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Analytics for vaccine economics and pricing: Insights and observations

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 Review

Analytics for vaccine

economics and pricing:
insights and observations
Expert Rev. Vaccines 14(4), 605–616 (2015)
Expert Review of Vaccines Downloaded from informahealthcare.com by University of Illinois on 03/09/15

Matthew J Robbins1
and
Sheldon H Jacobson*2
1
Department of Operational Sciences,
Air Force Institute of Technology,
2950 Hobson Way, Wright-Patterson
AFB, OH, USA
2
Department of Computer Science,
Simulation and Optimization
Laboratory, University of Illinois,
201 N. Goodwin Avenue (MC258),
Urbana, IL, 61801 2302, USA
For personal use only.
Pediatric immunization programs in the USA are a successful and cost–effective public health
endeavor, profoundly reducing mortalities caused by infectious diseases. Two important issues
relate to the success of the immunization programs, the selection of cost–effective vaccines
and the appropriate pricing of vaccines. The recommended childhood immunization schedule,
published annually by the CDC, continues to expand with respect to the number of injections
required and the number of vaccines available for selection. The advent of new vaccines to
meet the growing requirements of the schedule results: in a large, combinatorial number of
possible vaccine formularies. The expansion of the schedule and the increase in the number
of available vaccines constitutes a challenge for state health departments, large city
immunization programs, private practices and other vaccine purchasers, as a cost–effective
vaccine formulary must be selected from an increasingly large set of possible vaccine

*Author for correspondence:

combinations to satisfy the schedule. The pediatric vaccine industry consists of a relatively
Tel.: +1 217 244 7275
shj@illinois.edu small number of pharmaceutical firms engaged in the research, development, manufacture
and distribution of pediatric vaccines. The number of vaccine manufacturers has dramatically
decreased in the past few decades for a myriad of reasons, most notably due to low
profitability. The contraction of the industry negatively impacts the reliable provision of
pediatric vaccines. The determination of appropriate vaccine prices is an important issue and
influences a vaccine manufacturer’s decision to remain in the market. Operations research is
a discipline that applies advanced analytical methods to improve decision making; analytics is
the application of operations research to a particular problem using pertinent data to provide
a practical result. Analytics provides a mechanism to resolve the challenges facing
stakeholders in the vaccine development and delivery system, in particular, the selection of
cost–effective vaccines and the appropriate pricing of vaccines. A review of applicable
analytics papers is provided.

KEYWORDS: analytics • operations research • pediatric vaccines • public health • vaccine pricing

stands at over 70% for the combined vaccine

The US pediatric vaccine market
Vaccination is often lauded as one of the most
important and successful public health endeav-
ors in human history, profoundly reducing
mortalities caused by infectious diseases [1]. In
the USA, among children born during 1994–
2013, it is estimated that vaccination will
prevent 322 million illnesses, 21 million hos-
pitalizations and 732,000 deaths during their
lifetimes [2]. This success results from a public
health program that fully immunizes nearly
three-quarters of the children in the USA
annually. The current national vaccination
coverage among children aged 19–35 month
series [3]. The comprehensive success of large-
scale pediatric immunization programs results
from the collaboration of an interdependent
system of government and industry stakehold-
ers [4,5]. A stakeholder in this system acts inde-
pendently in pursuit of its own interests;
however, the actions of one stakeholder may
affect the welfare of other stakeholders. It is
imperative that stakeholders understand the
types of decisions faced by their fellow stake-
holders and how these decisions affect the
entire market. Indeed, the likelihood of sus-
taining the success of the public health immu-
nization program increases when stakeholders

informahealthcare.com 10.1586/14760584.2015.985662 Ó 2014 Informa UK Ltd ISSN 1476-0584 605

 Review Robbins & Jacobson
are better informed when making their decisions. Of particular
consequence are decisions concerning the selection of cost–
effective vaccine formularies [6], the determination of appropri-
ate vaccine prices [7] and the implementation of government
vaccination policies that best influence the vaccine industry [8].
These decisions become even more salient given discussions
concerning reductions in federal health spending over the next
decade [9].
A number of stakeholders are involved in the US pediatric
vaccine market. The CDC acts as the primary federal public
health organization responsible for setting pediatric immuniza-
tion policy. Based on recommendations from the Advisory
Expert Review of Vaccines Downloaded from informahealthcare.com by University of Illinois on 03/09/15
Committee on Immunization Practices, the American Academy
of Pediatrics and the American Academy of Family Physicians,
the CDC annually publishes a recommended childhood immu-
nization schedule (RCIS) (FIGURE 1 from [10]) that provides
specific guidance regarding the effective control of vaccine-
preventable diseases to include the appropriate periodicity and
dosage requirements for each pediatric vaccine. The schedule
serves as the fundamental force driving market demand for vac-
cines [4]; the customers (i.e., healthcare providers, state and
local government public health officials) purchase vaccines to
immunize the patients (i.e., the consumers) under their care in
accordance with the schedule. Just over 4 million children are
For personal use only.
born in the USA each year [11], representing a base annual
cohort of consumers. Changes in recommendations or require-
ments from the CDC greatly influence the demand for a par-
ticular vaccine. The CDC also maintains a list of acceptable
pediatric vaccines and negotiates prices [12] at which federal,
state and local governments can purchase the vaccines through
the Vaccines for Children (VFC) program. Pediatric vaccines
purchased at the public sector price, as negotiated by CDC
officials, account for approximately 55% of total pediatric vac-
cine purchases by volume [4]. The Center for Biologics Evalua-
tion and Research, a division of the US FDA, licenses new
vaccines. The FDA ensures manufacturing processes, facilities
and clinical studies result in the provision of safe and effective
vaccines. The FDA also maintains a list of vaccines licensed for
immunization and distribution in the USA [13].
The pediatric vaccine industry consists of a relatively small
number of pharmaceutical firms (i.e., companies, manufac-
turers) engaged in the research, development, manufacture and
distribution of pediatric vaccines [4]. The number of firms that
produce vaccines for the US market has steadily decreased since
the 1960s. In 1967, 37 vaccine manufacturers operated in the
USA [14,15]. As of 2014, only five firms manufacture all routine
vaccines; many vaccines are manufactured by a single company.
Public health experts [4,16–19] suggest several reasons for the
declining number of manufacturers. Participation in the vaccine
industry is a difficult, costly and risky enterprise. Bringing a
new vaccine to market can take up to 30 years and cost in
excess of US$ 700 million [4,16]. Stringent licensing require-
ments by the FDA serve as a barrier to market entry. The
FDA encourages creation of commercial production capacity
before granting a license, placing a company at substantial
606
financial risk. Moreover, vaccine manufacturers face ongoing
regulation of production. The FDA conducts frequent inspec-
tions of manufacturing facilities and must approve the release
of individual product batches [19]. Any change in the produc-
tion processes effects expensive product reviews. Finally, despite
the strict regulatory environment, vaccine manufacturers remain
susceptible to product-liability lawsuits (although, the national
vaccine injury compensation program, funded by a US$ 0.75
per antigen excise tax, greatly mitigates the risk associated with
vaccine injury claims). Pharmaceutical companies cannot justify
investment in their vaccine manufacturing business units if
their risk-adjusted returns are low. Another important consider-
ation affecting vaccine manufacturing business units is the com-
petition for resources within the larger pharmaceutical
company’s enterprise. The actual contribution to revenue after
accounting for the cost of researching, manufacturing and mar-
keting the vaccines may be quite small compared with other
available pharmaceutical endeavors. For example, Advair, a
prescription respiratory product, generated nearly 20% of
GlaxoSmithKline’s revenue in 2013 [20]. As such, Glaxo-
SmithKline may have a different perspective regarding the
production of pediatric vaccines compared with other products.
Should one of the five vaccine manufacturers decide to cease
production, it would take quite some time before a licensed
replacement vaccine became publicly available. This line of rea-
soning suggests the importance of appropriately pricing vac-
cines so as to encourage vaccine manufacturers to remain in
the market.
Expansion of the schedule
The CDC has published the RCIS annually since 1995 [21].
Before 1995, the schedule was updated periodically as new vac-
cines became available. In the 1980s, there were seven recom-
mended vaccines on the schedule: diphtheria, tetanus, pertussis,
measles, mumps, rubella and polio. As of 2014, there are
14 recommended vaccines on the schedule, with the following
seven further additions since the 1980s: Haemophilus influenzae
Type b, hepatitis B, hepatitis A, influenza, varicella, pneumo-
coccal and rotavirus. The rapid appearance of new vaccines
results from biotechnology improvements within the vaccine
industry [4]. The prevention of many more diseases is generally
perceived as good news. However, the advent of new vaccines
poses challenges for public health agencies and health
care providers.
One challenge involves the number of injections required to
be fully immunize according to the schedule. Another, perhaps
more salient challenge involves the number of injections a child
must endure during a single clinical visit. In the 1980s, the
schedule required children to receive a total of five shots by the
time they were 2 years old and not more than one shot at a
single clinic visit [21]. The low number of injections was due in
part to the diphtheria, tetanus and pertussis vaccines being
combined into a single DTP shot and measles, mumps and
rubella being combined into a single MMR shot. Moreover, at
that time the polio vaccine was given orally. As of 2014, the
Expert Rev. Vaccines 14(4), (2015)
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For personal use only.

19–23 11–12 13–15 16–18

Vaccine Birth 1 month 2 months 4 months 6 months 9 months 12 months 15 months 18 months 2–3 years 4–6 years 7–10 years years
months years years

Hepatitis B1 (HepB) 1st dose 2nd dose 3rd dose

informahealthcare.com
Rotavirus2 (RV) Rv1 (2-dose 1st dose See
2nd dose footnote 2
series); RV5 (3-dose series)
Diphtheria, tetanus, and acellular
1st dose 2nd dose 3rd dose 4th dose 5th dose
pertussis3 (DTaP: <7 years)
Tetanus, diphtheria, and acellular
(Tdap)
pertussis4 (Tdap: ≥7 years)
Haemophilus influenzae type See 3rd or 4th dose
1st dose 2nd dose
b5 (Hib) footnote 5 see footnote 5
Pneumococcal conjugate5
1st dose 2nd dose 3rd dose 4th dose
(PCV13)
Pneumococcal polysaccharide6
(PPSV23)
Inactivated poliovirus7 (IPV)
1st dose 2nd dose 3rd dose 4th dose
(<18 years)
Influenza8 (IIV; LAIV) 2 doses Annual vaccination (IIV only) Annual vaccination (IIV or LAIV)
for some: see footnote 8
Measles, mumps, rubella9
1st dose 2nd dose
(MMR)

Varicella10 (VAR) 1st dose 2nd dose

Hepatitis A11 (HepA) 2-dose series, see footnote 11

Human papillomavirus12
(HPV2: females only; HPV4: (3-dose
males and females) series)

Meningococcal13
(Hib-Men-CY ≥6 weeks;
See footnote 13 1st dose
MenACWY-D ≥9 months;
Booster

MenACWY-CRM ≥2 months)

Range of Range of recommended Range of recommended Range of recommended ages Not routinely
recommended ages for ages for catch-up ages for certain high-risk during which catch-up is recommended
all children immunization groups encouraged and for certain
high-risk groups

Figure 1. USA 2014 recommended childhood immunization schedule.

Analytics for vaccine economics & pricing

From [10].
Review

607
 Review Robbins & Jacobson
schedule requires children to receive a total of 24 shots by the
time they are 2 years old and up to six shots in a single visit
(e.g., the 2-month-old well-child visit). The vaccine industry
has responded to this increased complexity by designing and
producing new combination vaccines. A combination vaccine
contains antigens for immunization against more than one
infectious disease.
The CDC recognizes a number of advantages for using com-
bination vaccines to reduce the number injections required to
satisfy the schedule [22]. The reasons for using combination vac-
cines include simplifying the administration process, reducing
the pain and discomfort experienced by children and increasing
Expert Review of Vaccines Downloaded from informahealthcare.com by University of Illinois on 03/09/15
vaccination compliance rates [23–26]. Combination vaccines also
help alleviate the issue of vaccine injection overcrowding and
offer economic opportunities with respect to the cost of ship-
ping, handling and storage of vaccines.
However, when considering the merits of combination vac-
cines, one must also consider the increased cost to manufac-
turers due to the greater complexity of the formulations.
Although there are advantages to reducing the number of injec-
tions required to satisfy the recommended schedule, bulk pur-
chasers and recommending bodies cannot assume that the costs
of combining vaccines are simply the sum of their component
vaccines. Indeed, in many circumstances further research and
For personal use only.
development, as well as formulation changes, are required that
increase the cost of combination vaccines [27].
Vaccine selection
The advent of new vaccines results in a large, combinatorial
number of possible vaccine formularies. TABLE 1 lists the vaccines
(contract ending 31 March 2015) and prices acceptable for
purchase by immunization programs that receive CDC immu-
nization grant funds [12]. The large number of combination
vaccines available provides a plethora of options, affording pur-
chasers with different financial considerations more flexibility
when selecting a set of vaccines. The challenge for state health
departments, large city immunization programs, private practi-
ces and other vaccine purchasers is to select a vaccine formulary
from this set of vaccines so as to cost–effectively satisfy RCIS.
Analytics for vaccine selection
Operations research is a discipline that applies advanced analyti-
cal methods to improve decision-making. A myriad of
problem-solving techniques and methods can be applied,
depending on the nature of the problem being examined, to
include: simulation, mathematical optimization, stochastic
modeling, queuing theory, Markov decision processes, eco-
nomic methods, data analysis, multivariate statistics and deci-
sion analysis. Many of these techniques involve the creation of
mathematical models to represent the real system under consid-
eration. Operations research emphasizes analyses of the theoret-
ical properties of the developed models and/or the solution
methodologies used to examine them. Analytics is the applica-
tion of operations research techniques to problems, with an
emphasis on practical implementation using data. Analytics
608
employs operations research techniques to improve the
decision-making of client organizations. The emphasis in ana-
lytics is the improvement of business practices to obtain real,
sustainable results.
Analytics in the area of vaccine economics examines the pur-
chase of an optimal set of vaccines from a purchaser’s perspec-
tive. Weniger et al. [6] report the results of a pilot study that
applies operations research methods to the economic analysis of
vaccine formularies. The authors construct an integer program-
ming model of the 1997 RCIS, the analysis of which enables
specification of the vaccine formulary that minimizes the cost
to fully immunize a child. Jacobson et al. [28] provide a more
detailed mathematical presentation of the model introduced
in [6]. A sensitivity analysis demonstrates how the model selects
different vaccine formularies depending on the desired eco-
nomic criteria. An important economic criterion featured in
the model is the cost of injection. The cost of injection cap-
tures direct and indirect costs associated with delivering a single
immunization injection. Immunization related-activities include
routine nursing activities that occur each time an injection is
given, nonroutine activities that occur at times other than when
an injection is given, billing activities, immunization registry
activities, physician time, supplies and medical waste dis-
posal [29]. Glazner et al. [29,30] conduct empirical analyses of
actual variable costs of vaccine administration among private
pediatric practices in the Denver metropolitan area using a
microcosting approach; Glazner et al. [29] report an average cost
of injection of US$ 11.83. Another important component cap-
tured by cost of injection is the economic value to parents in
avoiding extra vaccine injections [23,25]. Kuppermann et al. [23]
and Meyerhoff et al. [25] report willingness-to-pay values of
approximately US$25 per injection avoided.
Hall et al. [31] introduce the general vaccine formulary selec-
tion problem, providing fundamental insights into the structure
of problems concerning minimum cost satisfaction of a routine
childhood immunization schedule. The authors examine the
simultaneous examination of the economic issue of vaccine for-
mulary cost and the medical issue of extraimmunization, where
extraimmunization is the event that a child receives antigens
for a given disease in excess of the recommended quantity and
timing sequence indicated by the schedule. While combination
vaccines are an attractive alternative over multiple single-
antigen vaccines for reasons previously discussed, the use of
combination vaccines might result in a child being injected
with antigens that they have already received. The authors’
model provides public health policy makers the means to con-
sider tradeoffs between low-cost formularies and avoiding
extraimmunization.
Engineer et al. [32] examine the catch-up scheduling problem.
For a child that misses a dose from the RCIS, the attendant
health care provider must construct a catch-up schedule for that
child. The CDC provides rules and guidelines for the administra-
tion of the remaining doses. Constructing a catch-up schedule
manually is a difficult and time-consuming endeavor; a model
that helps health care providers perform such a task can ensure
Expert Rev. Vaccines 14(4), (2015)
 Analytics for vaccine economics & pricing Review

Table 1. Vaccine price list, contract ending 31 March 2015.

Vaccine Brandname/ Packaging CDC cost Private sector Manufacturer
tradename per dose cost per
(US$) dose (US$)
DTaP DaptacelÒ 10 pack-1 dose vials 15.38 25.98 Sanofi Pasteur
Ò
DTaP Infanrix 10 pack-1 dose vials 15.76 20.96 GlaxoSmithKline
10 pack-1 dose T-L 15.76 21.44
syringes. No needle
DTaP-IPV KinrixÒ 10 pack-1 dose vials 38.50 48.00 GlaxoSmithKline
10 pack-1 dose T-L 38.50 48.00
Expert Review of Vaccines Downloaded from informahealthcare.com by University of Illinois on 03/09/15

syringes
DTaP-Hep B-IPV PediarixÒ 10 pack-1 dose T-L 53.86 70.72 GlaxoSmithKline
syringes, No needle
DTaP-IP-HI PentacelÒ 5 pack-1 dose vials 52.43 80.43 Sanofi Pasteur
Ò
e-IPV IPOL 10 dose vial 12.46 27.44 Sanofi Pasteur
Hepatitis A pediatric VaqtaÒ 10 pack-1 dose vial 16.17 30.37 Merck
10 pack-1 dose syringes 16.17 31.12
Ò
Hepatitis A pediatric Havrix 10 pack-1 dose vials 16.15 28.74 GlaxoSmithKline
10 pack-1 dose T-L 16.15 28.74
For personal use only.

syringes. No needle
Hepatitis A-hepatitis B 18 only TwinrixÒ 10 pack-1 dose vials 52.26 92.50 GlaxoSmithKline
Ò
Hepatitis B Engerix B 10 pack-1 dose vials 11.08 21.37 GlaxoSmithKline
Pediatric/adolescent 10 pack-1 dose T-L 11.08 21.37
syringes, No needle
Hepatitis B Recombivax 10 pack-1 dose vials 11.00 23.20 Merck
Ò
Pediatric/adolescent HB 10 pack-1 dose syringes 11.75 23.95
Ò
Hib PedvaxHIB 10 pack-1 dose vials 12.34 22.77 Merck
Ò
Hib ActHIB 5 pack-1 dose vials 9.36 26.21 Sanofi Pasteur
Ò
HIBMENCY MENHIBRIX 10 pack-1 dose vials 10.10 23.60 GlaxoSmithKline
Ò
HPV – quadrivalent human Gardasil 10 pack-1 dose vials 121.03 141.38 Merck
papillomavirus types 6, 11,
16 and 18 recombinant
HPV – bivalent human CervarixÒ 10 pack-1 dose syringe, 103.85 128.75 GlaxoSmithKline
papillomavirus types 16 and 18 no needle
Meningococcal conjugate MenactraÒ 5 pack-1 dose vial 82.12 112.93 Sanofi Pasteur
(groups A, C, Y and W-135)
Meningococcal Conjugate MenveoÒ 5 pack-1 dose vial 82.12 117.42 Novartis
(Groups A, C, Y and W-135)
MMR M-M-RÒII 10 pack-1 dose vials 19.91 56.14 Merck
Ò
MMR/Varicella ProQuad 10 pack-1 dose vials 103.16 157.64 Merck
Pneumococcal 13-valent Prevnar 13 TM 10 pack-1 dose syringes, 112.44 135.05 Pfizer
(Pediatric) no needle
MMR: Measles, Mumps and rubella.
From [12].

informahealthcare.com 609
 Review Robbins & Jacobson

Table 1. Vaccine price list, contract ending 31 March 2015 (cont.).

Vaccine Brandname/ Packaging CDC cost Private sector Manufacturer
tradename per dose cost per
(US$) dose (US$)
Pneumococcal polysaccharide PneumovaxÒ23 10 pack-1 dose vials 41.49 68.29 Merck
(23 Valent)
Rotavirus, live, pral, pentavalent RotaTeqÒ 10 pack-1 dose 2 ml tubes 63.96 75.20 Merck
25 pack-1 dose 2 ml tubes 63.96 75.20
Ò
Rotavirus, live, oral Rotarix 10 pack-1 dose vials 85.04 106.57 GlaxoSmithKline
Ò
Tetanus and diphtheria toxoids Tenivac 10 pack-1 dose syringes, 17.69 22.34 Sanofi Pasteur
Expert Review of Vaccines Downloaded from informahealthcare.com by University of Illinois on 03/09/15

no needle
10 pack-1 dose vials 17.69 22.34
Ò
Tetanus toxoid, reduced Boostrix 10 pack-1 dose vials 30.64 37.55 GlaxoSmithKline
diphtheria toxoid and acellular
pertussis
10 pack-1 dose syringes 30.64 37.55
Ò
Tetanus toxoid, reduced Adacel 10 pack-1 dose vials 30.25 41.06 Sanofi Pasteur
diphtheria toxoid and acellular
pertussis
5 pack-1 dose BD Leur- 30.25 41.06
Lok syringes
For personal use only.

Varicella VarivaxÒ 10 pack-1 dose vials 78.34 94.14 Merck

MMR: Measles, Mumps and rubella.
From [12].

the construction of accurate and complete schedules, resulting in
improved immunization coverage rates. The authors design a
dynamic programming algorithm to construct an optimal sched-
ule for a child given his or her particular age and history.
Smalley et al. [33] provide a more thorough discussion of the deci-
sion support tools created from the research presented in [32].
A decision support tool that constructs optimal recommended
catch-up immunization schedules is available online [34].
Behzad et al. [35] examine factors that affect pediatric vaccine
market share. The authors focus on the competition between
Pediarix and Pentacel in the 2009–2012 timeframe. Due to the
structure of the recommended childhood schedule, Pediarix
and Pentacel are not compatible for use in a single vaccine
formulary. TABLE 2 shows two possible vaccine formularies, one
with Pediarix and one with Pentacel. Notice that significant
overlap would occur (as indicated by the crosses) should the
two combination vaccines be used in the same formulary,
resulting in an expensive formulary with substantial extraimmu-
nization. For relatively higher costs of injection, the lowest cost
formulary is built with Pentacel or Pediarix as a backbone. The
authors suggest that competition is driven indirectly by the
presence of the Merck H. influenzae Type b vaccine and the
requirement by the schedule of a hepatitis B birth dose.
A special property of the Merck Hib vaccine is that the
6-month dose is not required if the Merck Hib vaccine is
administered in the 2- and 4-month time periods. The Merck
Hib vaccine complements GlaxoSmithKline’s Pediarix (DTaP–
HepB–IPV) vaccine. If a vaccine purchaser ignores the Merck
Hib special property then the economic value of Pentacel
increases. The schedule indicates that a monovalent hep B birth
dose should be administered to all newborns before hospital
discharge. If a vaccine purchaser assumes that the birth dose is
always given and does not account for its cost when designing
a vaccine formulary, then a combination vaccine, such as Pedia-
rix, which includes an extra dose of hep B is regarded as less
economically valuable due to the extraimmunization.
Vaccine pricing
The question that most relates to vaccine selection is one of
vaccine pricing. Consider a single vaccine manufacturer. Given
its own set of vaccines, a set of vaccines manufactured by com-
peting manufacturers, the current schedule as published by the
CDC, and the understanding that purchasers seek a cost–
effective vaccine formulary, how should the manufacturer price
its vaccines? The pricing determination is complicated by the
complementary nature of the competing vaccines. Moreover,
cost of injection may vary quite substantially. A purchaser with
a relatively low cost of injection does not value the economic
premium associated with reducing the number of injections
administered to satisfy the schedule. A manufacturer would not
want to set the prices of its combination vaccines too high for
fear of being nonselected in favor of monovalents. A purchaser

610 Expert Rev. Vaccines 14(4), (2015)


Table 2. Pediarix- and Pentacel-based formularies.
Pediarix + Merck Hib
Disease Time period
2-month 4-month
Hepatitis B Pediarix Pediarix
† †
Diphtheria, tetanus, Pediarix Pediarix
pertussis
Haemophilus PedvaxHIB PedvaxHIB
influenzae Type b
Polio Pediarix† Pediarix†
Expert Review of Vaccines Downloaded from informahealthcare.com by University of Illinois on 03/09/15
†
Doses for which Pediarix and Pentacel would overlap (i.e., extraimmunization) if included in the same vaccine formulary.
with a relatively high cost of injection does value the economic
premium associated with reducing the number of injections
and is willing to pay higher prices for such vaccines.
A manufacturer would not want to set the prices of its combi-
nation vaccines too low for fear of unrealized profit.
Consider the pricing of a new vaccine. When a new vaccine
is introduced to the market and no current vaccine exists to
compete with the product (i.e., no overlapping antigens), the
vaccine is priced independent of the existing vaccines with the
For personal use only.
intent of recouping sunk cost investments made by the vaccine
manufacturer (e.g., Prevnar 13 is priced at US$ 135.05 per dose
for private sector purchase). When a new vaccine is introduced
to the market and a competitive vaccine exists, then the price of
the current vaccine influences the price of the new product.
When considering incremental price increases for established
vaccines, manufacturers often face difficulties. Section 13631 of
the 1993 Omnibus Budget Reconciliation Act establishes the
VFC program and enables the CDC to negotiate discounted
vaccine prices (i.e., the federal contract prices) [36]. Increasing
the public sector price of more traditional monovalent vaccines
for purchase by entities using VFC program funds is limited by
law to no greater than the percentage increase in the consumer
prices index. The law effectively places a price control on older
monovalents (i.e., those in existence at the time of the
1993 law) sold at public sector prices, where the public sector
accounts for 55% of the market by volume [4].
A related issue germane to the vaccine pricing discussion is
one of reimbursement to private practice providers by insurance
companies. Current policy is to reimburse by injection, which
acts as a disincentive for the adoption of combination vaccines;
a better policy might be to reimburse by antigen. Indeed, this
reimbursement deficit issue provides an opportunity to use reg-
ulatory policies to create a more efficient market. Incentivizing
healthcare providers to use combination vaccines (e.g., reim-
bursing by antigen, not injection) benefits the consumer due to
time savings and less injections, as well the public due to
higher vaccine coverage rates. Higher coverage rates save insur-
ance providers money over time due to less public illness and
avoidance of expensive treatments of diseases. Analytics could
be used to examine such an issue.
informahealthcare.com
Analytics for vaccine economics & pricing Review
Pentacel + Engerix B
Disease Time period
6-month 2-month 4-month 6-month
Pediarix Hepatitis B Engerix B – Engerix B
† † †
Pediarix Diphtheria, tetanus, Pentacel Pentacel Pentacel†
pertussis
– H. influenzae Type b Pentacel Pentacel Pentacel
Pediarix† Polio Pentacel† Pentacel† Pentacel†
Analytics for vaccine pricing
Analytics in the area of vaccine economics examines the pricing
of vaccines from a manufacturer’s perspective. Sewell et al. [37]
investigate a vaccine’s maximum inclusion price (i.e., the maxi-
mum price at which a vaccine is selected by a customer to be
part of the minimum cost formulary). The authors employ a
reverse engineering scheme to determine the maximum inclu-
sion price of four combination vaccines not yet licensed for use
in the USA (at the time of the study). Such results inform the
pricing decision for vaccine manufacturers, based on the suppo-
sition that the purchaser selects its vaccine formulary using a
minimum cost criterion. Sewell and Jacobson [38] provide a
more detailed mathematical presentation of the model intro-
duced in [37]. The results presented in these two articles illus-
trate how analytics can provide beneficial economic analyses to
pharmaceutical companies that develop and manufacture vac-
cines and assist in the determination of vaccine prices.
Consider an analysis that focuses on a particular combina-
tion vaccine; Jacobson et al. [39] investigate the pricing of a
hepatitis B–H. influenzae Type b combination vaccine and
compare the reverse engineered price to its public sector price.
Results provide insights into the amount of price premium
that is built into the combination vaccine, thereby enabling
the assessment of whether the vaccine is underpriced or over-
priced based on the value placed on the cost of an injection.
Jacobson et al. [40] investigate the maximum inclusion price of
two pediatric pentavalents based on the 2003 vaccine market.
A maximal price comparison between the DTaP–HBV–IPV
and the DTaP–HIB–IPV vaccines is provided, again indicat-
ing how analytics can be used to gain insights into how com-
bination vaccines can be best fit into pediatric vaccine
formularies.
Jacobson and Sewell [41] use Monte Carlo simulation to
assess and quantify the premium associated with four combina-
tion vaccines. Different populations of parents/guardians, as
defined by different cost of injection distributions, are consid-
ered in the analysis. Distributions of maximum inclusion prices
for each of the four combination vaccines considered are
reported. Moreover, the authors report that the price premiums
associated with combination vaccines are based on the cost
611
 Review Robbins & Jacobson
assigned to administering an injection and that further develop-
ments in this area by vaccine manufacturers may provide signif-
icant economic and societal benefits.
Robbins et al. [42] present a method to optimally price a sin-
gle pediatric vaccine so as to maximize a vaccine manufacturer’s
expected revenue given an uncertain cost of injection parame-
ter. The authors analyze pricing strategies of directly compet-
ing, partially overlapping and mutually exclusive combination
vaccines in the US pediatric vaccine market and suggest a
method to maximize a pharmaceutical company’s expected rev-
enue. Further analysis determines if a combination vaccine is
competitively priced when compared to its competitors, for a
Expert Review of Vaccines Downloaded from informahealthcare.com by University of Illinois on 03/09/15
given suite of federal contract vaccine prices. The proposed
pricing approach suggests an appropriate price for a single
given combination vaccine, whereby a substantial increase in
expected revenue can be realized. Results of the analysis of
Pediarix and Pentacel pricing under 2009 market conditions
suggest that Pentacel is overpriced and that an even split of the
market occurs at a price difference of approximately US$ 1.03.
The results presented in this article suggest that a smaller price
difference between these two important combination vaccines is
appropriate. The structure of the schedule and the prices of the
complementing vaccines affect the equilibrium price difference.
Behzad et al. [43] examine pricing strategies for pediatric
For personal use only.
combination vaccines by comparing lowest cost formularies
across 3 years (2009–2011). The analysis emphasizes the exami-
nation of Sanofi Pasteur’s DTaP–IPV/HI vaccine (Pentacel).
The authors suggest that Pentacel could have been more com-
petitively priced when compared to the competing vaccine,
GlaxoSmithKline’s DTaP–HepB–IPV (Pediarix). Maximal pri-
ces for Pentacel and the attendant lowest cost formulary are
reported for Pentacel for a fixed cost of injection. Significant
cost savings for state public health agencies could be realized if
an agency is not already using its lowest cost formulary, which
is itself conditioned on its own cost of injection.
Robbins et al. [44] analyze pricing in the pediatric vaccine
market by creating a game theoretic model. Vaccine manufac-
turers satisfy demand by appropriately pricing and selling its
set of vaccines, where each vaccine contains one or more anti-
gen. Antigens are used to satisfy the dosage requirements (i.e.,
demand) of the 2010 recommended childhood schedule and it
is presumed that purchasers select vaccines by seeking a mini-
mum cost vaccine formulary that satisfies the schedule. Results
of the repeated game equilibrium prices between Pediarix and
Pentacel suggest a price difference of US$ 0.86, assuming the
manufacturers agree to share the market equally with respect to
volume. These results can inform both manufacturers and pur-
chasers on the appropriate pricing of combination vaccines,
given the existence of a reasonable set of collusive agreements.
Behzad et al. [45] propose an extended game theoretic model to
examine the pediatric vaccine market. The authors consider
capacity-constrained vaccine manufacturers producing differenti-
ated monovalent vaccines. Vaccines are differentiated based upon
the number of reported adverse medical events for that vaccine.
Equilibrium prices are computed for each monovalent vaccine.
612
Sensitivity analysis with respect to the manufacturers’ assumed
production capacity provides upper and lower bounds for vaccine
prices in the public sector of the market. Results indicate the
importance of several model parameters, such as market demand
and adverse vaccine events on equilibrium prices.
The results presented in these studies concerning pricing
strategies in the pediatric vaccine market often suggested that
Pentacel was overpriced. The 2010 federal contract prices for
Pediarix and Pentacel were US$ 48.75 and US$ 51.49 per
dose [44], respectively, with Pediarix US$ 2.74 less expensive. It
is interesting to note that the latest 2014 federal contract prices
for Pediarix and Pentacel are US$ 53.86 and US$ 52.43 per
dose [12], respectively, with Pentacel US$ 1.43 less expensive. It
is reasonable to conclude that the two combinations are now
much more competitively priced and that perhaps such studies
influenced the vaccine manufacturers’ pricing strategies.
Immunization policy: a holistic view of the market
Although examination of the vaccine selection problem is
framed from the perspective of a single vaccine purchaser and
examination of the vaccine pricing problem is framed from the
perspective of a single or a group of competing vaccine manu-
facturers, a third, holistic perspective exists. Higher level deci-
sion makers, such as federal public health agencies and
recommending bodies, are concerned about regulatory policies
affecting the long-term viability of the entire vaccine delivery
system. In this section, we consider a more comprehensive view
of the market from the perspective of a policy-making body.
Many public health policy experts address issues concerning
the current vaccine delivery system [17,14,46,18,5,47,19]. Vaccine
pricing remains an important matter of debate with respect to
short-term consumer fairness and long-term industry viabil-
ity [4,7]. The expansion of the RCIS and the advent of more
expensive combination vaccines, developed to satisfy new
schedule requirements, present challenges to the current vaccine
delivery system. There are reasonable arguments on both sides
of the debate concerning appropriate vaccine pricing.
Ehreth [48] argues that although vaccination is well regarded as
an important public health endeavor, vaccines remain under-val-
ued. The author highlights the benefits of disease eradication and
control by vaccination in terms of annual life years saved and
disability-adjusted life years saved. The direct and indirect cost
savings for many vaccine-preventable diseases are computed and
reported. Recommendations are for international agencies, gov-
ernments and health policy makers to keep the public aware of
the benefits of vaccination so as to not lose financial support.
Kim [9] discusses the role of cost–effectiveness in evaluating vacci-
nation policy. The author defines the cost–effectiveness of an
intervention (e.g., a single vaccine dose or an entire vaccine pro-
gram) as the additional cost required per additional unit of health
benefit achieved. The cost–effectiveness of vaccines is affected by
many factors, including vaccine efficacy and durability, govern-
ment regulatory concerns, severity of disease burden, vaccine
price and the costs of the delivery system. Cost–effectiveness
analysis indicates whether the health gain is worth the cost
Expert Rev. Vaccines 14(4), (2015)

compared with other alternative health care investments.
Zhou et al. [49,50] conduct analyses demonstrating that despite
increased vaccine and administration costs, the US routine child-
hood immunization program remains one of the most cost–effec-
tive prevention programs in public health. Postma et al. [51]
provide an economic evaluation of vaccines in Europe.
Meyerhoff et al. [52] conduct an analysis to determine how the
advent of the combination vaccine DTaP–HepB–IPV impacted
immunization coverage rates, number of injections required to
complete the schedule, and costs. The analysis, based on the
medical records of 775 children born in 2001 (who received care
from 32 private pediatrics centers), indicates that DTaP–HepB–
Expert Review of Vaccines Downloaded from informahealthcare.com by University of Illinois on 03/09/15
IPV improves coverage rates, reduces the number of vaccine
injections and reduces costs. Berge et al. [53], Jacobs et al. [54,55]
conduct cost–effectiveness analyses of a single monovalent vac-
cine, hepatitis A, under different immunization strategies.
Chuck et al. [56] conduct cost–effectiveness evaluations of the 10-
and 13-valent pneumococcal conjugate vaccines.
Newall et al. [57] discuss the methodological challenges in
implementing cost–effectiveness analyses of vaccine programs to
include estimation of disease changes attributable to vaccination
efforts, evaluation of the hypothetical no vaccination scenario
and evaluation of the full benefit achieved by executing a vacci-
nation program. The authors suggest adopting the practice of
For personal use only.
retrospective analyses in which disease surveillance data, the
evolution of vaccine prices over time and vaccine uptake data
are collected and used to create more robust cost–effectiveness
analyses. Moreover, the authors suggest that vaccines should be
evaluated on an individual basis so that vaccines that are not
cost–effective are not recommended simply because the aggre-
gate immunization program is cost–effective.
Note that cost–effectiveness studies are typically used to
inform the decision making of recommending bodies. Such
studies do not directly inform vaccine selection decisions. Indi-
vidual practice vaccine selection is driven by effectiveness, con-
venience, brand loyalty, formulary inertia, financial profit,
sustainability, flexibility, risk mitigation of shortages and many
other pertinent issues.
System stakeholders often provide suggestions regarding the
vaccine industry’s viability [58,59]. Such suggestions often entail
financial incentives [17] or seek to address regulatory concerns [8].
For example, Hinman [16] advises determining a vaccine’s price
in advance based on its estimated social value. McGuire [60]
presents an economic model to determine such prices, reporting
that although vaccines have high social value, the vaccine manu-
facturers do not receive appropriate financial incentives for par-
ticipation in the market. Indeed, many public health experts
contend that vaccine manufacturers should earn higher returns
on their investments to sustain and expand the production of
vaccines. Market contraction negatively impacts the safe, reli-
able provision of vaccines and places public health at risk.
However, viewed from the perspective of the vaccine pur-
chasers, lower prices are desired; higher prices may cause large
groups of patients in publicly funded programs to go unvacci-
nated as fewer vaccines would be purchased for a fixed program
informahealthcare.com
Analytics for vaccine economics & pricing Review
budget, leading to even higher costs to treat the subsequent
expected increase in disease incidence rates. O’Leary et al. [61]
report the results of as national survey among private pediatri-
cians and family physicians. The high cost of newer vaccines
increases financial risks to private vaccination providers; many
providers indicate dissatisfaction with payment for vaccine pur-
chase and administration from third party payers. The report
suggests that some private providers are considering not provid-
ing childhood vaccines. Freed et al. [62] report the results of a
survey concerning physicians’ attitudes related to vaccine
financing and their private practice; the authors report dissatis-
faction with reimbursement levels and increasing financial bur-
dens from vaccination. Shen et al. [63] examine the financial
impact to providers using pediatric combination vaccines.
Using data from a subscription remittance billing service
employed by private practice healthcare providers, the authors
analyze charge and payment information submitted by pro-
viders to insurance payers over a 2-year horizon (2007–2009).
Results indicate that providers who administer combination
vaccines to children incur a reduced payment due to their use
of the combination vaccine. Gidengil et al. [64] conduct a sur-
vey of pediatricians, state immunization program managers and
health insurance plan representatives concerning the use of
combination vaccines. Respondents note that high prices, low
reimbursement for vaccine costs and the loss of fees for vaccine
administration act as financial barriers to the use of combina-
tion vaccines. The common theme pervading such analyses is
the existence of economic barriers to the ideal execution of an
immunization program. Lieu et al. [65] discuss overcoming such
economic barriers, suggesting that increased public and private
sector financing for vaccines is necessary to close the gaps in
vaccine financing and development.
Analytics for informing immunization policy
Public health policy studies often argue for the joint consider-
ation of pediatric vaccine pricing and purchasing in the USA vac-
cine market. The use of analytics enables the simultaneous
treatment of the vaccine selection and pricing issues. Robbins
and Jacobson [66] present an operations research approach that
addresses the issue of the pediatric vaccine industry’s continuing
viability from the perspective of the CDC. The monopsonistic
market power of the federal government uniquely positions it to
significantly influence the pediatric vaccine market by negotiating
contractual agreements that increase the vaccine manufacturers’
financial incentives to remain in the market. The fundamental
premise of the analysis is the supposition that the CDC desires to
negotiate pediatric vaccine prices and determine purchase quanti-
ties to minimize the vaccine system’s delivery costs while also
ensuring that the pharmaceutical companies manufacturing the
pediatric vaccines each earn a profit that induces them to remain
in the market. Robbins and Jacobson [66] present a model that
minimizes the weighted sum of the cost to fully immunize a birth
cohort according to a given childhood immunization schedule.
The model determines optimal vaccine prices and purchase
quantities while ensuring that each vaccine manufacturer earns at
613
 Review Robbins & Jacobson

least a reservation amount of profit, with vaccine production
quotas, capacities and price caps respected. The model can be
used to design a pricing and purchasing policy for the CDC that
establishes a sustainable and stable capital investment environ-
ment in which the reliable provision of pediatric vaccines (so
essential to public health) can occur.
Expert commentary
Analytics can aid market participants in making more informed
decisions regarding the pricing and purchasing of vaccines in
the US pediatric vaccine market. The compendium of results
reviewed in this article provides approaches to understand the
Expert Review of Vaccines Downloaded from informahealthcare.com by University of Illinois on 03/09/15
seek formulary pricing. This bundling of products will offer
advantages to both customers and vaccine manufacturers. The
challenges facing the pediatric vaccine market are many; signifi-
cantly more collaboration between stakeholders will be neces-
sary to facilitate appropriate pricing. It is in the interest of
both the pharmaceutical industry and the vaccine purchasers to
pursue a healthy economic relationship in the interests of long-
term market stability.
Acknowledgements
The authors would like to thank LE Rodewald, Director, Immunization
Services Division, National Center for Immunization and Respiratory

impact of vaccine selection and pricing on pediatric vaccine
markets. A meaningful understanding of important issues
affecting the market can be gained. It is important for stake-
holders to comprehend the consequences of their own actions
as well the actions of other stakeholders. Such information can
be leveraged to improve a single stakeholder’s position or influ-
ence policy decisions that affect the market in its entirety, for
the betterment of all parties involved.
Five-year view
Over the next 5 years, new vaccines will be added to the RCIS.
Vaccine manufacturers will attempt to address the congestion
For personal use only.
Diseases, CDC (GA, USA), and JA Jokela, Head, Department of Inter-
nal Medicine, University of Illinois at Urbana-Champaign (IL, USA),
for their longstanding encouragement and feedback on this line of
research. The authors also thank the Commissioning Editor and two
anonymous referees for their insightful comments and suggestions, result-
ing in an improved manuscript.
Disclaimer
The views expressed in this article are those of the authors and do not
reflect the official policy or position of the US Air Force, Department of
Defense, National Science Foundation, or the US Government.

in the schedule by creating new, more complex combination
vaccines. Such vaccines will be expensive, as vaccine manufac-
turers seek a return on their research and development invest-
ments. The cost to complete the RCIS will continue to grow.
The resulting cost burden will challenge public immunization
programs and private practices operating on limited budgets.
Instead of individual vaccine pricing, market participants may
Financial & competing interests disclosure
This research has been supported in part by the National Science Founda-
tion (CMMI-1161458). The authors have no other relevant affiliations
or financial involvement with any organization or entity with a financial
interest in or financial conflict with the subject matter or materials dis-
cussed in the manuscript apart from those disclosed.
No writing assistance was utilized in the production of this manuscript.

Key issues
• Large-scale immunization programs in the USA are a successful and cost–effective public health endeavor, profoundly reducing
mortalities caused by infectious diseases.
• The pediatric vaccine industry consists of a relatively small number of pharmaceutical firms (i.e., companies, manufacturers) engaged in
the research, development, manufacture and distribution of pediatric vaccines.
• The number of firms that produce vaccines for the US market has steadily decreased since the 1960s; in 1967, 37 vaccine
manufacturers operated in the USA, whereas only five vaccine manufacturers operate as of 2014.
• The determination of appropriately priced vaccines is an important issue and influences a vaccine manufacturer’s decision to remain in
the market.
• The recommended childhood immunization schedule, published annually by the CDC, continues to expand with respect to the number
of injections required and the number of vaccines available for selection.
• In the 1980s, the schedule required children to receive a total of five shots by the time they were 2 years old and not more than one
shot at a single clinic visit; as of 2014, the schedule requires children to receive a total of 24 shots by the time they are 2 years old and
up to six shots in a single visit.
• The challenge for state health departments, large city immunization programs, private practices and other vaccine purchasers is to select
a cost–effective vaccine formulary from this set of vaccines so as to cost–effectively satisfy recommended childhood
immunization schedule.
• Operations research is a discipline that applies advanced analytical methods to improve decision-making; analytics is the application of
operations research to a particular problem using pertinent data to provide a practical result.
• Analytics provides a mechanism to resolve the challenges facing stakeholders in the vaccine development and delivery system.

614 Expert Rev. Vaccines 14(4), (2015)


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