H1N1 Vaccine Production
Namrata Uberoi - Andrew HelicherHPA 545
December 1, 2009
DrugCo:Who We Are
2
Bio-technology company
Established manufacturer of the seasonal flu vaccine
Situated in the United States
Agenda
3
Problem Definition
Risk Assessment
Profitability Analysis
Recommendation
Problem Definition
Risk Assessment
Profitability Analysis
Recommendation
H1N1Global and National Environment
4
Late April, 2009
• WHO announces the emergence of novel influenza A virus
June 11th, 2009
• WHO raises influenza pandemic alert to phase 6
October 25th, 2009
• President Barack Obama officially declares H1N1 a national emergency
World Health Organization, 2009.Flu.gov
H1N1 Options
1. Utilize existing capacity
2. Build a vaccine plant
3. Purchase an existing vaccine plant
4. Do not enter the market
5
Agenda
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Problem Definition
Risk Assessment
Profitability Analysis
Recommendation
H1N1 Vaccine Production
Gerdil, C. (2003)
7
Oct Dec
Associated Risks
Demand is highly unpredictable
Virus production
Costs
Legal liability
8
Risk Mitigation
Government involvement
Pre-order payment
Other revenue streams
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Agenda
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Problem Definition
Risk Assessment
Profitability Analysis
Recommendation
Profit Equation
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Revenue (Price x Quantity)
- Cost . (Fixed + Marginal)
Profit (Market Forces)
Market Forces
1. Herrick, D., 20042. Wikipedia, 20093. Danzon, P. et al., 2005 12
Profit ↓ Profit ↑
Vaccines are commodities
Bertrand Paradox2
Monopsony1
Fixed Cost to Market Size3
Hershaft index
Govn. price based on AWP3
Regional shortages1
Demand Curve Shifts
1. Putting Influenza H1N1 in its Place, 20092. Yoo et.al, 20093. Orenstein, W. et al, 20084. Danzon, P. et al., 2005 13
Shift Out – Price ↑ Shift In – Price ↓
WHO Pandemic Alert Level 61
Severe in early months2
Recommended population3
Government subsidies
Extended vaccination timeline3
1 dose needed (vs. 2)
Virus responds to antivirals
Fear of getting sick from vaccine3
Mild winter perception3
Winner’s curse4
Supply Curve Shifts
1. Danzon, P. et al., 20052. Orenstein, W. et al, 2008 14
Shift Up – Price ↑ Shift Down – Price ↓
Manufacturing issues1
Market restrictions
Input shortage/price increase
Aging technology
Government subsidies
New firms enter market (H1N1)
New technology Nasal spray2
Cell-culture1
Cost Considerations
1. Brown, D., 200415
Fixed Costs Marginal Costs
Factory
Management
Regional regulations
Small market1
$6B vs. $340B (pharma)
Inputs (eggs)
Labor-intensive
Technology
Distribution channels
Economies of Scale Economies of Scope
Agenda
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Problem Definition
Risk Assessment
Profitability Analysis
Recommendation
Recommendation
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Use existing capacity- determine optimal mix of seasonal and pandemic vaccine manufacturing
Lobby for supply-side and demand-side subsidies Supply-side: pricing, inventory buy-back, liability Demand-side: insurance, public health, mandates
Invest in new technology: cell-based culture
Questions?
References
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Bertrand Paradox. Retrieved from http://en.wikipedia.org/wiki/Bertrand_paradox_(economics). 2009 Nov. 29.
Brown, D. (2004 Oct. 17) How U.S. Got Down to Two Makers of Flu Vaccine. Washington Post. Retrieved from http://www.washingtonpost.com/wp-dyn/articles/A38776-2004Oct16.html.
Collin, N. & Radigues, X. (2009) Vaccine production capacity for seasonal and pandemic (H1N1) 2009 influenza. Vaccine. Vol. 27, 5184-5186.
Danzon, P., Pereira, N. & Tejwani, S. (2005) Vaccine Supply: A Cross-National Perspective. Health Affairs. Vol. 24, No. 3.
Feeney, M. (2006) Flu Vaccine Case Study. The Electronic Hallway. Retrieved from www.hallway.org
Gerdil, C. (2002) The Annual Production Cycle for Influenza Vaccine. Vaccine. Vol. 21, 1776-1779.
Herrick, D. (2004 Oct. 28) What’s Behind the Flu Vaccine Shortage. National Center for Policy Analysis. No. 493.
Orenstein, W. & Schaffner, W. (2008) Lessons Learned: Role of Influenza Vaccine Production, Distribution, Supply, and Demand—What It Means for the Provider. The American Journal of Medicine. Vol. 121, S22–S27.
Preparation for Pandemic: Influenza A H1N1. (2009 May 8). The Lancet – Leading Edge. Vol. 9, June 2009.
Putting Influenza H1N1 in its Place. (2009 May 8). The Lancet – Leading Edge. Vol. 9, June 2009.
Osterholm, M. (2005) Preparing for the Next Pandemic. The New England Journal of Medicine. May 5, 2005. Vol. 352, Iss. 18.
Yoo, B., Kasajima, M., Fiscella, K., Bennet, N., Phelps, C., Szilagyi, P. (2009) Effects of an Ongoing Epidemic on the Annual Influenza Vaccination Rate and Vaccination Timing Among the Medicare Elderly: 2000-2005. American Journal of Public Health. Suppliment 2, 2009, Vol. 99, No. S2.