# Presentation: 224105

## Strengthening the Supply of Vaccines:Increasing Financial Incentives2nd NVAC Workshop -January 25, 2005

***Robert Scalettar, MD, MPH***
*Corporate Medical Director, WellPoint, Inc.*
*AHIP Liaison to ACIP*
*Chair, AHIP Prevention & Public Health Work Group*
*-Representing America’s Health Insurance Plans (AHIP)-*

## America’s Health Insurance Plans 

*The national trade association representing the private sector in health care.*
*AHIP’s nearly 1,300 member companies provide health benefits to more than 200 million Americans.*

## AHIP Immunization Initiative

- AHIP Representation on National Committees
- Robert Scalettar, MD, MPH, WellPoint, Inc.- ACIP liaison Steve Black, MD, Kaiser Permanente- NVAC member
- AHIP Vaccine Safety Datalink (VSD) and Clinical Immunization Safety Assessment (CISA) for CDC
- 10 year contract 2002-2012
- AHIP Immunization Work Group
- Since 1997 committed to improving immunization programs and coverage rates
*Grant for Innovation in Immunization Practices Program*
- Annual grant program supports future programs to improve immunization rates for targeted populations

## NVAC Vaccine Supply Report January 2003

- Identified Problems of Vaccine Supply
- Immediate and Specific Factors
- -Vaccine Industry and Manufacturing
- Contributing Factors
- -“...low valuation of preventive measures such as vaccine...reflected in the (low) price the public and legislators are willing to pay for vaccines.
- -High cost/complexity of R&D, manufacturing and distribution
- -Decreased number of manufacturers
- -Lack of investment in some manufacturing facilities
- -Legal barriers to stakeholder communications

## 2003 IOM Report: Financing Vaccines in the 21st Century

***	******AHIP commends the IOM Committee for identifying the factors contributing to instability in vaccine research, development, production and supply-a challenge shared by all stakeholders***
** **
- Immunization represents one of the great triumphs of medical science, one of the _most distinctive achievements_ of the American health care system, and one of the _best investments_ in public health.
*Comment: Agreed and Health Insurance Plans have contributed by improving HEDIS rates for immunization (e.g., HEDIS measured childhood Varicella rates improved from 64% in 2000 to 86% in 2004 for health plan members.*

## 2003 IOM Report: Financing Vaccines in the 21st Century

**Conclusion 1:** Current public and private financing strategies for immunization have had _substantial success_, especially in improving immunization rates for young children. However, significant _disparities_ remain in assuring access to recommended vaccines across geographic and demographic populations.
*Comment: Despite health system incongruities, public policy and private sector initiatives have achieved substantial success, but as is true for all aspects of health care delivery in the US, disparities persist, and need addressing.*

## 2003 IOM Report: Financing Vaccines in the 21st Century

**Conclusion 2:** Substantial increases can be expected to occur in public and private health expenditures as new vaccine products become available...the growing costs of vaccines will be increasingly _burdensome _to all health sectors.
*Comment: Private sector pricing for even established vaccines such as IPV are 267% greater than public sector prices ($23.51 vs. $8.80-as of 03/04/2003 IOM Report). *
*The gap in sector-specific pricing is lowest with varicella at 40% premium for private purchase and highest at 360% for thimerosal free Hepatitis A Adult (Havrix®). *
*Dual pricing reflects an implicit cost-shift and impacts provider delivery and reimbursement.*

## 2003 IOM Report: Financing Vaccines in the 21st Century

**Conclusion 3:** Many young children, adolescents, and high-risk adults have no or limited insurance for recommended vaccines. Gaps and fragmentation in insurance benefits create barriers for both vulnerable populations and clinicians that can contribute to lower immunization rates.
*Comment: Gaps and fragmentation do exist, but insurance coverage for immunizations was reported by the IOM at between 78-80% in 2001 for HMO,POS, and PPO plans. *
*CDC’s MMWR weekly report (11/12/2004) on Vaccination Coverage for Children Entering School 2003-2004 reported a national coverage average > 95% for all vaccines except varicella at 93.3% coverage. *

## 2003 IOM Report: Financing Vaccines in the 21st Century

**Conclusion 4:** Current government strategies for purchasing and assuring access to recommended vaccines have not addressed the relationships between the financing of vaccine purchases and the stability of the U.S. vaccine supply. Financial incentives are necessary to protect the existing supply of vaccine products, as well as to encourage the development of new vaccine products.
*Comment: We agree with this premise and encourage efforts that create a guaranteed market for established vaccines. This secure market will provide needed support to the vaccine manufacturers and provide an incentive for “re-entrants” and  newcomers. With a known supply of routine vaccines, bold efforts to increase demand for routine vaccines can proceed .*

## 2003 IOM Report: Financing Vaccines in the 21st Century

**Conclusion 5:** The vaccine recommendation process does not adequately incorporate consideration of a vaccine’s price and societal benefits.
*Comment: The IOM documented benefit-cost ratio’s for selected vaccines ranging from 0.68:1 (pneumococcal conjugate) to 27.0:1 DTaP. *
*We encourage ACIP to include comparative effectiveness evaluations in its assessment process and incorporate these findings into its recommendations.   *

## For Consideration:  

- Yes...the issue is exceedingly complex!
- The ROI for established vaccines and immunization of ACIP recommended populations is one of the most compelling in preventive medicine.
- Vaccines are undervalued as evidenced by:
- there are few incentives to enter the established vaccine market (in fact, competitors are leaving the market)
- Private purchasing is increasingly inefficient;
- Public purchasing efficiency may drive pricing “below market”;
- Public purchasers lack a streamlined delivery model.

## Considerations: Building on Strengths of the Current System

- expansion of the Vaccine for Children (VFC) program to include adults and underinsured children in all settings;
- continued Federal support for 317 funding;
- removal of price controls under VFC;
- incentives for self-funded employers to include immunization as part of the preventive services package;
- harmonization of regulatory structure;
- education of  the public about vaccines and disease prevention;
- and continued research on effective approaches to building demand for established vaccines.

## Some options to consider...

- Reconciling the known public good of vaccines and the undervaluation we observe in the public, private and consumer “market place”?
- Recognize that the “public market” is itself fragmented with states opting for one of four basic financing and delivery models-each subject to significant fiscal pressures
- The “private” market” is itself atomized with the locus of control in the hands of thousands of private practice physicians and clinics, responsible for delivery of immunizations dependent on reimbursement from a variety of public and private sector sources
- This is not a distribution channel with built-in efficiency or economies of scale.

## Where can economies of scale be found? 

- Is there an advantage to the public’s health of routine vaccines priced the same for all children, for all seniors?
- Are there pricing mechanisms that can both secure vaccine manufacturers participation in the market place and at the same time provide a value-proposition to providers, consumers and payers, alike?
- Is there a roll for government to play as bulk buyer for established vaccines?
- Will guaranteed supply lead to improving immunization coverage rates?

## Influenza-a special case?

- Topic of interest (not just public health)
- Critical public health benefit (especially for pandemic)
- Unique annual R&D, production, distribution and administration cycle
- Recommended for broad populations
- Possible “test-case” for innovation in financing and incentives?

## Closing Thoughts

- We look forward to working with all participants in the healthcare industry:
- Physicians;
- Vaccine manufacturers;
- Public and private payors;
- Technical and policy review bodies; and
- Consumers
-    to ensure that vaccines and their associated health benefits remain accessible and affordable in the future to achieve the goals of Healthy People 2010.