Economic Feasibility Study of Vaccine Production in Thailand

Arthorn Riewpaiboon1, Siriporn Pooripussarakul1, Charung Muangchana2, Unchalee Siripitayakunkit2

1 Division of Social and Administrative Pharmacy, Department of Pharmacy, Faculty of Pharmacy, Mahidol University2 National Vaccine Institute, Department of Disease Control, Ministry of Public Health

Acknowledgments • WHO Thailand office, for the research grant• Dr. Suwanchai Wattanayingcharoen, Vice Director of the Department of

Disease Control• Government Pharmaceutical Organization: Mr. Somchai Srichainak, Deputy Director

Mr. Sit Thirapakpoomanunt, Senior Expert Mr. Chakkrit Prapaipittayakun, Acting Director of Biological

Product Department Mr. Ruengchai Kaweepornpoj, Head of Administration,

Biological Product Department Mr. Pattharachai Lakornrach, Head of JE Production Section

Mr. Chanasak Dechkum, Acting Head of Bacterial Vaccine Division • Graduate students of the Mahidol University Pharmacy Administration

Program: Ms. Tuangrat Phodha, Ms. Onwipa Rochchanathimoke and Ms. Chadarat Issararak, for data collection.

Background (1)

• Thailand spends about 3 billion baht each year on vaccine procurement by government and private sectors.

• At present, only BCG and JE vaccines are produced.

• Neighboring countries, e.g. India, Vietnam and Indonesia, have invested in vaccine production for their own countries as well as for export.

Background (2)• In April 2011, the Thai cabinet approved the national

agenda on vaccination. • Vaccine production is a major part of the agenda.• As part of the overall 10-year plan, nine vaccines for

seven diseases are targeted as follows: - four-year plans for diphtheria, tetanus, pertussis, and hepatitis B; -five-year plans for BCG, acellular pertussis, and JE (cell-derived); -ten-year plans for dengue and live attenuated JE.

Objectives•To develop an analytical model and an Excel-based template for the analysis.•To conduct preliminary analysis of the economic feasibility of vaccine production in Thailand.

Process of the study: 1. Systematic review of an economic feasibility study2. Model development of an economic feasibility study3. Supply-demand mapping4. Economic analysis of the vaccines; a systematic

review of the efficacy of the vaccine, including cost-of-illness and cost-effectiveness analysis.

5. Estimation of costs of research and development (R&D); costs of R&D for all vaccines were reviewed. In addition, a field study was conducted by interview.

6. Cost-benefit analysis (CBA) of vaccine production7. Development of an Excel-based template for the CBA

Results• Feasibility study is to determine whether a

project opportunity is possible, practical and viable before starting the project.

• A feasibility study can be categorized into economic or financial, technical or technological, and administration or management.

• Economic analysis is the method for evaluating the efficiency of a new system. Cost-benefit analysis (CBA), the procedure is to determine the benefits and savings that are expected from a candidate system and compare them with costs.

8

Policy &planning

R &D Manufacturing and Commercializationproduction cost/ management cost/ marketing cost

Cost of illness

Cost of R & D

Economic feasibility

Willingness-to-pay

Cost analysis

CEA/ CBA/ BIAfor national immunization program

Price setting

Cost of vaccination program

Economic Analysis of Vaccines

Vaccinationprogram

EE_TP_case.pptx

CBA of vaccine business

CEA=Cost-effectiveness analysisCBA=Cost-benefit analysisBIA=Budget impact analysis

Demand-supply mapping • Demand is presented in terms of population,

number of annual births, and Global Alliance for Vaccines and Immunization (GAVI) eligibility by country including the NIP.

In terms of supply, current producers of target vaccines and market prices are presented. The prices presented were from the following sources:•purchasing prices of the National Health Security Office (Thailand)•UNICEF purchasing prices•CDC vaccine prices

where NPV = net present value of the program Bt = benefits or revenue from selling in year t Ct = total costs of production and business management in year t r = discount rate

Cost-benefit analysis of the study vaccines

• Costs are composed of capital or investment cost (or fixed costs) and operating cost (variable costs). In addition to durable assets, costs of research and development or start-up costs (e.g. training) are categorized as capital costs.

• Benefits are revenue (unit price x sale volume).

Capital cost = Current price / annuity factor

where n = useful years r = discount rate

Base case and one-way sensitivity analysis

• Three production programs were evaluated: JE, DTP-HB and DTP-dT-TT.

• Data on production plans and resources used were collected from the GPO as program operator.

• Analysis of each production program generated two extreme scenarios:

• Scenario 1, the analysis used the lowest vaccine price (based on market prices), a discount rate of 8.19%, production waste of 30%, and administration/marketing costs of 30% of the price.

• Scenario 2 used the highest vaccine price (based on market prices), a discount rate of 3%, production waste of 25%, and administration/marketing costs of 10% of the price.

Discussion and conclusion• Regarding cost-benefit analysis of the

programs, there is a range of losses and gains (profit) for all three programs. The findings are based on the following factors:

• Internal factors are related to resources used and efficiency of production (production waste).

• External factors are market prices and discount (interest) rate.

• Therefore, the programs have to be carefully implemented.

• There are other existing competing producers, both in Asia and developed countries. Those producers may have a large market share, and with production at more efficient levels than those in Thailand. Therefore, they can reduce prices when faced by competition.

Limitations of the study

• In essence, estimates of costs of R&D, production, and administration/marketing costs were roughly forecasted as marginal costs to existing GPO facilities.

• Therefore, the program costs tend to be underestimated in terms of economic cost concepts.

• However, the study has produced Excel-based models for all programs. These can be continually revised based on the availability of more accurate data.

In conclusion,•there is enough demand for designed production levels of all programs. •However, the vaccine market is an oligopoly. •Business success is thus not only based on production feasibility•but also on marketing or business strategies.•These analyses should be revised as more accurate data become available.•The findings of this study could be useful as a tool for program implementers and policy makers in decision making and for adopting and monitoring these programs.