get their first vaccination for hepatitis B. Over

the next two years that infant will receive more than two dozen

vaccinations to protect them against everything from measles, mumps

and rubella to the flu. Vaccines

are one of the biggest successes in modern medicine.

They save up to 3 million people worldwide every year and protect

millions more from disability and suffering.

But the bar to create new vaccines is now higher than ever.

Developing a vaccine is expensive and it can take a long time. From

research and discovery to product development it can cost up to a

billion dollars to make one vaccine and that process can last up to

15 years.

Overall revenue of the pharmaceutical industry worldwide is over a

trillion dollars while the vaccine market is only about 37 billion

dollars. Which begs the question, who is making money developing

vaccines? How much do they cost to produce?

And why are so many parents afraid to have their children vaccinated?

The genesis of modern day vaccines began in 1796 when an English

doctor took on smallpox.

Dr. Edward Jenner observed that milkmaids who suffered the mild

disease a cow pox never contracted smallpox.

Jenner did an experiment.

He took material extracted from a cowpox sore on the hand of a

milkmaid and inoculated it into the arm of an eight-year-old boy.

The precursor to the smallpox vaccination was born.

Despite Jenner's discovery the 20th century saw smallpox wipe out an

estimated 300 million people worldwide.

Tens of thousands of children also died in the U.S. each

year from diseases like whooping cough, diphtheria and polio.

Since their mass introduction following World War Two vaccines have

saved millions of lives. Vaccines and have

been one of the greatest public health success stories the world has

seen. You know after clean water vaccines have saved more lives over

the last century than any other intervention.

Historically vaccines were produced at a low price and sold at a low

profit margin.

They were so low that many companies stopped producing them. In

the 1960s more than two dozen companies produced vaccines. Those

two dozen companies dwindled to just a handful after Novartis sold

its vaccine business to GlaxoSmithKline in 2014.

There are other players in the space but the four big drug companies

that now dominate the market are Pfizer, Merck, Sanofi Pasteur and

GlaxoSmithKline. Pfizer had vaccine sales of just over six billion

dollars in 2018.

Overall revenue with the company in 2018 was more than 50 billion

dollars. Pfizer is best known for making Viagra and Lipitor but the

company's best selling product in terms of sales is a vaccine called

Prevnar 13 which protects against pneumonia and meningitis.

In 2014 the U.S.

Centers for Disease Control and Prevention recommended that adults 65

and older get immunized.

That sent profits soaring Prevnar made five point eight billion

dollars in 2018 making it Pfizer's top selling products.

The second is Merck.

In 2018 Merck had vaccine sales of over 7 billion dollars.

Merck's top selling vaccine Gardasil fights HPV the most common

sexually transmitted infection in the U.S.

that can sometimes cause cancer.

The third vaccine maker is French drugmaker Sanofi.

Its vaccine division Sanofi Pasteur's two top selling vaccines are a

polio vaccine for emerging economies and a seasonal flu shot.

Total vaccine sales were almost 6 billion dollars in 2018.

And fourth is GlaxoSmithKline.

GlaxoSmithKline sold 770 million doses of vaccines around the world

in 2018 and had vaccine sales of over 7 billion dollars.

GlaxoSmithKline and Pfizer did not immediately respond to a request

for comment on their vaccine divisions.

People get sick take a drug to help them get better.

Healthy people take a vaccine to protect them from getting sick in

the first place.

A vaccine works by triggering the body's immune system to fight a

disease. Molecules from pathogen are injected into the body.

The immune system recognizes the hostile intruder produces antibodies

and remembers them for the future.

There are enormous about a risk of investment with vaccines that

generally goes beyond that for a drug. Compared

to a drug vaccines are tough to make.

To start the vaccine manufacturing and research process is an

extraordinarily complex process.

When you start back in basic research our scientists are really

understanding those underlying mechanisms of protection and really

trying to decipher what the best approach is for a vaccine.

Broadly speaking there are two main types of vaccines.

The first is a preventive vaccine like a flu shot or a measles

vaccine. It can prevent a disease you might get in the future.

The second is a therapeutic vaccine that is given to people after the

infection occurs.

It stimulates your immune system to fight back.

The vaccine process starts in the lab where researchers gather data

and test for safety.

Clinical development is a three phase process where trials are

conducted in the lab on animals and later with large groups of

people. The cost of overall development vs a typical vaccine is

generally over a billion dollars or euros to develop. Live

vaccines are difficult too manufacture and closely regulated by the

FDA for quality control.

Safeguards are put in place to protect children and adults during

testing. Following clinical trials the vaccine moves to the

manufacturing stage.

The lead time to build or establish a manufacturing facility that can

make a vaccine products is usually at least three years.

It could be as long as five years. In

the early 1990s Merck started their HPV research program.

The vaccine they developed Gardasil was approved in 2006 but it

wasn't until 2018 that the FDA approved Gardasil 9 for men and

women between 27 and 45 years of age.

The original HPV program was a quadrivalent vaccine where we actually

studied the four most common strains of HPV.

Over time we've evolved that work into a nine valent program.

Since 2006 more than 300 million doses of Gardasil and Gardasil nine

have been distributed worldwide with nearly 14 million people in the

U.S. including teens infected with HPV every year.

That's good news for today's kids.

Vaccines like the flu shot often deal in high volume and low margins.

But there are a few big factors that have actually been driving the

price of vaccines higher in recent years.

Selling a vaccine like Shingrix for the shingles or Gardasil is where

a company can hit much higher margins.

Gardasil nine cost between 400 and 500 dollars for a three dose

vaccination series and Gardasil 9 reached over three billion dollars

in sales in 2018.

With the patent not expiring until 2028 in the U.S.

it could reach billions more, according to analysts.

The price of vaccines is also on the rise because of upgrades to

older vaccines.

In 2001 the MMR vaccine made by Merck sold for 28 dollars a dose.

The 2019 version of the same vaccine sold for seventy five dollars a

dose a separate MMR vaccine that also includes chickenpox sells for

over two hundred dollars.

And like most vaccines the MMR requires multiple doses that can

significantly increase the costs.

Patents actually don't play nearly as big a role as you might think

when it comes to vaccination pricing. With

drugs patent protection is everything. When

a product like Viagra or Lipitor loses patent protection in the U.S.

sales can decline as much as 70 or 80 percent the following quarter.

Vaccines are very different.

Vaccines can have as many as 15 to 20 components that present complex

technical challenges and require multiple patents.

They also require large scale manufacturing facilities with the

ability to produce vaccines in large volume.

In the US, there are no generic or bio similar vaccines currently available.

There are other manufacturers largely based in India and China

who do produce other typical childhood vaccines like polio, measles.

But often their production volumes are directed to their countries

rather than the US.

Essentially, when a big pharma company loses its patent or a combination of patents,

that doesn't mean the market is suddenly flooded with generic competitors.

All four companies saw double-digit gains in vaccine sales in the first quarter of 2019.

And with Merck, vaccine sales saw almost double the percentage growth

of their pharmaceutical sales in 2018.

Every year, 85 percent of the world's children receive vaccines to

protect them against tuberculosis, polio and measles.

Despite this, more than 3 million people die from vaccine-preventable deaths each year.

Even in the U.S., about 100,000 young children have not received vaccinations for any

of the 14 diseases that were recommended.

The U.S. government provides free vaccinations but some families may lack

access to health clinics or don't understand their importance.

People with compromised immune systems could get sick if they receive a vaccination.

And a few are intentionally not vaccinating their children.

In fact, parents in 17 states could opt out of vaccinating their kids

for personal or philosophical reasons.

Over the past decade, the number of Americans who consider vaccines, for

things like polio and measles to be vital to public health, has fallen by 10 percent.

Reported cases of measles is up more than 30 percent worldwide since 2016.

And as of May 2019, there are over 700 cases of measles from 23 states.

The largest number of cases reported in the U.S. since Measles was eliminated in 2000.

In April, New York City Mayor Bill de Blasio ordered mandatory

vaccinations after more than 250 people mostly members of an ultra

orthodox Jewish community contracted the disease.

Some people in the community chose not to vaccinate their children

after they were targeted by anti-vaccination groups.

Today, we are declaring a public health emergency effective immediately.

This will mandate vaccines for people living in the affected area.

Dr. Joseph Kaplovitz, a doctor and Borough Park, Brooklyn said

vaccination rates in the ultra-Orthodox community dropped after

anti-vaccination pamphlets were distributed in the community.

He had a head-to-toe rash. Had very high fever.

It was actually a three month old and they had a sibling that did contract the measles as well.

Those pamphlets say that vaccines are made from ingredients that

include human cells from aborted fetuses, rabbit brain, and monkey kidney.

Even more alarming health officials have condemned measles

parties where parents are gathering unvaccinated children with kids

suffering from the measles in order to infect them. So

they don't understand that a kid with the measles can have a

complication of pneumonia.

They don't understand that there is something called encephalitis with measles that could cause brain damage.

We are seeing these diseases that we have eradicated now are starting to make a comeback.

Limiting an outbreak from a vaccine-preventable disease requires herd immunity.

Basically, if enough people are vaccinated the bugs can't

catch hold and spread through the community protecting those who are unable to get vaccinated.

Merck is the sole supplier of the measles vaccine in the U.S..

The company said that they increased production of the vaccine in the

U.S. to meet an uptick in demand.

U.S. sales of MMR and chickenpox vaccines rose around 10 percent to

$343 million in the first quarter of 2019.

Much of the increase came from sales to private clinics which pay more

than the government for vaccines.

One time consuming and costly element is tracking the infected person

and every person they came into contact with.

A measles outbreak in Washington State in January 2019 prompted the

governor to declare a state of emergency. Of

74 cases reported 60 people who contracted the disease were not vaccinated.

State and local health departments spent more than 1.6 million dollars to quarantine and treat the sick.

And it's not just public health departments that rack up multi-million dollar bills.

In 2017, an unvaccinated 6-year-old boy in Oregon who cut his head and

got tetanus spent two months in the hospital and racked up more than

$800 thousand in medical bills.

Globally some countries are making big gains.

Vaccination rates in Australia climbed after the government

instituted a policy depriving families of a child benefit payment if

their children were not vaccinated.

Cervical cancer there could be eliminated in the next two decades

thanks to vaccination efforts targeting the HPV infection.

In poor countries with severely underfunded health budgets, external

donors and governments often provide critical funding for vaccine

programs. The Bill and Melinda Gates Foundation donated more than 10

billion dollars to help organizations with the aim to increase access

to immunization.

Bill Gates says the gamble is paying off on a couple different levels.

When you take these vaccines get them to be very inexpensive by making

big volume commitments have that right relationship with the private

sector get the delivery system.