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Price controls, overregulation caused flu vaccine shortage

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The announcement came last week: Flu vaccine shortage. Chiron Corporation’s flu vaccine facility in Liverpool, England, had its license suspended for three months by British health regulators because of contamination problems. As a result, the supply of flu vaccine to the entire United States was cut in half for this flu season.

How can this be? The United States has the largest, most sophisticated and productive pharmaceutical industry in the entire world. Are we now turning to an American company to make up the shortfall? No. Federal officials are asking Aventis Pasteur, a French company that is already supplying 54 million doses this year, to make more vaccine, if possible. Of course, it is likely the company will be unable to do so. But what about the American companies? There are none.

Americans have every right to be angry and frustrated. And because our politicians have created this mess, they have every obligation to explain to us what they are doing to correct it.

The pharmaceutical industry is large, about $250 billion in the United States alone. But the vaccine business is relatively small, only about $2 billion each year. In 1988, there were 25 manufacturers of vaccines in the United States. Today, there are only four major players. And there are only two companies making flu vaccines. The government has become the most important purchaser of vaccines and now controls the market. This is because public health agencies have stepped into the market to help the poor by providing low-cost vaccinations. While this sounds like a laudable goal, the "public customer" has come to dominate the market. This has lowered prices for these medications.

With prices low, the risks associated with vaccine manufacture have become relatively more important. Vaccine manufacturers continue to be sued in vaccine-related lawsuits. Over the past 15 years, such litigation has chased several companies out of the vaccine business altogether.

Quality standards in the United States are similar to those in Europe, but the validation of those standards is more complex in the U.S. As a result, vaccine shortages that arise in this country cannot be met by products that have been approved in other countries, even if the standards for approval are the same as those used here.

Commercial companies on their own cannot guarantee they will be able to supply a complex product such as a flu vaccine without problems or interruptions. Testifying two weeks ago before the Senate Special Committee on Aging, Chiron’s chief executive officer stated his belief that this nation would have plenty of vaccine. Even he was unaware that his plant would be closed within a week and his testimony would become a joke in the industry.

The flu vaccine shortage is an example of the inability of government to improve on the functioning of the open market. By pushing out other customers, government programs have forced prices down. Regulation has continued unabated, putting additional pressure on suppliers. So today, we have few choices for vaccines in general and only two choices for flu vaccines.

Last year, 36,000 people died from the flu and 200,000 were hospitalized, according to Sen. Larry Craig, R-Idaho, chairman of the Senate aging panel. He and Sen. Evan Bayh, D-Indiana, have introduced the Flu Protection Act of 2004 to correct some of these problems. However, the act does not get the government out of the vaccination business; rather, it makes the industry more dependent on the government through guaranteed purchasing agreements.

We want to see action that increases the number of companies making vaccines in the United States. We want to see action that reduces the legal liability of companies making these important medicines that save thousands of lives each year. We want to see a move away from price controls, which suppress innovation and limit options for all Americans. And we want to see action that allows companies to follow a simpler pathway to regulatory approval for both European and American markets.

William F. Buckley Jr. once explained that the solution to high meat prices was higher meat prices. High prices created by shortages encourage additional suppliers to enter the market, thus lowering prices over time. The government is preventing companies from entering the vaccine market through overregulation and price controls. And shortages are the result. Sometimes the most basic laws of economics are the ones we must learn over and over again.

- Portsmouth Herald

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