Sanofi Pasteur: Vaccine Ecosystem In Danger

By Louis Garguilo, Chief Editor, Outsourced Pharma

Not that there are many pharma companies left in the business. Two more of the R&D-conducting vaccine producers have bailed out recently: Baxter and Novartis. That appears to leave just six of these vaccine producers in the world. Perhaps only four of the six are of global production scale: GSK, Merck, Pfizer, and Sanofi Pasteur. Of these four global companies investing in cutting-edge vaccine R&D, there are only two able to supply each of the key vaccines globally (i.e., MR/MMR, Rota, HPV, PCV, acellular pertussis-based pentavalent and hexavalent combinations).

The Pursuit Of Price Leads To Road Blocks

A titan of the vaccine industry, Michael Watson, VP of Global Immunization Policy, Sanofi Pasteur, has grown concerned. Among other accomplishments, Watson led the development and licensing of Pediacel in the UK and Gardasil in Europe; he has worked on most classes of vaccines, including hexavalent infant vaccine. Watson recently completed his term as chair of the Vaccines Committee of the International Federation of Pharmaceutical Manufacturers Association (IFPMA). We had the opportunity to speak privately a few days after his R&D presentation at the World Vaccine Congress in Washington, DC.

Watson’s concerns stem from his personal experiences and the unfolding scenario described above. “As a member of the executive committee [at Sanofi Pasteur], I found myself party to some difficult product discussions,” he explains. “One was around the MR and MMR [measles, rubella; measles, mumps, and rubella] vaccines that we produce for low-income countries. These had come up for reinvestment like all longstanding vaccines. We needed to move production to new technologies and update facilities to meet future demands. The internal conclusion was this would only be possible if the very low price for the vaccines were increased.”

Sanofi Pasteur discussed the situation with Gavi, the Vaccine Alliance, and with its partners the WHO, UNICEF and the Bill & Melinda Gates Foundation.

“We said we are willing to reinvest, but the new price needs to be higher. Does that sound like something we can work together on?” recalls Watson. “After many discussions, raising prices to allow investment was deemed unacceptable by the organizations. We were forced to stop producing MMR and MR vaccines. That leaves just one global producer of MR for UNICEF and Gavi. That just didn’t sound right to me.”

It shouldn’t sound quite right to others, either, considering measles elimination is the next targeted disease after polio. And although Sanofi Pasteur decided differently in the case of a second vaccine – for yellow fever – the decision is not more comforting … and perhaps not sustainable. Watson says although in theory there are four producers of yellow fever vaccine in the world, only his company has been able to reliably produce and supply UNICEF with the needed quantities over recent years.

“Again, the business case was marginal for the reinvestments needed to keep producing,” he says. “However, this time we went ahead based on the realization we might be the only ones able to supply people in need.”

Watson says the available supply of yellow fever vaccine is about half of the global demand, and the global demand is less than it would be if there were more supply. He says Crucell also faced this decision regarding yellow fever vaccine. It took a different path, and stopped production. “The irony is that an estimated 20,000 people die every year from a disease for which we have had a vaccine for 70 years, but which today is too cheap ($1.20 per dose in 10-dose vial) to support production or a market," says Watson.

It’s become too cheap to vaccinate populations around the world. It appears the organizations mentioned above are veering from the goal of providing access to vaccines, to focusing on pushing for the cheapest prices for them.

“Leaders of these organizations invariably start by reminding us what an amazing public health intervention vaccines are,” says Watson. “A sentence or two later they insist that this already incredibly cost-effect intervention must be even cheaper. Unfortunately, there is a false connection between price and access. How wrong is this connection? One in five of the world’s children don’t get vaccinated. That means they don’t get the polio vaccine that costs about 12 cents a dose. These children don’t get DTP, which costs about 19 cents a dose. It is hard to find many things in life as inexpensive.”

Or as difficult to discover, develop, manufacture, store, and ship through a supply chain to less developed nations around the world. “Reducing everything to price,” concludes Watson, “is now having negative consequences.”

An Alternative World of Supply And Demand

Commercial-scale vaccine producers fit largely into two profiles: Pharma in the West performing R&D and selling into global markets, and companies in the East (mostly in India and often contract manufacturers) focused less on R&D and intently on cheaply reproducing high volumes of products specifically for poorer markets.

This bifurcation isn’t dissimilar to other parts of the drug industry. “There should be no criticism whatsoever of the two business models,” says Watson. He adds, “Interestingly, though, when you look at the P&L of the biggest R&D-based producers and compare that with non-R&D companies, net profit margins can be twice as big in the non-R&D segment. Again, not a criticism, but an observation; it’s great there are profitable vaccine producers in the East providing high volumes of low cost vaccines.”

Where there is criticism, and the ecosystem breaks down, is in trying to apply the same pricing to R&D-producers as on the imitators. The innovators can’t sustain their R&D business model: They’ll curtail R&D, and/or exit vaccines altogether (see above). As a corollary, note the serious situation the world finds itself in due to a lack of innovative antibiotics.

Perhaps some feel little empathy for the producers in the West. Maybe what they don’t consider is this: Reducing R&D in vaccines, and shutting out global producers in the East, will primarily affect patients in lower income countries. For example, according to Watson, of the nine vaccines UNICEF procures for GAVI (for poorer countries), seven are currently in short supply. Forty-three percent of countries experienced supply shortages in 2013. And without new vaccines, patients in the U.S. are not immune from shortages of vaccines to fight new disease outbreaks. Again, we can draw comparisons to the lack of new alternatives on the antibiotic front.

 “There are strong warning signs out there,” says Watson. “If we had the leaders of the health systems in front of us, our humblest advice is to be very clear on what you are trying to achieve. If it is global access to the best vaccines, ensure your actions are aligned with this goal, and have the right metrics. We all look for cognitive ease in a complex world, but beware of the unintended consequences of reducing access to price, and price to access. Price is not the shortcut to real solutions.”

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Editor’s Note: In part two, we’ll talk with Marco Chacon, president and CEO, Paragon Bioservices. His CRO/CMO provides services to a growing number of biotechs deciding to engage in vaccine R&D despite – or in response to – the industry and market (un)realities described above.