a potential market; no matter what regulatory hurdles are removed; and no matter what the public image of the U.S. vaccine industry, if a vaccine is not affordable, it will not be used in the developing world.

Given this reality, U.S. vaccine makers will need to vary the price of their products if the United States is to participate fully in the CVI, several workshop participants stressed. Domestically, U.S. vaccine companies employ (in their sales to the U.S. public and private sectors) a form of tiered, or differential, pricing. This practice rarely extends outside U.S. borders, however. Limiting the use of differential pricing in this way appears to run counter to international trends. One former industry executive pointed out that tiered pricing is becoming the rule rather than the exception as the world moves away from controlled markets. Another workshop participant noted that European vaccine manufacturers for decades have supported the sales of inexpensive vaccine to the developing world through private-sector sales in the developed world. There are no U.S. laws or regulations that prohibit tiered pricing for vaccine sold outside the United States. Nevertheless, many inside and outside of government seem to believe that U.S. citizens should not pay more than those in other countries for medicinals—including vaccines—made in the United States.

With the exception of limited sales to individual countries, U.S firms have not sold vaccine at reduced prices outside the United States since the early 1980s, when questions about the practice arose in congressional hearings. The concern then was that American consumers were subsidizing the sale of lower-priced vaccine in other countries through their purchase of higher-priced vaccine in the United States. One workshop participant maintained that Congress is now much more cognizant of the benefits of tiered pricing and therefore would be more receptive to policies that encourage such practices. Differential pricing may have an additional appeal in the current cost-cutting climate on Capitol Hill: It is a form of indirect, or “off-budget, ” foreign-aid spending.

If differential pricing were used by the U.S. vaccine industry to enter new markets, the resulting increase in production volume might actually mean lower vaccine prices for some segments of the U.S. market. This is because the marginal costs of production would be distributed over a larger number of doses. However, because of the need for dramatically enhanced production capacity, multi-tier pricing strategies might not appeal to manufacturers whose capacity to make vaccine already is fully utilized. According to one workshop participant with public-sector vaccine manufacturing experience, renovating an existing plant generally is not cost effective. Therefore, companies choosing to sell reduced-price vaccine may be forced to build new facilities, costing tens of millions of dollars, to accommodate the increased demand.

Technology Transfer

Opportunities for U.S. involvement in the CVI are not limited to the sale of vaccine. Another important option is technology transfer, which when successful



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