Vaccines

1
Effectively Utilizing Vaccine Stockpiles
Presentation to NVAC Phil Hosbach, Vice
President, New Products and Immunization
Policy sanofi pasteur January 24, 2005
2
Effectively Utilizing Vaccine Stockpiles

• Agenda
• Importance of Pediatric Stockpiles
• Overview of Pediatric Stockpiles
• History of Supply Interruptions
• Contracts/Funding
• Other Issues associated with Stockpiles
• Current Developments Revenue Recognition Issues
• Options to Resolve Stockpile Challenges
• Stakeholder Report Card Update from February
  2002 NVAC Meeting

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Importance of Pediatric Vaccine Stockpiles
The national vaccine stockpile program appears
to be the most advantageous short-term solution
to prevent future shortage crises. NVAC 2003

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Importance of Pediatric Vaccine Stockpiles

• Vaccine enterprise stakeholders agree that
  pediatric vaccine stockpiles need to be in place
• Minimize impact of supply interruptions
• Prepare for pandemic scenarios
• Goal is to maintain a 6-month supply of all
  routinely recommended pediatric vaccines funded
  by VFC

5
Supply Interruptions Routinely Recommended
Pediatric Vaccines
Source Strengthening the Supply of Routinely
Recommended Vaccines in the U.S., 2003
6
Stockpiles Important for Existing and Pipeline
Products
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Brief Overview of Stockpile Contracts

• Historically, CDC took title and paid for vaccine
  when it was delivered into stockpile
• CDC solicits a bid and industry responds
• CDC purchases product
• Vaccines stored by manufacturer
• Product is segregated in warehouse and rotated to
  maintain freshness and reduce wastage
• Manufacturer responsible for vaccine rotated out
  of stockpile
• For more than 20 years, sanofi pasteur contracted
  with CDC to maintain certain pediatric vaccine
  stockpiles

8
Congress Appropriated Resources

• In 1982, CDC received its first Congressional
  appropriation of 4.6 million to stockpile a
  supply of MMR, OPV, DT and DTP
• CDC indicated that stockpiles have been used on 9
  occasions since 1983 to alleviate vaccine supply
  interruptions
• FY 2003, CDC allocated 171 million to expand
  national stockpile program to include all
  routinely administered vaccines
• According to CDC, President requested 707
  million for FY2003-2006 for 6 month stockpiles

Source Strengthening the Supply of Routinely
Recommended Vaccines in the U.S., 2003
9
Current Developments Revenue Recognition Issues

• Between 1982 and 1999 revenue recognized when
  orders fulfilled
• In 1999, the Securities Exchange Commission
  issued Staff Accounting Bulletin 101 SAB101
• Intended to identify criteria for revenue
  recognition
• After reviewing SAB101, vaccine industry auditors
  concluded that CDC stockpile contract language
  falls into a bill and hold sale
• As a result, industry auditors interpreted that
  not all conditions necessary for revenue
  recognition (upon delivery into stockpile) have
  been met
• Industry may no longer recognize revenue for
  building and maintaining the stockpiles
• Revenue can only be recognized upon delivery to
  end-users
• Under this scenario, firms may never recognize
  revenue

10
Current Developments RevenueRecognition Issues

• Important to match revenue from stockpile sales
  with significant expenses/resources incurred and
  to manufacture vaccines to be delivered and
  maintained in stockpiles
• To resolve stockpile issue, numerous discussions
  with key agencies have occurred during past two
  years with modest results

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How Can We Move Stockpile Issue Forward?

• Profound implications exist for public health and
  emergency pandemic preparedness
• All stakeholders need to support prompt
  resolution of this matter to ensure that a robust
  stockpile program is established

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Recommended Options to Resolve Stockpile Issue

• Policy Options
• Option 1 SEC allows revenue recognition upon
  delivery of product into stockpiles as an
  acceptable method of accounting
• Option 2 Restructure current agreement format
  between manufacturers and CDC

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Other Issues To Be Resolved ToStrengthen
Vaccine Stockpile Program

• Need to effectively balance between single entity
  and combination products
• Draw downs on stockpiles need to be done in
  manner that balances public health and does not
  undermine market distribution
• During stockpile contract period, newer/more
  expensive product rotated into stockpile at the
  original contract price

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Stakeholder Report Card Update from February
2002 NVAC
15
Ten Proposals for a More Robust Vaccine Supply
Report Card
Presented at February National Vaccine Advisory
Committee Meeting February 11 12, 2002