At least part of the answer is financial. Each new vaccine is estimated to cost approximately $1.5 billion and take 13 years to develop. Often, the return on the research and development costs take years to recoup, if they are realized at all.
Coupled with a long and costly development cycle are business risks for manufacturers. It’s almost impossible to predict with certainty when an outbreak will take place, or the number of people who will be affected. Moreover, the viruses themselves are difficult to predict, as some mutate as they are transmitted across populations, rendering an entire stock of vaccines obsolete. We’ve seen this occur with flu vaccine manufacturers, which typically need to reformulate vaccines each year depending on the current strains.
Then, there’s the unpredictability of supply and demand. If, for instance, there is light demand for a vaccine in a given year, manufacturers may end up with unused, wasted inventory that poses a direct hit to their bottom line. But if the opposite problem occurs and there’s a particularly strong demand, shortages may ensue, putting the manufacturers at risk for potential liability.
Because of these financial and legal risks, many vaccine makers have left the market.
Fragile markets
What we’re seeing in the vaccine supply chain mirrors some of the issues we have experienced with drugs in shortage. Like in other markets, when drugs are in shortage it results in rising costs to procure replacements, and both providers and manufacturers experience complications with inventory management and safe sourcing.
A recent Premier survey showed the annualized financial impact of more expensive generic alternatives for drugs in shortage among a subset of U.S. hospitals averaged approximately $61 million in 2013. From a national standpoint, the analysis suggests that total additional incurred costs were $209 million last year.
So what can either the private or public industry do to help incentivize and promote the creation of vaccines and other necessary drugs?
To mitigate the burden of drug shortages, Premier has been helping to bring smaller or emerging manufacturers, like Heritage Pharmaceuticals, to the generic injectable market by putting them on contract with its hospital and health system members.
For health systems, this means having access to the drugs their patients need when they need them. Subsequently the suppliers committed to manufacturing drugs in short supply are then rewarded with a more predictable market share.
Industry stakeholders, like GPOs, also help to alert hospitals of potential shortages so that inventory can be managed proactively.
Supporting the supply chain
This type of industry collaboration could be utilized for other market absences or fragile supply chains, like what we’re experiencing with vaccines. Some organizations — PATH and the Bill & Melinda Gates Foundation, for instance — work with emerging vaccine manufacturers to support them in technology transfer and helping to navigate regulatory issues. The U.S. Food and Drug Administration also offers expedited review and approvals for necessary infectious disease drugs and vaccines.
But are we doing enough? And if not, who should step up? Disaster and public health preparedness is integral to minimizing the burden of healthcare emergencies and quelling outbreaks. However, these events can stress already fragile supply chains, like that of vaccines. Industry participants must do more to ensure these markets are healthy.
There is opportunity for the FDA and other government organizations to provide additional support and funding of necessary infectious disease vaccine and drug development, and to make the regulatory environment easier for manufacturers. Manufacturers, by the same token, that produce drugs within highly healthy drug supply chains could leverage their scale to assume risk in the vaccine space. And, like the example with Heritage Pharmaceuticals, Premier and other industry stakeholders can help further limit risk for manufacturers trying to enter a fragile supply chain by securing the market for these products with our health systems.
By collaborating to promote development and products of necessary drugs and vaccines that might otherwise be a hard sell financially, we can help spur innovation that takes these supply chains from fragile to fit.
The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker’s Hospital Review/Becker’s Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.
