Tuesday, October 19, 2004
More on the Vaccine Shortage
Weekly Standard examines the effects of liability and a little bit about price controls.
A blogger sums up the reasons he's found in the news media.
Weekly Standard examines the effects of liability and a little bit about price controls.
A blogger sums up the reasons he's found in the news media.
- For starters, it's a pretty small market. The total vaccine market (for all vaccines, that is) is about $6 billion out of a market of $340 billion for drugs of all kinds.
- The flu vaccine business is risky: some years you sell out, but other years you make 50 million doses and only sell 20 million. That makes it fairly unattractive, especially since....
- It's a commodity market, so profit margins are thin to begin with.
- What's more, the biggest buyer is the government, which buys in bulk at a very low price. So profit margins are even thinner than they might be.
- FDA regulations have gotten tighter over the years, and vaccine makers have had an increasingly hard time meeting them because it requires expensive plant upgrades.
- But nobody wants to invest a lot of money to upgrade their flu vaccine plants because there's new technology coming down the road in a few years that will render the current manufacturing technique (which uses chicken eggs) obsolete.
- Finally, huge awards in liability lawsuits have scared vaccine makers out of the market. About 50-70% of the cost of most vaccines is taken up by the cost of liability insurance.
