Why Vaccine Shortages?—a Political “Virus”

Concerns are being voiced that vaccines may not be available if there is an epidemic of avian influenza, transmitted from birds to humans. This latest chapter about vaccine shortages is yet to be written, but there have already been eight major shortages of vaccines just since the year 2000. These include shortages of vaccines for diphtheria, tetanus, whooping cough, chicken pox, measles, and three years of shortages of flu vaccine. The Wall Street Journal has noted that the supply disruptions “result from government policies that treat vaccine makers as a branch of socialized medicine—to the point that many have stopped making vaccines.” For 30 years the politicians have been driving the industry out of business with regulations, price controls, litigation—including opportunities for frivolous lawsuits—and intellectual-property abuse.

In 1967 there were 37 vaccine manufacturers in the U.S. By 2001 there were only ten. Today there are only three large vaccine makers in the U.S. In 2004 there were only two makers of flu vaccine. After one of these shut down, there was a severe shortage of flu vaccine. The remaining one was a Swiss company (Roche)—and it is the only one the U.S. is counting on for a vaccine that would potentially protect against bird flu.

Under a new crackdown by the FDA on vaccine manufacturers, the FDA in October 2000 fined Wyeth-Ayerst $30 million for manufacturing problems even though the agency admitted it never found any contaminated products. A few months later, Wyeth got out of the market for tetanus, leaving just one manufacturer. Wyeth and Baxter both got out of the vaccine market for diphtheria and pertussis. These exits created major shortages.

The FDA’s crackdown also escalated the costs of vaccine approval. The manufacturers used to be allowed to perform their test on hundred of patients. Now they need tens of thousands, and approval normally takes six to seven years. Vaccine makers also contend that the FDA has an unscientific approach to risk, which derails production and exposes companies to lawsuits. The industry also has revolutionary technologies (reverse genetics and mammalian cell culture) that would dramatically cut time and development costs. Europe is moving forward on these, but the FDA has refused to do so.

The manufacturers cannot recover the escalating costs by raising prices, because the government buys more than half of all the vaccines in the country—thanks to Hillary Clinton’s Vaccines for Children’s Program—and uses its clout to keep prices low. The program offers free vaccines to uninsured children under 18 or to those who are eligible for Medicaid or care from federally qualified health centers. The Centers for Disease Control in many cases pays less than half of what the private sector pays. So, if it is no longer profitable to manufacture vaccines, the companies quit making them. There is no point in investing huge amounts of money in extensive research when that investment cannot be recovered in the sale of products. When Wyeth spent more than a decade on a revolutionary new childhood vaccine against pneumonia and meningitis, it asked for $58 per dose. So-called public health advocates went ballistic, and the CDC paid only $46.

In 2003 a report by the Institute of Medicine, an arm of the National Academy of Sciences, noted that the price squeeze and a heavy regulatory burden have driven companies out of the vaccine business. It also noted, “reimbursements [to health-care providers such as doctors and clinics] for vaccines and administrative fees barely cover the costs of vaccine purchase. In many cases, providers lose money on immunization.”

Politicians want companies to take the risk of developing vaccines, but they don’t want them to make any money from taking those risks. This includes not only the pricing of the products but protection of the companies’ intellectual property—their patents. Private companies developed the AIDS drugs that have extended millions of lives, but countries like Brazil and South Africa--and "do-gooders" everywhere--want the drugs given away at cost. And UN Secretary General Kofi Annan said he hoped concern for “intellectual property” would not “get into the way” of distributing avian flu vaccine.

When politicians try to manipulate the market (for vaccines or anything else) in their efforts to benefit some some people at the expense of industry or taxpayers—the socialism model—consumers should expect disastrous consequences. Childhood vaccines that cost $10 in 1975 by 2001 cost $385. And we have shortages.