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Monday
Jul142014

Costly Immunity - Consequences of Rising Vaccine Prices

You walk into your local Starbucks and order your favorite coffee. It is the same coffee that you have been ordering for the past thirty years and you know just how you like it. You take out the 5 dollars that you usually pay, and the barista tells you that the total is $100 because of new environmental regulations. How do you react? You freak out, you refuse to pay, you vow to never go to Starbucks again.

Now lets look at a different but similar situation. Parents today are walking into family-practices and pediatrician offices around the country looking to get their children vaccinated to meet the requirements for summer camps or the upcoming school year. In 1986, about the time they themselves had been vaccinated as kids, parents paid $100 for all the vaccinations their children needed through the age of 18. Today that price is $2,196; nearly a 2100% increase over the past 28 years. Granted, the U.S. has experienced significant inflation over that time frame, however, when discounted to 2014 dollars, using CPI data from the US Bureau of Labor Statistics, the service still only would be projected to be worth $216 - approximately 10 times cheaper than the going rate.

So what has happened to push up the price of vaccines? After all, they are public health policy’s most effective weapon in the battle against infectious disease, and we want them to be as widely used as possible. Most vaccine producers will point to a growing number of mandatory vaccines, and rising production and development costs as the culprits for skyrocketing prices. Since 1986, another 8 vaccines have been added to the list of mandatory vaccines for school aged children and acquiring FDA approval is also much more expensive today than it has been in the past as studies proving the efficacy and the safety of vaccines must be much larger to accommodate growing public concern over a possible connection to autism. Yet, these complaints still do not justify the rising price of vaccinations.

Vaccine producers are pushing these price disparities. An example of price manipulation by pharmaceutical companies pointed out by Elisabeth Rosenthal in her article, “the Price of Prevention: Vaccine Costs are Soaring,” is the drug Prevnar, manufactured by Pfizer. As Ms. Rosenthal elucidates in her article, the predecessor of the current Prevnar vaccine experienced a 50% increase in price once it was labeled as a mandatory vaccination for school children, jumping from $80 to $120. There was no change in the production cost or formula to justify the price difference. The only thing that was different was that all American children were required to have the vaccination. With the sale of millions of vaccines guaranteed by the government, the company didn’t have to worry about selling at a competitive price, allowing it to boost profit margins.

Another example of pharmaceutical companies taking advantage of the profitable vaccine environment is with a later edition of Prevnar, Prevnar 13. In her article, Ms. Rosenthal notes that since Prevnar 13’s approval by the FDA in 2010, its price has increased at an average of 6% a year. According to data taken from the United States Bureau of Labor Statistics, that is about twice the rate of inflation associated with other medical care cost in the US over that time frame (2010: 3.4%; 2011: 3.0%; 2012: 3.7%; 2013: 2.5%).

These examples show that the price hikes that we are seeing in the vaccine market aren't being created only to cover the price of research and development of these drugs. After all, both of these price hikes occurred after the original market opening. That means that the drastic increase in prices that we are seeing is simply the pharmaceutical industries way of increasing profitability of a necessary service.

The vaccine price hikes are having two effects. First, they are driving up insurance prices. All preventative vaccines are part of the essential benefits that all insurance plans must cover as described in the Affordable Care Act. Thus, insurance companies pass on the increased costs to the general populace in the form of higher premiums. Second, these high vaccine prices are actually causing more physicians to not offer vaccinations. Many of the family practice physicians that Ms. Rosenthal interviewed for her article reported that either they themselves or their colleagues either no longer carry enough vaccines to vaccinate all children who need them, or are considering dropping coverage of vaccines. Physicians are losing money on vaccines, and pediatricians and family-practice doctors are already some of the lowest paid physicians in health care. Doctors can’t afford to continue to stock vaccinations that they are, according to the interviews in Ms. Rosenthal’s article, not fully reimbursed for. In the end, we all are held hostage by the leverage of the pharmaceutical industry.

~Jack Kent, Summer Research Intern


Check out a more in depth presentation of the issue in Ms. Rosenthal’s original article at http://www.nytimes.com/2014/07/03/health/Vaccine-Costs-Soaring-Paying-Till-It-Hurts.html?_r=0

Other sources used for this post:

Medical Care CPI: http://data.bls.gov/timeseries/CUUR0000SAM?output_view=pct_12mths

CPI from 1986 and 2014 used for discounting: http://www.usinflationcalculator.com/inflation/consumer-price-index-and-annual-percent-changes-from-1913-to-2008/

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