ON-THE-RECORD PRESS CALL
BY CEA ACTING CHAIRMAN TOMAS PHILIPSON
ON THE CEA REPORT ON MITIGATING THE IMPACT OF
PANDEMIC INFLUENZA THROUGH VACCINE INNOVATION
Via Teleconference
1:04 P.M. EDT
MS. SLOBODIEN: Thank you. Thank you all for joining us today to unveil CEA's report on mitigating the impact of pandemic influenza through vaccine innovation.
Joining us for the call today, we having Acting Chairman Tomas Philipson. We also will have, for the question and answer portion, Joel Zinberg, who is the Senior Economist and a physician at the Council of Economic Advisers.
I’ll turn things over to Tomas to get started.
ACTING CHAIRMAN PHILIPSON: Okay. Thanks, Rachel. And thank you to everyone for joining our call today to discuss the CEA’s report. It’s a newly released report which estimates the potential costs of pandemic influenza. It discusses the current lack of responsiveness in reducing the risks of such pandemics, and highlights the benefit of public-private partnerships to address this problem. The report also sets forward the rationale and cost-benefit analysis for our government to reduce this major threat to public health if it were to occur.
I’ll begin by providing a brief overview of three major components of the report. First, we estimate the potentially large health and economic losses in the United States associated with influenza pandemics and discuss why the most commonly used vaccine production technologies are unlikely to mitigate these losses because the production process is too slow.
Second, we estimate the value of new vaccine technologies that would make vaccines available more quickly and thereby improve their effectiveness in moderating the risks of radically emerging pandemics.
Lastly, we argue that the private market incentives may be insufficient to develop new vaccine technologies or promote the uptake of existing, faster, but more expensive technologies, despite their large expected value to society. This is because vaccine innovators only get rewarded when a pandemic occurs, even though they provide great value in terms of risk reduction when pandemics do not occur. We therefore argue that public-private partnerships to spur innovation may be valuable to decrease the impact of pandemic health risks.
The report first addresses the health risk of potential pandemics. While millions of Americans suffer from seasonal influenza every year -- commonly called “the flu” -- there is a more deadly and costly form of flu -- pandemic influenza -- in which a new influenza virus could spread rapidly throughout the population. Historically, the chance of a pandemic influenza may be low -- roughly 4 percent per year -- but our nation is unprepared for such a catastrophe.
For example, the so-called “Spanish Flu” pandemic of 1918 sickened approximately one-third of the world’s population, killing an estimated 50 million people, including 675,000 Americans. As a result, life expectancy in the United States fell by 12 years.
The Council of Economic Advisers estimates that the cost of a modern influenza pandemic per episode could range from $413 billion to over $3 trillion, with an average cost of $1.8 trillion, depending on the transmission efficiency and virulence of the particular influenza virus, or in other words, how easily the virus is spread and how serious the infection it generates is. These costs include direct medical costs, reduced productivity, and the cost of fatalities using standard measures of mortality costs. This is substantially higher than the estimated $361 billion cost of the average seasonal influenza.
We assume in a single wave of infection over the course of about half a year, in the most serious pandemic scenario, more than half a million Americans would die.
The most effective way to combat an influenza pandemic is with large-scale, immediate immunization. Unfortunately, with the current vaccine technologies, our nation is not currently prepared to deliver a sufficient number of vaccine doses quickly enough to stop the rapid spread of a pandemic virus.
Current vaccine production for the seasonal flu primarily relies on using chicken eggs, which can take half a year or more to produce sufficient doses of the vaccine. Half a year would be too slow to combat the rapid spread of an unexpected and highly contagious pandemic virus, no matter how effective a vaccine was. Adequate doses of vaccine would only arrive after new infections have peaked.
Additionally, current slow egg-based production may impair the effectiveness of influenza vaccines for both pandemic and seasonal influenza because targeting the vaccine to an emerging virus must be done quickly.
Increasing the speed of influenza vaccine production is, therefore, critical to combating a future pandemic and better to target seasonal flus. Therefore, the second part of the report estimates the value of such improved vaccine technologies.
If a pandemic occurs, faster production technologies that could deliver sufficient doses of vaccine at the outset of a pandemic would produce a $730 billion benefit over the course of an average pandemic.
Combining faster vaccine production with a 30 percent improvement in vaccine effectiveness far over the last influenza pandemic, which occurred in 2009, increases the benefit to $953 billion –- about one-half the cost of an average epidemic -- or pandemic.
However, these benefits dissipate quickly. The average savings forgone per week of delay in vaccine availability during the first 12 pandemic weeks is $53 billion per week, declining to $26 billion during the following 12 weeks, due to following the peak of the epidemic.
Since pandemics are rare, their true expected costs, before any potential occurrence, must be discounted by the discussed 4 percent annual probability of a pandemic. CEA finds that the expected value of having a better and faster vaccine available at the outset of a pandemic is $29 billion, which amounts to $89 per American.
Adding a 30 percent increase in vaccine effectiveness increases the expected value of an improved and faster vaccine to $38 billion, or the equivalent of $117 per American.
New and existing vaccine production methods like cell-cultured and recombinant vaccines may cut production times and improve effectiveness compared with egg-based vaccines. While these new vaccines are more expensive than egg-based vaccines, CEA finds that their current per-dose price is far less than the discussed expected value of having a vaccine available at the outset of a pandemic.
Nevertheless, the market share of cell-based vaccines is only 10 to 15 percent, and of recombinant vaccines is 1 to 2 percent.
Lastly, the report discusses the lack of appropriate innovation incentives that exist for mitigating pandemic risk. In the report, CEA argues that the private market has not embraced these new technologies or encouraged other innovations because of a misalignment between the social and private returns of developing and utilizing newer vaccines.
The private market does not get rewarded for the insurance value to society of mitigating future pandemic losses -- a value that accrues regardless of whether a pandemic occurs or not. Vaccine developers only realize sales if a pandemic occurs, even though an effective pandemic vaccine would eliminate the health threat of a pandemic.
To put it simply: Provisional insurances, such as (inaudible) life insurance, reduces the financial risk for rare events, and the insurance is therefore valuable even if the risk does not turn out to materialize. Pandemic vaccine innovators provide a similar insurance value to society in terms of health risk, but they’re sales-driven, R&D decisions that will not be impacted by it.
The lack of appropriate innovation incentives partly explains why private markets have failed to provide the innovation needed to reduce pandemic risk and improve pandemic influenza preparedness. Public-private partnerships were key to developing existing cell-based and recombinant vaccine technologies. These partnerships will be key to providing other innovations needed to accelerate vaccine production timeliness and a timeline needed for pandemic influenza, and could potentially improve vaccine effectiveness for both seasonal and pandemic influenza.
This concludes my discussion of the report. But we will be happy to take some questions.
Q Yeah, hi. I have two question. One, a few weeks ago, several of us, I think, were told that there was going to be an executive order related to research on the universal flu vaccine, or on improved flu vaccines. And I was wondering if you could comment on that or tell whether that’s still in the works or how that relates to this current report?
Second, the -- you mentioned in the report, the 20- -- 2006, I believe it was, legislation that puts many billions of dollars into improving vaccines. You mentioned that that it’s done that job partially. Are you advocating just more money be put into these public-private partnerships, or something more -- a larger sort of structural change in how that’s done? Thank you.
MS. SLOBODIEN: Arthur, for the question you had about the EO, I would refer you to the White House Press Office for that.
And -- I’m sorry, hold on one moment. And the second one is best for us not to comment on it. I would also refer you to the White House Press Office.
Q Hi. Thank you again for taking the time on this. Can you just say, essentially, what this boils down to? This report is recommending that in order to have a breakthrough, both for pandemic situation but also breakthroughs that would help in the seasonal situation, that essentially private markets need more of a nudge of some kind? There needs to be a new incentive if they're going to make breakthroughs here that are worth having?
ACTING CHAIRMAN PHILIPSON: Yeah. That’s pretty much -- I mean, we document that this benefit from these new technologies -- we document that they're not used, and we're basically providing a cost-benefit rationale for greater innovation and use of those technologies.
Q Hi, thanks very much. From my understanding with conversations with people at the NIH, we're still a few years away from a universal flu vaccine, scientifically speaking. I'm curious how, whether or not -- how much money needs to be dumped into that before that timeline can be shortened.
ACTING CHAIRMAN PHILIPSON: Yeah. So in general I would leave that to HHS to address, in terms of allocating the funds for this. And we're, in this report, laying out the value of that potential effort.
Q Gotcha.
Q Yeah. Hi, I was just wondering if you could disclose, or if you had any more information about why the Flublok vaccine, which seemed to be, you know, able to be produced much faster and also was more effective had so much trouble getting traction in the market?
And if you could specifically talk to -- I mean, I understand it's somewhat more expensive, but how would you ameliorate a situation like that? I mean, we do have these vaccines out there that seem to be better already, but they don’t have much market share. I think Flublok is produced by the company that makes most of the egg-based vaccines. Does that have anything to do with why it's been sort of tamped down -- its production?
ACTING CHAIRMAN PHILIPSON: Yes. So we discussed some of the barriers to adoption and innovation in the paper. One, for the adoption piece, is the pricing of it and the reimbursement, which we'll also go through in the paper. I think that’s the major one that is hindering its further adoption.
Q Hey. Sorry, when I was trying to put through a question before, I guess I had my phone on mute. So the question I had was: Was this report put together to back up the need for the executive order that there's going to be a later call on today?
MS. SLOBODIEN: Donna, the nature of the Council of Economic Advisers is to provide information and economic analysis to the President. And so the report is consistent with that.
OPERATOR: And we have no further questions in queue.
MS. SLOBODIEN: Thank you all for joining us. You can find the CEA report on CEA's website.
END 1:20 P.M. EDT
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