Flu INC - A $24 Billion a Year Business

Vaccines were a $24 billion in 2009 with the widespread worry that the H1N1 swine flu would wreak havoc on our health. Vaccines weren't always big business as big pharma would focus on blockbuster drugs to help arthritis, impotence, depression, smoking cessation, high cholesterol, anxiety, etc.

Since the H5N1 avian flu in 2003 became such a big scare, governments around the world became proactive with pandemic planning. This urgency by government shifted the marginal, money-losing vaccine business to a massive commercial opportunity for the pharmaceutical companies.

Between 2004 and 2007, vaccine sales averaged an increase of 32% a year, four times faster than any pharmaceutical product. Analysts predict that global vaccine sales will increase to $40 billion by 2012. This has resulted in huge windfalls for big pharma as nearly 1 billion doses of the H1N1 vaccine was ordered in 2009.

The change is driven by a new approach in government thinking about how to react to future flu pandemic threats. Health officials see the merit of stockpiling vaccines even if the prices per dose are overinflated than in the past.

There is fear from the public that is forcing the governments to adopt this new way of thinking. In 2009, 40% of Canadians got the swine flu vaccine in hopes of limiting the spread of the disease.

Heavy regulations, low margins and a lack of a customer base – governments are essentially the only buyers – left little incentive to produce vaccines. “We were losing money,” said Claude Vezeau, former chief executive officer at Montreal-based IAF BioChem International, Canada's largest maker of vaccines in the 1990s. “All vaccines were losing money.”

After the avian flu outbreak, many countries started countering with a pandemic preparedness plan with stockpiling an abundant supply of the vaccine a centrepiece of that strategy. Considered a cheap insurance policy, many countries adopted similar preventative policies.

Latest estimates peg the cost per vaccine at $1 while governments pay $8-$12 per shot – a ridiculous margin for the pharmaceutical companies. The vaccine market will continue to grow and become more profitable as demand and fear become greater.