Viability of local vaccine production in developing countries: An economic analysis of cost structures, revenue sizes, market shares and vaccine prices
Creators: name: Munira, Syarifah Liza
Publisher: name: The Australian National University
Year: 2017
Subjects: Vaccine production
Developing country
Manufacturer viability
Manufacturing costs
Cost analysis
Vaccine price

description: Over half of the vaccines used in developing countries’ immunisation programs are supplied by developing country manufacturers. The viability of vaccine production in developing countries play a significant role in securing the global capacity of vaccine supplies. These producers however, face challenges in balancing between meeting the needs of the large population sizes and high disease burden typically found in developing country markets with uncertainties in demand forecasting and low profitability. Economic studies on the viability of vaccine production in developing countries are limited. An identification and better understanding of the critical elements influencing local vaccine production is crucial and timely, given the present need to secure and enhance the capacity of global vaccine supplies in the face of emerging and re-emerging diseases. This thesis focuses on the viability of local vaccine production in developing countries by conducting three assessments on cost structures, revenue sizes and percent market shares, and vaccine prices. The objective of the first assessment, cost structure, is to address the supply-side barriers of local vaccine production. In the second assessment, the research utilises revenue sizes and percent market shares as a proxy of viability and quantifies the influence of vaccine viability factors on developing country vaccine production. The third assessment on vaccine prices addresses the demand side barriers to vaccines produced by developing countries and observes the influence of procurement factors on prices of vaccines produced by developing countries. For the first assessment, on cost structures, primary data were collected from existing vaccine producers in developing countries and analysed using a cost-analysis method. Three hypothetical scenarios using different production scale and scope were applied to estimate the costs-per-dose of vaccines. The findings showed that the scale and scope of production are essential in achieving and sustaining viability. The findings also showed that the main factors influencing viability were strong domestic sales and consistent supply, this also holds for companies planning to expand into export markets. Further, a step-cost characteristic for fixed costs, and failure rates ranging between 2% to 45%, were identified. In the second assessment, factors were assessed for their influence on revenue sizes and percent market shares of vaccine products supplied by developing country manufacturers for immunisation programs. A multilevel regression model was built using a hierarchical dataset for years 2012 – 2014, for the overall global market as well as the domestic and export markets specifically. The findings showed that revenue sizes were influenced by national income levels, consistent production supplies and the ability to meet the needs of immunisation programs in procuring countries. While factors identified as influencing percent market share were: having consistent production, the ability to meet the needs of immunisation programs in procuring countries as well as having vaccines with prequalification status. The third assessment, on vaccine prices, was based on a mixed effects regression on a panel dataset of vaccine prices for years 2005 to 2015. The analysis found that procurement volume, method and size of vaccine formulation were influential in determining vaccine prices, for both traditional and modern technology types. The overall findings suggest that the cost of producing vaccines in developing countries are an average of $2.05 per dose ranging between US$0.92 and $4.40. These estimates are within the cost range suggested for multinational companies (Mercer Management Consulting (2002): $0.05 to $3-4 per dose). Whilst the vaccine markets that developing country producers face are not premium markets like those found in high-income countries, this is likely compensated by the vast size of these markets and the lack of domestic competition. Their production viability however becomes challenged once they expand their production into export markets and when they produce newer technology vaccines. It is in these situations where knowledge of critical factors becomes important. This thesis not only adds to what is known about the viability of vaccine production in developing countries, but also provides robust evidence for developing countries and global health advocates to understand better the factors driving viability in regards to costs, revenue sizes and percent market shares as well as prices. This may allow policymakers to navigate and develop policies that can further support local vaccine producers and other developing countries that are considering investing into local vaccine production.