The Economics of Immunization

Rising Costs of Immunization

Currently, the four basic vaccines recommended by the World Health Organization (BCG, DTP, measles, and OPV) reach nearly three-quarters of all children worldwide and prevent nearly 2 million deaths every year. Immunization must reach the remaining children if countries are to attain the ambitious target set by Millennium Development Goal No. 4: reducing child mortality by two-thirds by 2015.

Providing these four basic vaccines costs an estimated 20 USD per fully immunized child. In addition, many countries are now introducing three newer and underutilized vaccines (hepatitis b, Haemophilus influenzae type b (Hib), and yellow fever), which may potentially save another 1 million lives annually. However, these additional vaccines will increase the cost to 40-50 USD per child. Adding rotavirus, pneumococcal, and Human Papilloma Virus vaccines will reduce mortality even further but continue to increase costs.

Immunization costs are increasing for other reasons, such as growing immunization infrastructure costs. A well-equipped immunization infrastructure requires:

• A central cold room for vaccines
• A warehouse to store injection supplies (syringes, safety boxes)
• Cold chain equipment to store vaccines until they are administered
• A provider network (hospitals, health centers, temporary posts)
• Vehicles to transport vaccines, supplies, and personnel
• Educational and public awareness materials (posters, loudspeakers, flipcharts, etc.)
• A management information system
• An epidemiological surveillance system and laboratory
• Buildings for administration and training

Countries continue to improve their health infrastructures but at considerable expense. Many have upgraded their cold chain, transport and logistics systems; hired skilled personnel to manage more sophisticated data management and analysis systems (for both administration and epidemiological surveillance); increased training and supervision to improve the quality of services offered; and expanded communications, health education and social mobilization to boost public demand.

Immunization costs are also increasing as national immunization programs continue to target unvaccinated children. While most nations currently reach 70-80% of vaccine-eligible children, the 20-30% who remain unimmunized often live in remote or disorganized areas. This makes them especially difficult—and expensive—to reach.

Rising immunization costs pose significant challenges, even for those governments fully committed to building strong national systems. The cost of fully immunizing a child today actually exceeds the total per capita government spending on health care as a whole in a majority of GAVI project countries. And while governments currently include immunizations as a critical investment in their overall national budgets, new vaccines, expanded outreach, and infrastructure maintenance demand still greater investment. As quickly as governments continue to increase their investment in immunization, the associated costs continue to rise, adding to growing funding gaps.

Until now, donor support has helped national immunization system budgets to keep pace with these rising costs. But external aid is volatile and cannot be expected to last indefinitely.

Growing Funding Gaps

Funding Projections (US$), GAVI project countries

Source: WHO/IVB 2007

Immunization: The Benefits Remain Invaluable

Immunization is viewed, correctly, as a public investment in a nation's future—an investment that benefits society as a whole but one the market cannot bear alone. It makes sound economic sense for governments to provide immunizations for children. Even at US$40-50 per child, immunization is still one of public health’s “best buys.” Recent studies estimate:

1. For every 14-20 USD spent on immunization, a child gains one healthy year of life ⁽¹⁾;
2. The cost-benefit ratio^a of immunizing a child against measles was 2.27 in one South African province ⁽²⁾;
3. Eradicating smallpox saves governments 275m USD/year in direct medical costs ⁽³⁾;
4. Eradicating polio will save governments 2 USD in medical costs for every 1 USD spent on vaccination ⁽⁴⁾.

The benefits of immunization extend far beyond health treatment savings. Eliminating vaccine-preventable childhood diseases also increases life expectancy and contributes to a healthier, more productive labor force. Recent studies show that by the year 2020:

• Immunization systems in lower-income countries will add more than four years to overall life expectancy for vaccinated children (Matthews and Diamond 1999);
• Wages earned by a fully immunized child will be roughly 14 USD/year higher than those of an unimmunized child ⁽³⁾;
• Collectively, fully immunized children worldwide will earn an estimated 1.3b USD in additional wages, compared to the estimated costs of nearly 748 m USD to vaccinate them⁽³⁾;
• The internal rate of return^b on immunization was 12.4% in 2005 and will be nearly18% by the year 2020— slightly above estimated returns on educational investments (3). In many countries, a dollar spent on immunization adds more to the nation's economy than a dollar spent on education.

Fully immunizing all children will also reap demographic dividends. As more children survive, the labor force will expand, increasing overall economic growth. Over time, birth cohorts will decrease as parents begin to have fewer children, allowing greater investment in each individual child and increasing overall human capital.

^a benefit-cost ratio: defined as: (value of disability-adjusted life years, medical costs avoided) / (immunization program costs)

^b internal rate of return: defined as: the interest rate that would make the net present value of the flow of future benefits equal the initial costs.