Vaccine Marketing - Innovation and Marketing in the Pharmaceutical Industry - page 388

home—hopefully not during a long trip on a hot day—stock it in their refrigerator,
and then return with the vaccine to the physician for administration. 33
Physicians are the main private market purchasers in countries which allow
physician-dispensing. Other private market purchasers include pharmacies, hospitals,
and—for infl uenza vaccines—employers.
The Decision to Purchase a Vaccine
Vaccine-dispensing physicians usually have both public and private vaccines in their
refrigerator. Public vaccines are purchased by the authorities and made available to
physicians at no cost. Private vaccines are purchased by physicians and involve the
economics typical of pharmacies and other types of distributors. Key concerns
include consumer demand, the profi t margin, asset turnover, fi nancial leverage
(asset/equity ratio), and fi nancial risk.
Drivers of the private consumer demand for a vaccine include the size of the
population for which the vaccine is licensed, whether the vaccine is recommended
by the country's NITAG and for which population, consumers' out-of-pocket costs,
and the promotional effort for vaccination and the vaccine brand, in case there are
competing brands. The speed, breadth (percent of the eligible population), and
extent of insurance coverage (percent of the total retail price which is reimbursed)
are important factors for the uptake of a new vaccine (Shen et al. 2009b ).
Many US physicians complain about the profi t margin from vaccines (see sec-
tion “Financial Concerns” ). In one study, one or more practices reported that the
vaccine purchase price exceeded the most common payer reimbursement for 15 out
of 21 vaccines (Freed et al. 2008b ). In another study, the net profi t margin (vaccine
revenues minus vaccine expenses) was higher for patients with private insurance
reimbursement than for Medicaid-enrolled patients, many of whom generated a
negative net margin (Hunsaker et al. 2009 ).
Because asset turnover is reduced when physicians carry several brands of vac-
cines that target the same disease, physicians prefer to concentrate their purchasing
on one of the brands. 34 Financial leverage is infl uenced by the payment terms of the
vaccine supplier compared with the speed of insurance reimbursement. Financial risk
derives mainly from demand and supply uncertainty. When the amount of vaccines
purchased exceeds demand, physicians may experience high inventory, obsolescence,
and expiration costs, the risk being especially high for seasonal vaccines such as infl u-
enza and for new vaccines. Purchasers attempt to shift the risks of over-stocking by
requesting a returns policy. Such a policy requires monitoring by a manufacturer, to
ensure that his vaccine is not the “fi rst in but last out” at the purchaser.
33 There is also an inoffi cial route in which pharmacists dispense a vaccine to regular clients, who
subsequently return with the prescription obtained during the vaccine administration visit.
34 Spreading purchases over several brands also reduces the profi t margin because of higher purchase
prices due to a lower purchase volume per brand.