NCPA - National Center for Policy Analysis

Government Program Causing Vaccine Shortages

December 8, 2003

There has been a steady erosion in the number of vaccine producers over the past three decades. In the 1970s, there were 25 vaccine makers; today -- because of slim profit margins and legislative and liability issues -- there are just five. With such a small number of producers, shortages can develop quickly as a result of manufacturing problems or a bad guess on the expected demand, according to a report by the Institute of Medicine, an arm of the National Academy of Sciences.

For makers of all types of vaccines, the Institute of Medicine's report traced the decline in manufacturers' interest to the fact that the U.S. government -- predominantly through the Vaccines for Children program run by the Centers for Disease Control and Prevention (CDC) -- buys slightly more than 50 percent of the vaccines in the United States, and keeps prices low (the percentage is much lower for flu vaccines, which are given to many more adults than children).

  • Under the Vaccines for Children program, the CDC negotiates a discounted price with the manufacturer.
  • It then allocates to each state a credit balance, which states can use to buy vaccines from the manufacturer at the discounted price.
  • The program offers free vaccines to uninsured children under 18 years of age or to those who are eligible for Medicaid or care from federally qualified health centers.

The report concluded that the price squeeze, coupled with a heavy regulatory burden, has discouraged investment and driven drug companies out of the vaccine business. The U.S. vaccine market is only a couple of billion dollars a year in sales, and many pharmaceutical companies can make more money on other products than on hard to make and market vaccines.

Source: Bernard Wysocki Jr., "Lack of Vaccines Goes Beyond Flu Inoculations: Eight Shortages Have Occurred Since 2000; Fewer Shots From Tetanus to Chickenpox" Wall Street Journal, December 8, 2003; based on, Committee on the Evaluation of Vaccine Purchase Financing in the United States, "Financing Vaccines in the 21st Century: Assuring Access and Availability," Institute of Medicine of the National Academies, August 4, 2003.

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