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Vaccines: Who Should Pay and for What?
Thirty years ago, there were more than 25 vaccine manufacturers in the United States; today there are fewer than five. This, along with the appearance of fault lines in the immunization finance and delivery structure prompted an Institute of Medicine (IOM) panel to issue a report this past August warning that the system was "showing signs of erosion." The report, Financing Vaccines in the 21st Century: Assuring Access and Availability, was produced by the IOM Committee on the Evaluation of Vaccine Purchase Financing in the United States. It included a thorough assessment of the nation's immunization infrastructure from the financing of vaccine purchases to delivery under various insurance structures to the value of vaccines for the individual and society. The report also discussed the industry, which is critical for ensuring an adequate supply of available vaccines and for developing new vaccines against a host of diseases, infectious and otherwise.The report paints a grim picture of the stability of the vaccine system and recommends an overhaul of the vaccine-purchasing process. The central recommendation of the report, the replacement of the current patchwork financing system with a government-directed vaccine insurance mandate has captured the attention of health officials, policymakers, and the editorial boards of major papers.
The report highlights several factors that have created the current situation: an increase in government purchase of vaccines (the government buys more than half of all children's vaccines, wielding considerable market power), the gap between the profitability of vaccines and the greater return that pharmaceutical companies could earn on other investments, and the "strong relationship ... between the system for purchasing and administering vaccines and the stability and growth of the U.S. vaccine supply industry."
The Value of Vaccines
Vaccines against a wide array of childhood and other diseases form a critical component in the arsenal of medicine and public health, preventing serious morbidity and mortality. In the U.S., it is recommended that children be vaccinated against eleven diseases, requiring 20 doses at a cost of about $400 in the public sector and $600 in the private sector. The cost of these immunizations has increased dramatically in the past decade or so, according to the report, leading the major vaccine public assistance program, Vaccines for Children (VFC), to double its budget in the last two years to $1 billion. Newer vaccines are more expensive than older ones, and those in the pipeline threaten to stretch the public and private purse strings even further.The decline in companies researching, developing, and manufacturing vaccines has been a concern in the field for years, though comprehensive approaches to addressing the problem, as well as the vital connection between the health of the industry and the role of financing vaccine purchasing has rarely been as explicit as in the IOM report. "What is missing," concluded the committee, "in the array of current vaccine purchasing programs is a clear and deliberate strategy that the government can use to stabilize and assure adequate rates of return on future private investments in vaccine development. While the true costs of innovation remain unknown, government pricing systems and bulk purchases alone appear to provide insufficient incentives...."
The report also recommends a shift in the work of the Advisory Committee on Immunization Practices (ACIP), the body of experts who make recommendations on immunizations that should be administered, to include a more thorough analysis of the value to society of individual vaccines. The report warns that "ACIP recommendations directly affect vaccine prices and supply.... ACIP has no mechanism for distinguishing vaccines with strong spillover effects, such as those that prevent highly contagious diseases, from vaccines that do not, such as tetanus and certain therapeutic vaccines that are in development. The lack of capacity to address these variables is a serious impediment to a coherent finance strategy for vaccine purchases in the national immunization system."
Frank Sloan, the J. Alexander McMahon professor of health policy, law and management and professor of economics at Duke University, and chair of the committee that produced the report, suggests a different approach. "Currently, decisions about which vaccines are recommended are based on professional judgment and the clinical literature," he said. "We are asking for greater transparency and a consistent method that can be followed by all."
"Estimating the value of a vaccine is more challenging than simply making projections of the medical costs averted based on the disease cases that will be prevented," explained Tracy Lieu, HMS associate professor of ambulatory care and prevention, director of that department's Center for Child Health Care Studies, and a reviewer of the report. "For some childhood illnesses, such as chickenpox, the value of the time that parents lose from work or personal activities is actually far more than the medical costs incurred. Estimating time costs requires actually asking the parent or patient how much time they missed due to the illness."
Thus, putting a dollar figure on the costs and benefits of a particular vaccine is far from simple. In fact, says Lieu, many of the new vaccines prevent more morbidity than mortality. "For example, the new pneumococcal conjugate vaccine for children prevents meningitis, but it also prevents many cases of ear infection and pneumonia for every meningitis case. It is not simple to place a quantitative value on preventing these illnesses: How many ear infections equals one case of meningitis or one year of life?" Lieu and her colleagues form part of the Joint Initiative in Vaccine Economics, a collaboration among HMS, HSPH, and the CDC, which is conducting research into many of these issues. In light of these challenges, the report recommends that changes be made to the procedures and membership of the ACIP, to include experts in health insurance-benefit design, consumer issues, health economics and finance, cost-benefit assessment, and vaccine manufacturing.
The Current System
Currently, though insurance plans are not required to cover immunization, many do, yet coverage differs by vaccine and extent of cost sharing. The VFC program covers millions of children, but adults and adolescents lack coverage for some of the newer vaccines (especially those aimed at curbing the transmission of sexually transmitted diseases). The underinsured and uninsured are a concern to policymakers, as well.Recent vaccine shortages in the United States, which affected some of the major childhood vaccines and caused widespread concern among health care providers, parents, and health officials, brought the inadequacies of the current system to the fore. Sloan, speaking at the public briefing on the report's release, remarked on the inadequacies of the current system, but focused on the future challenges. "As new vaccines become available in the next decades," he said, "the number and cost of vaccines recommended for future use will escalate substantially. Unless the basic structure of the immunization system changes, the problems ... can be expected to increase in magnitude."
Recommended Restructuring
The committee's primary recommendation, the creation and implementation of a new insurance mandate, is a major departure from the current system. It would require that all insurance programs, private and public, include a specified set of vaccines, to be supplemented by a government subsidy and voucher plan to reimburse plans and providers and ensure access to those without insurance.One concern addressed by the committee is that if the cost of vaccines is shifted to consumers, many will choose not to be vaccinated. The creation of subsidies and vouchers is intended to address this concern to ensure that vaccine manufacturers have adequate incentive to remain in the industry and that providers and health plans are not unduly burdened with costs that should be borne in part by society.
The spillover effects of the committee's recommendations to the international vaccine market are uncertain. "We cannot rely on other countries adopting our methodology," said Sloan. "To the extent that the new system resulted in higher vaccine prices in the U.S., this would only expand the international differences in prices. Our offering higher prices would serve as an incentive for an increase in vaccine R&D, but the incentive would not be as great as if other countries followed, which seems not very likely."
Sloan is aware that the reforms recommended by the committee may cause some rifts in the vaccine community. "We are hearing (mainly via the media) that some stakeholders doubt that the federal government would really follow through on promised fixed-dollar subsidies," he said. "Credibility is essential to our plan. Thus, in the implementation-planning phase, it will be important to develop mechanisms that provide adequate assurances. Some within the public community may fear that change will involve dismantling successful programs without putting a more promising program in its place. Any program develops vested interests (not only financial, but professional as well) and change inevitably involves uncertainties. It will be clearly necessary to involve public health officials as well as private insurers and manufacturers in the implementation process. It seems unlikely that much progress can be made without involving these stakeholders."
Erica Seiguer, a fifth-year MD-PhD student studying economics in Harvard's Doctoral Program in Health Policy
The opinions expressed in this column are not necessarily those of Harvard Medical School, its affiliated institutions, or Harvard University.