children have access to recommended 6This report follows the CDC National Immunization Program's definition of underinsured, which includes only those persons who have medical insurance coverage that excludes cov- erage for immunizations. This definition does not encompass the additional population of individuals who have insurance with high deductibles and copayments, even if these costs limit their access to vaccines.

OCR for page 21
INTRODUCTION 35 vaccines regardless of their income level or location. Yet efforts to reduce or contain the costs of these programs have raised fundamental concerns about the extent to which private clinicians and vaccine suppliers will be able to continue their participation in the vaccine supply and system. Initial warning signs of increased tensions have already appeared in the form of delays in reimbursement to health care providers for vaccine costs, shortages in the vaccine supply system, dwindling numbers of vac- cine manufacturers in the United States, gaps in the coverage of recom- mended vaccines by private health plans, and hesitation to recommend newly licensed vaccines because of concerns about higher costs. The fact that at least six of the routine childhood vaccines, as well as the adult influenza vaccine, are produced by foreign manufacturers has been raised as an additional concern. Before these tensions reach crisis proportions, it is appropriate to step back and assess whether public resources are being employed wisely. In particular, this study examines whether the strate- gies and finance arrangements that have evolved over the past few de- cades are sufficient to address the burden of an accelerating number of new vaccine products for diverse child and adult populations in the fu- ture. STUDY PROCESS The IOM formed the Committee on the Evaluation of Vaccine Pur- chase Financing in the United States in 2002 to carry out this study. The 11-member committees met four times within a 12-month period, receiv- ing expert testimony and the perspectives of representatives of CDC, the vaccine industry, and public and private health plans, as well as employee benefit managers and clinicians. The committee commissioned a national survey and eight background papers to inform its discussions (see Ap- pendices C and D, respectively, for descriptions of the survey and the commissioned papers). Further analyses and data were provided by CDC's National Immunization Program, a survey of health plans con- ducted by the American Association of Health Plans (AAHP, 2002), and data obtained with the assistance of the American Medical Group Asso- ciation from individual member groups. The committee also received materials from four companies that distribute childhood vaccines in the United States (Aventis Pasteur, GlaxoSmithKline, Merck, and Wyeth- Lederle). Although the committee requested industry data on vaccine Biographies of the committee members are provided in Appendix E. A twelfth commit- tee member, Sam Ho, attended no committee meetings and resigned in August 2002.

OCR for page 21
36 FINANCING VACCINES IN THE 21ST CENTURY pricing, distribution, production, and profits, it was unable to obtain ac- cess to primary data or proprietary information. The committee also benefited from a series of earlier IOM studies on vaccine finance and vaccine policy issues (IOM, 1985, 1993, 1995, 2000a,b).8 A series of IOM workshop reports on immunization finance further in- formed the committee's discussions (IOM, 2002a,b, 2003~. Several key reports published during the study period provided ad- ditional perspective and data sources. These included a report by the Gen- eral Accounting Office (GAO) (2002) on vaccine supply, a report on vac- cine supply issues prepared by the National Vaccine Advisory Committee (NVAC, 2003), and a report prepared for the Global Alliance for Vaccines Initiative (Mercer Management Consulting, 2002~. The IOM report on The Future of Public's Health in the 21st Century (IOM, 2002c) also informed the committee's deliberations. SUMMING UP Despite the improvements in child and adult immunization rates over the past decade, troubling signs persist in the form of the differ- ences between public health goals and actual rates of immunization, dis- parities in state-level and urban rates, and the burden of vaccine- preventable disease among the elderly and high-risk adult populations. In addition, tensions have emerged in both assuring access to vaccines and sustaining the availability of a reliable supply of vaccines in the health care system during periods of fiscal restraint and higher prices for new vaccine products. Health officials have expressed concern that higher costs will lead to reduced health plan benefits for immunization and that low administration fees and the burden associated with check- ing the status of vaccine benefits are contributing to missed opportuni- ties and private-sector referrals to public health clinics. The result will be lower rates of immunization, greater disparities in immunization rates, and possible outbreaks of vaccine-preventable disease. Any one of the challenges discussed above could have a profound impact on immunization. Combined, they contribute to a sense of urgency about the long-term viability of the public-private partnership that sup- ports the national immunization system. The purpose of this study was to consider what is known about the experience with existing vaccine pur- chase programs. Building on this knowledge base, the committee sought The Institute of Medicine has also published more than a dozen studies on topics related to vaccine safety and military issues that are not cited here.

OCR for page 21
INTRODUCTION 37 to develop a long-term finance strategy that can achieve the goals of as- suring access to recommended vaccines in the settings where children and adults receive routine health care, as well as creating incentives to sustain a reliable and innovative supply of vaccines now and in the de- cades ahead. Public concern about fair access, low costs, and a reliable and innova- tive vaccine supply has stimulated many proposals for reform in vaccine payment, pricing, regulatory, patent, stockpile, and health insurance sys- tems (Fairbrother and Haidery, 2002~. The interaction of policy objectives suggests that no single approach is sufficient to address all significant concerns. The evidentiary base associated with selected reforms in vac- cine financing and delivery is not well developed, and uncertainty per- vades the decision-making process. Yet to do nothing at this juncture be- cause of the complexity of the problem could result in a further reduction in access to vaccines and discourage the development of effective new vaccines. ORGANIZATION OF THE REPORT The remainder of this report consists of six chapters. Chapter 2 pro- vides a historical overview of the origins and rationale of the U.S. immu- nization system and describes the different federal, state, and private components that shape national vaccine policy. Chapter 3 describes as- pects of vaccine finance related to public and private insurance coverage, including private health care plans and such public plans as Medicare, Medicaid, VFC, and SCHIP. Chapter 4 focuses on the health care delivery system, examining arrangements for clinician reimbursement and factors that influence access to vaccines in routine health care settings. Chapter 5 addresses what is known about vaccine availability by highlighting key aspects of the vaccine supply system. This chapter provides a broad over- view of the role of private industry in producing and distributing vaccines to public and private health care providers, as well as the role of the governmental contracting process in establishing vaccine prices for public- sector purchase. Chapter 6 presents the committee's conclusions, as well as alternative vaccine finance strategies considered for this study. The committee's recommendations are given in Chapter 7.

OCR for page 21