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The Social Value of Childhood Vaccination in the United States
Tomas J. Philipson, PhD; Julia Thornton Snider, PhD; Ayman Chit, PhD; Sarah Green, BA; Philip Hosbach, BA; Taylor Tinkham Schwartz, MPH; Yanyu Wu, PhD; and Wade M. Aubry, MD
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The Social Value of Childhood Vaccination in the United States

Tomas J. Philipson, PhD; Julia Thornton Snider, PhD; Ayman Chit, PhD; Sarah Green, BA; Philip Hosbach, BA; Taylor Tinkham Schwartz, MPH; Yanyu Wu, PhD; and Wade M. Aubry, MD
Vaccination of children born in the United States in 2009 will save 1.2 million quality-adjusted life-years, generating $184 billion in social value net of vaccination costs.
ABSTRACT

Objectives: To determine the lifetime social value of using the guideline-recommended vaccines for children born in the United States in 2009. 

Study Design: This study utilized an economic model with parameter values sourced from clinical and observational data, as well as the literature. 

Methods: The model quantified the health effects of routine vaccination for 14 diseases in terms of quality-adjusted life-years (QALYs) saved. The health effects were then valued by applying an economic value of a QALY. Producers’ profits were estimated using data on vaccine prices, profit margins, and the number of vaccines administrated in the 2009 US birth cohort. The costs of producing the vaccines were subtracted from the value of the health effects to yield the total social value of vaccination. The producers’ and consumers’ shares of this social value were calculated. Sensitivity analyses were conducted to determine how results depend on underlying parameter assumptions. 

Results: Estimates indicated that vaccination of this cohort will save 1.2 million QALYs, relative to no vaccination. Of those health gains, 88% stemmed from reduced mortality and 12% from reduced morbidity. We estimated a social value of $184.1 billion from these gains, of which $3.4 billion accrues to manufacturers as profits, while $180.7 billion accrues to the rest of society. In sensitivity analysis, the total social value ranged from $40 billion to $675 billion, and the manufacturers’ share ranged from 0.3% to 11.5%. 
 
Conclusions: Policy makers should account for this social value when considering policies affecting incentives to vaccinate and develop new vaccines.

Am J Manag Care. 2017;23(1):41-47
Take-Away Points

  • By preventing illness and premature deaths, vaccination of children born in the United States in 2009 will generate $184 billion in lifetime social value above the costs of the vaccines. 
  • Because saving a child’s life yields many healthy life-years, the large majority (88%) of the health benefits of vaccines is due to avoided premature deaths rather than reduced morbidity (12%). 
  • The high social value of vaccines has improved population health and provided economic benefit to multiple stakeholders, including patients, health plans, and vaccine manufacturers, whose profits in this cohort amount to approximately 2% ($3.2 billion) of the total social value.
The innovation of childhood vaccines has resulted in a decline in infectious disease, as well as gains in length and quality of life. Smallpox has been eradicated, poliomyelitis is nearly eliminated, and many other vaccine-preventable diseases have seen declines in incidence.1-3 Although adverse events (AEs) can occur with vaccines,4-7 and recent research has focused on their rising costs,8-10 the postvaccine era has seen life expectancy increase 15 to 25 years compared with the pre-vaccine era, and further gains are expected.3,11 Evidence suggests a large share of these survival gains is due to the control of infectious disease through vaccination.3

When encouraged by public health policies, vaccination also provides a benefit to government and private payers by reducing overall costs and increasing population health. The CDC has cited evidence that common childhood vaccinations save over $5 in direct medical costs and effects on productivity for every $1 spent.12 Maciosek and colleagues found that preventative childhood immunization produced annual net medical savings of $267 per person.13 Vaccination also generates community (herd) immunity by reducing disease incidence and transmission, thus resulting in a healthier population.14

Because vaccines have been successful at preventing disease, the public is no longer regularly confronted with many vaccine-preventable diseases, and the health and economic benefits of vaccination may be underappreciated.15 As childhood vaccines have reduced disease prevalence, real and perceived AEs of vaccination have become more salient to parents than the vaccine-targeted diseases.16,17 Consequently, vaccination rates in many US states have declined in recent years.17 As vaccination rates slip, the risk of new outbreaks increases.18

Moreover, although consumers are insulated from the cost of many vaccines, vaccine cost is an important consideration for payers and providers and has been criticized.19 This focus on AEs and costs has obscured vaccines’ overall value to individuals and society. Previous research has yet to show how the total social value of vaccines is divided between innovators who develop these technologies and patients and the broader society who benefit from them. Therefore, in this study, we sought to measure the social value of childhood vaccines in the United States and the distribution of that value to manufacturers versus the rest of society.

The concept of social value of therapies and its distribution between manufacturers and patients has been described in other disease areas. For instance, Grabrowski et al found that statin usage resulted in a social value of $1.25 trillion, of which patients received 76%.20 Yin et al performed a similar analysis on tyrosine kinase inhibitors for the treatment of chronic myeloid leukemia and found a social value of $143 billion—90% of which was retained by patients.21 Recent gains in cancer survival have provided $1.9 trillion of additional social value, with 81% to 95% of that being retained by patients.22 Lastly, HIV/AIDS therapies have generated $1.38 trillion in social value, with 95% accruing to patients.23 Such analyses are net monetary benefit analyses, which is a common economic way of thinking about value which is distinct from cost-effectiveness analysis. The aim is to measure the total value a given health intervention generates for society, and how that value is distributed across patients and manufacturers.

This study applied similar methods to determine the social value of childhood vaccines for a birth cohort in the United States. Consistent with previous research, social value was defined from an economic perspective as the quantity of resources, in monetary terms, that society would be willing to give up in order to retain the health gains attributable to vaccines. Put another way, the overall social value of vaccines equals the aggregate value retained by consumers (above the actual payments for vaccines) plus the value retained by manufacturers (in the form of vaccine profits). We decomposed the social value into the shares accruing to manufacturers versus the rest of society. For infectious diseases, the social value includes not only those vaccinated, but also those not vaccinated who benefit from the reduction in disease incidence.15

METHODS

Overview


The study entailed constructing an economic model based on observational and clinical data. The model calculates the social value of the routine pediatric vaccination schedule used in the United States in 2009. We do so by quantifying the health effects of routine vaccination of children born in the United States in 2009. In particular, vaccines to prevent the following 14 diseases were considered: congenital rubella syndrome, diphtheria, haemophilus influenzae type b (Hib), hepatitis A, hepatitis B, measles, mumps, pertussis, pneumococcus-related diseases (including pneumococcal disease, otitis media, pneumonia, and meningitis), polio, rotavirus, rubella, tetanus, and varicella. The influenza vaccine was not included because its changing seasonal nature would have required different methods.

The social value was estimated by applying an economic value to the health effects of vaccines, measured in terms of quality-adjusted life-years (QALYs) saved through vaccination. QALYs take into account both duration and quality of life. A year in perfect health would be measured as 1 QALY, whereas death counts as 0. From the value of the QALYs gained, the costs to produce vaccines were subtracted. This yielded the social value—or in economic terms, the total surplus—of vaccines, and represents the economic value of the health gains from vaccines minus the resources society spent to produce them. The shares of the total surplus accruing to manufacturers (producer surplus) versus the rest of society (consumer surplus) were also calculated.

It should be noted that vaccine-preventable illnesses impose additional costs on society beyond the utility loss infected individuals experience, including caregiver utility loss and the use of special services for persistent disability. Therefore our estimate of the health value of vaccination should be considered a lower bound.

In addition, one should exercise caution in interpreting the results of this framework for rotavirus, since in industrialized countries like the United States, the costs of rotavirus are mainly hospitalization and caregiver utility loss, as rotavirus mortality and morbidity are lower in the industrialized setting. In contrast, many of the other studied vaccines target illnesses that imposed a high mortality and morbidity burden in the pre-vaccine era.24

Data Sources

According to the CDC, 4,130,665 children were born in the United States in 2009.25 The health effects of vaccination in this cohort were estimated by combining data from the literature with life tables from the Human Mortality Database.26 From the literature, we obtained for each disease data on cases of illness prevented, premature deaths avoided, average age of onset, average age at death from the disease, average duration of disease, and utility loss. Specific parameter values and sources are available in the eAppendix (eAppendices available at www.ajmc.com). The survival benefits of vaccination were net of adverse reactions to vaccination. To obtain the economic value of a QALY, we considered values generated by revealed and stated preference studies.27,28 A mid-range value of $150,000 was used and varied in sensitivity analysis.

Estimating manufacturers’ profits required 3 types of data: 1) data on vaccine prices, 2) data on manufacturers’ profit margins, and 3) data on the number of vaccines administered in the 2009 US birth cohort. We obtained data on prices (available in the eAppendix) from the CDC Vaccines for Children Program website, which contains archived data on public and private vaccine prices from 2008 to 2015.29

We obtained data on vaccine manufacturers’ profit margins from annual reports and financial statements. When measuring manufacturers’ profits, we used the gross profit margin, which represents the sales volume minus production costs. Obtaining a companywide average across the top 5 vaccine manufacturers produced an average gross profit of 75%.30-34 This is a conservative approach, as gross profits do not subtract out manufacturer research and development (R&D) and marketing expenses. By using the gross profit margin, we can view vaccines’ social value as society’s benefit from vaccination, and society’s investment in R&D as the cost of inventing and developing the vaccines. (Subtracting R&D from profits would negate this framing.) This framing is useful because investments should be undertaken when the benefits (ie, the return on investment) exceeds the cost; social value is an important part of this equation. Moreover, R&D costs include the costs of many failures that the innovator encountered on the way to the given successful product; there is not an established method for measuring R&D costs for vaccines.

To estimate the number of vaccines administered, we required data on vaccine coverage rates, dosage schedules, wastage, and the cohort size. Following previous work, we assumed that 53% of vaccine doses were publicly (vs privately) administered and the wastage rate—the rate at which additional vaccines must be purchased beyond those needed for each vaccinated child because some vaccines will be unused—was 5%.35 We obtained vaccination rates,36 the recommended vaccination schedule,37 and the size of the cohort25 from the CDC. Doses administered between ages 0 and 18 were included, but the costs of any adult booster doses were excluded. Given that any adult booster doses occur many years into the child’s life, whereas the lives saved and illnesses avoided from vaccination are realized mainly in early childhood, the effect of the focus on childhood doses should be minimal.

Analysis

The 3 analytic steps are described broadly below. Additional detail is provided in the eAppendix. Throughout the analysis, monetary values were inflation-adjusted to 2014 US dollars using the Consumer Price Index,38 and an annual discount rate of 3% was applied.

Step 1: Value Health Effects of Vaccination

The health effects of vaccines were calculated by summing the changes in morbidity and mortality among the 2009 US birth cohort due to vaccination. The mortality effects were calculated as the number of deaths averted from vaccination multiplied by the QALYs the typical child would lose from dying of the given disease (calculated as average life expectancy minus average age at death from the given disease times aged-adjusted utility). The morbidity effects were calculated as the number of cases of illness prevented through vaccination times the typical duration of illness times the disutility from the given illness. The health effects of vaccines in QALYs were then converted to economic terms by valuing each QALY at $150,000.39-41 This yielded the economic value of the health effects of vaccination.

Step 2: Estimate Manufacturers’ Profits

 
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