[Senate Hearing 107-97]
[From the U.S. Government Printing Office]

                                                         S. Hrg. 107-97




                               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

74-367                     WASHINGTON : 2001

            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           JOHN B. BREAUX, Louisiana
CONRAD BURNS, Montana                HARRY REID, Nevada
RICHARD SHELBY, Alabama              HERB KOHL, Wisconsin
RICK SANTORUM, Pennsylvania          RUSSELL D. FEINGOLD, Wisconsin
SUSAN COLLINS, Maine                 RON WYDEN, Oregon
MIKE ENZI, Wyoming                   EVAN BAYH, Indiana
TIM HUTCHINSON, Arkansas             BLANCHE L. LINCOLN, Arkansas
PETER G. FITZGERALD, Illinois        THOMAS R. CARPER, Delaware
JOHN ENSIGN, Nevada                  DEBBIE STABENOW, Michigan
                                     JEAN CARNAHAN, Missouri
                      Lupe Wissel, Staff Director
                Michelle Easton, Minority Staff Director



                            C O N T E N T S

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


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





                        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.


    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 
    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, particularly 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 
    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 
    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?


    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 
    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 
    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 
    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 
    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.
    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 
    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.


    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 
    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 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 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 
    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.


    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 
    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 
addressing 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.


    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 guidelines 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 
    [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. 
    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 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 
    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 
    Very good. All right. Mr. Sattenspiel.
    Dr. Sattenspiel. Great. Thank you.
    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 
    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.
    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 
    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 Medical Products in Indianapolis, IN; and Grant 
Higginson, M.D., MPH, State of Oregon Health Officer, Portland, 
    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.


    Dr. Fukuda. Thank you. Good morning, Senator Wyden. I am 
Dr. Keiji Fukuda from the Centers for Disease Control and 
    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 
    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 
    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 
    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 
    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 between 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.


    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 
    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 
    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.
    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 
    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.


    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.
    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 mid-season.
    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 
    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 average-sized 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 represents 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 
    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 
re-examine 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 
    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 
vaccines they need to administer to the millions of patients 
they serve.
    Thank you again for inviting me to testify before your 
    [The prepared statement of Mr. Rowan follows:]

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    Senator Wyden. Thank you. Anything you would like to add, 
Mr. Skoronski.


    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.

                     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 
    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 
    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 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 
    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 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 
    [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 
    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 
    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? 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 
    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 
    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 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 
    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 
    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 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 
    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 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 
    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 
    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 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 
    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.
    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 
    Senator Wyden. I would give you----
    Mr. Rowan [continuing.] By domestic manufacturers.
    Senator Wyden [continuing.] Equal time on that, Mr. 
    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?
    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 
    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 non-standard 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 
    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. 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 
    Mr. Rowan. I agree with that 100 percent and look forward 
to being a resource for you in your committee work moving 
    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 
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 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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