A Needless Vaccine Shortage

U.S. health officials have been struggling for months with a vaccine shortage that has made eight of 11 critical shots -- including those for whooping cough, diphtheria and chicken pox -- unavailable to millions of children. Now, the Journal reported last week, the crisis has spread to lifesaving vaccines for adults.

How did this happen? Nobody wants to admit 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.

From 1967 to 1984, the number of U.S. vaccine manufacturers dropped from 37 to 15, while the number of licensed vaccines dropped from 380 to 88. By last year there were just 10 producers and 52 licensed products. Some of this is due to natural marketplace consolidation and changing demands.

But much is the result of an untenable marketplace. Vaccine makers simply can't afford to pay for increasing regulations and frivolous lawsuits, while getting paid little for what the government considers public goods.

The problem starts with regulation. Back in 1999, the Food and Drug Administration got a black eye after two children died from a recently approved diarrhea vaccine. The agency chose to bolster public confidence by cracking down on vaccine manufacturers. It used a new regulatory approach to ratchet up regulations, shut down plants and impose fines.

In October 2000, the FDA levied an extraordinary $30 million fine against Wyeth-Ayerst for manufacturing problems, though the government agency admitted it never found contaminated products. Several months later, citing business reasons, Wyeth got out of the market for tetanus products, leaving just one manufacturer. Wyeth and Baxter also both got out of vaccines for diphtheria, tetanus and pertussis (DTP). Their exits created major shortages.

Approval-process costs have also climbed as the FDA increases its demands. Vaccine makers used to be allowed to perform their tests with hundreds of patients, but today they need tens of thousands. The FDA's normal approval process takes six or seven years.

Demanding higher safety is reasonable, but the problem is that public officials refuse to pay for it. Thanks to a Clinton-era program, the CDC has socialized the market and currently buys more than half of all the vaccines in the country. The agency uses its buying clout and power over future vaccine recommendations to keep prices low. In many cases, the CDC pays less than half of what the private sector pays.

You've got to wonder about this penny pinching, given the benefits of vaccinations. According to CDC studies, in 1994 every dollar spent on measles vaccines saved $13.50 in medical and societal costs; every $1 for polio saved $6.14. And yet what happens when a company invests in new money-saving products? Last year, Wyeth finished more than a decade of work on a revolutionary new childhood vaccine against pneumonia and meningitis. When it asked for $58 a dose, the so-called public health lobby went nuts (the CDC pays only $46).

Vaccine makers must also contend with the FDA's unscientific approach to risk, which derails production and exposes companies to lawsuits. Last year the FDA told vaccine makers to take a longstanding preservative called thimerosal out of their products -- though there is no evidence it causes harm. The rush to comply is behind many of today's shortages. Tort lawyers interpreted the FDA's move as an excuse to sue.

There is still a healthy market in vaccines for new, niche products -- primarily because they hold out promise of good returns. The problem is getting the public health industry to realize that makers of standard vaccines must also be guaranteed a healthy market. The country's ability to continue triumphing over disease depends on it.

Updated May 21, 2002