for vaccines sold in the United States.40 These negative views gained strength early in the Clinton presidency, when concern arose over less-than-optimal immunization rates among U.S. infants.

Despite evidence41 that cost is only a minor barrier to immunization (and certainly not the most important), one response to the problem was congressional enactment of the Vaccines for Children (VFC) program42. Because it caps the prices of currently recommended immunizations at the May 1993 level and increases the number of children who can receive free vaccine, the VFC is expected to reduce vaccine industry revenues. One result, according to the head of a major U.S. vaccine firm, will be reduced spending on vaccine research,43 including on CVI-type products. This concern was echoed by biotechnology industry officials. The VFC may deal another blow to the CVI: Enactment of the program has made the vaccine industry extremely hesitant to propose pricing schemes—including reduced-price sales to the developing world—that might create a backlash in the United States. (See “Differential Pricing,” below.)

Interestingly, since the price cap does not now apply to new vaccines or vaccine combinations, the VFC may have the positive (and unintended) effect of encouraging vaccine innovation. But innovation comes with a price—literally. The expected high cost of vaccines developed with proprietary technologies could delay, or perhaps even prevent altogether, the widespread use of these products in the developing world. (It should be noted that there is nothing preventing Congress from extending the cap to new vaccine products.) Cost is an issue both for industry, which requires a moderate profit to support its R&D activities, and


Vaccine manufacturers in the United States sell their products at one price to the private sector and at a lower price to the public sector. In effect, sales to the private sector have helped to subsidize purchases by the public sector. Until enactment of the Vaccines for Children program, the proportion of sales to both sectors was roughly equal. Now, considerably more vaccine is purchased at the cheaper, public-sector price. For more information on U.S. vaccine pricing policies, see pages 79-82 of The Children’s Vaccine Initiative: Achieving the Vision, National Academy Press, 1993.


See, for example, the Institute of Medicine report, Overcoming Barriers to Immunization: A Workshop Summary, National Academy Press, 1994.


The VFC, enacted as part of the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) is an entitlement program that expands the group of children eligible for free vaccine to include those without insurance. It also provides federal funds to pay for vaccine previously paid for by state Medicaid programs, in effect providing a windfall of millions of dollars to many state treasuries.


The U.S. National Vaccine Program Office has asked Mercer Management Consulting to examine this possibility as part of an in-depth look at the economics of the U.S. vaccine industry. Mercer presented preliminary results from its study at a May 11–12, 1995, meeting of the National Vaccine Advisory Committee in Washington, D.C. Public release of the Mercer findings awaits the completion of additional analyses requested by the NVAC.

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