The COVID-19 pandemic has catalyzed a sustained, global focus on vaccines, driving breakthrough innovation and diversification in the traditionally consolidated vaccine industry. As a result, manufacturers are beginning to more critically assess how they can shape their portfolios to move ahead of increasing competition. This evolution raises a key question for new entrants and more established vaccine players alike: How can companies drive greater value across their vaccine offerings?
While historically the U.S. market has been highly consolidated among four multinational manufacturers (GlaxoSmithKline, Merck, Sanofi and Pfizer represent more than 80% of annual sales, according to Evaluate Pharma), the COVID-19 pandemic has reshuffled this landscape. The vaccine market has now become one of the most competitive spaces in pharma, with increased pressure from both new entrants with differentiated technology platforms (such as Moderna’s mRNA portfolio and Dynavax’s adjuvant offering) and low-margin, high-volume global players (such as Serum Institute of India, Bharat Biotech and Sinovac).
While the U.S. has always been a key market to win, it is becoming vital for multinational players, as global markets are tasked with securing a nationalized vaccine manufacturing capacity in the aftermath of the COVID-19 pandemic. With the number of marketed vaccine products expected to double over the next five years and competition coming from new entrants and local players alike, identifying ways to drive value across a U.S. vaccine portfolio is critical to long-term success.
We highlight five considerations that will help pharma companies optimize their vaccine portfolios for the U.S. market and drive an effective U.S. portfolio strategy, based on industry trends and our interviews with expert decision-makers.
Vaccine products tend to be highly commoditized (aside from those that address COVID-19). They are characterized by low consumer brand recognition, minimal price variations between competing products, smaller profit margins and the proliferation of bundling in the U.S. market. Outside of the much-publicized COVID-19 vaccines, healthcare personnel and consumers rarely differentiate between vaccine manufacturers and are unlikely to know the differences among their options. Because consumers have limited understanding of and lack the willingness to pay for clinically differentiated vaccines, a portfolio approach is more important in the vaccine space than in other pharma segments.
Given these dynamics, vaccine purchasers play a critical role in determining which shots ultimately end up in patients’ arms. In a 2022 ZS market research study, 12 vaccine-purchasing decision-makers (including VPs of operations, chiefs of pharmacy and directors of procurement and contracting at some of the largest pharmacies, integrated delivery networks [IDNs], group purchasing organizations [GPOs] and U.S. public buying channels) overwhelmingly cited price and associated commercial contracting terms, convenience of administration and supply availability as the most influential factors in their choices among competing vaccine products.
Differences in clinical profiles among the multiple options were described as having a lower impact on purchasing decisions. These decisions are often made at the portfolio level, where purchasers can receive benefits such as discounts, rebates and preferential buyback terms for committing to purchase a specific share or number of doses across a vaccine manufacturer’s brands. Those incentives play a major role in decision-making and can influence purchasers to stock vaccines with slightly inferior clinical profiles to fulfill a commercial bundling agreement.
Offering a best-in-class vaccine product is not necessarily sufficient to capture the U.S. market, particularly where competition is robust. Consider for instance the competition to provide rotavirus vaccines between Merck (RotaTeq) and GSK (Rotarix). While the two vaccines offer similar clinical efficiency, GSK’s Rotarix has a shorter dose schedule for a superior overall product profile. But Merck has been able to capture significantly higher market share (according to Evaluate Pharma, sales by revenue), through contractual provisions that require physician buying groups (PBGs) to pay increased fees on Merck’s broader vaccine portfolio, should they opt out of purchasing RotaTeq. In this case, a more complete portfolio offering was key to locking in share against competitors.
The evolution of vaccine bundling segments is an area ripe for further exploration. Vaccine manufacturers currently bundle their pediatric offerings discretely from their adult offerings; joint bundles that comprise vaccines for both age segments are a worthy area for experiment. And as pipelines grow, manufacturers may begin to differentiate themselves by offering bundles specific to therapeutic areas (such as respiratory) across age ranges.
Decision-makers’ purchasing needs should more directly influence not only a company’s commercial strategies, but also its portfolio development decisions. Vaccine manufacturers have traditionally framed their strategies around therapeutic areas or consumer groups, such as the pediatric and adult populations, or at-risk populations for specific diseases. While understanding both the consumer’s journey to care and the perspectives of healthcare personnel continues to be important, we propose broadening focus toward a third constituency: customer buying groups. We define customer buying groups as the main decision-makers who purchase vaccines for large retail chains, IDNs, GPOs, PBGs and government purchasers such as the Veterans Health Administration and the Department of Defense.
Each of these buyers has unique purchasing preferences that drive them toward manufacturers practicing different portfolio strategies. Consider, for example, the differences between retail pharmacies and IDNs. Retail pharmacies are generally not able to offer pediatric vaccinations (although regulations vary state-to-state) and tend to attract buyers through the convenience they provide, making them a popular destination for seasonal respiratory vaccines and adult travel vaccines. Volume-based sales contracts may therefore make sense for these pharmacies: The consolidation among a few major U.S. retail players positions them to purchase large volumes from multiple manufacturers, ameliorating the risk of supply shortages. By comparison, because IDNs need to have vaccines on hand for consumers of all ages, they may prefer to engage in value-based contracting with manufacturers that can commit to supply guarantees. IDNs will also have less trouble than retail pharmacies tracking purchasing data to confirm compliance with contracting terms.
A single manufacturer will have difficulty meeting the needs of all buyers equally. Prioritizing specific customer buying segments is vital to achieve long-term growth ambitions, as is developing tailored strategies for engagement with these segments.
Decision-makers are primarily persuaded to choose vaccine offerings based on price, contracting terms and convenience of administration. They tend not to notice differences in efficacy and immunogenicity unless those differences result in a preferential recommendation by the Advisory Committee on Immunization Practices (ACIP). Purchasers and healthcare providers (HCPs) lack the time to analyze large bodies of product data while attending to patient care and administrative needs. These decision-makers generally defer to ACIP’s guidance: Customer buying groups will prioritize ACIP’s recommendations even when they represent the more-expensive option between competing vaccines but will not otherwise prioritize clinical differences that ACIP has not highlighted as meaningful.
ZS’s study of executive-level decision-makers at key customer buying groups revealed cost and commercial contracting terms, as well as convenience of administration, as the most important factors in vaccine-purchasing decisions. These factors were consistent across all customer segments. Clinical profile tended to play a secondary role in decision-making, even between vaccines with significant differences, including variations in efficacy greater than 20% or longer dose schedules.
In an environment of rising healthcare costs and increased pressure to contain spending, purchasers are more focused on providing affordable vaccines and maximizing HCP patient coverage. These pressures are leading purchasers toward lower-cost vaccine options that are more convenient to administer, minimizing expenses and prioritizing care.
New technologies, such as mRNA, are a secondary factor to decision-makers, unless the advances translate into significant differences in patient outcomes and lead to a preferential ACIP recommendation.
Many vaccine manufacturers are looking to follow in the footsteps of Moderna and Pfizer’s successful mRNA vaccine launches during the COVID-19 pandemic. This technology delivers substantial clinical benefits, including the potential to develop and manufacture vaccines more quickly while covering new disease targets. It is already playing a significant role in accelerating R&D of new vaccines in a variety of disease areas—a major achievement for public health.
But regardless whether mRNA or similar platforms reach the potential that researchers hope for, vaccine decision-makers noted in ZS’s study that they do not tend to be influenced by new technologies. Until new platforms produce substantial differences in clinical profiles, cost and convenience remain the priority for these purchasers.
Manufacturers are increasingly shifting focus toward a major public health opportunity—increasing adult vaccination, particularly against respiratory diseases. Vaccine awareness has never been higher than it is today, but unfortunately, the COVID-19 pandemic has also catalyzed the growth of vaccine hesitancy among adults in the U.S. Adult immunization rates fell by an average of 32% from January 2020 through July 2021, leading to approximately 27 million missed doses. Vital to adoption will be driving vaccine awareness with HCPs and consumers and overcoming vaccine hesitancy among adults, where coverage is lower than it is for children. New guidance from the Centers for Medicare & Medicaid Services (CMS) gives cause for optimism, as it aims to increase reimbursement for vaccination administration fees and to change quality measures to incentivize greater adult vaccination.
Additionally, given the magnitude of public health need and market opportunity, vaccine manufacturers have shifted their strategies to drive greater coverage in the adult respiratory space. The sheer size of the market for annual flu vaccinations makes vaccine manufacturers’ renewed focus on the adult segment unsurprising. Comirnaty and Prevnar, among the largest vaccines by revenue on the market today, represented 38.6% of U.S. vaccine sales in 2021 and drove 52.5% of Pfizer’s annual revenue in the same year (Evaluate Pharma, sales by revenue).
Successfully tapping into this market will require overcoming vaccine hesitancy through coordinated disease awareness and uptake campaigns, in coordination with behavioral science experts. The ZS Cognitive team conducted multiple vaccine hesitancy research studies in 2021 and 2022. These studies identified the cognitive processes most responsible for vaccine hesitancy, and how different nudges could be used to overcome the hesitancy in specific patient segments (adults, parents vaccinating children or adults getting boosters). Because of the large number of companies investing in this space, manufacturers will also need to consider how to differentiate their offerings.
Faced with increasing competition from new entrants and more established competitors alike, vaccine manufacturers need to adapt their portfolio offerings to stay ahead of the market. Investing in assets that provide portfolio synergies for specific customer buying groups while designing valuable contract offerings that are easily administrated can help manufacturers to drive a successful strategy.
Based on ZS’s findings, making major differences in a vaccine’s clinical profile more easily identifiable to HCPs and purchasers may help manufacturers achieve greater uptake of their portfolio components, as woud driving value recogniztion by ACIP in the context of providing the right localized evidence for best-in-class clinical products. And as pipeline activity shifts toward adult patients, increasing disease awareness and vaccine uptake through effective campaigns and behavioral changes will be critical.
New entrants can use these strategies to design their portfolios as they develop and acquire new assets and to define commercial offerings in each market. More established players can likewise apply these takeaways to evolve their existing portfolios, making strategic trade-offs to maintain competitive advantages over impending competition. We recommend that vaccine manufacturers approach their portfolio designs more intentionally, beginning by reassessing their current offerings and identifying opportunities for greater focus both within their vaccine portfolios and in adjacent spaces, such as diagnostics, monoclonal antibodies (mAbs) and therapeutics.
Acknowledgments: Thank you to Howard Deutsch, Fatima Dilruba, Clement le Royer and Akshita Grover for contributions to this work.