How lawsuits brought on the flu vaccine shortage: one lawsuit seeks $30 billion in damages, even though the entire vaccine market is valued at only $5 billion. Considering such obstacles, why on earth would any business want to make vaccines? They wouldn’t. And most don’t
If you think the lines for flu shots are long now, imagine what would happen in the event of a global pandemic.
Most people who needed flu shots wouldn’t get them. The immunization system would collapse. An underground market would appear, disrupting already-distorted supply and demand patterns. Instead of 36,000 U.S. deaths caused by flu each year, there could be hundreds of thousands.
Worst-case scenario? Yes. Out of the question? Hardly.
“The influenza pandemic is a major public health threat with the potential to cause a rapid increase in morbidity and mortality,” Howard Pien, president and CEO of Chiron Corp., recently told a congressional committee.
Pien should know. He’s the man at the center of this season’s vaccine storm. His California-based company took the fall after regulators declared its Liverpool, England, factory contaminated. In one fell swoop, 47 million flu shots were gone.
The 2004 flu vaccine shortage is a case study of what’s wrong with America’s healthcare system. It’s time for politicians to stop pandering to the public’s fears and admit the real cause of the shortage.
Shortages occur when free markets are missing. Three distinct but related factors have eliminated the free market in vaccines:
* The cost of lawsuits and government regulations forced vaccine makers out of the business in the 1980s. Although Congress responded with a law to minimize their liability, most never returned to the marketplace. Today, only five companies make vaccines for U.S. distribution, compared to about 30 before the liability crisis. These firms live with the daily fear of being hauled into court.
* In recent years, government has become the number-one purchaser of many vaccines, flu included. “Inevitably, the government strong-arms companies into accepting the lowest possible price–far less than they would be able to charge in a more diverse marketplace,” according to researchers Andrew Grossman and Edmund F. Haislmaier of The Heritage Foundation. When companies can’t make money on something, they stop producing it. Only three companies produce U.S.-licensed influenza vaccine, compared to more than a dozen 30 years ago.
* There’s little incentive to produce vaccines in the first place, and even less for flu because the strains are always changing. Huge amounts are spent on research and development of new formulas, yet the slightest miscalculation of demand can send manufacturers into the red. During the 2002-03 flu season, manufacturers lost $120 million on unused vaccine that had to be dumped.
Considering all these obstacles, why on earth would any business want to make vaccines? They wouldn’t. And most don’t.
Litigation concerns linger
In 1988, Congress created a no-fault system designed to compensate families for adverse effects of childhood vaccines. Without that protection, no manufacturer could bear the risk of the multibillion-dollar lawsuits that trial lawyers routinely threaten on behalf of their clients.
Vaccines contain weak or killed microorganisms that cause a particular disease. When these substances enter the body, the immune system is activated in defense. On rare occasion, injury or death occur.
Since its creation in 1988, the Vaccine Injury Compensation Fund has paid out more than $1.4 billion to nearly 1,800 people. Under terms of the law, families who think their children have been harmed by vaccinations must attempt to resolve claims with the fund before going to court.
The fund has reduced (but not stopped) the lawsuits. In a pending class-action case, parents of children with autism are blaming vaccines containing mercury for damage to their children’s brains during critical stages of development. According to Senate Majority Leader Bill Frist, R-Tenn., one such lawsuit seeks $30 billion in damages, even though the entire vaccine market is valued at only $5 billion. Mercury (thimerosal) is not a covered ingredient under the fund.
Also on the rise: lawsuits over adult vaccinations. One litigant claimed that he developed Guillain-Barre syndrome as a result of a flu shot. Similar suits have been filed across the country, prompting congressional action. On Oct. 22, President Bush signed into law a bill that expands coverage of the fund to adults claiming injury from flu, hepatitis, or other immunizations.
One anecdote is revealing. The U.S. Senate Special Committee on Aging, chaired by Sen. Larry Craig, R-Idaho, held a hearing in September of 2004 on the flu vaccine shortage, but Chiron was the only manufacturer to show up. “The untold story is that the other firm which makes flu vaccines for senior citizens declined to appear at our hearing because of concerns about lawsuits,” Craig said afterwards.
Government needs to get out of the way
If excessive litigation hampers the free market, government policies aggravate the distortions. It’s no coincidence that flu vaccine makers dropped out of the business just as the government became the chief purchaser of the vaccine for seniors served through federal programs.
Incredibly, some politicians want the federal government to negotiate drug prices on behalf of senior citizens enrolled in the Medicare program.
According to Heritage researchers Grossman and Haislmaier, “After this year’s flu vaccine shortage, we know how the story ends. Government negotiation could drive down prices for a few years with little noticeable effect. But when there is a public health crisis, as happens unpredictably, what manufacturer is going to have the spare capacity and ability to churn out extra Cipro or smallpox vaccine on short notice? Without a fair chance of making a profit, no drugmaker could justify the expense of keeping such capacity at the ready.”
Vaccination shortages are not unusual. Since 2001, shortages have occurred in eight vaccines, including those used for tetanus, measles and rubella.
The solution is not more lawsuits, government restrictions, or price controls. It’s creating a less risky environment for healthcare manufacturers so they can satisfy shareholders and continue to save lives by the millions.
At flu vaccination clinics across the country this past fall, police were called to perform crowd control.
Does this make any sense in a country that prides itself on its free economy, outstanding medical care, and compassionate concern for all its citizens? Not hardly.
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