Supply, Demand and the Price of a Flu Shot

January 14th, 2011 | Sources: Commentary

Somehow, it seems a bit odd that classical microeconomic theory should apply to the price of a flu shot. After all, the jab has proven to be effective in reducing mortality from an infectious disease that kills about 36,000 Americans each year. But it does. Perfectly.

Flu shot providers from retail drugstores to physician’s offices are slashing prices for this year’s seasonal flu vaccine in response to consumer demand that has been much weaker than expected.

oldschool 300x208 Supply, Demand and the Price of a Flu ShotJust one year ago, enormous media coverage and public uncertainty surrounding a burgeoning pandemic of H1N1 flu motivated 110 million Americans to get the H1N1 vaccine. Nearly equal numbers of people took the seasonal flu vaccine as well.

Those in charge of planning and producing this year’s seasonal flu vaccine figured that people would remember the hysteria from a year ago, and those memories would drive up demand for the jab this winter. They also took into account new CDC recommendations, which call for everyone over the age of 6 months to get vaccinated.

They eventually decided to produce 163 million doses of the vaccine, a 50% increase over last year’s supply. Commercial outlets and doctor’s offices stocked-up on the vaccine in anticipation of the rush.

But the predicted increase in demand never materialized, at least not so far. Why? To date, the flu season has been mild, and press coverage of the annual flu season has been sparse. It seems that when flu is out of sight, it’s also out of mind.

And with vaccine demand in the tank, flu shot distributors have responded by cutting prices on flu shots, just as economists would predict.

For example, Rite Aid is distributing discount coupons for beauty items to folks who come in for a shot. The retail giant told the Wall Street Journal last week that it has dispensed 635,000 vaccines so far this year, and that it now expects to inoculate 300,000 less people than originally planned. Walgreen’s is also on record as saying its initial goals for flu vaccines were “aggressive.”

For its part, Kroger, the nation’s largest grocer, recently cut the price of its flu shot by $5 to $19.99 in most areas of the country.

Physicians’ offices haven’t been immune to the fall-off in demand. “We can’t give them away,” Thomas Haugh, a practice administrator in Raleigh, N.C. told the Journal. Demand is off 25% at his clinics, and that prompted a price cut from $25 to $15.

In normal years, the flu shot is a financial winner for retail distributors and doctors alike. They usually charge between $20 and $30 per shot, and achieve profit margins of 30-50% on the service. But the downside is that the shots must be ordered months before they’re needed, and they can’t be returned because the vaccine changes each year in response to never ending mutations in the virus that causes seasonal flu.

Of course, it’s not too late for suppliers of the flu shot. Flu season isn’t half-way over yet. An upsurge in reported cases, perhaps associated with some press coverage could result in a sudden surge in demand for the vaccine.

Economists have already told us what that would do to the price of a flu shot.


 

Comments

  1. Michael Polidori | 24/08/11

    The flu does not kill 36,000 people each year. The real number is about 20, and those unfortunate kids and adults have impaired immune systems.
    The other 35,980 are killed by something other than the flu while they have the flu, like a car accident, pnemonia, heart failure etc.
    These deaths are ESTIMATED by the FDA/CDC as very few tests are done to ensure someone has the current flu virus when they die of something else while exhibiting “flu-like symptoms”.
    The CDC and FDA bureaucrats are in the business of helping the drug industry make more money. Bureaucrats are also in the habit of taking employment with the drug industry after boosting their profits with regulations or legislation (Congressman Billy Tauzin & 14 congressional aids, CDC head Julie Gerberding, FDA head Arthyr Hayes for example).
    In Virginia school superintendents instructed every absence in 2009-2010 flu season be counted as swine flu regardless of what was known about the absence. Hospitals set up their volunteer networks to “guard the entrances” asking if people had any symptoms of flu before granting them admission.
    An invented epidemic, false numbers of deaths, misreporting of flu case #’s, bribed regulators/congressman… all to protect & increase drug industry profits.

  2. Joe | 2/11/11

    Michael I understand your point, but the real number is not 20. That’s a little low my friend, but yes most people that die from the flu have something else happening as well. I think the flu shot isn’t necessary for the general public, but I think further funding for vaccines is a must. What happens when a strain comes out that’s 10x worse?

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