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Date: Aug. 4, 2003
Contacts: Christine Stencel, Media Relations Officer
Chris Dobbins, Media Relations Assistant
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Nation Needs New Strategy for Purchasing and Distributing Vaccines

WASHINGTON -- The national immunization system has been largely successful to date, but a new approach to financing and distributing vaccines is needed to achieve more widespread immunization throughout the United States and to sustain the development and production of vaccines in the future, says a new report from the Institute of Medicine of the National Academies. A new insurance mandate – combined with a government subsidy and voucher plan to administer all recommended vaccines – should be implemented, stated the committee that wrote the report. This would effectively change the government's role from buying vaccines to assuring immunization.

"Immunizations against common, dangerous diseases convey valuable health and social benefits, but the higher prices of newly developed vaccines and the outmoded system by which they are financed create significant financial burdens on health plans, consumers, health providers, and vaccine makers," said committee chair Frank Sloan, professor of health policy, management, and economics, Duke University, Durham, N.C. "We offer a plan that both ensures access to vaccines for those in need and creates incentives for private investment in the vaccine industry that would sustain the development and manufacture of these products in the future. Under this strategy, the amount that the government pays for a vaccine would reflect an independent and evidence-based assessment of its societal value, rather than the price that a vaccine maker decides to charge."

Ever since the discovery of the polio vaccines in the 1950s, the government has played a major role in purchasing and distributing vaccines. The federal government's purchases of childhood vaccines – currently topping $1 billion annually – account for more than half of that market. These expenditures have risen as the number of life-saving vaccines has increased over the years.

While high levels of immunization have been achieved in the United States, especially in young children, significant disparities remain in access to recommended vaccines across geographic and demographic populations. These disparities result, in part, from a fragmented public-private health care system in which 10.5 percent of children lack insurance coverage for immunization, the report says.

Moreover, unprecedented vaccine shortages in 2001 and 2002 further limited access and revealed the fragility of the U.S. vaccine industry. The government's purchasing policy seeks to curb expenditures and decrease the cost of vaccines, leaving little financial incentive for commercial firms to develop new vaccines. While more than 25 companies produced vaccines for the U.S. market 30 years ago, only five companies do so today.

A three-part plan made up of a federal government mandate, subsidy, and voucher should be implemented to ensure that everyone has access to recommended vaccines, the report says. The mandate would require that vaccine benefits be included in all private and public insurance plans, including Medicare, Medicaid, and the State Children's Health Insurance Program. The federal government also should provide a subsidy per vaccine to reimburse health plans and providers for the purchase costs and administration fees created by the mandate. Lastly, the federal government should offer vouchers so that anyone not covered by insurance has access to immunizations, and that clinicians who administer vaccines are reimbursed for their expenses.

The subsidy would create economic incentives that encourage manufacturers to invest in vaccine production and foster market competition, while ensuring that immunization is a basic element of routine health care services, the report says. The value of the subsidy for each vaccine should be set prior to production and should reflect the societal value of the vaccine. The value could be determined by estimating the health care expenses that will be reduced by the vaccine, as well as other savings that might be achieved through improved quality of life and enhanced productivity. "A number of approaches for estimating these savings have been developed by various groups, and while the committee does not endorse any particular approach, we conclude that it will be possible to estimate the societal value of a vaccine through a consistent and widely accepted methodology," Sloan said.

The committee acknowledged that federal expenditures for vaccines will increase, primarily because of expanded public coverage for vaccines as a result of the insurance mandate and because replacing a government purchase price with a federal subsidy may result in spending more on some vaccines. However, these increases need to be balanced against savings generated by greater disease prevention as well as the benefits associated with future investments and innovation in vaccine development, the committee noted.

As part of the proposed shift from the existing government purchasing programs to the new plan, the committee recommended changes in the composition and decision-making procedures of the Advisory Committee on Immunization Practices (ACIP), the government body that currently recommends vaccines. These changes would give ACIP more explicit responsibility for incorporating an assessment of a vaccine's societal benefit and cost-effectiveness into its recommendations.

The National Vaccine Program Office also should convene a series of stakeholder deliberations to consider administrative, technical, and legislative issues related to the new strategy, the report says. The Centers for Disease Control and Prevention, which has administered the vaccine purchase program for the federal government for many years, should sponsor a study of the strategy after it has been implemented and gather data to guide vaccine financing policy and practice in the future.

However, assuring access to vaccines is only one part of the effort necessary to achieve high immunization levels, the report notes. As noted in the 2000 Institute of Medicine report Calling the Shots, public investments in areas such as immunization outreach, assessment, data collection, and education are also essential.

The current study was sponsored by the CDC. The Institute of Medicine is a private, nonprofit institution that provides health policy advice under a congressional charter granted to the National Academy of Sciences. A committee roster follows.
Copies of Financing Vaccines in the 21st Century: Assuring Access and Availability will be available this fall from the National Academies Press; tel. 202-334-3313 or 1-800-624-6242 or on the Internet at Reporters may obtain a pre-publication copy from the Office of News and Public Information (contacts above).

Board on Health Care Services

Committee on Evaluation of Vaccine Purchase Financing in the United States

Frank A. Sloan, Ph.D. (chair)
J. Alexander McMahon Professor of Health Policy and Management, and
Professor of Economics
Duke University
Durham, N.C.

Steve Berman, M.D.
Professor and Head
Section of General Academic Pediatrics, and
Children's Outcomes Research Program
University of Colorado School of Medicine and The Children's Hospital

David M. Cutler, Ph.D.
Department of Economics
Harvard University
Cambridge, Mass.

Eric K. France, M.D., M.S.P.H.
Chief of Preventive Medicine
Kaiser Permanente - Colorado

William J. Hall, M.D.
General Medicine/Geriatric Unit
University of Rochester School of Medicine and Dentistry
Rochester, N.Y.

David R. Johnson, M.D., M.P.H.
Deputy Director and Chief Medical Executive
Michigan Department of Community Health

Alison Keith, Ph.D.
Health Economist
Pfizer Inc. (retired)
Springdale, Utah

June E. O'Neill, Ph.D.
Professor of Economics and Finance
Zicklin School of Business
Baruch College
City University of New York
New York City

Mark V. Pauly, Ph.D.
Bendheim Professor and Chair
Department of Health Care Systems
Wharton School
University of Pennsylvania

Sara Rosenbaum, J.D.
Center for Health Policy Research
George Washington University
Washington, D.C.

Iris R. Shannon, Ph.D., R.N.
Health Consultant and Associate Professor
Health Systems Management
Rush University College of Health Sciences


Rosemary Chalk
Study Director