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Financing

PERSPECTIVE

Addressing The Vaccine Financing Conundrum

Abstract

 
An Institute of Medicine (IOM) committee recommended a dramatic change in the national approach to financing immunizations in the United States. Major features were an insurance mandate to cover immunization, federal government subsidy for the purchase of vaccines, and vouchers for uninsured people. The National Vaccine Advisory Committee (NVAC), while agreeing with many of the IOM observations, did not agree with the recommendations for action. NVAC recommended, among other things, expanding and stabilizing funding through the existing Vaccination Assistance Act (Section 317 of the Public Health Service Act), expansion of the Vaccines for Children program, and assurance of adequate reimbursement for administration of vaccines.

Financing child coverage. Private insurance coverage for childhood immunization is negotiated between purchasers and providers of insurance and can be modified during regular negotiations. Section 317 and state/local health department vaccine purchases are subject to legislative appropriation and hence are influenced by the overall governmental budget situation as well as by the timing of legislative sessions. For example, a new vaccine may be introduced after appropriations have already been made for a given fiscal year and there are no funds to purchase the new vaccine until the next year’s appropriation. Over the years, the level of appropriation under Section 317 has varied dramatically. By contrast, VFC is an entitlement that automatically takes effect when the ACIP so determines.

Financing adult coverage. For adults, Medicare beneficiaries can receive pneumococcal disease and influenza immunizations, with providers being reimbursed for the vaccine and administration. In addition, those in the end-stage renal disease (ESRD) program can receive the hepatitis B vaccine. Otherwise, adult immunization is financed entirely in the private sector, and it is estimated that only 24 percent of adults under age sixty-five have insurance that covers immunization.⁶ Although Section 317 is written broadly enough to permit use of funds to support adult immunization, the appropriations have never been large enough to support both child and adult immunization, and childhood immunization has taken precedence.⁷

Immunization rates. Immunization of U.S. children is at all-time high levels (typically, 90 percent or more of children ages 19–35 months have received individual vaccines, and approximately 80 percent have received the complete series of recommended vaccines).⁸ Disease incidence is at record low levels. By contrast, only 60–70 percent of adults age sixty-five or older have received pneumococcal or influenza vaccine, and the figure is much lower for high-risk people younger than age sixty-five.⁹

Status of vaccine manufacturing. Over the past thirty years, the number of domestic vaccine manufacturers has greatly declined because of a number of factors, including the need to prove safety and efficacy (mandated in the 1970s), corporate mergers and acquisitions, increased regulatory requirements, reportedly low profit margins, and liability exposure.¹⁰ It is unclear what the relative importance of these factors has been.

The IOM Report

Top The IOM Report NOTES

 
In 2002 the Institute of Medicine (IOM) was asked by the National Immunization Program (NIP) of the U.S. Centers for Disease Control and Prevention (CDC) to identify strategies that would achieve an appropriate balance of private- and public-sector involvement in purchasing and administering recommended vaccines and develop recommendations for pricing strategies that could contribute to achieving current and future national immunization goals. In response, the IOM formed an eleven-member committee that met four times over a twelve-month period to hear testimony from a variety of perspectives and commissioned a national survey and eight background papers.

Based on its analysis, the IOM committee recommended a dramatic change in the national approach to financing immunizations.¹¹ The major features of the recommendations were to implement an insurance mandate requiring all health insurance policies to cover immunization for children and high-risk adults. The federal government would subsidize the purchase of vaccines and provide vouchers for those who were not insured. The subsidy/price of a vaccine would be set in advance of its development based on its estimated societal value. This approach would replace the VFC program and, presumably, Section 317.

The response to the IOM report has been varied, with most stakeholders expressing reservations about whether such a dramatic change was needed, whether implementing the recommendations would have the desired effect, and whether it would be feasible to achieve the legislative changes that would be required at the national and state levels.

Vaccine Financing Workgroup. The National Vaccine Program Office (NVPO) and the National Vaccine Advisory Committee (NVAC) formed a Vaccine Financing Work-group to develop a response to the IOM report. NVAC is a fifteen-member committee chartered in 1988 to advise and make recommendations to the NVP director and the assistant secretary for health (in the U.S. Department of Health and Human Services) on matters related to the prevention of infectious diseases through immunization and the prevention of adverse reactions to vaccines. The workgroup conducted a series of stakeholder interviews and a meeting in June 2004, attended by approximately sixty people representing the perspectives of vaccine manufacturers, private and public providers, health departments, and consumers.

While agreeing with many of the IOM’s observations, no one who spoke at this meeting felt that the IOM proposal for insurance mandate, subsidy, and voucher is currently practicable. Most of those who spoke at the meeting favored improvements in the current system rather than the dramatic changes recommended by the IOM. Many did not feel that the IOM recommendations would solve current problems even if implemented. Representatives of vaccine manufacturers did not feel that setting vaccine prices in advance would stimulate research and development (R&D); some even felt that it might be counterproductive and represent price fixing in advance.

NVAC’s official response. Based on the workgroup’s activities and deliberations, in October 2004 NVAC adopted an official response to the IOM report.¹² NVAC agreed with many of the observations and conclusions of the IOM committee but did not agree with its recommendations for action. NVAC believed that the IOM recommendations did not sufficiently acknowledge the progress made under the current system and the potential feasibility and impact of incremental, rather than revolutionary, changes. It was not convinced that the recommended approaches would have the desired effects and also felt that it would be extremely difficult to bring about the legislative changes required to implement them.

Major features of the NVAC recommendations were (1) expanded and stable funding through Section 317 for immunization program infrastructure and operations, as well as for vaccine purchase, within existing guidelines; (2) expanded funding through Section 317 to specifically support adolescent and adult immunization programs, including vaccine purchase; (3) rapid appropriation of new funds through Section 317 when new vaccines are recommended for universal use; (4) expansion of VFC to include underinsured children in all public health clinics, removing price caps, and giving all providers and clinics a choice of vaccines; (5) regulatory harmonization to facilitate introduction into the United States of vaccines licensed in other countries that are in compliance with FDA-approved harmonized standards; (6) promotion of "first-dollar" insurance coverage for immunization and promoting prompt coverage and recalculation of capitation rates when new vaccines are recommended; (7) assurance of adequate reimbursement for administration of vaccines; and (8) expanded discussion about the need, desirability, and feasibility of a variety of approaches to ensure that adults have access to vaccines, regardless of whether they have insurance.

Neither the IOM nor the NVAC recommendations provide the specificity necessary for implementation. In addition, neither set of recommendations will address all of the issues relating to financing vaccine research, development, production, and use. The NVAC recommendations do not directly address many of the issues surrounding vaccine R&D. On the other hand, the IOM recommendations may not provide the incentives that manufacturers need, according to statements of manufacturers at the NVAC stakeholders’ meeting.

In my estimation, the NVAC recommendations provide a higher probability of meeting the goals of stabilizing vaccine supply and improving vaccinations in children and adults. They also are far more likely to be achievable, as they require much less (simultaneous) legislative change at the federal and state levels.

Editor's Notes

 
Alan Hinman (ahinman{at}taskforce.org) is senior public health scientist on the Task Force for Child Survival and Development in Decatur, Georgia. He was director of the Immunization Division at the U.S. Centers for Disease Control and Prevention from 1977 to 1988 and coordinator of the National Vaccine Program from 1987 to 1990. He now serves as a member of the National Vaccine Advisory Committee and chaired its Vaccine Financing Workgroup, whose findings contributed to this report.

The author has no financial conflicts of interest.

NOTES

Top The IOM Report NOTES

 

1. M.V. Pauly, "Improving Vaccine Supply and Development: Who Needs What?" Health Affairs 24, no. 3 (2005): 680–689.[Abstract/Free Full Text]
2. A.R. Hinman, W.A. Orenstein, and L. Rodewald, "Financing Immunizations in the United States," Clinical Infectious Diseases 38, no. 10 (2004): 1442.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid., 1443.
7. Ibid., 1441.
8. Ibid., 1443.
9. Ibid.
10. Institute of Medicine, Financing Vaccines in the Twenty-first Century: Assuring Access and Availability (Washington: National Academies Press, 2004).
11. Ibid.
12. A. Hinman, B. Gellin, and the National Vaccine Advisory Committee, Institute of Medicine Report on Financing Vaccines in the Twenty-first Century: National Vaccine Advisory Committee/National Vaccine Program Office Follow-up, 6 October 2004, www.dhhs.gov/nvpo/nvac/NVAC-IOM100604.htm (17 January 2005).

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