The Centers for Disease Control and Prevention (CDC) estimates that influenza ("flu"), aviral respiratory illness, causes 36,000 deaths and more than 200,000 hospitalizations in the UnitedStates each year. For many years, vaccination has been urged for those at highest risk of seriousillness from flu, such as older persons and those with chronic illnesses. Peculiarities of flu vaccineproduction, especially its finite shelf life (it is good only for the one season for which it is produced),have led to supply and demand imbalances in recent years. Overall demand for flu vaccine hasgrown over the past decade. But CDC reports that there have been vaccine surpluses each of the pastfive winters, and unused vaccine has been discarded. (See Table 1.) Within a season,maldistribution of vaccine may lead to shortages at particular times and places, despite an overallsurplus. Gauging demand from year to year in what is mostly a private-sector market is a matter ofboth art and science, an exercise fraught with difficulty. The shortage of flu vaccine in the fall of 2004 renewed discussion of the fragility of thenation's system for providing this potentially life-saving product. Some have expressed concern thatthis situation bodes ill for national preparedness for an influenza pandemic or a large-scalebioterrorism event. This report will describe the current system of flu vaccine production anddelivery, the causes of supply problems, and options for improvement. On October 5, 2004, Chiron (pronounced KÄ«Ì-ron), a California-based biotechnologycompany, notified U.S. health officials that British regulatory authorities had suspended productionof influenza ("flu") vaccine in its plant in Liverpool, England, due to vaccine safety concerns. Theplant was slated to provide between 46 million and 48 million doses of injectable flu vaccine(FluvirinÂ®) for the U.S. market for the imminent 2004-2005 flu season, almost half the plannednationwide supply of 100 million doses. Aventis-Pasteur (Aventis), a French-based company witha plant in Swiftwater, Pennsylvania, was slated to produce 52 million doses of its injectable fluvaccine (FluzoneÂ®). After the Chiron suspension was announced, Aventis announced that its production for thisseason was on target, and could be augmented somewhat to a total of 58 million doses by continuingproduction through January 2005. An additional manufacturer, MedImmune, based in Maryland,produces a flu vaccine made of live virus for intra-nasal administration (FluMist,â¢ also referred toas live attenuated influenza vaccine, or LAIV). MedImmune was slated to produce 2 million dosesfor the 2004-2005 season after the product was poorly received the prior year. The companyannounced that it could ramp up production somewhat, but because LAIV is a live virus product, itis not licensed for use in some of the high-risk priority groups identified by CDC. The DefenseDepartment sought to obtain doses of LAIV for its healthy recruits slated for overseas deployment,in order to assure force protection without consuming the limited civilian supply of injectablevaccine. The announcement of Chiron's suspension prompted CDC and its Advisory Committee onImmunization Practices (ACIP) to re-define the groups most at risk (enumerated in Table 2 ), to begiven priority for the available vaccine doses. CDC also activated its Emergency Operations Centerto coordinate nationwide tracking of available vaccine doses, high-priority individuals who mightneed them, and infections signaling the beginning of the winter flu season. Officials from theDepartment of Health and Human Services (HHS) and CDC repeated in public statements thatvaccine doses from Aventis would continue to roll off production lines for several months, and urgedthose at risk not to stand in long lines because they believed that there will not be futureopportunities to be vaccinated. On November 9, 2004, CDC announced an allocation plan todistribute the remaining vaccine doses to state health departments based on states' unmet needs. (1) The allocation plan wouldapply to Aventis doses that became available each week through December 2004 and January 2005. In addition, CDC developed clinician recommendations for the use of antiviral drugs . Theseare drugs that can be given before infection occurs as a preventive measure, or during illness tominimize serious complications. HHS estimated that 40 million doses of antiviral drugs would beavailable, including 7 million doses purchased by HHS to treat low-income individuals, and theremainder within the private sector. The Food and Drug Administration (FDA) sent a team to the Liverpool plant to determineif any of the affected Chiron vaccine lots could be salvaged, but announced on October 15, 2004 thatnone of the vaccine was safe for use. The FDA also sought to identify additional sources of vaccinefrom other manufacturers, domestically and abroad. (Both British and U.S. regulatory agencies arerequired to assure the safety and efficacy of the Chiron product, for export and import respectively.) On December 7, 2004, HHS announced that the FDA had authorized the use of a GlaxoSmithKlineinfluenza vaccine, FluarixÂ® (manufactured in Germany), in the United States under anInvestigational New Drug (IND) application, and had reached an agreement with the company topurchase 1.2 million doses for distribution to areas most in need. (2) Because the vaccine is notlicensed in the United States, the IND allowed it to be used as an investigational drug. Thosereceiving it would be required to sign a release form noting informed consent for use of theinvestigational product, and the company would be required to conduct enhanced monitoring of theproduct's use. In response to the shortage, the House Committee on Government Reform launched aninvestigation of the FDA to determine whether it knew or should have known of the impendingproduction failure, as its British counterpart did, since FDA is required to assure the safety andefficacy of this product for importation. The House Committee on Energy and Commerce launchedan investigation of the activities of HHS and Chiron leading up to the shortage. Also following announcement of the Chiron suspension, the Securities and ExchangeCommission (SEC) and the Justice Department launched inquiries into whether the company knewof the imminent failure of its annual production before its public announcement. In addition, severalclass-action stockholder lawsuits were filed against Chiron on the premise that the company had notfulfilled its disclosure obligations. States responded to the shortage by launching plans to locate and re-distribute or ration dosesof vaccine, and by pursuing widespread reports of price-gouging. Some states exercised authorityto prohibit administration of vaccine to non-priority individuals. Some localities held lotteries toapportion limited vaccine to those in priority groups. By early December 2004, some states werereporting that all those in priority groups who sought vaccine had received it, and that they had dosesremaining. In order to prevent possible wastage of vaccine, CDC sent an update to states onDecember 8, 2004, suggesting that they consider expanding vaccination recommendations to thoseoutside the priority groups, if circumstances warranted. A number of states that had earlier placedrestrictions on providers relaxed them in response. It is not uncommon for there to be a patchwork of vaccine shortages and surpluses at differenttimes and places in the course of a flu season, or for there to be early shortages that resolve into aneventual surplus at seasons' end. The causes of this paradoxical imbalance include the timing andseverity of the flu season, (which affect demand), the overall supply for the season, and the supplyat times of peak demand. (3) In early December 2004, CDC officials were reporting that the influenza season was off toa slow start, and a number of states were reporting a drop-off in demand for flu vaccine. Inmid-December 2004, the CDC published the results of two surveys. One found that as of November30, 2004, only about one-third of individuals in high-priority groups had been vaccinated, below thecoverage rate for the prior season. (4) The other survey of demand for vaccine, conducted by the HarvardSchool of Public Health, found that slightly less than two-thirds of seniors who sought to bevaccinated were successful, and that more than half of high-risk adults did not attempt to bevaccinated, some because they felt they would not be successful. (5) After the surveys werepublished, the ACIP reviewed the status of flu vaccine supply and issued revised guidelines forgroups that should receive vaccine, essentially restoring its pre-shortage recommendations. (6) The challenge for publichealth officials was to maintain demand among unvaccinated high-risk individuals as vaccinecontinued to be produced each week, while avoiding a surplus at year's end. Historically, manufacturers, distributors and providers have absorbed the cost of unusedvaccine. The cost of additional vaccine in 2004, when it was specifically requested by the U.S.government, would have to be borne by the U.S. government in this special circumstance. Somevaccine policy experts voiced concern about the possibility of a surplus, and discussion ensued aboutfinancial responsibility for vaccine doses that had not yet been delivered. A news report suggestedthat HHS would use federal funds designated for state immunization programs to purchase theinvestigational flu vaccine doses from Germany, thereby reducing the amounts available to supportchildhood immunization programs in states. (7) The CDC Director subsequently confirmed the use of the stateaccount but noted that it could potentially be reimbursed from other accounts. She also noted thatFY2005 appropriations had not yet been signed by the President and therefore were not available atthe time the purchase was arranged. (8) In FY2005 appropriations, Congress provided HHS with $100million to ensure year-round influenza vaccine production capacity, stating that the Secretary coulduse the funds for flu vaccine purchase if deemed necessary. (9) The flu vaccine supply for the 2005-2006 season became a matter of serious concern when,in early December 2004, British regulators extended their suspension of Chiron's Liverpool plantthrough March 2005. (10) While the action was intended to allow more time for Chiron's remediation efforts at the plant, manywere concerned that the company might not succeed in its efforts to return as a licensed U.S. supplierfor the upcoming season. It was reported that Aventis would be able to expand its production. Inaddition, HHS launched an unprecedented effort to license the GlaxoSmithKline vaccine in less thanone year, with the company saying it could supply 10 to 20 million doses for the U.S. market for2005-2006. The process typically takes several years. Another manufacturer, ID Biomedical ofCanada, sought FDA licensure for its flu vaccine but did not anticipate its availability in the U.S.before 2007. In general, vaccines, which are regulated as biologics by the FDA Center for BiologicsEvaluation and Research (CBER), are more tricky to produce than are drugs. Manufacturers mustsuccessfully grow the particular virus or other organism of interest while avoiding the growth ofother organisms that might contaminate the final product. Several peculiarities of the influenza virusitself and its production process make flu vaccine production especially complicated. There arenumerous points at which the process could fail, and has failed in recent years. The influenza virus changes over time. From year to year, the dominant strains of virus incirculation change, which is why we may get sick every year from flu, in contrast with havinglifelong immunity to more stable viruses such as measles. Each year in late winter, the FDA, withinput from the National Vaccine Advisory Committee and using surveillance information from theWorld Health Organization (WHO) and CDC, reviews virus strains in global circulation and selectsthree that are most likely to cause serious illness in the United States during the subsequent winterseason (i.e., one year hence). The chosen strains are incorporated into that next winter's trivalent fluvaccine, which typically contains at least one new strain each year. Strain selection may be basedon both the dominance and severity of strains in circulation, but may be limited by certain obstacles. For example, an especially virulent strain called Fujian was an obvious choice for the 2003-2004flu vaccine, but it could not be successfully grown in eggs in time to include it in the vaccine. Thisproblem was eventually surmounted, and based on its continuing circulation, the Fujian strain wasincluded in the 2004-2005 flu vaccine. To make large amounts of virus for vaccine production, the virus must be grown in fertilizedeggs. Large numbers of fertilized eggs are required each year to support vaccine production. Theymust be specially produced, assuring the health of the laying hens, appropriate sanitation, care intransport, incubation, and other actions as required by the FDA to assure vaccine safety and efficacy. This endeavor is far more complicated than the production of unfertilized eggs for food. Relianceon eggs and is a rate-limiting step in flu vaccine production, requiring many weeks for growing thevirus and extracting it from the eggs, and introducing contamination risks. Each year the current flu vaccine production system is a race against the clock. Strains mustbe selected by February in order that they can be grown, purified, processed and made into vaccine. Under optimal conditions vaccine is made in batches from August through November, barely makingit to market ahead of the annual influenza epidemic. Breakdowns in the process, especially oneoccurring in the fall as with the Chiron vaccine, can subvert the entire production volume. It isdifficult, if not impossible, to start over within a given season, so as with the Chiron situation, alarge-scale process failure can lead to complete loss of the entire season's vaccine production fromthat supplier. The flu vaccine production process can be optimized in a number of ways. A promisingoption is replacement of the cumbersome egg-growth step with cell culture methods, in which thevirus is grown in tubes or vats of certain cells. With this technique, growth is faster, more controlled,takes up less space, and introduces fewer contamination problems than using eggs. Cell culturetechniques could make the annual flu vaccine production cycle less prone to failures and moreamenable to re-starting production within a season if problems do arise. In other words, cell culturetechniques can provide surge capacity within existing infrastructure. This technique is not currentlyFDA-approved for flu vaccine production, but is in early stages of clinical trials, funded by theNational Institutes of Health (NIH). Potential problems must be evaluated, such as the risk of cellcomponents and genes getting into the vaccine or the virus. Also, for existing flu vaccinemanufacturers to use this method they would have to renovate existing facilities or construct newones, and would have to develop consistency in meeting good manufacturing practices (GMPs) andother standards if they are to reliably produce vaccine each year. Flu vaccine production can also be optimized by using reverse genetics to produce "vaccinestrains," strains of influenza virus with the right combination of traits to stimulate immunity, and togrow well in eggs. Currently, obtaining strains with the right characteristics for vaccine productionis a trial-and-error process; strains are grown together in batches and sampled in a search for thosewith the desired traits. With reverse genetics, the desired parts of the viral genome are cloned andcombined to create the needed traits more quickly and reliably. Reverse genetics is not currentlyapproved for vaccine production, but NIH-funded clinical trials are currently underway using thetechnique to produce vaccine for the strain of avian influenza ("bird flu") now circulating in Asia,in the event that it becomes a serious human pathogen. The safety and efficacy of flu vaccineproduced using this technique remains to be evaluated. In addition, there are potential consumeracceptance concerns, especially in Europe, because the vaccine virus produced is a geneticallymodified organism. Another opportunity to optimize annual flu vaccine production rests with steady enhancementof global influenza surveillance, which could improve the speed and accuracy of strain selection. Ultimately, the influenza virus holds two trump cards for which science does not offersolutions on the near horizon. First, there is a limited ability to predict how the virus will modifyitself into each year's dominant circulating strains. Once these strains emerge, there is a race againsttime to produce vaccine while the strains are actually causing illness somewhere on the planet. Second, the regular drifts of the viral genome (and the more cataclysmic shifts that define apandemic) are inherent in its genes, and the resulting evasion of the human immune response isinherent in our genes. This relationship has existed for eons, and no near-term scientificbreakthrough is likely to change it. Those seeking to prevent influenza infection are stuck with theprospect of annual flu vaccines for the foreseeable future. The flu vaccine shortage announced on October 5, 2004, unfolded within a complexinteraction of government and private sector actions, leading many to question whether the federalgovernment's authority is adequate to prevent these types of crises. States and the federalgovernment have different roles and authorities with respect to this event. In general, public healthauthority rests with the states as an exercise of their police powers. As a result, states took the leadin restricting vaccine distribution to high-risk individuals and in prosecuting price-gouging. Thefederal government, under the Commerce Clause in the Constitution, may regulate the safety andefficacy of vaccines in commerce in the United States, but this authority does not extend tocontrolling the distribution or administration of the product. In a public health emergency, the PublicHealth Service Act grants the Secretary of HHS broad authority to take such actions as necessary tocontrol infectious diseases. Traditionally, the federal government has supported states in exercisingtheir public health authorities rather than subsuming them. HHS Secretary Tommy G. Thompsonsaid that he did not intend to declare the flu vaccine shortage a public health emergency. (11) Flu vaccination is a medical procedure, and many people voluntarily choose to be vaccinatedin settings that are primarily non-governmental, such as a physician's office, a workplace, or a localgrocery store. While federal, state and local governments do not control these activities directly, theyplay an important role in studying the use and impacts of flu vaccination, making recommendationsand providing guidance on the use of flu vaccine, and educating providers and the public about theirfindings and recommendations. Examples of relevant public health research include studying theeffectiveness of vaccination in preventing illness in different risk groups, and the economic impactsof vaccination such as reduced absenteeism in the workplace. Government-supported educationefforts include educational materials for providers outlining the use of different types of flu vaccinesin specific populations, and flyers and public service announcements encouraging vaccination. Federal policies and recommendations also drive private-sector flu vaccine demand. Thisis discussed further in an upcoming section on "Determining Annual Flu Vaccine Production." Most federal activities related to flu vaccine are conducted by HHS. The National VaccineProgram Office in HHS serves to coordinate vaccine-related activities in several agencies, and is thehub for federal pandemic influenza preparedness activities. The FDA is responsible for assuring thesafety and efficacy of vaccines. (12) The NIH conducts intramural vaccine research and developmentand funds research in universities. The Health Resources and Services Administration (HRSA)administers the National Vaccine Injury Compensation Program (VICP), which providescompensation for injuries judged to have been caused by certain listed vaccines. The CDC housesthe National Immunization Program, which coordinates research projects, state grant programs(including funding for purchase of vaccines), and other immunization activities and supports theAdvisory Committee on Immunization Practices (ACIP). CDC also administers the Vaccines forChildren (VFC) program, authorized in Medicaid law to provide immunizations for children whoare uninsured, Medicaid recipients, Native Americans, and Alaska Natives at physicians' offices andFederally Qualified Health Centers. Vaccine responsibilities lie outside of HHS as well. The Department of Defense (DOD)maintains research and development programs for vaccines against both naturally occurringinfectious diseases and bioweapons agents. DOD administers routine and deployment-relatedvaccines to military personnel and some civilian employees and contractors. As a primary healthcareprovider, DOD also administers vaccines to its retirees and to current personnel and their families. The Department of Veterans Affairs administers vaccines to veterans within its healthcare system. Veterinary biologics are regulated by the U.S. Department of Agriculture (USDA), Animaland Plant Health Inspection Service (APHIS), under authority of the Virus, Serum and Toxin Act. These products must meet similar standards of safety, efficacy, purity, and potency as do humanproducts. APHIS currently licenses influenza vaccines for horses and swine. State and local governments carry out relevant activities within their public health authority,such as conducting vaccine clinics, maintaining immunization registries, and establishingimmunization requirements for school attendance. (These requirements apply to vaccine-preventablechildhood diseases such as measles and whooping cough, but not influenza at this time.) In responseto the current flu vaccine shortage, many states have taken action to prohibit administration ofvaccine to non-priority individuals and to track available vaccine, among other activities. For more information on the production, safety and availability of all types of vaccines, see CRS Report RL31793 , Vaccine Policy Issues for the 108th Congress , by [author name scrubbed]. Based on historical demand and on the new pediatric recommendation from the ACIP, thetwo manufacturers licensed for the 2004-2005 season, Aventis and Chiron, planned to make around100 million doses, about evenly split between them. The failure of all annual production by Chironcut the supply in half. Gauging demand from year to year in what is mostly a private-sector marketis a matter of both art and science, an exercise fraught with difficulty. In the winter of 2003-2004 Americans received 83 million doses of flu vaccine; 87 millionwere produced. According to the CDC, doses of unused flu vaccine have remained in each of thelast five seasons. (See Table 1. ) Vaccine manufacturers bear the loss from surpluses, and theyattempt to carefully gauge demand each year to avoid these losses. Demand has grown in the pastten years, though, as a result of growing ranks of high-risk groups such as the elderly, increasing useof vaccine by other high-risk groups, and growing interest from low-risk groups, such as employersseeking to decrease absenteeism by offering the vaccine to workers at no cost. Table 1. Surplus Flu Vaccine, 1999-2003 (doses in millions) Source: Communication from CDC, Oct. 20, 2004. Note: Target production for the 2004-2005 season was approximately 100 million doses. a. Most of this surplus was live attenuated (intra-nasal) influenza vaccine. Flu vaccine demand is also driven by federal policies and recommendations. In the springof 2004, for the upcoming flu season, the Advisory Committee on Immunization Practices (ACIP)added healthy young children aged 6 to 23 months to the list of groups that should receive thevaccine. To encourage beneficiaries to be vaccinated, Medicare began covering the full cost of fluvaccine and administration in 1993. The Healthy People 2010 project, a public-private nationalgoal-setting agenda for health, set a goal of 90% for influenza vaccine coverage for certain high-riskgroups. Recently there has been greater emphasis on the prevention of influenza in institutionalizedpopulations. In 2000 CDC published guidance encouraging standing orders programs to increaseflu vaccination coverage in long-term care facilities and other settings. These programs give nurses"standing orders" to administer annual flu vaccines to residents without a physician's explicitauthorization. To support this recommendation, in 2002 the Centers for Medicare and MedicaidServices (CMS) removed the physician signature requirement for flu vaccine for Medicare andMedicaid participating hospitals, long-term care facilities, and home health agencies. The ACIP alsorecommends that healthcare workers receive flu vaccine, following studies showing that vaccinationof workers reduces mortality in elderly residents in long-term care facilities. The path of flu vaccine from assembly line to injection is complex and largely outside ofgovernment control. Manufacturers sell the product to distributors, or may also sell it directly topharmacy chains, health maintenance organizations, hospitals, state health departments, and others. Vaccine may be transferred through multiple distributors along the way. The CDC, as a purchaser, would have access to distribution information for the product ithas purchased even if the product does not physically pass through CDC's direct control. But almost90% of the product is circulated outside of government control, and has not been tracked. TheGovernment Accountability Office (GAO) has noted the lack of a means to redirect flu vaccineduring a shortage, a system that would depend on centralized tracking. (13) In the face of the 2004shortage, HHS Secretary Thompson announced that CDC had set up a secure website for state healthofficials to use to identify available vaccine in their jurisdictions. Aventis and many of itsdownstream distributors provided information for the site, information which the Secretary stressedwas proprietary and which state health officials must protect as such. This marked the first time sucha system was used to track flu vaccine. Also, when the shortage was announced the FDA waivedits prohibition against the transfer of vaccine among hospitals and other healthcare entities, tofacilitate their own reallocation efforts. These downstream reallocations, while clearly helpful underthe circumstances, might not have been captured in the new CDC tracking system. In the afternoon of October 5, 2004, the day Chiron advised U.S. officials of its failedproduction for 2004-2005, CDC and the ACIP issued interim vaccine recommendations, designating"priority groups" for vaccine coverage following the shortage. The groups previously recommendedto receive vaccine and the narrowed recommendations announced after the shortage are listed in Table 2. CDC subsequently estimated that the pre-shortage target population of roughly 185 millionpeople (about 2/3 of the population) would be reduced to about 98 million priority recipients. Basedon historical vaccine usage by these groups (which ranges from 12.4% for pregnant women to 66.2%for those over age 64), CDC estimated that only about 43 million doses would be needed to vaccinatethose in priority groups. (14) CDC acknowledged that some vaccine was administered tonon-priority groups before the shortage was announced, and that despite best efforts, reallocation ofremaining vaccine to priority groups would be imperfect. On December 17, 2004, CDC announced that the ACIP had reviewed the current status offlu vaccine demand, and issued revised guidelines, essentially restoring the pre-shortagerecommendation that individuals aged 50-64 and out-of-home caregivers and household contactsof persons in high-risk groups be vaccinated. The ACIP suggested that health departments andhealth care providers consider delaying the implementation of the expanded recommendations untilJanuary 3, 2005, to provide more time for unvaccinated persons in high-priority groups to seekvaccination. (15) It is worth noting that the expansion of federal recommendations over time, and the growingrecognition of the health benefits of flu vaccination even in healthy individuals, drives demand andserves as a market incentive to increase supply. In the face of a severe shortage, public and privateactions to encourage flu vaccination in lower-risk groups have had to be abandoned for the2004-2005 flu season. Table 2. Federal Recommendations for Flu Vaccine, Before and After the Vaccine Shortage Sources: Pre-shortage recommendations: Prevention and Control of Influenza: Recommendations of the Advisory Committee on Immunization Practices(ACIP), MMWR Recommendations and Reports, May 28, 2004. Post-shortage recommendations: Interim Influenza Vaccination Recommendations, 2004-05 Influenza Season: Guidance from CDC, in coordination withthe ACIP, Oct. 5, 2004. Note: In a typical year, in addition to the high-risk groups noted above, many healthy persons without risk factors would also seek and receive vaccine. Actions During the 2004 VaccineShortage. While the federal government has broad authority to takeactions necessary to control infectious diseases in an emergency, traditionally theexercise of public health authority in this respect has rested with states. As aconsequence, when the flu vaccine shortage was announced and CDC recommendedthat vaccine be prioritized to certain groups, several states, counties and the Districtof Columbia issued orders requiring healthcare providers to comply, and establishedfines for the administration of scarce vaccine to non-priority individuals. Some ofthe states declared the situation a public health emergency, while others usednarrower authorities to support their orders. A number of states and localities relaxedthese restrictions beginning in December 2004, when they had vaccine dosesremaining after priority individuals were no longer seeking vaccine. A listing of stateactions is maintained by the Association of State and Territorial Health Officials(ASTHO) at http://www.astho.org . While CDC facilitated states' efforts by gathering information about suppliesand unmet needs during the shortage, the agency lacks authority to compelmanufacturers or distributors to provide this information. CDC reported goodvoluntary cooperation with the effort, but the GAO has repeatedly noted the absenceof a coordinated national system to assure that those most in need receive flu vaccinewhen supplies are limited. (16) Outgoing HHS Secretary Tommy G. Thompsonsaid shortly after the shortage was announced that he did not intend to declare thesituation a public health emergency, and the federal government would not exerciseauthority to control vaccine distribution or administration. (17) CDC's plan to identify vaccine doses in distribution and coordinate athree-part information exchange -- unmet need, available vaccine, and circulating fluvirus -- had not been done before and may serve as a useful exercise in preparednessfor a variety of public health emergencies. Since it was a new effort, its utility in theface of the vaccine shortage has yet to be demonstrated. Strategies for Rationing. Rationing of scarce resources is not a new concept in health-related services. Prioritization decisions have been made in many health-related areas including, forexample, organ donation and dialysis. Not all attempts at rationing have been metwith enthusiasm. One notorious example occurred in the 1960s, when a hospitalcommittee attempted to ration life-saving dialysis based on a notion of "socialworth." (18) This rationing mechanism led to heavy criticismof the committee, subsequently deemed the "God Committee" for its valuation ofsome human lives over others. In the late 1980s, Oregon developed a rationing system for its entire Medicaidprogram, allocating various types of services rather than distributing one scarceresource. The rationing system was designed to provide coverage to all Oregoniansliving below the federal poverty line, not just those who met more selective financialeligibility standards, by ranking condition-treatment pairs in order to determine onan annual basis what services would be covered for which ailments. The system wasbased upon a combination of cost-effectiveness, available funding, and aprioritization of medical services "from most to least important to the entirepopulation." (19) Oregon's rationing plan caused some controversywhen it was first enacted because it explicitly involved a concept of rationing inproviding access to care, and because it created difficulty in determining whichservices would be covered; however the system is still in place today. Despite the moral difficulties involved with rationing, allocation of scarcemedical resources must still occur when the supply is not sufficient to meet thedemand. Allocation decisions can be made with a range of rationing mechanisms,each with its own benefits and drawbacks. Potential mechanisms are discussedbelow. Not all of these options were considered in response to the 2004 flu vaccineshortage, but a number of them may come into play during an influenza pandemic orlarge-scale bioterrorism event, when governments will face more dire circumstances. The mechanisms are discussed in the context of vaccine rationing, but may also beapplied to the rationing of antivirals or other medications as well. Most Likely to Suffer HealthConsequences. In a selection system that gives a preferenceto those most likely to suffer health consequences, vaccine is given first to those mostlikely to catch the flu, suffer serious consequences such as hospitalization, and/or diefrom infection (e.g., the elderly, young children, pregnant women, and those withsuppressed immune systems). Recommended by: WHO, (20) CDC. (21) Benefit(s): Those most vulnerable to death or serious healtheffects from flu infection are protected from the virus. Drawback(s): This selection method does not address impactof epidemic on the continuation of essential services, nor does it focus on how to stopthe spread of the flu. This method also fails to address the state's obligation to thosewithin its control or custody, except to the extent that those in custody are at anincreased risk of suffering serious health effects from infection. (22) Key Personnel. With a preference forkey personnel, vaccine is given first to persons whose health is necessary to limitsocial disruption (e.g., health care workers, government employees and militarypersonnel). Recommended by: WHO, CDC. Benefit(s): This method limits social disruption, maintainshuman infrastructure for essential services. Drawback(s): A preference for key personnel may favorvaccinating those empowered to make decisions about who is vaccinated, creatingan appearance of conflict. The method does not address issues of how to stop thespread of the flu, or the morbidity and mortality rates of flu on various populations. In addition, it does not address the state's obligation to those within its control orcustody. Special Relationships. In a selectionsystem based on special relationships, vaccine is given first to those people whosehealth care is the responsibility of the state or federal government (e.g., prisoners, andmilitary personnel). Recommended by: American Civil Liberties Union, for at-riskprisoners. (23) Benefit(s): Governing bodies meet their obligations to protectthe health and safety of persons within their sole control. Drawback(s): Selection based on special relationships does notaddress issues of contagion, or the morbidity and mortality rates of flu on variouspopulations, except to the extent that those within the state's control are more likelyto suffer serious health effects and/or spread the virus. It also does not addressimpact of epidemic on the continuation of essential services. Most Likely to Spread Disease. In aselection system based upon those most likely to spread disease, populations knownfor rapidly transmitting infection are vaccinated first (e.g., children and prisoners). Recommended by: Some scientific studies. (24) Benefit(s): The spread of disease is curbed across thepopulation. Drawback(s): This selection method does not address impactof epidemic on the continuation of essential services, or state's obligation to thosewithin its control or custody, except to the extent that those in custody are at anincreased risk of spreading disease. This method also fails to address the morbidityand mortality rates of flu on various populations. Lottery. With a lottery system,vaccine is given to people who are selected randomly. Recommended by: Used in some places in the United Statesto allocate flu vaccine. (25) Benefit(s): The system does not require people to choose anyone person or population over others. Drawback(s): Registration and communication with lotterywinners could prove cumbersome. Lottery selection does not address impact of anepidemic on the continuation of social services and infrastructure. This method doesnot address the state's obligation to those within its control or custody. Lotteryselection also fails to address issues of how to stop the spread of the flu, or themorbidity and mortality rates of flu on various populations. (Note: some of thesedrawbacks could be averted if lottery selection were used in conjunction with otherselection criteria.) First come-first served. With a firstcome-first served selection system, vaccine is given to those who arrive first at adesignated time and place. Recommended by: Used in some places in the United Statesto allocate flu vaccine. (26) Benefit(s): This method is easy to coordinate, requires onlybasic advertising, and does not require people to choose any one person or populationover others. Drawback(s): A first come-first served method favors thosewith flexible schedules, transportation to vaccination site, and does not addressimpact of epidemic on the continuation of social services and infrastructure. Thismethod does not address the state's obligation to those within its control or custody,issues of contagion, or the morbidity and mortality rates of flu on variouspopulations. (Note: some of these drawbacks could be averted if first come-firstserved were used in conjunction with other selection criteria.) Some recent scientific studies suggest that there may be two additionalmethods of rationing vaccine. The first study indicates that vaccine is more effectivein some populations than in others. (27) Based upon this finding, vaccine doses could bewithheld from those populations in which it is least effective. The problem is thatthe group in whom the vaccine is least effective is also one that is most likely tosuffer health consequences from the flu: the elderly. For this reason, the vaccine'seffectiveness in a population is unlikely to be used as a tool for rationing. The second study indicates that less than a full dose of some types of fluvaccine may create a serum antibody response (indicating that the vaccine may beeffective) in healthy individuals. (28) This finding could lead to a system of rationingthat increases the number vaccine doses by giving certain populations less than a fulldose. However, this strategy has not been fully evaluated to test its effectiveness, andit was not implemented during the 2004 vaccine shortage. One confounding issue is that studies suggest that particular populations,including some minority groups, are less likely to participate in vaccinationprograms. (29) The rationing system of choice might have somemechanisms designed to encourage participation by targeted populations that historically have low rates ofvaccination. When designing a rationing policy, many of the aforementioned rationingmethods may be used alone, or in conjunction with one another. For example,priority could be given to both key personnel and those most likely to suffer serioushealth effects. In addition, if the number of eligible people were larger than thenumber of available doses, a lottery could be used to determine which of theprioritized people would receive vaccine. During the 2004 flu season, states and localities employed a variety ofrationing methods, many of which were derived from federal guidelines presented inTable 2. The guidelines call for the vaccination of some individuals who are mostlikely to suffer health consequences (some categories of elderly, sick, and children),as well as some who are most likely to spread the virus (some categories of children,health care workers, and institutionalized persons), and certain key personnel (somecategories of health care workers). Media reports of price gouging were widespread following the announcementof the vaccine shortage, with reports that distributors were seeking more than 10times the original price. The Attorneys General of Connecticut, Florida, Kansas, andTexas responded with lawsuits. In addition, most state attorneys general issuedconsumer alerts, urging consumers to report price gouging violators. According toa chart compiled by the National Association of Attorneys General, more than halfof the states have statutes prohibiting price-gouging, though there are a variety ofdefinitions and triggering events, not all of which would apply to this situation.However, the Association also provided information showing that most if not allstates could bring action under broader, more flexible authorities that prohibit "unfairand deceptive acts and practices." On October 14, 2004, HHS issued a press release urging states to aggressivelyprosecute flu vaccine price-gouging. (30) State action would require not only the requisiteauthority, but also the decision to act and the resources to do so. Some in Congress,concerned that states may not always be able to respond effectively, have asked aboutrelevant federal authorities. Neither CDC nor FDA has authority to act in this matter,though CDC (which activated its Emergency Operations Center when the shortagewas announced) gathered reports of price-gouging and referred them to stateattorneys general. On October 22, 2004, HHS announced that it had filed (along withthe Department of Justice) a friend of the court brief in support of Florida'sprice-gouging lawsuit against a distributor. (31) HHSreported that the brief lays out the public health threat posed by price gouging,namely that price gouging leads to allocation of scarce flu vaccine based on who hasthe most money and not on who has the most need, that it risks the health ofMedicare and Medicaid eligible patients, who are vulnerable and most in need of thevaccine, and that it may also lead to violations of the Federal Food, Drug, andCosmetic Act such as tampering with, and counterfeiting of, flu vaccine. On October 15, 2004, the House Committee on Government Reform calledon the Federal Trade Commission (FTC) to launch a nationwide investigation of fluvaccine price-gouging, and to report on enforcement actions it is taking or plans totake. (32) It is not clear under what specific authority the FTC would act, as there is no federalprice gouging statute. However, as noted above for states, the Commission couldpossibly bring an action under its general authority to prohibit unfair or deceptiveacts or practices under the Federal Trade Commission Act. Vaccines for the U.S. market are made by private, for-profit firms, and mostof the supply is privately controlled. For the 2004-2005 season, CDC purchased 11.4million doses of flu vaccine, or about 11% of total production. (See Table 3 for abreakdown of CDC purchases.) The public purchase price ranged from $6.80 to$10.00 per dose, depending on the formulation, which is generally lower than privatesector prices. Table 3. CDC Purchases of Flu Vaccine for2004-2005 Source: Communication from CDC on Oct. 10, 2004. Note: Table reflects purchasing contracts prior to announcement of shortage. Manufacturers point to a number of disincentives that deter them from the fluvaccine market, such as poor profitability, risk of a production failure, and injuryliability. (33) Policymakers point to a number of problems inassuring adequate supply, including too few manufacturers, low vaccination ratesamong groups who are advised to be vaccinated, unpredictable timing and severityof annual flu seasons, and reluctance of manufacturers to overshoot demandestimates. The 2004 flu vaccine shortage resulted from failure of production by acompany that held almost 50% of the market share, because there were only twocompanies producing injectable flu vaccine for the U.S. market. During the2001-2002 season, when there were three manufacturers supplying the U.S. market,one sustained significant losses from unused surplus vaccine, which led to itsdecision to drop out of the market Many have noted that expanded public purchase of vaccine would havehelped this situation only if such purchases had increased overall production byshifting some of the risk of over-production from the manufacturer to thegovernment. Then, if a product were to fail, the other supplier would have producedrelatively more and a shortage would not have been as severe. Long term, many feelthat it is essential to have more manufacturers involved, so the consequences of afailure of one would have less impact on supply. But absent a substantial increasein demand, diversification would likely cut into the market for existingmanufacturers, potentially reducing their incentives for remaining engaged. A number of these issues have been discussed in the context of ProjectBioShield, a program to promote research and development of countermeasures forbioterrorism. In some ways Project BioShield is an imperfect model for flu vaccineshortages, because BioShield is designed to create production incentives for productsthat lack a commercial market. Nonetheless, there are enough similar issues at playthat flu vaccine supply may be added to the agenda in ongoing discussions of theBioShield program. For example, the Project BioShield Act of 2004, P.L. 108-276 ,contains a provision which allows the Secretary of HHS to temporarily authorize theemergency use of non-licensed drugs and vaccines. Some in Congress called on theSecretary of HHS to exercise this new authority in response to the flu vaccineshortage, by locating available flu vaccine in other countries and making it availableto Americans as quickly as possible. As Congress considers follow-on legislation toaddress remaining concerns, additional issues such as ways to expand vaccineproduction capacity may also be relevant for flu vaccine. (34) The next section will explore several disincentives to flu vaccinemanufacture, and several proposals for removing these barriers or otherwisestabilizing the annual flu vaccine market. The Problem. It is oftensuggested that making flu vaccine is not a good business proposition. The product isnot highly profitable. Furthermore, production of vaccines is technically difficult,and lot failures resulting from sterility breaks or other causes are not uncommon. Fluvaccine is especially tricky because of the time constraints inherent in using eggs, andbecause vaccine does not have a shelf life beyond the year it is produced. It isdifficult to start from scratch if a problem crops up mid-way in production. If annualdemand is overestimated, unused vaccine is discarded at a loss to the manufacturer. Manufacturers have an obligation to investors to make sound businessdecisions, and to adhere to standards of transparency in their business conduct. Following Chiron's announcement of its failed flu vaccine production for 2004-2005,the company became the subject of Securities and Exchange Commission (SEC) andJustice Department inquiries, reportedly to determine whether Chiron knew of theimminent failure of its product before its public announcement. (35) Severalclass-action shareholder lawsuits were filed on the premise that the company had notfulfilled its disclosure obligations. (36) In early December 2004, British regulatorsextended their suspension of Chiron's Liverpool plant through March 2005. Thecompany has tried to balance its obligations to shareholders and its interests inremaining a U.S. supplier, saying that it seeks to produce vaccine for the 2005-2006season, but not stating with assurance that it could overcome regulatory hurdles byMarch 2005, when production for the upcoming season would have to begin inearnest. This situation also poses a challenge for CDC as it attempts, in itsdiscussions with other suppliers, to set production targets without knowing Chiron'sstatus with certainty. Proposals to Mitigate EconomicRisk. Some in Congress and others have proposed a number ofincentives to vaccine manufacturers to encourage entry into the market and toguarantee demand for vaccine, which would in turn promote diversity ofmanufacturers and increase annual supply. Government Buy-Back of Surplus. Under this proposal the federal government would purchase vaccine that remainedunused at the end of a season. This would work, in theory, by encouragingmanufacturers to produce more than they believed they could sell, thereby providinga cushion if annual supply were to fall short for any reason. However, ifmanufacturing problems or other supply disruptions did not occur, wastage of unuseddoses would become a government expense rather than a private one. In FY2005 appropriations, Congress provided HHS with$100 million toensure year-round influenza vaccine production capacity, stating that the Secretarycould use the funds for flu vaccine purchase if deemed necessary. Some haveconsidered these fund appropriate for the purchase of any surplus vaccine from the2004-2005 season, while others have argued that it was intended to back-stop the2005-2006 season if necessary (though if a surplus resulted in that season, it wouldoccur in FY2006). Still others have argued that the original intent of the funds wasto support pandemic influenza preparedness. Neither statutory language norcommittee report language clarifies the intended use of these funds. Government Purchase for Stockpiling. Under this proposal, the federal government would purchase doses of vaccine at thebeginning of the season, to serve as a cushion if needed. However, because of itsone-season shelf life, flu vaccine is not an attractive candidate for stockpiling. Products such as smallpox vaccine have a long shelf life, and stockpile purchases canbe considered one-time expenditures for which a high cost is acceptable. CDCpurchased 4.5 million doses of flu vaccine to stockpile for the 2004-2005 season, ata cost of $40 million. Two and a half million of these doses were produced byAventis and would be used to ameliorate the shortage, but it was a small amount inthe face of a shortfall of 46 million doses. A federal flu vaccine purchase ofsufficient magnitude to cushion a two-supplier market in the event that one failedwould be costly, considering that in each of the past five seasons there were surplusesof flu vaccine, and that the 2004 shortage may be the exception. But by expandingannual demand, stockpile purchasing could encourage additional manufacturers toenter the market. Incentives for Construction of NewFacilities. Since the shortage was announced, several vaccinemanufacturers expressed interest in entering the flu vaccine market. For newmanufacturers to be licensed in the United States, they must apply years in advancefor FDA approval, and pay for plant construction or renovation, clinical trials andother regulatory obligations before any profit can be realized. Given the high capitalcost for entry into this market, some have proposed offering tax credits or otherincentives to offset these costs and encourage new manufacturers to join the U.S. fluvaccine market. An Aventis executive, when asked about the impact of injury liability on fluvaccine producers, commented that it is a burden, that it is absorbed as a cost ofdoing business, and that his company is committed to remaining in the flu vaccinebusiness. (37) The chair of an Institute of Medicine (IOM)panel examining vaccine financing testified that when the panel attempted todetermine how serious this problem is, as far as its potential deterrent effect onmanufacturers and therefore on vaccine availability, the panel had difficulty obtainingpertinent information. (38) Vaccine manufacturers have two potential avenues for protection againstinjury liability claims. They can purchase insurance to cover the costs of defendingagainst or paying out claims, and incorporate costs into the price of vaccine. Also,certain vaccines are covered under the National Vaccine Injury CompensationProgram (VICP). Congress added flu vaccine to the VICP list in October 2004, inthe American Jobs Creation Act of 2004 ( P.L.108-357 ). Under VICP, an excise taxapplied to vaccine sales pays for a public compensation fund. Congress enacted theprogram in 1986 as a no-fault alternative to the tort system for resolving claimsresulting from adverse reactions to mandated childhood vaccines. Individuals of anyage alleging injury from any covered vaccine must seek compensation through theprogram first, though they may decline a proposed award and then seek a remedy incourt. The program is administered by the Office of Special Programs in the HealthResources and Services Administration (HRSA). (39) HRSAsays that the program has been successful in providing compensation to those injuredby vaccine-associated adverse events, in reducing liability for vaccine manufacturersand healthcare workers who administer vaccines, and in achieving vaccine marketstabilization. Others have reported problems in program administration andperformance. (40) A number of vaccines in the U.S. market are purchased by federal agenciesat prices that are discounted or capped through various mechanisms. Some haveargued that this depresses overall prices and contributes to the lack of attractivenessof vaccines as business ventures. Examples of such public purchases include CDCpurchases of pediatric vaccines for uninsured children, and purchases by the VeteransAdministration for its patient population. HHS notes that the Centers for Medicare& Medicaid Services (CMS) has more than doubled the Medicare payment rates forthe flu vaccine, from $8.92 in 2000 to $18.30 in 2004. (41) Accordingto HHS, this increase will help assure that beneficiaries can get the vaccine from theirphysicians' offices, and help cover the costs of vaccine and administration for theproviders. An Institute of Medicine (IOM) panel examining vaccine financing and itseffects on availability has recommended a different approach to financing, based onthe premise that vaccines confer benefit not just to the individuals who receive them,but to society as a whole. (42) The panel recommended replacing a governmentpurchase price with a federal subsidy to maintain affordable vaccine coverage fortarget groups, and mandating that private insurers cover federally-recommendedvaccines. The recommendations have not been universally embraced and theirimplementation has not gone forward, though they have stimulated furtherdiscussions of vaccine financing and availability among interested parties. Influenza circulates around the globe every year, changing slightly each yearso that healthy adults have partial immunity to new strains. The virus, its genome inconstant flux, typically makes healthy people sick, but not too sick, each year. Nowand then, usually several times in a century, the virus changes enough that there is nopartial immunity. This event, called an influenza pandemic, results in severe illnessand death, even in healthy people. The CDC estimates that in the United States,while an annual flu season results in 36,000 deaths, on average, a pandemic couldcause more than 200,000. The extent and severity of illness, and the disabling impacton healthy young people, could cause serious disruptions in services and social order. Some have expressed concern that the 2004 flu vaccine shortage presagesproblems for a national response to an influenza pandemic. The shortage was insome ways a relevant drill for pandemic preparedness, but in other ways wasdifferent. In the face of the shortage, many were concerned with the logistics offinding available vaccine and vaccinating high-risk individuals. Others wereconcerned about fairness in the way that companies and federal, state and localagencies handled the situation. Many of these concerns about limited resources and equity in their allocationwill be writ large during a flu pandemic. Potentially, a vaccine could not beproduced until a pandemic virus strain is actually circulating. For this and otherreasons, severe vaccine shortages are expected during an influenza pandemic. TheWHO and HHS each have published plans for influenza pandemicpreparedness. (43) Both stress the role of basic infection controlpractices and have expanded guidance for handling large numbers of victims, suchas expanding capacity for isolation and enacting plans to keep people at home. The WHO says that with current technology, worldwide production capacityfor influenza vaccine would cover only 5% of the world's population. Countries areadvised to consider how they would apportion this scarce resource. WHO notes thatbecause healthy individuals may become severely ill, or may even die from infectionwith a pandemic flu strain, consideration should be given to maintaining essentialservices by prioritizing vaccine delivery to critical service providers such ashealthcare, public health and public safety workers. Americans are accustomed todeferring to those who are most vulnerable in situations where risk of death is low,as they have been asked to do for the current flu vaccine shortage, but a pandemicmay require a different message. (See the previous section on "Vaccine Rationing"for further discussion.) Some in Congress have expressed concern that a portion of the U.S. fluvaccine supply is produced in a foreign facility. The concern is that during a flupandemic or other emergency, foreign governments may seize vaccines andproduction facilities within their borders. The International Federation ofPharmaceutical Manufacturers Associations reports that in 2003, more than 95% ofthe world's flu vaccine was produced in nine countries: Australia, Canada, France,Germany, Italy, Japan, Netherlands, the United Kingdom, and the United States. (44) The globalflu vaccine market is a confusing patchwork of companies and subsidiaries that maybe based in one country, producing vaccine in another, and marketing in multipleother countries. Aventis and Chiron are the only companies currently licensed by theFDA to produce injectable flu vaccine for the U.S. market, though other companieshave expressed interest in having their products licensed in the future. While both the WHO and HHS plans also stress the use of antiviral drugsduring a pandemic, these are likely to be in very short supply as well. A similarproblem may arise with access to healthcare facilities and providers. A flu pandemiccould result in mass casualty situations, and while these may be isolated in time andplace, they may force what is referred to as degradation of care, the circumstance inwhich a standard of care is lowered in the face of overwhelming resource constraintsin order to maximize overall survival. Providers are concerned about theramifications on social order and liability, and have sought federal guidance on thismatter. The 2004 flu vaccine shortage demonstrates the concept of dual use in publichealth preparedness, in which plans, systems and protocols for one event areapplicable to others as well. CDC's flu vaccine reallocation plan, which coordinatedinformation about vaccine availability, unmet need, and circulating virus, is a usefulmodel for any number of natural or intentional public health emergencies, includingpandemic influenza. In addition, efforts to bolster bioterrorism preparedness haveyielded bonuses for pandemic preparedness, such as the development of communitymass-vaccination plans. Generally, advancements in the development of vaccinesfor pandemic influenza will benefit annual flu vaccine production, and vice versa. The response of the public to government recommendations during the 2004shortage is illustrative. According to CDC surveys (discussed in an earlier section"Shortage to Surplus?"), persons not in designated priority groups mostly deferredvaccination, while a small number of them reported that they sought vaccination butwere unsuccessful. Of particular concern were findings that significant numbers ofhigh-risk individuals did not seek vaccination because they doubted they could getit, and that willingness to be vaccinated dropped off when the vaccine wasinvestigational and required signing a consent form. These findings remind publicofficials of an important premise for public health preparedness: that imperfectcompliance with recommendations is expected and should be taken into account inplanning. Serious questions remain about the exercise of federal authority during aninfluenza pandemic. Many of these questions were raised in the face of the 2004 fluvaccine shortage. Should the federal government have, or exercise, authority toidentify and control doses of scarce flu vaccine? Should the federal governmenthave, or exercise, authority to control administration of vaccine by healthcareproviders? Is the current model, which leverages state authorities with federalassistance, adequate for the current shortage, or for pandemic influenza or otherpublic health emergencies? Given that the federal government has overarchingemergency authorities but has not used them, will federal officials know how toconduct themselves if such authorities were invoked in an emergency? The fluvaccine shortage presents a small study of these important questions. It is intuitively appealing to think that federal officials, when faced with apublic health emergency, could take charge of information and assets, and assure thatremedies and burdens were equitably and efficiently distributed. Actually, theshortage of flu vaccine illustrates two serious challenges that the federal governmentfaces in a public health emergency. Law and tradition place much of theresponsibility for preventing or managing the shortage either with the states, or withthe private sector, and the threshold over which the federal government would wrestcontrol from either appears high. The federal government does not dictate thepractice of medicine or compel companies to do business. As a result, in situationslike this one, free market forces operate, the public health system responds in adecentralized fashion, efforts may seem disorganized, and the federal governmentmay appear unresponsive. Since the terror attacks of 2001, some barriers have been overcome withoutsubstantial changes in the legal landscape. An example is state preparednessplanning with uniform guidance, so that states aim for the same targets in planningfor mass drug distribution, or in overhauling their emergency public healthauthorities. Decentralization of public health authority to states is less of a problemif all of them can respond capably and in a consistent fashion. Another example isthe government use of proprietary information, such as drug store sales, to conductsurveillance for unusual health events. The flu vaccine shortage has prompted furtherexamination of the coordination of these partners in response to a national challenge,posed another opportunity to explore creative solutions, and offered another chancefor lessons learned. Selected legislative proposals aimed at addressing flu vaccine production orshortages are listed. A number of bills were introduced before the 2004-2005 shortage was announced, some in response to flu vaccine problems during the2003-2004 season. Several proposals would subject flu vaccine to an excise tax, inorder to add it to the Vaccine Injury Compensation Program table. A version of thisprovision was passed in <108> P.L. 108-357 , the American Jobs Creation Actof 2004, which was signed by the President on October 22, 2004. Other proposalsin authorizing legislation listed below have not been considered in either chamber asof this writing. H.R. 3758 (Emanuel) The Flu Protection Act of 2004, to amend the Public Health Service Act to providefor an influenza vaccine awareness campaign, ensure a sufficient influenza vaccinesupply, and prepare for an influenza pandemic or epidemic, to amend the InternalRevenue Code of 1986 to encourage vaccine production capacity, and for otherpurposes. Introduced February 3, 2004. Related bill S. 2038. H.R. 4520 / S. 1637 (Thomas, Grassley) The American Jobs Creation Act of 2004, includes a provision to add any trivalentinfluenza vaccine as a taxable vaccine for purposes of the excise tax on certainvaccines. Became P.L. 108-357 on October 22, 2004. H.R. 5243 (DeFazio) The Influenza Vaccine Emergency Act, to amend the Public Health Service Act toprovide for emergency distributions of influenza vaccine. Introduced October 7, 2004. H.R. 5404 (Kucinich) The Fair Vaccine Price Act of 2004, to prohibit price-gouging during a shortage ofa covered vaccine. Introduced November 19, 2004. H.R. 5409 (Lowey) The Emergency Flu Response Act of 2004, to amend the Public Health Service Actto address the shortage of influenza vaccine, and for other purposes. Introduced November 19, 2004. S. 15 (Gregg) Project BioShield Act of 2004, to amend the Public Health Service Act to provideprotections and countermeasures against chemical, radiological, or nuclear agents bygiving the National Institutes of Health contracting flexibility, infrastructureimprovements, and expediting the scientific peer review process, and streamliningthe Food and Drug Administration approval process of countermeasures. IntroducedMarch 11, 2003. Became P.L. 108-276 on July 21, 2004. S. 666 (Lieberman) The Biological, Chemical, and Radiological Weapons Countermeasures ResearchAct, to provide incentives to increase research by private sector entities to developantivirals, antibiotics, vaccines and other products to prevent and treat illnessesassociated with a biological, chemical, or radiological weapons attack. Introduced March 19, 2003. S. 754 (Frist) The Improved Vaccine Affordability and Availability Act, to amend the PublicHealth Service Act to improve immunization rates by increasing the distribution ofvaccines (including flu vaccine) and improving and clarifying the vaccine injurycompensation program. Introduced April 1, 2003. S. 1817 (Santorum) To amend the Internal Revenue Code of 1986 to include influenza vaccines in theVaccine Injury Compensation Program. Introduced November 4, 2003. S. 1896 (Grassley) To add to the definition of taxable vaccines any vaccine against hepatitis A and anytrivalent vaccine against influenza. Introduced November 19, 2003. S. 2038 (Bayh) The Flu Protection Act of 2004, to amend the Public Health Service Act to providefor an influenza vaccine awareness campaign, ensure a sufficient influenza vaccinesupply, and prepare for an influenza pandemic or epidemic, to amend the InternalRevenue Code of 1986 to encourage vaccine production capacity, and for otherpurposes. Introduced January 28, 2004. Related bill H.R. 3758. S. 2959 (Dayton) The Influenza Preparation and Vaccination Act, to amend the Public Health ServiceAct to ensure an adequate supply and distribution of influenza vaccine. Introduced October 8, 2004. S. 2968 (Reed) The Emergency Flu Response Act of 2004, to amend the Public Health Service Actto address the shortage of influenza vaccine, and for other purposes. Introduced October 8, 2004. S. 2997 (Inhofe) The Flu Vaccine Incentive Act of 2004, to amend the Social Security Act toencourage the production of influenza vaccines by eliminating the price capapplicable to the purchase of such vaccines by HHS, to amend the Internal RevenueCode of 1986 to establish a tax credit to encourage vaccine production capacity, andfor other purposes. Introduced November 18, 2004. H.R. 2660 / S. 1356 (Regula / Specter) Making appropriations for Labor, Health and Human Services, Education andRelated Agencies for FY2004, includes funding for influenza vaccine research andstockpile purchase. Became Public Law No. 108-199, the Consolidated Appropriations Act, 2004, onJanuary 23, 2004. H.R. 5006 / S. 2810 (Regula / Specter) Making appropriations for Labor, Health and Human Services, Education andRelated Agencies for FY2005, includes funding for influenza vaccine research andvaccine purchase. Became Public Law No. 108-447, the FY2005 Consolidated Appropriations Act, onDecember 8, 2004. House Committee on Energy and Commerce, Subcommittee on Health andSubcommittee on Investigations, joint hearing on Flu Vaccine: ProtectingHigh-Risk Individuals and Strengthening the Market, November 18, 2004. House Committee on Government Reform, full committee hearing on The Nation'sFlu Shot Shortage , November 17, 2004. Senate Special Aging Committee, hearing on Liability, Licensing and the FluVaccine Market: Making Decisions Today to Prevent a Crisis Tomorrow, November 16, 2004. House Committee on Government Reform, full committee hearing on The Nation'sFlu Shot Shortage , October 8, 2004. Senate Committees on the Judiciary and Health, Education, Labor and Pensions,joint hearing on BioShield Legislation , October 6, 2004. House Appropriations Committee, Subcommittee on Labor, Health and HumanServices and Education, hearing on Influenza Vaccine , October 5, 2004. Senate Special Aging Committee, hearing on Influenza and the Elderly , September 28, 2004. House Committee on Government Reform, Subcommittee on Human Rights andWellness, hearing on Mercury and Autism , September 8, 2004. House Appropriations Committee, Subcommittee on Labor, Health and HumanServices and Education, hearing on Global Diseases ProgramsAppropriations , April 28, 2004. House Committee on Government Reform, hearing on Health System Preparednessto Handle Health Threats , focused on the 2003-2004 influenza season,February 12, 2004. The House Committee on Energy and Commerce is conducting an investigation intothe federal role in the flu vaccine shortage. The Committee Chairman and RankingMember sent letters to the Chiron Corporation, the Acting FDA Commissioner andthe Secretary of HHS, requesting information, on November 18, 2004, available at http://energycommerce.house.gov/108/News/11182004_1408.htm . The House Committee on Government Reform is conducting an investigation intoFDA's role in the shutdown of the Chiron plant. The Committee Chairman andRanking Member sent a letter to the Acting FDA Commissioner, requestinginformation, on October 13, 2004, available at http://reform.house.gov/UploadedFiles/101304fdaletterrelease.pdf . CRS Report RL31793 , Vaccine Policy Issues for the 108th Congress , by SusanThaul. CRS Report RS21507 , Project BioShield , by [author name scrubbed]. CRS Report RL32549 , Project BioShield: Legislative History and Side-by-SideComparison of H.R. 2122, S. 15, and S. 1504 ,by [author name scrubbed] and Eric Fischer. CRS Report RS21747, Avian Influenza: Multiple Strains Cause Different EffectsWorldwide , by [author name scrubbed]. CRS Report RL31333, Federal and State Isolation and Quarantine Authority , byAngie A. Welborn, (discusses state and federal authority for public healthemergencies). CRS Report RL31719 , An Overview of the U.S. Public Health System in the Contextof Bioterrorism , by [author name scrubbed] and Sarah Lister. GAO-05-177T, Flu Vaccine: Recent Supply Shortages Underscore OngoingChallenges, testimony, November 18, 2004. GAO-04-1100T, Infectious Disease Preparedness: Federal Challenges inResponding to Influenza Outbreaks , testimony, September 28, 2004. GAO-04-458T, Public Health Preparedness: Response Capacity Improving, butMuch Remains to Be Accomplished , testimony, February 12, 2004. GAO-02-987, Childhood Vaccines: Ensuring an Adequate Supply Poses ContinuingChallenges , report, September 13, 2002. GAO-01-786T, Flu Vaccine: Steps Are Needed to Better Prepare for Possible FutureShortages , testimony, May 30, 2001. GAO-01-624, Flu Vaccine: Supply Problems Heighten Need to Ensure Access forHigh-Risk People , report, May 15, 2001. IOM, The Threat of Pandemic Influenza: Are We Ready? A Workshop Summary November 16, 2004, at http://www.iom.edu/report.asp?id=23639 . IOM, Immunization Safety Review: Influenza Vaccines and NeurologicalComplications, October 6, 2003, at http://www.iom.edu/report.asp?id=15625 . IOM, Financing Vaccines in the 21st Century: Assuring Access and Availability, August 4, 2003, at http://www.iom.edu/report.asp?id=14451 . IOM, Board on Health Care Services, Calling the Shots: Immunization FinancePolicies and Practices, June 16, 2000, at http://www.iom.edu/report.asp?id=5508 . HHS National Vaccine Program Office Home Page: general information on vaccines,and the Draft Pandemic Influenza Preparedness and Response Plan. http://www.hhs.gov/nvpo/ . CDC Influenza Home Page: information for health professionals and the generalpublic, including guidelines related to the current vaccine shortage, http://www.cdc.gov/flu/ . CDC, Prevention and Control of Influenza, Recommendations of the AdvisoryCommittee on Immunization Practices (ACIP), MMWR Recommendationsand Reports , May 28, 2004, recommendations prior to announcement of thevaccine shortage for 2004-2005. CDC National Immunization Program Home Page: information about CDC-fundedvaccine purchases and related information, http://www.cdc.gov/nip/ . CDC Public Health Law Program Home Page: information on state authorities andactions taken to assure priority distribution of flu vaccine, http://www.phppo.cdc.gov/od/phlp/Influenza.asp . FDA Center for Biologics Evaluation and Research, Influenza Virus Vaccine2004-2005 Home Page: information about Chiron, Aventis, and MedImmunevaccine production, http://www.fda.gov/cber/flu/flu2004.htm . HRSA National Vaccine Injury Compensation Program (VICP) Home Page, http://www.hrsa.gov/osp/vicp/INDEX.HTM . NIH National Institute of Allergy and Infectious Diseases influenza Home Page: http://www.niaid.nih.gov/dmid/influenza/ . WHO Influenza Home Page at http://www.who.int/csr/disease/influenza/en/ . F.A. Sloan et al., "The Fragility of the U.S. Vaccine Supply," New England Journalof Medicine, 351:2443-2447, Dec. 2, 2004. J. Treanor, "Weathering the Influenza Vaccine Crisis," New England Journal ofMedicine , 351:2037-2040, Nov. 11, 2004. R. Giffin et al., "Childhood Vaccine Finance and Safety Issues," Health Affairs, 23(5): 98-111, Sept./Oct. 2004 (despite the title, a general overview offederal/state/private vaccine financing and distribution issues). National Vaccine Advisory Committee, "Strengthening the Supply of RoutinelyRecommended Vaccines in the United States: Recommendations from theNational Vaccine Advisory Committee," JAMA 290(23), Dec. 17, 2003, pp.3122-3128.

Summary: On October 5, 2004, Chiron (pronounced KÄ«Ì-ron), a California-based biotechnologycompany, notified U.S. health officials that British regulatory authorities had suspended productionof influenza ("flu") vaccine in its plant in Liverpool, England, due to vaccine safety concerns. Theplant was slated to provide between 46 million and 48 million doses of flu vaccine for the U.S.market for the imminent 2004-2005 flu season, almost half the expected nationwide supply. The announcement of Chiron's suspension prompted the Centers for Disease Control andPrevention (CDC) and its Advisory Committee on Immunization Practices (ACIP) to re-define thegroups most at risk, to be given priority for the available vaccine doses. CDC coordinatednationwide tracking of available vaccine, high-priority individuals who might need it, and infectionssignaling the start of the winter flu season. The Food and Drug Administration (FDA) sent a teamto the Liverpool plant to determine whether any of the Chiron vaccine lots could be salvaged (theylater determined that they could not) and sought additional sources of vaccine from othermanufacturers, domestically and abroad. States launched plans to locate and re-distribute or rationvaccine, and responded to reports of price-gouging. The response of local, state, and federalagencies was limited because most of the U.S. flu vaccine market is in private hands. Several bills were introduced in response to the shortage, and proposals introduced earlierin the 108th Congress, in response to flu vaccine supply problems during the 2003-2004 season,received renewed attention. Two hearings on influenza vaccine were held immediately prior toannouncement of the shortage, indicating Congress's ongoing interest in this issue. Additionalhearings were held after the shortage was announced. Congress also passed (in P.L. 108-357 , theAmerican Jobs Creation Act of 2004) a provision adding flu vaccine to the National Vaccine InjuryCompensation Program (VICP), and provided $100 million in FY2005 funding for influenzapreparedness, which could be used to purchase flu vaccine. The shortage illustrates the challenges that the federal government faces in responding topublic health threats. Much of the responsibility for preventing or managing the shortage rests withthe states or with the private sector, and the threshold over which the federal government wouldwrest control from either appears high. As a result, the federal government may appear disorganizedor unresponsive. The shortage also raises questions about the role and effectiveness of governmentin rationing a scarce health resource. As communities across the country saw long lines of sick and elderly citizens waiting in vainfor flu vaccine, and concerns about the supply for the 2005-2006 season emerged as well,policymakers asked why the system to provide this potentially life-saving product was so unreliable,and what could be done about it. Some have expressed concern that this situation bodes ill forpreparedness for an influenza pandemic or a large-scale bioterrorism event. This report will describethe system of flu vaccine production and delivery, the causes of supply problems, and options forimprovement. It will be updated as circumstances warrant.