More progress has been made in vaccine pricing in the past 10 days than in the past decade. On Monday, GlaxoSmithKline and Merck announced their decision to slash the prices they charge the world's poorest countries for rotavirus vaccines by up to 68 percent. This decision marks the first major shift in vaccine pricing since the birth of the GAVI Alliance -- a public-private partnership working to improve access to immunization in developing countries -- in 2000.
Also on Monday, three emerging market manufacturers -- Serum Institute, Panacea Biotec and Bharat Biotech -- announced that they will provide DTP-Hepatitis B-Hib pentavalent vaccines at the lowest price these vaccines have ever been made available -- as low as $1.75 per dose. Merck announced that it will reduce the cost of its human papillomavirus (HPV) vaccine, which prevents cervical cancer. And last week, UNICEF -- the world's leading vaccine purchaser -- announced that it will now make the prices it pays for these vaccines transparent to the public.
These announcements were good news to many of the key players in global immunization -- and show clear evidence of the "market shaping" impact of GAVI. When GAVI was launched in 2000 with $750 million over 5 years, there were widespread expectations that prices for common vaccines, such as the DTP-Hepatitis B-Hib pentavalent, mentioned above, would drop within that time period. These expectations were naïve and overly optimistic given that the vaccine industry typically needs at least 8-10 years to develop new vaccines. Nonetheless pressure mounted on GAVI to show progress in driving prices down, and so these announcements represent some welcome relief.
The first step forward was in November 2010 -- a decade into GAVI's work -- when it announced pricing for the pentavalent vaccine would drop below $3.00 USD per dose. The unprecedented announcements made in recent days further this progress, and represent the most significant industry steps to date to help increase vaccine access in the world's poorest regions.
With sufficient funding support from donors, GAVI plans to introduce rotavirus vaccines in 40 countries before 2015 and is looking to make HPV vaccines available to girls in the future. Both rotavirus and HPV vaccines came on the market in the U.S. in 2006. The new pricing arrangements signify significant progress in accelerating vaccine access when compared to many other vaccines from the past.
While the moral imperative and life-saving value of vaccines is clear, vaccine pricing is the result of market interactions between buyers and sellers. Vaccine manufacturers were able to make this unprecedented move, in part, because GAVI and the developing countries where these vaccines will be used are becoming a reliable market with credible, predictable demand and financing. By indicating their demand for vaccines years in advance of when they are needed, and by investing in the systems needed to deliver them, GAVI and the countries it serves have begun reducing the risks that previously characterized this market -- risks that companies previously passed along in the form of higher prices. The price drops observed this week are in large part a product of this evolution from a risky, unpredictable market into a credible, predictable one.
The recent announcements tell us a lot more about the seller than the buyer, an essential component of this equation. Better understanding the buyer's side is imperative to further improving global access to vaccines. Procurement, for example, is an important component of vaccine costs that is still relatively opaque. And while national financing for vaccines has been increasing since 2000 -- one of the most underappreciated success stories of the GAVI years -- the introduction of newer, more complex vaccines has also led to substantial overall increases in vaccine costs for countries like Ghana, Uganda, and Bangladesh. Consequently, vaccine financing and procurement will remain important issues in the years to come.
Broad agreements for vaccine financing, where every player knows what, how and when they must contribute to the process, are critical to expanding access. Driving down prices provides relief to buyers of current products. But realizing the full benefits of vaccines requires stable vaccine supply and sustained innovation, both of which generally come from vaccine manufacturers, and at least, in part, are funded by the margins that they gain from selling vaccines above manufacturing costs. Finding the right balance between affordable prices, innovation, and supply security will require hard work, patience, and a long-term view.
The timing of this week's announcements by industry could not have been better for GAVI, its donors or the children in developing countries who benefit from its work. Next Monday, June 13, GAVI's donors will come together in London to make new pledges of funding to support the Alliance's goal of reaching 240 million more children with lifesaving vaccines by 2015. With decreasing vaccine prices, donors can be more confident in the value that comes from their support to GAVI -- getting more bang for their buck.
Before these price declines, vaccines were already amongst the most cost-effective life-saving interventions available. With these lower prices, the value of vaccines and the case for investing in them, just got even stronger.