At the Intersection of Health, Health Care and Policy Cite this article as: Niamh Herlihy, Raymond Hutubessy and Mark Jit Current Global Pricing For Human Papillomavirus Vaccines Brings The Greatest Economic Benefits To Rich Countries Health Affairs, 35, no.2 (2016):227-234 doi: 10.1377/hlthaff.2015.1411
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Economics Of Vaccines By Niamh Herlihy, Raymond Hutubessy, and Mark Jit 10.1377/hlthaff.2015.1411 HEALTH AFFAIRS 35, NO. 2 (2016): 227–234 ©2016 Project HOPE— The People-to-People Health Foundation, Inc.
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Current Global Pricing For Human Papillomavirus Vaccines Brings The Greatest Economic Benefits To Rich Countries
Niamh Herlihy is a research assistant at the Centre Virchow-Villermé de Santé Publique, in Paris, France. At the time of this research, she was a master’s degree student at the London School of Hygiene and Tropical Medicine, in England.
Vaccinating females against human papillomavirus (HPV) prior to the debut of sexual activity is an effective way to prevent cervical cancer, yet vaccine uptake in low- and middle-income countries has been hindered by high vaccine prices. We created an economic model to estimate the distribution of the economic surplus—the sum of all health and economic benefits of a vaccine, minus the costs of development, production, and distribution—among different country income groups and manufacturers for a cohort of twelve-year-old females in 2012. We found that manufacturers may have received economic returns worth five times their original investment in HPV vaccine development. Highincome countries gained the greatest economic surplus of any income category, realizing over five times more economic value per vaccinated female than low-income countries did. Subsidizing vaccine prices in lowand middle-income countries could both reduce financial barriers to vaccine adoption and still allow high-income countries to retain their economic surpluses and manufacturers to retain their profits. ABSTRACT
V
accination against human papillomavirus (HPV) is touted as a global health success story, with good reason. The vaccine is highly efficacious at preventing persistent HPV infection, which is a cause of cervical cancer—a disease that kills over 250,000 women annually around the world.1 Two HPV vaccines are widely used: a bivalent vaccine, which prevents the two HPV types (16 and 18) responsible for 70 percent of cervical cancer cases, and a quadrivalent vaccine, which prevents HPV 16 and 18 and two other types of HPV that cause most cases of genital warts. Additionally, a nonavalent vaccine that prevents these four types of HPV and five others, which are responsible for an additional 10–20 percent of cervical cancer cases, was recently licensed. The World Health Organization (WHO) recommends that females ages 9–13 be vaccinated against HPV,2 as the vaccines are most effective
Raymond Hutubessy is a senior economist in the Department of Immunization, Vaccines, and Biologicals, World Health Organization, in Geneva, Switzerland. Mark Jit ([email protected] .uk) is a reader in vaccine epidemiology in the Department of Infectious Disease Epidemiology, London School of Hygiene and Tropical Medicine.
before the debut of sexual activity but are licensed only for females ages nine and older. Vaccinating this group is likely to be a costeffective investment in almost every country.3 Most developed countries have already incorporated HPV vaccines into their national immunization schedules. Adoption has been slower in developing countries, even though that is where almost 90 percent of cervical cancer deaths occur.1 Adoption in the poorest countries was expedited by an agreement for 2013–17 between vaccine manufacturers and Gavi, the Vaccine Alliance. According to the agreement, Gavi can purchase vaccines on behalf of the poorest countries at very low prices.4 However, the cost of vaccination remains a barrier to more widespread adoption,5–7 particularly in middleincome countries that are not eligible for the low Gavi prices or other financial support from Gavi. Vaccines in national immunization schedules F e b r u a ry 2 0 1 6
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Economics Of Vaccines are often procured through public-sector tenders. Tender prices are negotiated and are usually lower than retail prices. However, because tender prices are usually subject to confidentiality agreements,8 countries usually know only their own prices. This information asymmetry places them in a weak position to negotiate prices based on vaccine value. Furthermore, the mechanism by which prices are set for different countries is unclear and has been criticized for not always producing equitable or affordable outcomes.9 Vaccine manufacturers have a system in which prices are set according to tiers of country income levels. An analysis by the nongovernmental organization Médecins Sans Frontières suggests that prices in each tier are not known to countries and do not appear to be based on the health and economic benefit of receiving the vaccines.10 Manufacturers are not obliged to consider transparency or public benefit when setting prices. Several commentators believe that to expedite vaccine introduction in low- and middle-income countries, prices there need to fall further and be more transparent.7,8,11 However, lower prices would need to be balanced by manufacturers’ ability to retain positive producer surpluses after accounting for vaccine development costs. One way to address this issue would be to explicitly set vaccine prices based on sharing the estimated value of the health benefits of vaccination (including the health care cost savings from reducing disease burden). In this article we estimate the value of health benefits that could be obtained from HPV vaccination. We explore how these benefits are distributed across different countries and manufacturers, and we examine the effect of six alternative pricing scenarios on the distribution of benefits.
Study Data And Methods Analytical Overview The sum of all potential health and economic benefits from the HPV vaccine less the cost of its development, production, and distribution is called the economic surplus attributable to HPV vaccination. We divided the economic surplus into the producer surplus (the difference between the revenue that manufacturers receive from selling the vaccine and the cost to develop, manufacture, and market it) and the consumer surplus (the difference between the value of benefits that countries receive from vaccination and the amount they pay for the vaccines). Our estimates were based on the hypothetical scenario of vaccinating 80 percent of a birth cohort of twelve-year-old females (acknowledging that 100 percent vaccination is not realistic in 228
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most countries), as quantified by the 2010 United Nations population estimates.12 An explanation of how we calculated health benefits derived from the HPV vaccine appears below. Producer Surplus The producer surplus was calculated as the total revenue earned from HPV vaccine sales by manufacturers less the cost of developing, manufacturing, and marketing the vaccines. Marketing costs were assumed to be 9 percent of revenues. Development costs were inflated to account for the fact that successful vaccines cover development costs for vaccine candidates that fail to reach the market. Producer surplus was used for two comparisons. First, revenues from HPV vaccine sales in 2006–14 were compared to the cost of developing the vaccines. This was done to calculate the manufacturers’ return on investment. A positive return on investment indicated that HPV vaccination was a profitable investment. Second, revenues from selling vaccines to countries to vaccinate a 2012 cohort of twelveyear-old females were compared to the cost of manufacturing and marketing the vaccines, as well as the annualized vaccine development costs. Consumer Surplus The consumer surplus was calculated as the difference between improved health and reduced cervical cancer treatment costs resulting from vaccination and the cost of purchasing and delivering the vaccine. Improved health was measured in terms of the number of disability-adjusted life-years (DALYs) averted by vaccination. We used the Papillomavirus Rapid Interface for Modelling and Economics (PRIME)—a mathematical model developed to estimate the cost-effectiveness of HPV vaccination in 179 countries3—to calculate the DALYs averted and treatment costs saved from vaccinating 80 percent of the 2012 cohort of twelve-year old females. Health gains were then converted into their economic value by multiplying each DALY averted by each country’s gross domestic product (GDP) per capita.13 Hence, richer countries gained more economic value from an averted DALY than poorer countries did, as is the case in many health economics evaluations. Further methodological justification for using GDP per capita as a DALY multiplier, including citations to the relevant literature, is provided in the online Appendix.14 The online Appendix also provides further details about methodological assumptions, calculations, and data sources used.14 Sensitivity Analyses We altered key assumptions to create five alternative sensitivity analysis scenarios. The first two scenarios replaced the GDP per capita with 0.52 times and 2.3 times
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The global economic surplus from the development of HPV vaccines is measured by the net value of public benefits they confer.
the GDP per capita, respectively, to represent the economic value of each DALY averted. The range of 0.52–2.3 times the GDP per capita represents the range of health valuations proposed in comparable literature.15,16 Third, we assumed that noncervical cancers— such as those of the vulva, vagina, anus, penis, mouth, and oropharynx—would also be prevented by HPV vaccination, since these cancers have been linked to HPV types 16 and 18. We assumed that preventing a case of noncervical cancer had the same impact on treatment costs and DALYs as preventing a cervical cancer case. Fourth, because the WHO recently recommended that providers offer a two-dose HPV vaccine schedule instead of a three-dose schedule,2 we assumed that every country in our study had done so. We also assumed that manufacturers kept per dose vaccine prices constant, so that both procurement and administration costs were reduced by one-third. Fifth, we restricted our analysis to countries that had introduced national HPV vaccination programs by July 2015.17 Alternative Pricing Scenarios We considered six alternative scenarios for pricing HPV vaccines. First, we assumed that the full retail price was paid for vaccines, because in some countries HPV vaccines are not procured through public-sector tenders. Second, we assumed a price reduction of 37 percent for HPV vaccines in all countries to match the reduction in prices of bivalent HPV vaccines achieved by the Pan American Health Organization’s Revolving Fund between 2013 and 2015. The Revolving Fund facilitates the pooling of resources to procure vaccines for its member states.18 Those prices dropped from $13.50 per dose in 2013 to $8.50 in 2015. Third, Anthony Nelson and coauthors7 have suggested that other middle-income countries
should develop regional pooled procurement strategies (in which countries negotiate vaccine prices as a group to increase negotiating power) similar to those created by Gavi and the Pan American Health Organization’s Revolving Fund. We assumed that as a result of such initiatives, all middle-income countries would also be able to obtain the price of $8.50 per dose. Fourth and fifth, we assumed that all low- and lower-middle-income countries paid nothing for HPV vaccines, with either high-income countries paying extra or manufacturers reducing profits, respectively, to make up the difference. Sixth, we assumed that every country paid the same price of $21.34 per dose of HPV vaccine, which is the price at which manufacturer revenues would be unchanged. Limitations Our analysis had several limitations. First, our model to project vaccine impact did not take into account indirect (herd) immunity—that is, protection for nonvaccinated individuals as a result of reduced transmission. However, the effect of this simplification was small at the high level of coverage (80 percent) that we assumed. Second, we considered vaccination of twelveyear-old females alone. Some countries also vaccinate older females as well as males. Third, we did not consider the vaccine benefits of reduced cancer screenings and treatments of precancerous neoplasias or genital warts. Fourth, we assumed that vaccine manufacturers captured the entire producer surplus, but part of this may actually go to distributors.
Study Results Producer Return On Investment Total HPV vaccine sales for the manufacturers of both bivalent and quadrivalent vaccines amounted to $14.1 billion in 2006–14.We estimated that clinical trials cost $2.2 billion (for details about our estimates, see the Appendix),14 and if preclinical studies accounted for 30 percent of total costs, they would cost $0.7 billion. Public-sector grants in the United States and Australia leading to patented discoveries that enabled the development of HPV candidate vaccines were estimated to cost $4.9 million, which would imply that the patents were sold to manufacturers with a markup of more than 130 times the cost. Even using a figure of $2.9 billion for total costs, manufacturers would have already achieved a positive return of almost five times on their investment. For purposes of comparison, vaccine development for two rotavirus vaccines was estimated to cost $317–$974 million.19 Economic Surplus Per Vaccinated Cohort We found that the cost per DALY averted was well Febr uary 201 6
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Economics Of Vaccines below the regional GDP per capita in every country income group, which suggests that HPV vaccination is cost-effective everywhere. The total economic surplus produced by vaccinating each cohort of twelve-year-old females against HPV was $12.5 billion in 2012 (Exhibit 1). The high-, upper-middle-, and lower-middle-income groups of countries received approximately equal shares of this surplus, but the low-income group received a smaller share. Because the sizes of the vaccination cohorts in the country income groups differed, highincome countries received the largest surplus per vaccinated female (Exhibit 1). The cost per DALY averted was lowest in low-income countries, but the economic surplus decreased with income level: High-income countries gained over five times more economic value per vaccinated female than low-income countries did. However, most of the cost of vaccine procurement and delivery in these countries was met by Gavi. Alternative Scenarios The distribution of the economic surplus among countries changed with each different sensitivity analysis and pricing scenario (Exhibit 2). Compared to the base case, at a low monetization rate of DALYs averted (0.52 times GDP per capita), less of the surplus went to consumers, particularly high-income countries. The opposite happened with a high monetization rate (2.2 times GDP per capita). However, low-income countries’ share remained fairly static, at 5–6 percent of the total surplus. If HPV vaccines also protected against other cancers besides cervical cancer, then the economic surplus increased overall compared to the base case (Exhibit 2). However, most of
the additional benefit went to high-income countries, since noncervical HPV-related cancers constitute the largest proportion of HPV-related cancers in these countries. If we included only the countries that had introduced nationwide HPV vaccination by July 2015, the share of the surplus received by lower-middle- and low-income countries decreased to almost zero (Exhibit 2). This showed slow uptake of vaccination by these countries. The greatest change across alternative pricing scenarios was seen when the full retail price was paid for vaccines. In that scenario, manufacturers captured 86 percent of the economic surplus attributable to HPV vaccination, and the share of the surplus for all countries except those in the low-income group (which are eligible for reduced Gavi prices) declined sharply (Exhibit 2). Indeed, upper-middle-income countries actually spent more than the value they received from vaccination. More pooled procurement increased uppermiddle-income countries’ share of the surplus at the expense of the manufacturers, but it had little impact on other countries (Exhibit 2). Explicit subsidies increased the share of the surplus for lower-middle-income countries in particular, at the expense of either high-income countries or manufacturers (depending on which provided the subsidy). Even the most generous subsidies, which reduced the price of vaccine procurement to zero in low- and lower-middle-income countries, would only reduce the economic surplus captured by high-income countries from 22 percent to 14 percent, or by manufacturers from 23 percent to 16 percent, depending on which provided the subsidy.
Exhibit 1 Distribution, Among Countries And Manufacturers, Of Disability-Adjusted Life-Years (DALYs) Averted By And Economic Surplus From Human Papillomavirus Vaccination, Based On 2012 Vaccination Cohort Country income category High
Upper middle
Lower middle
Low
Manufacturer
Total or average
DALYs averted (millions) Share of global DALYs averted Cost per DALY averted
0.12 5.3% $11,700
0.47 21.1% $3,700
1.06 47.3% $1,150
0.59 26.2% $330
—a —a —a
2.24 100.0% $2,030b
GDP per capita Vaccinated females (millions)
$33,000 6.82
$10,000 17.30
$3,500 24.40
$2,000 9.61
—a 58.13
$9,200b 58.13
Benefits (billions)c Costs (billions)d Surplus (billions)e
$4.13 $1.23 $2.73
$5.19 $1.49 $3.44
$3.85 $0.86 $2.62
$0.96 $0.13 $0.77
$3.72 $0.79 $2.93
—a —a $12.5
Share of global surplus Surplus per vaccinated female
21.9% $401
27.5% $199
21.0% $108
6.2% $80
23.5% $51
100.0% $215b
SOURCE Authors’ analysis. NOTES Dollar amounts are in 2013 US dollars. Numbers may not sum to totals because of rounding. GDP is gross domestic product. aNot applicable. bAverage. cBenefits are sale revenues for manufacturers, and total monetized DALYs and health care costs averted for countries. dCosts are manufacturing costs for manufacturers, and vaccine procurement and administration costs for countries. eSurplus is benefits minus costs for first five columns, and sum of surplus in all preceding columns for the last column.
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Exhibit 2 Distribution, Among Countries And Manufacturers, Of Economic Surplus From Human Papillomavirus Vaccination Under Different Parameter Assumptions And Pricing Scenarios, Based On 2012 Vaccination Cohort Country income category High Vaccination cohort size (millions) Economic surplus Base case
Upper middle
Lower middle
Low
Manufacturer
No. 6.82
% 12
No. 17.3
% 30
No. 24.4
% 42
No. 9.61
% 17
No. —a
% —a
Total 58.1
$2.73
22
$3.44
28
$2.62
21
$0.77
6
$2.93
23
$12.5
0.76 7.66 3.89 3.20 0.89
13 26 25 25 16
0.97 9.62 4.47 4.02 2.34
17 33 29 31 42
0.80 7.19 3.21 3.03 0.03
14 25 21 23 1
0.32 1.90 0.87 0.83 0.01
5 6 6 6 0
2.93 2.93 2.93 1.80 2.32
51 10 19 14 41
5.77 29.30 15.36 12.89 5.60
1.05 3.19
9 25
-0.86 3.99
-7 32
0.72 2.94
6 23
0.77 0.82
7 6
10.11 1.68
86 13
11.79 12.61
2.73 1.74 2.73 3.53
22 14 22 28
4.49 3.44 3.44 3.82
36 28 28 31
2.87 3.49 3.49 1.93
23 28 28 15
0.77 0.90 0.90 0.28
6 7 7 2
1.75 2.93 1.94 2.93
14 23 16 23
12.61 12.50 12.50 12.50
Sensitivity analyses 1. Health value 0.52 times GDP per capita 2. Health value 2.3 times GDP per capita 3. Including noncervical cancers 4. Two-dose vaccine 5. Vaccine introduced by July 2015 Alternative pricing scenarios 1. Retail price 2. 37% tender price reduction 3. $8.50 per dose in upper-middle- and low-middle-income countries 4. Subsidy from high-income countries 5. Subsidy from manufacturers 6. No tiered pricing
SOURCE Authors’ analysis. NOTES Dollar amounts are billions of 2013 US dollars. Percentages are the share of total surplus. The sensitivity analyses and alternative pricing scenarios are described in the text. GDP is gross domestic product. aNot applicable.
If tiered pricing was not used at all, then lowincome countries’ share of the surplus dropped to only 2 percent. The surplus per vaccinated female would be distributed most equally with the most generous subsidies to low- and lower-
middle-income countries, and least equally with no tiered pricing at all (data not shown). Each alternative pricing scenario had a dramatic impact on the global distribution of vaccine procurement prices (Exhibit 3).
Exhibit 3 Average Procurement Price Per Human Papillomavirus Vaccine Course Under Different Parameter And Pricing Scenarios For 2012 Vaccination Cohort Country income category High Base case Sensitivity analyses 1. Health value 0.52 times GDP per capita 2. Health value 2.2 times GDP per capita 3. Including noncervical cancers 4. Two-dose vaccine 5. Vaccine introduced by July 2015 Alternative pricing scenarios 1. Retail price 2. 37% tender price reduction 3. $8.50 per dose in upper-middle- and lower-middle income countries 4. Subsidy from high-income countries 5. Subsidy from manufacturer 6. No tiered pricing
$180.00
Upper middle $ 86.40
Lower middle $ 35.50
180.00 180.00 180.00 120.00 425.00
86.40 86.40 86.40 57.60 104.00
427.00 113.63 180.00 326.00 180.00 64.00
Low $13.70
All countries $ 64.00
35.50 35.50 35.50 23.70 66.70
13.70 13.70 13.70 9.10 13.70
64.00 64.00 64.00 42.70 260.00
335.00 54.41
114.00 22.36
13.70 8.60
200.00 40.34
25.50 86.40 86.40 64.00
25.50 0.00 0.00 64.00
13.70 0.00 0.00 64.00
41.70 64.00 46.90 64.00
SOURCE Authors’ analysis. NOTES Dollar amounts are 2013 US dollars. The sensitivity analyses and alternative pricing scenarios are described in the text. GDP is gross domestic product.
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Economics Of Vaccines Discussion The global economic surplus from the development of HPV vaccines is measured by the net value of public benefits they confer. The amount of surplus per vaccinated twelve-year-old female indicates how the overall surplus is distributed among vaccinated females in countries from different income categories. Our results demonstrate that the surplus per vaccinated female is distributed more equally across countries with tiered pricing than without it. However, even at current tiered prices, high-income countries still receive the largest share of surplus per vaccinated female, while low-income countries receive the lowest share. Indeed, even when the costs of vaccination in low- and lower-middle-income countries are completely covered by high-income countries or manufacturers, high-income countries still receive a larger share of the surplus than low-income countries, and manufacturers still receive a positive return on investment. Our results were consistent with those of previous analyses: We found that HPV vaccination is likely to be cost-effective in all country income groups. Indeed, the cost per DALY averted is lowest in low-income countries. From the perspective of the consumers (people who are vaccinated), the majority of DALYs averted as a result of HPV vaccination would benefit low- and lower-middle-income countries if vaccination were implemented in every country in the world. However, from the perspective of the payers of vaccination (such as a ministry of health) and of the national economies, HPV vaccination may be cost-effective but unaffordable. The opportunity costs of vaccination (in terms of DALYs averted by other interventions that could be purchased with the same money) are greater and the economic gains of each averted DALY are smaller in low- and lower-middle-income countries. This may partially explain why vaccine uptake is lower in these countries than in high-income countries, despite the favorable cost-effectiveness profile. Our economic surplus calculations relied on the ability to determine the economic value of improved health resulting from vaccination. We determined this value by pricing one averted DALY (that is, gaining one year of disability-free life) in accordance with a country’s GDP per capita. This rate of conversion has been used by the WHO to determine the value of health interventions at the subregional level.20 It is based on the extra market income created when a person lives an extra year in good health. Other means of valuing vaccination consider the alternative uses for money had that money not been spent on HPV vaccination, or the 232
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Lowering prices in lower-middle-income countries may be more challenging than doing so in low-income countries.
amount that people are willing to pay to avoid premature mortality. These methods also give more economic value to a DALY averted in rich countries than to one averted in poor countries. Our method of analysis simply captured the economic benefits of improved health and the consequences of committing resources to improving health in a resource-constrained world. This method of analysis is not meant to be a value judgment on the intrinsic worth of a life. A portion of the economic surplus is retained by vaccine manufacturers. This rewards them for their investment in vaccine research and development and helps generate profits in excess of manufacturing costs for each vaccinated cohort. Manufacturer revenues have been bolstered by high prices paid by early adopting high-income countries such as the United States, where a dose of HPV vaccine in 2015 cost around $150.21 HPV vaccines were first adopted in the United States, Australia, Canada, and several Western European countries in 2007.22 By the end of 2014 over 200 million doses of HPV vaccines had been distributed around the world, mostly to high-income countries.23 Some maturation in vaccine prices has already occurred. For example, the price for HPV vaccines paid by the Pan American Health Organization’s Revolving Fund decreased from $32.00 per dose in 2010 to $13.50 in 2013 and then to $8.50 in 2015.18 In the future, the expiration of patents and the entry of new manufacturers into the markets of developing countries may bring about further price reductions. However, waiting for price maturation creates a delay in the adoption of a potentially lifesaving and cost-effective intervention by low- and middle-income countries. Almost ten years after the HPV vaccine became available, most of these countries still have not implemented nationally funded HPV vaccination programs. Our calculations show that as of July 2015, low- and lowermiddle-income countries had not yet realized
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Both vaccine manufacturers and high-income countries have received large economic surpluses from the development of HPV vaccines.
most of the economic surplus they could obtain through HPV vaccination.
Policy Implications Our results highlight the role of bulk procurement tenders in ensuring that the amount paid for vaccines is much less than the value of the health and economic benefits of vaccination. If all countries paid retail instead of tender prices for vaccines, their share of the estimated $12.5 billion global economic surplus from HPV vaccination of a single birth cohort would decrease from 77 percent to 15 percent, and many countries would be paying more for vaccination than the value they received in return. However, outside of settings where pooled procurement is practiced (for example, via Gavi or the Pan American Health Organization), the process by which vaccine tenders are negotiated is not transparent. Hence, we cannot be certain that countries really do receive the large price reduction that our extrapolation from publicly available data suggests (for more information on that extrapolation, see the Appendix).14 Successful country-led vaccine negotiations require robust institutions for public procurement, transparent tendering arrangements, and an understanding of pharmacoeconomic drivers of value in health. Not all of these features are in place in every country.We can assume that many countries see current HPV vaccine prices as prohibitively high, since vaccine uptake in lowerincome countries with the highest cervical cancer incidence has lagged behind that in higherincome countries.3 Increasing the subsidization of vaccine prices in low- and lower-middle-income countries could reduce financial barriers to vaccine adoption7,8,11 while still allowing high-income countries and manufacturers to retain economic sur-
pluses. Although feasible, such transfers are obviously not without costs: They would require vaccine price increases in high-income countries (if they reduced the high-income country surplus) or reduced investment in pipeline products with the lowest likely returns on investment (if they reduced the manufacturer surplus). In this article we did not explore the contractual or legislative mechanisms that could achieve a redistribution of the economic surplus resulting from vaccination. It is possible that such mechanisms would involve extending regional pooled procurement arrangements to a global level. This would enable vaccine prices to be tied to the economic value of vaccination in different settings, instead of to the market considerations that currently drive tiered pricing schemes outside of countries eligible for support from Gavi. Lowering prices in lower-middle-income countries may be more challenging than doing so in low-income countries. Private demand for vaccines in low-income countries is very small, so there only small profits to be made by manufacturers. In contrast, there is a sizable middle class in middle-income countries with the means to purchase vaccines at current prices. However, relying on private demand alone to increase vaccine uptake in these settings would concentrate vaccine coverage in the middle class, jeopardizing broader communitywide benefits of vaccines such as herd protection and reductions in health disparities.24 Furthermore, vaccine prices are not always driven by short-term profit considerations alone. Instead, a range of factors that may shape the long-term market for vaccines also affects prices.25 For example, GlaxoSmithKline, in collaboration with the Malaria Vaccine Initiative, has developed a vaccine against malaria at a price that will give the manufacturer little profit.
Conclusion Both vaccine manufacturers and high-income countries have received large economic surpluses from the development of HPV vaccines. Developing countries also have the potential to enjoy economic surpluses from vaccination. However, vaccine adoption has been hindered by high and nontransparent pricing schemes, particularly in middle-income countries. Alternative pricing schemes that explicitly and transparently take into account the health and economic value of HPV vaccination in different countries instead of relying on market forces alone could expedite vaccine adoption in these settings. Such schemes would still enable highincome countries and manufacturers to obtain a positive economic surplus. In the interim, the F eb ru a ry 2 0 16
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Economics Of Vaccines development of methods and databases to provide countries with accurate and comprehensive information on vaccine prices and values could The authors thank Kate Elder (Médecins Sans Frontières) for helpful discussions about vaccine pricing, and Marc Brisson (Université Laval) and Allison Portnoy (John Hopkins University) for help in
improve the bargaining position of countries that are not currently part of pooled procurement schemes. ▪
developing the Papillomavirus Rapid Interface for Modelling and Economics (PRIME). Raymond Hutubessy is a staff member of the World Health Organization (WHO). The views
expressed in this article do not necessarily represent the decisions, policy, or views of the WHO.
NOTES 1 Arbyn M, Castellsagué X, de Sanjosé S, Bruni L, Saraiya M, Bray F, et al. Worldwide burden of cervical cancer in 2008. Ann Oncol. 2011;22(12): 2675–86. 2 Human papillomavirus vaccines: WHO position paper, October 2014. Wkly Epidemiol Rec. 2014;89(43): 465–91. 3 Jit M, Brisson M, Portnoy A, Hutubessy R. Cost-effectiveness of female human papillomavirus vaccination in 179 countries: a PRIME modelling study. Lancet Glob Heal. 2014;2(7):e406–14. 4 Gavi, the Vaccine Alliance [Internet]. Geneva: Gavi. Press release, Millions of girls in developing countries to be protected against cervical cancer thanks to new HPV vaccine deals; 2013 May 9 [cited 2015 Dec 29]. Available from: http:// www.gavi.org/library/news/pressreleases/2013/hpv-priceannouncement/ 5 Wigle J, Coast E, Watson-Jones D. Human papillomavirus (HPV) vaccine implementation in low and middle-income countries (LMICs): health system experiences and prospects. Vaccine. 2013;31(37): 3811–7. 6 Padmanabhan S, Amin T, Sampat B, Cook-Deegan R, Chandrasekharan S. Intellectual property, technology transfer, and developing country manufacture of low-cost HPV vaccines—a case study of India. Nat Biotechnol. 2010;28(7):671–8. 7 Nelson EA, de Quadros CA, Santosham M, Parashar UD, Steele D. Overcoming perceptions of financial barriers to rotavirus vaccine introduction in Asia. Hum Vaccin Immunother. 2013;9(11):2418–26. 8 Hecht R, Kaddar M, Schmitt S. Transparent pricing of vaccines would help poor as well as rich countries. BMJ. 2011;343:d7414. 9 Moon S, Jambert E, Childs M, von Schoen-Angerer T. A win-win solution? A critical analysis of tiered pricing to improve access to medicines in developing countries. Global
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Health. 2011;7:39. 10 Médecins Sans Frontières. The right shot: bringing down barriers to affordable and adapted vaccines. 2nd ed. [Internet]. Geneva: MSF; 2015 Jan [cited 2015 Dec 29]. Available from: http://cdn.doctorswithout borders.org/sites/usa/files/ attachments/the_right_shot_2nd_ edition.pdf 11 Brearley L, Eggers R, Steinglass R, Vandelaer J. Applying an equity lens in the Decade of Vaccines. Vaccine. 2013;31(Suppl 2):B103–7. 12 United Nations Department of Economic and Social Affairs. World population prospects: the 2010 revision. Volume 1: comprehensive tables [Internet]. New York (NY): UN; 2011 [cited 2016 Jan 4]. Available from from: http://www.un.org/en/ development/desa/population/ publications/pdf/trends/WPP2010/ WPP2010_Volume-I_ Comprehensive-Tables.pdf 13 Tan-Torres Edejer T, Baltussen R, Adam T, Hutubessy R, Acharya A, Evans DB, et al. editors. Making choices in health: WHO guide to cost-effectiveness analysis. Geneva: World Health Organization; 2003. 14 To access the Appendix, click on the Appendix link in the box to the right of the article online. 15 Revill P, Walker S, Madan J, Ciaranello A, Mwase T, Gibb DM, et al. Using cost-effectiveness thresholds to determine value for money in low- and middle-income country healthcare systems: are current international norms fit for purpose? York (UK): University of York, Centre for Health Economics; 2014, May. CHE Research Paper No. 98. 16 Jamison DT, Summers LH, Alleyne G, Arrow KJ, Berkley S, Binagwaho A, et al. Global health 2035: a world converging within a generation. Lancet. 2013; 382(9908):1898–955. Erratum in Lancet. 2014;383(9913): 218. 17 According to data on file at the World Health Organization’s Department
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of Immunization, Vaccines, and Biologicals. Pan American Health Organization. PAHO Revolving Fund [Internet]. Washington (DC): PAHO; [cited 2015 Dec 29]. Available from: http:// www.paho.org/hq/index.php? option=com_content&view=article &id=1864%3A2014-paho-revolvingfund&catid=839%3Arevolvingfund&Itemid=4135&lang=en Light DW, Andrus JK, Warburton RN. Estimated research and development costs of rotavirus vaccines. Vaccine. 2009;27(47):6627–33. Edejer TT, Aikins M, Black R, Wolfson L, Hutubessy R, Evans DB. Cost effectiveness analysis of strategies for child health in developing countries. BMJ. 2005;331(7526): 1177. Centers for Disease Control and Prevention. Vaccines for Children Program (VFC): CDC vaccine price list [Internet]. Atlanta (GA): CDC; [last reviewed/updated 2015 Nov 5; cited 2015 Dec 29]. Available from: http://www.cdc.gov/vaccines/ programs/vfc/awardees/vaccinemanagement/price-list/ Koulova A, Tsui J, Irwin K, Van Damme P, Biellik R, Aguado MT. Country recommendations on the inclusion of HPV vaccines in national immunization programmes among high-income countries, June 2006–January 2008. Vaccine. 2008;26(51):6529–41. Brotherton JML. HPV prophylactic vaccines: lessons learned from 10 years experience. Future Virol. 2015;10(8):999–1009. Deogaonkar R, Hutubessy R, van der Putten I, Evers S, Jit M. Systematic review of studies evaluating the broader economic impact of vaccination in low and middle income countries. BMC Public Health. 2012;12:878. Lee BY, McGlone SM. Pricing of new vaccines. Hum Vaccin. 2010;6(8): 619–26.
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Economics Of Vaccines By Niamh Herlihy, Raymond Hutubessy, and Mark Jit 10.1377/hlthaff.2015.1411 HEALTH AFFAIRS 35, NO. 2 (2016): 227–234 ©2016 Project HOPE— The People-to-People Health Foundation, Inc.
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Current Global Pricing For Human Papillomavirus Vaccines Brings The Greatest Economic Benefits To Rich Countries
Niamh Herlihy is a research assistant at the Centre Virchow-Villermé de Santé Publique, in Paris, France. At the time of this research, she was a master’s degree student at the London School of Hygiene and Tropical Medicine, in England.
Vaccinating females against human papillomavirus (HPV) prior to the debut of sexual activity is an effective way to prevent cervical cancer, yet vaccine uptake in low- and middle-income countries has been hindered by high vaccine prices. We created an economic model to estimate the distribution of the economic surplus—the sum of all health and economic benefits of a vaccine, minus the costs of development, production, and distribution—among different country income groups and manufacturers for a cohort of twelve-year-old females in 2012. We found that manufacturers may have received economic returns worth five times their original investment in HPV vaccine development. Highincome countries gained the greatest economic surplus of any income category, realizing over five times more economic value per vaccinated female than low-income countries did. Subsidizing vaccine prices in lowand middle-income countries could both reduce financial barriers to vaccine adoption and still allow high-income countries to retain their economic surpluses and manufacturers to retain their profits. ABSTRACT
V
accination against human papillomavirus (HPV) is touted as a global health success story, with good reason. The vaccine is highly efficacious at preventing persistent HPV infection, which is a cause of cervical cancer—a disease that kills over 250,000 women annually around the world.1 Two HPV vaccines are widely used: a bivalent vaccine, which prevents the two HPV types (16 and 18) responsible for 70 percent of cervical cancer cases, and a quadrivalent vaccine, which prevents HPV 16 and 18 and two other types of HPV that cause most cases of genital warts. Additionally, a nonavalent vaccine that prevents these four types of HPV and five others, which are responsible for an additional 10–20 percent of cervical cancer cases, was recently licensed. The World Health Organization (WHO) recommends that females ages 9–13 be vaccinated against HPV,2 as the vaccines are most effective
Raymond Hutubessy is a senior economist in the Department of Immunization, Vaccines, and Biologicals, World Health Organization, in Geneva, Switzerland. Mark Jit ([email protected] .uk) is a reader in vaccine epidemiology in the Department of Infectious Disease Epidemiology, London School of Hygiene and Tropical Medicine.
before the debut of sexual activity but are licensed only for females ages nine and older. Vaccinating this group is likely to be a costeffective investment in almost every country.3 Most developed countries have already incorporated HPV vaccines into their national immunization schedules. Adoption has been slower in developing countries, even though that is where almost 90 percent of cervical cancer deaths occur.1 Adoption in the poorest countries was expedited by an agreement for 2013–17 between vaccine manufacturers and Gavi, the Vaccine Alliance. According to the agreement, Gavi can purchase vaccines on behalf of the poorest countries at very low prices.4 However, the cost of vaccination remains a barrier to more widespread adoption,5–7 particularly in middleincome countries that are not eligible for the low Gavi prices or other financial support from Gavi. Vaccines in national immunization schedules F e b r u a ry 2 0 1 6
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Economics Of Vaccines are often procured through public-sector tenders. Tender prices are negotiated and are usually lower than retail prices. However, because tender prices are usually subject to confidentiality agreements,8 countries usually know only their own prices. This information asymmetry places them in a weak position to negotiate prices based on vaccine value. Furthermore, the mechanism by which prices are set for different countries is unclear and has been criticized for not always producing equitable or affordable outcomes.9 Vaccine manufacturers have a system in which prices are set according to tiers of country income levels. An analysis by the nongovernmental organization Médecins Sans Frontières suggests that prices in each tier are not known to countries and do not appear to be based on the health and economic benefit of receiving the vaccines.10 Manufacturers are not obliged to consider transparency or public benefit when setting prices. Several commentators believe that to expedite vaccine introduction in low- and middle-income countries, prices there need to fall further and be more transparent.7,8,11 However, lower prices would need to be balanced by manufacturers’ ability to retain positive producer surpluses after accounting for vaccine development costs. One way to address this issue would be to explicitly set vaccine prices based on sharing the estimated value of the health benefits of vaccination (including the health care cost savings from reducing disease burden). In this article we estimate the value of health benefits that could be obtained from HPV vaccination. We explore how these benefits are distributed across different countries and manufacturers, and we examine the effect of six alternative pricing scenarios on the distribution of benefits.
Study Data And Methods Analytical Overview The sum of all potential health and economic benefits from the HPV vaccine less the cost of its development, production, and distribution is called the economic surplus attributable to HPV vaccination. We divided the economic surplus into the producer surplus (the difference between the revenue that manufacturers receive from selling the vaccine and the cost to develop, manufacture, and market it) and the consumer surplus (the difference between the value of benefits that countries receive from vaccination and the amount they pay for the vaccines). Our estimates were based on the hypothetical scenario of vaccinating 80 percent of a birth cohort of twelve-year-old females (acknowledging that 100 percent vaccination is not realistic in 228
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most countries), as quantified by the 2010 United Nations population estimates.12 An explanation of how we calculated health benefits derived from the HPV vaccine appears below. Producer Surplus The producer surplus was calculated as the total revenue earned from HPV vaccine sales by manufacturers less the cost of developing, manufacturing, and marketing the vaccines. Marketing costs were assumed to be 9 percent of revenues. Development costs were inflated to account for the fact that successful vaccines cover development costs for vaccine candidates that fail to reach the market. Producer surplus was used for two comparisons. First, revenues from HPV vaccine sales in 2006–14 were compared to the cost of developing the vaccines. This was done to calculate the manufacturers’ return on investment. A positive return on investment indicated that HPV vaccination was a profitable investment. Second, revenues from selling vaccines to countries to vaccinate a 2012 cohort of twelveyear-old females were compared to the cost of manufacturing and marketing the vaccines, as well as the annualized vaccine development costs. Consumer Surplus The consumer surplus was calculated as the difference between improved health and reduced cervical cancer treatment costs resulting from vaccination and the cost of purchasing and delivering the vaccine. Improved health was measured in terms of the number of disability-adjusted life-years (DALYs) averted by vaccination. We used the Papillomavirus Rapid Interface for Modelling and Economics (PRIME)—a mathematical model developed to estimate the cost-effectiveness of HPV vaccination in 179 countries3—to calculate the DALYs averted and treatment costs saved from vaccinating 80 percent of the 2012 cohort of twelve-year old females. Health gains were then converted into their economic value by multiplying each DALY averted by each country’s gross domestic product (GDP) per capita.13 Hence, richer countries gained more economic value from an averted DALY than poorer countries did, as is the case in many health economics evaluations. Further methodological justification for using GDP per capita as a DALY multiplier, including citations to the relevant literature, is provided in the online Appendix.14 The online Appendix also provides further details about methodological assumptions, calculations, and data sources used.14 Sensitivity Analyses We altered key assumptions to create five alternative sensitivity analysis scenarios. The first two scenarios replaced the GDP per capita with 0.52 times and 2.3 times
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The global economic surplus from the development of HPV vaccines is measured by the net value of public benefits they confer.
the GDP per capita, respectively, to represent the economic value of each DALY averted. The range of 0.52–2.3 times the GDP per capita represents the range of health valuations proposed in comparable literature.15,16 Third, we assumed that noncervical cancers— such as those of the vulva, vagina, anus, penis, mouth, and oropharynx—would also be prevented by HPV vaccination, since these cancers have been linked to HPV types 16 and 18. We assumed that preventing a case of noncervical cancer had the same impact on treatment costs and DALYs as preventing a cervical cancer case. Fourth, because the WHO recently recommended that providers offer a two-dose HPV vaccine schedule instead of a three-dose schedule,2 we assumed that every country in our study had done so. We also assumed that manufacturers kept per dose vaccine prices constant, so that both procurement and administration costs were reduced by one-third. Fifth, we restricted our analysis to countries that had introduced national HPV vaccination programs by July 2015.17 Alternative Pricing Scenarios We considered six alternative scenarios for pricing HPV vaccines. First, we assumed that the full retail price was paid for vaccines, because in some countries HPV vaccines are not procured through public-sector tenders. Second, we assumed a price reduction of 37 percent for HPV vaccines in all countries to match the reduction in prices of bivalent HPV vaccines achieved by the Pan American Health Organization’s Revolving Fund between 2013 and 2015. The Revolving Fund facilitates the pooling of resources to procure vaccines for its member states.18 Those prices dropped from $13.50 per dose in 2013 to $8.50 in 2015. Third, Anthony Nelson and coauthors7 have suggested that other middle-income countries
should develop regional pooled procurement strategies (in which countries negotiate vaccine prices as a group to increase negotiating power) similar to those created by Gavi and the Pan American Health Organization’s Revolving Fund. We assumed that as a result of such initiatives, all middle-income countries would also be able to obtain the price of $8.50 per dose. Fourth and fifth, we assumed that all low- and lower-middle-income countries paid nothing for HPV vaccines, with either high-income countries paying extra or manufacturers reducing profits, respectively, to make up the difference. Sixth, we assumed that every country paid the same price of $21.34 per dose of HPV vaccine, which is the price at which manufacturer revenues would be unchanged. Limitations Our analysis had several limitations. First, our model to project vaccine impact did not take into account indirect (herd) immunity—that is, protection for nonvaccinated individuals as a result of reduced transmission. However, the effect of this simplification was small at the high level of coverage (80 percent) that we assumed. Second, we considered vaccination of twelveyear-old females alone. Some countries also vaccinate older females as well as males. Third, we did not consider the vaccine benefits of reduced cancer screenings and treatments of precancerous neoplasias or genital warts. Fourth, we assumed that vaccine manufacturers captured the entire producer surplus, but part of this may actually go to distributors.
Study Results Producer Return On Investment Total HPV vaccine sales for the manufacturers of both bivalent and quadrivalent vaccines amounted to $14.1 billion in 2006–14.We estimated that clinical trials cost $2.2 billion (for details about our estimates, see the Appendix),14 and if preclinical studies accounted for 30 percent of total costs, they would cost $0.7 billion. Public-sector grants in the United States and Australia leading to patented discoveries that enabled the development of HPV candidate vaccines were estimated to cost $4.9 million, which would imply that the patents were sold to manufacturers with a markup of more than 130 times the cost. Even using a figure of $2.9 billion for total costs, manufacturers would have already achieved a positive return of almost five times on their investment. For purposes of comparison, vaccine development for two rotavirus vaccines was estimated to cost $317–$974 million.19 Economic Surplus Per Vaccinated Cohort We found that the cost per DALY averted was well Febr uary 201 6
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Economics Of Vaccines below the regional GDP per capita in every country income group, which suggests that HPV vaccination is cost-effective everywhere. The total economic surplus produced by vaccinating each cohort of twelve-year-old females against HPV was $12.5 billion in 2012 (Exhibit 1). The high-, upper-middle-, and lower-middle-income groups of countries received approximately equal shares of this surplus, but the low-income group received a smaller share. Because the sizes of the vaccination cohorts in the country income groups differed, highincome countries received the largest surplus per vaccinated female (Exhibit 1). The cost per DALY averted was lowest in low-income countries, but the economic surplus decreased with income level: High-income countries gained over five times more economic value per vaccinated female than low-income countries did. However, most of the cost of vaccine procurement and delivery in these countries was met by Gavi. Alternative Scenarios The distribution of the economic surplus among countries changed with each different sensitivity analysis and pricing scenario (Exhibit 2). Compared to the base case, at a low monetization rate of DALYs averted (0.52 times GDP per capita), less of the surplus went to consumers, particularly high-income countries. The opposite happened with a high monetization rate (2.2 times GDP per capita). However, low-income countries’ share remained fairly static, at 5–6 percent of the total surplus. If HPV vaccines also protected against other cancers besides cervical cancer, then the economic surplus increased overall compared to the base case (Exhibit 2). However, most of
the additional benefit went to high-income countries, since noncervical HPV-related cancers constitute the largest proportion of HPV-related cancers in these countries. If we included only the countries that had introduced nationwide HPV vaccination by July 2015, the share of the surplus received by lower-middle- and low-income countries decreased to almost zero (Exhibit 2). This showed slow uptake of vaccination by these countries. The greatest change across alternative pricing scenarios was seen when the full retail price was paid for vaccines. In that scenario, manufacturers captured 86 percent of the economic surplus attributable to HPV vaccination, and the share of the surplus for all countries except those in the low-income group (which are eligible for reduced Gavi prices) declined sharply (Exhibit 2). Indeed, upper-middle-income countries actually spent more than the value they received from vaccination. More pooled procurement increased uppermiddle-income countries’ share of the surplus at the expense of the manufacturers, but it had little impact on other countries (Exhibit 2). Explicit subsidies increased the share of the surplus for lower-middle-income countries in particular, at the expense of either high-income countries or manufacturers (depending on which provided the subsidy). Even the most generous subsidies, which reduced the price of vaccine procurement to zero in low- and lower-middle-income countries, would only reduce the economic surplus captured by high-income countries from 22 percent to 14 percent, or by manufacturers from 23 percent to 16 percent, depending on which provided the subsidy.
Exhibit 1 Distribution, Among Countries And Manufacturers, Of Disability-Adjusted Life-Years (DALYs) Averted By And Economic Surplus From Human Papillomavirus Vaccination, Based On 2012 Vaccination Cohort Country income category High
Upper middle
Lower middle
Low
Manufacturer
Total or average
DALYs averted (millions) Share of global DALYs averted Cost per DALY averted
0.12 5.3% $11,700
0.47 21.1% $3,700
1.06 47.3% $1,150
0.59 26.2% $330
—a —a —a
2.24 100.0% $2,030b
GDP per capita Vaccinated females (millions)
$33,000 6.82
$10,000 17.30
$3,500 24.40
$2,000 9.61
—a 58.13
$9,200b 58.13
Benefits (billions)c Costs (billions)d Surplus (billions)e
$4.13 $1.23 $2.73
$5.19 $1.49 $3.44
$3.85 $0.86 $2.62
$0.96 $0.13 $0.77
$3.72 $0.79 $2.93
—a —a $12.5
Share of global surplus Surplus per vaccinated female
21.9% $401
27.5% $199
21.0% $108
6.2% $80
23.5% $51
100.0% $215b
SOURCE Authors’ analysis. NOTES Dollar amounts are in 2013 US dollars. Numbers may not sum to totals because of rounding. GDP is gross domestic product. aNot applicable. bAverage. cBenefits are sale revenues for manufacturers, and total monetized DALYs and health care costs averted for countries. dCosts are manufacturing costs for manufacturers, and vaccine procurement and administration costs for countries. eSurplus is benefits minus costs for first five columns, and sum of surplus in all preceding columns for the last column.
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Exhibit 2 Distribution, Among Countries And Manufacturers, Of Economic Surplus From Human Papillomavirus Vaccination Under Different Parameter Assumptions And Pricing Scenarios, Based On 2012 Vaccination Cohort Country income category High Vaccination cohort size (millions) Economic surplus Base case
Upper middle
Lower middle
Low
Manufacturer
No. 6.82
% 12
No. 17.3
% 30
No. 24.4
% 42
No. 9.61
% 17
No. —a
% —a
Total 58.1
$2.73
22
$3.44
28
$2.62
21
$0.77
6
$2.93
23
$12.5
0.76 7.66 3.89 3.20 0.89
13 26 25 25 16
0.97 9.62 4.47 4.02 2.34
17 33 29 31 42
0.80 7.19 3.21 3.03 0.03
14 25 21 23 1
0.32 1.90 0.87 0.83 0.01
5 6 6 6 0
2.93 2.93 2.93 1.80 2.32
51 10 19 14 41
5.77 29.30 15.36 12.89 5.60
1.05 3.19
9 25
-0.86 3.99
-7 32
0.72 2.94
6 23
0.77 0.82
7 6
10.11 1.68
86 13
11.79 12.61
2.73 1.74 2.73 3.53
22 14 22 28
4.49 3.44 3.44 3.82
36 28 28 31
2.87 3.49 3.49 1.93
23 28 28 15
0.77 0.90 0.90 0.28
6 7 7 2
1.75 2.93 1.94 2.93
14 23 16 23
12.61 12.50 12.50 12.50
Sensitivity analyses 1. Health value 0.52 times GDP per capita 2. Health value 2.3 times GDP per capita 3. Including noncervical cancers 4. Two-dose vaccine 5. Vaccine introduced by July 2015 Alternative pricing scenarios 1. Retail price 2. 37% tender price reduction 3. $8.50 per dose in upper-middle- and low-middle-income countries 4. Subsidy from high-income countries 5. Subsidy from manufacturers 6. No tiered pricing
SOURCE Authors’ analysis. NOTES Dollar amounts are billions of 2013 US dollars. Percentages are the share of total surplus. The sensitivity analyses and alternative pricing scenarios are described in the text. GDP is gross domestic product. aNot applicable.
If tiered pricing was not used at all, then lowincome countries’ share of the surplus dropped to only 2 percent. The surplus per vaccinated female would be distributed most equally with the most generous subsidies to low- and lower-
middle-income countries, and least equally with no tiered pricing at all (data not shown). Each alternative pricing scenario had a dramatic impact on the global distribution of vaccine procurement prices (Exhibit 3).
Exhibit 3 Average Procurement Price Per Human Papillomavirus Vaccine Course Under Different Parameter And Pricing Scenarios For 2012 Vaccination Cohort Country income category High Base case Sensitivity analyses 1. Health value 0.52 times GDP per capita 2. Health value 2.2 times GDP per capita 3. Including noncervical cancers 4. Two-dose vaccine 5. Vaccine introduced by July 2015 Alternative pricing scenarios 1. Retail price 2. 37% tender price reduction 3. $8.50 per dose in upper-middle- and lower-middle income countries 4. Subsidy from high-income countries 5. Subsidy from manufacturer 6. No tiered pricing
$180.00
Upper middle $ 86.40
Lower middle $ 35.50
180.00 180.00 180.00 120.00 425.00
86.40 86.40 86.40 57.60 104.00
427.00 113.63 180.00 326.00 180.00 64.00
Low $13.70
All countries $ 64.00
35.50 35.50 35.50 23.70 66.70
13.70 13.70 13.70 9.10 13.70
64.00 64.00 64.00 42.70 260.00
335.00 54.41
114.00 22.36
13.70 8.60
200.00 40.34
25.50 86.40 86.40 64.00
25.50 0.00 0.00 64.00
13.70 0.00 0.00 64.00
41.70 64.00 46.90 64.00
SOURCE Authors’ analysis. NOTES Dollar amounts are 2013 US dollars. The sensitivity analyses and alternative pricing scenarios are described in the text. GDP is gross domestic product.
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Economics Of Vaccines Discussion The global economic surplus from the development of HPV vaccines is measured by the net value of public benefits they confer. The amount of surplus per vaccinated twelve-year-old female indicates how the overall surplus is distributed among vaccinated females in countries from different income categories. Our results demonstrate that the surplus per vaccinated female is distributed more equally across countries with tiered pricing than without it. However, even at current tiered prices, high-income countries still receive the largest share of surplus per vaccinated female, while low-income countries receive the lowest share. Indeed, even when the costs of vaccination in low- and lower-middle-income countries are completely covered by high-income countries or manufacturers, high-income countries still receive a larger share of the surplus than low-income countries, and manufacturers still receive a positive return on investment. Our results were consistent with those of previous analyses: We found that HPV vaccination is likely to be cost-effective in all country income groups. Indeed, the cost per DALY averted is lowest in low-income countries. From the perspective of the consumers (people who are vaccinated), the majority of DALYs averted as a result of HPV vaccination would benefit low- and lower-middle-income countries if vaccination were implemented in every country in the world. However, from the perspective of the payers of vaccination (such as a ministry of health) and of the national economies, HPV vaccination may be cost-effective but unaffordable. The opportunity costs of vaccination (in terms of DALYs averted by other interventions that could be purchased with the same money) are greater and the economic gains of each averted DALY are smaller in low- and lower-middle-income countries. This may partially explain why vaccine uptake is lower in these countries than in high-income countries, despite the favorable cost-effectiveness profile. Our economic surplus calculations relied on the ability to determine the economic value of improved health resulting from vaccination. We determined this value by pricing one averted DALY (that is, gaining one year of disability-free life) in accordance with a country’s GDP per capita. This rate of conversion has been used by the WHO to determine the value of health interventions at the subregional level.20 It is based on the extra market income created when a person lives an extra year in good health. Other means of valuing vaccination consider the alternative uses for money had that money not been spent on HPV vaccination, or the 232
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Lowering prices in lower-middle-income countries may be more challenging than doing so in low-income countries.
amount that people are willing to pay to avoid premature mortality. These methods also give more economic value to a DALY averted in rich countries than to one averted in poor countries. Our method of analysis simply captured the economic benefits of improved health and the consequences of committing resources to improving health in a resource-constrained world. This method of analysis is not meant to be a value judgment on the intrinsic worth of a life. A portion of the economic surplus is retained by vaccine manufacturers. This rewards them for their investment in vaccine research and development and helps generate profits in excess of manufacturing costs for each vaccinated cohort. Manufacturer revenues have been bolstered by high prices paid by early adopting high-income countries such as the United States, where a dose of HPV vaccine in 2015 cost around $150.21 HPV vaccines were first adopted in the United States, Australia, Canada, and several Western European countries in 2007.22 By the end of 2014 over 200 million doses of HPV vaccines had been distributed around the world, mostly to high-income countries.23 Some maturation in vaccine prices has already occurred. For example, the price for HPV vaccines paid by the Pan American Health Organization’s Revolving Fund decreased from $32.00 per dose in 2010 to $13.50 in 2013 and then to $8.50 in 2015.18 In the future, the expiration of patents and the entry of new manufacturers into the markets of developing countries may bring about further price reductions. However, waiting for price maturation creates a delay in the adoption of a potentially lifesaving and cost-effective intervention by low- and middle-income countries. Almost ten years after the HPV vaccine became available, most of these countries still have not implemented nationally funded HPV vaccination programs. Our calculations show that as of July 2015, low- and lowermiddle-income countries had not yet realized
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Both vaccine manufacturers and high-income countries have received large economic surpluses from the development of HPV vaccines.
most of the economic surplus they could obtain through HPV vaccination.
Policy Implications Our results highlight the role of bulk procurement tenders in ensuring that the amount paid for vaccines is much less than the value of the health and economic benefits of vaccination. If all countries paid retail instead of tender prices for vaccines, their share of the estimated $12.5 billion global economic surplus from HPV vaccination of a single birth cohort would decrease from 77 percent to 15 percent, and many countries would be paying more for vaccination than the value they received in return. However, outside of settings where pooled procurement is practiced (for example, via Gavi or the Pan American Health Organization), the process by which vaccine tenders are negotiated is not transparent. Hence, we cannot be certain that countries really do receive the large price reduction that our extrapolation from publicly available data suggests (for more information on that extrapolation, see the Appendix).14 Successful country-led vaccine negotiations require robust institutions for public procurement, transparent tendering arrangements, and an understanding of pharmacoeconomic drivers of value in health. Not all of these features are in place in every country.We can assume that many countries see current HPV vaccine prices as prohibitively high, since vaccine uptake in lowerincome countries with the highest cervical cancer incidence has lagged behind that in higherincome countries.3 Increasing the subsidization of vaccine prices in low- and lower-middle-income countries could reduce financial barriers to vaccine adoption7,8,11 while still allowing high-income countries and manufacturers to retain economic sur-
pluses. Although feasible, such transfers are obviously not without costs: They would require vaccine price increases in high-income countries (if they reduced the high-income country surplus) or reduced investment in pipeline products with the lowest likely returns on investment (if they reduced the manufacturer surplus). In this article we did not explore the contractual or legislative mechanisms that could achieve a redistribution of the economic surplus resulting from vaccination. It is possible that such mechanisms would involve extending regional pooled procurement arrangements to a global level. This would enable vaccine prices to be tied to the economic value of vaccination in different settings, instead of to the market considerations that currently drive tiered pricing schemes outside of countries eligible for support from Gavi. Lowering prices in lower-middle-income countries may be more challenging than doing so in low-income countries. Private demand for vaccines in low-income countries is very small, so there only small profits to be made by manufacturers. In contrast, there is a sizable middle class in middle-income countries with the means to purchase vaccines at current prices. However, relying on private demand alone to increase vaccine uptake in these settings would concentrate vaccine coverage in the middle class, jeopardizing broader communitywide benefits of vaccines such as herd protection and reductions in health disparities.24 Furthermore, vaccine prices are not always driven by short-term profit considerations alone. Instead, a range of factors that may shape the long-term market for vaccines also affects prices.25 For example, GlaxoSmithKline, in collaboration with the Malaria Vaccine Initiative, has developed a vaccine against malaria at a price that will give the manufacturer little profit.
Conclusion Both vaccine manufacturers and high-income countries have received large economic surpluses from the development of HPV vaccines. Developing countries also have the potential to enjoy economic surpluses from vaccination. However, vaccine adoption has been hindered by high and nontransparent pricing schemes, particularly in middle-income countries. Alternative pricing schemes that explicitly and transparently take into account the health and economic value of HPV vaccination in different countries instead of relying on market forces alone could expedite vaccine adoption in these settings. Such schemes would still enable highincome countries and manufacturers to obtain a positive economic surplus. In the interim, the F eb ru a ry 2 0 16
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Economics Of Vaccines development of methods and databases to provide countries with accurate and comprehensive information on vaccine prices and values could The authors thank Kate Elder (Médecins Sans Frontières) for helpful discussions about vaccine pricing, and Marc Brisson (Université Laval) and Allison Portnoy (John Hopkins University) for help in
improve the bargaining position of countries that are not currently part of pooled procurement schemes. ▪
developing the Papillomavirus Rapid Interface for Modelling and Economics (PRIME). Raymond Hutubessy is a staff member of the World Health Organization (WHO). The views
expressed in this article do not necessarily represent the decisions, policy, or views of the WHO.
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