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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Vaccines occupy a curious corner of the pharmaceutical industry. They’re much harder to make and distribute than medicines delivered in pill form. But this corner of the market is also cosy: given the need for specialised facilities, expertise and scale, a small cohort of companies is predominant, including GSK, Merck & Co, Pfizer and Sanofi.
But one of the appeals of the vaccine business — its dependability — is under threat. Typically, the lack of competition means that even when patents expire, rivals tend not to come flooding in. Notwithstanding swings at companies such as Moderna and BioNTech that scored big wins around Covid-19, the vaccine business is pharma’s equivalent of selling tins of soup, a recipe for steady, repeat sales.
A change of tone from the US authorities has introduced new uncertainties. Under health secretary and outspoken vaccine sceptic Robert F Kennedy Jr, the US last week reduced the number of recommended childhood vaccines to 11, from the previous 17. That was followed by further appointments to the US’s federal vaccine advisory board on Tuesday.
In the context of global drugmaking, vaccines are virtually a pinprick. At just under $67bn in 2024, according to the World Health Organization, they account for about 4 per cent of pharma sales. They also tend to be less profitable: vaccines are expensive to manufacture and many older shots are priced relatively cheaply.
But another oddity of vaccines is that the US is less important than it is for pharma more broadly. While US drug prices average 2.8 times those in many other developed countries, according to The Rand Corporation, those of vaccines are more closely aligned. The price of a childhood HPV vaccine in the US is only about 20 per cent higher than in the UK, according to US Centers for Disease Control and Prevention and NHS vaccine pricing lists.
There will be pain nonetheless. Merck’s HPV vaccine Gardasil and rotavirus vaccine Rotateq look exposed to the change in recommendations and could cost Merck about $2bn in annual vaccine revenue, Bernstein estimates, about 3 per cent of its overall revenue.
Distrust has been building for some time. The Department of Health and Human Services says the uptake rate for childhood Covid vaccines was less than 10 per cent by 2023. Last year, Kennedy’s agency cancelled $500mn in contracts that funded the development of mRNA vaccines targeting flu and Covid, hitting projects at Pfizer and Moderna, among others.
All of this changes the economics for vaccine makers. Demand is now a function of politics as well as demographics, effectiveness and vulnerability to diseases. Adoption of the CDC recommendations is likely to vary sharply by state and along party lines. Whatever one’s grandparents might say, vaccines remain a better defence against many illnesses than a wholesome can of soup, but they are getting rather less reliable an investment.
