Name of Lead Author: Laura Laughlin
Organization: Sanofi Pasteur
Country: France

Please note: The following article is an initial work that was subsequently published as Watson and Faron de Goër, "Are good intentions putting the vaccination ecosystem at risk?" Human Vaccines & Immunotherapeutics, 2016.


Vaccination prevents five premature deaths every minute and was pivotal in the 49% decrease in the mortality among children younger than 5, between 1990 and 2013. Increasing access, coverage and sustainability of vaccination has the potential to save even more lives. Vaccination is made possible by an interconnected and interdependent ecosystem of vaccine producers, vaccine procurers, vaccination policy makers and implementers, and vaccine purchasers, whether national governments, donor governments or philanthropic donors. The future of vaccination depends on the continued health of this ecosystem and its ability to produce, purchase, deliver, and innovate. However, over recent years the number of vaccine producers that also do significant research and development (R&D) is decreasing. Many of these R&D‐based producers have been forced to cease production of critical vaccines, such as measles‐containing vaccines, yellow fever, and diphtheria‐tetanus‐polio despite global shortages of these vaccines and in many cases only one global WHO pre‐qualified vaccine available to GAVI and UNICEF. Available data shows a vaccination ecosystem that is overly focused on measuring success through vaccine price and that this focus is asymmetrically impacting global vaccines R&D and heritage vaccine production in the North. If the ecosystem is to remain healthy and sustainable and avoid a tragedy of the commons, akin to antibiotics
then we must refocus on the holistic goals laid out in the Global Vaccination Action Plan (GVAP.) Achieving these goals will require a more inclusive oversight that includes market experts and producers and the development and serial collection of a set of metrics that allows the global health community to truly understand and measure the health and impact of vaccination and the health of future innovation in all aspects of vaccines and vaccination.


Vaccination prevents five premature deaths every minute and has been pivotal to the 49% reduction in under‐five mortality between 1990 and 2013 [1]. Increasing access, coverage and sustainability of vaccination has the potential to save even more live [2]. Delivering this potential requires sustainable ability to innovate and to produce, purchase, and deliver vaccines and vaccination. However, the number of global vaccine producers that are also conducting significant research and development (R&D) has continuously decreased over the last 30 years [3‐5]. In 2002, UNICEF highlighted the fact that between 1998 and 2001, 10 of 14 manufacturers partially or totally stopped production of traditional vaccines and most recently both Baxter and Novartis divested their vaccines divisions [6‐8].Vaccine producers, vaccine purchasers, and philanthropic donors collectively make up the dynamically interconnected and interdependent vaccination ecosystem. We use existing data to consider whether the vaccination ecosystem is healthy and able to adapt to meet global demand for supply and innovation, and whether the most likely evolution of today’s vaccination ecosystem is consistent with the long term goals of the vaccination community. Finally, we suggest ways that the stewardship of the vaccination ecosystem can be more effectively guided, measured, sustained and improved for the present and the future.

The vaccination ecosystem
In 1998 there were14 R&D‐based vaccine producers, today there are just 4 remaining [6]. This contraction has resulted from the inability of producers to absorb the combined cost of the high volumes and low prices demanded by global vaccination programs, the increasing pre‐clinical, clinical, pharmaceutical and quality standards expected by regulators and producers and evolving technology of vaccine production technology [12]. These pressures, and the dramatic industry contraction, have been documented by UNICEF as have the resulting shortages of diphtheria, tetanus, and pertussis (DTP), Bacillus Calmette‐Guérin (BCG) vaccine against tuberculosis and oral polio vaccine (OPV) [6,13]. Many of these shortages persist today [14].

On the positive side, advances in biotechnology in the 1980s and 90s saw the development and licensure of a new generation of innovative vaccines against H. influenza type B (Hib), N. meningitides, S. pneumoniae, human papillomavirus (HPV), rotavirus, zoster, hepatitis B (HepB), as well as new combination vaccines [15,16]. The creation of GAVI, the Vaccine Alliance, in 2000 created a mechanism to address the low income market failure through donor‐funded purchase of vaccines and implementation support in the poorest countries. Today GAVI is the world’s largest vaccine procurer by volume, procuring for 58% of the global birth cohort i.e., ~75 million children and spent US$ 1.7 Billion in 2015 on vaccines [17]. GAVI is funded by philanthropic donations, most notably from BMGF and national donors [18–20]. The GAVI‐led volume of demand and demand certainty, theoretically addresses the pre‐GAVI market‐failure by giving producers the confidence to invest in producing higher volumes at lower costs and to produce better adapted vaccines such as pentavalent DTP‐Hib‐HepB in place of [21]. It therefore accelerates introduction of the innovations of the 1980s and 90s such as pneumococcal conjugate vaccine (PCV), rotavirus and HPV. GAVI therefore focus their market‐shaping on increasing demand and demand certainty in return for reduced vaccine prices. This may address the vaccination gap for which price was the barrier to access. However, one in five of the world’s children still does not receive even the minimum EPI vaccines, including GAVI‐funded, cents‐a‐dose vaccines such as DTP and OPV [22]. For these 20 million children and these vaccines, the barrier is not price but the health
and vaccination systems, as well as political will, fiscal space, awareness, acceptance, education, and physical access. In this situation, low price focused market‐shaping is not solving the underlying problem and risks creating unintended negative consequences because of its asymmetrical impact on the two different types of vaccine producers.

The vaccination ecosystem is supplied by two types of producers: those that produce and significantly self‐ reinvest in research and development (R&D), and those that focus almost entirely on production. R&D‐based producers manufacture vaccines that they have developed. They self‐invest in the R&D of new and improved vaccines. They are headquartered in high income countries and supply globally to almost all private and public markets. Their capital and operating costs are high due to their location, R&D investment, and the diversity and level of the regulatory, quality, and commercial demands of supplying all markets [22]. Non‐research producers manufacture vaccines that were usually developed by others. They invest little in R&D infrastructure and know‐how, and their primary costs are production related [22]. Developments such as MenAfrivac® are partly or fully subsidized [23]. They are based in lower‐middle and middle income countries, sell to domestic procurers or UNICEF/GAVI/PAHO, and focus on high volume and low price [22]. A 2002 GAVI board report confirmed that these producers had significantly enhanced their scale and product breadth but had little experience in developing new products, and had not invested in the R&D infrastructure and know‐how possessed by US and European manufacturers [24]. In 2012 non‐research producers supplied around half of the total volume procured by UNICEF [24]. 

There are also two main types of procurers. Self‐procurers are primarily high and middle-income countries that autonomously define and implement vaccination policy. The higher prices they pay make tiered pricing possible for lower income countries [26‐28]. The pooled procurer GAVI purchases vaccines through UNICEF for countries with gross national income (GNI) per capita of below USD 1570 [29]. Their vaccination policy and regulatory and quality standards are taken primarily from WHO [30‐32]. PAHO countries finance and manage their own vaccination programs but may pool procure through the PAHO revolving fund [33]. Despite relatively high GNI/capita they controversially seek to access the lowest vaccine prices by reference pricing through the Lowest Price Clause (LPC) mechanism [22,28,34]. Since 2001, GAVI and R&D‐based producers have agreed tiered prices for rotavirus, HPV and PCV that are less than one tenth of non‐GAVI prices (Figure 2) [15,36‐40]. The weighted average price (WAP) of the DTP‐based pentavalent vaccine has decreased by 20‐65%, driven by a combination of more suppliers and a shift from single dose presentations to less‐expensive multidose presentations [39]. The prices of MMR (‐45% to ‐59%) and HepB (‐46% to ‐48%) were reduced by about half. Today, however, MMR is supplied by a sole producer and price increased in 2014 by 10%. HepB vaccine is now supplied by two producers, compared to six prior to 2010. The price of the other UNICEF procured vaccines has remained unchanged or has increased. Of concern is the fact that since 2001, the number of vaccines manufactured by a single producer has tripled, from two to six (Table 1), and in 2014 six of eight vaccines
procured by GAVI are in limited or very limited supply [14,41].

Vaccine research and development
Vaccination R&D is long (over 10 years), risky, and expensive, often costing in excess of $1 billion [42,43]. Many vaccines are over 70 years old and require significant periodic reinvestment, as well as continuous reinvestment at a lower level, to meet the evolving technical, regulatory, and quality requirements, and changing market demands. Reinvestment is either self‐generated (i.e., income, or sales minus costs) or externally subsidized. However the two producer species have different sales and costs, and therefore different income profiles.

The largest non‐research producer re‐invests 3.1% of sales in R&D compared to 13.9% for an R&D producer such as Sanofi Pasteur, and whilst a 2005 study found that the emerging manufacturers spent 4‐14% of sales on R&D, the maximum was $6M compared to around
$500M per year by each of the four global R&D‐based producers (GSK, Merck, Pfizer, and Sanofi Pasteur) [44‐49].

Non‐research producers have fewer purchaser and supply points, and fewer product versions with fewer regulatory and release obligations. Manufacturing facilities, labour, and other production costs are also lower in lower income markets. Manufacturing facilities in developed countries cost $200 to $400 million compared to less than $100 million in India [21]. Consequently operating and production costs represent 43% of a non‐research producer’s income, compared with 64% for a typical R&D‐based producer, and the resulting net profit margin can be twice as high for the former (49.5%) compared to the latter (24.5%) [48‐50]. As a consequence of this financial asymmetry, non‐research producers can remain profitable at a price where an R&D‐based producer cannot. It is this loss of profitability that has forced some R&D producers to stop producing some vaccines. For example Crucell withdrew from yellow
fever vaccine, Sanofi Pasteur from measles‐containing vaccines and DTP vaccine, as did CSL limited. This is despite the global supply shortages of all three [21,22,28].

The health and future of the vaccination ecosystem.
Today, the vaccination ecosystem is shaped by a focus of the world’s largest vaccine procurer, GAVI, on the short term, static efficiency goal of increasing demand and lowering prices across all producers. The GAVI price is also increasingly becoming the reference of LMICs and PAHO, revolving fund countries. Focus on price alone does not take explicit account of the asymmetric cost base of the two different producer species that supply them. As prices fall, the profit margins for the same vaccines sold at the same prices become proportionately smaller for the R&D producers compared to the non‐R&D producers. For a given vaccine, when the threshold of acceptable margin is crossed for a producer or when significant reinvestment is required, the R&D‐based producers’ higher cost‐base and break‐even point force them inevitably to exit the market first (figure 2). In other words, R&D producers are more sensitive to price pressure. As producers withdraw from the market there are increasing oligopolies and monopolies of supply. Since scaling up vaccine production takes so much time and investment this inevitably leads to supply shortages. If these shortages are not rapidly corrected, then the impact of demand exceeding supply will cause prices to rise and defeat the initial objectives of GAVI. This is currently happening with DTP, yellow fever and measles‐containing vaccines whose prices have risen 200%, 530% and 25%–150%, respectively, since GAVI's birth in 2001 [21,22,28].

At least as concerning is the potential impact on vaccines R&D in terms of volume of work and targeted diseases. R&D‐based producers rely on R&D to generate higher value vaccines that fund further R&D and tiered pricing, keeping them profitable and competitive, despite higher costs [51‐53]. Lowering prices reduces the incentive to invest in R&D and increases the risk of doing so. Continuous price reductions therefore reduce the overall attractiveness of R&D, especially R&D for lower margin products and markets. This will mean less R&D for GAVI countries and re‐concentration of R&D in the North for the North, leaving donors/philanthropy to take on responsibility for all R&D for the South. Many of the GAVI donor countries (Australia, Canada, Germany, European Commission, France, Italy, Netherlands, Norway, Spain, USA, and UK) are also home to the sites of the few remaining R&D‐based vaccine producers. The irony is that their donations and acceptance of price reduction as a primary goal, may be resulting in the loss of their domestic vaccines R&D capability and capacity. This begs the question of how comfortable the donor countries are that their donations could eventually make them reliant on middle and low income country producers for vaccines such as MMR vaccines in case of supply problems or outbreaks.

In a continuing price‐driven static‐efficiency scenario, the R&D‐based producers would be expected to need to consolidate in order to survive through economies of scale. The absorption of Novartis vaccines by GSK in 2015, leaves only four global R&D‐based producers. Of these four, only two produce HPV, MenB and rotavirus, and are able to supply significant quantities of pentavalent and hexavalent, acellular pertussis‐containing, combination vaccines, and only three (GSK, Sanofi Pasteur, and Merck) have significant ranges of vaccines. Today only four (GSK, Sanofi Pasteur, Merck and Pfizer) have estimated annual vaccine R&D budgets of over $200 million each [44‐46,48]. With development costs of innovative vaccines able to exceed $1billion, this scenario is concerning.

Switching to dynamic efficiency rather than a static efficiency approach would address many of the unintended and well documented consequences of a race‐to‐the‐bottom on price [54,55]. With dynamic efficiency, metrics shift from price alone to a broader set of metrics that recognize quality, supply reliability, vaccination coverage and future innovation. These metrics are aligned with the goals of a healthy vaccination ecosystem, unlike price. With dynamic efficiency, procurement and pricing could be constructed to recognize and reward R&D, the construction and maintenance of production facilities, and the wages of highly skilled personnel involved in production, quality control, and compliance with regulatory requirements. Such an approach is only possible with clear set of shared goals with which to match the companion metrics. The vision already exists in the form of the WHO Global Vaccine Action Plan (GVAP), however the companion metrics do not exist [56]. We argue that a dynamic efficiency strategy, with market‐shaping, procurement, pricing and metrics aligned with the GVAP goals represents a healthier future for the vaccination ecosystem. Unless we are able to shift to a more holistic impact‐aligned set of ecosystem metrics we are at risk that the current ecosystem is not sustainable. There is a real possibility that changing global health priorities, changing political leadership, donor fatigue, or adverse economic
conditions could cause donations from governments and philanthropists to fall. For examples if Ebola had not been contained or if a new HIV were to emerge. In this scenario, there would be a reversion towards the pre‐GAVI era. The lowest income countries would be forced to either raise income or reduce vaccination, leading to less demand certainty and visibility, and probably lower volume demand. In turn, this would lead to price increases. In the absence of third‐party subsidy behind many technology transfers, such transfers to non‐R&D producers would be less attractive and unsubsidized non‐research producers would probably be less viable. This undesirable scenario highlights the implicit risks of over‐dependence on subsidy. It reminds us why GAVI has a graduation policy, whereby countries raise their financial contribution as their GNI/capita increases. It also emphasizes the need to build an ecosystem that is sustainable, incentive‐based, and driven and measured by holisitic public health objectives and metrics, rather than an ecosystem shaped by the belief that that low price will solve all problems [28,57,58]. In reality focus on price alone will create as many problems as it solves.

Conclusion and Proposal
Philanthropic funding over the last decade or so has been pivotal to efforts to provide access to vaccination in the lowest income countries. Removal of these subsidies would have far reaching negative effects on the entire ecosystem and is neither desirable nor in any way suggested here. However we must ensure that the sustainability of the vaccination ecosystem is not compromised to achieve short term goals, and that the ecosystem does not become over dependent on subsidy. Broadening vaccine manufacturing capability and capacity globally is desirable for the vaccination ecosystem, but this should not be achieved at the cost of lost vaccine production capability and capacity in Europe and North America. Not only would this be undesirable for the ecosystem, it would be ironic given their location in the donor nations. As a metric, price is convenient and attractive for donors and politicians, but does not reflect the complex realities of the vaccination ecosystem or the WHO Global Vaccine Action Plan, which calls for improvement in country ownership, shared responsibility, equity, integration of immunization systems, sustainability and innovation [56]. The recent, unintended adverse consequences of this static efficiency on vaccine supply, price, and number of producers can be viewed as warning signs from within the ecosystem. If market failure akin to that seen in antibiotics is to be avoided, then the true interrelationships and dynamics of the vaccination ecosystem must be recognized and the ecosystem stewarded accordingly [61]. In this regard, we make the following recommendations. Public health policy makers, influencers, funders and financers should be made aware of the dynamics, strengths and weaknesses of the vaccination ecosystem. The vaccination community should be refocused on the shared, short‐ and long‐term goals for the ecosystem that should be aligned and consistent with the GVAP goals. These goals should be achieved through aligned actions, incentives and most importantly the development and implementation of a set of metrics that are planned, enacted, and managed by true cross‐partner collaboration. Global oversight bodies such as the WHO’s SAGE should not be restricted to public health experts alone but should also include representatives from vaccine producers, as well as experts in economics and market dynamics. Market‐shaping, procurement and pricing practices all have their place but to be successful and to avoid unintended consequences they must be aligned with best practice, and coherent with the strategic objectives for the ecosystem. The ecosystem will only remain healthy if it is overseen not only by experts in public health, but also by those that understand the functioning of healthy markets and vaccine research, development and production. This oversight must be accompanied by a set of companion metrics that allow us to track the holistic health and impact of the vaccination ecosystem and avoid the unintended consequences of an obsession with price reduction as the only metric of success. 

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