Vaccine Industry

With diseases running rampant throughout the world, wealthy citizens of industrialized countries run to the doctors to vaccinate their children. But how do the profits for the industry add up?

According to the World Health Organization the sales from vaccines are comprised of 82% from industrialized nations with the rest coming from developing nations. The odd statistic is: out of the total amount of vaccines given out in the world 85% are given to developing nations. What does this mean? This means that even though 1st world countries take 15% of total vaccines, they pay for 82% of them. How is this possible? WHO attributes developing countries obtaining vaccines to donations from government organizations, foundations, and independent donors.

Annually the vaccination market grows 10-15% which is considered aggressive growth. This statistic compared to the 7% growth rate for pharmaceuticals, begs the question: population growth annually is 2% so why is vaccine growth so explosive? In 2000, the vaccine industry raised $5 billion in the US, in 2013 it was $24 billion. WHO answers the question simply blaming this on “newer, more advanced, and more expensive vaccines coming out faster than before.

What is the highest selling vaccine? Pfizer’s pneumonia vaccination is responsible for 2.4 of the 24 billion dollars in sales last year. But #3 is Merck’s HPV vaccination, which until recently had barley any market share. The HPV vaccination is an example of one of the advanced medicines that are causing the rapid growth in this industry.

Projection: As population-technology-threats all increase, we will see the vaccination industry continue to boom. Also, while developing countries develop, they will begin paying for the vaccines which will dramatically increase profits for the pharm giants. The pharm industry seems to be a relatively safe-solid investment.

5 thoughts on “Vaccine Industry

  1. How big is the profit margin with vaccines? I would imagine a significant portion of revenue is expended for research and development of a specific vaccine. Nonetheless, companies are able to patent the process by which it developed a patent, which can increase profitability for the firm. Indeed, pharmaceutical companies are a safe investment as bacteria evolve and become resistant to old vaccines, creating the need for newly innovated vaccines.

  2. I am unfamiliar with the vaccine industry, but I think it is fairly common for drug companies to receive the vast majority of their revenue from Western countries. I know in the US we pay significantly more for drugs because we are buying from a monopoly, but without the long lasting patent there is no incentive for these companies to create new drugs. In developing countries these are sold for much less and often subsidized by governments. Is the differential in vaccine prices due to similar reason? It doesn’t seem surprising that they don’t receive much profit at all from developing countries.

  3. Drug pricing ought to vary with the price elasticity of demand, no? And if prices are covered by insurance, final consumers aren’t very sensitive to prices, while without a single provider system, individual insurers are too small to negotiate for good prices.
    Other IO angles?

  4. Seems to me like this is a problem of price discrimination. The fixed costs of developing, testing, and patenting vaccines must be absolutely enormous. At such a point where vaccines are ready to be commercialized, what does vaccine production cost at the margin? As vaccines are hardly tangible products, ramping up production, producing at scale, and selling as many as possible at any level of profit would be very advantageous. So this makes sense then- it isn’t that industrialized countries pay for all vaccines consumed globally, but instead that industrialized countries are responsible for the vast majority of net income and revenue at the end of a fiscal quarter simply because they get gouged. The demand elasticity of vaccines is low- high income countries can afford it, and pay for it. Low income countries are only asked to pay what they can, still producing marginal profits for producers.

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