The 2 articles published in this issue of Pediatrics by Gary Freed and his colleagues document the prices that 76 pediatric and family medicine practices in 5 states (California, Georgia, Michigan, New York, and Texas) pay for vaccines and how much they are reimbursed by health plans for purchasing and administering the vaccines.1 In addition, the authors successfully surveyed 385 pediatricians and 251 family physicians (a 60% response rate) throughout the country to better understand their attitudes about vaccine reimbursement, whether they are having any financial difficulties purchasing vaccines, and whether they are seriously considering no longer providing all vaccines in their practices.2
The findings will be reassuring, as well as disturbing, to the nation's vaccine policy makers. The findings are reassuring in that current reimbursement levels are not an imminent threat to the vaccine-delivery system. Pediatricians remain committed to continuing to immunize their patients; only 5% of the pediatricians responded that they are seriously considering whether to continue to provide all recommended vaccines in their practice. Pediatricians provide the majority of infants and young children with primary care services and immunizations. On the other hand, many of the other findings have disturbing implications. First, the survey reveals that payments throughout the country for immunization services often do not cover the full costs of immunizing children, which has the potential to undermine the vaccine-delivery system in the future. Second, the survey results suggest that access to immunization services in rural areas is already eroding as increasing numbers of family physicians decide not to provide immunizations. One in 5 family physicians were seriously considering whether to stop providing all recommended vaccines to privately insured children. Many family physicians were not purchasing newer, more expensive vaccines such as the human papillomavirus (HPV) and meningococcal conjugate (MCV4) vaccines because of high vaccine inventory costs and varying levels of insurance. This means that increasing numbers of rural children will be referred to public health immunization clinics rather than receive immunizations in their “medical home,” delaying recommended immunizations. This will lead to rural pockets of underimmunization that are vulnerable to outbreaks of vaccine-preventable disease. Some pediatricians have also decided not to administer some of the more expensive vaccines. Third, although the isolated impact of low vaccine-related reimbursements may be small, the cumulative effects on a system that is already stressed may be more significant, especially over a longer time frame. We have to add the reimbursement impact to the trend of increasing numbers of families that are deciding not to immunize their children, the growing numbers of uninsured and underinsured children related to our current economic difficulties, the weakening of our public health immunization infrastructure, and sporadic vaccine shortages. These challenges must be considered within the context of the high cost of new vaccines and huge federal budget deficit.
The majority of early childhood vaccines are administered by private-practice pediatricians and family physicians who function as small independent businesses. Because well-child care and immunizations are the “core” of private pediatric practice, accounting for between 50% and 80% of patient visits according to our recent work with 10 pediatric practices in Denver, Colorado, immunization services must cover a proportion of practice overhead costs and also make a contribution to “profit.” Vaccine-purchasing costs account for ∼20% of all pediatric practice expenses (Anne Francis, Chairman of the American Academy of Pediatrics Private Payer Advisory Committee, written personal communication, 2008). Maintaining the financial health and solvency of this small-business sector is critical for maintaining our vaccine-delivery capacity.
What is a reasonable reimbursement for purchasing vaccines? The Private Payer Advisory Committee of the American Academy of Pediatrics, in their article entitled “Business Case for Pricing Vaccines and Immunization Administration,”3 advised pediatricians that the total practice costs of immunizing patients is greater than the vaccine purchase costs and that vaccine reimbursement (excluding the administration fee) should be at least 17% to 28% above the purchase price of the vaccine. These additional costs, which need to be considered, include expenses related to ordering, inventory control, storage, additional equipment needs such a refrigerators and back-up generators, wastage, and insurance, as well as general overhead. There are also the lost-opportunity costs of funds that are needed to purchase vaccines.
How well are physicians being reimbursed for purchasing vaccines? Study findings documented that vaccine pricing is related to the amount of the order; larger practices and those participating in purchasing cooperatives or buying groups usually received lower prices than smaller practices that did not participate in purchasing groups. Many physicians felt that their margin on vaccines was being reduced by the health plans. According to the study, 1 in 5 physicians reported a >20% decrease in vaccine profit margin during the previous 3 years. How do the data reported in the study compare to the American Academy of Pediatrics recommendation that vaccine reimbursement be at least 17% to 28% above the purchase price? Using mean values reported in the study, 5 vaccines were reimbursed at <10% above their purchase price (M-M-RII, Varivax, Prevnar, RotaTeq, and Menactra), and an additional 4 vaccines were reimbursed at <18% above their purchase price (Boostrix, Adacel, Gardasil, ProQuad, and PedvaxHIB). Only 8 vaccines were reimbursed at >28% above their purchase price. The authors also report that “[f]or 15 of the 21 specific vaccines analyzed, ≥1 practice reported that the vaccine purchase price exceeded the most common payer reimbursement.” Small practices, the situation of which is not appreciated when analyzing mean reimbursements, are likely to be affected disproportionately by low reimbursements. These practices may be very important to vaccine delivery in their communities.
Given the findings of these 2 studies and potential of low vaccine-related reimbursements to destabilize our private vaccine-delivery system, what are some options for addressing this problem? Because pediatricians are caught between pharmaceutical manufacturers and health plan payers, strategies should address reducing the price of vaccines (and other vaccine-related practice costs) and increasing reimbursements. The most feasible way to reduce price is to participate in private large-volume vaccine-purchasing cooperatives or pools. One interesting option that warrants additional study is the establishment of private state-based pools that encourage the participation of all pediatricians and family physicians who administer vaccines in the state. The private ordering and distribution could be integrated with the Vaccines for Children (VFC) program through the state immunization information system (state registry). In this way physicians would benefit from both lower prices and less administrative and inventory expenses. An alternative would be to allow and encourage pediatricians in private practice to participate in the vaccine-purchasing cooperative of their local or regional children's hospital or possibly national professional societies. In general, the larger the purchasing power, the lower the price that can be obtained. Of course, universal purchase at the state or federal level creates the most purchasing power, but the pharmaceutical industry has long opposed this for reasons that were presented in the Institute of Medicine publication Financing Vaccines in the 21st Century: Assuring Access and Availability4 and that I have reviewed in a previous commentary.5
Strategies for encouraging health plans to increase vaccine reimbursements are more complicated. The American Academy of Pediatrics has tried for many years to provide pediatricians with the information and tools they need to negotiate more beneficial contracts with health plans related to vaccines. The academy has also met with leaders of national health plan associations and the medical directors of the largest national health plans to discuss vaccine-related issues. Despite evidence that immunizations are the best preventive care intervention in medicine and despite the inclusion of immunization rates in Healthcare Effectiveness Data and Information Set measures, reimbursement levels remain low. The market does not seem to be responding well to the public health immunization needs of our country.
Recognizing that unregulated markets can cause widespread problems for our financial system, there seems to be an emerging consensus that government should intervene to set rules for “prudent behavior” to serve the national interest. Immunizing America's children is not simply a business decision that should be left to open markets so that health plans can maximize their profits. If public and private health plans do not act quickly enough to increase vaccine reimbursements on their own, federal and state regulatory legislation should be considered to ensure that vaccine reimbursement provides an incentive rather than disincentive to immunize. The failure to address these issues now will make it much more challenging to deal with the problems that low vaccine reimbursement will cause in the future. We cannot afford a “meltdown” of our vaccine-delivery system during the next decade. To avoid this, we need increased monitoring and transparency of how our delivery system is functioning to recognize problems at an early stage so that appropriate corrective actions can be taken. These studies reported in Pediatrics are a good first step in this monitoring process.
- Accepted September 26, 2008.
- Address correspondence to Stephen Berman, MD, University of Colorado School of Medicine, Children's Hospital, Department of Pediatrics, 13123 E 16th Ave, B032, Aurora, CO 80045. E-mail:
The author has indicated he has no financial relationships relevant to this article to disclose.
Opinions expressed in these commentaries are those of the author and not necessarily those of the American Academy of Pediatrics or its Committees.
- ↵Freed GL, Cowan AE, Gregory S, Clark SJ. Variation in provider vaccine purchase prices and payer reimbursement. Pediatrics.2008;122 (6):1325– 1331
- ↵Freed GL, Cowan AE, Clark SJ. Primary care physician perspectives on reimbursement for childhood immunizations. Pediatrics.2008;122 (6):1319– 1324
- ↵American Academy of Pediatrics, Private Payer Advisory Committee. Business case for pricing vaccines and immunization administration. Available at: http://practice.aap.org/content.aspx?aid=1808. Accessed September 5, 2008
- ↵Institute of Medicine, Committee on the Evaluation of Vaccine Purchase Financing in the United States. Financing Vaccines in the 21st Century: Assuring Access and Availability. Washington, DC: National Academy Press; 2003
- ↵Berman S. Do we need a structural engineer to redesign our vaccine infrastructure? Pediatrics.2003;112 (3 pt 1):671– 672
- Copyright © 2008 by the American Academy of Pediatrics