Supply, Demand and the Price of a Flu Shot
January 14th, 2011 | 2 Comments | Source: CommentarySomehow, 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.
Just 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.











21% in men, and 12% in women since 1991. The report attributes the fall-off to fewer people smoking, improved treatment, and better screening.
The company is Emergent BioSolutions, and its BioThrax vaccine is its only product. Emergent has copped $1.4 billion in federal contracts for the vaccine in the last decade alone.




