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The Great Swine Flu Mystery


It's a bonanza! At least that is how some describe the drug industry's expected windfall from the swine flu pandemic as it prepares to cash in on what could be the most widespread winter flu season for a generation.

The H1N1 outbreak will certainly be good news for the pharmaceutical groups, but just how good remains a mystery as the firms supplying the vaccines and treatments, and the governments buying them, refuse to give details on how much it is all costing.

GlaxoSmithKline yesterday said various governments had placed orders for another 149 million doses of Pandemrix, its newly approved vaccine, taking the total number of orders to 440 million doses. At the same time Japan confirmed orders of enough GSK and Novartis-made vaccine to treat 50 million people.

GSK charges countries on a sliding scale, from €7 (£6.48) a dose for the most developed, to less for emerging nations. While the company will not say how much it expects to earn from swine flu, analysts put the figure at between £1bn and £3bn. GSK has also agreed to give the World Health Organisation 50 million free doses.

However, Savvas Neophytou, an analyst at Panmure Gordon, points out that longer-term revenues could be higher. "The issue is more what companies like GSK, which generates revenues of $40bn (£25bn), will make in the longer term. There will be the windfall from the H1N1 pandemic, but the outbreak is likely to put pressure on governments to stockpile treatments and vaccines. That is more likely to provide the drugs companies with recurring revenues, and it is that that has got the investors more excited."

However, the drugs companies are reluctant to give details on how much they will make and, in the UK especially, the numbers are shrouded in mystery. GSK, and another vaccine maker, Baxter, have sold enough vaccine to the Government for two doses per person, the recommended supply, for almost the whole population.

The two companies will not say how much they have each sold, however, or how much the UK taxpayer is paying. GSK is known to have given the British Government a discount, but will not reveal the amount. The Department of Health is equally silent. "We cannot divulge the figure for the actual vaccine procurement as it would violate confidentiality clauses in our contracts. The manufacturers have quite reasonably insisted on these as if it is possible to calculate the amount per unit we paid for vaccine it could prejudice their negotiations with other countries," a DoH spokesman said.

GSK also refuses to say how many different governments have ordered vaccine, adding that some of those announced yesterday were second requests from administrations that had already asked for doses.

But it is not just GSK and the Department of Health that are secretive about the economics of swine flu. The Swiss pharmaceutical company Novartis is equally unwilling to give out information. A spokesman yesterday said it would only give details where the governments buying its vaccine had agreed to the disclosure. The group confirmed that it would get $979m from the US, but would not say how many doses it had ordered. France has ordered 16 million doses, for an undisclosed amount, while Switzerland had placed orders, but for an undisclosed number of doses, and for an undisclosed amount. Sanofi-Aventis also refused to give details that had not been published by governments, adding, "we see H1N1 vaccine production as a public health challenge, not as a business opportunity, although it will boost our revenues this year and next". Baxter, the US group that along with GSK is supplying the UK with vaccine, simply says it refuses to discuss pricing.

In the UK this has led to calls for an inquiry into how the contracts were negotiated. Norman Lamb, the Liberal Democrats' health spokesman, wrote to the National Audit Office in July asking if the contract with GSK represents value for money. The National Audit Office has replied, says Mr Lamb, and is broadly happy with the deal. The Taxpayers' Alliance has also said it intends to investigate the agreements.

GSK hit back at any allegations of profiteering. In July, its chief executive, Andrew Witty, refused to apologise for the swine flu revenues, adding that sales of the group's flu treatment, Relenza, had rocketed from £57m last year to more than £600m since the outbreak of the virus. "Swine flu is going to be positive for performance, but only because we have put ourselves in a position to do it. And we have done that by taking very significant risks over a long time, diverting a huge amount of resource to it and doing the research that nobody else has done, so I'm not going to apologise for the fact that the company is going to make a return," he said.

The UK ordered 10.5 million doses of Relenza, while Roche, the Swiss makers of Tamiflu, sold 23 million batches to the Department of Health. As with the vaccine contracts, the DoH declined to comment on how much the taxpayer paid. Roche said it "would rather not comment" on the deal, although it does say it will make about Sfr2bn (£1.2bn) from global sales of Tamiflu this year.


Reference Source 172
October 9, 2009

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