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ABC News

Drugmakers, Doctors Rake in Billions Battling H1N1 Flu

Swine Flu Is Bad for Victims, But Good for Businesses That Cater to Expanding Market

Dalia Fahmy

(ABC News)

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.

Drug makers pocket most of the revenues from flu sales, with Sanofi-Pasteur, Glaxo Smith Kline and Novartis
cornering most of the market. But it's not just drug makers who stand
to benefit. Doctors collect copays for injecting shots and use them to
cover office expenses and insurance. Pharmacies also charge co-pays 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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The promise of profits has attracted new players into the
business. Some of the world's largest drug makers, who in the past
avoided the vaccine market because of its limited scope -- its not easy
to convince healthy adults to get a shot for measles -- are now jumping
into the fray.

Last month alone saw three large vaccine deals. Abbott Labs bought a Belgian drug business, along with its flu vaccine facilities, for $6.6 billion. JJohnson & Johnson invested $444 million in a Dutch biotech firm that makes and develops flu vaccines. Merck, which already makes vaccines for singles and other diseases, struck a deal to distribute flu shots made by Australian CSL.

Smaller biotechs are also angling for a slice of the action,
making vaccines one of the fastest-growing areas of research in the
biotech industry.

Large and small drug makers are drawn to the business largely
because of scientific advances which promise to radically expand the
range of health problems that vaccines can address. In addition to
preventing childhood diseases such as measles and polio, vaccines can
now also ward off cervical cancer, and researchers are working on
vaccines for HIV and tuberculosis.

Scientists believe they can create therapeutic vaccines than
treat diseases such as Alzheimers and diabetes after they have set in.
(At least one company is betting on a vaccine that helps cigarette
smokers quit.)

"These innovations broaden the market potential for vaccine
makers and party explained the renewed interest by drug makers," says
Anthony Cox, a professor at Indiana University's Kelley School of
Business who specializes in the marketing of medical products.

Alternatives to Vaccines Are Few

While this promise of new treatments for painful diseases brings hope to many, vaccines continue to attract critics. The National Vaccine Information Center,
a non-profit advocacy group, is at the forefront of a movement
demanding that vaccines be tested more thoroughly before hitting the
market. Although there has been little evidence to support their claim,
detractors -- including the comedian Jim Carey -- believe that vaccines
are at least partly to blame for the sharp rise in autism in recent

The swine flu vaccine has also attracted its share of critics.
Frank Lipman, a New York-based doctor who specializes in a mix of
Western and alternative medicine, points out that the swine flu is
rarely fatal and that it's too early to tell if it's safe because it
hasn't been widely tested.

Others argue that Americans have little choice. The cost of a
widespread pandemic, similar to Spanish Flu outbreak in 1918 which
killed 675,000 Americans (and 50 million worldwide), would be
devastating. The Trust for America's Health, a Washington-based
non-profit organization, estimates that a severe pandemic could push
down GDP by more than 5 percent and cost Americans $683 billion.

"Were not seeing a pandemic that's this severe," says Jeff Levi, director of Trust for Americas Health. "We've dodged a lot of bullets."

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