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  • Within 24 hours most babies born in the U.S.

  • get their first vaccination for hepatitis B. Over

  • the next two years that infant will receive more than two dozen

  • vaccinations to protect them against everything from measles, mumps

  • and rubella to the flu. Vaccines

  • are one of the biggest successes in modern medicine.

  • They save up to 3 million people worldwide every year and protect

  • millions more from disability and suffering.

  • But the bar to create new vaccines is now higher than ever.

  • Developing a vaccine is expensive and it can take a long time. From

  • research and discovery to product development it can cost up to a

  • billion dollars to make one vaccine and that process can last up to

  • 15 years.

  • Overall revenue of the pharmaceutical industry worldwide is over a

  • trillion dollars while the vaccine market is only about 37 billion

  • dollars. Which begs the question, who is making money developing

  • vaccines? How much do they cost to produce?

  • And why are so many parents afraid to have their children vaccinated?

  • The genesis of modern day vaccines began in 1796 when an English

  • doctor took on smallpox.

  • Dr. Edward Jenner observed that milkmaids who suffered the mild

  • disease a cow pox never contracted smallpox.

  • Jenner did an experiment.

  • He took material extracted from a cowpox sore on the hand of a

  • milkmaid and inoculated it into the arm of an eight-year-old boy.

  • The precursor to the smallpox vaccination was born.

  • Despite Jenner's discovery the 20th century saw smallpox wipe out an

  • estimated 300 million people worldwide.

  • Tens of thousands of children also died in the U.S. each

  • year from diseases like whooping cough, diphtheria and polio.

  • Since their mass introduction following World War Two vaccines have

  • saved millions of lives. Vaccines and have

  • been one of the greatest public health success stories the world has

  • seen. You know after clean water vaccines have saved more lives over

  • the last century than any other intervention.

  • Historically vaccines were produced at a low price and sold at a low

  • profit margin.

  • They were so low that many companies stopped producing them. In

  • the 1960s more than two dozen companies produced vaccines. Those

  • two dozen companies dwindled to just a handful after Novartis sold

  • its vaccine business to GlaxoSmithKline in 2014.

  • There are other players in the space but the four big drug companies

  • that now dominate the market are Pfizer, Merck, Sanofi Pasteur and

  • GlaxoSmithKline. Pfizer had vaccine sales of just over six billion

  • dollars in 2018.

  • Overall revenue with the company in 2018 was more than 50 billion

  • dollars. Pfizer is best known for making Viagra and Lipitor but the

  • company's best selling product in terms of sales is a vaccine called

  • Prevnar 13 which protects against pneumonia and meningitis.

  • In 2014 the U.S.

  • Centers for Disease Control and Prevention recommended that adults 65

  • and older get immunized.

  • That sent profits soaring Prevnar made five point eight billion

  • dollars in 2018 making it Pfizer's top selling products.

  • The second is Merck.

  • In 2018 Merck had vaccine sales of over 7 billion dollars.

  • Merck's top selling vaccine Gardasil fights HPV the most common

  • sexually transmitted infection in the U.S.

  • that can sometimes cause cancer.

  • The third vaccine maker is French drugmaker Sanofi.

  • Its vaccine division Sanofi Pasteur's two top selling vaccines are a

  • polio vaccine for emerging economies and a seasonal flu shot.

  • Total vaccine sales were almost 6 billion dollars in 2018.

  • And fourth is GlaxoSmithKline.

  • GlaxoSmithKline sold 770 million doses of vaccines around the world

  • in 2018 and had vaccine sales of over 7 billion dollars.

  • GlaxoSmithKline and Pfizer did not immediately respond to a request

  • for comment on their vaccine divisions.

  • People get sick take a drug to help them get better.

  • Healthy people take a vaccine to protect them from getting sick in

  • the first place.

  • A vaccine works by triggering the body's immune system to fight a

  • disease. Molecules from pathogen are injected into the body.

  • The immune system recognizes the hostile intruder produces antibodies

  • and remembers them for the future.

  • There are enormous about a risk of investment with vaccines that

  • generally goes beyond that for a drug. Compared

  • to a drug vaccines are tough to make.

  • To start the vaccine manufacturing and research process is an

  • extraordinarily complex process.

  • When you start back in basic research our scientists are really

  • understanding those underlying mechanisms of protection and really

  • trying to decipher what the best approach is for a vaccine.

  • Broadly speaking there are two main types of vaccines.

  • The first is a preventive vaccine like a flu shot or a measles

  • vaccine. It can prevent a disease you might get in the future.

  • The second is a therapeutic vaccine that is given to people after the

  • infection occurs.

  • It stimulates your immune system to fight back.

  • The vaccine process starts in the lab where researchers gather data

  • and test for safety.

  • Clinical development is a three phase process where trials are

  • conducted in the lab on animals and later with large groups of

  • people. The cost of overall development vs a typical vaccine is

  • generally over a billion dollars or euros to develop. Live

  • vaccines are difficult too manufacture and closely regulated by the

  • FDA for quality control.

  • Safeguards are put in place to protect children and adults during

  • testing. Following clinical trials the vaccine moves to the

  • manufacturing stage.

  • The lead time to build or establish a manufacturing facility that can

  • make a vaccine products is usually at least three years.

  • It could be as long as five years. In

  • the early 1990s Merck started their HPV research program.

  • The vaccine they developed Gardasil was approved in 2006 but it

  • wasn't until 2018 that the FDA approved Gardasil 9 for men and

  • women between 27 and 45 years of age.

  • The original HPV program was a quadrivalent vaccine where we actually

  • studied the four most common strains of HPV.

  • Over time we've evolved that work into a nine valent program.

  • Since 2006 more than 300 million doses of Gardasil and Gardasil nine

  • have been distributed worldwide with nearly 14 million people in the

  • U.S. including teens infected with HPV every year.

  • That's good news for today's kids.

  • Vaccines like the flu shot often deal in high volume and low margins.

  • But there are a few big factors that have actually been driving the

  • price of vaccines higher in recent years.

  • Selling a vaccine like Shingrix for the shingles or Gardasil is where

  • a company can hit much higher margins.

  • Gardasil nine cost between 400 and 500 dollars for a three dose

  • vaccination series and Gardasil 9 reached over three billion dollars

  • in sales in 2018.

  • With the patent not expiring until 2028 in the U.S.

  • it could reach billions more, according to analysts.

  • The price of vaccines is also on the rise because of upgrades to

  • older vaccines.

  • In 2001 the MMR vaccine made by Merck sold for 28 dollars a dose.

  • The 2019 version of the same vaccine sold for seventy five dollars a

  • dose a separate MMR vaccine that also includes chickenpox sells for

  • over two hundred dollars.

  • And like most vaccines the MMR requires multiple doses that can

  • significantly increase the costs.

  • Patents actually don't play nearly as big a role as you might think

  • when it comes to vaccination pricing. With

  • drugs patent protection is everything. When

  • a product like Viagra or Lipitor loses patent protection in the U.S.

  • sales can decline as much as 70 or 80 percent the following quarter.

  • Vaccines are very different.

  • Vaccines can have as many as 15 to 20 components that present complex

  • technical challenges and require multiple patents.

  • They also require large scale manufacturing facilities with the

  • ability to produce vaccines in large volume.

  • In the US, there are no generic or bio similar vaccines currently available.

  • There are other manufacturers largely based in India and China

  • who do produce other typical childhood vaccines like polio, measles.

  • But often their production volumes are directed to their countries

  • rather than the US.

  • Essentially, when a big pharma company loses its patent or a combination of patents,

  • that doesn't mean the market is suddenly flooded with generic competitors.

  • All four companies saw double-digit gains in vaccine sales in the first quarter of 2019.

  • And with Merck, vaccine sales saw almost double the percentage growth

  • of their pharmaceutical sales in 2018.

  • Every year, 85 percent of the world's children receive vaccines to

  • protect them against tuberculosis, polio and measles.

  • Despite this, more than 3 million people die from vaccine-preventable deaths each year.

  • Even in the U.S., about 100,000 young children have not received vaccinations for any

  • of the 14 diseases that were recommended.

  • The U.S. government provides free vaccinations but some families may lack

  • access to health clinics or don't understand their importance.

  • People with compromised immune systems could get sick if they receive a vaccination.

  • And a few are intentionally not vaccinating their children.

  • In fact, parents in 17 states could opt out of vaccinating their kids

  • for personal or philosophical reasons.

  • Over the past decade, the number of Americans who consider vaccines, for

  • things like polio and measles to be vital to public health, has fallen by 10 percent.

  • Reported cases of measles is up more than 30 percent worldwide since 2016.

  • And as of May 2019, there are over 700 cases of measles from 23 states.

  • The largest number of cases reported in the U.S. since Measles was eliminated in 2000.

  • In April, New York City Mayor Bill de Blasio ordered mandatory

  • vaccinations after more than 250 people mostly members of an ultra

  • orthodox Jewish community contracted the disease.

  • Some people in the community chose not to vaccinate their children

  • after they were targeted by anti-vaccination groups.

  • Today, we are declaring a public health emergency effective immediately.

  • This will mandate vaccines for people living in the affected area.

  • Dr. Joseph Kaplovitz, a doctor and Borough Park, Brooklyn said

  • vaccination rates in the ultra-Orthodox community dropped after

  • anti-vaccination pamphlets were distributed in the community.

  • He had a head-to-toe rash. Had very high fever.

  • It was actually a three month old and they had a sibling that did contract the measles as well.

  • Those pamphlets say that vaccines are made from ingredients that

  • include human cells from aborted fetuses, rabbit brain, and monkey kidney.

  • Even more alarming health officials have condemned measles

  • parties where parents are gathering unvaccinated children with kids

  • suffering from the measles in order to infect them. So

  • they don't understand that a kid with the measles can have a

  • complication of pneumonia.

  • They don't understand that there is something called encephalitis with measles that could cause brain damage.

  • We are seeing these diseases that we have eradicated now are starting to make a comeback.

  • Limiting an outbreak from a vaccine-preventable disease requires herd immunity.

  • Basically, if enough people are vaccinated the bugs can't

  • catch hold and spread through the community protecting those who are unable to get vaccinated.

  • Merck is the sole supplier of the measles vaccine in the U.S..

  • The company said that they increased production of the vaccine in the

  • U.S. to meet an uptick in demand.

  • U.S. sales of MMR and chickenpox vaccines rose around 10 percent to

  • $343 million in the first quarter of 2019.

  • Much of the increase came from sales to private clinics which pay more

  • than the government for vaccines.

  • One time consuming and costly element is tracking the infected person

  • and every person they came into contact with.

  • A measles outbreak in Washington State in January 2019 prompted the

  • governor to declare a state of emergency. Of

  • 74 cases reported 60 people who contracted the disease were not vaccinated.

  • State and local health departments spent more than 1.6 million dollars to quarantine and treat the sick.

  • And it's not just public health departments that rack up multi-million dollar bills.

  • In 2017, an unvaccinated 6-year-old boy in Oregon who cut his head and

  • got tetanus spent two months in the hospital and racked up more than

  • $800 thousand in medical bills.

  • Globally some countries are making big gains.

  • Vaccination rates in Australia climbed after the government

  • instituted a policy depriving families of a child benefit payment if

  • their children were not vaccinated.

  • Cervical cancer there could be eliminated in the next two decades

  • thanks to vaccination efforts targeting the HPV infection.

  • In poor countries with severely underfunded health budgets, external

  • donors and governments often provide critical funding for vaccine

  • programs. The Bill and Melinda Gates Foundation donated more than 10

  • billion dollars to help organizations with the aim to increase access

  • to immunization.

  • Bill Gates says the gamble is paying off on a couple different levels.

  • When you take these vaccines get them to be very inexpensive by making

  • big volume commitments have that right relationship with the private

  • sector get the delivery system.

  • So they're really getting the coverage out there.

  • We feel there's been over a 20 to 1 return.

  • So if you just look at the economic benefits that's a pretty strong

  • number compared to anything else.

  • The numbers that you ran through were if you had put that money into

  • an S&P 500 and reinvested the dividends you'd come up with something

  • like 17 billion dollars but you think it's 200 billion dollars.

  • Here yeah.

  • But critics argue that the pharmaceutical industry has neglected

  • disease in poor countries and has invested too little in research and

  • development in those areas.

  • There are about 37 million people living with HIV in 2019 and nearly

  • one million people die for the disease every year.

  • Two thirds of people living with HIV reside in sub-Saharan Africa.

  • A lot of big pharma has dropped out of HIV vaccine research.

  • It's not a surprise that the companies will produce vaccines for

  • which they have a perceived market their businesses, they're going to

  • be less interested in investing these billions of dollars.

  • You don't always get a hit.

  • You're not always successful.

  • Vaccines were not available in more than 11,000 people died during an

  • Ebola outbreak in West Africa in 2014.