To David Webster, an industry consultant, flu vaccine is like a mixed investment portfolio. Some is pre-sold at low but secure profit margins, like bonds. The rest, like stocks, might be sold at varying prices in a "spot" market.
To Mark V. Pauly, a health economist, flu vaccine is like avocados. It's a perishable product whose price can go up, producing a windfall for the distributor when supply is short. On the other hand, if you don't unload your avocados quickly, they go bad and must be tossed out.
Neither is surprised at reports this week of prices reaching $600 or more for a 10-dose vial of a vaccine with a normal price tag of $85. A production problem blocked distribution of nearly half the country's vaccine supply, which has set off a scramble by providers to get their hands on what's left.
Although the production and safety of flu vaccine is tightly regulated, it is distributed through a complex and free market in which the balance of supply and demand can bound between extremes. While the system provides a chance for some distributors to profiteer, it also makes wide-scale price gouging unlikely, industry experts say, because much of the supply is committed under contract, at set prices, to customers who ordered it months ago.
Vaccines are distributed differently from other medications, which reach patients through retail pharmacies. Because they must be administered by a doctor or nurse, they get to the patient through hospitals, physicians offices and clinics, including inoculation clinics designed to generate customer traffic at stores and malls.
And flu vaccine, although sold through many of the same distributors to many of the same users, is unique within vaccines.
While most vaccines have a shelf life of about two years, Webster said, flu vaccine is made fresh each year, to match the strains of influenza expected, and sold during the fall and winter flu season.
Some years, when supply moves smoothly and demand is slack, "I have thrown out 5,000 doses," Lessans said.
Other years, supply is short.
Typically, Webster said, distributors base their orders for flu vaccine largely on early commitments from customers, then order extra to "set aside 30 to 40 percent for the spot market."
The distributors, he said, "have decades of experience, and they know if there's a shortage or delays, they're going to get a higher price."
Up to 40 companies are in the flu vaccine distribution business, which grosses about $350 million annually, Webster said.
But a handful of companies dominate, including Schein, which had ordered 20 million doses from Chiron, and PSS World Medical Inc. of Jacksonville, Fla., which has been adding a growing number of flu vaccine doses to its doctors office sales in recent years.
Vaccine gap shows faults in supply system; $85 vial may cost $600 amid shortage in U.S.
By M. William Salganik and Julie Bell
October 08, 2004|
