Global Vaccine Market: Main Players and Questions of Price

Today I start a series of posts dedicated to the commercial aspects of the UN drug market; that is, the companies who produce and develop drugs and other medical substances that are essential for health development and relief programs. I will start by focusing on the areas that are currently declared by the UN (WHO, UNICEF) as main priority areas: malaria, HIV, maternal and infant health programs.

Although I acknowledge that there is a lot of debate about why the UN has decided to include precisely these ones into its Millennium Goals, for the moment I prefer to use them as the starting point of my research. Later, I plan to write a similar post on non-communicative diseases and emergency medications.

The current post is a short overview of the global vaccine market. Here I would like to share a table which shows the vaccine product mix of the top 5 global vaccine producers. It is no surprise that these are 5 of the biggest pharmaceutical companies - Sanofi, Merck, GSK, Pfizer and Novartis - whose cumulated proceeds from vaccine sales in 2012 exceeded $21 Bln, accounting for 80% of the global vaccines market. 

Around 7.5% of this revenue accounts for the so called UN Market (vaccines purchased for WHO and UNICEF programs) through governmental and institutional funding (including big NGOs such as Bill and Melinda Gates foundation), which means that these companies received around $1.5 Bln from development funds. However, if we look at dose volumes, the UN Market accounts for more than 50% of EPI vaccines produced (WHO Expanded Program of Immunization BCG, diphtheria-tetanus-pertussis (DPT), oral polio, and measles for all and Hepatitis B (HepB), yellow fever and Haemophilus influenza meningitis (Hib) for some countries). 

Top 5 Vaccine Producers and their product mix

The difference in pricing for industrialized countries and UN projects (for vaccines these prices are negotiated by the GAVI alliance) can reach up to 99%, like in the case of Prevnar 13, which is priced at $150 in the USA and supplied by $3.5 to GAVI (source: GAVI).

What do these figures mean for vaccine manufacturers and for consumers? For instance, does it mean that consumers in wealthy countries, who contribute 80% of vaccine revenue, are de facto subsidising these UN development programs? If yes, can this fact be better communicated and used for marketing purposes both by governments (who are the main customers in most countries) and by the drug companies, who try to maximize prices? Should these numbers by taken into consideration when calculating the indirect contributions of the wealthy nations to these development programs? How does this impact economic development models? 

I will try to dig deeper into these subjects in the following posts, but above is the promised table.

Case of MSF: Thoughts on marketing efforts evaluation in humanitarian organisation.

Reaction paper on the article "Meassuring Marketing Productivity: Current Knowledge and Future Directions" by Roland T. Rust, Tim Ambler. Gregory S. Carpenter, V. Kumar. & Rajendra K. Srivastava

The article deals with the question of evaluating marketing efforts and actions. The basic idea is that all marketing "investments" should contribute to a company short-term profit, provide potential growth and sustain profits in the long term. It is required for the successful company to have a business model that assesses both financial and non-financial impacts of its marketing efforts. The financial impact is tracked by the assessment of the financial performance measures, such as sales, profits and shareholders value in both the short and long run. The non-financial impact is the influence on what the customers know, believe, feel and how they behave. The article further deals with the different short and long term aspects of marketing evaluation technique: ROI and market assessment as well as brand equity and customer awareness among others.

Although this model is relatively straight-forward if you see it through the prism of a profit oriented company (though in different industry, methods and tactics of marketing evaluation may differ dramatically), it becomes much less obvious in the case of non-profit oriented organisations.

To illustrate my thought, I will take the case of Médecins Sans Frontières (MSF), the French humanitarian organisation focused on providing medical aid, and well known for their work in war zones and areas affected by natural disasters. MSF's promotional spendings are not significant and constitutes only 2% of the organisation's budget (total 2012 budget $762 million; marketing expenses = promotional expenses + communication + publications = $18 million). This is a small number compared to the marketing budget of most commercial companies. However if one puts it in the perspective of MSF, $18 million is the cost of one medium large MSF country mission, such as Ethiopia, Zimbabwe, Nigeria, Central African Republic or Afghanistan. So despite the relatively small part of the entire budget, MSF will probably find itself needing to assess its marketing efforts. However, if one decides to apply a business marketing model to this task, one may face multiple difficulties.

The first difficulty will come as soon as the word "customer" will appear in the marketing model. For, who are the customers of MSF? And who are the beneficiaries? There is no single answer to this question, but many different ones, depending on the context. If one looks at it from the point of view of donations attractions, then the customers are the donators, both institutional, governmental and individual, and the people who receive medical help from MSF on the ground are the beneficiaries. If one looks at it from the perspective of human resources, the picture looks different. MSF considers its biggest asset to be medical personnel who commit for minimum 9 months of field work with an average monthly salary of 800 euros during this time. In this case it is the medical community that becomes the customer of MSF since MSF needs to attract resources from qualified and committed medical personnel, and the people in need become the beneficiaries. If we look at the MSF mission in-country, people who work in the mission see patients as the main customers and if those people working on a project with a local community or the government, see these latter ones as customers.

Example of MSF brand awareness campaign: 

White Flag campaign, Italy, Agency Lowe Pitella Fronzoni, 2010

The second difficulty lies in the identification of short term and long term marketing goals. If we agree that the main marketing goal is to attract donations, than the marketing ROI of MSF will be very low. The main donators of the organisation remain institutional and governmental organisations, and marketing is doubtfully the most effective way of dealing with them (perhaps a combination of PR and lobbing is more appropriate). Individual donations contribute only to around $3 million (out of $684 million in contributions). Targeting these private individuals with a $18 million marketing budget does not look very cost effective to say the least. Perhaps the most appropriate in this situation is to talk about long term non-financial impacts of marketing investments, such as brand awareness and recognition. These are undoubtedly beneficial for both tactical (operations on the ground, negotiations with governments and communities, attracting medical professionals, etc.) as well as strategical (inclusion of MSF in the governmental and intergovernmental plans and policies, etc.) reasons.

Thus when trying to apply business marketing evaluation models to humanitarian organisations, there are difficulties that should be considered. Additional research and innovation is particularly required in this field.