U.S. GOVERNMENT PRINTING OFFICE

74–367 PS WASHINGTON : 2001

S. HRG. 107–97

THE VACCINE VACUUM: WHAT CAN BE DONE

TO PROTECT SENIORS?

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

PORTLAND, OR

MAY 30, 2001

Serial No. 107–7

Printed for the use of the Special Committee on Aging

(

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC. 20402

SPECIAL COMMITTEE ON AGING

LARRY CRAIG, Idaho, Chairman

JAMES M. JEFFORDS, Vermont

CONRAD BURNS, Montana

RICHARD SHELBY, Alabama

RICK SANTORUM, Pennsylvania

SUSAN COLLINS, Maine

MIKE ENZI, Wyoming

TIM HUTCHINSON, Arkansas

PETER G. FITZGERALD, Illinois

JOHN ENSIGN, Nevada

JOHN B. BREAUX, Louisiana

HARRY REID, Nevada

HERB KOHL, Wisconsin

RUSSELL D. FEINGOLD, Wisconsin

RON WYDEN, Oregon

EVAN BAYH, Indiana

BLANCHE L. LINCOLN, Arkansas

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JEAN CARNAHAN, Missouri

LUPE WISSEL, Staff Director

MICHELLE EASTON, Minority Staff Director

(II)

C O N T E N T S

Page

Opening statement of Senator Ron Wyden ........................................................... 1

PANEL I

Mary Keene, Portland, OR ...................................................................................... 03

PANEL II

Janet Heinrich, Dr. PH, RN, Director, Health Care—Public Health Issues,

U.S. General Accounting Office, Washington, DC ............................................. 6

John Sattenspiel, M.D., Salem, OR ........................................................................ 57

Stephen Allred, Nurse Practioner, Owner and General Manager,

GetAFluShot.Com, Clackamas, OR .................................................................... 62

PANEL III

Keiji Fukuda, M.D., Chief, Epidemiology and Surveillance Section, Influenza

Branch, National Center for Infectious Diseases, Centers for Disease Control and Prevention, Atlanta, GA ........................................................................ 71

Sanford Kaufman, Director of Public Policy, Aventis Pasteur, Swiftwater,

PA .......................................................................................................................... 85

Matthew J. Rowan, President and CEO, Health Industry Distributors Association, Alexandria, VA ........................................................................................ 90

Steve Skoronski, President and CEO, Associated Medical Products, Indianapolis, IN ................................................................................................................... 102

Grant Higginson, M.D., MPH, State of Oregon Health Officer, Portland, OR ... 111

APPENDIX

Statement of Rep. Gary A. Condit .......................................................................... 133

Letter from GAO ...................................................................................................... 134

Background on Influenza and Vaccine Manufacturing and Distribution in

the U.S. ................................................................................................................. 137

Letter from Aventis Pasteur ................................................................................... 153

OMPRO’s written comments ................................................................................... 155

(III)

(1)

THE VACCINE VACUUM: WHAT CAN BE DONE

TO PROTECT SENIORS?

WEDNESDAY, MAY 30, 2001

U.S. SENATE, SPECIAL COMMITTEE ON AGING, Portland, OR

The committee met, pursuant to notice, at 9:30 a.m., in the

Metro Regional Building, 600 N.E. Grand Avenue, Portland, OR,

Hon. Ron Wyden, presiding.

OPENING STATEMENT OF SENATOR RON WYDEN

Senator WYDEN. The Senate Special Committee on Aging will

come to order, and it is a pleasure to be home and have a chance

to examine some critically important issues to senior citizens in our

communities this morning. I especially want to express my gratitude to Senator Larry Craig and Senator Breaux. The Senate

Aging Committee has always worked in an intensity bipartisan

way on the critical issues involving this country’s senior citizens.

I’m very pleased that two good friends of mine, Larry Craig and

John Breaux, constitute the leadership of our Select Committee on

Aging. We are very fortunate to have their staffs represented here

today, which is yet an indication that Senator Craig and Senator

Breaux are especially concerned about this issue. I want to express

my appreciation to the Committee and to Senator Craig and Senator Breaux for their leadership.

I want to begin with an announcement this morning. Today, I

was able to talk with the Secretary of Health and Human Services,

Tommy Thompson, and we discussed the flu shortage issue and the

problems that we have experienced in this country. He shares my

view that it is time to put in place a system that really works for

senior citizens and communities across this country.

Fortunately, it was possible to dodge the bullet last winter due

to a variety of circumstances that we will discuss this morning, but

that is not always going to be the case. It is unacceptable, in my

view, that a dose of vaccine becomes a rare privilege in this country

and that there would be a hit and miss system where many vulnerable people simply end up going without this essential healthcare

services.

So, this morning, I asked Secretary Thompson to create within

the next 60 days, a plan to insure that we do not have a shortage

this winter or in the days ahead. The Federal Government has

been studying this issue for long enough. The Federal Government

has been examining this kind of question now for more than a decade. I asked Secretary Thompson to bring together industry, parVerDate 11-MAY-2000 14:06 Sep 07, 2001 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\74367.TXT saging1 PsN: saging1
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ticularly the manufacturers and distributors, State health specialists, consumer groups, work with the bipartisan leadership of the

Senate Aging Committee, Senator Craig, and Senator Breaux, and

to put in place a plan to insure that there will not be shortages of

this critical needed health service in the future.

The Secretary, to his credit, agreed to my request. So, what will

happen now within 60 days, we will have an effort underway to insure that we do not have these shortages in the future. It will be

a bipartisan effort working under the auspices of the Secretary, but

with Senator Craig and Senator Breaux and other interested senators involving health specialists at the State level, consumer

groups. We are going to get a system in place so we do not have

to have our seniors and our communities and families at risk this

winter. We will not have to have a hit and miss system that leaves

vulnerable people behind and uncertain about where to turn to get

assistance.

I want to make sure that it is understood that I think that Secretary Thompson moving so quickly deserves great credit, and it is

certainly a statement on the part of the Secretary and the administration that they want to work with the Congress and not repeat

the problems of last winter. I am very appreciative of the Secretary’s response.

Suffice it to say, last year, this country was lucky. It was a light

year for the flu. Had there been a true epidemic, it is my view that

there would have been real tragedies across this country. The flu

vaccine is absolutely basic to protecting the health of seniors and

other high risk patients, and it is critical that access be assured to

this vaccine. In a sense, last year’s shortage was more than a

wake-up call. It was a real alarm bell making it clear that now is

the time to get serious about this issue. That is why Secretary

Thompson’s willingness this morning to turn this problem around

over the next 60 days is welcome.

We are going to examine this morning, a number of issues, the

congressional watchdog office, the General Accounting Office at the

request of a number of us in the Congress particularly, including

myself, have put together an excellent set of recommendations

going to be discussing what the Federal Government’s role should

be in distributing flu vaccines to seniors and other high risk patients.

Suffice it to say, given the Secretary’s agreement with me this

morning and with his willingness to work with the bipartisan leadership of the Aging Committee, I am particularly hopeful that our

witnesses will give us suggestions of what they would like to see

in this plan that is going to be designed over the next 60 days to

deal with this issue.

Given the openness and responsiveness of the Secretary—put a

special kind of focus on trying to get those ideas and suggestions.

Finally, I want to thank the good folks at Metro. We may have

Mr. Bragden and others here, but they are allowing us to use this

beautiful facility for this morning’s hearing, and we appreciate

that. And why don’t we go now to our witnesses beginning with

Mary Keene of Portland?

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STATEMENT OF MARY KEENE, PORTLAND, OR

Ms. KEENE. Good morning.

Senator WYDEN. Ms. Keene, welcome. And we’ll put your complete statement into the hearing record in its entirety, and you just

speak in any way that you feel comfortable. And we sure appreciate your coming and anxious to hear from you.

Ms. KEENE. It is an honor to be here. I would like to thank——

Senator WYDEN. Why don’t you pull that microphone down just

a little bit? Perfect.

Ms. KEENE. There?

Senator WYDEN. Perfect.

Ms. KEENE. It’s fine?

Senator WYDEN. You are doing better than perfect.

Ms. KEENE. Good morning again. I would like to thank Chairman

Craig and Senator Wyden for inviting me to give my testimony this

morning in front of the U.S. Special Committee on Aging.

My name is Mary Keene. I am 67 years old. I am currently living

in Portland, OR as a retired senior citizen. I also spend my days

volunteering at Loaves and Fishes serving meals to the elderly. My

experience with receiving a flu shot this past flu season was frustrating, and it left me without a flu shot in 2000.

This past September, I planned to attend an annual Loaves and

Fishes Flu Shot Fair. Because of the vaccine shortage, the doctors

who were participating canceled a prearrangement event because

he ran out of the flu vaccine. That meant I and many other senior

citizens were left without this important vaccine. Since I had a doctor’s appointment for my annual physical checkup in December, I

believed I could get a vaccination then. Unfortunately, my doctor’s

receptionist told me I could not have a flu shot because I was not

in high risk category. I believe that I was in a high risk population

because I am a senior citizen.

After visiting the doctors, I decided to stop by the local Fred

Meyer’s, a grocery store that was also sponsoring a flu shot fair.

I stood in line for 40 minutes. When I reached the front of the line,

the vaccine was completely out. I also went to another grocery store

chain, Safeway, a couple of days later, and they ran out as well.

Because of my early experience, I gave up on getting a flu shot altogether.

Senator, I do not want to gamble with my health in the future.

I was fortunate this past year that I was not sick with the flu, but

I did get sick. I hate to think of all the senior citizens like me who

were unable to get a flu shot and did get sick. I hope that you do

something to help ensure that I receive a flu shot this coming year.

Taking the necessary preventing measures like the flu vaccine is

important to me and other seniors like myself.

Thank you, Senator Wyden and Committee staff for looking into

this issue. Mary Keene, senior citizen.

[The prepared statement of Ms. Keene follows:]

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Senator WYDEN. Well, thank you very much for an excellent

statement. I gather from what you said is that what happened last

year was you and other senior citizens basically had to traipse all

over town—you went to your doctors’ office, you went to grocery

stores, you went to various programs trying to find the flu vaccine.

In a lot of instances even after traipsing all over town, you couldn’t

figure out how to get it, and at some point, everybody just gives

up in frustration. Is that a fair account of what happened?

Ms. KEENE. Yes.

Senator WYDEN. Your sense is that a lot of seniors had the same

sort of experience? You started with your doctor’s office; is that

right? The first visit you made was to your doctor’s office?

Ms. KEENE. Right. Yes, sir.

Senator WYDEN. Your doctor essentially didn’t know where else

to turn, I mean, given the fact that the doctor ran out? What did

he say you ought to do?

Ms. KEENE. My doctor?

Senator WYDEN. Yes.

Ms. KEENE. She went to her receptionist, like I said in my testimony, and the receptionist said that I could not really have it because they were keeping whatever vaccine they had left for the

higher risk patients.

Senator WYDEN. I see. So, they actually had some vaccine there?

Ms. KEENE. Yes.

Senator WYDEN. And your physician, in effect, said, You know,

Mary, we would like to be able to help you, but we have got to

hang on to it for higher risk people. And then she said—at least

the physician and the receptionist—they said, ‘‘Sorry. You are

going to have to go somewhere else.’’ Ms. Keene. Well, they didn’t

put it that I would have to go somewhere else. I just proceeded to

try to get it somewhere else.

Senator WYDEN. I guess what I was looking for—I mean, it just

seems to me that the chain of distribution with respect to flu vaccine breaks down at every single stage of the process.

Ms. KEENE. Right.

Senator WYDEN. There you are. You want it from your doctor.

And I’m sure your doctor was a good person. She would have liked

to have given it to you, but she had to reserve it for other people.

So the next thing you did is ask yourself ‘‘Well, can they give me

a place where I can get it?’’ And apparently, they couldn’t do that.

Then, you went to one grocery store, and they weren’t able to give

it to you. And then by your testimony, which is very good, you went

to another grocery store, and they couldn’t give it to you. So, it was

like here in our hometown, the whole distribution system seems to

have broken down; is that right?

Ms. KEENE. Right.

Senator WYDEN. OK. Well, I guess the only other question is,

how did you learn about the system at the outset? Did you get information from senior programs and the like, or did you just say

to yourself, ‘‘I know I ought to go to my doctor’s office on my own.’’

How did you first learn about the availability of——

Ms. KEENE. Flu shots?

Senator WYDEN. Yes.

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Ms. KEENE. We had an activity coordinator who arranged for we

seniors at the center to get the shot. She prearranged with a doctor

who was supposed to come in, and he ran out of—she said—she

came in and told us one day that he would not be here. He had

to cancel because he didn’t come in.

Senator WYDEN. Well, this is very helpful because what you have

said now is the breakdown with respect to your access to the physicians was both at the senior center where you thought somebody

was going to come, and then that person couldn’t get the vaccine

and it also was a problem in the doctor’s office because they said, ‘‘Mary, we can’t give it to you because we have to save it for higher

risk individuals.’’ This is exactly what we’re going to try to correct

in the next 60 days because I just don’t think folks like yourself

who are active members of our community and volunteering in senior programs should be subject to this kind of treatment. You ought

to be able to go to one place and be able to get access to a vaccination and that would be that. That may be too logical for the Federal Government at this point, but we’re going to sure try to

change it. And the Democrats and the Republicans are going to

work together, and we are going to get it done.

Ms. KEENE. Thank you.

Senator WYDEN. Anything else you would like to add?

Ms. KEENE. Not that I know of.

Senator WYDEN. All right.

You said it very well.

Ms. KEENE. I believe I said everything that needed to be said.

Senator WYDEN. And you said it very well, and I thank you for

coming.

Ms. KEENE. Thank you very much. Thank you, staff.

Senator WYDEN. OK. Our next panel, Janet Heinrich with the

General Accounting Office, John Sattenspiel, M.D., Salem, OR, Stephen Allred, GetAFluShot.com, Clackamas, OR.

Welcome to all of you. And Janet, always good to see you and

know about the fine work that you all do there at the GAO and

welcome to Oregon. Why don’t we begin with you, and we’ll put

your prepared statement into the record. And if you would summarize your principle views, that would be great.

Ms. HEINRICH. Thank you.

STATEMENT OF JANET HEINRICH, DIRECTOR, HEALTH CAREPUBLIC HEALTH ISSUES, U.S. GENERAL ACCOUNTING

OFFICE, WASHINGTON, DC

Ms. HEINRICH. Thank you, Senator Wyden. I am pleased to be

here today to discuss problems from a national perspective that occurred last fall with shortages of influenza vaccine. These problems

could repeat themselves in the future. I’m here to report on some

steps that could help better prepare for future shortages.

You asked us to examine reasons for delays in production and

distribution and pricing of the 2000/2001 flu vaccine. I will also address approaches Federal agencies could take to prepare for future

disruptions in vaccine supply. My comments are highlights from a

recently released report on the flu vaccine and supply problems.

In Oregon, as in the rest of the Nation, influenza and pneumonia

rank as the fifth leading cause of death among persons 65 and

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over. People are encouraged to obtain a flu shot each fall to protect

against the disease. Producing the vaccine is a complex process

that takes at least 6 to 8 months for manufacturers to produce.

Each year’s vaccine changes the strains of the virus to better protect against the expected varieties circulating that season.

Last fall, two manufacturers had unanticipated problems growing one of the two new strains introduced in the vaccine. Also, two

of the four manufacturers producing vaccine, shut down parts of

their facilities because of FDA concerns about good manufacturing

practices. One of those did not reopen. Now, only three companies,

two in the U.S. and one in the United Kingdom, produced the vaccine used in the United States. Because of these problems, only

about 28 million doses were available by the end of October. Seventy-eight million were expected. Companies experienced problems

in production to varying degrees. So, when a health care provider

received vaccine depended on which manufacturer’s vaccine it ordered. For example, health departments and other public entities

in 36 States, including Oregon, banded together under a group purchasing contract and ordered about 2.6 million doses from the manufacturer, as it turns out, experienced the greatest delays from production difficulties. These entities then, these public organizations,

did not receive most of their vaccine until mid to late December.

Because supply was limited, distributors and others who had supplies of the vaccine had the ability and the economic incentive to

sell their supplies to the highest bidder rather than filling lower

priced orders that they had already received.

Those who purchased vaccine in the fall had to pay much higher prices. For example, a physician group ordered the vaccine at $2.87

per dose in April. When none arrived in November, the provider

approached another distributor and purchased vaccine at the escalating prices of $8.80, $10.80 and ultimately, $12.80 per dose.

Demand for the vaccine dropped as additional vaccine became

available after the expected flu season passed. Roughly, one-third

of the total distribution was delivered in December or later. Because of the waning demand, manufacturers and distributors reported ultimately having more vaccine than they could sell. In a

typical year, there is enough vaccine available in the fall to give

a flu shot to anyone who wants one. However, when the supply is

not sufficient, there is no mechanism currently in place to establish

priorities and distribute flu vaccine first to high risk individuals.

CDC took some steps to try to manage the anticipated vaccine

delay by issuing recommendations for first vaccinating high risk

groups such as persons age 65 and over and those with chronic

health conditions. Several States took actions to ensure that high

risk groups obtain flu shots. A few States have explicit requirements to offer the vaccine to nursing home residents, while others

developed collaborative coalitions among provider groups. These efforts to target high risk groups were not always successful. The

timing of some mass immunization campaigns upset physicians

and public health officials because grocery stores were offering flu

shots to anyone when they were unable to obtain vaccine for their

high risk patients. Manufacturers and distributors told us that it

was difficult to determine which of their customers should receive

priority, nor did they have plans in place to prioritize deliveries. As

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a result, they made partial shipments to all customers as one way

to ensure that all providers had some vaccine. Others shipped vaccine only to nursing homes or first to nursing homes where those

could be identified and to physicians offices.

We need to recognize that flu vaccine production and distribution

are private sector responsibilities and that the Department of

Health and Human Services has no authority to control flu vaccine

production and distribution. Working within these constraints, we

believe it would be helpful for the Health and Human Services

agencies to take some additional actions. For example, CDC needs

to continue to provide leadership in organizing and supporting efforts to bring together all interested parties to formulate voluntary

guidelines for vaccine distribution in the event of another shortage.

CDC can concentrate greater efforts on education and outreach

to members of the public and providers focusing on the value of

being immunized past November.

Finally, while vaccine against pneumococcal disease is not a substitute for the annual flu shot, CDC and the Health Care Financing

Administration should collaborate to increase vaccination rates for

these diseases in adults 65 and over and for other high risk groups.

This concludes my remarks, Senator Wyden. And I am happy to

answer any questions you may have.

[The prepared statement of Ms. Heinrich follows:]

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Senator WYDEN. Thank you. Thank you very much. And as always, we really appreciate your good work at GAO. I’ll have some

questions in a moment.

Dr. Sattenspiel.

STATEMENT OF JOHN SATTENSPIEL, M.D., SALEM, OR

Dr. SATTENSPIEL. Thank you. My name is John Sattenspiel. I am

a family physician, and I am here on behalf of the Oregon Medical

Association and the Oregon Academy of Family Physicians.

I would like to thank you for asking me to appear before this

body, and I appreciate the opportunity to share with you my perspective on the matter of influenza vaccine availability during the

2000/2001 flu season.

By way of background, I am in a four-physician family practice

group. We are located in Salem, OR. During the fall and early winter of 2000/2001, our practice was responsible for the primary care

of approximately 9,000 patients. The number in my statement is

actually an error. It’s about 18 percent where high risk over age

65, and probably another 5 percent or so with other high risk conditions.

Prior to the start of the immunization season, sometime around

February of the year 2000, we placed an order for our usual quantity of vaccine with our local distributor at a quoted price of $3.95

per dose. In early October, we learned that our distributor would

not be able to provide us with any vaccine whatsoever. Fortunately,

we were able to round up vaccine from a national distributor and

were able to obtain about two-thirds of the vaccine that we needed

at a price of $4.67 per dose.

Due to the limited quantity of the vaccine that we received, we

initially restricted the use of the vaccine to members of high risk

groups and our office staff. This situation then lasted until around

mid-December when we received enough additional vaccine to then

offer immunization to all of our patients who desired it.

We are very fortunate because this year’s flu season was extremely mild, and in the end, we did have adequate supply of vaccine. Perhaps the most difficult aspect of the shortage from my perspective was the confusion and the uncertainty among my staff and

the public about how best to deal with the situation.

Early in the season, many of my high risk patients were quite

nervous about being able to receive their vaccinations. Many of the

media reports that they had seen made it seem as if only a very

fortunate few would have access to the vaccine. It took some doing

for my office staff to reassure them that we were prioritizing our

use of the supply that we had and that our supply would be sufficient to allow us to vaccinate them at the appropriate time.

I would like to come back to that, if I could. Later in the season,

some of my more public-minded patients called for advice when

their employers offered immunization to their employees, most of

whom were in low-risk groups. Because it rapidly became clear

that the shortage was more apparent than real and especially in

light of the mild flu season, we were then able to advise them to

accept the vaccine, if desired.

I recently attended the OAFP’s Annual Scientific Assembly. During that organization’s Congress of Members, a resolution addressVerDate 11-MAY-2000 14:06 Sep 07, 2001 Jkt 000000 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 C:\DOCS\74367.TXT saging1 PsN: saging1
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ing broader issues of vaccine and pharmaceutical shortages was debated. In the course of that debate, I polled some of my colleagues

about their experiences with vaccine supply issues. I received only

one reply, and that was from a physician in solo practice in

Newberg who reported that his supplier too had canceled his order

due to lack of supply. He was able to obtain a supply from another

distributor, but again at a much higher price. He reported that

when he looked into the matter, the only answer as to why his

original order had been canceled, and he was only able to obtain

it at a higher price was that the initial supply had been snapped

up by large commercial organizations that were using vaccines for

marketing purposes. This was the only report, however, that I

heard of that nature, and I have no corroboration of its facts.

In summary then, this year the matter seems to have been a

temporary glitch in the vaccine distribution system that was fortunately resolved relatively quickly, and more fortunately occurred in

the context of a very mild influenza season. My major concern is

that this episode clearly uncovered that our system of allocated

vaccines will be woefully short of adequate in the circumstances

where there is a genuine shortage of vaccine and/or a more severe

influenza season. In the future, it will be important for the system

to have some mechanisms in place to assure that those who are responsible for high risk patients will have access to limited vaccine

supplies and that those who have vaccines to administer will take

care to deliver it to the most appropriate patients.

[The prepared statement of Dr. Sattenspiel follows:]

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Senator WYDEN. Doctor, thank you.

Mr. Allred.

STATEMENT OF STEPHEN ALLRED, NURSE PRACTITIONER,

OWNER AND GENERAL MANAGER OF GETAFLUSHOT.COM

Mr. ALLRED. I am Nurse Practitioner Steve Allred with

GetAFluShot.com. Senator Wyden, I want to thank you for the opportunity to speak before this committee hearing on the flu vaccine

shortage that occurred this past fall.

My company, GetAFluShot.com, received 50,000 doses of influenza vaccine from General Injectables and Vaccine the week of October 16. This represented our entire pre-book order with the company. GetAFluShot.com has a 9-year history of purchasing vaccine

through this company. We paid the pre-book price that had been

agreed to the previous spring.

I have made some revisions on the percentage changes from the

original document to correct them. This price was 65 percent higher than we had paid the previous year for flu vaccine. In September, this company advised us that additional flu vaccine, if and

when available, would be increased another 64 percent. We purchased no more vaccine through that company last season.

We did receive an additional 30,000 doses of flu vaccine in November and December from two other wholesalers who we had also

pre-booked flu vaccine through them the previous spring. Both

wholesalers honored their pre-book price which is similar to what

we paid GIV.

In September and October, we were contacted by several other

wholesalers previously unknown to us. These wholesalers offered

immediate shipments of flu vaccine for prices ranging from $70 to

$130 per ten-dose vial. As the committee is aware, these prices exceeded the Medicare reimbursement rate. Purchasing vaccine at

these prices would have made it impossible for us to service Medicare recipients. We did not purchase any vaccine through them.

GetAFluShot.com is a mass provider of flu vaccinations having

administered more than 66,000 flu shots in Oregon, Washington

and Idaho this past season. As professional healthcare providers,

we break down access barriers bringing adult immunizations to the

people. GetAFluShot.com provides immunizations in senior centers,

retirement facilities, adult foster homes, churches, grocery stores

and the workplace.

One item that I would like to add to the statement, Senator, is

that in most counties that we went to throughout Oregon and

Washington, county health departments contacted us to be able to

send their high risk patients to the clinics that we were operating

in their county. Most of our services are provided in grocery stores.

The major grocery chains that we work with include Thriftway,

Sentry, Red Apple, Rosauers, Supervalu, and Zupan’s. These grocery stores donate space to host flu shot clinics and receive no revenue from this community service. In fact, busy flu clinics disrupted

regular activities and cost stores sales numerous times this past

season. GetAFluShot.com made every effort to comply with the

Center for Disease Control’s recommendations to prioritize service

to seniors and the medically needy. Copies of the guidelines were

posted at clinic sites and distributed to those in lines. Our guideVerDate 11-MAY-2000 14:06 Sep 07, 2001 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 C:\DOCS\74367.TXT saging1 PsN: saging1
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lines were also posted at our web site, GetAFluShot.com. We relied

upon self-policing, what we found to be a very effective policy. It

was regularly reported that people took themselves out of line,

sometimes after being there for an hour, with some comments to

the effect, ‘‘I can wait until next month for my shot.’’ Unfortunately, it was also observed that several people who were

high risk but not elderly deferred their own flu shots, apparently

out of confusion. GetAFluShot.com also deferred the majority of

business vaccinations until the supply issues resolved. I am a

strong believer in voluntary guidelines. A mandatory priority system would require us to obtain documentation from everyone not

obviously over the age of 64. Many diabetics, asthmatics, and those

with cardiac disease would be dissuaded from obtaining needed

protection from the potentially deadly complications of influenza.

Our staff, already working at capacity, would be further strained

and perceived as adversarial rather than supportive.

The decision to honor the CDC guidelines was not without cost

to our company. In a typical year, 25 percent of our flu shots are

provided to Medicare recipients. During the shortage this past season, this increased to 42 percent Medicare’s reimbursement rate is

significantly lower than the retail price. Deferring employee vaccinations cost us contracts both last season and for seasons to

come. We continued offering immunization clinics through mid-January. Unfortunately, many did not obtain flu shots once they were

available. Our company finished this season with approximately

14,000 unused doses of flu vaccine. Without the limitations of the

priority system that we voluntarily put into place, we could have

easily administered all of those flu shots and more.

Our wholesalers are advising us of the probability of another

79 percent increase in the wholesale price of flu vaccine for the

2001/2002 season. This means that GetAFluShot.com and others

will be paying up to three times the price paid for flu vaccine 2

years ago in 1999. We were forced to raise the price for flu shots

this past year. The public understood, and there were few complaints. Medicare reimbursement rates also were increased retroactively, we were notified, in April to adjust to the increased wholesale cost. Medicare reimbursement rates will again need to be adjusted for this coming season.

Again, I appreciate the opportunity to speak before the committee, and I will gladly answer any questions, Senator Wyden.

[The prepared statement of Mr. Allred follows:]

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Senator WYDEN. Well, thank you all. It’s very helpful to have

your testimony. And let me ask you a few questions.

The Oregon Medical Association, in a letter to me at the end of

last year, described the current system for distributing flu vaccine

as ‘‘chaotic’’ and ‘‘irrational.’’ Would any of you three disagree with

that assessment?

Ms. HEINRICH. I think one of the things that we have to remember, Senator Wyden, is that when we have enough vaccine, the system seems to be working quite well. We’re able to—in a very short

period of time—provide vaccine to a lot of people across this whole

country. The problem is that when you have a shortage, and you

have these multiple approaches for distribution, the system does

appear to be chaotic, and in fact, we found that it really depended

on which manufacturer and which manufacturer was working with

which distributors was a key factor on when you would get your

vaccine. So, in fact, some people really did have vaccine available

relatively early in the season, not as early as usually, but they had

it in October. But there were also existing contracts so that mass

immunizers; as we heard, were able to obtain a limited supply of

vaccine relatively early as well. What it meant is that there were

many providers serving high risk groups that could not find easy

access to the vaccine.

Senator WYDEN. I think I am going to record that as a ‘‘yes’’ answer to my question that it’s chaotic and irrational with the important qualifier that you have made, which is that it applies when

there is a shortage. I think it is fair to say that experts agree when

you have got a boatload of vaccine available for all concerned, you

can deal with pretty much any situation. Although we’ll need to

get to the price question that Mr. Allred mentioned in a moment.

I appreciate your thoughtful answer.

Did you want to add anything?

Dr. SATTENSPIEL. I would simply echo those comments with the

statement that I think, in large measure, the public health policy

in regards to vaccine is very clear, and in most of our offices with

apologies to Ms. Keene who had difficulty getting her vaccine when

she was clearly high risk, most of our offices generally do a pretty

good job of identifying high risk patients and prioritizing our use

of our vaccine, but what happens in between the clear policy and

the actual delivery in our offices is truly chaotic.

Senator WYDEN. Do you want to add anything to that, Mr.

Allred?

Mr. ALLRED. The only comment to add is that it was an extremely chaotic season for us and for others.

Senator WYDEN. The one thing you all didn’t get into is this matter of trying to turn this around in the next 60 days, because I feel

very strongly that after all of this study and after all of these reports, we have got an opportunity now with the Secretary who said

this morning and wants to work on a bipartisan basis with this

committee that he wants to turn this around that this has festered

long enough.

So, let us take a minute, and each one of you sort of pretend that

you are sitting there with the Secretary, and Senator Craig, and

Senator Breaux, and our committee, and health experts, and consumers and the like. Tell us what you want to see in that plan that

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we are going to try to turn around quickly to prevent this from

happening again.

Janet, why don’t you start?

Ms. HEINRICH. Well, first of all, you do have to have a plan in

place when there are shortages. And it does seem to me that, as

we’ve said in our report, that if there was progress on the development of a plan for a influenza pandemic that would really pave the

way for some of the agreements and the collaborative efforts that

have to occur.

It’s also terribly important that we learn from this past year and

really understand what educational efforts worked as we tried to

educate both the public, and the providers.

The other thing that I would stress is that whatever systems you

put in place, we still have to depend on people at the State and

local level to carry these activities out, and that means that you

have to have collaboration. You have to have the knowledge of all

the different players involved and that varies from State to State.

The other thing that I think would be very interesting for the

group to focus on as they think about developing this plan is what

I would call a natural experiment that occurred last year. We had

many States doing many very effective interventions to make sure

that the groups that are at risk did receive the vaccine, and I think

there are a lot of valuable lessons there to be learned.

Senator WYDEN. So, I want to see if I can distill out as concretely

as possible what you want to see in the plan. You want a public

education component?

Ms. HEINRICH. Yes.

Senator WYDEN. You want a lead role for the States?

Ms. HEINRICH. Yes.

Senator WYDEN. Lead role for the States. What else?

Ms. HEINRICH. I think that at the Federal level that we have to

have strong leadership, and it seems natural that that be the CDC

in terms of being the group that says we understand that there is

going to be a shortage, and this is the plan that we will follow.

These are the guidelines that we have all agreed to.

Senator WYDEN. So you want to see CDC be the Federal agency

to drive this effort to turn this around?

Now, I think it would also be helpful to know whether GAO

thinks that the Department of Health and Human Services and

CDC, of course, has enough authority under current law to put in

place what needs to be done, or does the U.S. Congress need to

pass varied and sundry additional laws?

Ms. HEINRICH. We have struggled with that issue as we’ve examined the current law. Our legal counsel, at the U.S. General Accounting Office in reviewing those laws, stated to us that there appeared to be adequate authority in a time of emergency. I guess,

the issue is when does the Secretary decide that there is an emergency?

I think that what we heard from the Department of Health and

Human Services and the Centers for Disease Control is that they

wanted to review that authority much more carefully to make sure

that they indeed had the authority that they would need to take

an action to essentially manage the supply of a vaccine.

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Senator WYDEN. One last question for all of you at GAO. Did it

turn out in your inquiry that there were problems with contracts

being broken with respect to vaccine? We’re talking about manufacturers breaking contracts or distributors breaking contracts for

physicians and other providers. Was that a problem in your inquiry? And, if so, how would you incorporate it into this 60-day effort to turn this around?

Ms. HEINRICH. What we found very interesting, Senator Wyden,

is that there were contracts—it’s hard to say that they were broken

because there was flexibility on the side of the purchaser, the provider, as well as flexibility on the side of the person that was distributing the vaccine, be it the manufacturer or the distributor.

And it was really quite amazing for us to find out that many providers, be they physician groups, public health agencies, were told

rather precipitously that the vaccine that they had ordered early

on would not be delivered, or they were told—— Senator WYDEN. Who told them that?

Ms. HEINRICH. The distributors, or they were told that there

would be a significant cutback in the amount of vaccine that would

be available to them, even though they had these early orders and

early agreements.

In some cases we found that the distributors would come back

and say, ‘‘But we can offer you ’X’ percent of what you want at a

higher rate.’’ But it’s hard to say that the contract was broken because there was no guarantee of delivery or price. Instead there

was flexibility built in at both ends. For example, in some arrangements, if you don’t use the vaccine as a provider, you can send it

back.

Senator WYDEN. I think this is an important issue because clearly, you have got to have enough flexibility to deal with real world

circumstances. But at the same time, if you are going to have any

predictability in planning capability, you can’t have people going off

and sort of saying, ‘‘Fine, you know, we thought we were going to

do this, but we have decided to do something else.’’ So, I am going

to examine that issue some more.

Anything else you want to see in the 60-day effort to turn this

around?

Ms. HEINRICH. I don’t think so at this time, but we’ll certainly

think about it and get back to you.

Senator WYDEN. OK. I’m going to hold the record open for each

of the groups here today to give us their ideas and suggestions on

what should go into this 60-day effort. I mean, if we are going to

do this and do it effectively, we are going to have to move fast.

And the sense given that, you know, the time line and the prospect of the Congress going out for the summer and like, that is

what it is going to take. Could you get us your recommendations

for the 60-day effort within 2 weeks?

Ms. HEINRICH. Sure. We would be happy to do that.

Senator WYDEN. We will hold the record open. That will be transmitted to the Senators Craig and Breaux through the Aging Committee, which will be involved in this effort with Secretary Thompson.

Very good. All right. Mr. Sattenspiel.

Dr. SATTENSPIEL. Great. Thank you.

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To finish up on the issue of contracts, in my office, we submit

purchase orders, and I don’t believe that they would really constitute the type of contract that could be necessarily considered

broken. They simply were not filled.

Clearly, from the discussion, I think that the first thing that is

absolutely crucial in terms of addressing the issue is to make sure

that we have adequate supply of vaccine. As has already been testified to by the GAO, the system worked when the supply is adequate. And clearly that, to me, is going to be the No. 1 issue.

The thing that got to me is the issue and the confusion that was

arranged in terms of timing. Influenza vaccine has become a marketing tool for some of our larger chains of pharmacies and other

organizations, and as such, sometimes it seemed to us that there

was almost a race, if you will, to see who can do influenza clinics

first for their patients. And as the CDC, I am sure would be happy

to testify, that’s not appropriate. Vaccines should be given at the

appropriate time based upon the disease that you are trying to

treat.

With influenza, the ideal time probably is not before mid-October

and can extend into late November, even December, depending

upon when the flu season starts. But when we have companies that

are beginning to advertise and promote flu clinics beginning in

September, and then we start having news reports that talk about

shortages so that people may not get their vaccine if they want it,

I think that combination was very volatile and really did lead to

at least some minor degrees of hysteria among my patients.

Senator WYDEN. So, you would like to see in this effort that we

would undertake a process to ensure the information got out in a

way that was fair to all parties and didn’t produce this kind of, you

know, semi-hysteria—— Dr. SATTENSPIEL. Absolutely.

Senator WYDEN [continuing.] About how you would you get it

and would give some parties an advantage?

Dr. SATTENSPIEL. An effort to coordinate among those people who

are providing public flu clinics, whether they are public organizations or private organizations or what have you, any effort that

would coordinate their activities so that they are done according to

an appropriate calendar as opposed to according to a marketing

calendar would, in my mind, be very helpful.

And then finally, from a standpoint of myself, and my office, and

my colleagues, I think making sure that the vaccine supplies that

are available at times of shortage do have a clear and easy pathway into my office. I do a lot of flu vaccinations. I think my colleagues overall, while the public clinics play a very important role,

I believe the majority of vaccination are still provided in private

physician offices. So, any system that does not recognize that and

does not ensure that we get adequate supplies into our offices is

going to fail in the long run.

Senator WYDEN. Well, we’ll keep this record open for 2 weeks,

and I invite you and the Oregon Medical Association, and of course,

the parent of all the State medical associations, the American Medical Association, to give us your ideas and suggestions. We would

like it within 2 weeks so that we can move quickly.

Dr. SATTENSPIEL. Thank you.

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Senator WYDEN. Mr. Allred.

Mr. ALLRED. Yes, Senator, I have several thoughts on some

issues that could help turn around the problem. One of the things

that has been suggested and discussed at some of the national immunization conferences is the question of who is licensed to manufacture vaccine.

As you are aware, we lost one manufacturer last year. We are

now down to three. It is my understanding, I do not have direct

knowledge—this is secondhand information, but it is my understanding that there are a number of pharmaceutical companies

who would like to be licensed by the FDA to be able to produce flu

vaccine rather than it being controlled by only three manufacturers

in the country. I would like to see that system looked at to find out

what the bottleneck is as to why other reputable pharmaceuticals

are not able to get license to produce it. Let’s increase the supply

for everyone.

Senator WYDEN. That is a good suggestion, and we may not be

able to have a perfect answer for that in 60 days, but we can sure

get started looking into that. That is a very constructive suggestion.

Mr. ALLRED. Thank you, Senator. Another issue that I am concerned about is the rate Medicare reimbursement. It is my understanding that the reimbursement rate is set in the spring based

upon what they anticipate the wholesale price to be. In fact, when

we were giving vaccinations, as I said, 42 percent of our vaccinations are Medicare recipients last year, we were very concerned

about the reimbursement rate which was previously set. We were

told that there would be no adjustments. As I mentioned, there was

retroactively. We went out and we vaccinated these people because,

as healthcare providers, we know the priorities, who needed to receive it. It could be a matter of life and death with seniors. However, if the reimbursement rate is not adequate to cover the cost

of providing the service, that is a serious detriment. I could see

why some other organizations might have been attempted to not

prioritize to seniors because of the low reimbursement rate.

Senator WYDEN. And you are saying that the Medicare reimbursement rate is a problem now even before that 79 percent potential increase that you have heard discussed kicks in?

Mr. ALLRED. Absolutely, Senator.

Senator WYDEN. Well, we will definitely follow-up on that, as

well. We have the good fortune of having Senators Craig and

Breaux being influential Members of the Senate Finance Committee which deals with these issues. So, we are well positioned to look

into that one as well.

Mr. ALLRED. Thank you, Senator.

Senator WYDEN. It has been an excellent panel. Anything you

would like to add further? All right, we will excuse you at this

time.

Senator WYDEN. Our next panel consists of Dr. Keiji Fukuda,

M.D., National Center for Infectious Diseases, CDC; Sanford Kaufman, Director of Public Policy at Aventis Pasteur; Matthew J.

Rowan, President and CEO of the Health Industry Distributors Association; Steven Skoronski, President and CEO of the Associated

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Medical Products in Indianapolis, IN; and Grant Higginson, M.D.,

MPH, State of Oregon Health Officer, Portland, OR.

Gentlemen, we welcome you. It’s going to be a long panel. If you

can, try to keep your prepared remarks to about a half an hour or,

excuse me, about 5 minutes or thereabouts so we will have plenty

of time for questions.

I would like to ask you, as I have with our other panel members,

I would like you to put a special focus on this matter that Secretary Thompson and I talked about this morning. I think we had

a very exciting opportunity extended to us by the Secretary to have

a chance to, through his offices working with the Aging Committee

on a bipartisan basis, to mobilize over the next 60 days to turn this

around. So, I know that constitutes some revisions you may have

to make in your prepared remarks. We are going to make them a

part of the record in their entirety. If you would, put a special focus

on your ideas and suggestions on what could be done here over the

next 60 days to mobilize and prevent this problem from happening

again.

Dr. Fukuda, welcome. I had a chance to work with the Centers

for Disease Control in a number of instances over the years. I think

you know I wrote the fertility clinic statute that you all administer

very well. And we welcome you and appreciate the good work that

you do.

STATEMENT OF KEIJI FUKUDA, M.D., CHIEF, EPIDEMIOLOGY

AND SURVEILLANCE SECTION, INFLUENZA BRANCH,

NATIONAL CENTER FOR INFECTIOUS DISEASES, CENTERS

FOR DISEASE CONTROL AND PREVENTION, DEPARTMENT

OF HEALTH AND HUMAN SERVICES, ATLANTA, GA

Dr. FUKUDA. Thank you. Good morning, Senator Wyden. I am

Dr. Keiji Fukuda from the Centers for Disease Control and Prevention.

Influenza is a major public health problem in the United States

which disproportionately harms the elderly and chronically ill. Influenza vaccine is the best tool to protect people from this disease.

In an average influenza season, vaccination of each one million persons over the age of 65 years will prevent approximately 900

deaths and 1,300 hospitalizations.

In 2000/2001, influenza vaccine delay was severe and unusual. In

other seasons, the system for providing and distributing influenza

vaccine has successfully met the country’s vast influenza vaccine

needs, and in recent years, has provided between 70 to 80 million

vaccine doses annually.

Influenza vaccine is produced and distributed primarily in the

private sector. CDC recommends use of the vaccine through a deliberative process involving guidance from the Advisory Committee

on Immunization Practices, ACIP. Each year, ACIP issues recommendations identifying which groups of individuals are at highest risk for developing complications from flu, and optimal timeframes for administering vaccine. The viral strains in the vaccine

are updated annually based on information collected through a

global public health surveillance system and through the closely coordinated work conducted by the Food and Drug Administration,

CDC, and other public health organizations.

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The manufacturers then produce very large amounts of influenza

vaccine and work with distributors to get the supplies to providers

within very tight timeframes. The complexity, fragility, scope, and

time pressures make the production and distribution of influenza

vaccine a unique product.

When difficulties in growing or processing the vaccine strains or

other manufacturing issues delay vaccine distribution, CDC can

take steps to minimize the effects, but cannot solve the entire problem.

Last year, it became clear by June that flu vaccine delays and

shortages were possible. CDC undertook a number of activities

such as mounting an education and media campaign which encouraged people at high risk of complications to seek a flu shot early

and which encouraged healthy people 50 to 64 years to seek flu

shots in December or later. As insurance against the possibility of

a severe shortage, CDC contracted with one manufacturer to extend their production period and produce up to nine million additional doses of flu vaccine. Despite these initiatives, many persons,

including those at high risk and providers experienced serious

delays in obtaining vaccine.

This year, three manufacturers will produce influenza vaccine for

the U.S., and they have estimated that up to 84 million vaccine

doses may be available. However, these estimates are subject to

change and not until much later this year will it be possible to

know with certainty how much or when vaccine may be available.

In general, CDC agrees with the GAO report and concurs that

the purchase, distribution and administration of flu vaccine are

mainly private sector responsibilities. Substantial efforts have been

made by the Department to address future influenza immunization

concerns. CDC continues to take a leadership role in supporting efforts to address flu vaccination and is working proactively with the

FDA and other key public and private sector partners to help ensure that high risk patients are vaccinated in the event of a vaccine

delay or shortage.

In March 2001, CDC and the American Medical Association

hosted a meeting with manufacturers, distributors, trade and provider organizations, and public health officials to discuss the need

for contingency plans and to learn more about vaccine production

and distribution challenges.

CDC has asked States to develop contingency plans and has provided written guidelines that assist them in planning. CDC has

sent letters to the healthcare provider organizations serving high

risk populations, including nursing homes and specialty physicians

and is working with the Health Care Financing Administration to

remind providers participating in Medicare reimbursement plans to

order vaccine now and to immunize high risk patients at the earliest possible time.

ACIP has extended the optimal influenza vaccination period to

the end of November. Mr. Chairman, it was an unusual year for

flu vaccination. CDC and its partners undertook steps to minimize

the effect of the delays, but we must anticipate that future supply

problems could occur again and could be more severe. Long-term

solutions are needed including increased routine collaborations beVerDate 11-MAY-2000 14:06 Sep 07, 2001 Jkt 000000 PO 00000 Frm 00076 Fmt 6633 Sfmt 6633 C:\DOCS\74367.TXT saging1 PsN: saging1
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tween State and local health officials and private sector vaccine

distributors and providers.

CDC will continue to work closely with its public and private sector partners and will provide more information about the flu vaccine supply as the season progresses.

Thank you again for your interest in this important public health

problem. I will be happy to respond to any questions you may have.

[The prepared statement of Dr. Fukuda follows:]

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Senator WYDEN. I will have some, you can be sure of that.

Mr. Kaufman, welcome.

STATEMENT OF SANFORD KAUFMAN, DIRECTOR OF PUBLIC

POLICY, AVENTIS PASTEUR, SWIFTWATER, PA

Mr. KAUFMAN. Thank you, Senator Wyden. My name is Sanford

Kaufman. I am Director for Public Policy for Aventis Pasteur.

Aventis Pasteur is one of the major vaccine manufacturers in

this country, and influenza vaccine is part of our portfolio. And we

appreciate greatly the opportunity to speak here today. As you requested, my comments will be limited to lessons learned from last

year, our view on recommendations for improving the current system, as well as, some recommendations and steps we are putting

into place for the upcoming year, as well as, comments on the GAO

Report.

The current public private distribution system delivers most vaccine orders to customers within a period of 24 to 48 hours. This

system relies on direct shipments from manufacturers and a national network of wholesalers and distributors.

The current state-of-the-art U.S. private sector influenza distribution network exhibits unparalleled time-tested efficiency, reliability, safety, and cost-effectiveness. The existing infrastructure

provides optimal flexibility for the most expeditious delivery of vaccine to thousands of healthcare providers. As was mentioned, about

80 percent of U.S. influenza doses are distributed to private sector

healthcare providers with less than 20 percent being distributed by

Federal, State and local government. Private sector providers include physicians offices, HMOs, food stores, chain drug stores,

mass merchandisers, independent pharmacies, hospitals, and integrated health systems.

It’s very important to note that the manufacturer, distributors,

and government agencies involved cannot completely control how

the end-user ultimately utilizes vaccine supplies. Compliance with

CDC recommendations must rely on broad cooperation and extensive and persistent educational efforts by medical professional societies, State and local health departments, healthcare providers,

and the general public.

In an effort to ease any potential influenza supply problems during the 2001/2002 influenza season, Aventis Pasteur announced on

February 13, 2001, that effective in 2001, our company will begin

shipping vaccines after Labor Day. Second, all public and private

sector customers will receive a partial shipment of approximately

25 percent of their orders, which should be adequate to immunize

their high risk patients. This will assure all of our customers have

at least some product early on and avoid a situation where some

channels of distribution have vaccines and others do not. To the extent that these shipments may not be adequate for the provider’s

high risk population, they can contact our company to obtain additional quantities which we provide on a case-by-case basis. The balance of all other customer orders will be shipped thereafter between October and November as additional vaccine lots are manufactured and released by the FDA.

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Third, our company will implement a ‘‘no return’’ policy to prevent providers and distributors from hoarding supplies or hedging

the market.

Finally, Aventis Pasteur will offer no guarantees or penalties for

designated shipping dates, thereby eliminating any preferential

treatment for one customer over another.

Additional lessons learned include the fact that the timing of

market demand was not consistent with the CDC’s optimal time to

immunize. We are very pleased that government is making significant efforts to extend the immunization season through November.

We believe that one of the biggest lessons learned is that there

is a critical role for government in mounting extensive professional

education efforts during any vaccine delay or shortage. It is extremely important to emphasize that the only practical approach

for addressing noncompliance is a greatly expanded educational effort by governmental and healthcare professional organizations. We

are very pleased this effort is being undertaken and is being endorsed by all members of the vaccine enterprise.

Finally, regarding the GAO Report, I would like to first commend

the investigators from the GAO for conducting a most thorough investigation in a most professional manner. Aventis Pasteur believes

that the recommendations provided in the GAO Report are appropriate and should serve to assist in any future vaccine delay or

shortage. As mentioned earlier, we wholeheartedly support the assessment and refinement of outreach efforts to make them more effective in meeting the challenge of educating the public and providers regarding the appropriate prioritization of patients. Aventis

Pasteur also welcomes the opportunity to take part in any ongoing

effort to bring all stakeholders together in order to formulate and

refine voluntary guidelines for vaccine distribution, especially as

related to getting this vaccine to high risk individuals first.

I’ll be pleased to answer any questions.

[The prepared statement of Mr. Kaufman follows:]

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Senator WYDEN. Thank you.

Mr. Rowan.

STATEMENT OF MATTHEW J. ROWAN, PRESIDENT AND CEO,

HEALTH INDUSTRY DISTRIBUTORS ASSOCIATION, ALEXANDRIA, VA

Mr. ROWAN. Good morning, Senator Wyden. My name is Matthew Rowan, and I am the President and CEO of the Health Industry Distributors Association. I appreciate the opportunity this

morning to appear before your committee to discuss the causes of

the vaccine delays that occurred during this past flu season, and

I also look forward to informing you of the steps the industry is

taking to collaboratively develop contingency plans with providers

and the Centers for Disease Control and Prevention, the CDC, to

deal with any future supply disruption.

In most years, flu vaccine was forecast, manufactured and distributed to providers at pre-book prices and administered to millions of patients. To properly serve the public, the flu vaccine system requires each entity in the production and supply chain to be

accurate and timely. It is important to note that manufacturers directly deliver 50 percent of flu vaccine to providers. Distributors account for the remaining 50 percent. In most seasons, in excess of

70 million patients are inoculated over the span of just a few

months. Only after the 2000/2001 flu season could we fully understand the weaknesses in this producer to patient supply chain. The

breakdown started early with the delayed CDC forecast. This was

followed by production problems and subsequent confusion in the

supply chain about how to get vaccine to the high risk populations

that the CDC singled out for priority treatment.

During the last flu season, the vaccine supply was hampered at

every critical juncture. I can report to you three conclusions based

on HIDA members actual experience during the past flu season.

First, vaccine suppliers, whether they are manufacturers or distributors, were left to guess which of their customers served high

risk populations. The CDC recommendations gave doctors and providers precise direction on which patients should receive treatment

priority. However, the same direction confused distributors. Distributors tracked delivery information to healthcare facilities. They

do not typically maintain clinical information on provider’s patient

make-up. Distributors can only guess at the mix of patients treated

by a particular healthcare facility they supply. While some information may be deduced from the name on the address, once the

product is delivered, the provider determines each individual patient’s risk status.

Distributors report being unsure if CDC was recommending supplying nursing homes first or physicians offices, which dispense the

largest quantity of flu vaccine. Among physician offices, it was unclear which specialties were likely to treat high risk patients. Also,

in some areas of the country, patients might get vaccinated at a

clinic or hospital, while in other places, they go to physician offices.

People also get shots at convenient, nonclinical settings such as

chain stores, community centers, libraries, schools, and at their

work site. Distributors have no control or role in these settings.

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Second, the vast majority of distributors behaved ethically in response to the delays.

In the 2000/2001 flu season, how much vaccine a provider received and when it was received depended entirely on the entity

with which he or she booked their initial pre-order. The general Accounting Office Report clearly documents that manufacturers and

distributors pursued different strategies to comply with the CDC

recommendation. According to the GAO Report, some suppliers,

both manufacturers and distributors, chose to supply based on the

initial order date and honoring contracts with special delivery

dates. Others chose to partially supply their customers based on

the amount of vaccine they were able to obtain from manufacturers

cutting the supply by equal proportions to all customers. Many

filled orders with their existing customers first before supplying

new customers who did not pre-book their orders. Still others gave

priority to either physician offices or nursing facilities. These separate supply strategies were the result of the confusion in the supply chain. In some cases, supply strategies were also altered midseason.

This confusion is the most likely explanation of the often quoted

example of a physician who was unable to receive his supply vaccine order only to find a flu clinic at a shopping mall or other convenient location was fully supplied. A long-term customer relationship is critical to a distributor’s financial performance. Most distributors would not engage in price gouging simply because it’s bad

for business. They know that is a sound business strategy to sell

vaccines to their long term customers who pre-book their orders for

vaccines year after year. These are the same customers who are

likely to purchase other medical supplies throughout the year and

provide a steady flow of orders. Giving up a steady customer for a

one-time profit is a losing business strategy for a distributor. Despite this, many distributors reported damaged customer relationships due to their inability to supply flu vaccine.

We know of numerous instances where HIDA members turned

down higher priced offers for vaccines from potential new customers. These offers were denied because distributors wanted to

serve their existing customers or simply did not have the vaccine

to supply.

Third, HIDA members lost millions of dollars in contracted sales

because there was no vaccine for them to distribute during the

height of the inoculation season. Our members have described to

us numerous instances where they were unable to fulfill existing

contracts or pre-booked orders for vaccines because they did not

have the product available. This seems to have been most pronounced for members who serve the physician market.

Distribution is a low profit margin business. HIDA members average a pre-tax profit of just 1.8 percent in 1999, which is the most

recent year we have figures for. This number reflects the industry’s

high investment cost relative to revenue and profit. An averagesized HIDA member distributor generates gross revenues of $5 million dollars per year in total sales of medical products. One of our

members in this size category reported losing $250,000 in pre-contracted vaccine orders that he could not supply. This loss repVerDate 11-MAY-2000 14:06 Sep 07, 2001 Jkt 000000 PO 00000 Frm 00095 Fmt 6633 Sfmt 6633 C:\DOCS\74367.TXT saging1 PsN: saging1
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resents 5 percent of his annual sales that would be very difficult

for him to recover.

HIDA has concluded that the supply system is fundamentally

sound but needs greater communication and contingency planning.

We oppose suggestions that the CDC or State government should

take over distribution. In fact, some States looked into this option

in the mid–1990’s and concluded that the distribution system is a

good and efficient one and should not be tampered with. HIDA believes that the government, through the CDC, can better serve the

vaccine distribution system by advising distributors on where priority distribution should occur and to whom and by encouraging more

manufacturers to enter the vaccine production market.

In addition, CDC education and communication to the general

public about the expanded inoculation season and locations for high

risk patient inoculation are important priorities.

Based on the experiences from last year, HIDA recommends the

following steps be taken: first, the CDC lead and support effort

among various groups that are involved in distributing and administering vaccines. This is the heart of our recommendations to

GAO. In fact, HIDA recently met with officials from the CDC’s National Immunization Program to discuss establishing procedures

that clearly define and communicate which providers should have

priority in receiving vaccines should there be another delay; second,

guidance on treatment and supply priorities driven by physician

recommendations should be developed and communicated by CDC.

Distributors particularly need guidance that is based on provider

category, physician specialty, or facility type. Instructions such as

first treat high risk patients who are seen by primary care physicians, that is internal medicine, family practice, general practice,

or who reside in nursing homes would give suppliers guidance they

can confidently act upon.

Third, the CDC forecast must be released on schedule so that

time is built into the system for any manufacturing delays that

cannot always be predicted.

Fourth, the Department of Health and Human Services must reexamine reimbursement levels for flu shots. We need to attract

more manufacturers to vaccine production. We simply cannot expect the two or three manufacturers who still produce flu vaccines

to consistently meet the rising demand for a product that health

conscious consumers want at the same time regardless of their actual risk.

Short of a major scientific advance in vaccine production, additional manufacturing capacity is the only way to improve production numbers. This will improve the system’s ability to respond to

forecast changes or any unexpected manufacturing delays.

Suppliers are in the business of supporting physicians and

nurses in what they do best: Providing patient care. In the upcoming flu season, distribution will play a much less significant role in

delivering flu vaccines. Major domestic manufacturers appear to be

pursuing a direct-to-customer approach that bypasses distributors,

who in the past, delivered approximately 50 percent of the flu vaccine supply. Early reports are that prices will be double those of

last year. It remains to be seen how this new ‘‘no distribution approach’’ will impact healthcare providers and their access to the flu

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vaccines they need to administer to the millions of patients they

serve.

Thank you again for inviting me to testify before your committee.

[The prepared statement of Mr. Rowan follows:]

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Senator WYDEN. Thank you. Anything you would like to add, Mr.

Skoronski.

STATEMENT OF STEVE SKORONSKI, PRESIDENT AND CEO,

ASSOCIATED MEDICAL PRODUCTS, INDIANAPOLIS, IN

Mr. SKORONSKI. No. I believe Matt’s testimony covered the specifics to this particular issue. My testimony dealt more with the

broader and general issues in medical practice distribution. I suspect the written testimony will probably cover what you are looking

for there.

[The prepared statement of Mr. Skoronski follows:]

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Senator WYDEN. Well, extra points for brevity and candor, and

I appreciate it.

We will have some questions here in a moment.

Dr. Higginson, welcome.

STATEMENT OF GRANT HIGGINSON, M.D., MPH, STATE OF

OREGON HEALTH OFFICER, PORTLAND, OR

Dr. HIGGINSON. Thank you, Senator Wyden. For the record, my

name is Dr. Grant Higginson. I am the State Health Officer, and

the acting Administrator for the Oregon Health Division Department of Human Services, which is the State’s public health agency.

I am also here today representing ASTHO, the State and Territorial Health Officials. And once again, thank you for the opportunity to let me testify.

I am going to dispense with the background information I provided in the testimony. I think that’s been adequately covered. I

would like to get right into what the health division’s role is in coordinating flu vaccine programs. And as you have already heard,

by and large, the influenza vaccine is primarily purchased, distributed and administrated through the private sector.

The Oregon Health Division does have a role though, in efforts

around immunization for adult populations. We have one adult immunization coordinator, and what she does is work with local

health departments, other local groups to try to ensure that there

is a coordinated effort at the local level to make sure that adults

are getting appropriately immunized.

In addition to that one coordinator, we also publish an article in

our Communicable Disease Summary Newsletter which is sent to

all healthcare providers which encourages them and urges them to

vaccinate the appropriate populations. We also issue a press release every year, which again deals with the influenza season and

appropriate recommendations for who should be immunized.

Last year, as you have heard, was an unusual year when the

Health Division was informed of expected delays in the influenza

vaccine, we learned about that in June and we immediately started

notifying and working with providers.

On September 15, we issued our first press release of this season

detailing the guidelines for vaccine recommendations and notifying

the public about the expected delay in vaccine distribution.

On September 26, we actually came out with contingency guidelines, and what they did was identify the high risk groups for priority vaccination and urged collaboration among providers and county health departments to share vaccine to ensure that vaccine was

available to high risk populations.

Long-term care facilities were also notified of the delays by their

affiliated organizations. On November 9, we then sent another

memo to all county health departments regarding the vaccine supply, distribution delays and how to order additional vaccines from

a new CDC contract that they had with Aventis. In late November,

we actually purchased over 1,500 doses of flu vaccine from the

Oregon Health Sciences University. We then surveyed our county

health departments to see who was in the most need for those immunizations, and we then distributed them, who in turn distributed those to people serving high risk populations.

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In December, we also received an additional 700 doses from the

Public Employees Benefit Board, another 130 doses from the University of Portland, and they were similarly distributed to most

needy populations through county health departments. I would also

like to note that a number of health systems and hospitals at the

local level also voluntarily distributed vaccines through local health

departments to needy population.

We also, in December, surveyed each county about the availability of vaccine in their communities and encouraged them to make

information available through a 1–800 number on where people

could get that vaccination.

Then, our final press release of last flu season was on December

13 where we announced that flu season had officially arrived in Oregon and stated that vaccine supplies were now near normal.

As you have heard from a number of other people, there were

problems that were experienced here in Oregon as were experienced around the country. Many private providers and county

health departments simply had no vaccine available during October

and November when most people should have got vaccinated, similar to what GAO has found, we did hear anecdotes that vaccines

were being inappropriately administered in some grocery stores

and other places where clinics were provided. We did follow-up on

some such reports. A number of people were administering to appropriate populations; some were not. Most of those people did appropriately respond to our recommendations when we talked to

them.

Unfortunately, as you have heard, by the time vaccine supplies

arrived, many of the providers had already had their clinics scheduled. New clinics for immunizations were not scheduled. And so, a

lot of vaccine was left on the shelf.

And so from what I have presented, Oregon’s Health Division’s

role during the 2000 vaccine season of flu vaccine season really was

one of information broker. We issued recommendations, prioritized

vaccination of high risk patients. However, I should note here that

while we made those recommendations, we did not have any authority to enforce those recommendations. We won’t know how well

we’ve done with last season or how poorly we have done until we

get this year’s Behavioral Risk Factors Survey results in. That is

something that we will share with you when that data is available.

And as other people have said, I think we were very lucky that

we did have a mild to moderate flu season last year.

The current private system, in general, as a number of people

have said, usually does work well. I have been here in Oregon now

for 14 flu seasons. This is the first year we have had a situation

like we did last year.

It’s important to keep in mind though that because the vaccines

have not been an issue in the past that we do need to continue to

encourage most people to be vaccinated. It is important that not

only the high risk people be vaccinated, but that most people be

vaccinated as well to curb this disease, if possible. However, we

have seen that while the current system works fine in most circumstances, there are going to be times when shortage of delays

can have substantial detrimental effects on providing vaccine to the

most vulnerable populations. Inadequate vaccine availability could

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have led to significant increases in morbidity and mortality in Oregon if we had seen the peak of the influenza season come earlier

or have seen a more virulent strain of the disease.

So, we do have a number of recommendations that I would like

to get on the record, and I do appreciate the opportunity to have

a couple of more weeks to get you more. And I will get that information to ASTHO, as well as, to our people in our program.

The first recommendation is that we think that CDC and the

FDA need to work with vaccine manufacturers so that we get the

earliest possible indications of expected vaccine. Availability for us

to plan for the season and any potential shortages is a very important thing.

Second, CDC should work with manufacturers and large distributors to ensure that in a situation of delayed or shortage of vaccine, that those customers who are most likely to vaccinate high

risk persons would be served first, and from our perspective, this

should include public clinics, physician practices, and nursing

homes. It is unclear to me right now whether or not that should

be totally voluntary or whether or not there should be some mandates. At the State level, we think that it is important that State

health agencies at least consider gaining the authority to direct the

distribution and administration of vaccine during times of shortage

or delays. This is something that we actually have been working

with our legislature on during this session.

There is a House Bill, House Bill 3339 which I have attached to

my testimony that actually would give the State Health Officer the

authority to implement a vaccine education and prioritization plan.

It would allow the State Health Officer to develop these guidelines

for the distribution and administration of vaccine, and it would also

grant us authority to mobilize public and private health resources

to help with that distribution and administration. It would also

give us some teeth in that it would allow us the ability to impose

$500 civil penalty fines for people who knowingly failed to adhere

to those guidelines.

A fourth recommendation is, we think that Federal, State and

the local public health agencies should promote persistently the

value of vaccination, and that’s not only just the general public

education, but vaccination later in the season. If we do have delays,

it is important that people know that they can get vaccinated in

December, and if the peak is in January or February like we had

this year, that that still would do a lot of good.

NIH should be supported in completing their studies of the half

dose of influenza vaccine in healthy persons. It is actually shown

by NIH that that can be an effective preventive measure as a way

to stretch existing supplies of vaccine.

Another recommendation is that we think that Federal, State,

and local public health agencies could more actively support efforts

to reduce mortality and morbidity during the influenza season by

increasing the rates of vaccination against pneumococcus. This is

something again that you have heard from a number of people, and

I won’t dwell any longer on that.

What people haven’t, I think, specifically said, but I do believe

is inherent in a lot of recommendations is that more Federal funding is needed. I think that both at the Federal level, and from our

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perspective at the State level, to deal with adult immunizations.

We have an extensive immunization program for childhood vaccinations. In fact, we have 35 staff positions that are working on childhood immunizations. They do things such as provide public education, work with local communities to coordinate those efforts.

While we have 35 people for childhood immunization, we only have

one person involved in adult immunizations. And we think that

this is really a disproportionate amount of funding and that more

funding should be provided to provide those same kind of levels of

service in planning, coordination, public education for the adult

population as well.

Then, just one final thought is that I think that thought should

be given at the national level to set standards for adult immunizations. We need to make sure that providers and insurers are using

effective measures in protecting people against influenza and pneumococcus.

And with that, I will close and be happy to answer any questions.

[The prepared statement of Dr. Higginson follows:]

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Senator WYDEN. Very good, thank you and an excellent panel.

Let me begin with you, Dr. Fukuda. What are the odds this year

that it’s going to be like last year?

Dr. FUKUDA. Do you mean in terms of the supply or in terms of

the——

Senator WYDEN. The overall problem. What are the odds that we

are going to have seniors like Mary Keene traipsing all over town

trying figure out where to get this, and where to turn and same

sort of problem?

Dr. FUKUDA. Well, it is difficult to give you really good odds on

what is going to happen. You have probably heard that it is a very

complex process getting vaccine made and out to people. And it is

possible for the system to breakdown at any place. For example,

the egg supply can be bad and so on.

And so, as I mentioned in my testimony, it is not really going to

be until later—probably toward the end of summer or the early

part of the fall that we really know what the picture is going to

be like. And that is the reality that we face every year. We are

never certain what the supply is going to be like until well into the

season.

Senator WYDEN. No, I understand that. I think that we have got

a plan for good times and bad times alike. So, is it 50/50 that we

are going to have another year this year like we had last year, or

10 percent or what is your sense?

Dr. FUKUDA. The information that we received from the manufacturers tells us that their estimates are up to 84 million doses of

vaccine. So far, the indications that we have that the estimates are

good, and we have not heard about any production problem.

Senator WYDEN. So, at this point then, you think that there is

a probability that we won’t have another year like last year?

Dr. FUKUDA. Well, there is always that possibility yes.

Senator WYDEN. I guess, you know, policymakers rely on people

like you so that you give us a sense of what we are heading into.

We have got to have a system that works for good times as well

as bad times. What you told me is you don’t think it is very likely

that this upcoming year will be like last year.

Dr. FUKUDA. It is fair to say that right now it does not look like

there are any production problems. We do know that there are ongoing discussions with one company and the FDA about continuing

good manufacturing practice issues. And I think we all need to

wait and see how those resolve. I think that we are very mindful

that what happened last year could happen this year. It could happen the year afterwards. So, we are really keen to push ahead with

whatever things can be done to strengthen the whole system.

Senator WYDEN. But you don’t think it is very likely at this

point?

Dr. FUKUDA. It is possible, and I don’t think I can go much further than that. I don’t think I can tell you it is 10 percent, or it

is 50 percent, or it is 100 percent. I think that it is possible. It is

possible enough that we are seriously pushing ahead with several

efforts to make the supply and distribution better. And I don’t

think I can prognosticate more than that.

Senator WYDEN. When do you think you will be able to tell the

public that we are not going to have another year like last year?

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Is this going to be in September or August, or when do you think

you will be able to tell us?

Dr. FUKUDA. Well, I think during the summer, if something goes

really bad, we are going to know about it. We are going to be able

to tell people. If things go along well, and we don’t hear about any

significant problems, then I think it is again really at the end of

the summer or the early part of the fall time before we can say

that things look really pretty good.

Senator WYDEN. Now, you heard me talk about my discussion

with the Secretary this morning.

Dr. FUKUDA. Yes.

Senator WYDEN. I really do want to bear down on getting ideas

of what you would like to see done in the next 60 days. I am going

to leave the record open, as I have done with everybody else for the

next 2 weeks, but what do you think needs to be done in the next

60 days to increase the prospects that we won’t have our constituents like Ms. Keene traipsing all over town trying to figure out

what’s going on?

Dr. FUKUDA. Sure. Well, Senator, to be practical and realistic

about what can be done, I think there are three things that really

ought to be kept in mind and considered for action. The first point

as has been pointed out by many of the speakers, is that the system is complicated but has worked well in general. Last year was

an unprecedented situation for the United States. In general, this

very complex system has done a good job about getting the vaccine

made, getting it out to people.

Senator WYDEN. The Oregon Medical Association says the system

is chaotic and irrational. These are not far out, wild-eyed kind of

people. I mean, these are folks on the front lines, and they say it’s

chaotic and irrational.

Dr. FUKUDA. Well, clearly, the past year did bring up some severe issues, which we have to keep in context in the big scope of

things. The second point is that we have to think about actions

that we can do in the short-term and those that need to be done

in the long-term. Both are clearly needed. In the short-term, I

think it is clear that some of the things which have to be done is

that these private and public sector discussions are needed—the

kind that took place at the American Medical Association Headquarters in March, those kinds of discussions need to take place

both at the local level and at other meetings, such as the kind of

meetings that you are proposing with the Secretary. In these meetings, everyone needs to understand how the system really does

work, what are the challenges, what are the real problems inherent

in trying to make an enormous amount of vaccine and getting it

out to people.

Another thing that we need to do a better job about is education.

The misinformation that Ms. Keene received she was told that she

is not at high risk, is a good example. We need to do a better job

of getting educational messages out there such as, who is high

risk? Who needs to get vaccine? We need to make those messages

accessible.

Again, I think that at CDC, the National Immunization Program

has really forged ahead in this area. It has been holding focus

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group meetings trying to figure out what is the best way to get information to people.

A third step is that contingency plans are going to be needed for

manufacturers, for distributors, for providers, and for State health

agencies. If we do come into another situation like last year, how

are you going to get vaccine to high risk people? That is the big

issue. The plans are likely going to vary depending on who you are

and where you are in the country as to exactly what you ought to

do, but those plans definitely are needed.

Senator WYDEN. But you believe then—I want to be clear on

this—that this effort that would be developed in 60 days ought to

lock-in some contingency plans?

Dr. FUKUDA. They ought to push ahead with the contingency

plans. This kind of effort that you are talking about can be very

helpful in pushing forward those plans.

Now, these actions have mentioned are what can be done in the

relative short- and medium-term. But we really have to look at

some long-term issues also. One major issue is that we really need

to change behaviors in the country about how flu vaccine is administered. We recommend giving vaccine in October and November as

the optimal time period because that gives high-risk people the

best chance of getting high risk people vaccinated, but it is clear

every year that there are a lot of high risk people who don’t get

vaccinated in that time period. It is also clear that in many years,

influenza activity doesn’t substantially pick up until later than November. So, we must teach physicians and recipients, it is OK for

high-risk people to get vaccinated after November if they weren’t

vaccinated earlier.

The second major issue is vaccine supply. There used to be seven

vaccine manufacturers; we are now down to three. And this is in

the face of growing demand. As you know serving on the Aging

Committee, the population of elderly people is increasing very rapidly in the United States. This is only going to drive up demand.

It is only going to increase the need for vaccine in the future.

The third issue is that we really do need to improve our ability

to deliver vaccine to adults. This combination of short-term approaches and long-term approaches will be needed to have a realistic solutions for these sorts of vaccine problems.

Senator WYDEN. How do you all intend to use your web site? I

understand that you want to try to get information out regularly

to physicians. Is this going to start in August, or when will you

start this year so that providers can know what place to turn to

get information on how often they can anticipate updating it?

Dr. FUKUDA. Well, I believe that the National Immunization Program has already begun these every 2 week updates. The information is posted on the Internet, and is also sent out to a wide variety

of users in different organizations and to providers. I believe that

this will continue through the year.

Senator WYDEN. How is CDC identifying the providers who serve

the high risk population?

Dr. FUKUDA. This is a difficult problem. For some of it, it is easy,

you know, nursing homes, physicians who take care of certain

kinds of patients, patients with diabetes or heart conditions. But

what is more difficult is that there are a lot of physicians who see

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a mix of patients out there, and there are organizations who see

a mix of patients out there. I think that this issue is difficult to

get at.

CDC has instituted a number of different surveys in attempt to

get information from providers and from healthcare organizations

about what kinds of patients they see, and also, to try to evaluate

what happened last season. So, those attempts are ongoing right

now.

Senator WYDEN. How do you all work with the Health Care Financing Administration in this area, and do you anticipate any

changes there?

Dr. FUKUDA. Well, in this particular problem, the CDC has been

working closely with HCFA to get letters and information out to

those providers who work in the Medicare program, to remind

them about who should get vaccinated, and to remind them to get

their vaccine orders in now. And there have been ongoing discussions about the pricing of flu vaccines. And we know that this is

a concern to providers, and it is an important issue. These are ongoing areas of discussion with HCFA.

Senator WYDEN. How do you all see the question of flu stocking

up to the issue of trying to increase the number of seniors vaccinated against pneumonia? Clearly, there are competing concerns

here, and I would be curious what resources are needed, and how

do you go about coming up with an approach to deal with flu vaccine shortages at a time when you are trying to increase the number of seniors vaccinated against pneumonia?

Dr. FUKUDA. There are a couple of useful ways to look at this.

One is that a lot of the people who are at high risk for flu are also

at high risk for pneumonia. So, there are not really competing

issues here. These same groups of people need to get both the

pneumococcal vaccine and the influenza vaccine. But I think another way to look at it is that if you have a big, broad-based pyramid, there are many more influenza vaccinations—or many more

cases of influenza every year, and these cases of influenza really

set up a lot of people for developing pneumococcal pneumonia and

other pneumonias. So influenza vaccine in many ways is a key to

preventing these pneumonias and other pneumococcal infections in

addition to getting a pneumococcal vaccine directly into people. We

need both, but there is this sort of pyramid in terms of what precedes what.

Senator WYDEN. All right. We are going to look forward to getting your recommendations within 2 weeks, as well, and they will

be particularly important since—while there is vigorous debate

about what to do in this area, almost everybody seems to think

CDC ought to be driving Federal policies. You will have that challenge to deal with, for sure.

Mr. Kaufman, same questions I asked Dr. Fukuda. What do you

think the prospects are for another year like last year with respect

to flu vaccines?

Mr. KAUFMAN. Well, without risking a percentage directionally,

I would say the probability is low that there would be a repetition

of last year. Last year was sort of a—as we put it in some cases,

almost a triple witching hour in that the last strain that was

named, it was named slightly late last year—I believe the first

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week in April—also happened to be the same strain that all manufacturers had a problem growing. It was a low yielding strain

which took some time before they found the key to getting it to

grow in the eggs, combined with the fact that there were two manufacturers that had GNP problems, with one of them totally walking away from the market. So, that confluence of three events, I

would say the probability is low of a repetition. Combined with the

fact that this year, the yields, at least so far, seemed to be very

good.

Senator WYDEN. What role, if any, do you and other private industry, you know, representatives feel that the government should

play here? That is really central to this debate. As you know, the

State Legislature and the Congress where some say the government ought to step in under the following circumstances and the

like.

I would be curious what you and other private industry representatives think ought to be the government role, if any, during

the kinds of problems we had last winter.

Mr. KAUFMAN. I think there very clearly is a government role.

And what evolved over the years was a disconnect between market

demand and when it was medically advisable to give the shots.

People were demanding that we ship them vaccines as early as possible. Maybe it gave them a feeling of security because now they

had the vaccine in August or very early September, which they

would keep in their refrigerators for their clinics which were going

to be held in late September and October.

I think what last year’s problems brought into focus is the fact

that it was really needed that the market demand be shifted to fit

more with the optimal time to immunize. And I think there have

been steps taken for that. Several of the speakers have referred to

the AMA meeting that took place. This year, the CDC already has

begun to issue—I believe there may have been something in the

MMWR—already talking about the optimal time to immunize, including through November, in fact, into December.

Senator WYDEN. What would you like to see go into this 60-day

push to try to ensure that we don’t have another year like last

year?

Mr. KAUFMAN. First of all, I think that what I just mentioned,

the fact that there should be ongoing meetings as there were last

time where all of the stakeholders are brought together where the

CDC met with the AAFP, the AMA hosted the meeting as a way

that there could be early warning that we could work with them.

I think that the hardest part of all of this is there is a number

of hard things. One of them is, it seems to us, at least from where

we sit as manufacturers, that all channels of distribution, no matter where you look, have high risk patients. It’s very difficult not

to ship, for example, a lot has been talked about the supermarket

chains. The best of our information is that approximately 5 percent

of the doses distributed—a relatively small amount—ends up going

into these, what we call private access programs, these supermarket types——

Senator WYDEN. But that really isn’t the appropriate barometer.

If 5 percent are engaged in activity that, in effect, skews everything else that’s going on because of all the advertising and the

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hype and the like, it is really not about, you know, 5 percent. It

is about activity that can drive the market and create chaos.

Mr. KAUFMAN. Well, and it got publicity way out of proportion to

the amount of doses that were there. I agree with you. What I am

saying is high risk people went there too. I believe Mrs. Keene

went there first. So, from a manufacturer’s—— Senator WYDEN. She went to a doctor’s office first.

Mr. KAUFMAN. I’m sorry. Doctor first and—— Senator WYDEN. She tried to use a doctor twice. She tried to use

the doctor at her senior center, and she tried to use the doctor in

the office.

Mr. KAUFMAN. Right, but for whatever reason, high risk people

end up at the end of all these distribution chains. So, guidance to

us which has been mentioned—and I don’t know how they do that.

But how do we know who to ship to? We have a very efficient system there. How do we know—a better way to look at it is, who not

to ship to so as not to prevent people from getting access?

Senator WYDEN. All right. Mr. Rowan, with respect to your membership, are there any, in your view, that are trying to exploit this

situation and jack up prices unreasonably?

Mr. ROWAN. Not that we are aware of. I mean, I think from the

testimony earlier today, I think bears that out. If you look at the

earlier testimony from Dr. Sattenspiel—I believe is how you pronounce his name—and Mr. Allred from GetAFluShot.com is that

these early—it is really a misnomer to call them precontracted orders. They are actually pre-booked orders that give flexibility to

both sides, both the customer and the distributor, or even in many

cases, the manufacturer.

As both of those gentlemen earlier testified, they got their orders,

and they got them at the pre-booked price. The reason anybody

pre-books an order is to lock in the price. Anybody who waits until

the flu season is in full swing and tries to make a purchase on the

spot market is going to experience somewhat higher prices. Again,

the testimony earlier bears that out that there were some modest

price increases.

The bigger concern, I think, from our viewpoint is that what are

prices doing this year with many distributors, particularly the

small distributors who, more than likely, serve smaller physician

practices being cut out of the market, we see prices—from our information—is that prices will double. And so, you know, we get

back to the reimbursement issue. We get back to the issue of how

do we deal with this as a public health issue and access to

healthcare for, you know, 70, 75, 77 million patients a year?

Again, our information is that most of our small distributors had

no vaccine to distribute at any price, pre-booked or otherwise.

Senator WYDEN. So, you were surprised at what we heard about

today?

Mr. ROWAN. Well, I do want to follow with the testimony from

the GAO earlier. I would be surprised if there was a pre-booked

order, and then there was a subsequent offer for—we can’t fulfill

that pre-booked order, but we have this supply at a higher price.

I think more than likely, the vast majority of providers and distributors had an experience much like what Mr. Allred and Dr.

Sattenspiel earlier testified to.

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Again, I think in the instance of Mr. Allred who was approached

by unscrupulous wholesalers—don’t know who they are, but I believe he did the right thing in turning away that offer—spurning

that offer.

Senator WYDEN. I guess the one thing we know now is there are

predictions for big price hikes next year.

Mr. ROWAN. Right.

Senator WYDEN. I mean, you have said it, and you are representing an industry standpoint. Mr. Allred said it. Who is raising the

prices, the manufacturers or distributors? Who is raising the

prices?

Mr. ROWAN. My estimation of that would be at the manufacturer

level. Again, the distributors largely are being cut out of the market in the 2001–2002 flu season that—our understanding anyway—

is that wholesale orders are not being accepted——

Senator WYDEN. I would give you——

Mr. ROWAN [continuing.] By domestic manufacturers.

Senator WYDEN [continuing.] Equal time on that, Mr. Kaufman.

Mr. KAUFMAN. I was hoping you would.

Senator WYDEN. The distributors say that the manufacturers are

raising the prices, and now I want to hear from you with—Mary

Keene ought to know that she is going to get a reasonably priced

vaccine that she can get access to, and she is not going to be so

much interested in who is pointing the finger at who. But the distributors said it was the manufacturers. Now, the manufacturers

ought to have a chance to respond.

Mr. KAUFMAN. I could speak for our price. And our price that

was announced—I can’t give you the exact date, but the pre-book

price on flu vaccine last year—this year—current vaccine was $5.00

a dose. I believe the vaccine was priced in the three—you may be

able to help me—but in the $3.00, $3.50 price for a number of

years from about 1992 up to around 1998, 1999. There was a small

increase then. And now, we have increased the price to $5.00 a

dose. It is not a doubling of the price. I think, quite frankly, there

are those who would still argue that it is an undervalued vaccine.

This may not be a popular statement, but one of the vaccine

manufacturers is based in the U.K. The reason, we believe, that

they do not make more vaccine available in this country—and I

think they make available somewhere in the neighborhood of 10 to

15 million doses only—is because they find it much more profitable

to sell the vaccine at a considerably higher price in Europe.

So, we, as a manufacturer—and again, I only speak for Aventis

Pasteur—have raised the price for a number of reasons. One of

which is the cost of compliance—and this is, in no way, a complaint, but Team Biologics at Ceber has raised the bar considerably

in what it takes to be a GNP compliant. And I think that was evident with what happened with two other manufacturers last year.

And second, we are investing considerable money to increase our

capacity to fermenters, I believe, require——

Senator WYDEN. So, you are going to raise prices how much next

year?

Mr. KAUFMAN. It’s at $5.00 a dose.

Senator WYDEN. From?

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Mr. KAUFMAN. I can’t swear. I believe in the high threes, $3.80 or $3.90. Somewhere in there. I could send you the exact price.

Senator WYDEN. Yeah, I would like to have that.

Mr. KAUFMAN. It is somewhere in that neighborhood, but it is

certainly not doubled.

Senator WYDEN. Mr. Rowan, what role, if any, do you think the

Federal Government should take in times of shortage with respect

to distribution?

Mr. ROWAN. Well, I think they should take the same role that

they take in any sort of emergency situation. If you liken it to what

FEMA does in terms of having contingency plans in place for nonstandard events, whether the CDC seems to be a logical place to

centralize some of this contingency planning.

You asked earlier, you know, was the situation chaotic and irrational as characterized by the Oregon Medical Association. I would

agree that it was probably chaotic, but I think it was rational in

the sense that everybody thought they were doing the right thing.

The one piece that was missing last year that I think should be addressed in the contingency plan is that all entities in the supply

chain need to recognize that they are part of something bigger than

what goes on in just their factory or just their warehouse or just

their doctor’s office. And to that end, I think that the role that the

government and the CDC should play is one of education. Educating the patients to educate whether they are high risk so that they

know. To educate them to the expanded flu season. We have providers that need that education. We heard earlier today that a particular place—a customer contact point is the receptionist at a doctor’s office. That is an individual that needs to know the specifics

of the CDC recommendations, in particular.

Suppliers need direction and education. If again, specific to the

facility so that we position doctors and nurses to do what they do

best, which is assess a patient’s risk status and make a diagnosis

and administer a flu shot, if it is appropriate.

I think another thing we heard today is that apparently we need

to educate the CEOs of Wal-Mart and Target and Safeway. They

need to understand that flu shots are not a marketing vehicle, that

it is a public health issue and that they shouldn’t be trying to attract customers at inappropriate times of the year that go against

the CDC recommendation.

So, I think the CDC, as an educational role is key, and it is critical.

Senator WYDEN. Well, you know, again without belaboring this,

it doesn’t sound very rational to me when our docs who are on the

front lines—I’m just paraphrasing this letter from the Oregon Medical Association—the docs on the front lines can’t get vaccine. The

public health departments can’t get it. And then, we have got various kinds of, you know, private entrepreneurs spending weeks giving people various kinds of deals. Then we run short. That doesn’t

strike me as a rational system, folks.

I am telling you, over the next 60 days, I’m going to do my best

to shake it up and turn this around because this isn’t working very

well. For those of you in the private sector, I would submit to you

that this is an invitation from the Secretary and now from the bipartisan leadership of the Aging Committee to move aggressively.

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This issue has been studied now for a full decade, and yet, you

know, my constituents—and I’m not the only Member of Congress

who faced this—found themselves last winter traipsing all over

town from doctor’s office to doctor’s office trying to figure out what

to do and how to get this done. In a country as strong and as good

as ours, it is unacceptable to me that getting a dose of flu vaccine

ought to be a rare privilege that you secure only after you have

navigated through a health system that is, at best cumbersome and

characterized by professionals as chaotic and irrational.

Mr. ROWAN. I agree with that 100 percent and look forward to

being a resource for you in your committee work moving

forward—— Senator WYDEN. OK. The only other question I had for you, Dr.

Higginson. What else would you like CDC to be working on, particularly in this effort over the next 60 days? I share your view that

State health departments ought to be in a position to play a key

role in trying to deal with potential shortages. Tell us what you

think over the next 60 days ought to be done.

Dr. HIGGINSON. Right. And Senator, one thing I already mentioned is, I do think they need to be working with the manufacturers to give us at the earliest time, you know, what the forecast for

flu vaccine looks like so we can start planning for contingencies

early on, if we need to.

I think that CDC definitely needs to be very actively involved in

these discussions with the manufacturers, with you over this next

60-day period to try to figure out what exactly is needed. And

again, I think just summarizing what a lot of people have said is,

I think that there is really two things we are were looking at here.

One is, what happens in a normal year. And most of the time,

things do work well, and the system does work. And I think I have

heard things from the distributors today and from the manufacturers that they are willing to work to tweak that system that usually

works to make it even better.

But I do think that we do have to plan for contingencies for bad

years. I mean, we are going to have bad years. There is going to

be a pandemic 1 day, and which is going to be a very bad year. And

for those contingencies, I think some real effort needs to be put into

what has to happen when things go bad. Some people said that it

was a chaotic system last year. The way I see it is that there was

a non-system. When things went bad, there simply was not a system to deal with how are you going to distribute the vaccine appropriately, and how are you going to get the right people to the vaccine? Those are the issues that I really think need to be worked

on. And I think that there are rules that both at the Federal level

and the State level. The Federal level, I really don’t know so much

about what you have in way of authority around the distribution

of vaccines.

Senator WYDEN. The General Accounting Office does. The Federal Government doesn’t seem to need much additional existing authority. They have the authority to do it.

Dr. HIGGINSON. And I do know down on the State level that it

is something that we are working on already. I think that it would

be good if the CDC and the Department of Health and Human

Services was to get out the message to State health departments

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that this is something that they should seriously consider and start

at the State level developing contingency plans at same time that

you are developing them at the Federal level.

Senator WYDEN. Well, the Federal level, it seems to me—and

this is what we have heard today—is going to have to make sure

that the States play a leading role. This is not going to be Federal

Government goes off and has a little discussion with itself, and

then waits for the States to do it. The Federal Government ought

to, under this important and significant offer from the new Secretary of Health and Human Services, have all of you from the

State health departments at the table and walk away after 60 days

with a plan that has you all play a leading role in the effort to ensure that this doesn’t happen again.

I will let all of you go, but to me, I mean, the measure of success

this time is going to be real simple, and that is, are there going

to have to be more hearings in another year to plow over the same

ground? I think what we want to do with a Secretary of Health and

Human Services who has moved today to make it clear that he

wants to be part of a solution, bipartisan leadership with Senator

Craig and Senator Breaux. We want to make sure that we are not

having hearings like this again in another year. It’s just that simple.

Unless you all would like to add anything further, we are going

to excuse you at this time.

Dr. HIGGINSON. Well, the other thing I would like to add—I said

this already—I do think that resources is an issue. We have talked

a lot about the need for public education. We talked a lot about the

need for developing web sites and 1–800 numbers so that people do

know where vaccines are available in a time of shortages. We have

talked about local planning, the need for coordination with local

providers and public health agencies and others who are actually

providing the vaccine. That all does cost money. There is some infrastructure dollars that are needed to support adult immunizations the way that we support childhood immunizations at this

time.

Senator WYDEN. Well, I am prepared to see additional resources

devoted to this, but I will tell you, I don’t think this is primarily

an issue of resources. I think this is a question of political will, and

whether we are going to step in and say, enough. This has been

studied for years and years. We have had meetings now for years

and years. And it is time to make the tough calls about how we

are going to come up with a plan to deal with the problems that

we had last winter. If, out of this, a bunch of recommendations to

spend more money—I think that is going to miss the point. I think

what we have seen there is a lot more to this than throwing money

at it. It may take some additional dollars for Medicare reimbursement. What this is going to take is some clearheaded thinking

about how to keep the kinds of problems we saw last year from developing. I’m not sure all that is about money.

Any other comments from our witnesses?

Dr. FUKUDA. Just one more comment, Senator, to address some

of the issues brought up by Dr. Higginson. We would all really like

to have those early forecasts about when a problem is coming down

the road. But again, I think everyone needs to realize that last

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year, we didn’t know there was a problem until pretty late into the

season. That is what made it partly so difficult to deal with. It is

just a reality of the flu vaccination supply situation that things can

go wrong pretty late into the year. So, though we would love to

know early on we often do not.

Senator WYDEN. The point is, however, we now need to come up

with a system so that if you don’t know until late that you have

got a problem, you have developed a system to deal with it if the

problem takes place. That is what we don’t have. And we are going

to get after it.

All right. Anything else you all would like to add?

The Aging Committee is adjourned.

[Whereupon, at 11:37 a.m., the committee was adjourned.]

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