Dr Bruce Lee, Associate Professor of Medicine, Epidemiology, and Biomedical Informatics at the University of Pittsburgh delivered a presentation at this year's World Vaccine Congress Washington about Impact of pricing strategies on new vaccine adoption and R&D.
Dr. Lee, who previously ran a modelling group for Quintiles, discussed the pricing of new vaccines in the context of eleven steps that are considered, not necessarily sequentially, citing examples from his experience assisting and informing companies to help their decision making for pricing of different products. These steps range from target population analysis to selecting pricing objectives and pricing structure.
Vaccines are essentially products that, from a public health perspective, are supposed to be developed in response to public need, so called "pull" technologies. Many times, however, vaccines are "push" technologies, and are developed without sufficient consideration of the scientific target population.
When mapping potential competitors and vaccine alternatives, companies ought to address other current comparable vaccines, said Dr. Lee, as well as preventive measures and treatments that play into the dynamics of vaccine use and potential pricing. The costs and effects of those other factors are harder to quantify, and sometimes manufacturers do not consider them. For example, with influenza, there are a number of hygiene and antiviral alternatives to vaccination that are part of a comprehensive prevention and treatment strategy.
Companies will construct a target product profile early on in development, which is essentially a menu of characteristics that regulatory bodies and developers are aiming for in coordination. Pricing may or may not be part of that analysis.
Additionally, companies attempt to quantify the incremental value of the vaccine, such as formulations with new adjuvants or delivery methods. Using economic models, they may ask what is the added value, though in many cases economic modelling may come too late, being used toward the marketing phase after much of the R&D has already been completed. Dr. Lee suggested that earlier use of economic modelling can benefit the R&D process and eventual success of a product in the marketplace.
There is also the determination of the position of the vaccine in the marketplace, where companies strategically and practically think of how the vaccine will be introduced and targeted. One example where a vaccine faced difficulties in the market due to unclear indications for use is the Lyme disease vaccine LYMErix. Market positioning may not have been considered appropriately, since health care providers were not clear on the the specific indicators of higher risk for Lyme disease that made vaccination advisable since such specific definitions were not available.
The profit margin of vaccine development measures the difference between the unit price and the unit cost, with the unit cost being the lower limit of potential pricing. This includes costs from R&D, manufacturing and distribution. The process of quantifying this can be complex due to failed products in the R&D development pipeline and also due to benefits from R&D of other products in producing a particular vaccine. Developing analytical models early on can help make this process work better. For example, in the case of an adenovirus vaccine which was marketed solely to the US military, the vaccine reduced instances of influenza-like illness in the military effectively. However, after the manufacturer decided to roll more R&D costs into the vaccine price, the military pulled out and vaccine purchases ended.
In the case of the Gardasil vaccine, legal, regulatory and other factors played a part in determination of vaccine prices, with controversies emerging over the legal recommendations for vaccination. Dr. Lee also examined a number of different customer demand-based pricing strategies as well as portfolio-based strategies which consider a company's entire product portfolio to help in vaccine price decision-making.
Download Bruce Lee's full presentation here and let us know what your thoughts are on the subject.
You might also be interested in:
- Daniel Berman (MSF) – Vaccine pricing and adaptation in developing countries
- Sheldon Jacobson (Uni Illinois) – Vaccine Pricing: An analytics perspective
- Suerie Moon – The need for new approaches to global vaccine pricing