The article mentions that vaccine innovations have had a recent slowdown. This has resulted in a lower number of vaccines that make it through to the market and McKinsey has boiled it down to three primary reasons.
- Investment requirements for mid and late stage RnD & manufcaturing
- Opportunity cost as economics converge with Biologics
- Higher techincal complexity and commercial uncertainty.
So what does “Investment requirements” mean? There has been increase in scrutiny amongst more complex products with longer timelines for vaccine approval. This makes these investments less lucrative. As there are preventive in nature, vaccines require a higher bar for quality and safety. (Question: what kind of higher bar are we talking about that biologics don’t already go through? I’m a bit hazy as to the development process for these).
As for the opportunity cost, this one is a bit more clear. If it takes longer to get to market, your runway for making money decreases. Furthermore, as it is a one time use product, you constantly shrink your market once the initial batch is captured. Prevnar saw 6B in sales during its peak but this pales in comparison with how much blockbuster biologics have made. Hence, it does not make sense to invest in vaccines. Now, vaccines must be specific in the people they target. McKinsey has 5 “archetypes” for vaccine innovation. High income areas would benefit from vaccines that include healthcare acquired infections as these have an enormous burden on the markets. Potential blockbusters target a large patient pool but also must be in high income areas. Targets include hepatits C and HIV. Treamtent is a bit hazy although McKinsey admits it is not too feasible. Incremental improvements on existing vaccines is not too innovative and it is questionable how much the company could demand on price. Emerging threats could target diseases we could see in the future but their markets are unknown and the value to payers is also unknown. Low income markets simply have moderate potential for commercialization and the feasibility against malaria or TB is Low-Moderate.
Lastly, newer vaccines will require higher technical complexity that will go beyond simple antigens. Newer vaccines will utilize new mechanisms of action such as RNA silencing and questions regarding the long term effects will always remain. For patients, the path for getting treated also is filled with roadblocks which gets clogged up with a physician’s perception and knowledge, whether the doctor recommends it, whether the patient will continue onto the pharmacy, whether the patient wants to pay for it etc. By the time we have counted the number of people who have gotten the vaccine, it could be incredibly low.
The argument that there should be government incentives that help private industry could be helpful. However, once this occurs, the public will demand that they be released at a price that does not help shareholders. This creates disincentive for them to pursue commercialization of a new vaccine because it creates no true value for their company. People do not understand NPV or WACC, without which there would be no products.
Medicine: Opinions? 