Vaccine cost and veterinary profits: The price of protection

Patty Khuly, DVM
Published: December 29, 2008
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“A rabies shot costs $30? I bet you buy that vaccine from the manufacturer for $3. So you want to charge me a 1000% markup. Seriously?”

This outburst was brought to you by one smart-cookie client from last week. She’d worked for a veterinarian in the past so she’d always received her vaccines at cost. She new what a lot of you don’t know:

Vaccines themselves are cheap!

But vaccines never sell for the standard 100 to 300% markup other products are subject to. Unless you’re getting them in a “vaccine clinic” setting (where their cost is subsidized by the government or via high-volume sales) they tend to sell for huge multiple markups.

Why do vaccines enjoy such a high markup relative to other drugs and supplies? I’ll give you five reasons:

1)    Because vaccines must be handled and stored carefully. It costs much more to manage a stash of vaccines than it does to manage almost any other drug or supply in the hospital.

2)    Because we have to buy in bulk and therefore have to factor in the cost of product expiration and the financial cost of large up-front payments to manufacturers and distributors.

3)    Because the cost of our related supplies (syringes, etc.), staff and overhead must be considered.

4)    Because the regulatory aspect of vaccines means we have to maintain detailed records and fill out regulatory forms when they’re administered. Computerized record management and trained staff are expensive.

5)    Because the professional know-how should be factored in and compensated. This includes the selection of vaccines and their administration protocols as well as the explanation of their actions and any treatment of their potential reactions.

This list of reasons explains why in the human medical world pediatricians are up in arms over how poorly they’re reimbursed for vaccines. On NPR this morning this issue was discussed in some detail in a five-minute segment on the Morning Edition program.

A recent study covered by the segment showed that prices and reimbursement of vaccines varied so widely as to price some pediatricians out of the vaccine business altogether. When the government or insurance company will only pay you $5 for a vaccine that costs you $3, you’re sure as heck not going to carry it. Not when it costs you a total of $12 to bring it to each patient.

It would seem that the government and the insurance companies are as confused as last week’s client on the issue of vaccine reimbursement. What these entities don’t understand is that physicians and veterinarians don’t consider vaccines to be moneymaking items. Not anymore.

Sure, we might have believed so in the past. In fact, you’d be correct in surmising that vaccines were once quite profitable for veterinarians. It used to be the lifeblood of our practices.

Yet while we don’t make much on vaccines these days  (reference items 1 through 5 on the list above) it would be unthinkable to outsource vaccination. After all, we know what damage vaccines can do when their administration is handled sloppily.

For my part, I often have cause to cringe when I see that my patients have gone to a local vaccine clinic or a “better-priced place” for their last set of boosters. Usually, that’s because my patients didn’t need the vaccines at all (I stick to the three-year protocol and exempt many geriatric or chronically diseased patients). And sometimes it’s because the patient was sick at the time, receiving vaccines along with steroids and/or antibiotics for conditions I’d never consider compatible with routine vaccination.

What many human insurance carriers and price-sensitive clients don’t understand is that vaccine administration is an art and a science. It’s not the simple draw and push that makes a vaccine safe and effective. It’s the care, the caution and the know-how that makes a $30 rabies worth its pricetag.