Myth: No Rainbow, No Pot of Gold

May 4, 2010 by
Filed under: General 

Note: separate re-issue of part two of one of our myths blogs. We got a complaint that this one was too hard to find and link to. The easiest fix was to split it into a separate article. Thanks for your understanding.

Myth: Vaccines aren’t money makers for drug companies.

Reality: As spoken by Tom Broker about Gardasil and Merck (see page 19 of pdf)

“From a purely business point of view, they’ve been facing some real interesting challenges over the Vioxx issue and they are looking at this as the foundation and the savior of the company. Believe me, they have a huge stake in this, just as we all do.

How profitable are vaccines? Prevnar did very well for Wyeth:

… Prevnar, which had $2.7 billion in sales last year. Prevnar is Wyeth’s No. 2 product by revenue, behind antidepressant Effexor.

Some business press projections on the potential in the vaccine market:

Gardasil sales totaled $365 million in the first quarter of 2007, helping Merck reach nearly $1 billion in total vaccine sales for the quarter, more than triple vaccine sales from a year earlier. Analyst projections have ranged up to $4 billion in annual sales for Gardasil, assuming the government mandates widespread vaccinations for girls.

Merck launched two other vaccines in 2006 – Zostavax, for the prevention of shingles, and Rotateq, for the prevention of a rotavirus that causes diarrhea in infants. Les Funtleyder, analyst for Miller Tabak, estimates that these vaccines could reach hundreds of millions of dollars in annual sales.

“Merck showed that you can make quite a bit of money with vaccines, and I think that got a lot of people’s attention,” said Funtleyder.

If vaccines have the potential to offer huge profits to pharmaceutical companies–just like other blockbuster drugs–Lipitor or Vioxx are good examples, I think we can reasonably assume that the temptation to publish ghostwritten studies, suppress unwelcome results and use Key Opinion Leaders to subtly sell product  is there with vaccines, too. And vaccines offer two additional benefits, available for no other drugs: mandates and immunity from lawsuits (in the US). Who wouldn’t be tempted by a package involving a guaranteed market, and tort immunity?

There was a period, quite a long time ago now, when vaccines were not profitable. But time past is not time present. This myth is long past its sell-by date.

Comments

3 Comments on Myth: No Rainbow, No Pot of Gold

  1. admin on Sat, 29th May 2010 4:41 pm
  2. http://blogs.forbes.com/sciencebiz/2010/05/the-death-of-the-blockbuster-drug/

    mentions Gardasil: “Consider this: It has been four years since any company launched a real mass-market blockbuster, that is, a drug that generates billions of dollars in sales based on the fact that it’s widely used, not just expensive. The last big winner was Januvia, from Merck, which was launched in 2006 and now has annual sales of $1.9 billion. (The other contender would be Merck’s Gardasil vaccine, also launched in 2006.)”

    but people are still claiming that vaccines are not big earners for drug companies.

  3. Pensive on Tue, 6th Sep 2011 1:45 pm
  4. I take your meaning. No doubt if vaccines consistently lost money for companies or only allowed them to break even, they would get out of the business and businesses have a motivation to make money. It is what business is about, that old bottom line. In fact, it has already happened. Many companies that used to manufacture vaccines not longer do or they only manufacture one or two.

    However, from a purely economic discussion, we absolutely cannot confuse “sales” with “profits.” The sale of something is just that, a sale. Yes, the sales are huge, but just looking at sales numbers does not reflect the cost to manufacture or license the products. Consider that there are millions and millions of dollars that are poured into just getting a single vaccine approved. The time it takes to approve a vaccine is many years and a whole lot of money. They are more expensive to license than most medications. Then there is the ongoing expense of manufacturing, regulations, testing, etc that products in general (not just vaccines) must undergo, so just because a vaccine has been licensed doesn’t mean it is pure profit from there on out. Quite the contrary. Add to this mix the liability that comes with any medical device/intervention and that only decreases the profit margin.

    The WHO has an interesting summary on why vaccines are so expensive to produce:
    http://www.who.int/immunization_financing/options/en/briefcase_vacproduction.pdf

    So, although sales are in the millions and even billions, it does not equal profit. I am not implying that pharmaceutical companies are altruistic (by no means) or that they make no money on vaccines, but I think to just list sales numbers of vaccines can be very misleading without qualifying the differences between sales and profits. I think it is very possible that pharmaceutical companies will produce more “research” that of course benefits them. This is another issue. I think the confusion of terms profits and sales is a misrepresentation of basic business concepts. Profit, sales, production costs, materials, etc all have their own role in the bottom line.

    Also, please do some more research on the claim that vaccine manufacturers are “immune” from liability. This is simply not true. That is why the National Childhood Vaccine Injury Act of 1986 established the National Vaccine Injury Compensation Program. It was so that families did not have to go through the general courts, but were “fast tracked” to a vaccine-specific court proceedings. It allows families to pursue compensation for specific side effects of vaccines. It doesn’t protect companies from liability. It protects companies from frivolous suits filed because a parent *thinks* his child developed a health condition that may actually be associated with the vaccine. I am not saying “poor pharmaceutical companies.” Not at all, I am saying we can’t hold someone liable for something they did not directly or indirectly do, we can only hold them liable for what they did do or neglected to do. If an injury does occur, the courts have to rule out other possible causes besides the vaccine, because many illnesses coincide with the time period of administration of a vaccine, but this doesn’t mean the vaccine caused the illness. Yes, vaccines have inherent risks just like any medical procedure/device etc. That is why pharmaceutical companies are required to list every single side effect and warning and make this public. It has always been a risk-benefit decision. Guess who is required to actually fund the Vaccine Injury Compensation Fund? You guessed it, pharmaceutical companies.

    And no, I am absolutely not, nor have I ever been, nor will I ever be in any way related to pharmaceutical companies or the FDA or what have you. I speak purely for myself.

    More info:

    Vaccine Liability:
    http://www.cdc.gov/vaccinesafety/Vaccine_Monitoring/history.html

    Vaccine Injury Compensation Fund table:
    http://www.hrsa.gov/vaccinecompensation/vaccinetable.html

  5. admin on Wed, 7th Sep 2011 5:47 am
  6. A member of the insidevaccines team offers these thoughts:

    Your response contains some interesting information, but it’s not actually clear what point you’re trying to make. It appears that you are attempting to argue that vaccines are not profitable. Unfortunately, you didn’t actually provide any evidence to support that assertion. The only evidence you provided (the WHO document) talks in generalities for companies thinking of investing. Additionally, you might not have noticed but the date of the article is March 2004. Many things have changed since 2004 including the increasing number of expensive vaccines mandated by governments which provide far higher profit margins and guaranteed markets for their products on an annual basis.

    On the other hand, we have the evidence provided in our post, in addition to the following basics of public companies. Pharmaceutical companies are actually interested in Profit (not just sales) since they are large blue chip organizations that are valued on their ability to create wealth for their investors. That is predicated on making a profit, not just selling. When deciding where to invest capital, a pharmaceutical company will therefore pick investments that will return a profit with the least amount of risk. Given that pharmaceuticals (very large ones) continue to both invest serious sums of money into vaccine research (there have been a few blockbuster vaccines that have made a lot of revenue and profit) and that they continue to keep those divisions — big companies sell off divisions that are not profitable — there is plenty of evidence that they are profitable. If you read the prospectus and quarterly reports of several of the biggest drug companies, you will find their vaccines listed prominently. You should probably note that several years after that WHO document was published, Wyeth (a major vaccine manufacturer) was purchased by Pfizer for a tidy sum of money. This is what the Wall Street Journal had to say about Wyeth:

    But even without Protonix, according to Arnold, Wyeth is a bargain. She loves its biotech drugs — namely Enbrel (marketed with Amgen), for rheumatoid arthritis and other auto-immune diseases, and the vaccine Prevnar — which have high margins and strong patent protection.

    http://blogs.wsj.com/health/2007/08/…zer-buy-wyeth/
    It is well established that Wyeth had a lot of value due to both it’s biotech and vaccine portfolio. Value does not come from low margin or money losing products.

    In an Ernst and Young 2010 Global Pharmaceutical industry report they note how Pharmaceuticals have shifted:

    The transition to Pharma 2.0 has been characterized by several shifts. Companies have been moving from blockbusters to diversified portfolios of drugs, over-the-counter (OTC) medications, branded generics,
    consumer products, vaccines and/or animal health products.

    If they have included vaccines in a shift to Pharma 2.0, then it’s pretty obvious that it must be profitable given that big companies don’t shift to lower margin or unprofitable business units.

    I think that’s plenty of evidence to dispel the continuing myth that vaccines are not profitable. Perhaps someone should let the WHO know that their documentation is really out of date?

    Onto the topic of NCVIA and liability. You are asserting that NCVIA only removes “frivolous” lawsuits but does not remove liability from vaccine manufacturers. What you seem to misunderstand is that you can’t prevent frivolous lawsuits without removing liability. NCVIA is a no fault system designed to compensate victims for their damage. By definition, a no-fault system removes liability from the manufacturer. Now, there is a technicality under which the manufacturer might be liable, but only in cases of fraud, extreme negligence (extreme is a key legal word here), or violated FDA requirements, and only after filing a petition through the vaccine court. However, this liability only applies to criminal matters and the burden of proof for these things is pretty high. This is NOT the same as tort liability as described in the article. The vaccine manufacturers are most certainly immune from the standard liability that provides consumer protection for all other products in the US. Given that the governmental organizations can barely get convictions (they usually settle) for clear cases of negligence (i.e. VIOXX) how is it even conceivable that an individual party — with no ability to conduct a criminal investigation — would ever get justice?

    I suggest you read sections: 42 USC Sec. 300aa-11 and 300aa-23

    If in such an action the manufacturer shows that it complied,in all material respects, with all requirements under the Federal Food, Drug, and Cosmetic Act [21 U.S.C. 301 et seq.] and this chapter applicable to the vaccine and related to the vaccine injury or death with respect to which the action was brought, the manufacturer shall not be held liable for punitive damages unless the manufacturer engaged in –
    (A) fraud or intentional and wrongful withholding of information from the Secretary during any phase of a proceeding for approval of the vaccine under section 262 of this title, (B) intentional and wrongful withholding of information relating to the safety or efficacy of the vaccine after its approval, or (C) other criminal or illegal activity relating to the safety and effectiveness of vaccines, which activity related to the vaccine-related injury or death for which the civil action was brought.

    So despite your protests to the contrary, the NCVIA most certainly provides almost total tort liability protection for pharmaceuticals. Their products could be faulty, but if they still complied with FDA regulations, then they are not liable.

    Author’s disclosure: I have worked for a pharmaceutical in the past.

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