NCPA - National Center for Policy Analysis


January 4, 2005

Government policies have rendered the vaccine manufacturing industry less-profitable, imposing a slow and cost-prohibitive research and development process, according to the American Enterprise Institute (AEI).

The problems of the vaccine industry have been well-documented -- some 20 years ago. In a 1985 Institute of Medicine report, it noted that high R&D costs, the expense and logistics of clinical testing, and the risk of litigation have put downward pressure on sales.

Instead of resolving these problems over the last two decades, government policy has done little but to make them worse:

  • From 1967 to 1984, the number of U.S. vaccine manufacturers fell from 37 to 15, while the number of licensed vaccines declined from 380 to 88.
  • In 2004, there are now only three large manufacturers in the United States and a few dozen vaccine products.
  • America is down to a single manufacturer for some of the most important childhood vaccines compared to more than a dozen in the 1980s.
  • Pharmaceutical giant Merck & Co., for example, abandoned the flu vaccine business some 20 years ago, while Wyeth pulled out last year due to disappointing sales.

Vaccine makers have fled the market because they must produce largely the same vaccines according to government specifications, use regulated manufacturing processes that are out of date, and sell their finished product mostly for a single, below-market government price.

AEI says that legislators should adopt policies that encourage companies to make vaccines more quickly and less expensively, such as applying federal liability preemption to vaccine products and avoid using government to buy vaccines outright.

Source: John E. Calfee and Scott Gottlieb, "Putting Markets to Work in Vaccine Manufacturing," American Enterprise Institute, December 2004.

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