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S. HRG. 108–780

LIABILITY, LICENSING AND THE FLU VACCINE

MARKET: MAKING DECISIONS TODAY TO PREVENT

A CRISIS TOMORROW

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC

NOVEMBER 16, 2004

Serial No. 108–46

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING 

LARRY CRAIG, Idaho, Chairman 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

MIKE ENZI, Wyoming 

GORDON SMITH, Oregon 

JAMES M. TALENT, Missouri 

PETER G. FITZGERALD, Illinois 

ORRIN G. HATCH, Utah 

ELIZABETH DOLE, North Carolina 

TED STEVENS, Alaska 

RICK SANTORUM, Pennsylvania 

JOHN B. BREAUX, Louisiana, Ranking 

Member 

HARRY REID, Nevada 

HERB KOHL, Wisconsin 

JAMES M. JEFFORDS, Vermont 

RUSSELL D. FEINGOLD, Wisconsin 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

DEBBIE STABENOW, Michigan 

LUPE WISSEL, Staff Director 

MICHELLE EASTON, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

Opening Statement of Senator Larry E. Craig ..................................................... 1

Statement of Senator Herb Kohl ............................................................................ 3

PANEL I 

Lester M. Crawford, D.V.M., acting commissioners, Food and Drug Administration, U.S. Department of Health and Human Services ............................... 4

Mitchell L. Cohen, M.D., director, Coordinating Center for Infectious Diseases, Centers for Disease Control and Prevention, U.S. Department of 

Health and Human Services, Atlanta, GA ......................................................... 22

PANEL II 

Peter R. Paradiso, vice president for New Business and Scientific Affairs, 

Wyeth Pharmaceuticals, Collegeville, PA .......................................................... 54

Frank A. Sloan, Center for Health Policy, Law and Management, Terry 

Sanford Institute of Public Policy, Duke University, Durham, NC ................. 68

APPENDIX

Prepared Statement of Senator Susan Collins ...................................................... 91

CDC Responses to Questions from Senator Wyden .............................................. 91

Statement of the American College of Physicians ................................................ 93

Statement submitted by the World Health Organization .................................... 98

Statement of Paul Strauss, United States Senator, District of Columbia (shadow) ......................................................................................................................... 106

(III) 

(1)

LIABILITY, LICENSING AND THE FLU VACCINE MARKET: MAKING DECISIONS TODAY 

TO PREVENT A CRISIS TOMORROW 

TUESDAY, NOVEMBER 16, 2004 

U.S. SENATE, 

SPECIAL COMMITTEE ON AGING, 

Washington, DC. 

The committee convened, pursuant to notice, at 2:34 p.m., in 

room SD–628, Dirksen Senate Office Building, Hon. Larry Craig 

(chairman of the committee) presiding. 

Present: Senators Craig, Kohl, Wyden, and Carper. 

OPENING STATEMENT OF SENATOR LARRY E. CRAIG, 

CHAIRMAN 

The CHAIRMAN. Good afternoon and welcome, everyone, to this 

hearing of the Special Committee on Aging. 

On September 28, this committee held a hearing entitled, ‘‘Combating the Flu: Keeping Seniors Alive.’’ The hearing stressed the 

seriousness of the disease and the importance of flu vaccines. With 

36,000 deaths last year, we cannot underestimate the danger that 

influenza poses to seniors and to at-risk populations. At that hearing, we were told we could expect to have more flu vaccine this 

year than ever before. 

Unfortunately, those expectations changed dramatically a week 

later when Chiron announced they would be unable to provide the 

48 million doses of vaccine they had anticipated. This announcement dealt a strong blow to the United States preparedness for this 

year’s season. Chiron’s alarming situation is, I hope, more than a 

wake-up call that better long-term flu preparedness is imperative. 

As we heard at the September hearing, this is especially true in 

light of the fact that scientists around the world now estimate or 

believe that we are especially close to a strong endemic strain of 

flu that could strike not just this country but the world. 

Since October, we have seen outstanding efforts on the part of 

public health officials, manufacturers, private providers, retailers, 

and all of those who have worked so hard to minimize the effects 

of this year’s shortage. I would like to congratulate the countless 

individuals who took immediate action to be sure that the most 

vulnerable in our country get the vaccine they need. Today, we will 

hear about that in an update from the CDC and from the FDA on 

continuing this effort to that end. 

Just as important as the swift reaction to this year’s shortage is 

the challenge to make swift decisions to avoid the same problem 

2

next year and the year after. We have absolutely no time to waste 

in addressing this issue and making the necessary changes to ensure an adequate supply of vaccine in the future. But many questions have yet to be answered, and that is why I decided to hold 

a hearing now in November during a lame duck session of Congress. 

Flu manufacturers are now making decisions in order to fill orders for the next year. We can’t wait until Congress is in full swing 

in February to address next year’s supply challenges. By then, it 

will be nearly too late, especially if Chiron Corporation is unable 

to start production next year. Flu is a worldwide killer and the 

need for vaccine is clear, and yet the market has dwindled to the 

point that the pull-out of just one company has devastated the 

U.S.’s supply. 

The reasons for this dilemma are many. Today’s hearing is not 

about pointing fingers and laying blame. This is about looking at 

the current situation and gathering the information necessary to 

make needed policy decisions that will address the flu vaccine problem in 2005 and beyond. In conversations with vaccine manufacturers, health officials, and other stakeholders, three main areas of 

concern come up time and time again: Liability, licensure, and the 

stability of the vaccine market. This afternoon, we will hear from 

four experts that will speak to each one of these issues, I hope. 

Senator Evan Bayh, who may be joining us later, and I introduced legislation earlier this year to further address some of the 

long-term issues. For example, our legislation, S. 2038, would encourage an increase in vaccine production capacity by offering a tax 

credit for companies to invest in the construction of or the renovation of production facilities. I would like to think we could get that 

through this year. That is probably very unrealistic. But certainly 

very early passage of it in this next session of Congress is something that many of us will seek. 

So I want to thank you for taking time to participate in the hearing today. Before closing, I would like to comment that I found it 

very disturbing that my staff and I had a difficult time finding appropriate witnesses to speak to these subjects. The combination of 

liability concerns and reluctance to openly question the regulatory 

review and approval process has acted to deter participation in this 

and other hearings on the topic. Certainly in an open public policymaking process, all should be willing to come forward to be open 

and frank in what I believe is a critical health care discussion for 

our nation. Yet, frankly speaking, many were very hesitant. 

I want to thank all of you who are here. I have great hope that 

today’s discussion will be a help to lawmakers as we move forward 

to address this issue. I should note also that the interest in this 

topic is not limited to just those of us as U.S. citizens. The World 

Health Organization held an unprecedented summit meeting last 

week on flu vaccine manufacturers and nations and encouraged 

them to ramp up plans for dealing with the growing threat of a flu 

pandemic. They will be submitting written testimony about the 

summit for this committee. 

We have two panels this afternoon. On our first panel, we will 

hear from Dr. Lester Crawford, acting commissioner of the Food 

and Drug Administration. We will also hear from Dr. Mitchell 

3

Cohen, director of CDC’s Coordinating Center for Infectious Diseases. 

On our second panel, we will hear from Peter Paradiso, vice 

president for New Business and Scientific Affairs for Wyeth Pharmaceuticals, and Dr. Frank Sloan from the Center for Health Policy, Law, and Management at Duke University. Dr. Sloan also 

chairs the Institute of Medicine’s Committee on the Evaluation of 

Vaccine Purchase Finance in the United States. 

Dr. Leyton Reid of Alloy Ventures was scheduled to join us today 

but unfortunately could not make the trip from California here because of family commitments. 

So we thank all of you for being with us, and before I turn to 

our panelists, let me turn to Senator Kohl, a valuable member of 

this committee. Senator, welcome. 

OPENING STATEMENT OF SENATOR KOHL 

Senator KOHL. Thank you, Senator Craig, for holding this important hearing today. The flu vaccine shortage our country is facing 

has been a wake-up call for all of us. Throughout Wisconsin and 

across the nation, flu shot clinics have been canceled. Health care 

providers have scrambled to find supplies of vaccine to serve the 

most high-risk individuals. Families and senior citizens have worried about their health and the health of their loved ones. 

Wisconsin has done its best to deal with the problem. State and 

local health officials have worked hard to assess the vaccine supply 

and distribute vaccine to the most needy areas. Healthier people 

have, for the most part, foregone their flu shots so our more vulnerable citizens could get the protection that they need. But we still 

face many challenges, we know, as the flu season has only just 

begun, and so these efforts will need to continue. 

While we deal with the immediate shortage, we know we need 

to make sure that we don’t treat this as a one-time freak accident. 

The shortage has exposed systemic problems, some of which have 

been known for years. They must be addressed. If we don’t act 

quickly, then we put ourselves at risk of the same situation and 

even worse happening again. 

So I am pleased to join Chairman Craig and Senator Bayh in 

sponsoring the Flu Protection Act. This legislation takes an important step toward shoring up the flu vaccine market and its distribution system. It has incentives that will help encourage more 

companies to invest in the flu vaccine market. It will encourage 

States and the CDC to develop plans for dealing with distribution, 

whether in a time of shortage or in a potential pandemic. It will 

educate all Americans about the need to be vaccinated, keeping 

people healthy and fostering a stable vaccine market. 

In a few months, development must begin for next year’s flu vaccine. So that means that we must act quickly to address the holes 

in the current system. I hope and I expect that this hearing will 

shed more light on the steps we need to take and that Congress 

will move quickly to take those steps. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Herb, thank you very much. 

4

Now let us turn to our first panelist and our first speaker is Dr. 

Lester Crawford, as I mentioned, acting commissioner for the Food 

and Drug Administration. Doctor, welcome back to the committee. 

STATEMENT OF LESTER M. CRAWFORD, D.V.M., ACTING 

COMMISSIONER, FOOD AND DRUG ADMINISTRATION, U.S. 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Dr. CRAWFORD. Thank you very much. Mr. Chairman, I am Les 

Crawford, acting commissioner of the Food and Drug Administration. As you know, we are responsible for the regulation and oversight of vaccines. I want to assure the committee and the public 

who are listening today that FDA takes their concerns about vaccine safety and availability very seriously. 

FDA has many important responsibilities related to vaccine safety. Before a vaccine is licensed, the FDA monitors the safety of investigational vaccines. Later, when a manufacturer submits a vaccine license application, we conduct more extensive reviews. If we 

determine that a vaccine is safe, effective, and that quality and 

consistency of manufacture have been demonstrated, we will license the vaccine. We also inspect the manufacturing facilities 

every 2 years. 

Influenza vaccine is unique in that its active ingredients change 

almost every year. This presents special manufacturing challenges. 

We work closely with manufacturers to facilitate the production of 

influenza vaccine. We begin working with manufacturers at the 

earliest stages of vaccine development. FDA and manufacturers 

conduct tests to assure the safety and efficacy of the vaccine because of the complexity of the manufacturing process. FDA’s Center 

for Biologics Evaluation and Research performs lot release testing 

on bulk vaccine lots. As a further safeguard, we also evaluate information on vaccine testing performed by the manufacturer. 

There has been a very significant increase in flu vaccine production over the past 10 years. However, with the increasing volume 

of doses needed each year and the decline in the number of influenza vaccine manufacturers, we have a very fragile infrastructure 

in the influenza vaccine market. For the 2004–2005 flu season, 

only three manufacturers began production of influenza virus vaccine for the United States market. Chiron Corporation and Aventis 

Pasteur produce inactivated influenza vaccine. MedImmune, Incorporated manufactures FluMist, a live attenuated influenza vaccine 

administered intranasally. 

On the morning of October 5, 2004, the British Medicines and 

Health Care Products Regulatory Agency announced a 3-month 

suspension of Chiron’s license to manufacture influenza vaccine. 

FDA immediately dispatched a senior team of scientists to the 

United Kingdom to meet with company officials and the regulatory 

agency for England and also to inspect Chiron’s Liverpool manufacturing facility. 

On October 15, 2004, after completing its inspection, the FDA determined that it could not adequately assure that Chiron’s vaccine 

met our safety standards. As a result, Chiron will not supply any 

influenza vaccine to the U.S. market for this season. 

In coordination with others at the Department of Health and 

Human Services, we have been actively exploring all viable options 

5

to secure additional doses of flu vaccine to provide more Americans 

protection against the flu. Through these efforts, we have been able 

to increase the available supply of licensed flu vaccines for the U.S. 

population to 61 million doses for this flu vaccine. 

Coupled with that initiative, we have been contacting manufacturers around the world in an effort to identify increased supplies 

of antiviral medications that will provide further protection and 

treatment for Americans during this flu season. Next year, Aventis 

Pasteur Corporation believes they have the capability of producing 

the same or more doses of influenza vaccine. In addition, 

MedImmune has indicated that it has the capability to produce ten 

million doses of FluMist for the 2005–2006 flu season, and as much 

as 40 million doses by the year 2007. 

We will continue to help Chiron address as quickly as possible 

the manufacturing problems they experienced during this year’s 

production process and are working closely with MHRA in Great 

Britain in this regard. In addition, FDA has also been encouraging 

foreign licensed manufacturers to apply for U.S. licensure and we 

are working to help them achieve this goal. 

Looking further ahead, we must develop more efficient ways to 

produce flu vaccine so we have flexibility to deal with shortages or 

unexpected problems. In each of the last two budgets, the Department has requested $100 million to shift vaccine development to 

new cell culture technologies as well as to provide for year-round 

availability of eggs for egg-based vaccine. We urge Congress to fully 

fund the $100 million requested for the fiscal year 2005 budget. 

To help manufacturers overcome challenges such as the vaccine 

development problems Chiron is experiencing, FDA has been investing its energy and resources in the important initiatives such 

as the Current Good Manufacturing Practices for the 21st Century, 

known as the CGMP initiative. Under this initiative, FDA is working with industry to encourage the use of advanced technologies as 

well as quality systems and risk-based manufacturing processes to 

avoid the problems such as those that Chiron experienced. 

Once again, thank you for the opportunity. I look forward to the 

rest of the hearing. 

The CHAIRMAN. Doctor, thank you very much. 

[The prepared statement of Dr. Crawford follows:]

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The CHAIRMAN. Now, let us turn to Mitchell Cohen. Dr. Cohen 

is director of the Coordinating Center for Infectious Diseases, Centers for Disease Control and Prevention. Welcome to the committee. 

STATEMENT OF MITCHELL L. COHEN, M.D., DIRECTOR, 

COORDINATING CENTER FOR INFECTIOUS DISEASES, 

CENTERS FOR DISEASE CONTROL AND PREVENTION, U.S. 

DEPARTMENT OF HEALTH AND HUMAN SERVICES, 

ATLANTA, GA 

Dr. COHEN. Thank you. Chairman Craig, Senator Kohl, I am 

pleased to be here today to discuss CDC’s efforts to address the 

current influenza vaccine shortage. 

I thank the committee for your continued interest in influenza, 

an important public health issue affecting our nation as a whole 

and our nation’s elderly in particular. Influenza is a contagious respiratory disease that can cause mild to severe illness and at times 

can lead to death. 

While most healthy people recover from the flu without complications, some people, such as older people, young children, and people 

with certain health conditions, are at high risk for serious complications from the flu. Each year, influenza causes more than 

200,000 hospitalizations and an estimated 36,000 deaths. Many of 

those deaths occur among the elderly. 

Vaccination is the primary strategy for protecting individuals 

who are at greatest risk for serious complications and death. In the 

face of this season’s influenza vaccine shortage, CDC, State and 

local health officials, practitioners, and vaccine manufacturers have 

worked tirelessly to protect our most vulnerable populations. We 

deeply appreciate the cooperation and the collaboration of all those 

who have helped to meet this challenge. 

We also want to express sincere appreciation to the many people 

across the country who have made a sacrifice and stepped aside 

and not gotten their vaccine so that the limited doses of vaccines 

could be given to those at highest risk. Despite those concerted efforts, we cannot guarantee that all persons in the targeted highrisk groups will receive vaccine this year. 

In general, CDC’s efforts have concentrated on increasing vaccination coverage levels, increasing public demand for vaccine, increasing vaccine supply from domestic vendors, and improving core 

and developing innovative public health strategies. 

Given the current shortage of influenza vaccine, our No. 1 objective this year is to ensure vaccination of the groups at greatest 

risk, although our long-term goal is to ensure a stable annual supply of influenza vaccine for all people who want it and to encourage 

more people to want it. 

Current reports indicate that influenza activity in the United 

States has been low in comparison with last year, when influenza 

activity began early in the fall and resulted in more widespread 

outbreaks earlier in the season than usual. However, it is impossible to predict the level of influenza activity even at this point in 

the year. We must remain vigilant in our monitoring of the situation. 

When on October 5, CDC learned that almost half of the nation’s 

inactivated influenza vaccine supply would not be available for the 

23

flu season, we began activities to address the situation through established public health actions and instituting innovative strategies. For example, CDC took immediate steps to work with partners to target the distribution of the remaining inactivated vaccine 

toward the most vulnerable populations; to identify available vaccine from other countries that might be used this season; to develop recommendations for the use of antiviral medications during 

the season and increase the agency’s stockpile of these medications; 

to increase surveillance for influenza disease and outbreaks to provide early warnings of hot spots and perhaps to target our response; to develop and disseminate strategic communication messages to facilitate the public health response to the vaccine shortage and to inform the public of ways to reduce the transmission 

and severity of disease; and to assess the effectiveness of the strategies to target vaccine to high-risk groups and the response to influenza outbreaks. My written statement provides additional details of these and other of CDC’s actions. 

I would be remiss, however, to discuss influenza without mentioning pandemic influenza. Influenza pandemics are uncommon 

events. There have been three in the 20th century and their timing 

cannot be predicted. However, pandemic preparedness is a public 

health priority because of the potential to cause substantial numbers of deaths and tremendous social disruption over a very short 

period of time. In a large measure, current preparedness efforts are 

responsive to growing concerns about a very large avian influenza 

epizootic in Asia that has involved poultry, wild birds, and mammals. Importantly, much of what we are doing now in this challenging flu season to deal with this influenza shortage will help in 

our preparedness for the inevitable pandemic that will occur. 

Flu has been and will remain a serious concern to the health and 

well-being of all Americans, but particularly older Americans. CDC, 

along with the other Department of Health and Human Services 

agencies, looks forward to working with Congress on the future opportunities to strengthen the fragile vaccine system which protects 

our nation’s health. 

This concludes my opening remarks and I will be happy to answer any questions that you have. 

The CHAIRMAN. Thank you both very much. 

[The prepared statement of Dr. Cohen follows:]

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The Chairman. Let us proceed with questions, and again, we 

thank you for being here. 

Dr. Crawford, it has been reported that millions of doses of 

Chiron vaccine had to be destroyed, but there was doubt as to 

whether they had actually been contaminated. Could any of those 

doses have been saved? That would be my first question. Could you 

have tested the vaccines for safety? Is your regulatory system flexible enough to adapt the review process in the current situation? 

Dr. CRAWFORD. The situation on the vaccine produced by Chiron 

Corporation in Liverpool, England, this year was the following. We 

were notified in August of some problems with the manufacturing 

process, which essentially means that you take a contaminated 

product that occurs because of what is called bioburden—and remember, the vaccine production comes from chicken eggs and they 

are not sterile and so that leads to a burden of bacteria that has 

to be reduced over time. They were having difficulty getting it reduced in 9 of 100 lots they were producing. 

So we were notified that this was a problem. They were continuing to work with the nine lots, but it looked like they were beyond reclamation. So we went into a mode of consultation, we and 

the Centers for Disease Control and Prevention, and separate of 

the British government was doing the same kind of thing, a little 

bit later, but they were basically performing the same kind of operation. 

At the end of the day, the British concluded on October 5, which 

was the final date on which the corporation was to report to the 

Food and Drug Administration what were the prospects for the entire production, the British concluded that they could not guarantee that contamination did not occur in the remaining 91 lots. 

We immediately dispatched a team and did one of the most indepth inspections any government has ever done because we recognized that this would critically diminish our vaccine stores. 

At the end of that time, I received a report and the essence of 

the report was that the nine vaccine lots in question are beyond 

reclamation and we cannot guarantee that the remaining 91 lots 

aren’t incubating some contamination of some kind or another. Recognize that the bacteria that was found in these nine lots, which 

is a bacteria called Serratia marcescens, essentially is like a sentinel finding. In other words, if you find it, you know that there 

could be contamination across all of the lots of vaccine and certainly within that lot. Among the other kind of contaminants would 

be viruses that you can’t detect, bacteria that have long incubation 

periods. 

In short, there had been a breakdown in production, a systematic 

breakdown. So by the power vested to me, I had to make the conclusion that we could not guarantee the safety of any of the lots 

of vaccine and therefore ordered them not introduced into production here or anywhere else, for that matter. 

The CHAIRMAN. So it is obvious your conclusion was that the balance, the 91, had a high risk of contamination? 

Dr. CRAWFORD. Absolutely. Yes. 

The CHAIRMAN. So it was obviously your opinion, then, that nothing could be salvaged from that? 

Dr. CRAWFORD. That is correct. 

43

The CHAIRMAN. Medical science or the technology of the laboratory today does not allow that kind of a determination on a lot-bylot basis? 

Dr. CRAWFORD. No, the—thank you for the question. Actually, 

what would have to happen is you would be taking something that 

was in all likelihood contaminated and you would be trying at the 

end of the process to decontaminate it. You would have to have 

something like either very strong antibiotics, and since antibiotics 

do not work against viruses and some of the other things we would 

be concerned about, you would have to have either chemical decontamination with a mercury-containing product or you could try cold 

filtration one more time. 

But even at the end of that time, based on our mathematical 

models and the conclusions that we had drawn based on FDA’s experience with these kind of things, we still could not assure the 

American people that if we gave this vaccine, there wouldn’t be illness problems. It most likely would have been something like abscesses, but it could have been a systemic infection that could have 

been quite serious, indeed. 

The CHAIRMAN. The process you are describing for us is, I think 

in all modern terms, an antiquated or an old process, is it not? 

Dr. CRAWFORD. The process of the production of the vaccine——

The CHAIRMAN. That is what I am speaking of. 

Dr. CRAWFORD [continuing]. Is decades old and it is a very old 

process. As I mentioned earlier, if I may——

The CHAIRMAN. Please. 

Dr. CRAWFORD [continuing]. We do believe that we need to get 

away from this egg-based production facility—I mean——

The CHAIRMAN. To cell-based, is that not correct? 

Dr. CRAWFORD [continuing]. To a cell-based operation which 

would produce the product starting from the beginning without this 

contamination. It just doesn’t make any modern scientific or laboratory sense to start with a contaminated product which has this 

bioburden, as we call it, and then try to decontaminate it over the 

cycle of production. It is much better to have something more modern. These cell-based technologies for producing vaccine do exist, 

but the state of them are such that they can’t get enough volume, 

not enough virus production to get it done. 

The CHAIRMAN. My time has run out and I am pleased that we 

are joined by my colleague from Oregon. Ron, welcome. Before I 

turn to Ron for any opening comments, you were the first here. 

Would you like to ask questions, Herb, of this panel and then we 

will move to Ron? 

Senator KOHL. OK. Thank you very much, Mr. Chairman. 

Will you say again how many doses are available this year and 

how many would we normally need? 

Dr. CRAWFORD. We have 61 million doses available this year. We 

had been shooting for 100 million doses for this vaccination season. 

This amount has been increasing considerably as we move, particularly as the Centers for Disease Control and Prevention moves to 

encourage Americans to get the vaccine. We would like to have—

I think Dr. Cohen would want to speak to this, but we would like 

to have 100 million or more, but only about in the late 1990’s, we 

were actually using about half of what we were projecting for this 

44

year. But it is a good thing that we want to move to 100 million. 

We just weren’t able to have them in the market this year. 

Senator KOHL. I don’t think I fully understand. We have 61 million doses available. 

Dr. CRAWFORD. Yes. 

Senator KOHL. How many did we use last year? 

Dr. CRAWFORD. Dr. Cohen, will you——

Dr. Cohen. It was about 85 million doses last year. It is projected 

that in the United States, there is probably, under the previous 

guidelines, about 185 million people who would benefit from immunization. Now, without having anywhere near that amount of vaccine, we had to hone the recommendations to those people who 

were the most vulnerable. In doing that, it probably reduced the 

number of people for whom the vaccine would be indicated to about 

90 million. 

Now, as I had mentioned, it varies from different priority group 

to priority group what rate of immunization you achieve, but generally across the board, we only immunize less than 50 percent of 

the people for which the vaccine is recommended. So based on the 

figure of 90 million and knowing that less than 50 percent of people actually seek vaccine, we estimated that we would need between 42 and 50 million doses this year to meet what would be projected demand. 

Senator KOHL. Well, if we have 61 million doses available and 

you are projecting a usage of maybe 50 million, so are you suggesting that based on previous records and usage in other years, 

the 61 million doses should cover most all of the people who will 

appear at a clinic for a dose? 

Dr. COHEN. Well, there are actually several issues that come to 

play. One is that on October 5, when we found out about this, 33 

million of those doses had already been distributed and we do not 

know how much of that vaccine was used in individuals who were 

not high-risk patients. So we don’t know exactly how much of that 

amount of vaccine was available. So that is one of the things that 

confound that. 

Also, the ability to move vaccine from an area in which there is 

a high need for it to an area where there is less need doesn’t always work as well, so you have distribution problems that may 

make you unable to give vaccine to all of those people who really 

would be indicated to receive it. 

Senator KOHL. I want to spend all my time just getting an understanding and clearing this up. In the last several years, is the dosage, the vaccine use, about 85 million? 

Dr. COHEN. It has increased over the last several years and I 

think that is one of the things that——

Senator KOHL. What has been the number? Can we get a number? Does it vary between 75 and 80 million? Is that a fair assessment? 

Dr. CRAWFORD. Yes, that is. Between 70 and 85 million is a 

fair——

Senator KOHL. Are you saying that we have 61 million flu shots 

available? 

Dr. COHEN. That is correct. 

45

Senator KOHL. So there is not—while there is a shortage, it is 

not as though 75 percent of the people who want or who are normally expected to get vaccinated won’t be able to. It is more like 

20 percent of the people who normally would show up for a vaccination conceivably may not get it if the requirements are comparable to what we have had in the last few years. Sixty-one million doses, 75 to 80 million requests in the last several years, so 

that is what we are talking about, is that right, Mr. Crawford? 

Dr. CRAWFORD. That is correct. Additionally, because there is 

this shortage, we have engaged the companies that manufacture 

the antiviral medication that can be used both as a treatment for 

flu and as a prevention for flu and we have 40 million doses of that 

that have been committed by the companies from around the world 

that manufacture the pill. 

Senator KOHL. One last question. FluMist, do we use FluMist 

now? 

Dr. CRAWFORD. Yes, we do. It has been on the market since last 

year. They were not able to sell last year all of their production, 

so they scaled down to only two million doses this year, which is 

about what their market was last year, as I understand it, and 

they have now, since we have engaged them in discussion, they 

have been able to increase that to a total of three million doses for 

this year, and that is included in that 61 million total. 

Senator KOHL. My last question, is FluMist as effective as vaccine? 

Dr. CRAWFORD. Dr. Cohen? FDA approved it on the basis that—

it is a modified live virus, not a killed virus. It is as effective, but 

it can only be used in healthy people between 5 and 49 years of 

age. Even if you are between 5 and 49 years of age and you have 

some disability that might affect the immunizing potential, such as 

diabetes or lack of immune competence or something like that, you 

should not be taking the FluMist vaccine. It is only for healthy people in that narrow age range. 

Senator KOHL. Thank you, Mr. Chairman. 

The CHAIRMAN. Herb, thank you. 

Now let me turn to Senator Ron Wyden. Ron, if you would like 

to make an opening comment, fine, and then you can proceed with 

your questions. 

Senator WYDEN. Mr. Chairman, thank you. I will spare you and 

them, our guests, any opening filibuster and just begin, if I might, 

with you, Dr. Crawford. 

It seems to me getting good flu vaccine out to the American people is Public Health 101. The fact that it is not getting done is, to 

me, a signal that a significant part of our public health system is 

really dysfunctional. I want to just ask you a couple of questions 

because I am concerned not just about the crunch this winter, but 

the prospect that this will get repeated again and again if we don’t 

have in place the kinds of policies to ensure that that is not the 

case. 

When the number of flu vaccine companies producing vaccines 

for the United States fell to two, why didn’t one of our many agencies in the government essentially say, ‘‘Look, we have got a coming 

crisis on our hands and bring the relevant people, the companies, 

independent scientists, consumer advocates, the relevant people in 

46

to, in effect, put together a plan to make sure a shortage doesn’t 

happen? They could give you their recommendations. Some might 

take legislation, some might not. Some might take money, some 

might not. But why didn’t that happen in this case, because certainly there was an early warning that we were going to have this 

kind of situation. Tell me why, in your opinion, that didn’t take 

place. 

Dr. CRAWFORD. As you may know, we began that process early 

in this decade and the key event was a Congressional hearing in 

June 2002 on the fragility of the vaccine supply. I testified at that 

hearing and estimated that by this year, we probably would be 

down to one company wanting to do business in the American market and how that put us at an unbelievably vulnerable spot. We began a process. That is where we asked for this $100 million 

to try to convert from the egg-based to the cell-based and Congress 

responded with half that amount and then a promise to try to do 

more as we needed it. So that effort is now beginning. 

Also, the National Institutes of Health cranked up its research 

in flu vaccine production from apparently a small amount to about, 

I think it is $282 million per year this year. So the research started, but it takes, as you know, three to five years to get what you 

want, and what we want is to get away from that kind of production. 

The other thing we talked about was how do we incentivize the 

industry in order to want to enter the market. I think we said that 

probably five producers of flu vaccine in the world by 2004. There 

actually now are six, but not all of them want to enter the U.S. 

market. The incentivization never was figured out at all. 

We looked at our regulations and we believe these Good Manufacturing Practices, which is the method, as I mentioned, that we 

use to regulate the flu vaccine industry either here or wherever it 

is if they want to be in this market, can be streamlined and sophisticated. We have started on that process. We are not done with it. 

We are done with it for drugs and we should be done with it for 

vaccines next year. 

But the middle part of it is what incentive is there for companies 

to enter this market, something FDA has little control over, but we 

did signal it in 2002. 

Senator WYDEN. I think what concerns me is that if we use that 

model, if somebody comes to the Congress and says, ‘‘Well, there 

is going to be a problem, we need some money, and we ought to 

look at incentivization, as sure as the night follows the day, we are 

going to have this exact problem with respect to other vaccines, 

Doctor.’’ That is not what I am talking about. 

What I am talking about is why we don’t have one agency as the 

point or lead to have the companies, scientists, and consumer 

groups say, ‘‘This is what we need and we need it within 90 days.’’ 

I mean, we are capable in this country of going to war in a hurry. 

Well, this is a need for a domestic mobilization, and pardon me if 

I don’t think somebody coming to the Congress and talking about 

incentivization and some money, I don’t think it is a plan. 

I am going to have further contacts with the agency about this 

because it just seems to me when you are dwindling down to where 

we are, it is going to take a lot more than coming up to a CongresVerDate 0ct 09 2002 12:23 Feb 16, 2005 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 H:\DOCS\98460.TXT SAGING1 PsN: JOYCE
47

sional committee, talking about some money and talking about 

some incentivization. To me, what I have just essentially outlined 

is also a way to hold the Congress accountable. To me, if the public 

health community, the companies, the scientists and consumer 

groups say, this is what we need, we need it within 90 days, and 

then the Congress and the executive branch don’t act, then you 

know you can hold somebody accountable. 

What you have described when everybody is off talking about 

incentivization doesn’t strike me as a program. 

Let me, if I might, ask you about one other area. The State of 

Illinois, the city of New York, and other States have purchased, as 

you know, a significant number of doses of flu vaccine from European distributors in the hope that they can bring the vaccines into 

the country and get them to the most vulnerable. The Governor of 

Illinois sent you all a letter in October of this year asking the agency what needs to be done. I understand you need data from the 

manufacturers, Aventis and GlaxoSmithKline. Are these companies 

cooperating with you at this point? 

Dr. CRAWFORD. Yes. Just quickly on what you said earlier, we 

would welcome all the help we can get. Whatever FDA can do within its authority, we will try to do, but——

Senator WYDEN. Would FDA like to be the lead agency? I mean, 

what I just basically described is what amounts to a public health 

SWAT team. 

Dr. CRAWFORD. Yes. 

Senator WYDEN. When you see a problem, you essentially bring 

the relevant people and agencies and you put together the program, say we need it within 90 days, and if Senators like us then 

don’t vote for it, you have somebody that you can go to and you 

know how to do it. Would FDA take the lead in what I just described? 

Dr. CRAWFORD. Well, we would need to do it with CDC, who is 

here. Dr. Cohen is from CDC. So we would be a partnership. We 

have good diplomatic relations and we will work hard together. 

Senator WYDEN. Dr. Cohen, do you want to go on record as saying you are interested in something along the lines of what I said, 

what amounts to, with FDA, what amounts to a public health 

SWAT team where, in effect, when you see a problem like we saw 

several years ago with flu vaccine, we take a different approach? 

Dr. COHEN. I think that you are pointing out a very severe problem that has been recognized for almost the last decade, and it is 

not just flu vaccine. 

Senator WYDEN. Right. 

Dr. COHEN. We are in a very fragile circumstance for all our vaccines where we have one or two or three producers, and it relates 

to a whole variety of issues that have economic and other considerations as to why companies don’t want to produce vaccines and we 

would be very happy to work and look at all the possible solutions 

to try to resolve this issue. It is an important public health problem. 

Senator WYDEN. Let me then go the next step and flesh it out, 

but the fact that the two of you would be willing to have your agencies look at heading this up is constructive. Just so we are clear 

on the record, Dr. Crawford, with respect to those two companies 

48

cooperating on the matter of getting the data, given the fact that 

we have got a significant number of cities and States, in effect, 

going out of their own volition, I am interested in whether this 

data has been forthcoming. 

Dr. CRAWFORD. Yes. You are right. There are a number of Governors that have been able to find in distribution channels, generally wholesalers, a certain number of doses of vaccine. This 

amount could be up to as much as 750,000 doses. We are evaluating that. They were sold from these manufacturing facilities and 

have been in circulation for a while. We have to be sure they have 

been refrigerated correctly and also they were produced in a safe 

way. Then we have to figure out a plan for bringing them into the 

country. None of that has come into the country yet, but it is still 

available and we should have some action on that very shortly, indeed. 

The other thing is that FDA has gone around and asked every 

known manufacturer around the world if they had spare doses. We 

have come up with approximately six million doses that we are in 

the final stages of evaluation. The manufacturers of those doses 

have been completely cooperative and we should be able, again, 

within a very short amount of time, to make a determination on 

them and hopefully some or all of that product could be here by the 

end of this year. 

Senator WYDEN. One last question if I might, Mr. Chairman. I 

am just puzzled on one point. Has the agency contacted Glaxo specifically on this matter of documentation, Dr. Crawford? 

Dr. CRAWFORD. Yes, we have. 

Senator WYDEN. My understanding was that the agency had not. 

The reason I ask is that I was concerned that there had been some 

delay because my understanding was that FDA was waiting to decide to authorize this because they were waiting for CDC to give 

a recommendation or a direct authorization. But that is not your 

understanding? 

Dr. COHEN. No. In fact, we have been working very closely with 

FDA and a number of these companies because this is not a licensed product in the United States and under current rules and 

regulations, this would have to be used as an investigational new 

drug. So we have been working very closely to handle all of those 

regulatory activities that are required to be able to bring the drug 

in and use it under those considerations. 

Senator WYDEN. How long, gentlemen, will it take for these Governors and cities to get the approval to bring the vaccines into the 

United States that they want? How long is this going to take? 

Dr. CRAWFORD. We are evaluating them as fast and as hard as 

we can. I can’t really say, but we have been at it for a few days. 

Normally, we can make some determination within two to three 

weeks. 

Senator WYDEN. So within two to three weeks, these Governors 

and mayors—I know the city of New York wants to do it—they 

ought to have an answer? 

Dr. CRAWFORD. Yes, they should. 

Senator WYDEN. Mr. Chairman, you have been very generous. If 

I could submit some additional questions in writing on this, it 

would be very helpful. 

49

The CHAIRMAN. All right. Thank you. 

Senator WYDEN. Thank you. 

The CHAIRMAN. Ron has followed a line of questioning that I 

would like to pick up now for my second line because I think it is 

very important. I said early on in my opening statement, it appeared to me that the situation we are involved in is a liability 

issue, a licensure issue, and a stability of the market issue, a combination of all of those put together. 

You have talked about the licensing process and I wish, Dr. 

Crawford, you would pursue that with me a little bit more. As you 

reach out to foreign companies, encouraging them to enter the market, are they refusing to? Is the market too complicated? Is the 

process too long? Is it too expensive? Why aren’t they here now if 

they are reputable, credible manufacturers in other places in the 

world? 

Dr. CRAWFORD. As I mentioned, there are only like six major 

manufacturers. There is only one company that manufactures influenza vaccine in the United States and that is in a Pennsylvania 

plant. The company that ran into difficulty is an American-owned 

company, but the facility is in England. 

The CHAIRMAN. But you said in your opening statement, ‘‘We are 

encouraging foreign producers.’’ 

Dr. CRAWFORD. We are, and we are telling——

The CHAIRMAN. What in that encouragement is an impediment 

to them that they wouldn’t come rushing to this market? 

Dr. CRAWFORD. It is, as I understand it, a business decision. If 

your plant is in Germany, which the GlaxoSmithKline plant is, obviously, if you can get rid or sell most of your production run in 

Germany or close by, then you are probably going to do that. If you 

need the American market in order to make ends meet or to expand, then you might consider the U.S. market. 

The CHAIRMAN. Does FDA accept the German licensure process? 

Dr. CRAWFORD. We do not accept it exactly. We have——

The CHAIRMAN. How long is theirs and how long is yours? 

Dr. CRAWFORD. Well, it is about the same. It doesn’t take very 

long to get through that. They just have to indicate an interest in 

coming to the U.S. market, and we can’t force them to do that 

under our law. 

The CHAIRMAN. No, I appreciate that. I just wondered if there 

are obstacles out there beyond a pure business decision, costs and 

problems and complications involved that would suggest to them 

that this was a market not to come to. 

Dr. CRAWFORD. There have been a number of things that have 

been mentioned during this crisis. One is liability concerns in the 

United States. There are liability concerns in all countries, but that 

has been something that is mentioned. I am not qualified in that 

area to say whether that is right or wrong. I think it probably is 

a factor. 

Another thing that has been mentioned is FDA is very serious 

about regulation, as are most Western countries, and maybe the 

way we do the regulation is an impediment, and that is why we 

are examining these Good Manufacturing Practice regulations. We 

want to modernize them in such a way that we get the same protection perhaps quicker with less burden on the industry. I menVerDate 0ct 09 2002 12:23 Feb 16, 2005 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 H:\DOCS\98460.TXT SAGING1 PsN: JOYCE
50

tioned that is a process that is ongoing. So we are refining what 

we do as best we can in order to make the market more attractive. 

I think that could also be a factor, although I don’t think it is much 

different than it is in any other Western country. 

Then the third thing would be basically the profitability of the 

industry, which has been mentioned. The FluMist vaccine, for example, took a lot of doing to develop. There was a cost of development and it was greeted with a lot of enthusiasm. But the cost per 

dose if you buy it at the maximum discounted rate based on the 

volume of your purchase, I believe is lower than $20 per dose. If 

you compare that to a prescription for a new drug that is under 

patent, you know, perhaps a company—most of these companies 

also manufacture pharmaceuticals—it makes sense to me, although, again, I am not an expert in that area, that you can make 

more profitability out of a pharmaceutical than you could a vaccine. 

The CHAIRMAN. You mentioned your Clear Pathways. Are there 

any performance measures that point to the success of your Pathways initiative? I want to ask a couple of questions on that. 

Dr. CRAWFORD. Yes. The critical path that we are—process that 

we are under now is essentially a way that FDA can reform all of 

the regulatory programs it has in place, from foods to vaccine to 

drugs and so forth, and do it on a continuing basis. It is basically 

the first kind of scientific self-improvement for a regulatory agency 

in the world and so I think it does represent the new FDA. 

I point out that we have just started with the rudiments of it in 

2002 and the first successes happened in the drug area this particular year. So it is not very far along and it is not reaping the 

benefits that I feel confident that it will in the years to come. 

The CHAIRMAN. What are the challenges that you have already 

identified in this approach and what do manufacturers tell you 

their challenges are? Can you spread for us the timeline of this 

kind of an initiative? 

Dr. CRAWFORD. Are you talking about just vaccines or all things? 

The CHAIRMAN. Well, let us focus on vaccines today. I mean, 

that——

Dr. CRAWFORD. Well, with vaccines, I think the industry is well 

aware that we are reforming these regulations and we will be asking for public input. That primarily means the academic, scientific, 

and industrial communities. We will be taking those commentaries 

next year in a way to try to fashion something that is both medically sound, adequately protects the public health, and also represents the special needs and interests of the industry. I think by 

engaging in this along the critical path approach, we will attract 

interest from the vaccine community and those pharmaceutical 

companies that formerly produced biologicals, as we call them, 

might be hopefully attracted to cranking those areas of their portfolio up again. 

We are going to engage them as carefully and as well as we can, 

but I have to tell you that that industry has contracted over time 

and it is—I don’t think anyone is particularly optimistic about it 

returning to the number of suppliers that we had before unless 

something unforeseen happens. 

The CHAIRMAN. Well, I think we have recognized that. Both Senator Bayh and I recognized that. That is why we want to build iniVerDate 0ct 09 2002 12:23 Feb 16, 2005 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 H:\DOCS\98460.TXT SAGING1 PsN: JOYCE
51

tiative or incentives into the system, because I think I agree with 

you. Streamlining the process and doing all of that and trying to 

more clearly identify the market is one thing. Being able to provide 

some level of protection for those companies who invest in the market from a financial standpoint or incentive is another thing. Of 

course, last, to make the process a thorough, responsible one, as 

you will do, but to not make it so cumbering that it costs tens of 

millions of dollars more than it might somewhere else. That in 

itself is a disincentive and I hope that this Pathways process that 

you are about, or that you are under, will do so. By the way, the 

$100 million is in the budget. 

Dr. CRAWFORD. Thank you, sir, very much. 

The CHAIRMAN. So you are going to get that kind of money. Next 

year, we expect large volumes of vaccine produced by the cell process, OK? 

Dr. CRAWFORD. Thank you, sir. [Laughter.] 

The CHAIRMAN. All right. We expect that kind of return. 

Dr. Cohen, we have been lucky that, so far, we have had what 

appears to be a mild flu season at the very early stages of it. Historically, does a mild start mean a generally mild season? 

Dr. COHEN. Influenza, unfortunately, is one of the most unpredictable diseases. Last year, we had an early flu season and it 

ended early, as well. This year, we could have a mild season or it 

could be severe. The onset of it doesn’t predict the severity or the 

amount of disease. 

So far, worldwide, the virologic tests that have been done have 

shown a very low level of flu activity. Of the over 6,000 specimens 

that have been submitted to the surveillance laboratories, less than 

one percent actually have flu virus isolated from them. The good 

news there is that all of the isolates appear to be the isolates that 

are present in this year’s vaccine. They are related very closely to 

the Fujian strain of Influenza A. 

So we are keeping our fingers crossed, but it is very unpredictable and we always have to look at this very, very closely. 

The CHAIRMAN. In the discussion you had with Senator Kohl 

about the volume of vaccines that will be available versus what is 

an average of usage, what happens if a worst case scenario develops? What is your plan at this moment if we get into a tremendously bad flu season and we are simply well beyond—assuming 

that we have had reasonable distribution to the most vulnerable of 

our society of the 60 million doses and we get to a very substantial 

situation? What do we do? What is your plan? 

Dr. COHEN. Well, there are several things that we have done in 

preparation. One is that we have developed guidelines for the use 

of antiviral drugs, and, in fact, we have stockpiled enough antiviral 

drugs. There is enough Rimantadine, for example, to treat five million people. This would be used in a focused way, hopefully to control outbreaks that might occur in institutional settings, such as in 

nursing homes. So we have those efforts. 

There are antiviral drugs that are available in the pipeline that 

can be described by practitioners, as well. These can be used to 

prevent disease and they also can be used to treat disease. If they 

are used within the first 24 to 48 hours, they can shorten the illness. So that is one approach. 

52

The other approach is some of the things that our mothers 

taught us growing up that prevents disease transmission. So we 

have been pursuing a number of educational campaigns, trying to 

encourage people to do things that would interrupt transmission of 

disease. For example, cough hygiene, for example—if you cough or 

sneeze, to cover your cough; to wash your hands before you eat, 

after you sneeze; all of those things that would prevent you from 

becoming ill—keeping your fingers out of your nose, your mouth, 

your eyes, those kinds of things. Then particularly in times like 

this, if you have a sick child or you yourself are sick, you don’t 

want to send your child to school to spread disease or you don’t 

want to go to work to spread disease. 

So there is a variety of specific things that we can do to try to 

prevent or make people better more quickly, and there are things 

that people can do to protect themselves and others. 

The CHAIRMAN. Is that process or public awareness campaign underway? Is there now a timeline of implementation of it? Obviously, 

the antivirals are important, but I agree with you. What do we do? 

I think that question will get asked and you should be able to respond before it is asked in the circumstance we are now in. To be 

able to not meet the demand is one thing. We now know that is 

at hand and we hope for a very limited season. But there ought to 

be a very large public effort out there with our public health officials to make sure that the rest of the story is told. 

Dr. COHEN. One of the other areas, we often see transmission of 

influenza in institutional settings and long-term care, obviously 

where we have many of the elderly or disabled people who are very 

vulnerable. We are providing guidance, as well, to those kinds of 

institutions. We are working closely with their trade associations, 

trying to tell them the things that they can do to try to prevent 

transmission of the disease. Again, a lot of these relate to hygiene 

and sanitation, the use of antivirals, the rapid use of diagnostic 

tests to say, ‘‘Yes, we really do have influenza and we need to implement things to try to stop it.’’

The educational campaigns have been ongoing. There have been 

various activities. For example, we have provided much information on our website. During the early part of this episode, there 

were over 300,000 visits a day to the website. We have been putting out public information, video and audio information, and there 

will be a series of print information that initially was encouraging 

people about the appropriate use of vaccines and foregoing vaccines 

if they were not high-risk, but will then change into the things that 

people can do to protect themselves and protect others from transmitting disease. 

The CHAIRMAN. My last question of both of you before I turn to 

my colleague who has joined us, in your views, what is the top priority that Congress should be working on to address the issue of 

the vaccine shortage. Dr. Crawford. 

Dr. CRAWFORD. Well, I think this research funding and also following through on what we are doing with it, because remember 

that the idea is that this is not basic research, this is applied research that we want to do to try to get a system together using experts in other countries from around the world so that we can 

produce this vaccine without going through this laborious egg procVerDate 0ct 09 2002 12:23 Feb 16, 2005 Jkt 000000 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 H:\DOCS\98460.TXT SAGING1 PsN: JOYCE
53

ess which is going to continue to get us into trouble. I believe that 

if we get this done so that the cell culture type of way of producing 

the vaccine can be mass produced and we can get enough vaccine 

to get the job done, I believe it stands to be more profitable. I think 

it might energize the industry. I think it is the kind of thing we 

in the government are going to have to do for them in order to get 

it going. 

So I would say that is the long-range thing. These things like incentives and these things like FDA improving its regulatory process are not necessarily going to result in the kind of explosion of 

interest that you and I would like to see because it doesn’t really 

give them the technology to do what we are going to ask of 

them——

The CHAIRMAN. But it won’t hurt. 

Dr. CRAWFORD. It won’t hurt. 

The CHAIRMAN. All right. 

Dr. CRAWFORD. It absolutely will not hurt. 

The CHAIRMAN. Therefore, I don’t want you to back away from 

what you are doing. 

Dr. CRAWFORD. No, sir, I won’t. 

The CHAIRMAN. I came to this city 24 years ago, and at that 

time, one of the first things I heard was that the cost of health care 

today, or the cost of new medicines today on the market was a very 

laborious process that FDA puts everybody through. Now, it has 

ensured over time, without question, historically safe medicines. 

There is no doubt about that in anybody’s mind. But the question 

remains, is there a better, cleaner, less expensive, more time sensitive way of getting this job done——

Dr. CRAWFORD. Absolutely. 

The CHAIRMAN [continuing]. Still making it safe for the American 

public, and that is your challenge and I trust you can—you will 

work toward that. We will have you back next year to see how the 

pathway is working. 

Dr. CRAWFORD. We hope to work with you and the committee on 

that. 

The CHAIRMAN. Certainly. Thank you. 

Dr. Cohen. 

Dr. COHEN. Senator, I am not sure there is one answer. When 

I look ahead, I see that what we need is we need more vaccine. We 

need more domestic production of vaccine. We need to convince people that these vaccines are important in protecting their health, so 

we need greater demand. So there are a number of things that we 

potentially can do, and I think we have to work together to look 

at what kind of a package to put together that gets us there, to 

where we have more vaccines and more people who want the vaccines so there is greater demand, there is a greater economic benefit for companies to want to enter into a domestic vaccine production. 

The CHAIRMAN. I am always amazed by the fact that in the generation I grew up in, my mother never questioned the importance 

of my childhood vaccinations. They simply got done, and we largely 

eliminated a variety of crippling and death-causing illnesses 

around this country as a result of that. 

54

Today, that number and that desire and the demand on the part 

of new parents is amazing to me, the drop and decline in the understanding, the sensibility of it, and that is an educational process 

that I think we were much more engaged in as a country 40 or 50 

or 60 years ago than we probably are today. We have simply got 

to get back to doing that. It does improve public health. Thank you. 

Senator Carper, welcome. 

Senator CARPER. Mr. Chairman, thanks very much to our witnesses. I am conducting an orientation for new Senators this week 

and I am helping to cohost and co-lead and I need to return to join. 

Our session is just about to conclude, and I apologize. I had a couple of questions I wanted to ask. I would like to maybe be able to 

ask them for the record, if I could, to submit them in writing? 

The CHAIRMAN. Sure. Fine. 

Senator CARPER. I would appreciate your following up on those. 

Thanks very much. 

The CHAIRMAN. Thank you very much. Gentlemen, thank you. 

Let us move to our second and last panel. Gentlemen, thank you 

for being here and we thank you for your patience. Let me introduce this panel to the committee. 

Dr. Peter Paradiso, Vice President for New Business and Scientific Affairs, Wyeth Pharmaceuticals, we welcome you. Dr. Frank 

Sloan, Center for Health Policy, Law, and Management, Terry Sanford Institute of Public Policy at Duke University, we thank you for 

being here. 

Dr. Paradiso, please proceed. 

STATEMENT OF PETER R. PARADISO, VICE PRESIDENT, NEW 

BUSINESS AND SCIENTIFIC AFFAIRS, WYETH PHARMACEUTICALS, COLLEGEVILLE, PA 

Mr. PARADISO. Good afternoon, Mr. Chairman and members of 

the committee. My name is Peter Paradiso and I am vice president 

for New Business and Scientific Affairs at Wyeth. 

Wyeth has been in the business of researching and manufacturing vaccines and biologicals for more than 100 years and I have 

been part of that effort for the last 20 years. We are proud of the 

contributions of our products to the public health. 

As important as these products are to society, the vaccine enterprise has become increasingly difficult. The shortage of flu vaccine 

is but a symptom of a larger problem. To address flu vaccine supply and the limited number of manufacturers, you need to understand the reasons there are so few manufacturers of vaccines of 

any type. 

Some of the unattractive facets of the vaccine business are not 

inherent but are the result of government policies, some justifiable 

and others more questionable, that have had an impact on the development and the subsequent supply of vaccines. These barriers 

can hinder existing vaccine companies and act as disincentives for 

new participants. These derive in part from a mindset intolerant 

of even theoretical risk, and therefore often skew the risk-benefit 

ratio to the point where the benefit is forgotten. 

One of the biggest changes that has occurred in the vaccine industry in the time that I have been working in this field is the 

changing regulatory and compliance environment. In our company, 

55

almost all of the new hires in vaccine research over the last several 

years are involved in FDA compliance-related issues. Manufacturers——

The CHAIRMAN. Doctor, would you pull that mike down a little 

bit and maybe a little closer to you? I am 59 years old. Something 

is happening. Thank you. [Laughter.] 

Mr. PARADISO. Manufacturing facilities that are licensed for new 

products are outdated within 2 years and require significant and 

seemingly continuous large investments. 

Using our new Prevnar vaccine as an example, this product is 

manufactured in two facilities that were licensed in 2000. More 

than $300 million of capital has been invested in the existing 

Prevnar facilities in the last 3 years. In the same period, operating 

expenses have nearly doubled due largely to the need to update facilities and systems to meet evolving standards of FDA’s Good 

Manufacturing Practices. 

Due to the diligence of the FDA and the efforts of manufacturers, 

the safety record of vaccines’ manufacturing and supply is exemplary, so it is hard sometimes to understand why we need to have 

still higher standards. 

In the case of Wyeth’s inactivated influenza vaccine FluShield, 

continued investment was not sustainable. The fact is that our influenza vaccine business had lost money in four of its previous five 

years and significantly more investment in manufacturing was required. We had eight million unsold doses of vaccine at the end of 

2002 when we exited the business. We announced that we would 

exit the injectable fluid business and focus our resources on the 

new intranasal vaccine FluMist that we were developing in collaboration with the MedImmune Company. FluMist was licensed in 

2003, but unfortunately, not for any of the high-risk groups for 

whom flu vaccine is recommended. As a result, millions of doses of 

FluMist went unused in 2003, even in the face of a severe early 

epidemic and vaccine shortages. 

While Wyeth no longer makes an influenza vaccine, we are still 

in the vaccine business and I would now like to address some of 

the marketplace challenges in pediatric vaccines. 

Roughly 60 percent of the U.S. market is one customer, the Federal Government. This customer has the legal power to control 

prices. The government-fixed price for tetanus is so low that no 

company has bid to provide the vaccine to the government for 

many years. While it is an obligation of the government to be a 

prudent purchaser, it is also an obligation of government to protect 

the public health. By overemphasizing the former, one risks jeopardizing the latter. 

Another poorly understood risk for the vaccine business is liability. Vaccines are given to virtually every young child in this country and many diseases and afflictions manifest themselves in young 

children. The likelihood that any of these conditions would occur in 

temporal proximity to immunization is high just because of the frequency with which immunizations are given. Vaccines have been 

accused of causing epilepsy, multiple sclerosis, attention deficit disorder, cancer, auto-immune disease, learning disability, Gulf War 

syndrome, and even the AIDS epidemic. Today’s allegations linking 

56

vaccine to autism are but the latest in a long history of accusations, none of which have been proven to have scientific validity. 

In 1986, Congress created the Vaccine Injury Compensation Program administered by the Department of Health and Human Services. Although that statute has been helpful, it needs to be reformed to reflect today’s realities. 

There is a widespread perception that this program completely 

shields companies from liability, but that is not the case. Today, 

companies that produce childhood vaccines have been served with 

over 350 lawsuits, some of them massive class actions. These suits 

allege that vaccines cause autism. In May 2004, the Institute of 

Medicine issued a report concluding that there is sufficient evidence, scientific evidence, to reject a causal relationship between 

autism and vaccines. Despite this, we estimate that the companies 

involved in this litigation have spent more than $200 million collectively in outside legal costs and the first case has not yet gone to 

trial. 

These and other issues confront companies as they decide whether to enter or remain in the vaccine business. There are constructive steps that Congress can take. 

For example, Senators Bingaman and Smith have introduced a 

bill that would remove the price caps on children’s vaccines and 

allow CDC to develop a stockpile of pediatric vaccines to utilize in 

the event of shortages. Senators Craig and Bayh have introduced 

a bill that would provide tax incentives for upgrading or building 

a new vaccine facility and also offers a method of purchasing 

unsold doses of flu vaccine at the end of the year. These would be 

positive steps. 

The FDA, as we heard, has announced a project which they call 

GMPs for the 21st Century. I would urge the FDA to make review 

of vaccine CGMPs the top priority. 

Finally, the liability burden facing companies needs to be addressed. Senators Frist and Gregg made an attempt to do so last 

year and a new start needs to be made in the next Congress. 

I am very excited about the scientific possibilities for the future 

of vaccines, but recent events serve as a reminder of the fragility 

of this enterprise. 

Thank you for your attention and for this opportunity to appear 

before the committee. 

The CHAIRMAN. Doctor, thank you. 

[The prepared statement of Mr. Paradiso follows:]

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The CHAIRMAN. Dr. Sloan, thank you for being with us. 

STATEMENT OF FRANK A. SLOAN, CENTER FOR HEALTH POLICY, LAW, AND MANAGEMENT, TERRY SANFORD INSTITUTE 

OF PUBLIC POLICY, DUKE UNIVERSITY, DURHAM, NC 

Mr. SLOAN. Thank you. Mr. Chairman, I appreciate the opportunity to appear before you today. I recently chaired the Institute 

of Medicine’s Committee on the Evaluation of Vaccine Purchase Finance in the United States. The full report, ‘‘Financing Vaccines in 

the 21st Century: Assuring Access and Availability,’’ was released 

in August 2003 and is published by the National Academies Press. 

Although the report applied to childhood and adult vaccines in 

general, the findings and recommendations of the report have even 

greater force today than in late 2003 given the substantial shortage 

of flu vaccine the United States is currently experiencing. Although 

each shortage is unique, the current shortage follows a pattern of 

shortages for flu and other vaccines. While short-run solutions may 

be devised specifically for flu, the recent crisis represents an important wake-up call and presents an opportunity for consideration of 

longer-run and more comprehensive reforms. 

The charge to the IOM committee was, (1), examine current arrangements for purchasing and distributing vaccines. (2), identify 

strategies to ensure access to vaccines and offer incentives for the 

development of new vaccines. (3), develop recommendations to 

guide public decisionmaking. 

The committee was hampered by lack of data, including data on 

vaccine manufacturing and R&D costs and on liability costs. We 

heard that these were issues, but never could get quantitative estimates. 

The national immunization system has made important progress, 

as our report documents. Yet despite many successes, many problems remain. Structural and financial problems plague the vaccine 

supply system, which are not unique to flu vaccine. For example, 

recent unprecedented shortages in 8 of the 11 routine childhood 

vaccinations caused serious delays in immunization. 

The committee was concerned about the degree of concentration 

of firms that produce vaccines for the U.S. market. From 1966 to 

1977, half of all commercial vaccine manufacturers stopped producing vaccines and this exodus has continued. Today, only five 

companies produce all vaccines recommended for routine use by 

children and adults, and only three of these are U.S.-based firms. 

Eight critically important vaccines have only one supplier. A longterm shut-down in capacity of any of these companies could be devastating. Experts suggest it could take years to replace vaccine license and available to the public in sufficient quantities. 

The current situation with flu vaccine brought about by a dearth 

of suppliers is a harbinger of shortages to come. There are also delivery problems in vaccines to the public, particularly for childhood 

vaccines. Also, many adults, an indeterminate number, do not have 

insurance coverage for recommended vaccines. 

A strong relationship exists between the system for purchasing 

and providing vaccines to the public on the one hand and stability 

and growth of the United States supply system on the other. The 

thrust of public policy for childhood vaccines has been to conVerDate 0ct 09 2002 12:23 Feb 16, 2005 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6633 H:\DOCS\98460.TXT SAGING1 PsN: JOYCE
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centrate purchasing power in the Federal Government. The government uses its purchasing clout to negotiate substantial discounts 

and enforce price caps. Further growth of the government market 

share, in fact, seems as likely to create disincentives for private 

vaccine companies to develop new vaccines and to provide vaccines 

on a continuous and as-needed basis. Lack of adequate financial incentives are responsible for the vulnerability to shortage we are 

currently experiencing. 

The committee considered several strategies ranging from incremental changes in the current system to comprehensive changes. 

Each alternative, and there were seven in total, has pluses and 

minuses and each is worth considering. But in the end, the committee recommended one of these seven alternatives. 

The approach ultimately selected was a unified approach to vaccine finance and is contained in the committee’s three recommendations. The first proposes a substantial redesign of the system for purchasing and financing vaccines. The recommendations 

state the current system for purchasing and distributing vaccines 

should be replaced by a vaccine mandate subsidy and voucher system. The mandate would require that all public and private insurance plans cover immunizations that, (1) yield benefits in excess of 

cost, and (2) only for those groups for which benefits exceed costs, 

and (3) for immunizations with substantial spillovers or 

externalities, both health and financial. 

The mandate addresses several concerns, the major one being 

that many vaccines not only benefit the person being vaccinated, 

but others, even strangers, as well. The mandate would apply to all 

private insurers, both State regulated and self-insured employer 

plans, and to all public insurance plans. The subsidy provision 

means the Federal Government assumes responsibility for paying 

for the vaccines that are mandated, at least in part. Health plans 

will receive payments from the Federal Government for vaccine 

purchase and administrative fees. 

While the funded mandate would cover everyone who is insured, 

the voucher provision would cover everyone who is uninsured. 

Under this plan, uninsured children and adults would receive immunizations from the health care providers of their choice and the 

government would reimburse providers for each vaccine plus an administration fee. 

The committee proposed that a subsidy amount be determined 

for vaccines not yet available as a way to stimulate their development and licensure. The amount of subsidy would be based on the 

total societal benefit of the vaccine, not 100 percent of value, but 

some percentage of that amount that at a minimum reflects the 

health and financial benefits accruing to others than the person 

being vaccinated. 

The expectation is that, on average, this approach will increase 

the prices of vaccines. While this may be a tough sell in today’s fiscal environment, it is important to place this spending in context. 

The entire global market for all vaccines is about the same as one 

of several blockbuster drugs. 

The subsidy should be based on an objective benchmark, the actual savings to society resulting from the discovery and use of the 

vaccine. The subsidy should be set by an independent body by a 

70

completely transparent process and a methodology consistent 

across all vaccines. In my opinion, this should not be a fixed government price, however is a fixed dollar subsidy reflecting social 

benefit rather than either production or R&D costs. 

The committee also recommended changes in the composition of 

decisionmaking process of the Advisory Committee on Immunization Practices, and as a third recommendation, called for a public 

process of stakeholder deliberations to explore the full implications 

of the proposal and address technical design issues. There have 

been some public meetings since the release of the report, but to 

my knowledge, there has been no refinement of either the IOM 

Committee’s recommendation or an in-depth exploration of the alternatives examined in the report. 

Events since the release of report, in particular the experiences 

with flu vaccine both this year and in the previous year, point to 

the need for change. Hopefully, as short-run solutions for the shortage of flu vaccine are examined, the current shortage will also be 

seen as an occasion for consideration of longer-run reforms affecting flu as well as other vaccines. 

Thank you for the opportunity to speak before the committee 

today. 

The CHAIRMAN. Doctor, thank you very much. I will search out 

your report and read it and examine it. 

Mr. SLOAN. Thank you. 

[The prepared statement of Mr. Sloan follows:]

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The CHAIRMAN. Dr. Paradiso, President Bush recently signed legislation that makes some changes in the Vaccine Injury Compensation Program. Are you familiar with that? 

Mr. PARADISO. Yes. 

The CHAIRMAN. In this last tax bill, there was an expansion. 

What will this do to the current liability situation that is within 

the compensation fund? Will it help? We believe it would. That is 

why we did it. Have you evaluated it? Secondarily, you said it 

needs to be reevaluated again, I believe in your comments, or some 

adjustments made in it. Would you address those two issues? 

Mr. PARADISO. Yes, I would be happy to. First of all, I have to 

tell you that I am not an expert on the compensation program. The 

issue with the compensation program, however, is that plaintiffs’ 

attorneys have found ways to circumvent that system and as a result, cases that would normally have come before the system are 

now going to the courts. I mentioned in my testimony that the latest example of that is the lawsuits currently facing manufacturers 

relating to causes of autism. We have now 350 lawsuits, as I mentioned, that are not in the Vaccine Injury Compensation system. It 

is really these methods to circumvent the system that need to be 

taken care of. 

I think some of the changes that have been made have been on 

the basis of adding vaccines to the system, and that is a fairly regular upgrading of the compensation system, but it hasn’t addressed, I think, some of the basic issues that has led to these lawsuits. 

The CHAIRMAN. Have you found the regulatory intolerance for 

risk that you mentioned a result of legislative confines or as a result of administrative rulemaking? Has Congress passed laws that 

do more harm than good, in your opinion? 

Mr. PARADISO. I think the environment that I spoke of that is totally averse to theoretical risk or risk in general——

The CHAIRMAN. How about zero? That is what everybody wants 

nowadays, the perfect environment. 

Mr. PARADISO. As a result, when you are faced with regulations 

that talk about current Good Manufacturing Practices, you are 

really not talking about a fixed set of regulations. You are actually 

talking about an interpretation of regulations and setting the 

standard for the definitions for Good Manufacturing Practices is 

not easy and can be expanded more or less depending on where the 

technology takes you and depending on how strict and how risk 

averse you want to be in that interpretation. 

In an environment where, as you say, zero risk is tolerated, the 

regulatory agencies are put in a position where they are responding, to a certain extent, from what they are hearing from the public 

and perhaps from Congress. I think the result has been a good 

faith attempt to raise the standards and improve the safety of vaccine products, but I think in my experience over the last 20 years, 

what has happened is that those requirements have become quite 

onerous. 

So for us, in developing a new vaccine or in keeping a vaccine 

on the market, what is required has taken some quantum leaps 

over the last at least 20 years that I have been in the business and 

86

it just makes it harder and harder for us to stay with products and 

to develop new products. 

The CHAIRMAN. Let me ask this question in as constructive a 

way as I can because it is a bit hypothetical, although it is based 

on the reality that both Evan Bayh and we thought we saw in the 

marketplace and what we have tried to do in addressing the legislation that you mentioned. 

You also mentioned that you as a company have gotten out of the 

flu vaccine market. Walk me through, let us say, a comparative 

process where we would give tax credit for the constant updating 

that you are talking about and/or after CDC makes the projections 

into the market on an annual basis as to volumes necessary and, 

of course, you all determined the active virus involved and you 

begin manufacturing and the season didn’t materialize. So we negotiate a compensation to move that product off the shelf and out 

of the market, obviously, at the end of the season. Would that have 

kept—this is very difficult to ask because I know you can’t say, 

‘‘Well, of course it would, but would it have helped a company like 

Wyeth stay in the market?’’

Mr. PARADISO. Let me start by just addressing the flu vaccine 

business itself. 

The CHAIRMAN. If you would, please, because that seems to be 

the most complicated. 

Mr. PARADISO. It is, and there are things that are distinct about 

the flu vaccine business from other vaccines. 

The CHAIRMAN. Yes. 

Mr. PARADISO. The greatest distinction is that it is a seasonal 

vaccine business. So the vaccine changes 90 percent of the years, 

so there is no shelf life. 

The CHAIRMAN. It is a new product. 

Mr. PARADISO. So at the end of the year, you throw away what 

you don’t use. So if there is a delay or there is an issue with vaccine supply and you can’t sell the doses in January, February, and 

March. So that is No. 1. 

Second, the paradigm, in this country has been to vaccinate in 

October and November. When Thanksgiving comes, vaccination 

stops. So in some of the years leading up to 2002, when vaccine 

was really not in a shortage but rather coming later in the season, 

vaccine was coming out in November and December. There was 

enough for supply but vaccination had stopped by that time and so 

doses were left unsold. In other years, there is 95 million doses 

made—that was the year 2002—and the demand was only for 80 

million doses. Excuse me, 95 million doses were made and the demand was only for 80 million. 

Third it is a very hard market to predict. It is very hard to predict what the season will be in terms of timing and severity. It is 

very hard to predict how many people are going to want to get vaccinated every year and whether vaccination is valued in any particular year. 

So it really is hard to say what it is that would incentivize people 

to stay in the flu business. I think, obviously, any help as you suggested with tax credits or otherwise that would help defray the cost 

of upgrading the manufacturing process and keeping facilities in 

compliance would be useful. 

87

But I think it is important that any way to ensure that the doses 

that we predict or that the CDC predicts are going to be required 

for a given year will, in fact, be utilized. If there is a safety stock, 

if you want to project 25 percent above that, then there needs to 

be some incentive for manufacturers to over-produce in a given 

year because the way it is now, if you are over-producing and you 

can’t sell it by the end of November or early December, as we said, 

‘‘That vaccine will not be used.’’

So it is not a simple problem for flu, but I think there are things 

that can be done, as you suggested. 

The CHAIRMAN. Well, I am beginning to learn that in the time 

that I have spent with this issue over the last couple of months, 

holding the hearings later and, of course, as the whole situation developed. It is a relatively complicated process, but it does appear 

there are some looming problems. 

As I said in my opening statement, the issue of liability, the 

issue of licensure and regulatory process, this constant moving to 

the assurity of a zero risk environment that all the world wants 

nowadays but never has existed and never will exist is a great 

problem, and so we will try to put our finger in a couple of those 

holes to see if we can shore up the dike a bit and I thank you for 

being here today. 

Dr. Sloan, in one of your evaluations as to how we do traditional 

benefit-cost standards so we result in the Federal participation, you 

talked about involving—well, let me see if I can find the language 

here. The amount of the subsidy would be based on total societal 

benefit of the vaccine, not 100 percent of the value, but some percentage of that amount that, at a minimum, reflects the health and 

financial benefits accruing from other than the persons being vaccinated. How do you justify, then, a subsidy to somebody who is 80 

years old, not in the workforce and not really contributing to the 

productivity of society? How do you put a social value to that one? 

Mr. SLOAN. OK. When that person gets sick, very sick with the 

flu, the person ends up in the hospital. The person ends up going 

to physicians, costing the Medicare program thousands of dollars. 

That cost is not borne by the 80-year-old but is borne by all of us 

who contribute to the Medicare program. These are called financial 

externalities. These are substantial. So for an insured population, 

or even an uninsured one, because if an uninsured person ends up 

in the hospital, that hospital care will be covered one way or another, not by that individual, or at least a large part of it not by 

that individual. 

So it is not only the health externalities, like in the nursing 

home where we talk about people making other people sick, but it 

is because we have assumed a social obligation. We have taken on 

a social obligation to care for people who get sick. That is a burden 

that we all share and the individual does not have the incentive. 

If somebody has an income of $20,000 a year and you said, ‘‘Well, 

now you are at risk for a hospitalization and we are going to 

charge you $10,000, and then for those three or four physician visits we are going to charge you another $500, they would look at 

this differently than having just the front-end Medicare deductible 

for the hospitalization.’’

88

The CHAIRMAN. That was valuable. I knew where you were 

going, but I thought that was important for the record. There are 

a variety of ways of measuring social values in this country and we 

have taken them on in a variety of aspects of who the contributors 

are or what the costs are as it relates to, if you will, the social or 

the policy obligation that this country has assumed. 

You commented on a fragmented system for financing, but is 

that causing the shortage this year? 

Mr. SLOAN. Not in flu vaccine. It is causing other shortages. One 

of the problems that we heard as a committee was that this isn’t 

shortage of vaccine but the shortage of vaccinations. Pediatricians 

in particular had patients who had various sources of financing and 

they couldn’t figure out who in the world is covering them, whether 

the patient is covered. They are having to store vaccines in different bins in their refrigeration area, et cetera, and it just is a 

hassle to figure all of this out. 

So some of them are saying, let me just refer these patients to 

health departments, and then a lot of people in our country don’t 

know where a health department is or it is an inconvenience to go 

and so they don’t get the vaccine. 

The CHAIRMAN. How do we increasingly involve the government 

in this business and yet avoid the very thing that I heard Dr. 

Paradiso say, and that is in relation to the government being a 

large consumer and a price-fixer of product and, therefore, driving 

down the profitability and taking the incentive out of the marketplace? 

Mr. SLOAN. Well, in my view, we don’t want a price-fixer, and 

anything—if our program, if there was some worry that our plan 

would lead to price fixing, we certainly don’t want to lead to price 

fixing. 

The CHAIRMAN. In your discussions about your program, did you 

get to that point? Was that a part of your discussions at any point 

in time? 

Mr. SLOAN. Certainly, the idea that the government would set 

the price. I mean, maybe there would be a maximum price. If we 

thought, for example, the flu vaccine was worth $300 a dose and 

a manufacturer wanted to sell the vaccine for $305 a dose, the government at some point should say, ‘‘Well, this is just way overpriced.’’ But we would rely on competition to set the price of vaccines, so HMOs and the Medicare HMOs would negotiate the 

prices. So what we are talking about is a subsidy for the vaccine. 

The CHAIRMAN. Am I right in asking this question, that it appears that more vaccine production is now going on overseas than 

it is here in the United States? 

Mr. SLOAN. That is true, and we have——

The CHAIRMAN. Why is that happening? 

Mr. SLOAN [continuing]. Lost a lot of vaccine——

The CHAIRMAN. Are other countries losing the same amount of 

contributors to the market as we, or are we driving them out? 

Mr. SLOAN. I don’t know whether they have—there is a lot of 

production—currently for flu, there is no shortage abroad and we 

have a shortage here, so there is clearly some supply out there. 

What our analysis is that in the United States, for the U.S. market, it is much more attractive for a pharmaceutical manufacturer 

89

to make a blockbuster drug like a Lipitor which is taken every day 

than it is to supply vaccine on a seasonal basis to people who 

maybe don’t realize the value of what they are getting. 

One of the problems is the public isn’t very educated in the value 

of this vaccine. Maybe they don’t care completely because if they 

go to the hospital, they are subsidized and all that. But there is 

a lack of awareness of the importance of vaccines. If you look at 

the cost-benefit ratios, in those terms, vaccines are a very attractive investment. 

The CHAIRMAN. Gentlemen, I am out of time and I apologize. 

There are other questions that I wanted to ask. Let me ask this 

closing question of both of you. Is there something that you haven’t 

said yet that you want to say for the record on this issue? Dr. 

Sloan? 

Mr. SLOAN. We found very little in our study about liability, but 

in another area that I have studied—I have looked at no-fault for 

neurologically impaired infants and we heard the same story in 

Florida and in Virginia, where the State legislature had thought 

that they had capped the problem by establishing a no-fault program. For the trial bar, it was much more attractive to bring a tort 

suit than it is to file a no-fault claim and they found ways around 

this, and I do think that we do need to study it. 

The CHAIRMAN. More attractive meaning more profitable for 

them? 

Mr. SLOAN. Profitable. 

The CHAIRMAN. Thank you. That is what I thought you said. 

Mr. SLOAN. The problem is that we don’t have the good data or 

liability, in this one case just spoken about today we hear the figure 350 lawsuits, but we really haven’t seen the whole panoply of 

lawsuits that are out there. I mention this because you said that 

the hearing has ‘‘liability’’ in its name. 

The CHAIRMAN. Yes. 

Mr. SLOAN. We also need to be looking at the incentives. We 

need to provide more incentives for pharmaceutical manufacturers 

to produce vaccine and sell vaccine in the United States. 

The CHAIRMAN. Dr. Paradiso. 

Mr. PARADISO. Yes. I would like to comment just that I think the 

overriding factor here is valuing the vaccines. We made some comments here about assigning value. We talk about vaccines in terms 

of cost-benefit. I think you had a comment about the cost should 

be equivalent to the benefit. Well, in fact, for vaccines, that is the 

paradigm we use, where we try to match the actual cost of the vaccine to what we are going to be saving as opposed to saying, we 

are going to be saving an incredible number of lives. We have to 

assign a value that is proportionate to that compared to everything 

else we do from a public health perspective. I think if we do that, 

then we will understand that the value of vaccines is incredible. 

We have just had an experience with our Prevnar vaccine. It is 

a vaccine for pneumococcal disease in babies. That vaccine was introduced in the year 2000 and it has had a dramatic impact on 

pneumococcal invasive disease in young children, including meningitis, in the last four years, so that the disease is greatly reduced 

in that population. 

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But over and above that, and unexpectedly, it turns out that 

those children were spreading that disease to their parents and to 

their grandparents, and in the last four years, there has been a significant decline in pneumococcal invasive disease in the elderly in 

particular who are at high risk for pneumococcal pneumonia. In 

fact, those percentages are 30 or 40 percent reductions in invasive 

pneumococcal disease in a population that is not vaccinated. 

This is a story that is happening now. It is a story that happened 

with polio. It is a story that happened with smallpox and measles. 

It is a continuous story with vaccines. So we need to understand 

the importance of this venture from a value perspective and treat 

it that way, and I think if we do that, then we will help that enterprise. 

The CHAIRMAN. Thank you. I guess I would also say that it is living proof that little kids really are Petri dishes, if they are. I have 

accused mine of being that on occasion. [Laughter.] 

Gentlemen, thank you very much for your time with us today. 

We are going to continue to pursue this until we get it right. 

Mr. PARADISO. Thank you very much. 

Mr. SLOAN. Thank you very much. 

The CHAIRMAN. The hearing is adjourned. 

[Whereupon, at 4:08 p.m., the committee was adjourned.] 

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A P P E N D I X 

PREPARED STATEMENT OF SENATOR SUSAN COLLINS

Mr. Chairman, I want to commend you for holding this hearing to examine the 

current flu vaccine shortage and to discuss ways to remedy our vaccine supply problems in both the short and the long-term. 

Influenza results in approximately 36,000 American deaths and more than 

200,000 hospitalizations each year. It is particularly appropriate that the Aging 

Committee is holding today’s hearing since the elderly are disproportionately affected, and are at particularly high-risk of complications and even death from influenza. Seniors account for nine out to ten deaths and one out of two hospitalizations 

related to the flu. 

This issue is not new to the Aging Committee. I recall that, on September 28, the 

Senator from Idaho chaired a hearing in conjunction with National Adult Immunization Week at which both federal health officials and the CEO of Chiron (pronounced 

‘‘Kyron’’) testified that the U.S. should have plenty of vaccine available for the upcoming flu season. Ironically, this was one week to the day before the announcement 

that United Kingdom health officials had revoked the Chiron Corporation’s license 

to manufacture the flu vaccine in its Liverpool facility, effectively cutting our supply 

of vaccine in half. 

Clearly, Congress must take action to increase and strengthen the nation’s supply 

of flu vaccine. While long-term measures are needed to increase our nation’s capacity to manufacture vaccine, I believe that action must also be taken without delay 

to maximize the value of the existing vaccine supply. This is particularly true given 

the fact that even the most aggressive efforts to increase supplies of new vaccine 

will have little effect on the current shortage due to the long period of time necessary to produce more vaccine. 

To that end, on October 26, I joined Senator Jack Reed in sending a letter to Secretary Tommy Thompson urging that he do all that he can administratively to optimize the utilization of the existing vaccine and to increase the available supply. We 

were particularly concerned that the Centers for Disease Control not adopt a ‘‘one 

size fits all policy’’ and urged that they consider each state’s unique needs in allocating new shipments of vaccine. I was therefore pleased by the Department’s announcement on November 9 that they would be working with state health departments to ensure that the remaining vaccine reaches those people at highest risk for 

complications from influenza. 

In addition, I have also signed on as a cosponsor of the Emergency Flu Response 

Act, which gives our health agencies the tools they need to respond to the current 

flu vaccine shortage and to maximize the effectiveness of our reduced vaccine stocks. 

I understand that the Chairman has also introduced legislation to improve our nation’s preparedness to combat influenza. I therefore look forward to working with 

him next year on a comprehensive plan that addresses not just the short-term problems with this year’s flu vaccine supply, but that also revitalizes our efforts to ensure adequate supplies of all vaccines. 

Again, I commend the Chairman and thank him for holding this important hearing. 

CDC RESPONSES TO QUESTIONS FROM SENATOR WYDEN 

Question.What justification does CDC have for not buying the many doses of vaccine available from wholesalers in Europe? That vaccine is available now unlike the 

vaccine from manufacturers which may not be available till January, which may be 

too late to protect some of the highest risk patients. 

Answer. In the United States, it is illegal to use any drug that is not approved 

by the Food and Drug Administration (FDA). Therefore, to allow treatment of paVerDate 0ct 09 2002 12:23 Feb 16, 2005 Jkt 000000 PO 00000 Frm 00095 Fmt 6601 Sfmt 6601 H:\DOCS\98460.TXT SAGING1 PsN: JOYCE
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tients with an unapproved drug, FDA may permit its use under an Investigational 

New Drug application (IND), which must be approved by FDA before an unapproved 

drug is released for use in the United States. These FDA requirements are designed 

to ensure the protection of human subjects and require that certain safety, efficacy, 

manufacturing, shipping, and storage process date be available. 

The influenza vaccine available from Europe is not licensed for use in the United 

States. In order for it to be given to individuals in the United States, the manufacturer or some other sponsor must submit product information and an Investigational New Drug Application (IND) to FDA. FDA reviews the data and determines 

whether the product is safe for use in people. For more information about INDs, see 

http://www.fda.gov/cber/ind/ind.htm. 

On December 7, 2004, the Health and Human Services (HHS) Secretary Tommy 

Thompson announced that the influenza vaccine manufactured in Germany was safe 

enough to be used in the United States and that as many as four million doses 

would be available to alleviate the U.S. shortage. Secretary Thompson announced 

that the government was immediately buying 1.2 million doses of the vaccine, called 

Fluarix, which will be available in January. 

Question. Has CDC provided states or other entities assistance in locating doses 

available in the world market and what is CDC’s role in helping these entities in 

making doses available in the U.S.? 

Answer. Two manufacturers of influenza vaccines licensed for use in Europe have 

vaccine which is under review for use in the United States as Investigational New 

Drugs (IND). Because these vaccines are not licensed in this country, they will have 

to be administered under special protocols with written consent that must be approved by an Institutional Review Board (IRB) and the FDA. CDC is working with 

these companies to develop protocols for the use of these vaccines so they can be 

made available to states that choose to offer them under the CDC- and manufacturer-sponsored INDs. In addition, states that have identified and/or purchased vaccine from foreign distributors can choose to submit their own IND protocol to FDA 

for review and approval to allow them to import and administer these vaccines.

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