Let’s Make Vaccines and Stockpile Them . . . Not!

How about this for great business model – selling vaccines that are put on a shelf and have to be replaced every 4 years. Some vaccine companies make billions on that proposition. But we ask, as citizens and scientists, are we in this business to make money or to make better medicines? Since it appears we must prepare for biothreats, why not make such vaccines faster, and better, when we need them. Why stockpile?

Well, if you are in the business of making money, instead of making better medicines to solve unmet medical needs, you produce a vaccine that is far from innovative  (read, Conventional) that is one that the US government desperately wants so as to ‘check the box’ on a  biodefense need. And set up a situation where you are the only provider of that desperately desired product. And then you charge Uncle Sam an arm and a leg for it. Here’s the situation analysis by Scott Lilly, of the Center for American Progress, who uncovered how Emergent Solutions makes billions off Uncle Sam

. . . what caught my eye as an old Appropriations Committee staffer was a table in the middle of the report that listed previous year revenues from product sales at $217 million, and the cost of product sales at $46 million.

Even if you allow a generous amount for administration and overhead above the $46 million “cost of product sales,” the $217 million in revenue from those sales would indicate a markup in the neighborhood of 300 percent. By comparison, a 2009 study of 6,000 Army and Air Force contracts by the Institute for Defense Analysis found that margins on such contracts typically ranged between 9 percent and 10 percent of production costs.

Based on my years of work in congressional oversight, a markup of even half the size suggested by this annual report seemed mind boggling. But the company, Emergent BioSolutions Inc., had somehow managed to win such a contract. Was this a one time sweet deal? The answer was right there on the same page of the company’s Form 10-K. The company had been billing the government with those same giant profit margins for at least four years.

Further research indicates that over the past decade the government forked over more than $1.3 billion for doses of the vaccine, which had cost the company only about a quarter billion dollars to manufacture—leaving more than a billion dollar difference between revenues and the cost of product sales.

What’s even more interesting is that the company making that vaccine, Emergent has a contract to replace the vaccine that the government stockpiles every four years, because the vaccine becomes obsolete after three.

Unfortunately, stockpiling a vaccine that few people even want to take – and which any halfway intelligent terrorist would find a workaround for (how about mutating the key antigen, like this year’s H3N2 vaccine).

Isnt there a better way?  EpiVax CEO Annie De Groot MD sought to answer that question in her testimony at the Blue Ribbon Study Panel on Biodefense.  She talked about making Vaccines on Demand – a concept pioneered by her team at EpiVax – would eliminate stockpiles and build resiliency. There’s a recorded stream of the proceedings on line if you want to check it out. The full “Vaccines on Demand” testimony (PDF) can be obtained here. More information about the panel can be found here. And let’s do some good work and prevent disease while we’re at it. After all, it’s better to prevent than to cure.