Drugmakers, Doctors Rake in Billions Battling H1N1 Flu

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Americans are still debating whether to roll up their sleeves for a swine flu shot, but companies have already figured it out: vaccines are good for business.

Drug companies have sold $1.5 billion worth of swine flu shots, in addition to the $1 billion for seasonal flu they booked earlier this year. These inoculations are part of a much wider and rapidly growing $20 billion global vaccine market.

"The vaccine market is booming," says Bruce Carlson, spokesperson at market research firm Kalorama, which publishes an annual survey of the vaccine industry. "It's an enormous growth area for pharmaceuticals at a time when other areas are not doing so well," he says, noting that the pipeline for more traditional blockbuster drugs such as Lipitor and Nexium has thinned.

As always with pandemic flus, taxpayers are footing the $1.5 billion check for the 250 million swine flu vaccines that the government has ordered so far and will be distributing free to doctors, pharmacies and schools. In addition, Congress has set aside more than $10 billion this year to research flu viruses, monitor H1N1's progress and educate the public about prevention.

Drugmakers pocket most of the revenues from flu sales, with Sanofi-Pasteur, Glaxo Smith Kline and Novartis cornering most of the market.

But some say it's not just drugmakers who stand to benefit. Doctors collect copayments for special office visits to inject shots, and there have been assertions that these doctors actually profit handsomely from these vaccinations.

It is a notion that Dr. Lori Heim, president of the American Academy of Family Practitioners, says is simply not true.

"According to most of the physicians I have talked to, the administration of these vaccines is done for the community's benefit as opposed to anything that helps profit," she says. Heim adds that even though doctors will not have to shell out for the H1N1 vaccine, they will bear the usual costs associated with storage and administering the shots.

"There is an administration fee, for the costs that you can't get reimbursed through Medicare or Medicaid," she says. "This is usually less than, or right at the break-even point."

Still, pharmacies also charge co-payments or full price of about $25 to those without insurance and often make more money if patients end up shopping for other goods.

"Flu shots present a good opportunity to bring new customers into our stores," says Cassie Richardson, spokesperson for SUPERVALU, one of the country's largest supermarket chains. Drawing customers to the back of a store, where pharmacies are often located, offers retailers a chance to pitch products that might otherwise go unnoticed.

Even companies outside of the medical industry are benefiting: the UPS division that delivers vaccines in specially designed containers, for example, has seen a bump in business.

New Entrants in Flu Shot Business

The intensifying competition has irked some doctors.

"Retailers and other non-medical professionals have siphoned off the passive income that once helped to cover medical overhead," says Dr. Caroline Abruzese, an internist in Atlanta. "The larger retail chains can invest up front in large volumes of vaccine at low prices, and market to customers already in their stores."

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