The Flu Vaccine Crisis
Jude Wanniski
October 17, 2004


Memo To: Website Fans, Browsers, Clients
From: Jude Wanniski
Re: Who's to Blame?

Senator Kerry is blaming President Bush for the fact that as many as 50 million Americans will not be able to get flu shots before winter sets in. Senator Edwards, the Democratic vice presidential nominee, is also jumping up and down. But maybe both should consider the possibility that if it were not for trial lawyers bringing frivolous lawsuits, the U.S. pharmaceutical industry would not have seen the steady departure of vaccine manufacturers. They might also question the wisdom of having supported Hillary Clinton's Vaccines for Children program, which dictates prices for flu doses so low that they could not produce a profit, even without contingencies for lawsuits. It was not until I got a report Friday from Grace-Marie Turner of the Galen Institute of Washington, D.C. that I began to understand what had happened, especially when I went to the 2002 report of the Manhattan Institute of NYC that Turner mentioned in her report. Looks like there is plenty of blame to go around.

Galen Institute
Health Policy Matters
October 15, 2004

Flu Vaccine

As go vaccines, so goes the pharmaceutical industry? We are hearing virtual panic among doctors worried that their patients won't be able to get a flu shot this year. Even some good free-market physicians have called for nationalization of the vaccine supply.

We urge them to think again about the consequences of getting the government any more involved in the vaccine industry.

How could the U.S. have been pushed into the corner of relying on a supplier in the U.K. to produce half of our supply? Chiron Corp. in Liverpool recently was cited by British authorities when they found some of the vaccines had abnormally high levels of bacteria. It takes up to eight months to make vaccine, which is grown in chicken eggs, and there's no time to make millions more doses in time for the winter flu season.

AEI's Scott Gottlieb writes in the Washington Times that, "It is looking more and more like the violations…were process problems, not widespread contamination of shots…Early word is that only a very small portion of the 50 million doses were actually contaminated."

But it's too late. The Centers for Disease Control says that an average of 36,000 people die every year from the flu. Tens of thousands of people are now at risk. Global news coverage would make any purchaser leery of buying the vaccine, and lawyers would be ready to sue in an instant for anyone with an adverse reaction.

This crisis is the result of a series of policy decisions dating back a decade. In 1994, First Lady Hillary Clinton led an effort to enact the Vaccines for Children program, and the government now purchases 60% of all pediatric vaccines.

The government has dictated prices to manufacturers that are often below costs, and many suppliers have been forced out of the market, unable to make a profit at 15 cents a dose, in some cases. At the same time, the cost of manufacturing and the cost of complying with increasingly burdensome regulation have gone up.

Other manufacturers watched and saw that this clearly is not a good business to be in.

The Manhattan Institute held a forum in 2002 to analyze the problems, and it forecast today's shortages. At that forum, Wayne Pisano of Aventis said that just two decades ago, there were a dozen companies making vaccines, most of which have left the market or been driven out by a variety of pressures.

Henry Miller, M.D., of the Hoover Institution said this "should be the golden age of vaccine development" because new biologic technologies are available. "But there is scant enthusiasm for vaccine development in the drug industry."

This is a clear warning to those who would try to impose price controls on the pharmaceutical industry. They would predictably force many companies out of business, supplies would be dislocated and even vanish, and, most importantly, research for tomorrow's medical miracles would dry up.

And what was the president talking about during the debate Wednesday night when he said that we were going to be able to get supplies of flu vaccine from Canada? Apparently, a Vancouver company called ID Biomedical has 1,500,000 extra doses of flu vaccine available and is negotiating with HHS to provide the surplus to the U.S.

Two obstacles: The vaccine would still need speedy approval for U.S. use by the FDA and, even then, it would only represent a fraction of the 48 million-dose shortfall.