[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]


 
  FLU VACCINE: PROTECTING HIGH-RISK INDIVIDUALS AND STRENGTHENING THE 
                                 MARKET

=======================================================================

                             JOINT HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                and the

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                           NOVEMBER 18, 2004

                               __________

                           Serial No. 108-134

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house


                               __________

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                    ------------------------------  
                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
RALPH M. HALL, Texas                   Ranking Member
MICHAEL BILIRAKIS, Florida           HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
JAMES C. GREENWOOD, Pennsylvania     FRANK PALLONE, Jr., New Jersey
CHRISTOPHER COX, California          SHERROD BROWN, Ohio
NATHAN DEAL, Georgia                 BART GORDON, Tennessee
RICHARD BURR, North Carolina         PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming               BART STUPAK, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona             GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING,       KAREN McCARTHY, Missouri
Mississippi, Vice Chairman           TED STRICKLAND, Ohio
VITO FOSSELLA, New York              DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        TOM ALLEN, Maine
MARY BONO, California                JIM DAVIS, Florida
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
JOHN SULLIVAN, Oklahoma

                      Bud Albright, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

                         Subcommittee on Health

                  MICHAEL BILIRAKIS, Florida, Chairman

RALPH M. HALL, Texas                 SHERROD BROWN, Ohio
FRED UPTON, Michigan                   Ranking Member
JAMES C. GREENWOOD, Pennsylvania     HENRY A. WAXMAN, California
NATHAN DEAL, Georgia                 EDOLPHUS TOWNS, New York
RICHARD BURR, North Carolina         FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky               BART GORDON, Tennessee
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
  Vice Chairman                      BART STUPAK, Michigan
BARBARA CUBIN, Wyoming               ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois               GENE GREEN, Texas
HEATHER WILSON, New Mexico           TED STRICKLAND, Ohio
JOHN B. SHADEGG, Arizona             DIANA DeGETTE, Colorado
CHARLES W. ``CHIP'' PICKERING,       LOIS CAPPS, California
Mississippi                          CHRIS JOHN, Louisiana
STEVE BUYER, Indiana                 BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania        JOHN D. DINGELL, Michigan,
MIKE FERGUSON, New Jersey              (Ex Officio)
MIKE ROGERS, Michigan
JOE BARTON, Texas,
  (Ex Officio)

                                  (ii)

                                     

                                     

                                     

                                     

                                     

                                     

                                     

                                     

              Subcommittee on Oversight and Investigations

               JAMES C. GREENWOOD, Pennsylvania, Chairman

MICHAEL BILIRAKIS, Florida           PETER DEUTSCH, Florida
CLIFF STEARNS, Florida                 Ranking Member
RICHARD BURR, North Carolina         DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire       TOM ALLEN, Maine
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
  Vice Chairman                      HENRY A. WAXMAN, California
MIKE FERGUSON, New Jersey            EDWARD J. MARKEY, Massachusetts
MIKE ROGERS, Michigan                JOHN D. DINGELL, Michigan,
JOE BARTON, Texas,                     (Ex Officio)
  (Ex Officio)

                                 (iii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Coelingh, Kathleen, Senior Director of Regulatory and 
      Scientific Affairs, Medimmune, Inc.........................   106
    Crawford, Lester M., Acting Commissioner, Food and Drug 
      Administration.............................................    18
    Fauci, Anthony S., Director, National Institute of Allergy 
      and Infectious Diseases, National Institutes of Health.....    24
    Gerberding, Julie L., Director, Centers for Disease Control 
      and Prevention.............................................    29
    Heinrich, Janet, Director, Healthcare/Public Health Issues, 
      U.S. Government Accountability Office......................    84
    Mlotek, Mark E., Executive Vice President, Henry Schein, Inc.   101
    Olszewski, Janet, Director, Michigan Department of Community 
      Health.....................................................    77
    Paradiso, Peter R., Vice President, New Business Development, 
      Wyeth......................................................    94
    Rosenbloom, Alan, President and CEO, Pennsylvania Health Care 
      Association/Center for Assisted Living Management..........    90
Material submitted for the record by:
    American College of Physicians, prepared statement of........   119

                                  (v)

  


  FLU VACCINE: PROTECTING HIGH-RISK INDIVIDUALS AND STRENGTHENING THE 
                                 MARKET

                              ----------                              


                      THURSDAY, NOVEMBER 18, 2004

              House of Representatives,    
              Committee on Energy and Commerce,    
                 Subcommittee on Health, Joint with the    
                  Subcommittee on Oversight Investigations,
                                                    Washington, DC.
    The subcommittees met, pursuant to notice, at 9:45 a.m., in 
room 2123, Rayburn House Office Building, Hon. Joe Barton 
(chairman) presiding.
    Members present, Subcommittee on Health: Representatives 
Bilirakis, Upton, Deal, Whitfield, Shimkus, Wilson, Pickering, 
Ferguson, Rogers, Barton (ex officio), Eshoo, Green, 
Strickland, and Dingell (ex officio).
    Members present, Subcommittee on Oversight and 
Investigations: Bilirakis, Stearns, Bass, Walden, Ferguson, 
Barton (ex officio), Schakowsky, and Markey.
    Staff present: Chuck Clapton, majority counsel; Ryan Long, 
professional staff; Bill O'Brien, legislative analyst; Cheryl 
Jaeger, professional staff; Jeanne Haggerty, health policy 
coordinator; Eugenia Edwards, legislative clerk; Tony Cooke, 
majority counsel; John Ford, minority counsel; and Ashley 
Groesbeck, minority research assistant.
    Chairman Barton. The subcommittee joint hearing will come 
to order.
    I want to thank our witnesses today for this important 
discussion. The flu vaccine shortage is vitally important and 
all of today's witnesses have a unique perspective on what is 
being done to address the problem.
    I would assume all of the other members of this committee, 
have heard a lot about flu vaccines while we were back in our 
districts in recent weeks campaigning for the recently 
concluded election. I myself went to a nursing home and heard 
directly from the individuals in that particular nursing home 
that needed a shot and could not get the shot. I also visited 
senior centers and health care centers and met with doctors, 
nurses, clinicians, and in Texas there is and was a severe 
shortage for high risk patients.
    I know that there are many, many people in my district and 
every other Congressional district in the country that want flu 
shots. They don't want a cheap political attack or demagoguery 
on this issue. There have been some that seem to view the 
current crisis as an opportunity to score political points and 
to try to lay blame. I can assure my panelists that is not why 
we are here today.
    The Energy and Commerce Committee is a committee that tries 
to find solutions to existing problems. This committee has a 
responsibility and I think the expertise to examine the issues 
surrounding the current shortage. The Energy and Commerce 
Committee today is going to be constructive. We hope to 
identify problems that led to the current shortage. We hope we 
can come to some conclusions about how to develop necessary 
solutions to, if at all possible, solve the problem this year, 
which is not likely to happen because of the severe shortfall, 
but at the minimum to come up with a matrix that prevents it 
from ever happening again.
    Before October 5, the United States was expected to have on 
hand about 100 million doses of flu vaccine. With the 
announcement of Chiron's vaccine being contaminated, the United 
States' supply was effectively cut in half to about 50 million 
doses. But we have 300 million citizens approximately in the 
United States. 50 million does not go very far, doesn't go as 
far as it needs to in taking care of the percentage of the 300 
million that need a flu vaccine.
    The FDA and CDC have really, really tried in my opinion to 
work with other manufacturers to increase the current supply 
and we hope, because of those efforts, that it is going to be 
up to 61 million doses. The FDA is also working with facilities 
overseas to supply what they hope will be an additional 5 
million doses. The CDC has developed and is implementing a plan 
to allocate 10 million doses of the flu vaccine to States that 
can then distribute those doses to high risk individuals.
    One objective for today's hearing is to assess how 
successful this effort has been and what more can be done to 
provide high risk individuals with better access to flu 
vaccine.
    Many of the witnesses on the second panel are on the front 
lines in delivering the vaccine, and I am going to be very 
interested in hearing of their perspective on the CDC plan and, 
if possible, if we can improve on that plan.
    Ten years ago we had five suppliers in this country of 
injectable flu vaccines. Going into this flu season, we are 
down to two. You would think maybe we only have two because the 
demand has gone down. That is not right. Demand has gone up. 
The number of companies to meet that demand have gone down. The 
companies have continued to leave the market.
    The lack of suppliers is a prime reason that we find 
ourselves in the situation that we have today. Without a 
diversity of vaccine suppliers, any problem turns into a major 
supply disruption. It is important that this committee examine 
the short-term solutions to address shortages for this year and 
possibly for next year, but we also should be prepared to 
address the generic weaknesses in the vaccine market and why 
companies are reluctant today to get into the flu vaccine 
business.
    One company here today was a manufacturer of flu vaccine, 
but has decided to leave that market. We need to ask why the 
flu vaccine market has become so unattractive to manufacturers 
and, if possible, what steps can be taken to encourage new 
producers to come back into the market.
    I want to thank all of the witnesses today and their staffs 
that have worked to prepare for this hearing. It is hopeful 
that at the conclusion of the hearing, at a minimum the U.S. 
public is going to have a better understanding of what the 
situation is and a very, very positive outcome would be if we 
can come to agreement on some ways to help in the short term 
and prevent it from happening again in the long term.
    Again, I want to thank our witnesses today and I look 
forward to hearing your testimony.
    [The prepared statement of Hon. Joe Barton follows:]

 Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy 
                              and Commerce

    Good morning. Let me begin by thanking all of the witnesses on both 
panels for being here today for this important hearing. The flu vaccine 
shortage is a vitally important health issue, and all of today's 
witnesses have unique perspectives on what is being done to address 
this problem.
    I, and probably most other Members of Congress, heard a lot about 
flu vaccines while we were back in our districts in recent weeks. We 
heard the concerns of nursing homes, senior centers and health care 
providers about the problems they face getting doses of flu vaccine for 
their high risk patients.
    I know that the people back in my district want flu shots, not 
cheap political attacks. There are some who seem to view the current 
crisis merely as an opportunity to score partisan points and try to lay 
blame. That is not why we are here today.
    This is the Committee that has the responsibility and the expertise 
to examine the issues surrounding the current shortage. This Committee 
is going to be constructive--we will identify the problems that led to 
the current shortage and we will develop any necessary solutions to 
solve these problems. It is my hope that our efforts will not be 
diverted by attempts to assess blame, which are both ultimately futile 
and do nothing to improve any patient's access to flu vaccine.
    Before October 5th, we expected 100 million does of flu vaccine 
would be delivered. With the announcement of Chiron's vaccine being 
contaminated, our supply was effectively cut in half. The FDA and the 
CDC have done an effective job in working with several manufacturers to 
increase our current supply to 61 million doses. The FDA is also 
working with facilities overseas to supply an additional five million 
doses of vaccine.
    The CDC has developed and is implementing a plan to allocate 10 
million doses of the flu vaccine to states that can then distribute 
these doses to high-risk individuals. One objective for today's hearing 
will be to assess how successful this effort has been and what more can 
be done to provide high-risk individuals with better access to flu 
vaccine. Many of the witnesses on the second panel are on the front 
lines in delivering flu vaccine, and I am interested in hearing their 
perspectives on the CDC's plan, and how we can improve the delivery of 
vaccine.
    Ten years ago we had five suppliers of injectable flu vaccine. 
Going into this flu season we were down to two. Demand has increased 
over time, but companies continue to leave the market. The lack of 
suppliers is a prime reason that we find ourselves in the situation 
that we do today. Without a diversity of vaccine suppliers, any problem 
turns into a major supply disruption.
    It is important that this Committee examines short-term solutions 
to address shortages for this and potentially next year. We must also 
be prepared to address the weaknesses in the vaccine market, and why 
companies are reluctant to get into the flu vaccine business. One 
company here today was a manufacturer of flu vaccine, but decided to 
leave that market. We need to ask why the flu vaccine market has become 
so unattractive to manufacturers and what steps can be taken to 
encourage new producers.
    I would like to commend and thank all parties that have worked 
together to address this important public health concern. Thank you, 
and I look forward to your testimony.

    Chairman Barton. With that, I would ask the distinguished 
ranking member of the full committee, the Honorable John 
Dingell of Michigan, if he wishes to make an opening statement.
    Mr. Dingell. Mr. Chairman, thank you. I commend you for 
scheduling this hearing to respond to the questions related to 
the severe shortage of flu vaccine this year. All of us are 
hearing from constituents who are justifiably alarmed by this 
situation. They are alarmed for themselves and they are alarmed 
for their loved ones. We need to learn what got us to this 
point and, more importantly, we need to determine how to reduce 
the risk of repeating this mess.
    I would observe that it appears to me that the watchdogs 
who are supposed to be diligent and vigorous in assuring the 
safety of the American people have been asleep or resting 
tranquilly instead of fully carrying out their 
responsibilities. There are questions into which this committee 
must go with considerable vigor.
    As a preliminary matter, how and why did this immediate 
problem occur? What happened to Chiron? Did the Food and Drug 
Administration fully and wisely exercise its authority? Does 
the foreign inspection system work, or is it broken? Is it 
applied with sufficient vigor by the Food and Drug 
Administration?
    It appears at first glance that answers to these questions 
are going to give our people little comfort. Chiron purchased a 
chronically troubled facility and was insufficiently aggressive 
in addressing shortcomings. FDA allowed the problems to fester 
and was laggard in reacting to bad news. Did FDA engage in 
sufficiently vigorous inquiry into the behavior of Chiron and 
did they provide the necessary inspections and inquiry into the 
functioning of that company?
    Our hearings in 2000 showed that Food and Drug's foreign 
inspection system, which is often little more than an 
international honor system, is badly underfunded. Has that 
question been addressed? And it was in disarray at that time. 
Is this situation still the case?
    Congress needs to get to the bottom of this and the 
Committee on Government Reform has already done important and 
useful work on what has happened here. But Congress must not 
wait to act on the underlying vulnerability of the vaccine 
supply that this sorry episode has revealed.
    I recently announced my interest in developing bipartisan 
legislation aimed at ensuring an adequate and reliable supply 
of safe and effective flu vaccines. A number of elements are 
necessary to help achieve that goal: Guaranteeing adequate 
vaccine supplies, providing compensation for those injured, 
enhancing vaccine efforts in the area of research and other 
things, improving FDA inspection of flu vaccine manufacturing, 
improving FDA review process for new flu vaccines; authorizing 
emergency vaccine allocation procedures; and providing for 
continued monitoring and accountability; but also treating all 
vaccine manufacturers in the United States and elsewhere with 
equal care, intensity and vigor.
    Mr. Chairman, I hope that in the best bipartisan tradition, 
this committee will be able to work together, as we have in the 
past, on this issue, and I would hope that we will be able to 
do so soon. It is not an exaggeration to say this is among the 
most important public health matters we face, now and in the 
future, and if we do a good job of addressing the matter of 
annual vaccines for influenza, then we may very well be 
improving our chances of minimizing the damage that will be 
caused by the next influenza pandemic. A lot of work has been 
done to identify policy options. The Institute of Medicine, the 
Government Accountability Office, advisory committees and 
others have sifted through mountains of data and provided 
thoughtful analyses. It is now time for us to assess the policy 
options and to act.
    Today's hearing is a good start, and we have an excellent 
array of witnesses. I am particularly pleased to welcome from 
the State of Michigan Janet Olszewski, the Director of the 
Michigan Department of Community Health. She is going to 
provide an important perspective from the State level on 
programs and policies used to manage this year's severe 
shortage of flu vaccine. She joins many other distinguished 
witnesses and I thank them all for appearing before us today.
    I would note that the Food and Drug Administration should 
take small comfort about their appearance here today, because 
it appears that they have been tranquilly at rest where 
important responsibilities are needed to be addressed with 
vigor.
    Thank you, Mr. Chairman.
    Chairman Barton. Thank you, Congressman Dingell.
    We would now like to recognize the distinguished chairman 
of the Health Subcommittee, Mr. Bilirakis, for an opening 
statement.
    Mr. Bilirakis. Thank you, Mr. Chairman.
    Mr. Chairman, we all know I think what went wrong this 
year, but I am glad, and you pretty well said it, that we will 
not focus on what happened and who is to blame. That would be 
taking the easy way out of this problem. Too often in Congress 
we like to finger point, rather than take the more difficult 
road of finding real practical solutions. But today's hearing 
and the excellent panels of witnesses before us, I am really 
hopeful that members can focus on examining what is currently 
being done to get the flu vaccine to Americans and very 
importantly how we can prevent shortages in the future.
    We have all heard from constituents, of course, many of 
them asking us if we have gotten our flu shot yet and that sort 
of thing. My son is a primary care physician, and for the first 
time he was not able to get any vaccine for his patients. 
Hopefully the witnesses here today will tell us what is being 
done to ensure that the people that we all represent will be 
able to get the vaccines they need.
    What happened this year is, of course, extremely 
unfortunate, and we don't want to downplay that fact. However, 
Mr. Chairman, as a result of this shortage, several good things 
are happening. For example, because the flu vaccine is not as 
widely available this year, State and local health agencies 
have been working to target high risk individuals. In 2002-2003 
flu season, only 43.6 percent of the high risk population was 
vaccinated. This year, due in large part to the focus on the 
importance of the vaccine and information about which 
individuals qualify as high risk, it is anticipated that 
percentage will be much higher.
    Hopefully the problems experienced this year will encourage 
us, the Congress, to examine the barriers that currently exist 
to encourage participation in the flu vaccine market, and that 
examination will result in better policy.
    There are some very real problems that exist in this 
market. For example, vaccines are difficult and expensive to 
make and the risk of failure in the development process is 
high. They require complex biological procedures and elaborate 
processing to keep them uncontaminated and yet effective. It 
can take a year to produce a vaccine, and each batch must be 
rigorously tested before it can be released to the U.S. market, 
which can take several additional months.
    Also the demand for the vaccine is extremely unpredictable. 
There is a continuous struggle with how much flu vaccine to 
keep on hand, which often leads to irregular purchasing 
patterns. This in turn complicates production planning by 
manufacturers.
    Additionally there is also the threat of litigation, as we 
know, which has played a role in driving companies out of the 
vaccine business.
    It is tragic, Mr. Chairman, that there are barriers to 
market entry of vaccine companies. The flu vaccine is cost-
effective, preventing not only the illness but also the far 
greater cost of treating the cases they prevent, yet the 
overall vaccine pricing structure that has evolved in the 
United States does not value a vaccine's role in holding down 
overall health care costs, sort of like what we experience with 
the Congressional Budget Office.
    The fact that so few manufacturers remain is a clear 
indication that risks and rewards are askew. We are all anxious 
to hear answers to all of these questions, as so many others, 
from our witnesses.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Michael Bilirakis follows:]

Prepared Statement of Hon. Michael Bilirakis, Chairman, Subcommittee on 
                                 Health

    Thank you Mr. Chairman. Good morning. I'm extremely pleased that we 
are holding this hearing on the flu vaccine shortage today. As I am 
sure you are all aware, this has been a topic that has been on the 
minds of most Americans as we enter into flu season this year.
    Each year, millions of people in the United States get the flu. For 
many, this can be a life-threatening disease. About 36,000 people each 
year die and over 200,000 are hospitalized. Throughout our history, we 
have been plagued with epidemics and pandemics of influenza, ``flu.'' 
The flu affects all age groups; however, infection is highest among 
children and the elderly. The flu vaccination is the primary method for 
preventing influenza and its severe complications.
    Most of us are aware of what happened with regard to the flu 
vaccine this year. Currently, in the United States, there are only two 
manufacturers of the influenza, ``flu'' vaccine. When one of those two 
companies had their license to manufacture the flu vaccine suspended, 
preventing any release of this vaccine for this season, the expected 
supply of the flu vaccine available in the United States for this 
season was severely reduced.
    As we all know what went wrong this year, I am glad that the 
hearing today will focus not on what happened and who is to blame. That 
would be taking the easy way out of this problem. Too often in 
Congress, we like to ``finger point'' rather than take the more 
difficult road of finding real, practical solutions. With today's 
hearing, and the excellent panels of witnesses before us, I am really 
hopeful that Members can focus on examining what is currently being 
done to get the flu vaccine to Americans, and how we can prevent 
shortages in the future.
    First and foremost, I want to ensure that information is getting to 
the public about which individuals are considered to be ``high-risk'' 
and how we can get those individuals vaccinated. When I was home over 
the break, I had many of my constituents asking me about how they could 
get their flu shot. Hopefully the witnesses here today will tell us 
what is being done to ensure that the people I represent will be able 
to get the vaccines they need.
    What happened with the flu vaccine this year is extremely 
unfortunate, and I don't want to downplay that fact. However, as a 
result of this shortage, several good things are happening. For 
example, because the flu vaccine is not as widely available this year, 
state and local health agencies have been working to target ``high 
risk'' individuals. In 2002-2003 flu season, only 43.6% of the ``high 
risk'' population was vaccinated. This year, due in large part to the 
focus on the importance of the vaccine, and information about which 
individuals qualify as ``high risk,'' it is anticipated that that will 
be a much higher percentage.
    The flu vaccine shortage this year highlights larger issues that 
plague the vaccine market, and I believe strongly that those issues 
need to be addressed. Ten years ago, there were 5 manufacturers of the 
influenza vaccine, over the past few years, more and more manufactures 
have ceased to produce vaccines, so we are down to two manufacturers.
    Hopefully, the problems experienced this year will encourage 
Congress to examine the barriers that currently exist to encourage 
participation in the flu vaccine market, and that examination will 
result in better policy. There are some very real problems that exist 
in this market. For example, vaccines are difficult and expensive to 
make, and the risk of failure in the development process is high. They 
require complex biological procedures and elaborate processing to keep 
them uncontaminated yet effective. It can take a year to produce a 
vaccine, and each batch must be rigorously tested before it can be 
released to the U.S. market, which can take several additional months. 
Also, the demand for the flu vaccine is extremely unpredictable. Then 
there is a continuous struggle with how much flu vaccine to keep on 
hand, which often leads to irregular purchasing patterns. This, in 
turn, complicates production planning by manufacturers. Additionally, 
there is also threat of litigation has also played a role in driving 
companies out of the vaccine business.
    It's tragic that there are barriers to market entry for vaccine 
companies. The flu vaccine is cost-effective, preventing not only the 
illness, but also the far greater costs of treating the cases they 
prevent. Yet the overall vaccine pricing structure that has evolved in 
the United States does not value a vaccine's role in holding down 
overall health-care costs. The fact that so few manufacturers remain is 
a clear indication that risks and rewards are askew.
    I am anxious to hear from witnesses about what possible changes 
that could be made to encourage more participation in this area. As 
Chairman of the Energy and Commerce Subcommittee on Health, I do not 
intend for this hearing to be the extent of the Committee's examining 
this issue, rather the first step.
    Thank you, Mr. Chairman.

    Mr. Upton [presiding]. I recognize Ms. Eshoo for an opening 
statement.
    Ms. Eshoo. Thank you, Mr. Chairman. First let me say to all 
of my colleagues, congratulations on your reelections. I look 
forward to working with you in the next 2 years on the really 
major issues that come through this committee in the best 
traditions of the House Energy and Commerce Committee.
    I want to thank the chairman for holding this critical 
hearing. I am pleased that it is Investigation and Oversight 
and the Health Committee. This issue deserves the attention of 
both of the subcommittees, and welcome to the distinguished 
representatives of really the premier agencies I think in the 
Federal Government, the FDA, the CDC and the NIH. It is a 
pleasure to see you here.
    We all know what this issue is because it affected every 
single part of the country regardless of where anyone's 
Congressional district is. We knew it firsthand from our 
family. We understand it if we are of the age where we are 
supposed to get a flu shot. We understood it for ourselves. 
Most importantly, we understood it from the standpoint of our 
constituents.
    For me, it was a sad sight to turn on the television and to 
see the news of seniors standing in line all over the country 
and exclaiming how could this happen in America? So that says 
more than one thing to me. What our system is, how this came to 
be, what kind of fixes do we need to take a look at. Is there 
something wrong with the market? We have too few that are 
producing the vaccine. What can we do to enhance the private 
sector in producing a safe supply of vaccine, even though there 
are some rocks along the way in terms of the way they do it.
    I also think we need to, through this hearing, take a very 
hard look at the FDA and its enforcement. Whatever we have on 
the books, the laws that we have had on the books, and I use 
the word premier organizations in my first few words this 
morning, I have always had a great deal of regard for the FDA. 
The American people have trusted the FDA to stand between them 
whatever it takes to guarantee consumer protection, consumer 
safety, and when that fails the American people are failed.
    So one of the aspects of this hearing I think must zero in 
very professionally and in a surgical way, if I might say, what 
the enforcement of the FDA was. It is very disturbing to me to 
read about enforcement via the telephone. We all know that 
there isn't anything that takes the place of being in a plant. 
What happened during that timeframe? What kind of effect did it 
have to bring about on October 5 and what happened following 
that?
    So I think, Mr. Chairman, we need to draw out of this 
hearing what I just described, the role of the private sector, 
where we can help to make that far more robust, where the 
private sector may need some help and some incentives.
    At the end of the day we have the responsibility to 
guarantee a safe and full flow of vaccines available to those 
that need the vaccines the most without a rationing system, 
without having 80 and 85-year-olds standing in line in the cold 
and dismayed, and really disheartened and disappointed by what 
this Nation has to offer them.
    It really was a public health mess. There wasn't any one of 
us that had a good answer to our constituents, except to say 
that the Public Health Service was doing everything that it 
could to double and triple up so that people could get their 
vaccines, those that needed them the most.
    So I look forward to what we are going to learn from the 
experts today, but I do hope that we will not leave out that 
portion of a real probing look at the FDA, not for any 
political purposes. The FDA is not a political agency, and the 
public health of this country is not a political football 
either. The elections are over, so it is not a part of that. 
But I think we need to take a look at enforcement.
    The chairman of the full committee and myself have worked 
on FDA issues. We know what those issues are and we know the 
importance of them and the relevance to the American people.
    So thank you again for having this hearing, and welcome 
again to our distinguished guests here today. I look forward to 
what we are going to learn. Thank you.
    Mr. Upton. I recognize myself for an opening statement.
    This is a very important hearing, exploring the lessons 
that we must learn from our current flu vaccine shortage and 
the steps that should be taken to ensure an adequate and 
reliable supply of vaccines in the future. This shortage has a 
very human face. I am hearing from many elderly and disabled 
folks who are shocked and frightened by the shortage.
    Particularly poignant and troubling are the calls my office 
is getting from home-bound elderly folks who cannot get to 
their senior centers where flu shots may be given. Also very 
troubling are the calls from health professionals who care for 
our most vulnerable individuals and those who feel helpless in 
the face of the shortage to address their patients' fears and 
needs.
    Clearly a major part of the problem is the fact that many 
pharmaceutical companies have withdrawn from the vaccine 
market, making us even more vulnerable to serious shortages, 
not only of flu vaccines, but also of childhood vaccines. For 
example, there is only one manufacturer in the United States 
that now produces the measles-mumps-rubella vaccine. There is 
only one producing the varicella vaccine, and only one that is 
producing the pneumonia vaccine. We need to figure out how to 
get more companies back into the production of those vaccines 
before we face even more critical trouble.
    There is also a related issue that I think we should focus 
on today, the system for distributing vaccines. As you recall, 
we had a shortage for a month or so in the last flu season as 
well. I got a lot of calls from doctors and other health 
professionals who were angered and deeply frustrated by the 
fact that they could not get the vaccine they needed for their 
high-risk patients while right down the street people were 
getting flu shots at the supermarkets and drugstores, 
regardless of their risk status.
    Further, when this year's shortage struck and we recognized 
that we needed to prioritize who was receiving the limited 
number of flu shots that were available, I don't think we had a 
handle on where the vaccines were. In Michigan, for example, 
our Department of Community Health officials estimated there 
were between half a million and a million flu shots in the 
State, but they weren't sure where those shots were 
distributed.
    I would like to know how the current distribution system is 
organized and what changes need to be made to ensure that 
getting those vaccines to high risk individuals is a priority, 
particularly when shortages occur.
    I look forward to working with my colleagues on both sides 
of the aisle on this committee and the administration to make 
sure we learn the lessons this flu vaccine shortage holds and 
take the steps needed to ensure that we have a stable supply 
for all vaccines.
    I also want to lend a special welcome to a witness on the 
second panel, Janet Olszewski, who is the Director of the 
Michigan Department of Community Health. I look forward to her 
participation.
    With that, I yield to the gentlewoman from Illinois, Ms. 
Schakowsky, for an opening statement.
    Ms. Schakowsky. Thank you, Mr. Chairman. It is not just 
Congressional committees that are interested in getting to the 
bottom of this. Clearly the American public, people who are 
waiting in line for hours, who are searching around for flu 
shots, many who are unable simply to get them, even some of our 
most vulnerable people, are asking those questions.
    I think the front page today of the Washington Post shows 
the great concern that a vast majority, that many, many people 
feel about it. One headline, FDA Is Flexing Less Muscle. Some 
question as to the relationship with drug questions. That is 
the headline.
    The first paragraph begins, ``In the past 4 years, the Food 
and Drug Administration has taken a noticeably less aggressive 
approach toward policing drugs that cause harmful side effects, 
records show,'' et cetera.
    The other, U.S. knew last year of problems at vaccine 
plant. The Food and Drug Administration found serious problems 
of bacterial contamination at an influenza vaccine plant in 
England in 2003, 16 months before British regulators 
effectively closed the site and impounded its flu shots because 
of fears they were tainted. Not the FDA closed it, but the 
British regulators closed the plant.
    So there are many, many answers that need to be had. Even 
in August of this year when the FDA was told again of 
additional contamination at the Chiron facility, it failed to 
act in a meaningful way to address the problem or to secure 
additional vaccine supply from elsewhere.
    We have seen price gougers appear out of the woodwork to 
profit from a public health crisis. None of these problems 
occurred in other countries where the government plays a far 
greater role in assuring affordable access to health care. In 
fact, in Canada, they had enough flu vaccine supply to sell to 
those Americans who were close enough to the border to get it.
    This is a big deal. 30,000 people die annually from the 
virus. Hundreds of thousands of others end up in the hospital. 
We need to answer these questions.
    I was very disturbed when Vice President Cheney in kind of 
an explanation of what the problem is said that vaccine 
production just isn't profitable enough for private 
pharmaceutical companies. Is that going to be the 
consideration, that the profits of the pharmaceutical companies 
are going to take precedence over the health of the American 
people?
    There is no question that had the FDA taken an appropriate 
course of action, that this year's vaccine shortage and perhaps 
the unnecessary sickness of many would be relieved.
    I just want to end with this. The Governor of Illinois, Rod 
Blagojevich, who has been a leader in the fight for 
reimportation, has undertaken efforts to secure additional 
vaccine supplies for the most vulnerable people in our State, 
and is awaiting FDA authorization for those efforts. I want to 
hear more about the FDA's response, when we can get an answer 
to this, and why since we are still relying on foreign sources 
to meet our flu vaccine names, the Bush administration still is 
blocking Illinois' reimportation efforts of other lifesaving 
medicines.
    Thank you, Mr. Chairman.
    Chairman Barton [presiding]. We would now like to hear from 
the distinguished Congressman from Florida, Mr. Stearns, for an 
opening statement.
    Mr. Stearns. Thank you, Mr. Chairman. Thank you for holding 
this hearing. It is timely even though we are in sort of a lame 
duck session.
    We have a lot of seniors obviously in Florida, and when 
this occurred, I just want to give kudos to Governor Jeb Bush. 
He and his Secretary of Health immediately sprang into action. 
They issued directives implemented by DOH to help identify flu 
vaccines to ensure information on prevention measures, reach 
all these individuals who needed it. So immediately they 
stepped forward. They contacted the Florida nursing home 
industry, the Florida Medical Association, AARP, health care 
providers, the Department of Elderly Affairs and the Agency For 
Health Care Administration.
    So, most importantly, our leaders in Florida sprang forth 
and said, hey, there is no need for panic. We are going to 
identify what we have, we are going to identify the highest 
risk, and we are going to give those individuals the flu shot 
that is needed so we will not have a health crisis.
    Now, the flu vaccine is a unique case here. The length of 
its production can be up to 18 months, according to the GAO. 
There are so many strains of this flu and the virus seems to be 
always one step ahead of us, mutating its way to resistance. We 
may predict for the Hong Kong strain for next year and then we 
are pummeled by the Tokyo strain. It seems to me we hear there 
is a shortage not just this year but several in the past years 
in autumn, only to have vast unused quantities discarded the 
next March or so.
    It is voluntary to get this flu vaccine and not necessarily 
lucrative to industry to produce it. Yet for their efforts and 
some of the lawsuits they have to undergo, which sometimes is 
the highest level, it makes them discouraged.
    So why have we gone from just three or four manufacturers 
down to just one? Perhaps the manufacturers just decided, ``I 
am going to throw up my hands and not deal with this. I don't 
want the litigation. It is too much hassle.'' We have to make 
sure this doesn't occur. Free market competition generally 
brings out choices, to which litigation and excessive 
regulation can be impediments.
    So I would like to get out of this hearing tools to instill 
consumer confidence that the vaccine will be there, there will 
be choice and competition. Maybe the answer lies in liability 
protection or market incentives to get this going. Maybe we 
need some new innovative techniques that rely more on computer 
modeling, that cultures a better understanding of which flu 
vaccine is best. I don't know. But I am hoping to hear from our 
witnesses today some solutions and not just some bureaucratic 
explanation, some definite clearances.
    Thank you, Mr. Chairman.
    Chairman Barton. We thank you, and would welcome our 
distinguished friend from Texas, Mr. Green, for an opening 
statement.
    Mr. Green. Mr. Chairman, thank you for holding this hearing 
on the flu vaccine shortage. It is fitting this hearing is a 
joint effort by both the Health Subcommittee and the Oversight 
and Investigations Subcommittee.
    The investigation work done by our Oversight and 
Investigations Subcommittee will no doubt be instrumental in 
helping us craft a government response to this problem and help 
prevent future shortages.
    When the British government shut down production, the 
public health officials in my hometown of Houston learned they 
would not be receiving any of the flu vaccines they ordered for 
the adult population in Harris County.
    As far as economics goes, the Harris County hospital 
district decision to go with Chiron was an easy one. It ordered 
over 60,000 doses from Chiron since it had established a 
business relationship with the firm, and Chiron offered the 
lowest price. It also has become all too clear, however, that 
the reliance on economic rationale has failed us just as it 
failed our Harris County hospital district in Houston.
    The current vaccine production market, which is controlled 
by the private sector, doesn't allow for the production of a 
vaccine supply adequate enough to further public health. The 
financial incentives simply are not there.
    Unlike other vaccines, the makeup of the flu vaccine must 
change annually to respond to each year's dominant strains of 
the flu virus, which is to predict. The final product has a 
short shelf life that often yields surplus doses, which 
pharmaceutical firms must simply throw out and count as a loss.
    These unfavorable market conditions have pushed all but one 
U.S. producer of flu vaccines out of market, which is little 
surprise considering the significant financial risk inherent in 
flu vaccine production. With only two flu vaccine manufacturers 
in the U.S. market, one U.S. based and one foreign, it is 
extremely difficult to ensure a supply adequate enough to meet 
the government's goal of widespread flu vaccination.
    The shutdown proves without a doubt that any production 
disturbance has broad and serious ramifications, not only for 
flu vaccine supply but also for other potential vaccines.
    In communities throughout the country the vaccine supply 
problems create long lines and fears in the ability of high 
risk individuals to get vaccinated. While this situation has 
forced public health officials to coordinate their efforts to 
provide the flu vaccine to those most in need, the shortage has 
also brought the worst out in some folks.
    The Houston Chronicle puts it, ``The invisible hand of the 
free market provides many benefits, but the suppression of 
greed is not among them.''
    This statement, unfortunately, hits close to home as price 
gouging has been uncovered as a result of not only a 
significant problem in Houston, but also around the country. 
According to a suit filed by our Texas Attorney General Greg 
Abbott, Houston Public Hospital has been a direct victim of 
price gouging as a result of restrictive flu vaccine supply. 
Ben Taub Hospital in Houston, one of our public hospitals, was 
scheduled to receive a portion of the 60,000 doses from Chiron 
for less than $80 a vial. Yet faced with no flu vaccine at all, 
Ben Taub paid nearly $400 a vial from a vaccine distributor 
which later tried to sell the addition vials to the hospital 
for $800 a vial, 1,000 percent markup. Again, this is a public 
hospital that either gets its public funding from the property 
taxes in Harris County or what they earn from Medicaid and some 
of our other public systems. This explanation is unacceptable 
and has to stop.
    While I have every confidence that the judicial system will 
take care of the price gougers, we have to take the necessary 
steps at the Federal level to make sure this situation is not 
replicated today, and we rely heavily on the experience of our 
witnesses here today to help us understand what went wrong and 
where we can go from here, what legislative solutions we need 
to craft or where in the regulatory process we need to deal 
with it.
    Again, Mr. Chairman, thank you and both of our 
subcommittees for holding this hearing.
    Chairman Barton. Thank you, Congressman Green.
    We would now like to hear from the distinguished gentleman 
from Georgia, Mr. Deal, for an opening statement.
    Mr. Deal. Thank you Mr. Chairman. I thank you for holding 
this joint hearing, and I would especially like to welcome Dr. 
Gerberding from the CDC in Atlanta and the other distinguished 
panel members. I had the opportunity to hear their testimony 
yesterday in another committee, and I look forward to hearing 
additional evidence.
    I think I am sort of like a lot of people. I didn't want a 
flu shot until I knew I couldn't get one. That wasn't true, 
however, of my 98-year-old mother and my 91-year-old father-in-
law who live with me. They wanted one all along. To have a 
crisis like this come upon us obviously has dramatic effects. 
It is one of those reality tests that I guess Congress has to 
deal with from time to time.
    All of us have identified as you will further identify for 
us that there are several components to trying to find a 
solution. One, and I think the information from the NIH is 
going to be very helpful with regard to the issue of research, 
what do we need to do further in terms of research to provide 
other alternatives? With no pun intended, certainly the egg-
based life virus, we literally found us with all of our eggs in 
two baskets and one of those baskets taken away. That is 
alarming to all of us.
    I think we need to know what can we do to stimulate 
additional entries into the marketplace and that may or may not 
be within the realm of anything you can give us advice about, 
but it is certainly a question that I think Congress must 
wrestle with.
    The other area is one that has already been touched upon in 
opening statements and that is when a crisis of this nature 
emerges, do we need to have greater legislative authority given 
to our Federal agencies, whether it be the CDC or the FDA, in 
terms of controlling the distribution of limited resources in a 
time of crisis? That apparently is legislatively lacking at 
this point. At least it is only of minimal amount of authority 
given and conveyed at the current time. So I would be 
interested in hearing comments on all of those areas as to what 
your thoughts and feelings are on that.
    Thank you, Mr. Chairman. I yield back.
    Chairman Barton. We thank the gentleman from Georgia and 
recognize the gentleman from Kentucky, Mr. Whitfield, for an 
opening statement.
    Mr. Whitfield. Mr. Chairman, thank you very much. All of us 
are very much interested in this hearing on a matter of great 
importance. I don't think that we do anyone any good by trying 
to demonize anybody in this process, either the drug companies 
or FDA, but our goal here is to try to find some answers why 
there are only three vaccine manufacturers of influenza 
vaccine.
    Two, will the new cell culture technology help improve the 
process and maybe encourage more companies to get into the 
process.
    Three, I think we do have to acknowledge the cost of 
lawsuits today. I have been told that many of these companies, 
because of the volatility of lawsuits regarding vaccines, 
cannot obtain insurance for liability and many of them are 
operating without liability insurance.
    So I think there are many interesting questions here. I 
know that all of us look forward to the response of the 
witnesses and trying to come to a solution to this very 
important issue facing the people of the U.S.
    I yield back the balance of my time.
    Chairman Barton. I thank the gentleman. I would ask the 
gentleman from Illinois, Mr. Shimkus, if he wishes to make an 
opening statement.
    Mr. Shimkus. Mr. Chairman, in the interest of time and 
information, I waive.
    Chairman Barton. The gentleman waives. The gentleman from 
Oregon?
    Mr. Walden. Mr. Chairman, just very briefly. I think this 
really boils down to two things: What did the FDA know, when 
did they know it, what did they do about it and what should 
they have done? Second, what is wrong with the current vaccine 
market and what should or can we do in the Congress to fix it?
    That is what I really want to go to, is where were there 
breakdowns, either in the regulatory process or where were 
there breakdowns in the legislative process. We each have 
responsibilities here to fix the problems that exist. I look 
forward to the testimony.
    Thank you.
    Chairman Barton. We recognize the distinguished gentleman 
from Michigan, Mr. Rogers, for an opening statement.
    Mr. Rogers. I yield, Mr. Chairman.
    Chairman Barton. Seeing no other members present, the 
Chair--I am sorry, Congressman Ferguson of the Garden State of 
New Jersey.
    Mr. Ferguson. Mr. Chairman, the Garden State and the 
medicine chest of the world, I might add. I thank you for this 
hearing.
    Chairman Barton. Do you have any extra vaccine?
    Mr. Ferguson. That is what we are going to find out today.
    I appreciate, Mr. Chairman, your calling this hearing. Over 
the past week, committees on the Hill have been holding a 
number of hearings looking into what led us to the point that 
we are at today. I would prefer to look forward to take the 
opportunity today to examine why the vaccine market is so 
prohibitive to producers and subsequently what we can do in the 
future to ensure the American public is protected for flu 
seasons to come.
    I would also like to discuss at some point what the CDC is 
doing to ensure we are protected against a future pandemic. Are 
we stockpiling antivirals for when the next pandemic strikes?
    Vaccines are a difficult and risky product to make. Each 
year the FDA, in consultation with other agencies and 
organizations, reviews the flu virus strains that are prevalent 
and selects the three strains that are most likely to cause 
illness in the United States the following winter. 
Manufacturers then produce a vaccine that includes these three 
different strains which go into making that next year's unique 
flu vaccination.
    The strain that the experts guess will strike varies from 
year-to-year, as does the number of people who will take the 
vaccine, which leads to a difficult guessing game.
    Adding on top of that the myriad of regulations that the 
producers must adhere to and adding on top of that a mountain 
of liability concerns, and you find yourself in the position we 
have today: Only two companies, foreign companies, make flu 
vaccines for the U.S. Market.
    The flu can be anywhere from an annoying to a debilitating 
illness that affects millions of people in the United States 
every year. On average, about 36,000 people a year die from the 
flu and over 200,000 people are hospitalized as a result of the 
flu.
    These numbers highlight the importance of the flu vaccine, 
the role that it can play in protecting high risk individuals, 
particularly seniors and people who have diseases like 
diabetes. But what do we do when we are hit with a flu pandemic 
we are not prepared for? It is vital that we do what is needed 
to have the necessary stockpile of antiviral medications to 
address the needs of a population that becomes sick with the 
flu.
    So I look forward to hearing the thoughts from our panel 
this morning on these and other questions. I thank you again 
for holding this hearing.
    Chairman Barton. We thank the gentleman for that statement 
and apologize for not recognizing him. I simply didn't see you. 
I apologize.
    The Chair would ask unanimous consent that all members not 
present have the requisite number of days to put their 
statements in the record.
    Hearing no objection, so ordered.
    [Additional statements submitted for the record follow:]

Prepared Statement of Hon. Heather Wilson, a Representative in Congress 
                      from the State of New Mexico

    Thank you, Mr. Chairman, for holding this hearing today on the flu 
vaccine shortage. The flu vaccine shortage has had an effect on my 
constituents in New Mexico, just like in every other state.
    New Mexico has historically had a higher proportion of citizens 
getting flu shots than other states. In 2003, 72.4 percent of seniors 
in New Mexico received a flu shot, greater than the national median of 
69.9 percent, according to the Centers for Disease Control and 
Prevention. Sixty-one percent of New Mexicans age 18 to 64 who have 
diabetes received a flu shot last year, while the national median was 
49 percent.
    New Mexicans understand that flu vaccines are an important 
preventative health measure they can take to keep them healthy and save 
them on the costs of getting sick. People in New Mexico want to have 
the option to get a flu vaccine, and they are worried that some who 
want it may not be able to get a flu shot this year.
    Tom Hopkins and his wife are seniors who live in Albuquerque. They 
waited in line for 3 hours before receiving their flu shots. Five-
thousand seniors braved long lines to receive free flu shots at a two-
day senior's expo in Albuquerque in October.
    These instances are just a symptom of a larger problem--an unstable 
flu vaccine market with too few companies participating. While there 
were five flu vaccine manufacturers in 1994, there are only two today. 
It is our responsibility to ask why.
    I believe we should focus on what we can do in the future to 
attract more manufacturers and prevent this from happening again. I 
look forward to hearing the testimony of the witnesses here today and 
hope it will help us in determining what Congress can do to improve the 
situation. It's an effort I believe Congress should and will address 
next year.
    Thank you Mr. Chairman.
                                 ______
                                 
 Prepared Statement of Hon. Bart Gordon, a Representative in Congress 
                      from the State of Tennessee

    Mr. Chairman, thank you for holding this important hearing. The 
shortage of flu vaccine this year highlights glaring problems with the 
vaccine industry. This is not a new problem. There have been flu 
shortages in 2000, 2003 and now 2004. We've seen similar shortages and 
distribution problems in recent years with vaccines for preventable 
childhood diseases including polio, whooping cough, and tetanus. This 
raises the question how prepared are we to combat a bio-terrorism 
threat if our public health system is ill-equipped to deal with the 
flu?
    In 2002, I cosponsored legislation to establish a National Vaccine 
Authority, which would identify and ensure accountability for delays in 
vaccine production, supervise vaccine distribution and develop an 
emergency response and contingency plan to deal with shortages. I am 
encouraged that the committee is interested in developing bipartisan 
legislation to prevent future vaccine shortages. I look forward to 
working with my colleagues to ensure this legislation is not limited to 
the flu vaccine but looks at the entire vaccine production and 
distribution system, including childhood vaccines.
                                 ______
                                 
 Prepared Statement of Hon. Eliot Engel, a Representative in Congress 
                       from the State of New York

    Mr. Chairman, I want to thank you for holding this hearing. I have 
been concerned about the flu vaccine industry for many years now. It is 
the forth year of the new millennium--and we have had flu vaccine 
problems for three of these four years. Obviously, this is a health 
care system in need of doctoring itself.
    The health toll on the American people due to the flu is terrible. 
Influenza can be very dangerous for people with heart, kidney, and lung 
conditions, including asthma. Young children and people over 65 are 
most at risk of flu becoming more serious, leading to hospitalizations 
and death. Influenza and pneumonia are the seventh leading cause of 
death among all Americans, resulting in over 62,000 deaths in 2001. The 
flu vaccine minimizes the dangerous consequences of influenza including 
pneumonia.
    The annual cost to the U.S. economy is staggering. I have here an 
article from the CNN/Money website that states the annual cost is $13 
to $15 billion per year. And, due to this year's shortage could rise 
about $20 billion. I ask unanimous consent that the article be made 
part of the record.
    I believe that there is a general consensus that the economics of 
the industry are not very encouraging for manufacturers. Each year 
companies produce millions of doses that are eventually destroyed--this 
is one reason Wyeth, a company with a manufacturing plant in my 
district, got out of the vaccine production industry.
    To me, it is obvious that the federal government can and should 
step in and have a positive role to play. I am a cosponsor of HR 3758, 
the Flu Protection Act of 2004, that would have the federal government 
contract with vaccine manufacturers to ensure adequate supply and that 
the shots are available throughout the flu season. It would also put 
federal funds into research for alternative vaccines with a faster 
production time. The cost to the federal government will be minimal in 
comparison to the cost of future hits to our economy.
    My only regret is that the 108th Congress is to end so soon. I hope 
that when the 109th Congress convenes that we make this our first 
legislative priority. The Congress must move swiftly to ensure that we 
do not face millions of Americans who once again cannot get a flu shot.
    I thank the Chair and yield back.
                                 ______
                                 
                       Flu season could cost $20B
   report: lack of vaccine could limit shots for employees; cost to 
                   employers could be up nearly 50%.
                     October 18, 2004: 7:41 AM EDT

    NEW YORK (CNN/Money)--A flu season made worse by a shortage of flu 
vaccine could cost the U.S. economy about $20 billion in health care 
costs and employee absences, according to a published report Monday.
    The Wall Street Journal quotes David Cutler, a professor of 
economics at Harvard University, as saying the $20 billion estimate is 
up from the $13 billion to $15 billion in direct and indirect costs of 
a typical flu season. That would represent a rise in costs of between 
33 to nearly 50 percent.
    The U.S. is facing a shortage of flu vaccine after Chiron Com. 
(Research), which the U.S. government had counted on for about half the 
nation's supply, had its entire stock of the vaccine pulled because of 
problems discovered by British health authorities inspecting the 
Liverpool, England, plant that makes the vaccine.
    U.S. public health authorities are urging that only those most at 
risk of health problems from the flu get flu shots this year. But many 
of those in the at-risk population, including the chronically ill, the 
elderly and infants age 2 and younger, are not in the work force.
    Thus, many of those in the work force who normally get a flu shot 
will go into this year's flu season without their normal vaccine.
    The Journal reports a recent study by ComPsych Corp., a Chicago 
human resources service firm, found 40 percent of people who don't get 
shots miss some time at work because of the flu, compared with less 
than 20 percent of people who receive flu shots.
    ``If we have a normal flu season and there are no shots available 
we're going to have a significant number of people miss work,'' 
CompPsych CEO Richard Chaifetz told the paper.
    The paper reports that about 60 percent of employers had planned to 
offer flu vaccinations to their employees this year in an effort to cut 
illness and absenteeism among their work force. But the paper reported 
nearly all of those company programs are being put on hold or scrapped 
due to the vaccine shortage and the focus on using available vaccine on 
high-risk individuals.
    Companies will focus on education and such measures as hand-
sanitizer units instead of vaccine to do what they can to combat this 
flu season, the Journal said.
                                 ______
                                 
   Prepared Statement of Hon. Edward J. Markey, a Representative in 
                Congress from the State of Massachusetts

    Mr. Chairman, thank you for holding this important hearing on the 
flu vaccine shortage. Just yesterday, hundreds of seniors in my 
district stood in long lines at the Elks Lodge in Natick to put their 
name on a list for their upcoming flu clinic. In Massachusetts, we are 
hoping that registration programs like this one will help us target our 
scarce resources and ensure that the most vulnerable individuals get 
their flu shots first. But many of my constituents won't be able get 
the flu vaccine this year. They are worried and they want to know how 
the federal government and the pharmaceutical industry have allowed 
such a state of affairs.
    Today we will hear from several witnesses about the problems at the 
Chiron manufacturing plant, and the events which led to the loss of 
half of the U.S. supply of flu vaccine. Today's news reports suggest 
that the FDA may have failed to properly exercise its responsibilities 
to ensure that Chiron's flu vaccine manufacturing facilities met 
appropriate safety and health standards. These reports are profoundly 
disturbing and I hope to learn why, if the FDA knew that Chiron had 
problems in June 2003, the agency they failed to promptly follow up 
with the company and ensure that the problems the FDA staff had 
identified at the plant were immediately corrected.
    I am also concerned that the flu vaccine crisis is indicative of a 
larger problem at the FDA and in the pharmaceutical industry. 
Approximately 36,000 people die and 200,000 people are hospitalized 
every year due to complications from influenza. It is a disease that, 
while variable in its form, its yearly presence is as predictable as 
the changing seasons. Yet despite the ancient and cyclical nature of 
this threat, and despite repeated warnings and recommendations from the 
National Vaccine Advisory Committee, the Institute of Medicine, and the 
Government Accountability Office, the Bush Administration does not have 
a system is in place to protect the American public from the flu and 
the possibility of a flu epidemic. How is it that they allowed a 
problem at a single plant to eliminate half of our yearly supply of 
vaccine without a contingency plan to ensure that the American public 
has access to an adequate supply of flu vaccine? We need answers.
    Ten years ago there were five suppliers of flu vaccine; today the 
US relies on two manufacturers to produce 95% of all our flu vaccine. 
This means that if a problem arises at one of the plants, it can 
significantly disrupt the supply of flu vaccine. Just as you shouldn't 
put all your eggs in one basket, the US should not grow all of its flu 
vaccine eggs at one company. We must find other companies who are 
willing to add to the future supply of the flu vaccine. Therefore, it 
is critical that we learn why companies have left the vaccine business 
and what steps we can take to change that trend.
    The pharmaceutical industry tells us that the high cost of many 
prescription drugs is justified by the expenses associated with 
developing new drugs. But if the private sector has concluded that 
producing new flu vaccines every year is not something they wish to do 
because it is not sufficiently profitable, we must ask just what are 
they using their massive prescription drug profits for? If we cannot 
rely on private sector drug manufacturers to produce the flu vaccine we 
need in the U.S. each year, do we need to rethink the federal 
government's entire relationship with this industry in some very 
fundamental ways?
    Today we are going to focus primarily on how we got here and what 
we can do to get the public through this upcoming flu season. However, 
it is my hope that the conversation will not end here. I look forward 
to further hearings on this subject and working with my colleagues to 
develop a comprehensive solution to the larger problem of guaranteeing 
a stable and adequate supply of vaccine.
    Thank you.

    Chairman Barton. The Chair would also like to announce that 
a number of our Democrat members really, really wanted to come 
to this hearing, but former President Clinton is having the 
opening of his library in Little Rock and they already made 
previous arrangements to attend that ceremony. So their 
statements will obviously be in the record and will be very 
useful in our analysis.
    We want to welcome our first panel. Our first panelist that 
is going to testify is the Acting Commissioner of the Food and 
Drug Administration, the Honorable Dr. Lester M. Crawford. Dr. 
Crawford, your statement is in the record in its entirety. We 
recognize you for 7 minutes to elaborate on it. Welcome to the 
committee.

 STATEMENT OF LESTER M. CRAWFORD, ACTING COMMISSIONER, FOOD AND 
                      DRUG ADMINISTRATION

    Mr. Crawford. Thank you very much.
    As has been said, FDA is responsible for the regulation and 
oversight of vaccines. I want to assure the committee and the 
public who are listening today that FDA takes these concerns 
about vaccine safety and availability very seriously indeed.
    We have many important responsibilities related to vaccine 
safety. Before a vaccine is licensed, FDA monitors the safety 
of investigational vaccines. Later, when a manufacturer submits 
a vaccine license application to FDA, we conduct more extensive 
reviews. If we determine that a vaccine is safe, effective and 
that quality and consistency of manufacture have been 
demonstrated, we will license the vaccine.
    In addition to a scientific review, we also inspect the 
manufacturing facilities every 2 years at a minimum.
    Influenza vaccine is unique in that its active ingredients 
change almost every year. As you can imagine, this presents 
special manufacturing challenges. We began working with 
manufacturers at the earliest stages of vaccine development and 
continue to assist them further by conducting tests that assure 
the safety and efficacy of the vaccine.
    Because of the complexity of the manufacturing process, 
FDA's Center for Biologics Evaluation and Research, or CBER, 
performs lot release on each lot of influenza vaccine 
manufactured prior to distribution of the product.
    There has been a very significant increase in production 
over the past decade compared to approximately 20 million doses 
per year that were distributed in the mid-1980's. However, with 
the increasing volume of doses needed each year and the decline 
in the number of influenza vaccine manufacturers, we have a 
very fragile infrastructure in the influenza market.
    For the 2004-2005 flu season, only three manufacturers 
began production of influenza virus vaccine. Chiron Corporation 
and Aventis-Pasteur produced inactivated influenza vaccines. 
MedImmune Corporation manufacturers FluMist, a live influenza 
vaccine.
    On the morning of October 5, 2004, the British Medicines 
and Healthcare Products Regulatory Agency, or MHRA, announced a 
3-month suspension of Chiron's license to manufacture influenza 
vaccine. FDA immediately dispatched a senior team of scientists 
to the United Kingdom to meet with company officials and MHRA 
and to inspect Chiron's Liverpool manufacturing facility.
    On October 15, 2004, after completing the inspection, FDA 
determined that it could not adequately assure that Chiron's 
vaccine met our safety standards. As a result, Chiron will not 
supply any influenza vaccine to the U.S. market for this 
season.
    In coordination with others at the Department of Health and 
Human Services, we have actively explored all viable options to 
secure additional dosages of flu vaccine to provide more 
Americans protection against the flu. As a result of these 
efforts, we have been able to increase the available supply of 
flu vaccines for the U.S. population to 61 million doses for 
this season. Coupled with that initiative, we have been 
contacting manufacturers worldwide in an effort to identify 
increased supplies of antiviral medications that will provide 
further protection and treatment for Americans during this flu 
season.
    Aventis-Pasteur believes that they have the capability of 
producing the same or more doses of influenza vaccine for the 
2005-2006 season. In addition, MedImmune has indicated that it 
has the capability to produce 10 million doses of FluMist for 
the 2005-2006 season, as much as 40 million doses by 2007. We 
will continue to work to help Chiron address as quickly as 
possible the manufacturing problems they experienced during 
this year's production process. In addition, FDA has been 
encouraging foreign license manufacturers to apply for U.S. 
licensure and we are providing clear pathways to efficiently 
reach this goal.
    Looking to the future, we must move science forward to help 
create more efficient ways to produce flu vaccine so we have 
greater flexibility to deal with shortages or unexpected 
problems. In each of the past two budgets, the Department has 
requested $100 million to shift vaccine development to new cell 
culture technologies as well as to provide for year-round 
availability for egg-based vaccines. We urge Congress to fully 
fund this $100 million request.
    To help manufacturers overcome challenges in vaccine 
development, FDA has been investing its energy and resources in 
important initiatives such as the current good manufacturing 
practices for the 21st Century Initiative, also known as the 
CGNP Initiative. Under this initiative, FDA is working with 
industry to encourage the use of advanced technologies as well 
as quality systems and risk-based approaches that build quality 
into the manufacturing process and avoid the problems such as 
those Chiron experienced.
    Once again, thank you for the opportunity. I look forward 
to the remainder of the hearing.
    [The prepared statement of Lester M. Crawford follows:]

Prepared Statement of Lester M. Crawford, Acting Commissioner, Food and 
   Drug Administration, U.S. Department of Health and Human Services

                              INTRODUCTION

    Mr. Chairman and members of the Committee, I am Dr. Lester M. 
Crawford, D.V.M., Ph.D., Acting Commissioner of the Food and Drug 
Administration (FDA or the Agency). As you know, the FDA is responsible 
for the regulation and oversight of vaccines in the United States. I 
want to assure the Committee, and the public who are here today, that 
FDA takes their concerns about vaccine safety and availability very 
seriously. I welcome this opportunity to describe FDA's ongoing efforts 
to ensure the safety, effectiveness, and availability of influenza and 
other vaccines licensed in the U.S.

                             VACCINE SAFETY

    Vaccines have contributed greatly to the health and well being of 
the people of our nation; however, we must nonetheless be vigilant of 
any potential safety concern related to vaccines. I will briefly 
describe some of FDA's vaccine safety activities. In the pre-licensure 
phase, FDA monitors the safety of investigational vaccines as they are 
studied in clinical trials conducted under investigational new drug 
applications. When a manufacturer submits a license application to FDA, 
we review extensive information describing the manufacture and 
characterization of the vaccine, the safety and efficacy data from the 
clinical trials, and we typically inspect the manufacturing facility 
where the vaccine will be made. In addition, we usually seek advice 
from our Vaccines and Related Biological Products Advisory Committee on 
the safety and effectiveness of vaccine candidates. If we determine 
that a vaccine is safe, effective, and that quality and consistency of 
manufacture have been demonstrated, we will license the vaccine.
    Post-licensure, we typically review the manufacturer's test results 
before the manufacturer can release new lots of vaccine to the market. 
We also inspect the manufacturing facilities every two years. In 
addition, FDA's Center for Biologics Evaluation and Research (CBER) and 
the Centers for Disease Control and Prevention (CDC) jointly manage the 
Vaccine Adverse Event Reporting System (VAERS), a cooperative program 
for vaccine safety. VAERS is a post-marketing safety surveillance 
program, collecting information about adverse events (side effects) 
that occur after the administration of U.S. licensed vaccines. Reports 
to the VAERS program are welcome from all concerned individuals: 
patients, parents, health care providers, pharmacists, and vaccine 
manufacturers. We review these reports on an ongoing basis and obtain 
additional information as needed.

                           INFLUENZA VACCINES

    To increase our control of this very important disease, efforts are 
ongoing to increase the availability of influenza vaccine and increase 
coverage, especially of those individuals at increased risk of 
complications from influenza. Influenza vaccine is unique among 
vaccines in that its active ingredients change almost every year and 
thus presents new manufacturing challenges on an annual basis. 
Influenza viruses are continuously evolving or mutating, and the 
recommendations of which viruses to include in the vaccine each year 
are based on the surveillance data provided from laboratories 
worldwide. Early each year, public health experts evaluate the data to 
determine the strains of virus to be used in the manufacture of the 
influenza virus vaccine that will be administered in the fall. 
Currently, licensed vaccines contain three virus strains representing 
the strains predicted to be in U.S. circulation, as recommended by the 
U.S. Public Health Service (PHS) [including FDA, CDC, National 
Institutes of Health (NIH), and National Vaccine Program] for 
incorporation into the vaccine for 2004-2005. Because of the necessity 
to have a vaccine that matches the virus strains currently in 
circulation, vaccines manufactured for the previous year cannot be 
used.
    FDA works closely to facilitate the rapid production of influenza 
vaccine each year. As soon as the strains are recommended, 
manufacturers begin to grow the virus strains in fertile hen's eggs. 
These strains of vaccine, known as ``seed strains,'' used by each 
manufacturer are tested by FDA's CBER to assure they are the same as 
the recommended strains. FDA and manufacturers conduct tests to assure 
the safety and efficacy of the vaccine. Manufacturers submit the 
results of their testing along with sample vials from each lot to CBER 
for our ``lot release.'' Because of the complexity of the manufacturing 
process, CBER performs ``lot release'' on each lot of influenza vaccine 
manufactured prior to distribution of the product. ``Lot release'' 
consists of CBER's review of the manufacturers' test results, including 
tests on the lots of monovalent virus strains. Furthermore, to assure 
the safety and efficacy of these products, CBER performs additional 
testing as appropriate.
    Although the manufacturing process and lot release is completed for 
some lots of influenza vaccine as early as July, the manufacturing of 
additional lots continues until September-October in order to 
manufacture and complete the testing on a very large number of vaccine 
doses. There has been a very significant increase in production over 
the past decade, as compared with approximately 20 million doses per 
year distributed in the mid-1980s. Because of the fragile 
infrastructure and decision of manufacturers to leave the market, the 
burden of production capacity and supply of influenza vaccine rested 
with thee manufacturers for the 2004-05 flu season. Chiron Corporation 
(Evans Vaccines Ltd.) manufactures Fluvirin, and Aventis Pasteur, Inc. 
manufactures Fluzone; both of these vaccines are inactivated influenza 
vaccines. MedImmune, Inc. manufactures FluMist, a live attenuated 
influenza vaccine.

                           2004-05 FLU SEASON

    The loss of Chiron influenza vaccine supply remains a challenge. As 
you know, we are working hard to assure the safety and health of 
Americans as the flu season approaches. In coordination with other 
elements of the Department of Health and Human Services (HHS or the 
Department), we have been actively exploring all viable options to 
secure additional dosages of flu vaccine licensed for use in the U.S. 
that will provide more Americans protection against the flu. As a 
result of these efforts, I can report that we have been able to 
increase the available supply of flu vaccines for the U.S. population 
to 61 million doses for this flu season.
    Coupled with that initiative, we have been contacting manufacturers 
worldwide in an effort to identify increased supplies of antiviral 
medications that will provide further protection and treatment for 
Americans during this flu season and are making progress in this area 
as well. In addition, we have already been working with our partners in 
the United Kingdom as well as with Chiron Corporation to complete our 
review of the problems encountered at their production facility in 
order to expeditiously determine what steps would be required to bring 
that facility into compliance.
    As a matter of enforcement policy, FDA inspects U.S. licensed 
vaccine manufacturing facilities every two years. Based on this 
schedule, FDA inspected the Liverpool, U.K. facility where the Chiron 
vaccine is produced in 1999, 2001, and 2003. It should be noted that 
Chiron acquired the facility in July 2003 after FDA conducted the 
biennial inspection. During the 1999 inspection, FDA identified various 
concerns and, as a result, issued a warning letter regarding the 
Liverpool facility. The most significant issues identified in 1999 
inspection were the lack of validation for its manufacturing processes, 
including establishing proper limits for bioburden (including bacteria) 
and issues related to assuring sterility in the manufacturing process. 
During the 2001 and 2003 inspections, although FDA found that the 
company made improvements, we also made observations related to current 
Good Manufacturing Practices (cGMPs). In each case, FDA reviewed the 
corrective measures and plans in response to these deficiencies. If 
fully implemented, the company's plans appeared adequate to correct 
deficiencies identified at the facility.
    It is important to understand that, from the start of the 
manufacturing cycle, influenza vaccine manufacturing is not a sterile 
process because it involves the use of eggs, which are not sterile. 
Therefore, a certain amount of bioburden will be present in early 
stages of manufacturing. However, vaccine manufacturers must have 
effective measures, such as sterile filtration, to eliminate this 
bioburden. As a further safeguard, FDA requires a lot release and 
testing system for vaccines. This is a vital component of the multi-
step safety assurance process for vaccines. It is also important to 
understand that new flu vaccine is formulated and produced for each flu 
season, so that concerns identified with vaccine from the prior year's 
supply do not necessarily relate to the current year's vaccine supply.

             FDA'S 2004 COMMUNICATIONS WITH CHIRON AND MHRA

    On August 25, 2004, Chiron informed FDA that the company had 
discovered bacterial contamination in eight lots of final vaccine 
product for this year's flu season supply and advised that they were 
investigating the problem. They shared with FDA an overview of their 
planned investigation to determine root causes of the problem as well 
as their plan to retest all other lots produced. Chiron quarantined all 
influenza vaccine lots during its investigation, including those that 
had passed all required testing, and did not release any of the 
product.
    In September 2004, FDA, CDC and Chiron scheduled weekly conference 
calls to discuss the status of the firm's investigation. Chiron stated 
to FDA that the company had identified the cause of the contamination 
and that the contamination was confined to the identified vaccine lots. 
The company indicated to FDA that it believed the cause of 
contamination in these lots could be traced back to one of two 
contaminated bulk lots used to formulate these final lots. Nonetheless, 
FDA concurred with the need for Chiron to thoroughly retest all final 
lots, complete a thorough investigation of the manufacturing process 
and provide a complete investigation report to FDA. While the 
investigation was ongoing, Chiron informed FDA that results of the 
retesting were negative and that the company would submit its final 
investigative report to FDA during the week of October 4-8.
    In late September, Chiron advised that it would substantially meet 
its plans to supply influenza vaccine to the U.S. On September 28, 
Chiron's CEO affirmed this in testimony to the Senate Special Committee 
on Aging when he stated: ``As of September 27th, it remains Chiron's 
expectation that between 46 million and 48 million Fluvirin doses will 
be delivered to the U.S. market beginning in early October as compared 
to the 50 million doses projected in July.''

                  MHRA'S OCTOBER 5, 2004 ANNOUNCEMENT

    On the morning of October 5, 2004, MHRA announced a three-month 
suspension of Chiron's license to manufacture influenza vaccine. FDA 
had no prior knowledge of the MHRA's intention to suspend the firm's 
U.K. license. MHRA's Chief Executive, Professor Kent Woods, indicated 
that MHRA did not have the legal authority to notify FDA about the 
suspension announced on October 5 until after MHRA instituted its 
administrative action. Dr. Woods has also stated that, ``Contrary to 
some reported statements, MHRA, as the responsible regulatory authority 
in the United Kingdom, made the decision to suspend Chiron's license 
after an internal meeting on October 4 and first informed the company 
and the FDA of this decision on October 5. At the same time, we 
informed other drug regulatory authorities via an intergovernmental 
rapid information alert.''
    Upon learning of the MHRA's suspension on October 5, 2004, FDA 
communicated with both Chiron and the MHRA. While Chiron indicated to 
FDA that it believed it had satisfactorily addressed MHRA's 
inspectional findings and provided to FDA a copy of those findings and 
the company's response, MHRA expressed serious concerns about Chiron's 
vaccine stocks and the company's ability to assure the safety of the 
vaccine.

                  FDA OFFICIALS DISPATCHED TO THE U.K.

    FDA dispatched a senior team of scientists, led by Dr. Jesse 
Goodman, the Director of FDA's CBER, to the U.K. on Wednesday, October 
6, 2004, to gain further understanding of the MHRA's action. The team 
met with the MHRA on October 7, and met with Chiron on October 8.
    FDA inspected Chiron's Liverpool manufacturing facility from 
October 10 through October--15, to evaluate the company's efforts to 
test for and assess the bacterial contamination detected in nine of the 
one hundred final vial lots of its influenza vaccine. FDA also 
evaluated Chiron's determination that the risk of bacterial 
contamination was confined to specific lots.
    On October 15, 2004, upon completion of its inspection, FDA 
determined that it could not adequately assure that Chiron's vaccine 
met our safety standards. On October 15, we also provided Chiron with 
our inspectional observations (Form FDA 483) from our inspection and 
met with the company to discuss its compliance issues. FDA will 
continue to work with Chiron and the U.K. government to ensure that the 
company corrects the deficiencies in the Liverpool plant so that it can 
eventually resume production of a safe and effective influenza vaccine. 
In the wake of the October 2004 inspection, FDA will work closely with 
MHRA and Chiron to assess any proposed corrective measures that the 
company submits in response to the October inspection and the company's 
findings of contamination in final lots. FDA will analyze Chiron's 
responses for their thoroughness, accuracy, and their adequacy. 
Ultimately, however, the agency's final determination regarding the 
effectiveness of Chiron's corrective measures will be based on a 
comprehensive inspection that we anticipate will occur once the company 
has notified the agency in February or March 2005 of the proposed 
corrective measure.

               FDA'S RESPONSE TO THE FLU VACCINE SHORTAGE

    Assuring the safety and effectiveness of vaccines is central to 
FDA's mission. Our goal is to assist the health care community as they 
work to provide protection to more Americans against the flu. To assist 
in these efforts, both Aventis Pasteur and MedImmune have indicated to 
FDA that they will provide additional doses of influenza vaccine. As a 
result, we have increased the available supply of licensed flu vaccine 
for the U.S. population to 61 million doses for this flu season, 
Aventis Pasteur will produce a total of 58 million doses of Fluzone and 
MedImmune has scaled up production to produce a total of 3 million 
doses of FluMist. FluMist is recommended for healthy individuals 5 to 
49 years of age, and therefore, provides an option for those who would 
not receive vaccine under CDC's priority guidelines as well as for 
certain categories within the CDC guidelines.
    In addition to supplies of vaccine approved for use in the U.S., we 
have also identified about five million doses of influenza vaccine from 
foreign manufacturers that could potentially be available under 
investigational new drug applications (INDs). We have sent FDA 
inspectors to the manufacturing facilities of GlaxoSmithKline (GSK) in 
Germany and ID Biomedical in Canada to evaluate their manufacturing 
processes. These efforts could result in as much as 4 million doses 
from GSK and up to 1 million doses from ID Biomedical. Finally, in an 
effort to expand further the supply of vaccine to those with the 
greatest need, Secretary Thompson recently announced that military 
personnel will maximize the use of FluMist and Defense agencies will 
allow HHS to purchase 200,000 doses of injectable vaccine for which 
they had originally contracted so that we can make it available to the 
high-risk population in the U.S.
    We have also been contacting manufacturers worldwide in an effort 
to identify increased supplies of antiviral medications. Antiviral 
medications are drugs that are approved to reduce symptoms and in some 
cases prevent onset of influenza if taken early after exposure has 
occurred. These drugs will help protect and treat for Americans during 
this flu season, and we are making progress in this area as well. There 
are enough antiviral medicines to treat influenza in 40 million 
Americans, if necessary.
    To address the complications of those who experience the flu, Merck 
& Company plans to triple its production of pneumococcal polysaccharide 
vaccine from 6 million to between 17 and 18 million doses. Pneumococcal 
pneumonia is one of the most important and common serious complications 
of influenza, and the availability of this expanded supply during the 
current flu season will allow public health officials to lessen the 
possibility of this complication.

                       PREPARATIONS FOR NEXT YEAR

    Aventis Pasteur believes they have the capability of producing the 
same or more doses of influenza vaccine for the 2005-06 flu season. In 
addition, MedImmune has indicated that it has the capability to produce 
10 million doses of FluMist for the 2005-06 flu season and as much as 
40 million doses by 2007.
    We will continue to work with Chiron Corporation, in close 
collaboration with the UK regulatory authorities, to help Chiron 
address, as quickly as possible, the manufacturing problems they 
experienced during this year's production process. To this end, we have 
reached agreements with Chiron that allows for full sharing of 
information between the FDA and the MHRA as the company works to 
resolve the problems in Liverpool. In addition, FDA has also been 
encouraging foreign licensed manufacturers to apply for U.S. licensure, 
and is providing clear pathways to efficiently reach this goal.

                         LOOKING TO THE FUTURE

    Immediately upon coming to HHS, Secretary Thompson under the 
leadership of President Bush began transforming the flu marketplace by 
investing in new technologies, securing more vaccines and medicines, 
and preparing stronger response plans. The largest investments ever 
made by the federal government in protecting against the flu have been 
made under President Bush's leadership.
    In keeping with these unprecedented investments, we must move 
science forward to help create more efficient ways to produce flu 
vaccine so we have greater flexibility to deal with shortages or 
unexpected problems. In each of the past two budgets, the Department 
has requested $100 million to shift vaccine development to new cell-
culture technologies, as well as to provide for year-round availability 
of eggs for egg-based vaccine. We received $50 million in the FY04 
budget for this activity and urge Congress to fully fund the $100 
million request in FY05 budget.
    To help manufacturers overcome challenges such as the vaccine 
development problems Chiron is experiencing, FDA has been investing its 
energy and resources in important initiatives such as the Current Good 
Manufacturing Practices for the 21st Century (known as the cGMP 
initiative).
    Under the cGMP initiative, FDA is working with industry to 
encourage the use of advanced technologies as well as quality systems 
and risk-based approaches that build quality into the manufacturing 
process. FDA is also using the same quality systems and risk-based 
approaches to modernize our manufacturing regulatory responsibilities. 
For example, we are providing advanced training for manufacturing 
investigators. This has led to greater inspection consistency and the 
ability to more readily identify manufacturing deficiencies. The cGMP 
initiative is also promoting better communication between manufacturers 
and the agency, which will enable manufacturers to anticipate and 
overcome production problems before they occur. Among the lessons we 
have learned from this year's events at Chiron is the need to enhance 
our international regulatory collaboration and harmonization efforts.
    In the past year, we completed information sharing agreements with 
the European Medicines Agency, Health Canada, and SwissMedic, and most 
recently MHRA, to help assure that legal barriers do not inhibit 
critical communication between these agencies and FDA. FDA is 
undertaking an inventory of foreign manufacturing of U.S.-licensed 
products, such as flu vaccine, that are critical to public health, and 
will put into place information sharing agreements with other national 
regulatory authorities as needed. In addition, we recognize that public 
health needs and resources are increasingly global in nature and, in 
the hope that vaccines can be licensed in multiple regions of the 
world, FDA has been encouraging more internationally harmonized product 
development.
    Recent events have highlighted how imperative it is that we support 
the U.S. and global vaccine manufacturing infrastructures and invest in 
more efficient, reliable and modern methods for producing influenza 
vaccine. With adequate supply and inoculation, influenza is manageable 
and we will be more likely to successfully face the challenge of future 
pandemics.
    Once again, thank you for the opportunity to come here today and 
testify on this very important issue.
    I would be happy to respond to any questions that members of the 
Committee may have for me.

    Mr. Bilirakis [presiding]. Thank you very much.
    Dr. Fauci, please proceed.

 STATEMENT OF ANTHONY S. FAUCI, DIRECTOR, NATIONAL INSTITUTE OF 
 ALLERGY AND INFECTIOUS DISEASES, NATIONAL INSTITUTES OF HEALTH

    Mr. Fauci. Thank you for giving me the opportunity to speak 
with you for a few minutes on the NIH research component of the 
departmental effort to address the many challenges that we face 
each year with flu and even in the eventuality of a possible 
pandemic flu, which is a serious issue we need to be looking at 
in the future, and I will address that in some of my comments.
    Let me talk a little bit about the research. The research 
endeavor at the NIH is founded fundamentally on basic research 
with the thought of developing countermeasures against 
influenza, including diagnostics, therapeutics and vaccines. By 
basic research, we mean determining the mechanisms of how the 
virus causes disease, how it changes, how it genetically 
assumes the capability of jumping species, as well as the 
properties that allow it to spread from person to person. In 
addition, we do a bit of surveillance in determining the 
relationship between animal viruses and human viruses, and 
ultimately take all of this and put it in the mix of how we are 
going to develop the vaccines that are the subject of this 
particular hearing.
    If you look at the resources that have been allocated to 
this endeavor, as you can see clearly from this poster, the 
amount of resources that have gone into influenza over the past 
few years under the leadership of Secretary Thompson has been 
tripled from 2001 to 2005, from $20 million to over $65 
million, as shown here.
    With regard to the precise nature of the research, there 
are several things that have been done to facilitate the 
vaccine enterprise and to partner with industry to provide the 
scientific base for the kinds of things that they will need to 
do to continue to meet challenges. One of these in particular 
is the issue of reverse genetics. You may have heard of that. 
Let me explain what that is.
    Reverse genetics creates a degree of consistency and 
predictability in how you isolate the initial virus that will 
go into your vaccine. Under most circumstances, we take a virus 
that we have worked with for many years, shown here on the 
right. That virus grows very well in egg-based cultures.
    The virus that we want to have in our vaccine, let's take, 
for example, H5N1 that we are working with with pandemic flu, 
we don't know its capability of growing, so what we generally 
do is we grow them together with the thought that they will 
just spontaneously combine to give the properties of the virus 
that we want the vaccine for, but the growth properties of the 
others. This is a chance event.
    With reverse genetics, you deliberately take the relevant 
genes from each of those viruses and insert them together to 
create a hybrid virus that will actually be the virus that will 
be the seed virus that will grow well in cultures. So with 
regard to what we can do in the future, this gives a 
consistency in our ability to isolate the virus and then go on 
and put it in the vaccine hopper.
    We have heard a bit about egg-based cultures. These are 
tried and true and have served us well. But they have little 
surge capacity and there is a risk in them, as we have seen 
what happened with the contamination in the Chiron plant.
    The two major endeavors that the NIH and our colleagues are 
doing to replace or get alternatives for the egg-based culture 
is what we call cell-based culture. This has the capability of 
being much more in your control and the ability to surge up if 
in the middle of the process you need more.
    In addition, the powers of recombinant DNA technology to 
specifically make the antigens in question, all of these will 
push the vaccine field forward. In addition, we need therapy, 
something that isn't often discussed, but it is an important 
compliment to the armamentarium against influenza.
    We have four drugs for treatment of influenza, three of 
which can also be used for prophylaxis or prevention. One of 
the NIH's goals is to keep the pipeline of these drugs robust, 
so that when we get to a situation where perhaps there may be 
the evolution of resistance to these drugs we will have 
alternatives to replace them.
    Finally, how are we addressing the eventuality of a 
pandemic flu? Most of you, I am sure, are aware of the fact 
that we have a problem right now in Asia in that we have had 
several countries, particularly Thailand and Vietnam, in which 
there have been substantial chicken kills caused by avian 
influenza. More importantly, it has jumped species from the 
chicken to the human, and there have been 44 human cases and 32 
deaths, a very high mortality rate. Fortunately, it has not 
acquired the capability of efficiently spreading from person to 
person. There has been only one probable case of person-to-
person transmission.
    So the research enterprise has been working very 
aggressively to try and address this. What we have done so far 
is isolated the H5N1 virus by reverse genetics that I just 
explained to you a moment ago. We have developed pilot lots of 
vaccine that are in the process of being made right now and 
that anywhere from January up to March or April will ultimately 
go into clinical trials to determine both safety and what the 
proper dose is. In addition, we are continuing our screening 
for the development of new therapeutics.
    So, in summary, the research approach to the comprehensive 
departmental approach toward influenza is a component that is 
essential to push the field forward so that we may be able to 
meet the challenges that we are facing right now and that we 
would inevitably face in the future, particularly with a 
pandemic flu.
    Thank you, Mr. Chairman.
    [The prepared statement of Anthony S. Fauci follows:]

Prepared Statement of Anthony S. Fauci, Director, National Institute of 
 Allergy and Infectious Diseases, National Institutes of Health, U.S. 
                Department of Health and Human Services

    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to discuss with you today the role of the National 
Institutes of Health (NIH) in helping to ensure that the nation has a 
reliable supply of safe and effective influenza vaccines.
    Because the influenza viruses in circulation change somewhat from 
season to season, the U.S. supply of influenza vaccine must be renewed 
each year--and often contains flu viruses that are different from those 
used the previous year. The current technology for vaccine manufacture 
requires that key decisions, such as which viruses will be included and 
the number of doses needed, be made many months before the arrival of 
the influenza season. The serious vaccine shortage that has occurred 
this year underscores the difficulties we face in annually renewing the 
influenza vaccine supply, and highlights the pressing need to move 
toward adoption of a variety of vaccine manufacturing techniques that 
include newer technologies that may decrease the risk involved in 
vaccine production as well as improve flexibility and the speed at 
which the vaccines can be made.
    The National Institute of Allergy and Infectious Diseases (NIAID), 
a component of NIH, is the lead agency for the conduct of research on 
all infectious diseases, including influenza. In that capacity, NIAID 
provides the scientific input required to facilitate the development of 
both new influenza vaccine technologies and novel antiviral drugs 
against influenza viruses.
    Under this administration we have made tremendous progress. 
Immediately upon coming to HHS, Secretary Thompson, under the 
leadership of President Bush, began investing in new technologies, 
securing more vaccines and medicines, and preparing stronger response 
plans. Total NIH funding for influenza research has grown more than 
three-fold in recent years, from $20.6 million in FY 2001 to a 
requested $65.9 million (320 percent) in the FY 2005 President's 
Budget. This is part of the largest investment ever made by the federal 
government in protecting against the flu.

                        NIAID INFLUENZA RESEARCH

    NIAID pursues an ambitious basic and applied research agenda on 
influenza, including viral biology, pathogenesis, host immune 
responses, and epidemiology, which underpin our many programs that are 
aimed at developing new and improved influenza countermeasures such as 
vaccines, therapies and diagnostic tools. Because influenza vaccines 
are the primary public health tools available to limit the disease 
burden caused by annual influenza epidemics, vaccine research has a 
very high priority. NIAID also supports several research activities 
specifically focused on identifying and countering any future influenza 
pandemic.

Basic Research
    The development of new and effective influenza countermeasures 
rests on a foundation of basic research. Some basic research focuses on 
specific questions regarding the biology of the virus such as how it 
enters cells, replicates, mutates, evolves into new strains and induces 
an immune response, while other projects can be more broadly applied. 
For example, under a recent NIAID initiative called the Influenza 
Genome Project, NIAID will collaborate with researchers around the 
world to obtain the complete genetic sequence of several thousand human 
and animal influenza viruses. The resulting library of influenza 
sequences, some of which may be derived from samples collected decades 
ago, should add greatly to our understanding of what makes one strain 
more lethal than another, what genetic determinants most affect 
immunogenicity, and how the virus evolves over time. All of this is 
precisely the kind of information that will significantly enhance our 
ability to create more effective countermeasures.

Vaccines
    Because influenza is such a highly transmissible virus, vaccines 
are essential tools for the control of influenza epidemics. The current 
system for the production of U.S. licensed influenza vaccines uses 
fertilized chicken eggs to grow influenza vaccine strains that have 
been selected to match the viruses likely to circulate in the coming 
influenza season. The viral particles are purified from the eggs, 
inactivated, and processed for distribution.
    Although the egg-based technology has served us reasonably well for 
more than 40 years, there are several limitations to the current system 
that include: (1) a lengthy manufacturing process; (2) the need to 
forecast and select the virus strains to be used in the vaccine at 
least six months in advance of the influenza season; and (3) the annual 
need for hundreds of millions of fertilized chicken eggs to manufacture 
the vaccine. The decisions about which viral strains to include in the 
vaccine may not always be correct, but the long lead time required to 
acquire eggs for vaccine production makes mid-course corrective action 
virtually impossible. Additional limitations include the fact that some 
people are allergic to eggs and therefore cannot receive the classic 
vaccine. In addition, some influenza viruses do not grow well in 
chicken eggs and may in fact be virulent for the eggs, a circumstance 
that may result in delays bringing a vaccine to market and a possible 
decrease in the total number of doses available.
    In each of the last two budgets, HHS has asked for $100 million to 
shift vaccine development from the cumbersome egg-based production to 
new cell-culture technologies, as well as to provide for year-round 
availability of eggs to provide for a secure supply and surge capacity. 
These new technologies will help produce flu vaccine more efficiently 
and provide more adaptability to unexpected problems or losses in 
production.
    NIAID supports several research projects and other initiatives 
intended to foster the development of new influenza vaccines and 
manufacturing methods that are simpler, more reliable, yield more 
broadly cross-protective products, and provide more protection than 
those currently in use. For example, a technique developed by NIAID-
supported scientists called reverse genetics allows scientists to 
manipulate the genomes of influenza viruses and to transfer genes 
between viral strains. The technique allows the rapid generation of 
seed viruses for vaccine candidates that exactly match the anticipated 
epidemic strain. By removing or modifying certain virulence genes, 
reverse genetics also can be used to convert highly pathogenic 
influenza viruses into vaccine candidates that are safer for vaccine 
manufacturers to handle.
    To encourage participation by the pharmaceutical industry, NIAID 
supports Challenge Grants to fund the development of new influenza 
vaccine technologies. One approach under active development is the use 
of cell cultures to grow vaccine strains, rather than eggs. Another 
approach is to genetically engineer baculovirus, an insect virus not 
related to influenza, to express a gene that encodes an influenza coat 
protein such as hemagglutinin or neuraminidase. The engineered 
baculovirus is then grown in insect cell cultures, and the influenza 
protein that the virus produces is purified for use as a ``recombinant 
subunit'' influenza vaccine. A recent NIAID-supported Phase II clinical 
trial of a vaccine produced by Protein Sciences Corporation using this 
strategy showed that it is well tolerated and immunogenic; the company 
is conducting further clinical evaluation of this product. Other new 
pathways for producing influenza vaccines include DNA-based approaches 
and the development of broadly protective vaccines based on influenza 
virus proteins that are shared by multiple strains.
    NIAID has been very successful in the past with ground-breaking 
vaccine research, including scientific advances that led to the 
development of hepatitis B, Haemophilus influenzae b, pneumococcal 
pneumonia, acellular pertussis, and live-attenuated intranasal 
influenza vaccines. I am confident that the approaches that we are 
currently pursuing with influenza will lead to a next-generation 
vaccine that improves upon the current egg-based technology.
    In addition to developing influenza vaccine candidates, NIAID has 
developed an extensive capacity for clinically evaluating these 
products. For example, NIAID's Vaccine and Treatment Evaluation Units 
(VTEUs) comprise a network of university research hospitals across the 
United States that conduct clinical trials to test candidate vaccines 
for infectious diseases. These units can be accessed by both academic 
and industrial vaccine developers to evaluate the safety, 
immunogenicity, and ultimately, the efficacy of candidate vaccines.

Therapeutics
    Antiviral medications are an important counterpart to vaccines, 
both to treat infection after it occurs and to prevent illness after 
exposure; four drugs are currently available for the treatment of 
influenza, three of which are also licensed for prevention. NIAID 
actively supports identification of new anti-influenza drugs through 
the screening of new drug candidates in both cell culture and in 
animals. In the past year, seven promising candidates have been 
identified. Efforts to design drugs that precisely target viral 
proteins and inhibit their functions also are under way. In addition, 
NIAID is developing novel broad-spectrum therapeutics against many 
influenza virus strains; some of these target viral entry into human 
cells, while others specifically attack and degrade the viral genome.

                           PANDEMIC INFLUENZA

    Although the impact of influenza on morbidity and mortality in a 
normal epidemic year is substantial, much more serious influenza 
pandemics also can occur. As influenza viruses spread, they 
continuously evolve and accumulate small changes in their outer coat 
proteins, a process called ``antigenic drift.'' This occurrence allows 
the virus to at least partially escape the human immune responses 
primed by vaccination or exposure to earlier versions of circulating 
influenza viruses. Influenza viruses can also jump species directly 
from certain animals such as chickens to human as well as swap genes 
with influenza viruses that infect birds, chickens, pigs, or other 
animals; the latter process is referred to as ``reassortment.'' When 
such reassortment events occur, the result is the replacement of one or 
more of the outer coat proteins of the human virus with that of the 
animal virus, or an ``antigenic shift.'' If the virus that has jumped 
species or the new reassorted virus evolves to be efficiently 
transmitted between people, a deadly influenza pandemic can result. As 
the population acquires immunity to the new strain over the next 
several years, the pandemic strain fades into the routine background of 
circulating viruses.
    Three influenza pandemics occurred in the 20th century, in 1918, 
1957, and 1968. The pandemic that occurred in 1918-1919 was the most 
severe, killing 20-40 million people worldwide, including more than 
half a million individuals in the United States. The pandemics that 
began in 1957 and 1968 killed approximately 2 million and 700,000 
people worldwide, respectively.
    One of the first internal committees Secretary Thompson created 
when he came to HHS was on pandemic flu. And last August, the Secretary 
unveiled the Department's draft Pandemic Influenza Response and 
Preparedness Plan. This plan outlines a coordinated national strategy 
to prepare for and respond to an influenza pandemic.
    NIAID conducts research to understand the viral biology and 
epidemiology that underpinned past pandemics, and funds an extensive 
surveillance network in Asia to detect the emergence of influenza 
viruses with pandemic potential. In addition, the draft U.S. Pandemic 
Influenza Preparedness and Response Plan describes specific roles for 
NIAID should a pandemic occur. Foremost among these is to help develop 
and produce an effective vaccine as rapidly as possible. Specifically, 
NIAID will help to characterize the newly emerging influenza strain, 
isolate candidate vaccine seed viruses, develop investigational batches 
of candidate vaccines, and produce and distribute research reagents for 
use by vaccine researchers in academic and pharmaceutical industry 
laboratories. NIAID will also work with industry to produce and 
clinically test pandemic influenza vaccines at different doses and in 
different populations in our vaccine clinical trials sites, and will 
coordinate closely with CDC, FDA, and WHO to provide a safe and 
effective vaccine to the public as quickly as possible.
    In recent years, several avian influenza virus strains that can 
infect humans have emerged. In 1999 and 2003, an H9N2 influenza strain 
caused illness in three people in Hong Kong. The H5N1 ``bird flu'' 
virus, first detected in humans in 1997, infected at least 44 people 
and killed 32 in 2004, and has spread widely among wild and domestic 
birds. There has been at least one documented case of human to human 
spread of an H5N1 virus. NIAID already has taken several steps to 
develop vaccines against both of these potential pandemic strains. To 
address the H9N2 threat, NIAID contracted with Chiron Corporation to 
produce investigational batches of an inactivated vaccine, which will 
be evaluated clinically by NIAID early next year. For H5N1, Aventis-
Pasteur, Inc. and Chiron are both producing investigational lots of 
inactivated H5N1 vaccine preparations; additionally, DHHS has 
contracted with Aventis to produce up to 2 million doses to be 
stockpiled for emergency use, if needed, to vaccinate health workers, 
researchers, and, if indicated, the public in affected areas. 
Development and evaluation of a combination antiviral regimen against 
these potential pandemic influenza strains are also now under way.

                               CONCLUSION

    Given the disruption of the influenza vaccine supply that we 
experienced this year, and the inherent difficulties associated with 
the current manufacturing technology, it is clear that we must move 
toward next-generation influenza vaccines with all deliberate speed. 
NIAID's role in influenza vaccine development is to carry out the 
research upon which these new vaccines will be based, and to forge 
productive partnerships with private sector pharmaceutical and 
biotechnology companies to speed development and clinical evaluation of 
promising candidates.
    In closing, Mr. Chairman, I would like to take a moment to remember 
John R. La Montagne, Ph.D., deputy director of NIAID, who died suddenly 
on November 2 while traveling to a meeting of the World Health 
Organization in Mexico City. Throughout his almost 30-year career at 
NIH, John's leadership and commitment to improving global health, 
particularly in the arena of influenza vaccine research, were 
remarkable. His generosity, wit, even-handedness and kindness made him 
a friend to all who knew him. Personally, he was a dear friend and one 
of the finest people I have ever known. He will be sorely missed.
    I would be pleased to answer any questions you may have.

    Mr. Bilirakis. Thank you.
    Dr. Gerberding.

    STATEMENT OF JULIE L. GERBERDING, DIRECTOR, CENTERS FOR 
                 DISEASE CONTROL AND PREVENTION

    Ms. Gerberding. Thank you. I do appreciate the privilege of 
being able to speak before the committee and subcommittees 
today. This is a very important issue for us at CDC, and we do 
have a vision of what we would like to end up with, and that is 
a modern influenza vaccine that is safe, affordable, effective 
and accessible and ideally one that was produced domestically 
from a reliable manufacturing process that would avoid the 
kinds of problems that we have experienced this year.
    It is going to take some time and dollars to modernize that 
vaccine system, and it is going to take an improvement of the 
business climate for the manufacturers so that they have a 
stable market and a fair price and their liability issues are 
addressed. But it is also going to take a public that 
understands the need for a vaccine and a stable demand for that 
vaccine so that we can have a marketplace that doesn't have the 
vagaries that the current one does.
    In the past several weeks, we have been working hard to get 
the doses of vaccine that we do have to the people who need it 
the most, and I want to really acknowledge and appreciate some 
health protection heroes in this regard.
    First of all, we at CDC were also sad to see people 
standing in line to receive their vaccine. That was a heart-
wrenching image, and we appreciate those who have been patient 
and persistent in trying to get their vaccine across all of 
your districts this year.
    We also recognize and honor those who stepped aside to 
allow those who needed the vaccine to get it. We also are 
impressed with the incredible public health heroes at the local 
and State level, including the health official from Michigan 
who will be on the panel later this morning, who have 
absolutely risen to the occasion in a way that I have never 
seen our public health system do before. This is truly the 
brightest star. So we are very grateful for the spirit of 
cooperation and altruism that has characterized this particular 
response.
    At CDC, we are working in our Emergency Operations Center; 
I am mentioning this to illustrate that the investments that 
the administration and Congress have made in preparedness for a 
variety of emerging health threats are serving us well during 
influenza. We have several hundred people who are involved in a 
whole range of operational capabilities, but their bottom line 
is, right now, focused on helping to allocate the vaccine that 
we have in the fairest and most equitable way that we can.
    We have for the first time ever developed a stockpile of 
vaccine and antiviral drugs. For the first time ever we have 
invested $50 million at HHS in developing year-round egg 
supply, and we hope to receive a $100 million investment for 
that and some other vaccine modernization efforts this year. 
And all together, CDC has benefited from a twentyfold increase 
in the investment in influenza preparedness over the last 4 
years. So we have made a lot of progress, but as you can see 
from the situation we are in, we have a long way to go.
    On the next graphic I have summarized where we are right 
now. At the current time, flu activity in the United States is 
not widespread. There are many States that still do not have 
flu activity. However, on the next graphic I am making a very 
important point, which is that flu is completely unpredictable. 
It is very early in the season right now. Most commonly flu 
peaks in February, so we are certainly not out of the woods. We 
don't know what severity the season will bring. We don't know 
what strain will ultimately predominate. We don't know yet 
when, where, and for whom flu will hit the hardest. So we still 
have a lot of work to do before we can rest.
    On the next graphic I have also highlighted what is an 
extremely important principle. Yes, vaccine is the most 
important and the most effective way to prevent flu, but there 
are other things that we can do, and we are emphasizing all of 
these through our communication channels, in particular the 
common-sense respiratory hygiene and hand hygiene issues, but 
also staying home when people have flulike illness and not 
sending kids to school is actually very, very important. This 
sort of voluntary isolation really does help prevent the spread 
of flu in communities, and we want to emphasize that.
    And I can't help but remind everyone that today is the 
Great American Smokeout Day, and while we don't usually 
associate tobacco with influenza, people who smoke tobacco are 
at risk for the complications of influenza, and now more than 
ever there is a strong reason to look at the opportunities for 
smoking cessation. So I just had to deliver that message as the 
CDC Director today.
    Let me just mention very briefly some of the activities 
that are going on to assist our State and local health 
officials. Our goal is to have information about where flu is 
and what strain it is, where are the people who need vaccine, 
and where is the vaccine. So we have been using a number of 
traditional CDC methods to do this, including tracking the 
consequences of flu and using the laboratory methodologies to 
know what strains are emerging in communities. On the next 
graphic I have listed a number of brand-new innovative 
strategies that we are using to track these issues this year, 
and for the first time ever we will have information at the 
county level in a very discrete way about people at risk, doses 
of vaccine delivered, and the specific information about flu.
    We are taking advantage of a variety of things, but I want 
to point out just two very important ones. One is the vaccine 
tracking system which is a secure Web-based data base, which 
mwans that for the first time ever, State health officials have 
information about the specific details of where vaccine has 
been shipped in their jurisdictions, so they can use the latest 
information to make decisions about the on-going allocation 
process.
    Since October, 13 million doses of vaccine were reallocated 
to high-priority people across our Nation with the full 
cooperation of Aventis, and over the last several weeks the 
remaining 12 million doses of vaccine have been apportioned to 
the States. State health officials are working in their 
jurisdictions to identify the gaps, the vaccine needs, and how 
they can do the very best job they can to get vaccine to the 
people who need it the most.
    While we are very much focused on this flu season and the 
importance of protecting people's health this year, we have to 
recognize that there is an even more urgent imperative about 
solving the vaccine supply problem, and that is, of course, 
pandemic influenza. This next graphic is a picture of the last 
100 years of influenza, demonstrating in the circles three very 
major global pandemics of flu, and on the far right-hand side 
the depiction of the emergence of these avian flu strains that 
Dr. Fauci mentioned. And the one, of course, that we are the 
most concerned about, the avian flu that exists in Asia right 
now. We have never had so much influenza circulating in birds 
and their contacts on the face of the globe at one time; and so 
not only do we need to deal with regular seasonal flu, but we 
have to speed up our whole intervention process to be prepared 
for what looks like a very serious incubator for the emergence 
of a potential global pandemic.
    So, again, thank you for allowing us to be here, and we 
really do look forward to working with the committees and with 
the administration in a proactive way to solve this problem. 
Thank you.
    [The prepared statement of Julie L. Gerberding follows:]

   Prepared Statement of Julie L. Gerberding, Director, Centers for 
  Disease Control and Prevention, U.S. Department of Health and Human 
                                Services

    Mr. Chairman and members of the committee, I am pleased to be here 
today to discuss the Centers for Disease Control and Prevention's (CDC) 
efforts to address the current influenza vaccine shortage. Vaccination 
is the primary strategy for protecting individuals who are at greatest 
risk of serious complications and death from influenza. In the face of 
this season's influenza vaccine shortage, CDC, state and local public 
health practitioners, and vaccine manufacturers have worked tirelessly 
to protect our most vulnerable populations. I want to especially 
recognize the good faith, cooperation, and the significant contribution 
of Aventis Pasteur to ensure that the available supply of influenza 
vaccine goes to those people who truly need it most this season. And we 
must not forget the important service of immunization providers on the 
front lines in doctors' offices, health clinics, grocery stores, and 
pharmacies working to prioritize, deliver, and administer vaccine so 
that it reaches high-risk individuals.
    I also want to thank the nation's health protection heroes, those 
people across the country who are stepping aside and not getting 
vaccinated so that those at high-risk will be protected this influenza 
season. I particularly appreciate the cooperative and collaborative 
spirit of Americans who have pulled together to help us meet this 
challenge head on.
    I would be remiss, however, if I failed to mention the tremendous 
progress we have made. In the last four years, the Department of Health 
and Human Services has begun investing in new technologies, securing 
more vaccines and medicines, and preparing stronger response plans. We 
have made significant investments in protecting against the flu, 
including increases for CDC influenza funding ($17.2 million to $41.6 
million, 242%) and creation of Strategic Reserves/Stockpiles ($0 to $80 
million). These investments are further detailed as follows:

 New Technologies: In each of the last two budgets, HHS has asked for 
        $100 million to shift vaccine development from the cumbersome 
        egg-based production to new cell-culture technologies, as well 
        as to provide for year-round availability of eggs to provide 
        for a secure supply and surge capacity. These new technologies 
        will help produce flu vaccine more efficiently and provide more 
        adaptability to unexpected problems or losses in production.
 Creating the Nation's First Stockpiles of Medicines: For the first 
        time ever, we have created stockpiles of both influenza vaccine 
        and antiviral medications. The Department invested $40 million 
        in 2004, and is planning to invest another $40 million in 2005, 
        to stockpile influenza vaccine through the Vaccines for 
        Children Program. We invested $87.1 million to stockpile 2.3 
        million doses of Tamiflu; we invested $34 million on 
        Rimantadine capsules to treat 4.25 million adults and on 
        Rimantadine syrup to treat 750,000 kids. These stockpiles give 
        the government new ability to protect the most vulnerable, and 
        respond effectively when there is a shortage of vaccine.
 Pandemic Flu Plan: In August, Secretary Thompson unveiled the 
        department's draft Pandemic Influenza Response and Preparedness 
        Plan. This plan outlines a coordinated national strategy to 
        prepare for and respond to a flu pandemic. One of the first 
        internal committees the Secretary created when he came to HHS 
        was on the pandemic flu.
 Improving Access by Covering Costs: The Centers for Medicare & 
        Medicaid Services (CMS) has more than doubled the payment rates 
        for the vaccine and its administration since 2000. In 2004, CMS 
        is paying $18.30 for the vaccine and administration--up from 
        $8.92 in 2000. This is helping to ensure the vaccine is 
        affordable for patients to get and cost-effective for providers 
        to administer.

             PREPARATIONS FOR THE 2004-05 INFLUENZA SEASON

    Currently, three vaccine manufacturers are licensed to produce 
influenza vaccine for use in the United States; two produce inactivated 
vaccine delivered by intramuscular injection and one makes a live 
vaccine delivered by nasal spray. The inactivated vaccine, commonly 
referred to as the ``flu shot,'' represents the majority of influenza 
vaccine available in the United States and is licensed for use in all 
individuals 6 months of age and older. The nasal spray vaccine is a new 
vaccine, introduced to the U.S. market for the 2003-04 influenza 
season, and is licensed for use in healthy persons between 5 to 49 
years of age. All influenza vaccine is produced, and the vast majority 
is distributed and administered, by the private sector. Because of the 
time required to obtain adequate supplies of eggs in which influenza 
virus is grown, manufacturers must predict demand and decide how much 
of the vaccine to produce six to nine months before the influenza 
season begins. Because influenza vaccine production is a complicated 
process involving several steps over a long period of time, it was not 
possible to begin new production of influenza vaccine after the 
shortage was announced.
    CDC and the Department of Health and Human Services (DHHS) took 
several steps to prepare for the 2004-05 influenza season, including 
specific action to prevent a late-season surge in vaccine demand such 
as the one experienced last year in which the demand for influenza 
vaccine in the United States exceeded what had been experienced in 
previous influenza seasons. In preparation for the 2004-05 influenza 
season:

 Vaccine manufacturers licensed to produce influenza vaccine for the 
        U.S. market anticipated producing a supply of approximately 100 
        million doses of inactivated influenza vaccine for this year, 
        significantly more doses than have ever been produced for the 
        United States.
 CDC planned to establish a stockpile of 4.5 million doses of 
        influenza vaccine for the nation's children. The primary 
        purpose of the stockpile was to meet late-season, unmet 
        pediatric demand as we are currently experiencing this year.
 CDC augmented domestic influenza surveillance this season with 
        surveillance for pediatric hospitalizations and pediatric 
        mortality reporting. In addition, CDC is expanding its capacity 
        for rapid detection of new strains of influenza viruses and has 
        funded a study to prospectively evaluate vaccine effectiveness 
        during this winter's influenza season.
    As noted previously, DHHS is supporting activities designed to 
ensure year round influenza vaccine capacity and to incentivize the 
accelerated development, licensing and domestic production of cell-
culture influenza vaccines. The President's FY 2004 and FY 2005 budgets 
each proposed $100 million for these efforts. A contract for egg surge 
capacity worth about $10 million has already been awarded. Negotiations 
are currently underway for tissue culture vaccine research and 
development contracts.
    In addition, DHHS has expanded biosurveillance activities so that 
scientists can more rapidly detect changes in circulating influenza 
viruses and determine potential strains for vaccines. DHHS is 
collaborating with the Department of Agriculture and the Department of 
State to further enhance surveillance efforts in Asia, in both human 
and animal populations

         CDC RESPONSE TO THE 2004-05 INFLUENZA VACCINE SHORTAGE

    On October 5, 2004, Chiron Corporation notified DHHS that none of 
its influenza vaccine (Fluvirin ') would be available for 
distribution in the United States for the 2004-05 influenza season. The 
company indicated that the Medicines and Healthcare Products Regulatory 
Agency (MHRA) in the United Kingdom, where Chiron's Fluvirin vaccine is 
produced, suspended the company's license to manufacture Fluvirin 
vaccine in its Liverpool facility for three months. This action 
prevented the release of its vaccine for this influenza season. This 
action reduced by approximately 46 to 48 million doses, or almost one-
half, the expected supply of inactivated influenza vaccine available in 
the United States for the 2004-05 influenza season.
    Following the Chiron announcement, DHHS and its agencies, including 
CDC, took immediate action in response to the loss of this vaccine 
supply. CDC responded quickly and effectively to the influenza vaccine 
shortage by activating the Director's Emergency Operations Center 
(DEOC) Influenza Task Force to coordinate the overall CDC response. 
CDC's immunization, infectious disease, and other experts are working 
collaboratively across the agency to address areas such as clinician 
policy and guidelines, vaccine supply and distribution, healthcare 
impact, logistics, influenza assessment and surveillance, informatics, 
and communications. These dedicated public health professionals have 
worked tirelessly to protect the nation's health during this influenza 
vaccine shortage.
    CDC is working hard to target the distribution of the remaining 
inactivated vaccine towards the most vulnerable populations; identify 
available vaccine from other countries that might be used this season; 
reinforce the agency's supply of antiviral medications in the Strategic 
National Stockpile and provide recommendations for their use during 
this influenza season; develop strategic communication messages to 
facilitate the public health response to the shortage; enhance 
surveillance for influenza disease and outbreaks so that early, 
effective responses can be delivered; and implement a comprehensive 
monitoring and evaluation system to assess the effectiveness of the 
strategies to target vaccine to high-risk groups and the response to 
influenza outbreaks.

Interim Influenza Vaccination Recommendations for the 2004-05 Season
    On October 5, in coordination with the Advisory Committee on 
Immunization Practices (ACIP), CDC issued interim recommendations for 
influenza vaccination during the 2004-05 season. The interim 
recommendations identify the priority groups of people that should 
receive the limited supply. These include people who are most 
vulnerable to develop serious complications and even death from 
influenza: adults 65 years of age and older, children 6 to 23 months of 
age, individuals with certain chronic underlying medical conditions, 
pregnant women, residents of nursing homes and long-term care 
facilities, and children on chronic aspirin therapy. In addition, the 
ACIP recommended vaccination for individuals who might otherwise spread 
influenza to high-risk individuals, including household contacts of 
infants under 6 months of age and healthcare workers providing direct, 
hands-on patient care. These interim recommendations take precedence 
over earlier recommendations.

Influenza Vaccine Supply and Allocation Plan
    Following the Chiron withdrawal, Aventis Pasteur announced that it 
would work with CDC to develop a plan to target the remaining available 
influenza vaccine toward providers serving the populations at greatest 
risk for serous complications from influenza. I commend Aventis Pasteur 
for its leadership and willingness to join us in addressing this public 
health concern. In addition, state and local health officials have 
worked together with the CDC and Aventis Pasteur to assure the most 
equitable and efficient means of distribution of the remaining, limited 
supply of vaccine across the Nation. The significant contributions and 
leadership of these public health professionals has enabled our nation 
to respond effectively to this public health challenge.
    As of October 5, Aventis Pasteur had planned to produce over 50 
million doses of inactivated influenza vaccine for the 2004-05 
influenza season. At that time, approximately 33 million doses had 
already been shipped to pediatricians, primary care and other office-
based physicians, public health providers, and other community-based 
vaccine providers. Approximately 14.2 million of the remaining 22.4 
million doses of unshipped vaccine were allocated for redistribution 
through Aventis Pasteur contracts with providers serving the high-
priority populations. On October 19, 2004, Aventis Pasteur announced 
that it would produce an additional 2.6 million doses of vaccine that 
would be available in January 2005. With these additional doses, their 
total of inactivated influenza vaccine for this season is expected to 
exceed 58 million doses, of which 10.3 million are still to be produced 
and distributed in the coming weeks, as of November 9, 2004.
    CDC and Aventis worked to identify a number of orders placed with 
Aventis Pasteur and the seven distributors through which Chiron vaccine 
is shipped, that were intended for providers known to serve substantial 
numbers of high-risk patients. These included doses ordered by:

 State and local health departments;
 The Vaccines for Children Program;
 Children's providers;
 Healthcare providers for Aventis Pasteur's preservative-free 
        influenza vaccine (licensed for use with children 6-35 months 
        of age);
 The Department of Veterans Affairs and the Indian Health Service;
 Long-term care facilities and acute care hospitals;
 The Visiting Nurses Association of American (VNAA); and
 The Department of Defense.
    Every effort has been made to provide vaccine to as many providers 
serving high-risk populations as possible in a timely fashion.
    CDC, state and local health officials, Aventis Pasteur, and Chiron 
vaccine distributors worked together to canvass the orders placed with 
the seven Chiron distributors, with an emphasis on orders placed by 
providers likely to be serving a high number of priority patients; and 
surveyed long-term care facilities to identify those facilities that 
ordered Chiron vaccine, either directly or via a sub-distributor or 
intermediaries such as pharmacies.
    The CDC implemented a secure web-based application, the Flu Vaccine 
Finder that is available to state health officials to identify all 
doses of inactivated influenza vaccine shipped to their state during 
the 2004-05 season. State health officials and CDC have worked 
together, in consultation with local health departments, to develop a 
formula for the equitable distribution of the remaining influenza 
vaccine to be shipped. This formula took into account the population of 
high-risk individuals in each state and the number of influenza vaccine 
doses that have already been shipped to each state.
    Of the limited number of licensed doses of vaccine that remains to 
be shipped, there is agreement that all public sector orders that were 
submitted on federal, state, and multistate contracts will be filled. 
CDC estimates this to be approximately 11.9 million doses total, with 
3.4 million of those doses to complete the public sector orders that 
were submitted on federal, state and multistate contracts. CDC has 
asked state health officials to work collaboratively with local health 
departments and private immunization providers to guide the final 
allocation of the remaining approximately 7.2 million adult doses. 
State and local health officials are best suited to develop and 
implement this second phase of the vaccine allocation plan. Another 1.2 
million doses of pediatric vaccine will be allocated to states using 
the same approach. State and local health officials have the most 
accurate and comprehensive understanding of the needs within their 
jurisdictions, the necessary relationships with public and private 
health care providers to target vaccine to reach the most vulnerable 
populations in their states, and the authority to ration in times of 
shortage.

Price Gouging
    Finally, there is the issue of alleged price gouging. CDC is very 
concerned to learn of reported incidences of price gouging during this 
particularly challenging time. In response to the reports of alleged 
price gouging, the Secretary sent a letter on October 14, 2004, to each 
state urging them to thoroughly investigate reports of price gouging 
involving influenza vaccine and to prosecute to the full extent of the 
law those found to be involved. CDC is also collecting reports on price 
gouging and sharing them with the National Association of Attorneys 
General and state prosecutors.

Additional Sources of Influenza Vaccine
    Approximately 3 million doses of the intranasally administered, 
live, attenuated influenza vaccine, FluMist, are being produced for the 
2004-05 season. This vaccine is encouraged for use among healthy 
persons ages 5-49 years who are not pregnant. This includes healthcare 
workers (except those who work with severely immunocompromised patients 
in special care units) and household contacts of infants less than 6 
months of age. CDC is making people aware of this alternative to 
inactivated influenza vaccine.
    Several manufacturers of influenza vaccines licensed for use in 
Europe and Canada have vaccine, which is under review for use in the 
United States as Investigational New Drugs (IND). Because these 
vaccines are not currently licensed in this country, they will have to 
be administered under special protocols with written consent. CDC is 
studying the feasibility of use of IND vaccine as it is developing 
protocols for vaccine use and the U.S. Food and Drug Administration 
(FDA) is inspecting the manufacturing plants. As many as 5 to 6 million 
doses of vaccine may be available from these manufacturers, although 
even if approved for an IND, we would not expect delivery of most of 
this vaccine until December and January.

Antiviral Medications and Pneumococcal Vaccine
    Influenza antiviral medications are an important adjunct to 
influenza vaccine in the prevention and treatment of influenza. CDC has 
developed interim recommendations on the use of antiviral medications 
for the 2004-05 influenza season. The interim recommendations were 
developed to reduce the impact of influenza on persons at high risk for 
developing severe complications secondary to infection. The 
recommendations are not intended to guide the use of these medications 
in other situations, such as outbreaks of avian influenza.
    Influenza antiviral medications have long been used to limit the 
spread and impact of institutional influenza outbreaks. They are also 
used for treatment and chemoprophylaxis (prevention) of influenza in 
other settings. In the United States, four antiviral medications--
amantadine, rimantadine, oseltamivir, and zanamivir--are approved for 
treatment of influenza. When used for treatment within the first two 
days of illness, all four medications are similarly effective in 
reducing the duration of illness caused by Strain A influenzas by one 
or two days. Only three antiviral medications (amantadine, rimantadine, 
and oseltamivir) are approved for prevention of influenza.
    CDC encourages the use of amantadine or rimantadine for prevention 
and use of oseltamivir or zanamivir for treatment of those who are ill 
from influenza, as supplies allow. People who are at high risk of 
serious complications from influenza may benefit most from antiviral 
medications.
    The United States has a supply of influenza antiviral medications 
for both adults and children stored in the Strategic National Stockpile 
for emergency situations. There are 1,336,380 regimens of rimantadine 
tablets, 60,000 regimens of rimantadine syrup, 859,993 regimens of 
oseltamavir capsules, and 110,336 regimens of oseltamavir suspension. 
DHHS has procured additional supplies of antiviral medications, and 
shipments are arriving weekly. By the end of December, the federal 
stockpile of antiviral drugs will include enough doses of rimantadine 
for 4.25 million adults and 750,000 children and enough oseltamivir for 
2.3 million people. Rimantadine will be made available to states and 
territories for use in outbreak settings, as might occur in a hospital 
or long-term care facility, if commercially available supplies become 
depleted nationwide. Because oseltamavir is the only antiviral drug 
known to be effective against avian influenza, we will work to maintain 
the supply of oseltamavir in reserve to be used in the event of an 
influenza pandemic.
    In addition, Merck & Co. is tripling its production of pneumococcal 
vaccine used to prevent pneumococcal disease, which is a common 
complication of influenza. Pneumovax is not a substitute for the 
influenza vaccine, but can help prevent influenza complications. Many 
people who fall into the priority groups for the influenza vaccine 
should also get the pneumonia vaccine.

Communicating the Public Health Response
    Since the release of the interim influenza vaccination 
recommendations, CDC has used a variety of channels to communicate 
comprehensive information about the influenza season, the 
recommendations for priority groups for vaccination, the status of the 
vaccine supply, and alternative methods of reducing the transmission 
and severity of disease. Relevant and timely communications with the 
public, health care professionals and policy makers is a critical 
component of the public health response to the current influenza season 
and the vaccine shortage.
    CDC's influenza web portal (http://www.cdc.gov/flu) features 
updated information and materials for the public and clinicians. 
Materials are available in ten languages (in addition to English) as 
well as in low-literacy formats. As the public health response to the 
vaccine shortage has evolved, this website has become a vital resource 
receiving 300,000 visits per day at its peak, leveling off at over 
150,000 visits per day over the past few weeks.
    In addition to communications via the Internet, CDC established a 
new toll-free hotline number, 1-800-CDC INFO, to respond to public and 
clinician inquiries related to the influenza season and the vaccine 
shortage. This automated hotline includes selections in English and 
Spanish, and provides callers with timely and relevant information 
regarding the influenza season and the vaccine shortage. Since the 
announcement by Chiron on October 5, 2004, CDC has responded to several 
thousand inquiries from the public and clinicians through its hotlines.
    In collaboration with the non-profit Ad Council, CDC recorded and 
distributed two audio public service announcements to over 9,000 AM and 
FM radio stations across the nation. In addition, two video public 
service announcements are being developed for distribution before 
Thanksgiving, and plans are underway to run print ads and articles in 
the nation's newspapers over the next several weeks.
    CDC has also made specific efforts to reach business and 
educational institutions with critical information about the priority 
populations recommended for vaccination and alternative methods for 
preventing transmission of disease in the workplace and educational 
settings.

                      THE 2004-05 INFLUENZA SEASON

    Influenza seasons are unpredictable. Although epidemics of 
influenza occur virtually all every year, the particular viruses and 
the beginning, peak, severity, and length of the epidemic can vary 
widely from year to year. Before a season begins, it is not possible to 
accurately predict what the season will look like. However, as of the 
week ending October 30, 2004, influenza activity in the United States 
has been low. Forty (0.8%) of 4,736 respiratory specimens tested by 
U.S. World Health Organization (WHO) and National Respiratory and 
Enteric Virus Surveillance System (NREVSS) collaborating laboratories 
were positive for influenza. The proportion of patient visits to 
sentinel providers for influenza-like illness (ILI) and the proportion 
of deaths attributed to pneumonia and influenza were below epidemic 
levels. One state has reported regional influenza activity, one has 
reported local activity, and 26 states and New York City have reported 
sporadic influenza activity. Twenty states and the District of Columbia 
have reported no influenza activity.
    CDC has characterized three influenza viruses collected by U.S. 
laboratories since October 1, 2004. All were influenza A (H3N2) viruses 
and were characterized as A/Fujian/411/2002-like, which is an influenza 
component included in the 2004-05 influenza vaccine.

                               CONCLUSION

    Thank you for bringing additional attention to this important 
public health issue. CDC is committed to protecting and promoting 
health for all Americans, preventing disease and disability through 
public health research and public outreach, and support of important 
interventions including vaccination. Recognizing the important role of 
vaccines in protecting the health of all Americans and in preparing for 
future threats, we will continue to work with our partners to manage 
the current influenza vaccine shortage and to address our nation's need 
for access to a safe, reliable supply of influenza vaccine in the 
future.
    Thank you for your interest in this issue and your support of CDC's 
immunization programs. I will be happy to answer any questions.

    Mr. Bilirakis. Thank you, Doctor.
    And you have indicated, all of you, your willingness to 
work with the committee. The committee would invite your 
comments, your recommendations; basically, you know, what can 
Congress do in order to help out the situation and whatnot. So 
there will be specific questions in writing that will be 
furnished to you after we finish up.
    Ms. Gerberding. Thank you.
    Mr. Bilirakis. But whether those questions go into what can 
we do further, please feel free to keep in mind that we can 
only help if we get input from you.
    Dr. Fauci, first, you have chosen to mention Dr. La 
Montagne in your written statement, and so you obviously were 
very close to him. Our sympathies, sir, for your loss and the 
country's loss, health care's loss, of Dr. La Montagne.
    I would ask you, sir, first of all, all of the vaccine that 
is out there now in use is egg-based; is it not?
    Mr. Fauci. Yes. The vaccine that we make now and have made 
in the past is made in eggs.
    Mr. Bilirakis. Okay. When you talked about these 
alternatives, cell-based, et cetera, when might we anticipate? 
Is there a time line, an anticipated time line, when we might 
anticipate those being on line and ready to be used?
    Mr. Fauci. It is a gradual phase-in process, Mr. Chairman, 
that will be measured in years, probably anywhere from 3 to 5 
years. There are some companies who are more aggressive in the 
sense of already transferring most of what they are doing vis-
a-vis their production into cell-culture based in a 
semiexperimental way. We are funding and others are funding--
both independently at the company level, as well as through the 
NIH--ways of looking at the real questions that arise. Is the 
cell culture adequate to grow the virus? Does the virus change 
when it grows in that cell? What are the safety issues?
    All of these things need to be done before you can with 
confidence essentially turn over your process to cell culture. 
So I think it is important to make clear that although we have 
great hopes for it, it is not going to be something that next 
year or the year after is going to replace eggs. It is going to 
be a gradual over several years.
    Mr. Bilirakis. Okay. And you have indicated in your charts 
that there have been great increases in funding provided for 
research in this regard. And so it is not a lack of resources, 
then, in terms of trying to speed up the process?
    Mr. Fauci. Well, it is a scientific issue at first. But 
also, we have asked the Department for $100 million in the 
previous year, and we hope that we will get that this year for 
not only increasing the egg surge capacity, which we do still 
need, but also making the transition to cell-based culture. So 
there is a two-pronged way of addressing the problems that the 
committee members mentioned in several of their opening 
statements. Not only do we need to phase into a cell-based 
culture, but we also need to provide a greater surge capacity 
for the egg-based culture. And, in fact, there has been 
investment just this year of $10 million to do that; in other 
words, to have eggs year round so that if we have an emergency 
where we need to surge up, we will not be in a position where 
the eggs are already gone because that phase of the process has 
already been passed.
    Mr. Bilirakis. Thank you.
    Dr. Crawford, would the FDA have stopped use of the drug, 
the vaccine, if the United Kingdom hadn't taken action?
    Mr. Crawford. Yes, we would have.
    Mr. Bilirakis. You would have definitely?
    Mr. Crawford. Yes. With our lot release program, we would 
not have allowed it into circulation or to be marketed.
    Mr. Bilirakis. You were aware that the U.K. Was going to 
pull their manufacturing?
    Mr. Crawford. We were not aware. They--in a statement 
released by the British Government, they said because of 
vagaries in their law related to confidential commercial 
information, they could not inform the United States or several 
other countries that were not going to get flu vaccine because 
of that particular problem. We had been made aware of a 
potential problem on August 25, and at that point we asked the 
company to quarantine all doses of the vaccine. So none of it 
was used. And we would have made the same determination we 
unhappily and sadly had to make 10 days later.
    Mr. Bilirakis. So you would have made that determination 
even before the U.K. Did?
    Mr. Crawford. No. We asked that the company give us its 
final data by October 5, and that conference was scheduled 
later the morning that the U.K. Announced its results. So we 
would have been a few hours later, due to the time change.
    Mr. Bilirakis. All right. I guess my time has expired.
    Mr. Dingell to inquire?
    Mr. Dingell. Mr. Chairman, thank you.
    Mr. Crawford, on October 3, 2000, this subcommittee held 
hearings that were focused in good part on the multitude of 
problems FDA has been experiencing with the policing of foreign 
firms sending drug products to the United States for domestic 
consumption. At that time we discussed the time limits with 
regard to how often these facilities could be inspected in 
other countries. I will be submitting to you a letter 
requesting further information on that. And I also ask 
unanimous consent that that letter, Mr. Chairman, be inserted 
into the record, and also the previous correspondence between 
the chairman of the Oversight Subcommittee and the ranking 
minority member of the Oversight Subcommittee with the Food and 
Drug Administration, because there are a number of questions 
that show that things are not going as well as they could down 
there.
    Mr. Bilirakis. Without objection, that will be the case.
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    Mr. Dingell. In the meantime, though, what have you done 
about this matter? How can you assure us that you are securing 
the necessary data on the firms, their inspection status, and 
that these matters are not still a problem at the Food and Drug 
Administration?
    Mr. Crawford. Thank you, sir. I look forward to working 
with you with respect to the letter and so forth.
    What we are doing is this particular plant in Liverpool, 
England, that was not able to produce vaccine that we could 
assure the safety of, we are working with the British 
Government and also with that company and trying to figure out 
what we can do to get them relicensed.
    Mr. Dingell. How often does the Food and Drug 
Administration send in inspectors over there? What arrangements 
do you have with regard to the inspections that the Food and 
Drug Administration should be making there? What cooperation do 
you have with the British agency on these matters? It looks to 
me like we have here a faith-based initiative.
    Mr. Crawford. What we have is an agreement now with the 
British Government because the corporation Chiron has agreed to 
jointly share all the information including the confidential 
information with both governments that we get every 2 years 
unless there is a problem. As you know, we were in this plant 
August 25, we were back in it after, from October 8 through 
October 10, and then a little bit beyond. We will go back in 
with the British Government before the determination is made as 
to whether or not they are going to relicense the plant. That 
decision has to be made by January 5.
    Mr. Dingell. Well, you have two problems. One is if they 
can't make safe vaccine, if you don't catch them and don't 
prevent it, then they can send it over here. If they can, and 
you can properly investigate them, they may not be able to send 
it, so we continue our flu vaccine shortage. What do we do 
about that?
    Mr. Crawford. Well, we will know this time early enough to 
where we--which will be, as I mentioned, by January 5, whether 
or not they are going to be able to produce vaccine. At that 
point we will confer with CDC and others in HHS to see where we 
can get the vaccine from, and it will be early enough at that 
point to get it from other sources.
    Mr. Dingell. I am going to ask you for a table of time and 
frequency on these inspections of all of your overseas 
suppliers; how often, when, and how many people do you have to 
perform the inspections that are needed. That--you can't 
respond to it at this particular time, but that is my concern, 
and that will be in the letter here.
    Now, I also want you to tell us here, Mr. Crawford, at the 
time of the earlier hearings, the Food and Drug Administration 
said that it was attempting to determine how much resources 
would be required to conduct good manufacturing practices 
inspections for all firms shipping drug product to the United 
States at least every 2 years. Do you have the capacity now, 
the resources, and the money necessary to inspect these plants 
at least every 2 years?
    Mr. Crawford. Yes, sir, we do. What is a problem for us is 
that every 2 years, as you know from the hearing, is a routine 
inspection if we need to go back on a regular basis, and that 
takes more money that isn't appropriated, so we are building 
into our request for the future enough funding to allow these 
continuing inspections. We do have more inspectors now than we 
did in 2000.
    Mr. Dingell. I am going to ask you to submit to us a 
description of all of the resources which you have, the 
frequency during which you may make these inspections, and the 
effectiveness of your achieving these inspections. Now, 
understand what I want from this table. I am not going to be 
deceived, nor are you, about how these inspections will 
necessarily accomplish our purposes of assuring safety, because 
it is more than just the frequency of the inspections. There is 
the quality of the work which is done, the capability of the 
inspectors, the need and the ability of the inspectors to go 
back to the place where there are troubles; and, last of all, 
the ability of the Food and Drug Administration to address the 
relationship with the foreign government regulatory agencies. 
And so the questions that you are to be getting from me on 
these matters will focus on this.
    And I ask unanimous consent, Mr. Chairman, that that 
correspondence be put in the record together with the response 
at the appropriate time.
    Mr. Bilirakis. Without objection, that would be the case.
    The gentleman's time has expired.
    Mr. Upton to inquire.
    Mr. Barton.
    Chairman Barton. We all get our chance. Thank you, though, 
Mr. Chairman.
    My first question is fairly basic. But when we decertified 
the--was it 50 million doses that Chiron had manufactured? Is 
that correct?
    Mr. Crawford. That is correct. Yes.
    Chairman Barton. Are any of those salvageable, or have they 
already been destroyed?
    Mr. Crawford. No. We had to make the determination based on 
our inspection and the information that was given over to us by 
Chiron that none of it could be used.
    Chairman Barton. So what has happened to it? Is it still in 
storage?
    Mr. Crawford. There were 6 million doses that had already 
been shipped to the United States that we had previously had 
under quarantine. The remainder was in the United Kingdom. They 
are being systematically destroyed.
    Chairman Barton. I don't know how you do your inspections, 
but if the doses--are they stored in big vats or gallons or 
little vials? How is it?
    Mr. Crawford. They are stored in a variety of ways. There 
are what are called tank car vials, which are big vials. They 
also--they hadn't completed the production run, so some of them 
were still in bulk, which would be large amounts of vaccine.
    Chairman Barton. But there is medically and scientifically 
no way that any of that vaccine is usable?
    Mr. Crawford. It is not usable. And that was one of the 
roughest decisions that I had ever had to make and the FDA had 
to make. But it cannot be used, none of it.
    Chairman Barton. Because that would be obvious, if there 
was some way to go through and inspect it batch by batch. You 
know, every little bit counts, because that is a lot that is 
destroyed. But that is off the table.
    I don't know if it is Dr. Gerberding or Dr. Fauci--and I 
think Congressman Bilirakis asked this question. Is there any 
availability of new technology to manufacture a vaccine that we 
could fast-forward that might actually produce some this year 
by using a different methodology than traditionally has been 
used?
    Mr. Fauci. Let me take a crack at it first. Not at this 
point. Certainly not egg-based, because the egg-based is a 
process that really goes over many months. The decision is made 
in January sometime about what virus, what seed virus, what 
reference virus you are going to put in the eggs. You have got 
to get the eggs from the chickens, you have got to inject them, 
you have got to get them grown up, you have got to harvest it, 
kill the virus, and then go through the process of putting it 
in the vials that is necessary to distribute it.
    Chairman Barton. And there is no way? There is nothing we 
can do?
    Mr. Fauci. I sense your frustration with that, but we have 
struggled with this: Is there anything we can do vis-a-vis 
producing more versus some of the things that I will yield to 
Dr. Gerberding because she has worked with the Aventis company 
about and other companies about how to get more doses. But from 
a production standpoint, we can't take the clock back and start 
the process over at this point in time for this flu season.
    Ms. Gerberding. I would just say that both Aventis and the 
manufacturers of FluMist, the nasal vaccine, have pushed their 
manufacturing processes beyond where we thought we would be 
this year. So Aventis was able to identify additional doses in 
part because their yield was higher than expected, and in part 
because they were able to extend the production cycle a bit 
longer.
    But one of the additional complications is that if we push 
on the system this year, it cuts into production for next year. 
That is how tightly coupled these cycles are. So anything we do 
now will mean less vaccine for whatever strains emerge next 
year. It is a very fragile system.
    Chairman Barton. So we can't salvage any of the doses that 
were already manufactured, and we can't change the process 
because of a lot of different reasons. So the next alternative 
for this year would be to go overseas to other nations that 
have vaccines that have not been approved for use in the United 
States and see if we can somehow, first, get them to agree to 
ship it to us, and second, make sure that it does meet the 
standards that are necessary for safety and efficacy. How much 
of that type of vaccine might be available on the world market?
    Mr. Crawford. We have contacted every country and every 
manufacturer in the world to see if we can't get some 
additional doses. We have identified now three companies in 
three overseas countries that are willing to ship vaccine from 
the amount that they have left over from sales. Now, that 
amount will be approximately 5 million, perhaps as much as 6 
million doses, and we are very close to some announcements with 
respect to that. We have to identify the company, talk them 
into it, get the data from them, and then visit the plant, 
inspect the plant, and then come back and make a determination.
    Chairman Barton. Well, is the general attitude overseas we 
are going to take care of 100 percent of our population, and if 
we happen to have a few extra doses, we might let you have 
them? I mean, I would think if we really needed 100 million, I 
am going to guess the world market is a billion? I don't know 
what it is, but----
    Mr. Crawford. I think Dr. Gerberding and Dr. Fauci know 
that particular amount. We consume about a third of it, I 
believe.
    Chairman Barton. So the world market is about 300 million. 
So there is 200 million floating around in the rest of the 
world. Is the attitude, when you talk to your international 
compadres, once we have taken care of everybody that we think 
might potentially need one, then we might let you have some? Or 
are they trying to actually trying to find ways to help?
    Mr. Crawford. I think there is a feeling that they want to 
help the United States, but there are multiple reactions that 
we get. These companies certainly want to help, and they are 
doing what they can do. In some countries influenza 
immunization isn't particularly emphasized, so they don't have 
any particular national interest in it. Other countries, there 
are some barriers to sale because we can't be sure of how it 
was stored and so forth, and some of them really don't want to 
get involved in the U.S. Market.
    Chairman Barton. Thank you, Mr. Chairman. Before I yield 
back, I want the audience to know, I did not get a flu shot.
    Mr. Bilirakis. Nor did I, Mr. Chairman.
    Mr. Green to inquire.
    Mr. Green. Mr. Chairman, I don't know if this is confession 
time or not, but I would like to ask some questions, and I 
appreciate the opportunity. It looks like there is a concern, 
and I know, Dr. Crawford, you talk about the FDA, after they 
discover a problem, and then according to the testimony we have 
is that most of that was dealt with by conference calls. And 
you don't have the budget available to go back in particularly 
a foreign location and investigate to see if they actually did 
correct the deficiencies?
    Mr. Crawford. Yes. What happened is we were, in fact, in 
the plant doing another task on August 25 when the company 
found that it had a problem. So we were able to consult with 
them onsite in August of this year. At that point we put them 
under notice that we wanted a report on a weekly basis of their 
progress. And then the other thing we did is we quarantined all 
the vaccine that had been produced or would be produced from 
that plant and then later had to make the decision to destroy 
it.
    Mr. Green. So that was in August?
    Mr. Crawford. That was in August.
    Mr. Green. And it seemed like it was early October, October 
7 or something like that----
    Mr. Crawford. October 5.
    Mr. Green [continuing]. That the release was made. And I 
assume there was activity between the end of August and October 
7 before it was released to the public trying to find 
alternative sources for the production?
    Mr. Crawford. Actually, it was too late to find alternative 
sources for the production, because it starts right after the 
first of the year, and we could not have gotten any at that 
point.
    Mr. Green. Does the administration, that you know of, have 
plans to submit legislation aimed at sharing the adequate and 
reliable supply of flu vaccines? And not only flu, but there 
are some of us who also have additional concerns.
    Mr. Crawford. I am not aware of such legislation, but I 
wouldn't necessarily be at this point.
    Mr. Green. Okay. I just noticed, you said you were there in 
August, and that was not for an inspection, it was for some 
other reason that you were in the United Kingdom?
    Mr. Crawford. Yes. As I said, we were doing another task, 
as I just mentioned.
    Mr. Green. Okay. Is there interest in the FDA, and do you 
need legislative authority to--other than just appropriations, 
to expand that? If somebody has a problem--and, again, this 
should be with lots of Federal programs--if instead of just 
relying on a conference call to say, yes, we corrected it, and 
here is our documentation, do you need legislative authority to 
be able to expand that ability to go back in?
    Mr. Crawford. No. We have the legal authority to do it. 
What we don't have are FDA offices overseas, so we have to 
dispatch people from here, which is a logistical and a 
financial problem for us. We did find violations within the 
plant for the 2001, 2002 season, and we sent a team over to 
reconcile that in the middle of the summer of 2003. That all 
was done directly. And if there are violations and we need to 
go back, then we do have to go back.
    Mr. Green. Mr. Chairman, I have a lot of questions, and 
will we have the opportunity to submit questions to our panels?
    Mr. Bilirakis. Yes. I have already mentioned that 
certainly, as per usual, we will do that.
    Mr. Green. Thank you.
    Dr. Gerberding, in our second panel we will hear from Alan 
Rosenbloom, who is on behalf of the American Health Care 
Association. He specifically requested guidance from CDC on how 
best to handle partial orders and how to allocate scarce 
vaccines within high-risk groups. Has the CDC provided that to 
not only that association, but our public health agencies?
    Ms. Gerberding. On October 5, CDC initially worked with the 
Advisory Committee on Immunization Practices to announce the 
high-priority risk groups, so that that was blasted out to all 
of the clinicians and public health agencies around the country 
through our health alerting system. Since that time, health 
care providers at the local level have had to make difficult 
choices about who to vaccinate first. The ACIP and CDC 
considered whether or not subprioritizing people in those high-
risk categories would be useful or helpful, and on October 5 
the decision was no because there was no science on which to 
base that subprioritization.
    Since that time, I initiated a consultation with several 
renowned ethicists to ask their advice. If science couldn't 
tell us about the importance of subprioritization, was there a 
way we could think about this using the tools of ethicists to 
make a fair and equitable distribution process? While the input 
from the ethicists was extremely helpful, it did not lead us to 
conclude that it was realistic for the Federal Government to 
tell local health officials how to make those decisions at the 
local level.
    And what we have really been seeing is that they have done 
a great job of making tough decisions, including Minnesota, 
which has done such a good job of encouraging the public to 
defer vaccination that they are actually not getting the people 
who need it the most to step up and receive it. So we have 
deferred and have supported the decisions that the hospitals 
and local health officers are making with authorities and 
statutes that----
    Mr. Green. I am almost out of my time. I am out of time. 
But my concern is that you are leaving it to the local 
community, and in most cases we like that. But if we have 85 
million high risk and only 61 million vaccines, do you have to 
prioritize in that high-risk group somehow? And the guidance 
from the CDC, because, again, it is a national problem, it 
wasn't my local hospital district, that they need that 
guidance, and whether it is the health care providers or the 
public health care and anyone else.
    But, Mr. Chairman, like I said, I have a whole lot of other 
questions I would like to submit.
    Mr. Bilirakis. Thank you.
    Mr. Upton to inquire.
    Mr. Upton. Thank you, Mr. Chairman. I, too, have a lot of 
questions. And as much as we would like to turn back the clock 
on this flu season, obviously we can't. We have got to learn 
from the experience. And so in that mode, let me ask a number 
of different questions.
    Dr. Fauci, you indicated at some point along the line that 
there was a study that was going on on half doses, their 
effectiveness on the non-high-risk population. I just wonder a 
question; when you expect the results of that study to come 
back, and if you can give us an early indication of what that 
may be, what those findings may be.
    Mr. Fauci. Yes. Thank you, Mr. Upton. Those studies have 
actually been done. The first study was done comparing 
intramuscular full dose with a half dose, and was done with 
healthy individuals from 18 to 49 years old and showed that, in 
fact, these individuals had comparable responses between a half 
and a full dose. I will get back to in 1 second why that is not 
particularly helpful right now for us, because this study was 
done in very healthy individuals and not in the people who 
would be in the risk groups.
    The studies that were just published in the New England 
Journal of Medicine actually used the technique of injecting 
the vaccine intradermally, or directly into the skin, not 
underneath the skin, which is subcutaneous, or into the muscle, 
which is intramuscular. And the finding is that you can inject 
anywhere from one-half to one-fifth of the dose if you give it 
intradermally. Because the cells in the skin are particularly 
attuned to responding to antigens that you stick into the skin. 
you would get comparable responses.
    Now, that was seen fundamentally best in young people 
again, to a lesser extent in people over 60, 65, but still it 
was an advantage. So what we take away from that study is that, 
given the logistics of what it would take to switch over to 
that now, it probably is not going to help us this year for a 
number of reasons: Because the vaccine is not approved for 
usage intradermally, and it would again require doing it under, 
quote, experimental conditions. But what we do learn from that 
is that this is a way that is going to be explored in future 
evaluations of vaccine, to see whether or not you can actually 
get comparable responses or even better responses with 
appropriate doses intradermally. So it is an important 
scientific observation, it will be pursued, but we don't feel 
from a practical standpoint it is going to bail us out for this 
year.
    Mr. Upton. You indicated in your testimony that you had 
tripled the funding for influenza research. I am wondering if 
your 2006 budget request continues on that same path as we look 
at perhaps a pandemic down the road.
    Mr. Fauci. As you know, the budget requests for the 
Department and the NIH is not a lot, not a major increase, it 
is a couple of percent, but within that framework we are giving 
high priority to a number of issues. Influenza is one of them. 
So we would predict that within the small increase that we are 
having, since we are going to be preferentially favoring 
influenza, we will be continuing that upswing.
    Mr. Upton. Thank you.
    Dr. Crawford, I want to go back through these dates for a 
second. You indicated that the FDA thought that there was going 
to be some problem on, I think you mentioned, August 25, and 
yet at what point did you trigger a response to the CDC that, 
in fact, there may be some trouble? Did you wait until October 
5? I mean, was there some communication between then?
    Mr. Crawford. Actually when we went into the mode following 
notification by the plant on August 25 of double-checking with 
the plant on a regular basis, CDC joined us in that initiative. 
So they were on those.
    Mr. Upton. So they knew back in August that there could be 
a problem, which you confirmed?
    Mr. Crawford. Well, we both believed that the problem was 
solvable, and we did not expect that the vaccine was going to 
be unusable at that point. But they were alerted to what we 
were alerted to.
    Mr. Upton. And then you came to the final conclusion then 
on October 5 that it was not salvageable and that we have a 
problem?
    Mr. Crawford. Actually what happened is that the British 
made their announcement on October 5. We had the final meeting 
and presentation of data from Chiron Corporation also on 
October 5. We sent a team over on--they were functioning by 
October 8, and on October 15 I made the decision that it could 
not be used.
    Mr. Upton. And, Dr. Gerberding, just as the CDC was 
beginning to become aware of this and looking at a seriously 
limited supply of vaccine, obviously one of the first things 
that comes to everyone's mind is that we need to prioritize so 
that those that really need it get it versus folks in a nonrisk 
department. At what point did you actually--did the CDC begin 
to formulate notices to the States and others that they should 
be prepared for this problem?
    Ms. Gerberding. In August, when the contamination of the 6 
to 8 lots out of the 48 million doses of vaccine, Chiron was 
not----
    Mr. Upton. That is not Mr. Bilirakis telling me that my 
time was expired. Go ahead.
    Ms. Gerberding. In August, when we learned about 
contamination of a few lots of Chiron's vaccine, we immediately 
conferred with FDA to determine what this meant for the 
ultimate supply. And we were reassured by Chiron as well as FDA 
that we should expect a delay in shipment, but that overall, we 
would still be expecting to receive 48 million doses from 
Chiron. So the likely scenario was that we would have the full 
100 million dose total that we had been expecting; but we had 
to be prepared for the worst-case scenario, and so we took some 
additional steps.
    First of all, we increased our stockpile purchase of 
vaccine, so we bought 2 million more doses of vaccine from 
Aventis, which is the first time we have ever been able to do 
that. We also increased our purchase of oseltamivir, which is 
the drug to treat influenza. And we also initiated a survey of 
States to determine prioritization, and contingency plans that 
were in place should we not receive our Chiron vaccine. We 
considered what could be done at this time to try to reallocate 
the vaccine supply in the best possible way if needed.
    Of course, in October when we learned the news, we were 
actually in the middle of another House hearing. I think when 
that information became known to Chiron and to us, we 
immediately began to initiate the reallocation scheme that we 
had in our back pocket.
    Mr. Bilirakis. The gentleman's time has expired.
    Did any of the bad vaccine get out there?
    Ms. Gerberding. Absolutely none of the bad vaccine has been 
used.
    Mr. Bilirakis. Ms. Eshoo to inquire.
    Ms. Eshoo. Thank you, Mr. Chairman.
    And thank you to the witnesses again. Dr. Fauci and Dr. 
Gerberding, I have a great deal of regard for what you have 
done for our country, and I salute you for it.
    Dr. Crawford, I want to go back to what I expressed as some 
of my concerns in my opening statement, and that is the quality 
of the work and the inspections, and what brought us to really 
losing at least half of our Nation's vaccine supply just as the 
season for giving the shots began, and the role of the FDA in 
this.
    Last evening, maybe some would think there is something 
really wrong with me, instead of watching other things on TV, I 
tuned into the hearing, the House hearing that took place 
yesterday. And you were there, you testified. There were at 
least--I think at least 100 pages, detailed reports, of the 
problems that came out and the FDA's role in that, and that is 
what I want to pursue.
    There seems to be a disconnect, as I heard it, between what 
happened in August, the follow-up to the 2003 determinations of 
contamination in the plant. You seem to be insisting that there 
is not any nexus between what was found in 2003 in 
contaminations and what happened in 2004. Is that correct?
    Mr. Crawford. That is absolutely correct.
    Ms. Eshoo. And you still stand with that?
    Mr. Crawford. Yeah. If I could explain about 2003.
    Ms. Eshoo. Well, I heard your testimony, and that is that 
what was reported seemed to be corrected, and that it doesn't 
have any connection to 2004. And yet it was the British Health 
Service that shut the plant down, and that is what I want to 
pursue.
    In August 2004, as I understand it, Chiron announced 
publicly that there were at least of the supply about 5 million 
contaminated. The British service convened very high-level 
meetings. They got copies of Chiron's--of what Chiron was 
doing. The FDA was nowhere to be found in this; is that 
correct?
    Mr. Crawford. That is absolutely incorrect.
    Ms. Eshoo. All right. Tell me what the FDA actually did.
    Mr. Crawford. We were in the plant doing another duty on 
August 25 when we were informed by----
    Ms. Eshoo. What was that duty?
    Mr. Crawford. They were introducing a new line, which 
basically is a subdivision of the plant.
    Ms. Eshoo. Was that FDA inspection?
    Mr. Crawford. Yes.
    Ms. Eshoo. Or was it--and was it, FDA inspection, related 
to the 2003?
    Mr. Crawford. Well, what happened in 2003 was----
    Ms. Eshoo. I know what happened in 2003.
    Mr. Crawford. I don't think you do. What happened in 2003 
was--is that we finished our investigation of the 2001, 2002 
production. The 2003 production was perfectly all right. 
Nothing went wrong in 2003. That is the misconception that the 
newspaper got.
    Ms. Eshoo. Well, you know, there is an old adage, and it 
does apply to many, many people, that--and Alcoholics Anonymous 
is famous for it--that you first have to acknowledge that there 
is a problem. And I would use that analogy, and I am sorry to 
say that about the FDA, because it seems to me that the British 
have beaten us to the punch on this.
    Mr. Crawford. No. We actually found out about it first.
    Ms. Eshoo. What did you do about it?
    Mr. Crawford. On August 25 we quarantined all the doses of 
the vaccine----
    Ms. Eshoo. Let me just read into the record, and I will 
place it in the record, the FDA's October 2004 inspection 
report. Your own inspectors said: Failure to adequately address 
root causes during failure investigations noted during the 
inspection of year 2003 have not been adequately corrected.
    Did you read their report, number one?
    Mr. Crawford. Yeah, I approved that report.
    [The report follows:]

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    Ms. Eshoo. And did you agree with your own inspectors?
    Mr. Crawford. That was about the 2001, 2002 production. The 
2003 production was all right. The 2004 production was quite 
correctly condemned by FDA.
    Ms. Eshoo. Dr. Crawford, let me ask you this: Did you agree 
with what the British Health Services did, or did you think 
that they were absolutely off on the wrong foot and that what 
they discovered you did not agree with?
    Mr. Crawford. We sent a team in and we authenticated what 
the British did, and that is why I made the decision to destroy 
the vaccine production.
    Ms. Eshoo. You made that decision after October 5, or 
before October 5?
    Mr. Crawford. After, when we sent the team of inspectors 
in.
    Mr. Bilirakis. The gentlewoman's time has expired.
    Ms. Eshoo. If I might just finish my sentence, Mr. 
Chairman.
    We have a problem, in my view, with the FDA. The FDA has 
been slow, the FDA has not been effective, the FDA has not been 
on the beat. And what Dr. Crawford just said is that they made 
a decision, essentially started singing off the same page as 
the British Health Service, after they shut the plant down.
    Mr. Crawford. I have to respond to that.
    Mr. Bilirakis. Very quickly now.
    Mr. Crawford. Actually, the FDA did not cause the 
contamination. What the FDA did was order destroy the 
production; it couldn't be used, so the FDA did precisely what 
it was supposed to do.
    Mr. Bilirakis. Mr. Deal to inquire.
    Mr. Deal. Thank you, Mr. Chairman.
    Dr. Gerberding, you have a program known as Vaccines For 
Children, and I believe this past--this year you ordered like 
4\1/2\ million doses under that program and got less than half 
of that. Do we have a similar stockpiling program for senior 
citizens? And if we do not, should we have one? And what kind 
of cost factor would there be?
    Ms. Gerberding. This was the first time that we had a 
stockpile of flu vaccine for children, and we originally had 
put our eggs in both baskets and ordered some from Chiron and 
some from Aventis. But when we could not receive the Chiron 
doses for the stockpile, we then purchased additional doses 
from Aventis. So we have about 4\1/2\ million doses of vaccine 
in that stockpile that have been used to support the 
immunization of at risk children and also children between the 
ages of 6 and 23 months.
    We don't have a stockpile of vaccine for adults at this 
point in time, and I think that is one of the issues that needs 
to be thought about when we are trying to find solutions to the 
vaccine supply change. Would a stable market or would a 
purchase or guarantee of not having doses go to waste, or what 
are some of the ideas on how we could stabilize the market for 
the manufacturers and ensure that we had some reserves that 
could be distributed or allocated equitably if we had another 
crisis like this.
    Mr. Deal. As I indicated in my opening statement, the 
distribution issue is of concern to me and I think to a lot of 
people. The apportionment process that you participated in from 
the CDC I assume was a voluntary approach by participating 
agencies who allowed you to be intervenor, if the word is 
correct, to make a distribution. Do you feel that we need to 
give statutory authority to your agency or some Federal agency 
that in a time of crisis you had that statutory authority to be 
an intervenor?
    Ms. Gerberding. We have been relying on statutory authority 
of the State health officials and local health officials, and I 
can't tell you yet whether we could improve upon that with a 
Federal authority or not. Our State health officials developed 
the criteria for the apportionment before they knew what that 
would mean to each of them in terms of doses, which was a very 
fair and equitable way of arriving at those decisions. So the 
apportionment was formula-based, and now they are in the 
challenging phase of allocating their apportionment to people 
who need it most. We will be assessing the success of this 
effort as it goes forward.
    Mr. Deal. I would like to ask that if you--in that 
assessment process if you could make recommendations in that 
regard. I think we would be interested in hearing that.
    Ms. Gerberding. Thank you.
    Mr. Deal. Dr. Crawford, with regard to the--one of the 
delays here was the fact that the British authorities under 
their law apparently could not, because of confidentiality 
rules, reveal to FDA some of the information that they had at 
an earlier stage. My question to you would be can FDA, in 
dealing with certification of manufacturers, especially foreign 
manufacturers, can you as a condition of certification require 
that they waive any national confidentiality rules such as the 
one here to avoid this in the future?
    Mr. Crawford. We are working with that with our attorneys, 
and I don't have an answer yet, but we are working on it.
    Mr. Deal. That would appear to me to be one of the things 
that you could put as a reasonable criteria for certification.
    Mr. Crawford. Thank you.
    Mr. Deal. And I forget who made the comment, but as 
somebody from the poultry capital of the world, where I have 
got at least one or two farmers that have got more chickens 
that I have people in my entire congressional district, 
somebody said something about you couldn't do it because of the 
availability of eggs. Dr. Fauci, was that you? Have we got an 
egg problem? I am accustomed to dealing with avian flu in my 
district, and we are more concerned sometimes about the chicken 
flu than we are the human flu. But this is a reversal here.
    Mr. Fauci. We don't have an egg problem in general, but 
when you start the process of getting chickens and then getting 
eggs that are prescreened eggs that you then use to inject the 
virus in to grow, it is a process that has to start off with a 
company getting the chickens, ordering them, getting them to 
lay the eggs, get the eggs, and then going through the process.
    Mr. Deal. Do we have to have special chickens to lay these 
eggs?
    Mr. Fauci. No, you don't have to have special chickens, but 
you can't just go running around the field and get chickens to 
start laying eggs.
    Mr. Deal. I am going to volunteer some of my poultry 
producers if that is the problem.
    Mr. Fauci. The fact is, Mr. Deal, that it is a process that 
takes months of sequential steps. So when you get to step 7 and 
something goes wrong, you can't just recreate the process. You 
have to go back again and start over, get new eggs, inject 
virus into the eggs, grow it up, kill the virus, process it, 
and put it into the vials.
    Mr. Deal. So I am assuming that if you make the 
determination of the species that you are going to go after in 
January, and it is only available until later in the fall of 
the year, it is in excess of a 6-month process?
    Mr. Fauci. Yes, it is in excess of a 6-month process. And 
that is the reason why one of the other Members had asked the 
question, let us say we knew in August or September, whatever 
it is, that we, in fact, needed to have more production, we 
couldn't just turn the clock back and start from square one. 
That is the issue at hand that sometimes gets lost in the 
process.
    Mr. Deal. Thank you.
    Chairman Barton [presiding]. The gentlelady from Illinois 
is recognized for 5 minutes for questions.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    Dr. Crawford, Illinois Governor Rod Blagojevich sent a 
letter to the FDA on October 25 of this year asking the agency 
what needed to be done to get your approval to bring the 
vaccines that have already been committed now to Illinois, 
hundreds of thousands, into the State as soon as possible. I 
understand the vaccines have been manufactured by Aventis and 
GlaxoSmithKline. I also understood that earlier this week you 
indicated that the FDA will have a decision as to whether 
Illinois and New York actually will be able to bring these 
vaccines into the country within 2 or 3 weeks. So I wanted to 
ask you when Illinois can expect the decision, if you have any 
hint of whether or not we are going to be able to do that. And 
I would like to ensure today that the schedule is going to 
remain as you said and not longer.
    Mr. Crawford. As you may know, we immediately met with the 
Governor's staff, and we started the process. They shared with 
us some important information. We had to get the lot numbers. 
We have now verified the lot numbers with the production 
companies. Then we also had to accumulate what is called the 
pedigree, where all the vaccine had been, whether it had been 
in other countries, whether it had been kept under 
refrigeration or not. And then the final thing is we had to get 
information which is called a master file from these companies.
    Ms. Schakowsky. You are talking about both companies?
    Mr. Crawford. Yes. And we have got all the data we need at 
this point, and we are sifting through it, and we should have a 
decision very soon. I might add that both that Governor and a 
number of others and the mayor of New York have been very 
cooperative with us.
    Ms. Schakowsky. And have you been getting full cooperation 
from both the drug companies in providing the data that you 
need?
    Mr. Crawford. We have. We absolutely have. They are worried 
a little bit because they don't know where all the vaccine has 
been. There were rumors that it had been to other countries and 
then shipped back to England, where it had been amassed. But we 
have assured the companies that we will know what that pedigree 
or history of the vaccine after it left their plant is.
    Ms. Schakowsky. So they are fully cooperating?
    Mr. Crawford. They are fully cooperating.
    Ms. Schakowsky. I wanted to go back to that document and 
your response to it that Ms. Eshoo had referred to on how--what 
you found in 2003 is nowhere related to 2004. And I am 
confused, and I want to again read this and the sentence that 
followed that wasn't read.
    During the 2003 inspection, the firm was cited for failure 
to evaluate the reduction in--something--connection to reduce 
the possibility of contamination. There is--this is now from 
the 2004 report. There is no documentation that adequate 
corrective action has been conducted.
    So if in 2004 you are finding that the corrective action 
that was expected was not taken, how is it that you can say 
that none of the previous problems that were detected affect 
what happened in 2004?
    Mr. Crawford. The citation that that refers to was for the 
2001, 2002 production, and we closed out that investigation in 
2003. And that is why 2003 shows up. But the 2003 production 
was fine. That vaccine was okay.
    Ms. Schakowsky. There is no documentation that adequate 
corrective action has been conducted. Why is that noted during 
the--that adequate corrective action has not been taken? So I 
don't understand that.
    Mr. Crawford. What happened, they were referring to not 
2003, but to 2002. And we did--what happened was they made the 
corrections, and then it seemed to have happened again. It is 
important to point out that Chiron did not own the plant until 
mid-2003, so they were not involved in their earlier 
violations.
    Ms. Schakowsky. So there is no systemic underlying problem 
that you feel was identified?
    Mr. Crawford. No.
    Ms. Schakowsky. Okay. Let me ask one quick question also. 
On October 5, have you gone back and gotten the British 
inspection reports that indicated the problems for--before you 
found out about them?
    Mr. Crawford. We are now--due to an agreement between the 
British Government, Chiron, and the U.S. Government, we are now 
able to share that information. So we have all that, yes.
    Ms. Schakowsky. You have the full reports, and you have 
looked at those?
    Mr. Crawford. We do.
    Ms. Schakowsky. Thank you very much.
    Chairman Barton. We thank the gentlelady.
    The gentleman from Illinois Mr. Shimkus is recognized for 5 
minutes for questioning.
    Mr. Shimkus. Thank you, Mr. Chairman.
    I think what we have learned today so far is this is a very 
capital-intensive business. It takes a long time, there is a 
lot of risk. There is just a risk in being able to identify the 
strain. And even though you put three strains in, who knows if 
it is the strain that is going to hit. Again, a lot of capital 
investment, risk in identifying the influenza. There is risk in 
the liability concerns. All of this, it is when people invest 
capital dollars to hopefully at a minimum break even or make a 
profit, probably speaks to why we had five at one time and now 
have two. So if the government is going to be involved, we need 
to really ask the questions of how to encourage these 
businesses to continue to assume the risks, this capital 
expense in being in this business.
    And there is a supply and demand equation. And I think 
since now we don't have the supply we need, there is also the 
debate and the discussion on demand; how do we work on 
restricting or identifying the individuals in need so that we 
can decrease the overall demand. We have done a good job of 
saying to the U.S., everybody get a flu shot. But when the 
supply is less, then we have to refocus. And I think of my 
friend Gene Green's question on help in getting information to 
States to help get that word out so that those most vulnerable, 
we are ensuring that they are the ones that have access to 
that.
    I also find it curious in the FDA debate, and, Director 
Crawford, you are receiving the brunt of it, is that we applaud 
you for being able to find the bad batch before it was used. 
Safety and efficacy is the important thing. We have the same 
people not wanting you to do your job on the reimportation 
issue on safety and efficacy. I am sure you feel like a Ping-
Pong ball; you can't do anything right sometimes. When you do a 
good job of finding the safety and efficacy, you get beat up on 
it, and then when you say you want to ensure safety and 
efficacy, you get beat up on it there. So isn't it great to be 
in public service and to your country?
    Two questions. One is to Dr. Gerberding, and it deals with, 
again, the demand side, as I did in the little brief opening 
before the question. And since I represent a rural area of 30 
counties in southern Illinois, there is always a concern that 
rural areas, smaller communities, and as we try to restrict 
demand to those who need, but then the population is oh so 
small, we don't want to be left out. I think we are fine if we 
know we have got a fair shot like everybody else, but there is 
always a fear that rural areas get left out in the 
apportionment of goods and services because our voice isn't--
the 30 counties is not--my population in 30 counties is 
probably the same as a couple-block area in downtown Chicago. I 
mean, who do you hear more? So can you speak to that for a 
second?
    Ms. Gerberding. Just a quick frame. Of the people in high 
risk categories in normal years who should be vaccinated, we 
generally do not even vaccinate 50 percent. So we cannot, no 
matter how hard we push, create the demand even for the people 
who are the most vulnerable. That has been most frustrating. 
Actually, manufacturers have thrown away 35 million doses of 
vaccine in the last 3 or 4 years.
    Mr. Shimkus. So another issue of return on investment, if 
you are making a product in a good year and you don't have the 
use.
    Ms. Gerberding. That is right. We generally have a surplus 
of vaccine, yet we are not vaccinating 100 percent of the 
people who need it.
    With respect to the rural areas, in addition to making the 
very detailed information about who is receiving vaccine doses 
in the State available to the State health officers, we are in 
the process of making that information available to the county 
health officials, so they will know how many high-risk people 
are in their county, what their needs are, and they can then 
work with the apportionment to the State and try to make sure 
they get a fair share of the State's vaccine allotment.
    Mr. Shimkus. Dr. Fauci, can you explain briefly the 
difference between the live and the killed vaccine? We are 
going to hear from FluMist in the second panel. It is my 
understanding, and it may not be correct, does the military 
receive the live vaccine now? And from the NIH perspective, can 
you kind of explain what advantages that might have?
    Mr. Fauci. Well, the killed vaccine is thoroughly killed. 
As Dr. Gerberding mentioned at yesterday's hearing, there is no 
chance with a killed vaccine that there will be any replication 
or any chance of a person getting infected from it. It is a 
good vaccine, and it induces a good response.
    The attenuated vaccine or live, weakened vaccine, the 
MedImmune FluMist, is also a very good vaccine. It has been 
attenuated by cold adaptation, which means it is grown out in 
the cold so that it can get into the nose and replicate a bit 
and produce a very robust immune response, but it doesn't have 
any chance because of how it has been selected, for example, to 
go into the lower respiratory tract and replicate there. So it 
is very safe.
    There are theoretical possibilities that the replicating 
virus can be transmitted to someone else, but that is only a 
theoretical possibility. In fact, as a scientist who has been 
involved in attenuated vaccines for some time, I would predict 
that when further studies are done, it is going to be shown to 
be very safe and not having a problem of being transmitted 
inadvertently to someone else.
    It has some distinct advantages. First of all, a live 
attenuated vaccine is almost invariably a more potent vaccine 
than is a killed vaccine because it mimics the natural 
infection better. In fact, we have some preliminary data from 
last year that people who were vaccinated with the attenuated 
vaccine, the FluMist, had a broader immunological response that 
covers cross-reacting viruses better than a killed vaccine.
    So although there is a theoretical issue of it being able 
to be spread from person to person, in fact, I believe it is 
only theoretical, and I believe, in the long run, it will be 
shown to be a very good vaccine.
    Mr. Shimkus. Thank you. I am going to be respectful of my 
time. I am going to just throw this out. I am not asking for an 
answer.
    In the United States, have we done a job of educating so 
much on the need for flu vaccines that we have? I know we are 
not getting all the high-risk, but are we getting a lot of 
people taking the flu vaccine that probably you could argue did 
not need it?
    Ms. Gerberding. This year, we have early information about 
the low-risk people who have been vaccinated, and right now, it 
looks like less than 5 percent, which is not bad considering 
that we normally really make a push for everyone to receive a 
vaccine, and the first 33 million doses went out before the 
high-priority list was demonstrated.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Chairman Barton. We thank the gentleman from Illinois and 
recognize the distinguished gentleman from Florida, Mr. 
Stearns, for 5 minutes.
    Mr. Stearns. Thank you, Mr. Chairman.
    I have a question I really want to ask for all three of 
you.
    Dr. Crawford, I think I will start with you.
    In my opening statement, I mentioned the unpredictability 
of this flu vaccine, whether it is the Tokyo flu or whether it 
is the Beijing flu, and all the strains and how they change as 
they move, so there is a nap shot that America tries to take of 
this flu vaccine, and they said, yes, we think in high 
probability that is the one that we should inoculate everybody 
for 18 months later or a year later.
    So how does the unpredictability in the flu vaccine market 
hinder efforts to prepare for such a potential public health 
disaster? That is for each of you.
    I will start with you, Dr. Crawford.
    Mr. Crawford. Well, as you mentioned, the Department of 
Health and Human Services does determine which strain or 
strains are most likely to be a problem. In my view, one of the 
things it does commercially is, that means you have to produce 
a new kind of vaccine every year, and that has got to be a 
strain on the companies.
    Mr. Stearns. For them to do that, that is more investment, 
with the possibility of----
    Mr. Crawford. That is my belief, yes.
    Mr. Stearns. Dr. Fauci?
    Mr. Fauci. I don't think that that is the most relevant 
area of risk for the company, because the determination is made 
by WHO, together with the CDC and the FDA, about what is going 
to go into the vaccine. Ninety percent of the time they are 
correct. It is usually based on which strains have been 
circulating, usually in the southern hemisphere.
    Mr. Stearns. So they are 90 percent correct every year?
    Mr. Fauci. They are usually quite good, anywhere between 80 
and 90 percent.
    Mr. Stearns. So the evidence comes in after the flu vaccine 
season, and they say, by golly, it helped 90 percent of the 
people. How do they come up with the 90 percent? How do they 
come up with the 90 percent?
    Mr. Fauci. No, it doesn't help 90 percent of the people. 
What they do, when I say 90 percent correct, usually the 
decision that is made around January based on strains that have 
been circulating the previous season in the southern 
hemisphere, which is usually a good indication of some strains 
we might see in our own hemisphere toward the end of the 
season, you can make a pretty good determination, a 
guesstimate, about what is going to happen the following year. 
Based on that, the decision is made as to what goes into the 
vaccine.
    When I say about 80 to 90 percent, I am not saying 80 to 90 
percent effective. I mean 80 to 90 percent of the time, it is a 
correct match, that what you decided would go into the vaccine 
is actually----
    Mr. Stearns. Not efficacy, but match.
    Mr. Fauci. Right, and Dr. Gerberding can address that even 
more cogently since she is involved in that process.
    Ms. Gerberding. I just want to mention this is a global 
effort, because these strains emerge usually in other parts of 
the world. In the 2005 President's budget, there is a specific 
initiative to enhance our global detection capability so we can 
get our hands on the viruses that are emerging in Asia or in 
the Middle East or wherever the new flu strains are coming out.
    So we are creating a network of laboratories that 
circumvent the globe and get those strains to Atlanta so they 
can be sequenced, and then we can utilize them in the NIH 
laboratories to create the seed virus.
    But this is a system that is not complete yet, so we are 
making additional investments. We hope to make more investments 
in making sure that we are getting the strains in surveillance, 
and we are getting them sequenced so that we have a better 
chance of getting a 100 percent match between the likely 
viruses and what the manufacturers are creating.
    Mr. Stearns. So if you only get 90 percent, that sounds 
like a good figure. But if you get a 90 percent match, and you 
miss it by 10 percent, that means 10 percent of a lot of people 
are getting something they don't need or it is the wrong type 
of match for their flu.
    Mr. Fauci. No, that is 10 percent of the time.
    Mr. Stearns. Can I extrapolate to population? So if we had 
36,000 people die because of a lack of flu shot, they had the 
flu and they didn't have the flu shot, 10 percent it wouldn't 
have mattered.
    Mr. Fauci. No, I am sorry. Ten percent of the time, you 
will have made a wrong match. So, for that year, 100 percent of 
the people who are getting the vaccine are not getting a 
correctly matched vaccine.
    Ms. Gerberding. I just need to clarify one thing, though. 
There are three strains.
    Mr. Fauci. I am sorry, that is correct. There are three in 
there. I didn't want to get too detailed about it, but there 
are three. For example, this year's vaccine has an H3N2, an 
H1N1 and a B, so there are three components, in that particular 
flu vaccine.
    The one you are generally referring to is the one that 
gives the most trouble, is the A. Right now, the circulating 
virus we are seeing in the population is fundamentally a Fujian 
H3N2. There are others also there, but that is the predominant 
one right now, which is also contained in the vaccine.
    So apropos of your question, it looks like this year is 
actually one of those 9 out of 10 correct matches.
    Mr. Stearns. Thank you.
    Chairman Barton. We welcome our distinguished member from 
Massachusetts, the home of the World Champion Boston Red Sox, 
to the hearing, and look forward to his questions.
    Mr. Markey. Also the World Champion Boston Patriots, and 
the next president--no, no, that is different.
    Thank you, Mr. Chairman. And the ranking minority member of 
the Telecommunications Subcommittee.
    Dr. Crawford, I understand that in your response to an 
earlier question, you indicated that the contamination 
discovered in the June 2003 inspection was corrected. However, 
the FDA's October 2004 report states that, during the 2003 
inspections, the firm was cited for failure to evaluate the 
reduction in aseptic connections to reduce the possibility of 
contamination.
    There is no documentation, Doctor, that adequate corrective 
action has been conducted.
    That is the FDA. Is that report wrong?
    Mr. Crawford. The inspection took place in 2002. The report 
was closed out in 2003. The 2003 production of vaccine was 
perfectly all right. There were no violations. What happened 
was--they are talking about the 2002 problems surfaced again in 
part in 2004, 2 years later.
    Mr. Markey. So you don't think that this is a case, a clear 
case, that it is not just a question of specific isolated 
problems at this plant, but a weakness in the overall system 
that created a risk of contamination?
    Mr. Crawford. The 2004 problem was a systematic breakdown. 
That did not occur in 2002 because we were able to salvage 
vaccine. We thought, at one point, we would be able to salvage 
91 percent of this particular vaccine, and that was not the 
case. We had to make a decision that all of it was destroyed.
    Mr. Markey. But your own report says that the problem has 
not been corrected.
    Mr. Crawford. No, the problem resurfaced. The 2003 vaccine 
was perfectly all right.
    Mr. Markey. That is not what it says. It says there is no 
documentation that adequate corrective action has been 
conducted.
    Mr. Crawford. Well, yes. Yes, what happened was, in the 
2002, we found violations, and then that was closed down in 
2003. The 2003 production was okay. That proves they had made 
the corrections. They resurfaced in 2004, which is disturbing, 
and that is why we had to make the decision we did to destroy 
it.
    Mr. Markey. So if there are contaminated connections 
between tanks in the production process that were identified in 
2003 and not corrected in 2004 and which the company concluded 
was the cause of the contamination this year, why won't you 
admit that?
    Mr. Crawford. That was not 2003, that was 2002. The bio-
burden, that is, the bacteria that were present in 2002, don't 
live long enough to be in the 2004 production. So what happened 
is the same kind of thing happened again.
    Mr. Markey. If the problem hasn't been corrected, then it 
is going to come back.
    Mr. Crawford. It was corrected.
    Mr. Markey. The report says it was not corrected.
    Mr. Crawford. In 2002, we had a problem with the fill. We 
made a report. We closed that report out in 2003. Some of the 
same kinds of problems did occur again in 2004. What happened 
in 2002 is not relevant to 2004.
    Mr. Markey. Do you agree with that, Dr. Fauci? Is he 
correct in what he is saying?
    Mr. Fauci. I don't think I have enough knowledge of that 
report.
    Mr. Markey. Dr. Gerberding, is he correct in what he is 
saying?
    Ms. Gerberding. This is the first I heard--yesterday and 
today--about connections and bio-burden, and I have not seen 
the reports.
    Mr. Markey. You have never seen the reports. I am just 
afraid that the FDA has become the Mr. McGoo of the flu. You 
don't see things that everyone else sees, that there is 
obviously a problem that was identified, and it is still not 
being admitted by the FDA.
    Mr. Crawford. The FDA is a regulatory agency. What we did 
in August of this year is we caused all the production to be 
quarantined so it could not go into production, and then we 
ordered it destroyed. So we did precisely what we are supposed 
to do. And about Mr. McGoo, I don't agree with that.
    Mr. Markey. You cited this problem in 2003 for this very 
same company.
    Mr. Crawford. No, it was 2002.
    Mr. Markey. But you cited them in 2003.
    Mr. Crawford. No, we closed out the 2002 report in 2003.
    Mr. Markey. So, in 2003, you gave them a clean bill of 
health?
    Mr. Crawford. Yes, the vaccine was fine in 2003. It was 
actually used in the United States, 48 million doses.
    Mr. Markey. And you don't believe there was any reason then 
to pursue any further a vigorous investigation of whether or 
not there was contamination going on in the supply?
    Mr. Crawford. We did the no-release system, which is a 
painstaking process, for the 2003 lot, and the vaccine was 
perfectly okay, not a problem.
    Mr. Markey. Thank you, Mr. Chairman.
    Mr. Walden [presiding]. I now recognize myself for 5 
minutes.
    Dr. Crawford, I just want to make sure I understand this. 
In 2002, there was a problem. You identified the problem. You 
investigated the problem. The report came out in 2003, correct?
    Mr. Crawford. That is correct.
    Mr. Walden. In 2003, you are keeping an eye on this 
situation. There was no problem. The vaccine was safe, and it 
was distributed properly.
    Mr. Crawford. Yes.
    Mr. Walden. For the 2004 batch of vaccine, there was a 
problem similar to that in 2002?
    Mr. Crawford. Yes. It was much worse than 2002 because we 
had contamination in the final vials. That is the first time we 
had experienced that.
    Mr. Walden. So what happened in 2004 is not what happened 
in 2002.
    Mr. Crawford. Not at all.
    Mr. Weldon. Is it a problem with cleanliness in the lab? I 
don't know----
    Mr. Crawford. Some of the same kinds of things happened, 
but they were unrelated to what happened in 2002. There was a 
different company that was using the plant in 2002, so I don't 
think it was related.
    Mr. Walden. Can you describe what it is specifically 
thought that occurred that might be similar?
    Mr. Crawford. Well, we----
    Mr. Walden. The vials are not clean? Are they not purified?
    Mr. Crawford. With the flu vaccine, because of the eggs 
that they come from, there is this accumulation of bacteria, 
not only in the plant, but in the vaccine. And it is the role 
of the company to decontaminate both as they go through the 
production process.
    In 2004, they were not able to do that, and so the plant 
was contaminated, and also the final doses of vaccine were 
contaminated. So that is what happened.
    Mr. Walden. So what is it you can do or the company can do 
to ensure that the vaccine for 2005 doesn't face the same 
challenge? Are there good practices? You have put out a report, 
right, on the practices?
    Mr. Crawford. Yes.
    Mr. Walden. What does that report say? What are we going to 
do to make sure this doesn't happen again, to the best of our 
ability?
    Mr. Crawford. What we are doing is we are working with 
Chiron, the company, and also the U.K., the regulatory agency 
there, to make a final decision on whether or not this plant 
can be relicensed. That has to be done under British rules and 
also for the company's benefit to produce vaccine for next year 
by January 2005. So we are working with them on that. We will 
know early enough.
    Mr. Weldon. What happens if that plant can't be 
reauthorized?
    Mr. Crawford. Then we will have to seek sources from 
elsewhere for the vaccine.
    Mr. Weldon. And what is the time line to secure that 
source?
    Mr. Crawford. Well, the vaccine production generally begins 
about the time we will know about this plant. We should be able 
to adequately seek additional sources.
    Mr. Weldon. There are companies that would step in to the 
void and plants that could make the vaccine?
    Mr. Crawford. Dr. Gerberding might want to comment on that, 
but there are other manufacturers. They just do not choose to 
be in the U.S. market.
    Mr. Walden. Dr. Gerberding?
    Ms. Gerberding. We know from the three companies that Dr. 
Crawford and FDA are investigating internationally right now 
that we may be able to get up to 5 million additional doses 
into the United States this flu season, so we would go first to 
those companies. But it would depend on whether or not they can 
increase their production and whether or not their product can 
be licensed in the United States, because bringing it in as an 
investigational drug is a lot more complicated than bringing it 
in as a fully licensed vaccine.
    Mr. Walden. So what do we face? What are you all doing in 
the worst case scenario, which would be that Chiron cannot be 
reauthorized and this plant cannot be used? What is the backup? 
What is plan B here?
    Ms. Gerberding. Plan B will be to get any vaccine that we 
can from international sources into the country, whether it is 
licensed or not.
    But setting aside that issue, obviously we are in 
communication with the two existing manufacturers in the United 
States to see what can be done to maximize their production. 
They are not going to be able to fill in the gap.
    Mr. Walden. That was my question. Can they produce 46 
million or 48 million doses?
    Ms. Gerberding. 61 million. And even if they push it up by 
10 percent, that is not necessarily going to solve the problem.
    Mr. Walden. What do you think they could produce?
    Ms. Gerberding. Well, we are in conversations to see what 
is the best they can do with their existing production 
facilities. One thing we don't want to do is push so hard that 
we end up with the same kind of bio-burden problem that we have 
had with Chiron. So we have to be respectful that good 
manufacturing processes and safety have to be the overriding 
concern. So we have to then do what we are doing right now, 
which is, from the very beginning of the flu season, prioritize 
the vaccine and work with the manufacturers and the health 
officials and the jurisdictions to target immediately at the 
beginning of the flu season and to make sure that we have that 
plan in place before flu hits.
    Mr. Walden. All right. My time has expired.
    Now, I would like to recognize the gentleman from New 
Jersey, Mr. Ferguson, for 5 minutes.
    Mr. Ferguson. Thank you.
    A number of the points and issues I wanted to talk about 
have been addressed, liability in particular and others. I do 
have a couple of questions for Dr. Gerberding, a couple of 
observations.
    The focus that we have been talking about in terms of 
preventing a crisis in the future, obviously, that is a big 
part of the focus of today. But it doesn't take much 
imagination to consider a very serious scenario of another 
pandemic. The New York Times Magazine on November 7 talked 
about that a little bit. From what I understand, the prospect 
of a pandemic flu is not a question of really if, it is really 
more a question of when.
    We had these disastrous flu pandemics in the past. In 1918, 
500,000 people died in the U.S. alone. We have had subsequent 
pandemics in the fifties and seventies.
    My friend, Mr. Markey, I am sure would remind us that 1918 
was the last time the Boston Red Sox won the World Series 
before this year. We have had more frequent flu pandemics in 
this country than we have had Red Sox World Series 
championships. So the fact that the Red Sox won again this year 
may, in fact, be a signal that other things are in store.
    But, in particular, I know there is a pandemic influenza 
preparedness and response plan that has been completed and 
provided to the public for a response. Planning, of course, is 
good, and it is important. But I am most interested in the 
actions we are taking in terms of the implementation of that 
plan.
    Given the potential lack of a match between the available 
vaccines and a particular strain of influenza that could cause 
a pandemic, this means, obviously, that antiviral stockpiling 
is very important, something that I referred to in my opening 
statement and that we have discussed a little bit here.
    How many antiviral medications do we currently have in our 
strategic national stockpile?
    Ms. Gerberding. Right now, we have enough of the Tamiflu 
for 2.6 million treatment courses, and we are in the process of 
purchasing enough Rimantadine, which could be used for 
treatment--but we are mainly focusing on that drug for 
prophylaxis--for about 5 million people.
    This is the first time we have ever had these drugs in our 
stockpile, and we do look forward for opportunities to scale up 
that stockpile as we go forward in time, particularly of the 
Tamiflu, which is the drug that we would need to use if we had 
an avian problem.
    Mr. Ferguson. Is 2 million-something, it is a nice 
stockpile, but is that enough? Is that a large enough 
stockpile? I know that HHS has indicated through lots of 
different sources they think they could stockpile as much as 
for 40 million cases. We are talking about 2 million of 
Tamiflu; several million from other sources. We are talking 
about a country of almost 300 million people.
    Ms. Gerberding. Currently, today, our manufacturers 
estimate that they have the production capability to treat 40 
million people for influenza. That would be a pretty big 
outbreak, if not a domestic pandemic, that would require us to 
need to treat 40 million people. Because, remember, even though 
there are many people who suffer complications from flu, the 
vast majority of us have an annoying illness and a couple days 
lost from work, but we don't need treatment, because we are not 
that ill and not vulnerable to the serious complications.
    We would like to have enough capacity to assure that 
anybody who needed a dose could have it, and one of the ways of 
doing that is to expand our stockpile in the same way that we 
do drugs for terrorism events. So we would certainly prefer to 
have a larger stockpile.
    Mr. Ferguson. How are the essential personnel, military, 
health care workers? Do we have enough for essential personnel 
purposes in the stockpile? I am specifically speaking of the 
antivirals now.
    Ms. Gerberding. Yes, the antivirals can be used for 
treatment--in which case, it is a small number of tablets 
necessary--or for prophylaxis. In the case of prophylaxis, the 
need is much greater, because you have to take the prophylactic 
drugs as long as there is influenza in your community or in 
your setting. So that means that people could need to be on 
prophylactic drugs for longer periods of time.
    Part of the planning for a pandemic includes some of the 
lessons that we learned from SARS, where we had no drug and we 
had no vaccine, but we had very serious and dangerous 
outbreaks. And we learned that other kinds of more traditional 
interventions also will need to play a role, like isolation and 
voluntary quarantine or even quarantine, if necessary.
    Also, we are working with education systems to identify at 
what point would schools need to be closed, when would we set 
aside certain hospitals as flu hospitals and so on and so 
forth.
    So the planning here is very complicated, but we are 
planning from the lessons learned from SARS. I think that was a 
very valuable help to us in recognizing the seriousness of what 
we face.
    Mr. Ferguson. Just very quickly, because my time is pretty 
much over, Tamiflu, much of the Tamiflu or all of the Tamiflu 
that we stockpile is made in Switzerland. Is that correct?
    Ms. Gerberding. I believe so.
    Mr. Ferguson. What provisions or thoughts or plans have 
been made for some sort of domestic production of antivirals 
that work?
    Ms. Gerberding. The same issues we are dealing with, with 
regard to vaccines, really apply to many antimicrobial agents 
as well, where the domestic market is small relative to the 
international market. And we face this problem with some of the 
countermeasures for terrorism threats as well where the drugs 
are actually not produced domestically. So I think many of the 
ideas and opportunities to solve the vaccine problem may have 
relevance to looking at these other antimicrobial agents as 
well.
    Mr. Ferguson. Well, I would just close by saying, I 
appreciate the work that you are doing, particularly with the 
stockpile. I happen to believe that antivirals are in many ways 
at least as important as the vaccine issue, and if we are going 
to be able to address the potential crisis, we need to make 
sure that we have an adequate stockpile. I would urge you and 
your colleagues to increase your work on that.
    Thank you.
    Mr. Walden [presiding]. The Chair recognizes the 
gentlewoman from New Mexico for 5 minutes for questions.
    Ms. Wilson. Thank you, Mr. Chairman.
    And I appreciate your willingness to come here today. This 
has affected all of us tremendously.
    I have a question both for the FDA and the CDC. New Mexico, 
as well as New York City and Illinois, have joined together in 
trying to purchase 150,000 additional flu vaccine doses 
directly from companies in France and Germany. This is part of 
an effort that was initiated I think in the State of Illinois. 
What is the position of the CDC and the FDA on this effort?
    Mr. Crawford. We have been working with the Governors of 
those States to get them to do a couple of things in 
conjunction with FDA. One is to get the serial numbers. The 
other is to get the production information and distribution 
information.
    We now have all of that in hand, and we are moving forward 
to a decision very quickly. I cannot say how we will decide at 
this point, but they have been very cooperative. They have 
helped us a great deal, as we have been on our quest to get as 
many doses as we can safely introduce into the U.S. So it is 
moving forward.
    Ms. Wilson. When you say it is be moving forward quickly, 
how fast is this being expedited? And when can we expect a 
decision?
    Mr. Crawford. We should have a statement on it within the 
next few days. I wouldn't want to say exactly when, because we 
may actually need a bit more information about what countries 
the vaccine has been in, and we do need to go back to the 
primary manufacturers and make sure they will help us with some 
production information.
    But we made those preliminary visits. Everything looks like 
it is great. I just can't say exactly when. But it will be 
sooner rather than later.
    Ms. Wilson. Is it likely there will be any conditions 
placed only those vaccines if they are approved for 
importation?
    Mr. Crawford. Those vaccines are not approved in the U.S., 
so we will have to go into a special approval system, which is 
what we use for experimental products. It will require 
consenting on the part of the people that receive the vaccine, 
in all probability. We are working through that also, and that 
is part of what we are up to.
    Ms. Wilson. Is the CDC involved in this, or is it strictly 
the FDA?
    Ms. Gerberding. The warrantee of the safety of the vaccines 
is an FDA responsibility, and we are very impressed how high 
safety is valued by the FDA. We want to be able to get safe 
doses of vaccine from any source we can. So once we know they 
are safe and they can be legally brought into the country, we 
will work with appropriate people to help allocate them from 
wherever they come from. We are interested in getting as many 
doses of safe and effective vaccine available to Americans as 
we can.
    Ms. Wilson. Are there other sources of this vaccine? I know 
the States are pursuing this directly. But is the CDC pursuing 
purchasing other doses of vaccine for more distribution from 
the same sources?
    Ms. Gerberding. I believe Dr. Crawford has his eye on about 
5 million doses of vaccine from three international markets, 
and we are working with Secretary Thompson and the Department 
to figure out how we can procure any of those that are 
determined to be safe and how we can then distribute them under 
this investigational drug status, which is a large scale effort 
that we have not undertaken on such a large scale before in our 
country.
    It is not a simple process to deliver investigational 
drugs, but we have a whole team of people who are working on 
this and are already developing the human subjects process. So 
we are taking all the steps we can to deal with the regulatory 
requirements in advance of even the purchase of the drug.
    Ms. Wilson. Let me shift gears here for a second and ask 
you, looking forward to how we can avoid this problem in the 
future. In 1994, as I understand it, we had 5 manufacturers of 
flu vaccine, at least that is the information I have been 
given, and we are now down to only two today supplying the 
American market.
    How do we change this? Are we underpaying or 
undercompensating the people taking the risk to manufacture 
this stuff? Is that driven by the Federal Government, because 
we are buying so many doses of it that we really do control the 
market? Or is it a liability issue? We obviously need more 
sources of supply, and I would like your view on how we fix 
this.
    Mr. Fauci. Well, there are several that we all have been 
discussing for some time, and it has to do with everything from 
incentivizing the companies to get involved to, in some manner 
or form, reducing the risk that one has to face, risk of a very 
uncertain market, risk of the actual manufacturing process 
itself.
    As we have often said, an important analogy is, if a 
company has an opportunity of making major investments in 
trying to develop a blockbuster drug versus a major investment 
to get into the vaccine field, most of the time, if you make a 
pure business decision, it is going to be to go with less risk 
and more profit. So what we can do is everything from the 
research that I have discussed to some of the things about 
getting the awareness and the culture in this country of more 
vaccines for more people.
    We are increasing the numbers of people to be vaccinated 
approaching close to if not 150 million people, as opposed to 
what it has been in the past, which has been much less.
    Liability issues clearly are important. Perhaps tax 
incentives would be important. As I mentioned, the research. 
Taking the risk out and making this something that is an 
incentive for the companies to get involved.
    So we have to partner with the companies. It all comes down 
to partnering with the companies.
    Ms. Wilson. Thank you.
    Mr. Walden. Thank you for your question.
    I want to thank the panel for being here today. We 
certainly appreciate your input on this important issue, the 
public health. There are many more issues we need to discuss 
about how to fix the problem for the future and how we can 
partner with you to do that. So we appreciate your enlightened 
testimony today. You are now excused.
    I would now like to call up the second panel, if you want 
to make your way forward. We have with us on the second panel 
Ms. Janet Olszewski, she is the director of the Michigan 
Department of Community Health; Mr. Mark Mlotek, the Executive 
Vice President of Henry Schein, Inc.; Mr. Alan Rosenbloom, 
President and CEO, Pennsylvania Health Care Association/Center 
for Assisted Living Management; Ms. Janet Heinrich, Director, 
Healthcare/Public Health Issues, U.S. Government Accountability 
Office; Peter Paradiso, Ph.D., Vice President, New Business 
Development, Wyeth; and Cathleen Coelingh, the Senior Director 
for Regulatory and Scientific Affairs, MedImmune, Inc.
    We welcome you all here.
    We will start with Janet Olszewski. Thank you for being 
here today. We look forward to your testimony. You will have 5 
minutes. Of course, your full written testimony is in our 
record for us to read. Thank you.

STATEMENTS OF JANET OLSZEWSKI, DIRECTOR, MICHIGAN DEPARTMENT OF 
 COMMUNITY HEALTH; JANET HEINRICH, DIRECTOR, HEALTHCARE/PUBLIC 
  HEALTH ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; ALAN 
    ROSENBLOOM, PRESIDENT AND CEO, PENNSYLVANIA HEALTH CARE 
  ASSOCIATION/CENTER FOR ASSISTED LIVING MANAGEMENT; PETER R. 
PARADISO, VICE PRESIDENT, NEW BUSINESS DEVELOPMENT, WYETH; MARK 
 E. MLOTEK, EXECUTIVE VICE PRESIDENT, HENRY SCHEIN, INC.; AND 
KATHLEEN COELINGH, SENIOR DIRECTOR OF REGULATORY AND SCIENTIFIC 
                    AFFAIRS, MEDIMMUNE, INC.

    Ms. Olszewski.  Thank you. Good afternoon, Mr. Chairman and 
distinguished members of the subcommittees. My name is Janet 
Olszewski, and I want to thank you for this opportunity to 
share Michigan's experience related to this year's influenza 
vaccine shortage.
    Governor Granholm and I are committed to keeping Michigan's 
citizens safe and informed throughout this process and to 
assure that this situation does not repeat itself.
    I am the director of the Michigan Department of Community 
Health, the State agency that houses the public health 
responsibilities for the State of Michigan. Today, I represent 
both the State of Michigan as well as the Association of State 
and Territorial Health Officials.
    I would like to share Michigan's experience with the 
current flu vaccine shortage and then highlight three areas 
where we believe the Federal Government must provide effective 
leadership to avoid problems like those we are facing today.
    These areas include ensuring a safe and adequate supply of 
flu vaccine every year; creating an adult immunization program; 
and maintaining and enhancing the infrastructure necessary for 
an optimal emergency response.
    On Tuesday, October 5, 2004, after Chiron announced it was 
unable to deliver any vaccine to fill this year's orders, staff 
from our department and health departments across the country 
participated in an emergency call with the Association of State 
and Territorial Health Officials and the Centers for Disease 
Control to discuss possible strategies to manage the sudden 
vaccine shortage.
    One of the responses that came from CDC, in consultation 
with the Advisory Committee on Immunization Practices, was to 
recommend that the vaccine that we have only be administered to 
individuals in a set of high-priority groups.
    In Michigan, as in many States, most vaccine is purchased 
privately by physicians, hospitals, nursing homes and even 
major grocery and retail chain stores through distributors or 
directly from manufacturers such as Aventis. We knew this fact 
would make the job of tracking inventory and assuring that only 
people in priority categories achieve the vaccine extremely 
challenging. We also knew that we could not do it alone.
    Using information from the CDC recommendations and other 
estimates, we determined that roughly 3.4 million or one-third 
of Michigan's citizens would be eligible for vaccination in the 
high-priority groups. Our first inventory after October 5 
indicated we had approximately 500,000 doses in the State. We 
now know we will have just under 2 million doses of Aventis flu 
vaccine to vaccinate that high-risk group. This includes the 
340,000 doses of redistributed vaccine that we expect to 
receive. And this would allow us to vaccinate only 58 percent 
of the high-risk groups if we knew that all doses were only 
going to high-risk groups. And as Dr. Gerberding indicated, 
there was some vaccine distributed before October 5, and that 
could have gone to other groups as well.
    By Friday of that first week, we had engaged the leadership 
of the Michigan Association of Local Public Health--we have a 
robust local health department community in our State--to 
discuss how they would participate with us in responding to 
this crisis.
    During that first week, we also made calls to grocery, 
retail and pharmacy associations to request that vaccine only 
be administered to individuals within the priority groups and 
to request that their members advise us of any vaccine supply 
they had.
    As the situation unfolded, the State's response included 
tracking inventory and disease; establishing mechanisms for 
routine communications with our public and private partners and 
the general public; and developing a reallocation plan, which 
included a rapid response team made up of individuals from the 
State and local public health teams to allocate vaccine supply.
    At the start of this event, outside of the vaccine that the 
State purchases for the Vaccine for Children Program, we had no 
method to track inventory. Therefore, in the week following the 
Chiron announcement, Michigan's 45 local health departments 
began the laborious task of calling all private physicians in 
their jurisdictions to identify who had extra vaccine and who 
was in need of vaccine.
    To reach the broader public, the department sponsored a 
large press conference on October 13 that included 
representatives of all the major health plans, medical, 
osteopathic, pharmaceutical, and local and public health 
association, and we have continued those activities on a 
regular basis.
    Because tracking vaccine was proving to be extremely 
challenging and we had anecdotal evidence that a few groups 
considered the CDC priority-group information to be advisory, 
the department took another step and issued a public health 
order that legally restricts vaccination to those in the 
priority populations. Several other States have also used their 
authority to issue such orders.
    The flu vaccine shortage has stretched our staff within the 
department as well as the staff in local health departments to 
capacity and beyond. We have fielded numerous calls and e-mails 
from corporations administering vaccine, health-related 
organizations, private providers, consumers, all of whom are 
trying to get vaccines, all of whom are trying to get high-
priority populations vaccinated.
    Recently, the CDC and Aventis released information 
regarding where vaccine in Michigan has been distributed using 
the secure data network that Dr. Gerberding referenced in her 
testimony. In addition, they soon followed this information 
with information about how much more we could expect.
    Although the details of how the States will physically 
receive and finance the remaining vaccine have not been fully 
explained, our task of smoothing out the distribution gaps 
should become easier now that we have this information.
    We are very appreciative of the public-private partnership 
that the CDC and Aventis have forged during these trying times. 
Likewise, we are appreciative of the help we have received from 
all of our colleagues in local public health, provider offices, 
health-related institutions and agencies, major corporations 
and the general public.
    However, I cannot stress enough how important it is for 
Congress to take steps now to prevent a similar shortage from 
occurring again. The Federal Government must start now to 
ensure that we have a reliable public health infrastructure to 
combat the flu, year in and year out. I will emphasize three 
components.
    The Federal Government must take responsibility for 
ensuring a safe and adequate supply of flu vaccine every year. 
We now see States and municipalities individually scrambling to 
secure their own additional supplies from Canadian and European 
sources because it is our obligation to take care of our 
citizens. This is not an effective approach to vaccine supply.
    Only the Federal Government has the ability to assure an 
adequate and safe influenza vaccine supply each year. This is 
not the only supply crisis we have faced in recent years. 
However, it is the most significant.
    The Federal Government should take whatever steps are 
necessary to ensure a stable supply. Relying simply on market 
forces does not work when it comes to flu vaccine. In order to 
assure the manufacture of adequate supply of vaccine, you may 
have to offer some types of financial guarantees to 
manufacturers, contract directly with suppliers, even if it 
means some years our supply exceeds actual demand.
    We also need to develop the capability to produce vaccine 
throughout the year and to encourage additional manufacturers 
to enter the market.
    Also, NIH research into new technologies to produce vaccine 
in more expeditious and efficient ways are necessary.
    Finally, the recent news that intradermal injection of 
inactivated flu vaccine could produce an immune response in 
selected populations using fractional doses would also help the 
supply issue, if it is pursued, and we believe it should be.
    Also, it is important that the Federal Government should 
help in creating an adult immunization program. Ninety percent 
of the 36,000 influenza-related deaths that occur each year in 
the U.S. are among those 65 and older. Due to influenza's 
profound impact on older adults' health, the ACIP broadened the 
recommendations for flu vaccine in 2002 to include adults age 
50 to 64 in addition to older adults.
    One objective of Healthy People 2010 is to achieve 90 
percent coverage of non-institutionalized adults. However, as 
you have heard, we often vaccinate less than 50 percent.
    There is no specific Federal CDC funding available to 
States or the private sector for adult vaccination programs. 
All immunization grants are intended to serve childhood 
vaccination programs before serving adults, and the grants have 
been insufficient to meet both needs.
    Funding for adult immunization programs would not only 
assist in achieving our objective of vaccination, but it would 
decrease morbidity and mortality from influenza and pneumonia 
and also therefore reduce health care costs.
    Finally, the Government must help us maintain and enhance 
the infrastructure necessary for optimal emergency response. We 
must better address the issues of both communication and the 
ability to redirect allocation of supply. A decentralized 
ordering and distribution system, such as the one we have now, 
requires strong provisions for communication regarding the 
location of existing supply and the ability to redirect 
allocation.
    CDC's Secured Data Network has worked well in disseminating 
vital information these last couple of weeks and has made the 
reallocation during Phase II far less burdensome than Phase I. 
We recommend that it be used regularly throughout the flu 
season to communicate flu vaccine allocation patterns to public 
health officials.
    We have also depended on our emergency preparedness network 
during this shortage. Both State and local health jurisdictions 
have used their emergency preparedness contact system, known as 
the Help Alert Network, to send and receive information. This 
system was built after 9/11 to address cases of bioterrorism, 
but the vaccine crisis demonstrates the importance of this 
infrastructure to an adequate and timely response to a wide 
variety of public health events.
    Continued and enhanced Federal support for Michigan and 
other States' emergency preparedness is absolutely vital. 
Likewise, our public health order served our citizens well by 
restricting the use of flu vaccine. We advocate that the 
Department of Health and Human Services have similar authority 
to potentially restrict the use and to manage allocation of flu 
vaccine during severe shortages.
    Thank you for the opportunity to speak with you today.
    [The prepared statement of Janet Olszewski follows:]

Prepared Statement of Janet Olszewski, Representing Michigan Department 
of Community Health and The Association of State and Territorial Health 
                               Officials

    Good morning Mr. Chairmen and distinguished members of the 
Subcommittees. My name is Janet Olszewski and I want to thank you for 
this opportunity to share Michigan's experience relating to this year's 
influenza vaccine shortage. Governor Granholm and I are committed to 
keeping Michigan's citizens safe and informed throughout this process.
    I am the Director of the Michigan Department of Community Health 
(MDCH), the state agency that houses the public health administration 
responsibilities for the State of Michigan. I earned my master's degree 
in social work from the University of Michigan and obtained my 
undergraduate degree from Boston University. I have worked for the 
State of Michigan, in a variety of public health roles for over 25 
years, and also served as Vice President for Government Programs and 
Regulation at M-CARE, a managed care company owned by the University of 
Michigan.
    Today I represent both the State of Michigan as well as the 
Association of State and Territorial Health Officials. I would like to 
share Michigan's experience with the current flu vaccine shortage and 
then highlight three areas where we believe the federal government must 
provide effective leadership to avoid problems like those we are facing 
today. These areas include:

1) Ensuring a safe and adequate supply of flu vaccine every year;
2) Creating an adult immunization program; and
3) Maintaining and enhancing the infrastructure necessary for an 
        optimal emergency response.

                     BACKGROUND/MICHIGAN EXPERIENCE

    On Tuesday, October 5, 2004, after Chiron announced it was unable 
to deliver any vaccine to fill this year's orders, staff from MDCH and 
health departments across the country participated in an emergency call 
with the Association of State and Territorial Health Officials (ASTHO) 
and the Centers for Disease Control and Prevention (CDC) to discuss 
possible strategies to manage the sudden vaccine shortage. One of the 
first responses came from the CDC, who in consultation with the 
Advisory Committee on Immunization Practices (ACIP), recommended 
inactivated flu vaccine be administered only to individuals within the 
following priority groups this flu season:

 all children aged 6-23 months;
 adults aged >65 years;
 persons aged 2-64 years with underlying chronic medical conditions;
 all women who will be pregnant during the influenza season;
 residents of nursing homes and long-term care facilities;
 children aged 6 months-18 years on chronic aspirin therapy;
 health-care workers involved in direct patient care; and
 out-of-home caregivers and household contacts of children aged <6 
        months.
    In Michigan, as in many states, most vaccine is purchased privately 
by physicians, hospitals, nursing homes, and even major grocery and 
retail stores through distributors or directly from manufacturers such 
as Aventis. We knew this fact would make the job of tracking inventory 
and assuring that only people in priority categories receive the 
vaccine extremely challenging. We also realized we could not do it 
alone.
    Using information from the CDC recommendations and other estimates 
from the CDC, our staff determined that roughly 3.4 million 
``priority'' Michigan residents would be eligible for vaccination, 
representing over one third of Michigan's population. Our first 
inventory after October 5 indicated we had approximately 500,000 doses 
within the state. We now know we will have just under 2 million doses 
of Aventis flu vaccine, which will be available to vaccinate those 3.4 
million residents. This includes the 340,000 doses of redistributed 
vaccine that Michigan expects to receive from Aventis.
    By Friday of that first week, MDCH had engaged the leadership of 
the Michigan Association of Local Public Health, an organization of 
county health departments, in discussions to determine the role of 
local public health in responding to this crisis. We also convened a 
meeting of public health and academic physicians to make 
recommendations about further prioritizing within the CDC priority 
groups.
    During the first week, calls were also made to grocery, retail and 
pharmacy associations to request that vaccine only be administered to 
individuals within the priority groups and to request that their 
members advise us of any vaccine supply they had. As the situation 
unfolded, the State's response included tracking vaccine inventory and 
influenza disease, establishing mechanisms for routine communications 
with private and public partners and the general public, and developing 
a reallocation plan, which included establishing a ``rapid response 
team'' made up of individuals from state and local public health 
agencies to allocate vaccine supply.
    At the start of this event, aside from the vaccine that the State 
purchases for the Vaccines for Children Program, there was no method to 
track vaccine inventory. Therefore, in the week following the Chiron 
announcement, Michigan's 45 local health departments began the 
laborious task of calling all private providers in their jurisdictions 
to identify who had extra vaccine and who was in need of vaccine. To 
reach the broader public, the Department sponsored a large press 
conference on October 13th that included representatives of major 
health plans and medical, osteopathic, pharmaceutical, and local public 
health associations and have continued those activities on a regular 
basis. Because tracking vaccine was proving to be extremely challenging 
and we had anecdotal evidence that a few groups considered the CDC 
priority group information to be advisory, the Department took another 
step and issued a public health order that restricted vaccination to 
those in the priority populations. Several other states have also used 
their authority to issue public health orders.
    The flu vaccine shortage has stretched the Michigan Department of 
Community Health's Division of Immunization to capacity and beyond. In 
addition to countless emails from the public, local public health 
agencies, health-related organizations and other corporations 
administering vaccines, staff have received numerous calls from 
individuals and agencies with requests for detailed information, such 
as locating vaccine sources, explaining the priority groups and how 
they were determined, and discussing the public health order. We are 
pleased to note that most providers have welcomed the order as a way of 
explaining to patients the rationale for adhering to the CDC's priority 
groups. And, to our knowledge, all providers have willingly followed 
the order.
    In addition to the Immunization staff, the flu vaccine shortage has 
required the involvement of all of our senior-level management, public 
information personnel and some of our emergency preparedness personnel 
to manage state level planning, logistics, communication and 
coordination of activities.
    Recently the CDC and Aventis released information regarding where 
vaccine in Michigan has been distributed using the CDC's Secure Data 
Network. In addition, they soon followed this information with data 
about how much more vaccine Michigan could expect this flu season. We 
will receive 340,000 doses, as I mentioned previously. Although the 
details of how the states will physically receive and finance the 
remaining vaccine have not been fully explained, our task of 
``smoothing'' out the distribution gaps should become easier.
    We are very appreciative of the public-private relationship that 
the CDC and Aventis have forged during these trying times. Likewise, we 
are appreciative of the help we have received from our colleagues in 
local public health, provider offices, health-related institutions and 
agencies, major corporations and the general public in Michigan during 
this flu vaccine shortage. However, I cannot stress enough how 
important it is for Congress to take steps now to prevent a similar 
shortage from occurring again.

                            RECOMMENDATIONS

    The federal government must start now to ensure that we have a 
reliable public health infrastructure to combat the flu year in and 
year out. I will emphasize three components of an effective national 
flu fighting strategy that will ensure a stable flu vaccine supply and 
develop systems to ensure maximum coverage of target populations:

1) The federal government must take responsibility for ensuring a safe 
        and adequate supply of flu vaccine every year
    We see states and municipalities individually scrambling to secure 
their own additional supplies of vaccine from Canadian and European 
sources because of our obligation to take care of our citizens, and 
advocating with FDA to approve the sources. This is not an effective 
approach to vaccine supply.
    Only the federal government has the ability to assure adequate and 
safe influenza vaccine supply each year. The current supply crisis is 
not the only one we have experienced in recent years. However, this is 
the most significant. The federal government should take whatever steps 
are necessary to ensure a stable supply in future years.
    Relying simply on market forces does not work when it comes to the 
flu vaccine. In order to ensure manufacture of adequate volumes of 
vaccine, the federal government may have to offer some type of 
financial guarantee to manufacturers, or contract directly with 
suppliers, even if it means that in some years our supply exceeds the 
actual demand for vaccine.
    Developing the capability to produce vaccine throughout the year 
and encouraging additional manufacturers to enter the market are two 
initiatives to address this issue. Also, NIH research to investigate 
new technologies to produce flu vaccine in more expeditious and 
efficient ways are necessary. Finally, recent news that intradermal 
injection of inactivated flu vaccine could produce an immune response 
in selected populations using fractional doses is both a supply and 
cost issue and this option should be pursued.

2) The federal government must help create an adult immunization 
        program
    A robust adult immunization program is necessary because 
approximately 90% of the annual 36,000 influenza-related deaths that 
occur in the U.S. are among those aged 65 and older. Due to influenza's 
profound impact on older adult health, ACIP broadened the 
recommendations for flu vaccination in 2002 to include adults aged 50-
64 years in addition to adults 65 years and older.
    This season, adults recommended to receive inactivated influenza 
vaccine include those with chronic medical conditions or weakened 
immune systems, those aged 65 and older or those in contact with high 
priority groups, such as most health care workers or caregivers to 
children aged less than six months.
    One objective of Healthy People 2010 is to achieve 90% coverage of 
non-institutionalized adults aged 65 years and older for both influenza 
and pneumococcal vaccinations. However, the CDC reported recently that 
perhaps only 50-60% of those eligible for influenza vaccination in this 
population receive it in a given season. There is no specific federal/
CDC funding available to the states or the private sector for adult 
vaccination programs; all immunization grants are intended to serve 
childhood vaccination programs before serving adults, and the grants 
have been insufficient to meet both childhood and adult needs.
    Funding for adult immunization programs in the United States would 
not only assist achieving the national 2010 health objective, but 
decrease morbidity and mortality from influenza and pneumonia in the 
U.S. population. It would also reduce health care costs because 
morbidity and mortality would be reduced.

3) The federal government must maintain and enhance the infrastructure 
        necessary for an optimal emergency response
    In addition to the supply problems, the infrastructure necessary 
for an optimal emergency response requires several elements related to 
the distribution of vaccine.
    We must better address issues of both communication and the ability 
to re-direct allocation. A decentralized ordering and distribution 
system requires strong provisions for communication regarding location 
of existing supply and the ability to redirect allocation. The CDC's 
Secure Data Network has worked well in disseminating vital information 
these last couple of weeks and has made vaccine re-allocation during 
phase II far less burdensome than in phase I. We recommend that it be 
used regularly throughout the flu season to communicate flu vaccine 
allocation patterns to public health officials.
    We have depended on Michigan's emergency preparedness network 
during the vaccine shortage. Both the State and local health 
jurisdictions have used the emergency preparedness contact system (the 
Health Alert Network) to send and receive information from providers 
and other health care colleagues. This system was built after 9/11 to 
address cases of bioterrorism, but the vaccine crisis demonstrates the 
importance of this infrastructure to an adequate and timely response to 
a wide variety of public health events. Continued and enhanced federal 
support for Michigan and other states' emergency preparedness is 
absolutely vital.
    Likewise, Michigan's public health order has served our citizens 
well by restricting the use of flu vaccine to those individuals in the 
CDC's priority groups. We advocate that the Department of Health and 
Human Services have similar authority to potentially restrict the use 
and to manage the allocation of flu vaccine during severe shortages.
    Thank you for this opportunity to speak with you today. I believe 
addressing these critical issues should be made a priority by Congress 
in order to protect our communities and avoid a potential large-scale 
flu outbreak. I would be pleased to answer any questions you may have.

    Mr. Walden. Thank you.
    Again, just a reminder to the other panelists of the 5-
minute rule, if you could.
    Ms. Heinrich, thank you for being here today. We look 
forward to your comments.

                   STATEMENT OF JANET HEINRICH

    Ms. Heinrich. Mr. Chairman and members of the 
subcommittees, I am pleased to be here today to discuss issues 
regarding the annual production and distribution of flu vaccine 
and efforts to target high-risk populations when there are 
shortages.
    Each year, influenza viruses are associated with deaths and 
hospitalizations, especially for persons age 65 and over. The 
best way to prevent influenza is to be vaccinated each year. 
But in the past several years, this country has experienced 
periods when the demand for flu vaccine exceeded the supply.
    Ensuring an adequate and timely supply of vaccine is 
difficult under the best of circumstances and has become more 
so with only a few manufacturers. As we are seeing this year, 
problems at one manufacturer can significantly upset the fall 
delivery of vaccine and cause fluctuations in who has ready 
access to the vaccine.
    Those who ordered from the manufacturer experiencing 
problems did not have any vaccine even for high-risk patients, 
while other providers who ordered the vaccine from the 
manufacturer without the problems could hold clinics in early 
October that were available to anyone who wanted a vaccination.
    Matching the supply and demand is also a challenge. For 
example, in work we did in 2000-2001, we saw a substantial 
proportion of flu vaccine distributed much later than usual due 
to manufacturing problems, causing temporary shortages, but 
then was followed by decreased demand as more vaccine became 
available later in the year.
    Last year's shortages of vaccine have been attributed to an 
earlier than expected and more severe flu season and to higher 
than normal demand, likely resulting from the media coverage of 
pediatric deaths associated with influenza. So far this year, 
clearly, demand is outpacing the available supply.
    Our work has also found continuing obstacles to delivering 
flu vaccine to high-risk individuals in a time of short supply, 
as we have just heard. During the fall 2000 vaccine shortage, 
for example, many physicians reported that they felt they did 
not receive priority for vaccine delivery, even though about 
two-thirds of seniors generally get their flu vaccinations in 
medical offices.
    For the current season, we have heard that CDC has revised 
its recommendations for vaccination to include only the 
estimated 85 million people in high-risk groups as well as 
about 13 million people in other priority groups, such as 
health care providers. Although HHS has limited authority to 
control distribution, it is working with the remaining major 
manufacturers as well as the State and local health departments 
to assess needs, prioritize customers and make plans to 
redirect the remaining vaccine.
    While CDC can recommend and encourage providers to immunize 
high-risk patients first, it does not have direct control over 
the distribution and cannot ensure that its priorities will be 
implemented.
    As these actions play out, more time is needed to gauge the 
success of the CDC's efforts to mitigate the current flu 
vaccine shortage and direct the vaccine to high-risk 
individuals.
    In conclusion, ensuring an adequate and timely supply of 
vaccine to protect high-risk individuals from influenza and 
flu-related complications continues to be a challenge. The 
limited number of manufacturers and the problems experienced in 
recent years illustrate the fragility of the vaccine production 
process.
    The abrupt loss of nearly half of the Nation's vaccine 
supply has further highlighted the potential inequities that 
can result from the current vaccine distribution system. 
Despite efforts by CDC and others, there remains no system to 
ensure that persons at high risk from complications receive the 
vaccine first when vaccine is in short supply.
    Mr. Chairman, that concludes my statement. I am happy to 
answer any questions.
    [The prepared statement of Janet Heinrich follows:]

 Prepared Statement of Janet Heinrich, Director, Healthy Care--Public 
             Issues, U.S. Government Accountability Office

    Messrs. Chairmen and Members of the Subcommittees: Thank you for 
the opportunity to be here today as you discuss the nation's response 
to problems with the supply and distribution of influenza vaccine. This 
year's loss of roughly half of the country's supply of flu vaccine 
highlighted what has become a growing problem--the fragility of the 
vaccine production and distribution system. We have been monitoring 
this issue for a number of years, and we are starting new work for the 
House Committee on Government Reform to analyze this year's situation 
in greater detail. My testimony today focuses on (1) the challenges in 
ensuring adequate supply to meet demand for vaccine and (2) the 
mechanisms in place to target high-risk populations when, as happened 
this year, a vaccine shortage occurs.
    My remarks are based on reports and testimony we have issued since 
May 2001 1 as well as work conducted to update key 
information. Our prior work on flu vaccine included analysis of 
information provided by and interviews with Department of Health and 
Human Services (HHS) officials, vaccine manufacturers, medical 
distributors and their trade associations, companies that provide flu 
vaccinations at retail outlets and work sites, physician and other 
professional associations, and other purchasers. We also surveyed 
physician group practices and interviewed health department officials 
in all 50 states about their experiences in the 2000-2001 flu season. 
In September and November 2004 we updated this work with analysis of 
information provided by Centers for Disease Control and Prevention 
(CDC) officials, one major manufacturer, and other sources. We obtained 
information on (1) the available doses and demand for the 2002-2003 and 
2003-2004 flu seasons, (2) the status of this year's flu vaccine, and 
(3) CDC activities, including actions taken following the announcement 
that one major manufacturer could not supply any vaccine for the U.S. 
market this year. We conducted all of our work in accordance with 
generally accepted government auditing standards.
---------------------------------------------------------------------------
    \1\ See ``Related GAO Products,'' at the end of this testimony, for 
a list of our earlier work related to flu vaccine.
---------------------------------------------------------------------------
    In summary, the current situation demonstrates the challenges of 
ensuring an adequate and timely flu vaccine supply. Only three 
manufacturers produce flu vaccine for the U.S. market, and the 
potential for future manufacturing problems such as those experienced 
both this year and to a lesser degree in previous years is still 
present. When shortages occur, their effect can be exacerbated by the 
existing distribution system. Under this system, health providers and 
vaccine distributors generally order a particular manufacturer's 
vaccine and have limited recourse, even for meeting the needs of high-
risk persons, if that manufacturer's production is adversely affected. 
By contrast, providers who purchased vaccine from a different 
manufacturer might receive more of their order and be able to vaccinate 
their high-risk patients.
    The current situation also reflects another concern: the nation 
lacks a systematic approach for ensuring that seniors and others at 
high risk for flu-related complications receive flu vaccine when it is 
in short supply. Once this year's shortage became apparent, CDC took a 
number of steps to influence distribution patterns to help providers 
get some vaccine for their high-risk patients. These steps are still 
playing themselves out, and it will take more time to assess how well 
they will work. Problems have not been totally averted, however, as 
there have been media reports of long lines to obtain limited doses of 
vaccine and of high-risk individuals unable to find a flu vaccination 
in a timely fashion.

                               BACKGROUND

    Influenza is associated with an average of more than 200,000 
hospitalizations and 36,000 deaths each year in the United States. Most 
people who get the flu recover completely in 1 to 2 weeks, but some 
develop serious and life-threatening medical complications, such as 
pneumonia. People who are aged 65 and older, people of any age with 
chronic medical conditions, children younger than 2 years, and pregnant 
women are more likely to get severe complications from influenza than 
other people. 2
---------------------------------------------------------------------------
    \2\ Influenza and pneumonia rank as the fifth leading cause of 
death among persons aged 65 and older. Persons aged 65 and older are 
involved in more than 1 of 2 hospitalizations and 9 of 10 deaths 
related to influenza.
---------------------------------------------------------------------------
    For the 2004-2005 flu season, CDC initially recommended in May 2004 
that about 185 million Americans--about 85 million in high-risk groups 
and over 100 million in other target groups--receive the vaccine, which 
is the primary method for preventing influenza. Groups at high-risk for 
flu-related complications included people aged 65 years or older; 
residents of nursing homes and other chronic-care facilities; people 
with chronic conditions such as asthma and diabetes; children and 
adolescents aged 6 months to 18 years who are receiving long-term 
aspirin therapy; pregnant women; and children aged 6 to 23 months. 
Other target groups identified in the May 2004 recommendations included 
persons aged 50 to 64 years and people who can transmit influenza to 
those at high-risk, such as health care workers, employees of nursing 
homes, chronic-care facilities, and assisted living facilities, and 
household contacts of and those who provide home care to high-risk 
individuals. 3 Not everyone in these high-risk and target 
groups, however, receives a vaccination each year. For example, based 
on the 2002 National Health Interview Survey and other sources, CDC 
estimates that only about 44 percent of individuals at high-risk and 
about 20 percent of individuals in the other target groups were 
vaccinated.
---------------------------------------------------------------------------
    \3\ See HHS, Centers for Disease Control and Prevention, 
``Prevention and Control of Influenza: Recommendations of the Advisory 
Committee on Immunization Practices (ACIP),'' Morbidity and Mortality 
Weekly Report, vol. 53 (2004). CDC also recommended a vaccination for 
anyone who wanted one.
---------------------------------------------------------------------------
    It takes about 2 weeks after vaccination for antibodies to develop 
in the body and provide protection against influenza virus infection. 
CDC recommends October through November as the best time to get 
vaccinated because the flu season often starts in late November to 
December and peaks between late December and early March. However, if 
influenza activity peaks late, vaccination in December or later can 
still be beneficial.
    Producing sufficient quantities of influenza vaccine is a complex 
process that involves growing viruses in millions of fertilized chicken 
eggs. This process, which requires several steps, generally takes at 
least 6 to 8 months from January through August each year, so vaccine 
manufacturers must predict demand and decide on the number of doses to 
produce well before the onset of the flu season. Each year's vaccine is 
made up of three different strains of influenza viruses, and, 
typically, each year one or two of the strains is changed to better 
protect against the strains that are likely to be circulating during 
the coming flu season. The Food and Drug Administration (FDA) and its 
advisory committee decide which strains to include based on CDC 
surveillance data, and FDA also licenses and regulates the 
manufacturers that produce the vaccine for distribution in the United 
States.
    In a typical year, manufacturers make flu vaccine available before 
the optimal fall season for administering flu vaccine. For the 2003-
2004 flu season, two manufacturers--one with production facilities in 
the United States and one with production facilities in the United 
Kingdom--produced about 95 percent of the vaccine for the United 
States. A third U.S. manufacturer produces a flu vaccine that is given 
by nasal spray and is only approved for healthy persons aged 5 through 
49 years. This nasal spray vaccine is not recommended for individuals 
at high risk for flu-related complications. According to CDC, this 
manufacturer produced about 4 million doses of the nasal spray vaccine 
for the 2003-2004 season.
    Flu vaccine production and distribution are largely private-sector 
responsibilities. Like other pharmaceutical products, flu vaccine is 
sold to thousands of purchasers by manufacturers, numerous medical 
supply distributors, and other resellers such as pharmacies. These 
purchasers provide flu vaccinations at physicians' offices, public 
health clinics, nursing homes, and at nonmedical locations such as 
workplaces and various retail outlets. Millions of individuals receive 
flu vaccinations through mass immunization campaigns in these 
nonmedical settings, where organizations such as visiting nurse 
agencies under contract administer the vaccine.4 In a 
typical year, most influenza vaccine distribution and administration 
are accomplished within the private sector, with relatively small 
amounts of vaccine purchased and distributed by CDC or by state and 
local health departments.
---------------------------------------------------------------------------
    \4\ Data collected by states through the CDC Behavioral Risk Factor 
Surveillance System during 2002 indicate that among persons aged 18 
years or older reporting receipt of flu vaccine, about two-thirds 
reported getting their last flu vaccination at a health care facility, 
such as a doctor's office, health center, or health department, while 
about one-third reported getting vaccinated at a workplace, community 
center, store, or other location.
---------------------------------------------------------------------------
    For the 2004-2005 season, CDC had estimated that about 100 million 
doses of flu vaccine would be available for distribution through this 
network. On August 26, 2004, one major manufacturer announced a small 
quantity of its flu vaccine did not meet sterility specifications and 
that distribution of its vaccine would be delayed until after further 
tests were completed. On October 5, 2004, this manufacturer announced 
that the regulatory body in the United Kingdom, the Medicines and 
Healthcare Products Regulatory Agency (MHRA), had temporarily suspended 
the company's license to manufacture flu vaccine in its facility in 
Liverpool, England. The manufacturer stated that this action prevented 
the company from releasing any vaccine for the 2004-2005 flu season--
effectively reducing the anticipated U.S. supply by nearly half. This 
sudden disruption of the supply set off the chain of events the nation 
has experienced in the past 6 weeks, and has focused national attention 
on the flu vaccine supply and distribution system.

 CHALLENGES EXIST IN ENSURING AN ADEQUATE AND TIMELY FLU VACCINE SUPPLY

    Ensuring an adequate and timely supply of vaccine is a difficult 
task. It has become even more difficult because there are few 
manufacturers. As we are witnessing this year, problems at one or more 
manufacturers can significantly upset the traditional fall delivery of 
influenza vaccine. These problems, in turn, can create variability in 
who has ready access to the vaccine.
    Matching flu vaccine supply and demand is a challenge because the 
available supply and demand for vaccine can vary from month to month 
and year to year, as the following examples illustrate.
     In 2000-2001, when a substantial proportion of flu vaccine was 
distributed much later than usual due to manufacturing difficulties, 
temporary shortages during the prime period for vaccinations were 
followed by decreased demand as additional vaccine became available 
later in the year. Despite efforts by CDC and others to encourage 
people to seek flu vaccinations later in the season, providers still 
reported a drop in demand in December. The light flu season in 2000-
2001, which had relatively low influenza mortality, probably also 
contributed to the lack of interest. As a result of the waning demand 
that year, manufacturers and distributors reported having more vaccine 
than they could sell. In addition, some physicians' offices, employee 
health clinics, and other organizations that administered flu 
vaccinations reported having unused doses in December and later.
     For the 2002-2003 flu season, according to CDC officials, vaccine 
manufacturers produced about 95 million doses of vaccine, of which 
about 83 million doses were used and about 12 million doses went 
unused.
     For the 2003-2004 flu season, shortages of vaccine were 
attributed to an earlier than expected and more severe flu season and 
to higher than normal demand, likely resulting from media coverage of 
pediatric deaths associated with influenza. According to CDC officials, 
this increased demand occurred in a year in which manufacturers had 
produced about the same number of doses used in the previous season--
about 87 million doses total--and that supply was not adequate to meet 
the demand.
    If production problems delay or disrupt the availability of vaccine 
in a given year, the timing for an individual provider to obtain flu 
vaccine may depend on which manufacturer's vaccine it ordered. This 
happened in the 2000-2001 season, and there are reports of similar 
problems this season after one manufacturer that had previously stated 
it expected to supply 46 million to 48 million doses announced that it 
would not deliver any flu vaccine to the U.S. market. Those who ordered 
from this manufacturer did not receive their expected vaccine--a 
different situation than those who ordered from the other manufacturer, 
which reported sending its vaccine on schedule beginning in August and 
September. As a result, one provider could have held vaccination 
clinics in early October that would be available to anyone who wanted a 
flu vaccination, while another provider may not yet have had any 
vaccine for its high-risk patients.
    Shortages of flu vaccine can result in temporary spikes in the 
price of vaccine. When vaccine supply is limited relative to public 
demand for flu vaccinations, distributors and others who have supplies 
of the vaccine have the ability--and the economic incentive--to sell 
their supplies to the highest bidders rather than filling the lower 
priced orders they had already received. When there was a delay causing 
a temporary shortage of vaccine in 2000, those who purchased vaccine 
that fall--because their earlier orders had been canceled, reduced, or 
delayed, or because they simply ordered later--found they paid much 
higher prices. For example, one physician's practice ordered flu 
vaccine from a supplier in April 2000 at $2.87 per dose. When none of 
that vaccine had arrived by November 1, the practice placed three 
smaller orders in November with a different supplier at the escalating 
prices of $8.80, $10.80, and $12.80 per dose. On December 1, the 
practice ordered more vaccine from a third supplier at $10.80 per dose. 
The four more expensive orders were delivered immediately, before any 
vaccine had been received from the original April order.
    With the severely reduced vaccine supply this year, opportunities 
exist for vendors who have vaccine to significantly inflate the price 
of available supplies. CDC is collecting information on allegations of 
such price increases and is providing information to respective state 
attorneys general. To date, CDC officials report receiving and 
forwarding over 100 reports of alleged price gouging that they received 
from 33 states.
    Following the 2000-2001 flu season, HHS undertook several 
initiatives to address supply and demand of flu vaccine and to protect 
high-risk individuals from flu-related complications when vaccine is in 
short supply. Actions taken include the following:

 Extending the optimal period for getting a flu vaccination until the 
        end of November, to encourage more people to get vaccinations 
        later in the season.
 Expanding the target population to include children aged 6 through 23 
        months.
 Including the flu vaccine in the Vaccines for Children (VFC) 
        stockpile to help improve flu vaccine supply. For the 2004-2005 
        flu season, CDC had originally contracted for a stockpile of 
        approximately 4.5 million doses of flu vaccine through its VFC 
        authority--of which 2 million doses were ordered from the 
        manufacturer whose license was temporarily suspended and 
        therefore will not be available. CDC officials said the 
        remaining 2.5 million doses intended for the stockpile will be 
        apportioned as they become available.
 Taking steps to identify additional sources of influenza vaccine from 
        foreign manufacturers that, once approved for safe use, could 
        help increase the flu vaccine supply in the United States.
  challenges persist in targeting flu vaccine to high-risk individuals
    Our work has also found continuing obstacles to delivering flu 
vaccine to high-risk individuals in a time of short supply. During the 
fall 2000 vaccine shortage, for example, targeting limited doses to 
high-risk individuals was problematic because all types of providers 
served at least some high-risk individuals. Some physicians and public 
health officials were upset when their local grocery stores were 
offering flu vaccinations to everyone when they, the health care 
providers, were unable to obtain vaccine for their high-risk patients. 
Many physicians reported that they felt they did not receive priority 
for vaccine delivery, even though about two-thirds of seniors--one of 
the largest high-risk groups--generally get their flu vaccinations in 
medical offices.
    For the 2004-2005 flu season, despite early indications that one 
manufacturer was having production difficulties, CDC published guidance 
in September 2004 stating that it did not envision any need for tiered 
vaccination recommendations or prioritization of vaccine for those at 
higher risk of flu-related complications. Following the suspension of 
one manufacturer's license and the announcement it would not supply any 
vaccine to the U.S. market this season, CDC revised its recommendations 
and took steps to mitigate the vaccine shortage.
    Although HHS has limited authority to control flu vaccine 
distribution,5 upon learning that nearly half of the 
nation's expected flu vaccine supply was in jeopardy, it took steps to 
help direct the available vaccine to help providers get some vaccine 
for their high-risk patients. In particular, CDC officials have worked 
with the remaining major manufacturer, as well as state and local 
health departments, to assess needs, prioritize customers, and make 
plans to distribute the remaining vaccine.
---------------------------------------------------------------------------
    \5\ Under the Federal Food Drug and Cosmetic Act, FDA ensures 
compliance with good manufacturing practice and has limited authority 
to regulate the resale of prescription drugs, including influenza 
vaccine, that have been purchased by health care entities such as 
public or private hospitals. This authority would not extend to resale 
of the vaccine for emergency medical reasons. The term health care 
entity does not include wholesale distributors. CDC has a role in 
encouraging appropriate public health actions.
---------------------------------------------------------------------------
    CDC also convened its Advisory Committee on Immunization Practices 
(ACIP) to reassess and revise the recommended vaccination priorities 
for the flu season.6 The revised priority groups for the 
2004-2005 flu vaccine include the estimated 85 million people in high-
risk groups, but they do not include many of the other target groups. 
In addition to high-risk individuals, the revised priority groups 
include an estimated 7 million health care workers and an estimated 6 
million household contacts of children aged 6 months or younger, for a 
total population of about 98 million in the revised priority groups.
---------------------------------------------------------------------------
    \6\ See HHS, Centers for Disease Control and Prevention, ``Interim 
Influenza Vaccination Recommendations, 2004-2005 Influenza Season,'' 
Morbidity and Mortality Weekly Report, vol. 53 (2004).
---------------------------------------------------------------------------
    While CDC can recommend and encourage providers to immunize high-
risk patients first, it does not have direct control over the 
distribution of vaccine (other than the generally small amount that is 
distributed through public health departments); thus, CDC cannot ensure 
that its priorities will be implemented. As these actions play out, 
more time is needed to gauge the success of CDC's efforts to mitigate 
the current flu vaccine shortage.
    Despite the efforts by CDC and others, many high-risk individuals 
appear to be experiencing problems getting a flu vaccination. Media 
across the country are reporting that some seniors are waiting hours 
for flu vaccinations and others are so frustrated they are traveling to 
Canada or Mexico to get vaccinated. There are other media reports of 
anxious seniors unable to get vaccinated in a timely fashion. How many 
high-risk individuals ultimately get vaccinated against influenza this 
season remains to be seen. We are beginning new work to analyze this 
year's vaccine shortage and the federal response.

                        CONCLUDING OBSERVATIONS

    Ensuring an adequate and timely supply of vaccine to protect high-
risk individuals from influenza and flu-related complications remains a 
challenge. The limited number of manufacturers and the manufacturing 
problems experienced in recent years illustrate the fragility of 
vaccine production. The abrupt loss of nearly half of the nation's 
vaccine supply has further highlighted the potential inequities that 
can result from the current vaccine distribution system. Under this 
system, some providers can be left with little immediate recourse for 
meeting the needs of those most at risk. CDC is responding by working 
with the remaining major flu vaccine manufacturer and states and local 
public health agencies to better target high-risk populations. 
Nonetheless, with this flu season, there are reports of long lines, 
people crossing international boundaries to obtain their flu 
vaccinations, and anxious seniors unable to obtain a vaccination on a 
timely basis. Whatever the outcome of this flu season, ensuring that 
vaccine can be made available as expeditiously as possible to those who 
need it most in times of shortage remains a challenge.

                            AGENCY COMMENTS

    We shared the facts contained in this statement with CDC officials. 
They informed us they had no comments.
    This concludes my statement. I would be happy to answer any 
questions the Chairmen or other Members of the Subcommittees may have.

                          Related GAO Products

    Infectious Disease Preparedness: Federal Challenges in Responding 
to Influenza Outbreaks. GAO-04-1100T, Washington, D.C.: September 28, 
2004.
    SARS Outbreak: Improvements to Public Health Capacity Are Needed 
for Responding to Bioterrorism and Emerging Infectious Diseases. GAO-
03-769T, Washington, D.C.: May 7, 2003.
    Infectious Disease Outbreaks: Bioterrorism Preparedness Efforts 
Have Improved Public Health Response Capacity, but Gaps Remain, GAO-03-
654T, Washington, D.C.: April 9, 2003.
    Flu Vaccine: Supply Problems Heighten Need to Ensure Access for 
High Risk People. GAO-01-624T, Washington, D.C.: May 15, 2001.

    Mr. Walden. I appreciate your comments, and your full 
statement, obviously, is in the record as well.
    Let me go now to Mr. Rosenbloom. Thank you for being here 
today, and we look forward to your comments.

                  STATEMENT OF ALAN ROSENBLOOM

    Mr. Rosenbloom. Thank you, Mr. Chairman, both to yourself 
and to all the members of the committee, for the opportunity to 
join you.
    As you know, my name is Alan Rosenbloom. I serve as 
President and Chief Executive Officer of the Pennsylvania 
Health Care Association and the Center for Assisted Living 
Management. We are part of a larger national federation, the 
American Health Care Association and the National Center for 
Assisted Living Management. Together, we represent roughly 
10,000 long-term care provider organizations who provide care 
and treatment to about 1.5 million elderly and disabled 
residents of the United States, all of whom by definition are 
in high-risk categories for receipt of flu vaccine.
    We also employ about 1 million direct-care workers, all of 
whom by definition are in high-risk categories for receipt of 
flu vaccines.
    Before beginning my substantive testimony, I also want to 
share greetings from AHCA's new CEO, Hal Daub, who is a former 
colleague of yours here in the House.
    I applaud the opportunity that you have given us to offer 
perspectives from long-term care providers. As I mentioned, the 
long-term care facility probably provides a unique nexus of 
high-risk populations, those over 65, those who reside in long-
term care facilities, those between the ages of 2 and 64 who 
suffer from chronic conditions and direct health care workers. 
In that environment, as you can well imagine, flu spreads like 
wildfire, and the risk of dying from flu is quite high.
    I also appreciate the fact that I am appearing here from 
Pennsylvania where our Department of Health announced last week 
that we will be 1 million doses short in flu vaccines for our 
at-risk population.
    In the spirit of the title of this hearing, which is 
Protect and Strengthen, I would like to offer some views on 
what has worked well with respect to the partnership between 
CDC, the State government and the long-term care provider 
community and then, with respect to the latter, strengthening, 
some suggestions for improving how we work together in the 
future.
    It is noteworthy that there has been strong collaboration 
among CDC, CMS, which is, of course, the primary payer for a 
large chunk of long-term care services in this country, and 
representatives of the long-term care provider community.
    CDC recognized the special circumstances that long-term 
care provider situations present. They have collaborated very 
closely with the American Health Care Association and the 
National Center on Assisted Living to gather information to 
assess the situation on the ground in these facilities to get a 
handle on what the needs are, what the available resources are, 
what the gap is and how we might be able to close it.
    CDC shared extensive information on prevention, infection-
control practices, prophylactic use of antiviral medications, 
treatment use with antiviral medications and the like, and we 
have had substantial support from the Centers for Medicare and 
Medicaid Services in this effort as well.
    For example, CDC, CNF, Aventis, Pasteur and AHCA 
collaborated on a survey to assess the circumstances on the 
ground in long-term care facilities so that the Federal 
Government and State health departments could plan effectively 
and act quickly.
    Having said that, there are some lessons learned that we 
would like to offer for ways in which this process can be 
improved, hopefully starting as soon as possible and certainly 
as we look out into future years.
    No. 1, clearer communication between Federal and State 
governments would be helpful. For example, Pennsylvania's 
health department right now is conducting yet another survey of 
long-term care providers in the Commonwealth for reasons that 
remain obscure given the work that has already been done at the 
Federal level.
    Second, clearer guidance on the scope of what other long-
term care settings, beyond nursing homes, would be very helpful 
as well, depending on how a State chooses to define those other 
settings: Are they assisted living? Are they home care? Are 
they personal care? Are they congregate living? Are they 
something else? The possibility exists that subsets of 
individuals who clearly should be within at-risk groups could 
be lost in the shuffle.
    In Pennsylvania, for example, we call assisted living 
personal care, and it is licensed by our Department of Public 
Welfare, not our Department of Health. As a consequence, when 
the Department of Health is, if you will, protecting 
institutional residents, they tend to look much more strongly 
at those entities they license, hospitals, nursing homes and 
the like, and so there is a risk that personal care homes in 
Pennsylvania and their residents, all of whom by definition are 
at-risk, could be lost in the shuffle.
    Third, we urge the CDC to rethink its decision not to 
provide guidance on what to do when there are partial doses 
allocated, when there is not enough of a dosage to make 
effective decisions about who you do and who you don't give 
medications to.
    In a nursing home, for example, do you choose your 
residents or your direct care workers? If you have to choose 
between residents, why choose one resident over another? 
Particularly in a climate where the liability risk to long-term 
care providers is growing, where there are more and more 
negligence suits for the decisions that are made in long-term 
care settings, it is particularly important, not only for the 
care and services that people receive but also to provide 
appropriate insulation from liability, that more guidance be 
made available.
    Finally, we recommend that the Center for Medicare and 
Medicaid Services establish a consistent payment standard for 
vaccines and for antiviral medications that can be used if 
there are no vaccines available. Right now, Medicare pays for 
most vaccines, Medicaid might or might not pay for most 
vaccines, depending on how the State Medicaid program works.
    Right now, Medicare generally does not pay for antiviral 
medications. However, the Medicaid program in a given State 
might or might not, depending on the choices that an individual 
State makes.
    According to CDC recommendations, however, if you are in a 
world where you have to administer antivirals prophylactically, 
you should be giving them to every resident and every direct 
care worker for up to 3 weeks as a time. If the resources are 
not made available to pay for those pharmaceuticals, then the 
preventive use of antivirals will suffer and the epidemic could 
spread on a building-by-building basis.
    In summary, we think that a lot has gone right; we think a 
lot could go better. And we urge the committee and the CDC and 
other branches of the Federal Government to look at those 
recommendations seriously.
    I appreciate the opportunity to be here and would be happy 
to answer questions at an appropriate time.
    [The prepared statement of Alan Rosenbloom follows:]

Prepared Statement of Alan Rosenbloom on Behalf of the American Health 
                            Care Association

    Good morning Chairman Barton, Chairmen Bilirakis and Greenwood, 
Ranking Members Brown and Deutsch, and members of the subcommittees. I 
appreciate the opportunity to be here with you today to discuss current 
efforts to deliver the flu vaccine to the nation's frail, elderly, and 
disabled citizens living in nursing facilities, assisted living 
residences, and intermediate care facilities for individuals with 
mental retardation and developmental disabilities, and to begin to lay 
the foundation for next year's anti-flu preparations.
    My name is Alan Rosenbloom, and I am President and Chief Executive 
Officer of the Pennsylvania Health Care Association and the Center for 
Assisted Living Management--the largest organization of for- and not-
for-profit long term care and assisted living facilities in 
Pennsylvania, and an affiliate of the American Health Care Association 
and the National Center for Assisted Living--organizations representing 
nearly 10,000 providers of long term care services, who serve more than 
1.5 million elderly and disabled people annually and employ more than 1 
million caregivers.
    I am here on behalf of the American Health Care Association and the 
National Center for Assisted Living and their new President and CEO Hal 
Daub. Today I would like to describe for you the efforts the long term 
care community, in collaboration with the Centers for Disease Control 
and Prevention, the Centers for Medicare & Medicaid Services, and 
Aventis Pasteur has made to ensure patient and resident protection 
against the flu this season, as well as the lessons we have learned 
that will make next year's preparation more efficient and effective.
    But before I do that, let me first explain why it is so important 
that the flu vaccine be available to the residents we serve. Long term 
care patients can be at risk of death should they contract influenza. 
The stakes are that high. In the nursing home setting, the average 
patient is 85 years old and is dependent on others for roughly four 
activities of daily living, including bathing, dressing, and toileting.
    The typical assisted living resident, who also is 85 or older, 
needs help with three or more activities of daily living, and that 
number continues to increase as the government shifts more high-acuity 
individuals away from skilled nursing care and toward assisted living 
settings.
    Our members also care for many of the 106,000 clients with mental 
retardation and developmental disabilities living in congregate 
settings, many of who suffer from chronic health conditions, such as 
cerebral palsy and respiratory illnesses.
    Clearly, the population we care for is at high-risk for contracting 
the flu, and the dangers associated with a diagnosis are greater than 
those for the average American.
    That's why the American Health Care Association and the National 
Center for Assisted Living member organizations took swift and decisive 
action upon learning that there would not be enough flu vaccine this 
season to protect our patients and residents.
    That is also why we were glad that CDC and CMS paid special 
attention to the long term care population early on in the process. 
Almost immediately, the Centers for Disease Control and Prevention 
collaborated with the American Health Care Association and the National 
Center for Assisted Living on an initial survey to learn how facilities 
were faring during the flu shortage. From that survey, they learned how 
widely and seriously LTC facilities were impacted by the problems at 
Chiron. The CDC quickly and appropriately identified ``residents of 
nursing homes and long term care facilities' as a priority group. 
Recognizing that an epidemic in any of our settings would be 
devastating, CDC rightly maintained a broad definition for long term 
care facilities so that assisted living residences and facilities for 
people with mental retardation and developmental disabilities were 
included.
    The CDC was further cautionary by listing as a priority group 
``health-care workers involved in direct patient care.'' We absolutely 
must keep healthy those who care for our very vulnerable population, 
and the CDC recognized this.
    Additionally, CDC maintained early and consistent communication 
with our national association and used us as a resource for 
establishing the extent of the vaccine need in our member facilities. 
The CDC also provided us with a wealth of information in lieu of the 
vaccine, including infection control techniques, signage that could 
easily be reproduced and placed in facilities, and recommendations on 
the use of influenza anti-viral medications specific to this flu 
season.
    The Centers for Medicare & Medicaid Services was equally 
supportive, and the agency's clear interest in moving vaccines to our 
facilities expedited the process in some states and helped allay our 
fears. CMS was particularly helpful in our communication efforts.
    The best example of the successful collaboration between our 
association, CDC, CMS, and Aventis Pasteur was the coordination and 
dissemination of a more in-depth second survey to which more than 
13,000 long term care facilities nationwide responded, identifying 
their vaccine needs. We worked together to quickly design a survey that 
would efficiently and effectively meet Aventis and CDCs' need to not 
only learn which facilities had none or limited vaccine, but also that 
recreated the chain of distribution. Results from this survey provided 
facility level data on the number of beds and direct care staff, among 
other things, that helped identify vaccine needs. The survey was posted 
on the AHCA web site, and CMS helped get the word out to facilities. 
The distribution of this critical survey was the centerpiece of an 
unprecedented collaboration.
    Allow me to clarify the process of getting vaccines from the maker 
to the facility. The vast majority of vaccines distributed by Aventis 
Pasteur go directly to end users; however, this is not the case for 
long term care facilities. For the most part, our members rely on long 
term care pharmacies for all their pharmaceutical needs because these 
pharmacies best meet our unique needs--special carts, special packaging 
of medications, and emergency deliveries, to name a few. These long 
term care pharmacies, in turn, order from their supplier, which may be 
a wholesaler or a group purchaser or the manufacturer. The wholesaler 
or group purchaser would then order from the manufacturer, and in most 
cases this year, the manufacturer was Chiron. And it's worth noting 
that providers, like others involved in the distribution of flu 
vaccine, bear liability risk.
    Despite the government's rapid response and the good intentions and 
efforts of all those involved with getting the vaccine into facilities, 
there were several areas of the vaccine shortage efforts that could 
have been handled differently and should be noted as we look toward 
next year's flu season.

AHCA/NCAL Recommends that the CDC Tighten Its Communications to State 
        Health Departments
    We observed a significant disconnect between the state health 
departments and the CDC relating to the dissemination and use of the 
results of the survey that we all worked so hard to collect. It took 
the CDC two full weeks to get the survey results to the state health 
departments, and because the CDC decided to turn over the vaccine to 
the states for distribution, the states needed that information 
desperately. Our national association interceded in several states to 
get the survey results from CDC to the appropriate state contact. In 
the future, the CDC must liaison better with the state health agencies.

AHCA/NCAL Recommends that the CDC Offer More Guidance to State Health 
        Departments and to Providers
    The CDC also should provide more guidance to the states than was 
offered this flu season. Without CDC's guidance, states are not 
required to give precedence to the congregate care elderly and disabled 
over adults aged 65 and older.
    While we agree that in many circumstances decisions should be 
state-based, the overwhelming evidence of the particular risk to 
persons in congregate settings should lead the CDC to establish 
national policy. The refusal to sub-prioritize was and continues to be 
an impediment.
    Furthermore, guidance on best practices from CDC to the states 
would help prevent delays in getting vaccines into providers' hands. 
While some states like Mississippi and Virginia were very efficient, 
others such as my own home state of Pennsylvania were not.
    We also requested guidance from the CDC on how best to handle 
partial orders. For facilities that received or will receive less than 
their full order, there are questions about who should be vaccinated 
first while awaiting the complete order. Do you immunize the workers on 
the theory that they have more contact with the outside world, or do 
you immunize the patient/resident on the theory that they are more 
fragile? And which residents should be vaccinated first? Do you make 
decisions based on proximity, or should you look at elements such as 
age or illness? These are the issues that we are grappling with right 
now and guidance from the CDC would be most helpful.
    The CDC also should offer guidance regarding the state distribution 
of vaccine to the congregate long term care population, where influenza 
spreads like wildfire. State health departments ought to be advised to 
treat residents in assisted living settings and in intermediate care 
facilities for persons with mental retardation similarly to the skilled 
nursing population per the CDC priority grouping, and the CDC must 
ensure that it's inclusion of all long term care settings in the 
priority group is replicated at the state level.

CMS Should Design Reimbursement System for Influenza Anti-Viral 
        Medications and Prophylaxis
    The issue of who will pay for influenza anti-viral medication and 
prophylaxis must also be addressed, especially since CDC recommended 
the use of the drugs in the absence of vaccine. CMS should begin work 
now on a way to reimburse for influenza anti-viral medication or other 
medication that is used to prevent epidemics when there is a health 
emergency.
    Thank you for the opportunity to join you today. I commend the CDC 
and CMS for fine work, and our profession stands ready to collaborate 
further with the centers to fulfill our mission of quality long term 
care.

    Mr. Ferguson [presiding]. Thank you very much. We 
appreciate your suggestions. That is what we are after today.
    Mr. Paradiso, I hope I produced your name correctly or 
close.

                 STATEMENT OF PETER R. PARADISO

    Mr. Paradiso. Very close. Good afternoon, Mr. Chairman and 
members. My name is Peter Paradiso, and I am the Vice President 
for New Business and Scientific Affairs at Wyeth.
    Wyeth has been in the business of researching and 
manufacturing vaccines and biologicals for over 100 years, and 
I have been part of that effort for the past 20 years. We are 
proud of the contributions our products have made to public 
health.
    As important as these products are to society, the vaccine 
enterprise has become increasingly difficult. The shortage of 
flu vaccine is but a symptom of a larger problem. To address 
flu vaccine supply and the limited number of manufacturers, we 
need to understand the reasons there are so few manufacturers 
of vaccines of any type.
    Some of the unattractive facets of the vaccine business are 
not inherent but are the result of government policies, some 
justifiable and others more questionable, that have an impact 
on the development and the subsequent supply of vaccines. These 
barriers can hinder existing vaccine companies and act as 
disincentives for new participants. These derive in part from a 
mindset intolerant of even theoretical risk, and therefore 
often skew the risk benefit ratio to the point where the 
benefit is forgotten.
    One of the biggest changes that has occurred in the vaccine 
industry in the time that I have been working in this field is 
the change in the regulatory and compliance environment. In our 
company, almost all of the new hires in vaccine research over 
the past several years are involved in FDA compliance-related 
issues. Manufacturing facilities that are licensed for new 
products are outdated within 2 years and require significant 
and seemingly continuous large investments. Using our new 
Prevnar vaccine as an example, this product is manufactured at 
two facilities that were licensed in 2000. More than $300 
million of capital has been invested in the existing Prevnar 
facilities in the last 3 years; that is since the product was 
licensed in 2000. Due to the diligence of the FDA and the 
efforts of manufacturers, the safety record of the vaccine 
manufacturing supply is exemplary. So it is hard sometimes to 
understand why we need still higher standards.
    In the case of Wyeth influenza vaccine flu shield, 
continued investment was not sustainable. The fact is that our 
influenza vaccine business had lost money 4 of its last 5 
years, and significantly more investment in manufacturing was 
required. We had 8 million unsold doses of the vaccine at the 
end of 2002. We announced that we would exit the injectable flu 
business in November 2002.
    While Wyeth no longer makes an influenza vaccine, we are 
still in the vaccine business, and I would like to address some 
of the marketplace challenges in pediatric vaccines. Roughly 60 
percent of the U.S. Market is one customer, the Federal 
Government. This customer has the legal power to control 
prices. The government-fixed price for tetanus vaccine is so 
low that no company has bid to provide the vaccine to the 
government for many years. While it is an obligation of 
government to be a prudent purchaser, it is also an obligation 
of government to protect the public health. By overemphasizing 
the former, one risks jeopardizing the latter.
    Another poorly understood risk of the vaccine business is 
liability. Vaccines are given to virtually every young child in 
this country, and therefore, the likelihood that any child 
affliction would occur in temporal proximity to an immunization 
is high just because of the frequency with which immunizations 
are given. Vaccines have been accused of causing epilepsy, 
multiple sclerosis, attention deficit disorder, cancer, 
autoimmune disease, learning disabilities, Gulf War Syndrome 
and even the AIDS epidemic. Today's allegations linking 
vaccines with autism are but the latest in a long history of 
accusations, none of which has been proven to have scientific 
validity.
    In 1986, Congress created the Vaccine Injury Compensation 
Program administered by the Department of Health and Human 
Services. Although that statute has been helpful, it needs to 
be reformed to reflect today's reality. There is a widespread 
perception that this program completely shields companies from 
liability, but that is not the case. Today, companies that 
produce childhood vaccines have been served with over 350 
lawsuits, some of them massive class actions. These suits 
allege that vaccines cause autism.
    In May 2004, the Institute of Medicine issued a report 
concluding that there is sufficient scientific evidence to 
reject a causal relationship between autism and vaccines. 
Despite this, we estimate that the companies involved in this 
litigation have spent more than $200 million collectively in 
outside legal costs, and the first case has not yet come to 
trial.
    These and other issues confront companies as they decide 
whether to enter the vaccine business. There are constructive 
steps that Congress can take. For example, the Administration 
has a proposal that would remove the price cap on childhood 
vaccines and allow CDC to develop a stockpile of pediatric 
vaccines to utilize in the event of shortages. H.R. 3758 would 
provide tax incentives for upgrading or building a new vaccine 
facility and also offers a method of purchasing unsold doses of 
flu vaccine at the end of the season. These would be positive 
steps.
    The FDA has announced a project which they call GMPs for 
the 21st century. I would urge the FDA to make review of 
vaccines' GMP the top priority. And finally, the liability 
burden facing company needs to be addressed. Various attempts 
to do so were commenced during this Congress, and a new start 
needs to be made in the next Congress.
    I am excited about the scientific possibilities for the 
future of vaccines, but recent events serve as a reminder of 
the fragility of this enterprise. Thank you for this 
opportunity.
    [The prepared statement of Peter R. Paradiso, follows:]

 Prepared Statement of Peter R. Paradiso, Vice President, New Business 
                     and Scientific Affairs, Wyeth

                              INTRODUCTION

    Good Morning Mr. Chairman and members of the committee. My name is 
Peter Paradiso and I am the Vice President for New Business and 
Scientific Affairs at Wyeth. Wyeth has been in the business of 
researching and manufacturing vaccines and biological products for over 
100 years and I have been part of that effort for the past 20 years. We 
are proud of the contributions we have made to public health throughout 
this time including our contribution to the eradication of smallpox 
worldwide not only through the supply of vaccine but also the 
technology for a bifurcated needle delivery device critical to the mass 
immunization programs. For nearly 20 years we were also the sole U.S. 
producer of oral polio vaccine, which conquered polio disease in the 
U.S. with the last case of indigenous disease occurring in 1979.
    Most recently we introduced the first conjugate vaccine to prevent 
meningitis and other invasive infections of childhood caused by the 
pneumococcal bacteria, an organism that not only causes serious 
diseases, but also was developing antibiotic resistance at an alarming 
rate. In the 4 years that this vaccine, named Prevnar, has been on the 
market in the U.S., childhood pneumococcal disease has declined by over 
80 percent. Furthermore, studies have shown that invasive disease 
caused by pneumococcus in adults has also decreased significantly due 
to fewer ill children spreading disease to adults. In total this means 
that not only have serious diseases and death declined but the need to 
use antibiotics has decreased as well which should serve to stem the 
rising tide of antibiotic resistance. While I speak of Wyeth vaccines 
in particular, vaccines made by our competitors can boast of the same 
type of dramatic results in decreasing or in some cases eliminating the 
former scourges of childhood diseases. The record shows that vaccines 
have had one of, if not the greatest impact of any public health 
intervention over the last century.
    As important as these products are to society, it has become 
increasingly difficult to justify remaining in the vaccine business. 
While the primary focus of this hearing is on influenza vaccine, the 
shortage of flu vaccine and flu vaccine manufacturers is but a symptom 
of a larger problem. There are only four companies left that make 
vaccines routinely used in childhood. Many vaccines are now made by 
only one company. And while it did not grab the public's attention to 
the extent of the flu vaccine shortage, during the early part of this 
decade most children's vaccines experienced dramatic shortages as well. 
To address flu vaccine supply and the limited number of manufacturers, 
one must look at the small number of manufacturers overall, and 
understand the reasons that the current situation exists.
    In February 2002, the National Vaccine Advisory Committee (NVAC), 
under the auspices of the National Vaccine Program Office (NVPO), 
reviewed the issues associated with the shortages in vaccine supplies. 
The conclusions of this detailed assessment highlighted numerous 
efforts that could impact vaccine supply in a positive way. These 
strategies included, among others, expansion of vaccine stockpiles, 
increased support for regulatory agencies, maintenance and 
strengthening of liability protections, financial incentives to 
manufacturers, streamlining the regulatory process without compromising 
safety or efficacy, and a campaign to emphasize the benefits of 
vaccination. I will highlight several of these issues in my comments 
but all of them are important and thoughtful approaches to the vaccine 
supply issue.
    Every company must weigh the benefits versus the risks in each 
business opportunity when deciding where to place its resources. Some 
unappealing factors are inherent to vaccines and not to other types of 
drugs. As an example, most vaccines are used by children in a 
particular age group and for a defined and limited number of doses. 
This is in contrast, for example, to drugs for hypertension, which are 
taken by a significant portion of adults across multiple birth cohorts 
and are taken multiple times a day perhaps for the lifespan of the 
individual. Also as a society we are generally willing to pay more for 
products that treat diseases than for products that prevent them. One 
very telling figure that illustrates these points is that the total 
worldwide market for vaccines made by all manufacturers around the 
globe is estimated to be around $8 billion. There are single drugs on 
the market that rival the size of the global vaccine market.
    Another inherent feature is that many drug products that are 
successful in the market find themselves with an ever-expanding market 
as new medical applications are found. With vaccines, the more 
effective a product is, the more likely it is to become obsolete. The 
smallpox and oral polio vaccines are both examples of highly effective 
products that worked themselves out of a market by eliminating disease.
    I will address issues that relate to the changing environment in 
the vaccine field. These include changes in research and development, 
manufacturing, regulation, liability and the overall marketplace 
dynamics. In addition, I will touch on some potential areas where this 
Congress can have a positive impact on securing vaccine supply.

                    VACCINE RESEARCH AND DEVELOPMENT

    Some of the unattractive facets of the vaccine business are not 
inherent but are the result of government policies, some justifiable 
and others more questionable, that have an impact on the development 
process and can result in barriers that hinder existing vaccine 
research companies and serve as disincentives to new participants. 
These derive, in part, from a mindset intolerant of even theoretical 
risk and therefore often skew the risk/benefit ratio to the point where 
the benefit is forgotten. This mindset persists despite the fact that 
the vigilance of FDA and the efforts of manufacturers have produced an 
exemplary safety record.
    Clinical trials for vaccines are much larger in scope than for 
drugs, which one would expect since these are products that are given 
to largely healthy individuals. The clinical trials for our Prevnar 
vaccine included over 40,000 children. Press reports about a vaccine to 
prevent childhood diarrhea under development at other companies have 
indicated that more than 60,000 children are in each trial. By 
contrast, drug trials typically involve 3000-5000 people. Importantly, 
however, vaccine development has become much more complex and costly 
over the last ten years. This ranges from increasingly stringent 
requirements for producing test vaccines to be used in clinical trials, 
to larger and more complex clinical programs. In fact, over the last 
five years in our company, the majority of the new hires in vaccines 
R&D are working in compliance, quality assurance or regulatory affairs 
rather than doing actual vaccine research. This has significantly 
increased our costs and lengthened our timelines.

                             MANUFACTURING

    The complexity of manufacturing a vaccine is much higher than for 
small molecule drugs (e.g., pills) in part because of the use of living 
organisms as opposed to a more predictable chemical process and in part 
because of the subsequent complexity of the quality control and 
compliance processes. It takes approximately five years to build and 
validate a vaccines manufacturing facility. As a result, it is 
necessary to commit to building facilities at the same time that 
pivotal clinical trials are starting and while their outcome is 
uncertain.
    However, the investments in manufacturing do not end with 
licensure. Using Prevnar as an example, this product is manufactured in 
two facilities that were licensed in 2000 after inspections by 
reviewers from the Centers for Biologics Evaluation and Review (CBER). 
Since then, to improve compliance and increase production capacity, we 
have made significant changes in these facilities and in our 
manufacturing and quality processes. Over $300M of capital has been 
invested in existing Prevnar facilities since 2000 and operating 
expenses have nearly doubled in the past three years. Over 2,000 people 
are involved in the manufacture of Prevnar and an additional 500 people 
are employed to insure that we are compliant with all of the regulatory 
requirements. It takes, on average, 50 weeks to produce and release a 
batch of product. It is, in part, this timeline that makes rapid 
response to shortages very difficult.
    Once licensed, it is possible to rationalize this level of 
investment for a new product like Prevnar for which we are the sole 
global supplier. It is much more difficult to justify the ongoing 
investment for older products with prices reflective of the environment 
decades ago. This need to make significant investments in facilities to 
meet ever more stringent cGMP (good manufacturing practices) 
requirements becomes a critical factor in deciding whether to continue 
to keep a product on the market. In the case of Wyeth's DTaP and 
influenza vaccines, this continued investment could not be justified.

                        THE VACCINE MARKETPLACE

    Once on the market, pediatric vaccines, which constitute the bulk 
of vaccine products, must deal with the fact that roughly 60 percent of 
the U.S. market is one customer, the federal government. Having one 
customer with that degree of dominance in the market is daunting enough 
but when that customer has the legal power behind it to control prices, 
the market becomes much less attractive. Further, some states have 
ignored definitions in federal law and have taken steps that would make 
the percentage of the government market even greater. To date the 
Department of Health & Human Services (HHS) has not undertaken any 
activity to uphold federal law and inhibit that expansion.
    When the Vaccines for Children program passed the Congress as part 
of OBRA 1993, it created price controls on the vaccines that were on 
the market at that time. This situation has become so egregious that 
the price for tetanus vaccine is so low that no company has bid to 
provide it to the government for many years. Merck's MMR vaccine is 
listed on the government schedule at around $16.25 while the market 
catalog price is $38.05. Haemophilus influenzae type b vaccines are 
capped at $7.65/dose but are over $21.78/dose in the private market. 
The CDC is the largest purchaser among the government agencies, and has 
the leverage of a price controlled federal supply schedule, designed 
primarily for use by the VA and DOD, to use in driving prices downward. 
While it is an obligation of government to be a prudent purchaser, it 
is also an obligation of government to protect the public health. By 
over-emphasizing the former, one risks jeopardizing the latter.

                               LIABILITY

    One poorly understood risk of being in the vaccine business is 
liability. Since vaccines are so stringently regulated, both before and 
after marketing, and have such an outstanding record of safety, it 
might seem baffling why liability should be so problematic. The root of 
the problem lies in the fact that vaccines are given to virtually every 
young child in this country and as every parent knows, many diseases 
and afflictions manifest themselves in young children. The likelihood 
that any of these conditions would occur in temporal proximity to an 
immunization is high just because of the frequency with which shots are 
given.
    Further, since nearly every child receives vaccines, any affliction 
without a known cause could be blamed on immunizations the child has 
received. Since the advent of the Internet, numerous unsubstantiated 
theories about vaccines have abounded. Over the course of the past 15 
years, vaccines have been accused of causing epilepsy, multiple 
sclerosis, autism, attention deficit disorder, cancer, autoimmune 
disorders, learning disabilities, and Gulf War Syndrome. Vaccines have 
even been accused of being the cause of the AIDS epidemic. Today's 
allegations linking vaccines to autism are but the latest in a long 
history of accusations, none of which have been proven to have 
scientific validity.
    While there were many more manufacturers making children's vaccines 
in the 1970's, that number has dwindled now to just four. The decrease 
has several causes but clearly the mostly precipitous decline occurred 
in the early 1980's as manufacturers left the market due to an 
explosion of lawsuits alleging damage from DTP vaccine. This explosion 
of litigation scared liability insurers away from vaccines and 
companies were left with no insurance coverage. The situation became so 
perilous that there was only one company left making this vaccine, 
which prevents diphtheria, tetanus, and whooping cough, and public 
health officials had to take the step of not immunizing two year olds 
against these diseases because of vaccine shortages. The one remaining 
company was forced to raise its price to cover the cost of litigation 
and at the height of the problem fully 75 percent of the cost of DTP 
vaccine was directly attributable to the cost of litigation.
    Congress intervened in 1986 and created the Vaccine Injury 
Compensation Program (VICP) administered by the Department of Health & 
Human Services to cover vaccines routinely recommended for use in 
children. This program was created to ease recovery for alleged 
vaccine-related injuries while protecting manufacturers from the costs 
and uncertainties of litigation that could potentially jeopardize the 
Nation's vaccine supply. There is a widespread perception that this 
program shields companies from liability but that is not the case. The 
law requires that anyone alleging an injury from a vaccine must first 
file a claim in the compensation program. However, whatever the 
decision from the program as to whether or not the injury was actually 
caused by a vaccine, the claimant has a right to leave the compensation 
program and proceed against the vaccine manufacturer in civil court. 
Furthermore, if a claim has been pending for more than 240 days and no 
decision has yet been rendered, a claimant can opt out of the program 
and proceed against the vaccine manufacturer in civil court.
    The VICP determines the validity of claims based on the 
preponderance of the scientific evidence. A petitioner who has 
sustained an injury on the table of compensable events during the 
specified time period is presumed to have a vaccine related injury and 
is compensated by the VICP without having to actually demonstrate 
causation or fault. If a petitioner brings a claim for an injury that 
is not listed on the table, then the petitioner must show by the 
preponderance of the scientific evidence that the injury was caused by 
vaccine, but unlike civil court, the claimant does not have to 
demonstrate that the vaccine was defective. Since the inception of the 
program in 1986, the Institute of Medicine has done periodic reviews of 
scientific studies and has reached various conclusions related to 
causation which have in turn aided the VICP in determining causation.
    Today, companies that make children's vaccines are facing a 
liability situation that dwarfs that of the 1980's when manufacturers 
were driven from the market. Each company has been served with over 350 
lawsuits, some of them massive class actions, alleging injuries arising 
from the vaccine preservative thimerosal. There are also 4200 related 
pending petitions in the VICP, which are proceeding together as part of 
the Omnibus Autism Proceeding. These petitions, which may one day turn 
into lawsuits directed at manufacturers, allege that autism may be 
caused by MMR vaccination or the preservative thimerosal, formerly 
found in other childhood vaccines, or by some combination of the two.
    In May 2004, the Institute of Medicine issued a report concluding 
that there is sufficient scientific evidence to reject a causal 
relationship between autism and vaccines. Although to date, not one of 
the 350 or so lawsuits has proceeded to trial, we estimate that the 
companies involved in this litigation have spent more than $200 million 
collectively in outside legal costs. Actual trials seeking damages for 
injuries are scheduled to commence early next year, at which point the 
legal costs will increase exponentially. Further, executives and 
scientists from the companies will spend countless hours in depositions 
and at trial. While there is overwhelming scientific evidence refuting 
any alleged link between vaccines and autism, no company would want the 
dynamics of a jury contemplating a disabled child versus a faceless 
corporation.

              RECENT CHANGES IN THE WYETH VACCINE BUSINESS

    All of the factors laid out above serve as the context in which our 
decision was made to leave various vaccine businesses including flu 
vaccine, and the routinely used DTaP vaccine for children. Regarding 
influenza, Wyeth had produced this vaccine in Marietta, PA, for nearly 
20 years. A new manufacturing facility was built in the 1990s and 
licensed in 1998. We announced in November 2002 that the 2002-2003 
would be our last season in the business. Our influenza vaccine 
business had lost money in four of its previous five years due largely 
to doses left unsold at the end of each season. Compounding that 
situation was the fact that in 2000, two years after licensure of the 
new manufacturing facility, the FDA informed us that extensive changes 
would need to be made at the site to remain in compliance with evolving 
standards. Wyeth reached an agreement with the FDA to enter into a 
consent decree focusing on the company's compliance with current Good 
Manufacturing Practices (cGMP). One of the sites involved was our flu 
manufacturing facility in Marietta, PA. When this significant 
compliance action was taken, FDA publicly acknowledged that there had 
been no safety risk to patients with any products that had been made at 
that site. During the interval from 2000 to when we close the doors at 
the facility at the end of this year, we will have invested over $100 
million in capital improvements for that facility alone. We could not 
justify further investment. If we had opted to persist in the flu 
vaccine business, many more millions of dollars in investment would 
have been required and our manufacturing costs would have continued to 
escalate.
    Faced with this financial prospect and coupled with the fact that 
we had eight million unsold doses of vaccine at the end of 2002, the 
only rational decision was to leave this flu vaccine business and focus 
our resources on the new intranasal vaccine, FluMist, that we were 
developing in collaboration with MedImmune Company. FluMist was 
licensed in 2003 but unfortunately not for any of the high-risk groups 
for whom flu vaccine is recommended. As a result, millions of doses of 
FluMist went unused in 2003 even in the face of a severe early epidemic 
and vaccine shortages.
    Our decision to leave the DTaP business had some common factors 
with the flu situation. The facility in Pearl River, NY where DTaP was 
produced was also subject to the consent decree we agreed to in 2000. 
We had known for several years that our DTaP had a limited lifespan in 
the market. Pediatricians and public health officials were 
understandably interested in combining some of the children's vaccines 
into one shot to reduce the number of injections given to babies. We 
had undertaken clinical trials to combine our Hemophilus influenzae 
type b (Hib) vaccine with DTaP, but our trials showed, as did the 
trials of other manufacturers, that combining these products resulted 
in a diminished immune response to the Hib component. Other potential 
vaccines that could be combined with DTaP were Hepatitis B and 
inactivated polio vaccines. Since we did not make either of those but 
our competitors did, we realized that our DTaP would not be a viable 
product much longer. In July 1999, the U.S. Public Health Service asked 
manufacturers to move away from using the thimerosal preservative in 
their vaccines. The U.S. Public Health Service and the American Academy 
of Pediatrics felt that removal of this preservative would be a means 
of maintaining parental confidence in vaccines while both organizations 
acknowledged that there was no scientific evidence to suggest any 
danger from the product. Our vaccine would have required a new 
manufacturing process, clinical trials, and re-licensure. These 
development requirements, coupled with the significant facility 
investments and the short projected lifespan of the product all 
contributed to our exit from this market.

                          POTENTIAL SOLUTIONS

    These are examples of the types of decisions facing vaccine 
companies in terms of justifying remaining in this business relative to 
other investment opportunities. As mentioned, some of relatively 
unattractive components of the vaccine business are inherent. Others, 
however, can and should be addressed.
    The Administration has proposed some changes to the Vaccines for 
Children program which have been incorporated into a Senate bill but no 
corresponding bill has yet been introduced in the House. The bill would 
remove the price caps on children's vaccines. It would also implement a 
technical change needed by the CDC in order to develop a stockpile of 
pediatric vaccines to utilize in the event of shortages. And it would 
transfer a category of needy children from an appropriated CDC account 
to an entitlement program which would not only benefit these children 
and the state public health departments that serve them but would also 
help manufacturers of new vaccines to know that government funds would 
be available to pay for the roughly 60% of the market controlled by the 
government.
    Another worthwhile approach is proposed in H.R. 3758, which would 
provide tax incentives for upgrading or building a new vaccine 
facility. This tax credit would diminish the cost differential between 
drug and vaccine facilities and would be very helpful, particularly if 
constructed so that the tax credits could be carried forward. H.R. 3758 
also offers a method of purchasing unsold doses of flu vaccine at the 
end of the season.
    The FDA has announced a project, which they call ``GMPs for the 
21st Century.'' Part of this endeavor is an examination of cGMP's 
(current good manufacturing practices) to determine if they are the 
correct approach. I would urge the FDA to make review of vaccine cGMP's 
a priority. The safety bar on vaccines must remain high but if FDA 
changes the requirements for cGMP it should only do so because of some 
demonstrable threat to the safety of the final product, not because it 
is possible to conduct a process differently. And finally, the 
liability burden facing companies needs to be addressed. An attempt to 
do so was undertaken last year and a new start needs to be made to 
ensure that manufacturers are not crippled from lawsuits born of 
unsubstantiated claims.

                              CONCLUSIONS

    In closing I would like to say that as a research scientist, I am 
very excited about the future of vaccines. Over the past 20 years I 
have been privileged to be a part of the development of a number of 
childhood vaccines such as HibTITER, Meningitec and Prevnar that have 
had a dramatic impact on the health of children here and around the 
world. Advances in technology allow us to contemplate vaccines today 
that were beyond our dreams just a decade ago. At Wyeth, for example, 
we are working not only on vaccines for unconquered infectious diseases 
but also for conditions like Alzheimer's disease. Unfortunately while 
the scientific frontier is very exciting, the business barriers can be 
daunting. This is particularly true of companies contemplating entering 
this marketplace anew or maintaining an aging product portfolio. Thus 
even though we have been in the vaccines business for many years, we 
have discontinued several vaccine products in the past five years and 
have closed a vaccine research facility in Rochester, New York and a 
manufacturing facility in Marietta, PA. We remain committed to 
continuing our work in vaccine development because we recognize the 
incredible public health potential of these products and we hope that 
recent events will serve as a reminder of the fragility of this 
enterprise.
    So I thank the committee for giving us the opportunity today to 
present our views and would urge you to continue to pursue ways to 
improve the business environment and stabilize the vaccine industry.

    Mr. Walden [presiding]. Thank you for appearing. We 
appreciate your input.
    Mr. Mlotek, thank you for being here. We look forward to 
your comments.

                   STATEMENT OF MARK E. MLOTEK

    Mr. Mlotek. Thank you, Mr. Chairman.
    I would like to start with commending the panel on two 
important points. The first is highlighting the issue of flu 
vaccine shortage, obviously trying to find a solution quickly. 
It surely would be a tragedy that, now that the public is 
educated on the benefit of inoculation, that we do not have 
adequate supplies to meet that need.
    Second is for allowing this, a different and perhaps more 
complete perspective of the distribution company to be heard. 
You are the first government body to really talk to the people 
who, in some respects, are closest to the issue from a business 
perspective. For example, some people might say, when the 
Chiron went out of market this year, that the issue was totally 
a distribution issue. We have heard that there is something 
like 86 million high-risk patients of which, in the normal 
year, 50 percent get inoculated. This year, there will be more 
than 50 million doses available--there will be close to 60 
million doses available. In that respect, some people may say 
the issue is one of distribution, not of supply. And that 
hasn't been addressed at all.
    The distributor has a unique perspective in that, in that 
we are closest to the customer. At Henry Schein, we do business 
with over 30,000 flu vaccine customers. We do business with all 
three manufacturers in the market today: The primary 
distributor for Chiron; the exclusive distributor for 
MedImmune; and we do business with Aventis as well. And we have 
had extensive discussions with all potential entrants into the 
market to hear what their plans are and when they may come into 
market and what the issues are.
    Some of the insight that we have had based on this 
experience is as follows: Like it or not, egg-based technology 
is here to stay. We see new technologies as coming to market in 
later years, but it is expensive to manufacture, produce and 
has not yet been shown to have higher efficacy.
    The second issue is, distribution plays a key part of the 
flu vaccine business. Obviously, we communicate with customers 
constantly about CDC guidelines, about changes in supply, 
allocation schedules. We communicate with the manufacturing 
community. We communicate with government and participate in 
ACIP meetings.
    On the logistics side, we receive in bulk the flu vaccine 
and have to repackage and redistribute in as small as one-vial 
containers to all remote parts of the country using 
sophisticated cold-chain expertise so that not one drop of the 
precious vaccine is lost. Over the last several years, our 
traditional spoilage rate is less than one-half of 1 percent. 
Most importantly, and this has not come out before, in the 
recent years, it is the distributor as much as the manufacturer 
who assumes risk in the flu supply chain-erupt equation.
    Several years ago, we introduced a concept at Henry Schein 
of a take-or-pay contract with Powderject, that later became 
Chiron, and put our capital on the line saying, we would take 
all of the product manufactured on a no-return basis which then 
allowed Powderject to not worry about the then prevalent fear 
that there would be a glut and, at the end of the year, returns 
would wipe out all of the profitability. With that contract, 
Powderject was able to reinvest in its plant and expand 
capacity. This take-or-pay practice is now standard, so, again, 
it is the distributor as much as the manufacturer who stands in 
the greatest risk of oversupply.
    The last key insight before I address some recommendations 
is that the doctor-patient relationship is critical in flu 
vaccine inoculation, because it is an essential part of case 
management. When there is a shortage of supply, who better than 
the doctor to determine among his or her patients who should 
get this critical treatment. Doctors make this sort of decision 
on an everyday basis. It is why, in the past several years, we 
have advocated giving a small amount of flu vaccine to as many 
doctors as possible and let them make the decision which of 
their patients should receive the inoculation. Instead, the 
plan this year and in the past is that States will receive 
doses to be administered by public health agencies, and the 
healthiest of the high-risk population, those who can stand in 
line for endless hours, will receive the shot while others, 
perhaps more needy but less able to meet this protocol, will 
not.
    Based on these insights, a few key recommendations. First, 
fully fund the FDA and HHS, provide them with a mandate to do 
all that is possible to help the three existing manufacturers 
remain in the market and to move very quickly on an expedited 
basis to bring a new egg-based manufacturer that is operating 
today outside the U.S. To market in the U.S. There are people 
wanting to come to the U.S., and we have to fund the FDA to 
allow that process to move quickly.
    Second, we need to fund a public-private initiative to 
increase the awareness of the benefits of flu vaccine. If we 
can raise demand, the profitability will be there, and more 
manufacturers will want to enter the market.
    Third, we need to continue to increase reimbursement rates, 
again, so that the demand will be there and that, therefore, 
manufacturers will want to enter the market.
    The fourth: In the short term, as we are increasing demand, 
we must provide a safety net for below-market purchases of 
unsold vials available to manufacturers and distributors 
alike--as I mentioned before, distributors assume risk in this 
equation--to make sure that the short-term oversupply until 
demand levels increase is balanced and that current players do 
not see their profits erode and leave the market, like Wyeth 
and Monarch did a few years ago.
    Fifth, allow the distribution community a seat at the table 
in all emergency planning due to our unique perspective of 
understanding our customer needs and the manufacturing 
community in general.
    I thank you for the opportunity to present today. I will be 
more than happy to answer any questions at the appropriate 
time.
    [The prepared statement of Mark E. Mlotek follows:]

        Prepared Statement of Mark E. Mlotek, Henry Schein, Inc.

    Mr. Chairman: Thank you for the opportunity to appear before your 
Committee this morning. You are hearing from a number of witnesses with 
unique roles in the flu vaccine market--from state public health 
representatives to nursing homes to vaccine manufacturers. We are very 
pleased to share with you the role of the distributor in the flu 
vaccine market. While I am Executive Vice President of Henry Schein, 
Inc. , the largest flu vaccine distributor in this country with more 
than 20 million doses sold in 2003, my comments have been discussed 
with the Health Industry Distributors Association, and I know that 
their views echo those of mine.
    If you stop and reflect for a moment, you will recognize that on 
October 5 when Chiron announced that it would not be sending any 
vaccine to the US market, the challenge immediately became one of 
distribution. While the major focus in the government and media was one 
of increased supply, the real issue is how to get the small amount of 
available vaccine to the right place at the right time with the right 
cold chain expertise so that not one precious drop would be unused. We 
would suggest that in all emergency planning, that private sector 
healthcare distribution experts like Henry Schein and our industry 
associations can make a major contribution and should have a seat at 
the emergency planning table. This is true with respect to all 
emergency planning scenarios, not just flu, and includes pandemic 
planning or a bioterrorism threat.
    From a public health perspective, we believe our greatest 
contribution would come from working more closely with the public 
health community to ensure that flu vaccine gets to where it is needed 
most. Just as the push packages in the Strategic National Stockpile 
ultimately must be delivered, broken down, and distributed to a 
designated site, flu vaccine must be received at one site, broken down 
into small lots and delivered with precise handling and shipping in a 
cold chain distribution process which calls for both heat and cold 
indicators as well as packing that ensures proper temperature control 
until the product can be received and used.
    Let me give you a snapshot of the distributor's role. In a typical 
season, Henry Schein will distribute 25 percent or so of the nation's 
flu vaccine. In 2003, we shipped more than 20 million doses to over 
20,000 customers. This season, before the Chiron issue, we had pre-book 
orders for over 30 million doses and we strongly believe that this 
amount was under-stated for this year. Many people were holding their 
orders for the ``spot'' market as all published communications by the 
CDC were that there would be an excess supply of flu vaccine this year, 
and people expected the pricing of flu vaccine to decrease as the year 
progressed.
    Our typical customer is a physician practice that orders 10-20 
vials per year. While we are capable of (and we do) ship large orders 
to hospitals, access companies, our expertise and core business is in 
marketing, distributing, and delivering small shipments for next day 
delivery with full cold-chain protection. We have been a reliable 
distributor of flu vaccine for our customers for the past 15 years. 
Customers look to us to manage the shortages that occur. If one 
manufacturer has an issue, our customers expect us to obtain supply 
from the other and service their needs.
    With respect to the first issue addressed by the Committee--namely 
targeting high risk individuals, what have we been able to do to 
further the nation's interests in reaching this population? It is 
important to understand that each physician has high risk patients. In 
past shortages, it has always been our plan, which we have shared with 
the CDC and HHS, to get a small amount of flu vaccine to many 
practitioners and allow them to do what they do best--make the medical 
decision based on knowledge of their patients to allocate the flu 
vaccine and make sure it is given to those patients that need it most. 
We personally believe that this allocation makes more sense than 
relying on public health clinics for a few reasons. First, it is 
usually the healthy senior who can afford to stand on line for several 
hours to be able to receive a flu shot. Second, the doctor-patient 
relationship is quite important and needs to be furthered. According to 
the CDC, 70% of flu shots are administered in a doctor's office. Flu 
inoculation is one area of managing a patient's critical care. To 
exclude that as a separate medical treatment makes no sense.
    Accordingly, we concluded that we would best serve the public 
health needs by distributing some amount of vaccine to all of our 
customers, rather than filling certain orders completely while leaving 
other customers with no supply.
    Another service we provide is information. We have received tens of 
thousands of calls from doctors' offices, clamoring for information, 
including close to 40,000 calls the day after the Chiron announcement. 
Without good communication with companies such as ours which are 
closest to the customers, doctors have had to tell their patients that 
they have no certainty that any supply would be forthcoming. On voice 
mails and websites in doctors' offices across the country, messages 
like the following from a prominent Washington physician's office were 
posted:

``UNFORTUNATELY, DUE TO THE FLU VACCINE SHORTAGE THE CENTERS FOR 
DISEASE CONTROL IS CONTROLLING THE SUPPLY OF VACCINE IN THE UNITED 
STATES. WE WILL NOT BE RECEIVING ANY FLU VACCINES THIS YEAR. THANK YOU 
FOR YOUR UNDERSTANDING.''

    Doctors in private practice see themselves at the end of a depleted 
distribution chain. They perceived correctly that before October 5, 
millions of doses had already been distributed to large private 
employers and government agencies for employee clinics and to 
promotional ``shoots'' sponsored by retail outlets. If given the 
chance, distributors could have played a role after October 5 in 
redistributing some of that vaccine to where it was most needed.
    Today, doctors perceive that the millions of doses remaining to be 
shipped have been earmarked for public health departments. Many, if not 
most, doctors are either unaware of that potential source or unwilling 
to tackle the red tape that they think would be involved in getting any 
of that vaccine.
    In retrospect, we believe it would have been prudent for those 
responsible for allocation plans to give more attention to private 
sector distribution. While it is easy to be a Monday morning 
quarterback in the face of an enormous challenge, we note for the 
future that the distribution community could have helped with the 
allocation and reallocation planning. CDC focuses on the public health 
sector and on increasing supply, while manufacturers focus on large 
purchasers. Distributors focus on the entire market, including small 
purchases by doctors in private practice who typically vaccinate a 
large majority of all patients who receive flu shots.
    To the second issue raised by the committee--how to strengthen the 
market, we do have some tangible suggestions and recommendations. For 
the 2005-2006 flu seasons, the US has a very short window of 
opportunity to encourage new production. We are not certain how many 
vaccine manufacturers will be producing flu vaccine, whether Chiron 
will be back in the market, and whether there will be new manufacturers 
who will have received timely FDA approval to bring vaccine into the 
country next year. It is extremely important that the FDA be able to 
move rapidly in examining other potential entrants and that the normal 
process of taking several years of review be expedited. If we are faced 
again with a limited supply, optimizing the distribution of that 
limited product will be critical. If we are fortunate and have an ample 
flu vaccine supply, we face a significant communications and public 
relations challenge in reversing course and telling those who were 
turned away this year to come back and get a flu shot--or to bring new 
patients in to get a flu shot. We would recommend that ample funding 
for a communications/public relations strategy be established.
    Longer term, we face a real chicken and egg proposition in 
strengthening the flu vaccine market. The CDC's goal is to vaccinate 
150 million people, a terrific public health objective in and of 
itself, but also a necessary objective for pandemic planning if we are 
to have adequate manufacturing capacity. If manufacturers had 
confidence that 150 million doses of flu vaccine would be sold in the 
US market, manufacturers would enter the market, competition would 
flourish, and we would not be faced with the issue of only having 2 or 
3 manufacturers. Instead, only 80 million doses of flu vaccine have 
been sold consistently in the market over the past several years. If we 
could raise demand, we are confident that the supply would be 
forthcoming without any need for government support. The challenge, 
accordingly, is to develop a demand for 150 million doses in this 
market.
    To get there, we must have a concerted and simultaneous attack on 
both supply and demand. We would recommend that the CDC, manufacturers 
and distributors undertake an aggressive joint public/private 
promotional program over the next several years calling for an 
increasing number of flu vaccine users. Universal flu inoculation 
should be the objective for 2008. The terrific public relations support 
that would be available to the CDC in the private sector will be key to 
meeting this goal.
    CDC will correctly point out that they don't dare undertake a call 
for broader vaccination until they can count on adequate supply being 
available. During the first few build up years, government market 
support may be necessary. It is important that government support be 
provided in a fashion that does not eliminate market competition, 
probably by providing a safety net at the end of the flu season under 
which the government would purchase unsold doses at a pre-negotiated 
below-market price. It is also very important that this program be made 
available to the distribution network and not just the manufacturing 
community. In the flu market, the distributors take the risk of loss by 
purchasing a firm amount of vaccine with no return privileges. If this 
support is not available to the distributors and supply were to 
increase, the distribution network could be lost along with and the 
role it has played in the past in stimulating investment by the 
manufacturing community through committing to firm orders. We are 
confident that once a joint public/private effort results in the market 
developing to a level approaching demand for 150 million doses, 
competition will ensure the availability of ample supply.
    Bottom line--distributors are an important part of the flu vaccine 
marketplace. Distributors physically deliver one-half of the flu 
vaccine to the market each year. Everybody has an interest, both for 
the remainder of this season and in future seasons, of working together 
to increase demand so that we build up our flu vaccine supply. It is 
important to get the distribution right before we confront a pandemic 
or a bioterrorist incident. We agree with the findings of the GAO, that 
distribution along with purchasing and administration are critical 
elements in the effective and efficient delivery of vaccines to high 
risk populations, in typical flu seasons as well as for pandemic 
preparedness. As you grapple with decisions about how best to stimulate 
supply, I would urge you to consider carefully the unique structure of 
the demand side, and the role that distributors play--especially the 
fact that distributors sign take or pay contracts with manufacturers, 
with no return privileges. If more supply comes in without concomitant 
demand, the distributor network will be lost. Accordingly, as support 
for manufacturing is considered, we need to factor in the distribution 
network as well. Henry Schein, and the entire distribution network, 
wants to serve our customers, but more importantly, we stand ready to 
do what we can do to help HHS, CDC and this committee, to respond to 
this or any public health crises.

    Mr. Walden. It has been helpful to have your perspective. 
Thank you.
    Ms. Coelingh, your are welcome to testify now. We 
appreciate your being with us today. Thank you.

                 STATEMENT OF KATHLEEN COELINGH

    Ms. Coelingh. Thank you. Good afternoon. My name is Dr. 
Kathleen Coelingh, and I am the senior director of regulatory 
and scientific affairs at MedImmune, a Maryland-based 
biotechnology company that manufactures the innovative 
intranasal influenza vaccine, FluMist. Approved by the FDA last 
year for healthy persons 5 to 49 years of age, FluMist is the 
first advancement in influenza prevention in 50 years.
    We are at a critical juncture in defining what the 
influenza vaccine market will look like in the future and how 
U.S.-based vaccine manufacturers will meet the needs of this 
country going forward. What will be the incentives for 
companies to build the U.S.-based manufacturing facilities? How 
will our government drive vaccine acceptance, utilization, and 
demand, since it is demand that ultimately determines the 
supply of vaccine manufactured? And what will be the incentive 
for continued innovation?
    MedImmune recommends that this committee support and 
encourage two key longer-term solutions in the realm of policy 
changes and incentives for innovation. The first recommendation 
is to move toward adoption of a universal recommendation for 
influenza vaccine for all Americans. The current 
recommendations, which are based on age groups and an ever-
expanding list of underlying chronic medical conditions, are 
both complicated for the health care provider and confusing to 
the public. We believe that a universal recommendation will 
stabilize demand for vaccine and thereby lead to an increased 
vaccine supply and ultimately to substantially lowering the 
current mortality and morbidity rates.
    As an interim step, MedImmune recommends required 
vaccination of school-aged children who have a very high 
influenza attack rate and spread influenza to their younger 
siblings, to their parents and to their grandparents. Thus, 
vaccination of school children would directly benefit not only 
the children themselves, but it may also have the potential to 
greatly reduce the impact of influenza in our communities. This 
concept of protecting an entire community by vaccinating the 
school-aged children has been demonstrated previously in Japan 
and also in studies in the U.S.
    In conjunction with this interim step, money must be 
appropriated to expand the education of the public and the 
medical community about the seriousness of influenza every year 
and the value of influenza prevention every year.
    The second solution that MedImmune recommends to ensure 
continued influenza vaccine supply is to provide tax incentives 
for scientific innovation and for construction of U.S.-based 
facilities. MedImmune is a primary innovator in the area of 
molecular techniques, which Dr. Fauci mentioned this morning, 
called reverse genetics. The use of reverse genetics is vital 
to producing seeds for the H5N1 pandemic vaccine. MedImmune 
owns multiple patents in this area and has granted free access 
to our reverse genetics intellectual property to government 
organizations and also to other companies who are developing 
pandemic influenza vaccines.
    In addition, MedImmune is currently collaborating with the 
National Institutes of Health to produce intranasal pandemic 
influenza vaccines and to test those vaccines in clinical 
trials. MedImmune also has coexpertise in the innovative area 
of cell culture manufacturing. The main advantages, as we have 
heard today, are elimination of our dependence on eggs and a 
more consistent and rapid production of vaccine which will be 
critical in the event that the egg supply is decimated by the 
emergence of a pandemic virus.
    The transition from egg-based to cell-based manufacturing 
will require considerable investment in the construction of new 
facilities and also clinical studies. Tax incentives to 
subsidize the cost of such innovations are necessary to 
guarantee a more stable vaccine supply on a yearly basis and 
also when the pandemic arises. The government also needs to 
incentivize manufacturers to build manufacturing facilities in 
the U.S. There is an increased risk that, with offshore 
manufacturing, companies will face political decisions that may 
prevent product from entering the United States, particularly 
in the event of a catastrophic pandemic. Tax incentives for 
U.S. based manufacturing facilities could encourage 
manufacturers to build more facilities in the U.S.
    To address what MedImmune has done during the current 
vaccine shortage since October 5, we have worked with the 
appropriate authorities to first blend and fill our excess bulk 
material to produce an additional 2 million doses of FluMist, 
bringing our total production this year to 3 million doses. We 
have supplied the Department of Defense with up to 400,000 
doses, the CDC with 125,000 doses, and we have supplied 
hospitals with over 60,000 free doses. Third, we have supplied 
the FDA with new storage data for FluMist, which they promptly 
reviewed and approved, allowing the additional 2 million doses 
to be stored in a household freezer without the requirement for 
a special freezer box. Finally, we have worked closely with 
ACIP and the CDC to clarify that FluMist is an option for all 
healthy people aged 5 to 9 to consider if they want to protect 
themselves against influenza this season.
    Shifting gears a bit and looking forward to the next 
season, you must understand that the influenza manufacturing 
campaign for the 2005-2006 season is starting right now. We are 
already preparing the new vaccine seeds which we anticipate 
will be in next year's vaccine, and we are making decisions 
about how many doses of vaccine we will manufacture for next 
year, including how many eggs we are going to order. Thus, the 
amount of FluMist that will be available for next year will 
soon be finalized.
    With some prompt additional regulatory cooperation, 
MedImmune has the capacity to produce between 8 to 10 million 
doses for next season. These regulatory actions include FDA 
approval allowing for production of larger lot sizes and 
product filtration, acceptance by FDA of our application to 
permanently eliminate the requirement for the FluMist freezer 
box, making shipping and storage infinitely easier for 
providers, and FDA acceptance of recently submitted data that 
supports the expansion of the FluMist indication to include the 
30 million healthy Americans who are 50 to 64 years of age, a 
group that is not eligible for the injectable vaccine this 
season and may not be eligible again next year if the shortage 
should continue.
    To summarize, MedImmune is clearly at a crossroads in 
determining not only how much FluMist will be available next 
season but also whether our investments and innovation will be 
recouped in this market. Our level of production for next 
season depends on the occurrence of several immediate 
regulatory actions. But whether MedImmune expands its 
production and whether companies continue their efforts to 
develop influenza vaccine depends in large part upon the 
government's commitment to encouraging innovation and to 
driving demand. Requiring childhood flu vaccinations as an 
interim step toward a universal recommendation and legislating 
tax incentives for both scientific innovation and U.S. Based 
manufacturing will go a long way toward stabilizing and 
ensuring adequate supply of influenza vaccine in the near 
future. I thank you.
    [The prepared statement of Kathleen Coelingh follows:]

Prepared Statement of Kathleen Coelingh, Senior Director of Regulatory 
                and Scientific Affairs, MedImmune, Inc.

    Good morning. My name is Dr. Kathleen Coelingh, and I am the Senior 
Director of Regulatory and Scientific Affairs at MedImmune, Inc., a 
Maryland-based biotechnology company that manufactures the innovative 
intranasal influenza vaccine, FluMist. Approved by the FDA last year 
for healthy persons 5 to 49 years of age, FluMist is the first 
advancement in influenza prevention in 50 years.
    We are at a critical juncture in defining what the influenza 
vaccine market will look like in the future and how U.S. based vaccine 
manufacturers will meet the needs of this country going forward. What 
will be the incentives for companies to build U.S. based manufacturing 
facilities? How will our government drive vaccine acceptance, 
utilization, and demand--since it is demand that ultimately determines 
the supply of vaccine manufactured? And what will be the incentive for 
continued innovation?
    MedImmune recommends that this committee support and encourage two 
key longer-term solutions in the realm of policy changes and incentives 
for innovation. The first recommendation is to move towards adoption of 
a universal recommendation for influenza vaccine for all Americans. The 
current recommendations, which are based on age groups and an ever-
expanding list of underlying chronic medical conditions, are both 
complicated for the health care provider and confusing to the public. 
We believe that a universal recommendation will stabilize demand for 
vaccine, thereby leading to increased vaccine supply, and ultimately to 
substantially lowering the current morbidity and mortality rates.
    As an interim step, MedImmune recommends required vaccination of 
school-aged children, who have a very high influenza attack rate and 
spread influenza to younger siblings, parents, grandparents, etc. Thus, 
vaccination of school children would directly benefit the children 
themselves and may also have the potential to greatly reduce the impact 
of influenza in our communities. This concept of protecting an entire 
community by vaccinating the school-aged children has been demonstrated 
in Japan and in studies in the U.S. In conjunction with this interim 
step, money must be appropriated to expand the education of the public 
and the medical community about the seriousness of influenza and the 
value of influenza prevention.
    The second solution that MedImmune recommends to ensure continued 
influenza vaccine supply is to provide tax incentives for scientific 
innovation and for construction of U.S. based facilities. MedImmune is 
a primary innovator in the area of molecular techniques, termed 
``reverse genetics.'' The use of reverse genetics is vital to producing 
seeds for an H5N1 pandemic vaccine. MedImmune owns multiple patents in 
this area and has granted free access to its reverse genetics 
intellectual property to government organizations and to other 
companies developing pandemic influenza vaccines. MedImmune is 
currently collaborating with the National Institutes of Health to 
produce intranasal pandemic vaccines and to test them in clinical 
trials.
    MedImmune also has core expertise in the innovative area of cell 
culture manufacturing. The main advantages of manufacturing using cell 
culture are elimination of dependence on egg supplies and more 
consistent and rapid production, which will be critical in the event 
that the egg supply is decimated by the emergence of a pandemic virus. 
The transition from egg-based to cell-based manufacturing will require 
considerable investment in the construction of new manufacturing 
facilities and clinical studies. Tax incentives to subsidize the cost 
of such innovations are necessary to guarantee a more stable vaccine 
supply on a yearly basis and when the pandemic arrives.
    The government also needs to incentivize manufacturers to build 
manufacturing facilities in the U.S. There is an increased risk that 
with offshore manufacturing, companies will face political decisions 
that may prevent product from entering the U.S.--particularly in the 
event of a catastrophic pandemic. Tax incentives for U.S.-based 
manufacturing facilities would encourage manufacturers to build more 
facilities in the U.S.
    To address what MedImmune has done during the current vaccine 
shortage, since October 5th, we have worked diligently with the 
appropriate authorities to:

1) Blend and fill our excess bulk vaccine to produce an additional 2 
        million doses of FluMist, bringing total production this year 
        to about 3 million doses;
2) Supply the Department of Defense with 400,000 doses, the CDC with 
        125,000 doses, and hospitals with over 40,000 free doses and 
        more than 200,000 commercially purchased doses.
3) Supply the FDA with new storage data for FluMist, which they 
        promptly reviewed and approved, allowing the additional 2 
        million doses of FluMist to be stored in a household freezer 
        without the requirement for a special freezer box; and
4) Work closely with CDC and ACIP to clarify that FluMist is an option 
        for all healthy people from 5 to 49 years of age to consider if 
        they want to protect themselves against the flu this season.
    Shifting gears a bit and looking ahead to next season, you must 
understand that the influenza vaccine manufacturing campaign for the 
2005-2006 season is starting right now. We are already preparing the 
new vaccine seeds for strains anticipated to be in next year's vaccine 
and making decisions about how many doses of vaccine we will 
manufacture next year, including deciding how many eggs to order. Thus, 
the amount of FluMist that will be available for next year will soon be 
finalized.
    With some prompt, additional regulatory cooperation, MedImmune has 
the capacity to produce between 8 and 10 million doses next season. 
These regulatory actions include:

1) FDA approval allowing for the production of larger lot sizes and 
        product filtration;
2) Acceptance by the FDA of our application to permanently eliminate 
        the requirement for FluMist storage in special freezer boxes, 
        making shipping and storage infinitely easier for providers; 
        and
3) FDA acceptance of recently submitted data that supports the 
        expansion of the FluMist indication to include the 30 million 
        Americans who are 50 to 64 years old, a group that is not 
        eligible for the injectable flu shot this year, and may not be 
        eligible again next year should we experience a continuing 
        shortage.
    To summarize, MedImmune is clearly at a crossroads in determining 
not only how much FluMist will be available next season, but also 
whether our investments in innovation will be recouped in this market. 
Our level of production for next season depends upon the occurrence of 
several immediate regulatory actions. But whether MedImmune expands its 
production and whether companies continue their efforts to develop 
influenza vaccines depends in large part upon the government's 
commitment to encouraging innovation and driving demand. Requiring 
childhood flu vaccinations as an interim step towards a universal 
recommendation and legislating tax incentives for both scientific 
innovation and U.S.-based manufacturing will go a long way towards 
stabilizing and ensuring an adequate supply of influenza vaccine in the 
near future.
    Thank you.

    Mr. Walden. Thank you, and all your colleagues on the panel 
here for your testimony today. I will start with the first 
round of questions. I appreciate your comments.
    Doctor, you know, in the last, I don't know, 5 or 6 years, 
we have more than doubled the funding for NIH for medical 
research. Do you feel like NIH is a good partner and is doing 
what they need to do in this effort of developing new--
assisting with basic research on the cell side, developing new 
vaccines and new ways to get about vaccines?
    Ms. Coelingh. Yes, I do. NIH is--the thing the NIH does the 
best is research, and they have spent a lot of time and energy 
in not only developing new vaccines. FluMist is a great example 
of that. The other thing that NIH is very good at doing is they 
have good facilities, and MedImmune is cooperating with them in 
making pandemic vaccines.
    Mr. Walden. Thank you.
    Dr. Paradiso, Wyeth pulled out of the business of making 
injectable flu vaccine; you have testified to that. It doesn't 
seem like anybody has rushed in to fill the void here in the 
United States. And my concern is, what are we going to do come 
January 5? As you heard the FDA comment, they have to make a 
decision by January 5 on this plant where Chiron works and 
produces their vaccines. If that turns out not to be 
acceptable, what do people like us do here in the Congress to 
try and get flu vaccine next year but also in the years 
thereafter? You have alluded to the need for some tax 
incentives, some liability reform and all. But is that going to 
get it done?
    Mr. Paradiso. You know, the influenza vaccine business is 
actually a little different than most vaccines. It is--as we 
have heard, the vaccine changes every year. It is a challenge 
that starts at the beginning of a year and needs to be 
completed by August. You need to be able to predict what the 
likely demand will be and try to match the demand. Our 
experience has been that, in fact, that was very hard to do. 
And as I indicated in my testimony, we throw away vaccine every 
year.
    I think Mr. Deal said earlier a comment that is very 
telling: He didn't know that he wanted a flu vaccine until he 
couldn't get it. And so what happens is that, traditionally, 
Thanksgiving comes around, and we stop vaccinating, and it 
doesn't matter how much vaccine is available, and the result is 
that we end up all throwing away vaccine most years. And so, to 
my mind, stabilizing that demand and having some way that a 
company can be assured that, if they make excess vaccine, in 
the event that these kind of shortages occur, that there is 
some way for a sharing of that risk in order to encourage 
people to do that, either to get into the business or, even if 
you are in the business already, to make more than you can 
predictably sell.
    Mr. Walden. I want to go back to Dr. Coelingh, because you 
said that FDA needed to make some regulatory changes for your 
company to be able to achieve an 8 to 10 million or 8 to 10 
million doses of your product. How soon do you have to have 
those changes in order to be in a position to achieve that 
goal, that production goal by next year?
    Ms. Coelingh. Well, as I mentioned in my presentation, we 
are at that time of year when the amount of doses--we have to 
decide the number of doses very shortly, and so we need a 
decision very shortly. If we don't know what our demand is 
going to be, we have to plan for another contingency. So there 
are a number of factors that we take into consideration, and 
some of these regulatory actions are absolutely required for us 
to go to that level.
    Mr. Walden. Okay.
    Ms. Coelingh. And they are required soon.
    Mr. Walden. And soon is?
    Ms. Coelingh. Soon, we are talking about weeks, not months.
    Mr. Walden. That is what I needed to hear. All right.
    Ms. Olszewski, I am sure you had maybe a reaction to what 
Mr. Mlotek said about the distribution system, because Mr. 
Mlotek said that, if I understood correctly, the best 
distribution point when there is a limited supply is through a 
doctor's office so that they can determine who best to give 
them to in terms of their patient load, who is most in need. 
And I am just curious, from a health clinic side, you obviously 
have some authority to make that decision as well and took that 
step. Does that same authority apply across other States, 
health departments? And is that an authority the CDC should 
have to mandate who gets it? Or do they even have that 
authority? If you would like to address that.
    Ms. Olszewski. Every State does have some authority, but it 
depends on how their State public health laws are constructed. 
So all of us have slightly different imminent danger, public 
health emergency authorities to essentially limit how--or to 
handle any public health events. So all of us do have 
authority. And, as I indicated, several States--I know Oregon 
was one. Vermont was another. Michigan was a third. There are 
others who have done that. In my testimony, I did say that I 
thought the Federal Government in the form of the Department of 
Health and Human Services--it could be Centers for Disease 
Control--should have some authority as well on a national 
level.
    Mr. Walden. You know, one of the things we hear though all 
too often is, don't trump our State's ability to make these 
decisions. Is that what you are asking for, is a Federal 
preemption over what you have the authority to do now and most 
States have the authority to do?
    Ms. Olszewski. Well, as I said earlier, the issue with flu 
vaccine is--the supply issue is really a national issue. And 
when we get into supply shortages, there were States, for 
example, there were a few states that had no supply in their 
State on October 5 because they had put all their orders 
through Chiron. And so, in that situation, it does that State 
no good to have only State authority. And so I think there 
really is a role for the national level. I think we need to 
think carefully about what the respective roles of the Federal 
Government and the State government are. But that would be 
important.
    Mr. Walden. Thank you. My time has expired.
    I now recognize the ranking member at this point, Mr. 
Green.
    Mr. Green. Thank you, Mr. Chairman.
    One of the suggestions is that the government support a 
supply, a surplus vaccine buy-back program, and for the 
government to do it at the end of this season so manufacturers 
aren't stuck with it--they can't hold it for the next year, 
obviously, below market price. Can each member of the panel 
talk about that may be one of the solutions we are looking at 
to take away some of the fear that you will be stuck with 
overexcessive vaccine?
    Mr. Paradiso. You know, I think that, in dealing with 
shortages in general of vaccines, one of the ideas that has 
come forward often is the idea of strategic inventories or 
stockpiles. For routinely administered vaccines, there is a 
different situation where you can build a stockpile and have 
some sort of rotation within that stockpile because you are 
giving the vaccine constantly over the years. For the flu 
vaccine, it is a little different situation, and so really, by 
the end of the year, if that vaccine is not used, you have to 
throw it away. And so if there is some way to share that risk, 
that is a positive step.
    The better solution of course is to actually better meet 
the demand and the supply, and get better at actually making 
that connection, and, furthermore, appreciating the value of 
the vaccine and the importance of the vaccine. As I said 
before, the importance of this influenza vaccine is not 
appreciated until it is not available, and it is then that we 
try to rush to have these solutions and, people are willing to 
pay lots of money, as we heard earlier, and want to do anything 
they can to get a vaccine. And that is not the case year after 
year, and in fact, they don't get a vaccine.
    Mr. Green. I agree. One of our members, I think, said they 
didn't know they really wanted one until they couldn't get one. 
But we have done a better job in the last few years of 
marketing this idea that you should have a flu vaccine, 
particularly if you are in the high-risk group. And so, you 
know, looking at ways, it would be great to be able to match 
the number of vaccines with the number of people who would be 
willing to get them.
    Ms. Olszewski.
    Ms. Olszewski. I think that is very important. And if we 
had some attention to an adult immunization program, we in the 
public health community could help stabilize that demand. I 
think that part of it is just a consistent message.
    Unfortunately, we did make some progress last year, and we 
were making great progress this year in getting people to 
realize they needed a flu vaccine, and then we were hit with 
the shortage. So now we have given out an inconsistent message; 
you know, you want it and now you can can't have it. And I 
think if we had an adult immunization program where we could 
put some concerted effort into that marketing, into that 
education piece, then we could help stabilize demand.
    Mr. Mlotek. May I, sir?
    Mr. Green. Yes.
    Mr. Mlotek. A few statements I just would like to clarify 
or perhaps even challenge. When Wyeth left the market, almost 
immediately the other two manufacturers issued press releases 
that they were going to increase production, and they ramped up 
production to amounts in excess of what Wyeth had produced. So 
this year--in previous years, the most that was ever produced 
was 80, 84 million doses. This year, the market was expecting 
to get 100 million doses, which was far more than the market 
had ever used before. In the past, the most that the market had 
ever bought was 80 million doses, and as a matter of fact, that 
amount had been stable for the last 3, 4, 5 years.
    So with the increased communication that we have been 
doing, we have not been able to increase demand for the supply, 
and this year, the projection was there were going to be 10 to 
20 million doses thrown away. And to incentivize people to come 
to market--and there are people who want to come to market as 
soon as next year if the FDA could be funded and do whatever 
they need to do to get them here. The idea that is needed is, 
there is going to be a short-term imbalance of demand versus 
supply until we can get the word out. And that is the need for 
short-term safety net until the free market economy can take 
over and work.
    Mr. Green. And do you think some type of buy back and 
sharing the cost of the loss is something that could be on a 
short-term basis?
    Mr. Mlotek. I believe a short-term basis until supply and 
demand works, because, as soon as you increase demand, people 
will come in and be able to produce. The free market works.
    Mr. Green. Let me ask another question, because I only have 
28 seconds. But there is suggestion on tax incentives to spur 
investment and capability and facilities to do both sale and 
other emerging technologies, so maybe we won't have to have 
this shelf-life problem, that we could deal with it, whether it 
is grants or other incentives. Can somebody just address that 
to see the potential? Is that something that is really, that we 
could look at, or is it something that is still in the research 
stages?
    Ms. Coelingh. Are you speaking of the cell cultures 
specifically?
    Mr. Green. Cell cultures, or any way that we can produce it 
other than with the eggs technology.
    Ms. Coelingh. All right. I think most of us in the business 
are quite enthusiastic about a move to cell culture, and there 
are a lot of reasons for that. Before we would make that move, 
of course, we have to show that we can get sufficient yields 
and that we can make vaccine consistently. But we have every 
reason to think that the consistency will be good and that we 
will have a little bit more flexibility in that we could maybe 
start off at a different time of year, or if we see a problem 
coming, that we could ramp up our production, whereas we 
couldn't do that sort of thing with eggs because of the long 
lead time.
    And there are other advantages to working in cells, and 
that really relates specifically to a pandemic, because these 
avian strains are lethal for chickens. Okay? So we want to be 
ready, we want to have something other than eggs if at all 
possible that we can use.
    The other thing I would like to add that I think gets lost 
in this conversation is that use of cell culture is not a new 
concept with vaccines. Most vaccines are made using cell 
culture. So it is not novel in that respect, it just has to be 
applied to influenza virus vaccines.
    Mr. Green. Mr. Chairman, if you will indulge me.
    Is there more interest now in doing the research so we 
could do the cell culture because of this year's example, 
either oversupply or this year's dramatic undersupply?
    Ms. Coelingh. I think that it has gotten more on the front 
burner because of those two reasons, the pandemic and because 
of our current shortages, that we just realize that we would 
like to make some moves if at all possible to cell culture.
    Mr. Walden. Doctor, do you want to go ahead and respond?
    Mr. Paradiso. I would also just like to make a comment. I 
think we need to be sure to put the context of the flu vaccine 
into the context of the vaccine business in general, because a 
company generally--or most of the companies who are in the flu 
vaccine business are in the vaccine business generally. They 
have an infrastructure. This is the first vaccine for 
MedImmune, but they plan to make more vaccines in the future. 
You have to invest in, and there are so many issues within 
vaccines that need to be addressed. It is not just flu vaccine 
related issues. It is related to the amount of time it takes to 
develop a vaccine, the risks associated with that, the cost of 
facilities, the liability issues. And so the issues that 
influence vaccines, any one of them you could think of ways to 
overcome. But if you don't broadly address those issues to make 
it more attractive to manufacturers, manufacturers of even flu 
vaccine are going to wonder why they want to do that.
    Mr. Green. And just briefly responding, I do an 
immunization day in August for our children, which is much more 
typically concerned with other than our annual flu shots. And I 
agree with you, and I would love and I think any member of the 
committee would like to have information on how we could do it 
on a statutory basis or even on a regulatory basis, encourage 
our agencies to do that. And if it takes statutes, then here at 
the authorizing committee, we don't give you money, we just can 
give you authority. But I would love to work with you on that.
    Mr. Walden. Here is your checkbook, that is all you get. 
And I will go to my colleague from Illinois. I think this issue 
though of the pandemic is one that I hope we can get into here 
at some point because the briefing I have had in terms of what 
can happen coming out of Asia runs those birds right up the 
west coast of the United States and hits pretty close to home 
before you will have any vaccine in place.
    And I would recognize the gentlewoman from Illinois.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    It seems to me that the notion of all of this as a security 
issue, certainly a health security issue, and that has been 
referred to when we talk about pandemic, that is really what we 
are talking about. But it is really also, it seems to me, 
reflective of the potential of a national security issue as it 
relates to a bioshield and our ability to address that problem. 
And I was concerned when I read in the testimony of Dr. 
Crawford, he describes what we have as a fragile 
infrastructure, because of the fragile infrastructure and 
decision of manufacturers to leave the market. We have been 
talking a lot about the market.
    Mr. Mlotek has said the market works. I think we have 
evidence I feel that the private market has not worked well for 
us. And Ms. Olszewski's statement that relying simply on market 
forces does not work when it comes to flu vaccine. So I want to 
talk a little bit about what I see as the necessity--and I 
heard you say that, Dr. Coelingh--that the importance of U.S. 
manufacturers for these vaccines, and I would agree.
    But I want to go to Dr. Paradiso, where you said that in 
your testimony--I don't know if you said this in your--you 
talked about the tetanus vaccine, that the cost is so low that 
no company has bid to provide it to the government for many 
years, that Merck MMR vaccine is listed on the government's 
schedule at around $16.25 while the market catalog price is 
$38.05. Is Wyeth a profitable company?
    Mr. Paradiso. Yes, it is.
    Ms. Schakowsky. My understanding is that the 2003 profit 
margin was 19.56 percent; that in 2002, $44 billion in profits, 
an increase of 95 percent over 2001, the greatest rate of 
increase of any Fortune 500 company.
    I am not against profits, but I am wondering, at what point 
do we say in a partnership with the providers of vaccines that 
we have an overriding public interest concern here that can't 
just simply be addressed in how big are the profits? And my 
question is, when we talk about, all right, Merck, the 
government's schedule at $16.25 while the market catalog price 
is $38.05. Does that mean that, at $16.25, or if there is 
something comparable with Wyeth, that you don't make any money, 
that you are actually losing money? Or is it just that there is 
not enough profit in making vaccine for U.S. companies to 
engage in that when they could be making so much more money 
doing something else?
    Mr. Paradiso. Thank you. I think the issue for the prices 
that you are talking about are the results of the program when 
the Vaccines for Children program was put into place. And when 
that occurred, the vaccines that were available at that time 
were, the prices were fixed except for cost-of-living 
adjustments. That was over 10 years ago, and those rules are 
still in place.
    And what is highlighted is an area that could be remedied, 
because most of the vaccines that were on that list to begin 
with are no longer used and have been superseded by new 
vaccines. So it is an area where I think that a change could be 
made that would be helpful. But when you talk about 
responsibility, and I think you talk about the vaccine 
enterprise, we have been committed for many years to make 
vaccines for children in particular; it has been our focus. We 
have provided vaccines that prevented serious diseases like 
meningitis, and in fact, our most recent vaccine, Prevnar, has 
had a dramatic impact on childhood invasive disease from 
pneumococcus, including meningitis, and that vaccine has been 
so effective in fact that parents and grandparents of those 
children are not getting diseases and pneumonia in particular.
    And so from our perspective, vaccines are probably the most 
valuable product that we could actually put onto the market and 
have proven to be that over and over again. So I think, from 
the government perspective, getting back to those products you 
referenced, fair market value ought to pay for those products.
    But when you talk about, for example, our flu vaccine, 
which is what we are talking about now, year after year, it was 
clear that the public didn't want that product from us and that 
there was ample product out in the marketplace that made it 
unnecessary for us to be in that business. And, in fact, since 
we were losing money every year and actually throwing doses 
away every year, and it was clear that the other manufacturers 
who were still available were able to supply the vaccine and 
did subsequent to our leaving the market, it was the decision 
that we made that was in fact responding to the marketplace at 
that time.
    Obviously, what has happened this year has changed that 
paradigm and made us perhaps think about that differently. But 
I would suggest what it has made us think about is the actual 
value of influenza vaccination and whether we need to increase 
our perception of what the value of that is beyond when there 
is a crisis and on an ongoing basis.
    Ms. Schakowsky. A universal--essentially a universal adult 
immunization program, Ms. Olszewski, you are suggesting, could 
stabilize the market, that is, address some of these market 
concerns and could save a lot of lives in the United States.
    Ms. Olszewski. Absolutely. It could save lives, it could 
save morbidity, mortality. It could also save health care 
costs, because obviously, those adults and children who suffer 
the complications of influenza, administering a flu shot is a 
lot cheaper than the hospitalization and the physician care 
that is required afterwards.
    Ms. Schakowsky. And, Mr. Chairman, if you could just--I 
mean, what concerns me here is that the public health of the 
United States is at risk right now and that, while we 
absolutely need to look at the ways that the United States, 
that the government can assure a U.S. production of this kind 
of vaccine, I think we also can't simply say, if we don't get 
this market price and we don't make sufficient profits, that 
that is not going to be the only--that is not going to be the 
only concern that we need to address. We have to work in 
partnership to figure out exactly how we can address what I 
think is a--it could be a devastating crisis. Thank you.
    Mr. Walden. Thank you.
    The Chair now recognizes the chair of the full committee, 
Mr. Barton.
    Chairman Barton. I thank the chairman. I had to attend the 
Texas delegation lunch, and that is why I was absent. Excuse 
me, the Republican section of the Texas delegation lunch. I 
don't want Mr. Green to get chagrined there.
    I have two questions, and they are general questions. And 
anyone who wants to can answer them, or all of you for that 
matter. No. 1, how confident are you folks that this won't 
repeat itself next year? And, two, if you think there is a 
possibility that we may have the same problem, what do we need 
to be doing, we the Congress, legislatively, to help change the 
system to minimize the potential for having these kind of 
problems that we are having this year?
    Ms. Heinrich. I will start out. I do think that we are at 
risk of having problems next year because we are not sure of 
what the flu vaccine supply is going to be. And it is 
absolutely critical that we identify the high-risk patient 
populations--and clearly, we have heard that the States are in 
the process of doing that--and that we identify the health care 
providers that are serving those high-risk groups, and that we 
find a way of quickly making sure that those providers are the 
ones that have the vaccine to give to the high-risk 
populations.
    From a legislative perspective, other than some of the 
ideas that have already been put on the table here, giving CDC 
actual authority when there is a public health crisis at a time 
of shortage to actually have more direct authority for that 
distribution process, I am just not sure what more could be 
done in the short term. Because as we have heard, the 
manufacturers have to be planning now for the number of doses 
that they are going to be producing for next year.
    Mr. Mlotek. May I jump in with a quick comment? I agree 
that in terms of whether it is going to happen again for next 
year, it is a distinct possibility, and we will not know for a 
while. And, again, so what does it lead to is a little bit of a 
chicken-and-egg situation. If they come back, there will be 100 
million doses in the market. So at the same time----
    Chairman Barton. When you say they, Chiron?
    Mr. Mlotek. If they--Chiron comes back there will be over 
100 million doses in the market, maybe 110 million doses. At 
the same time, the FDA should be going out and finding, with 
HHS, another potential manufacturer to enter the market. They 
are there, they just need to be inspected and gone through 
expedited approvals. They want to come to market. We have seen 
them. We have met with them. We know they want to come to 
market. The FDA needs to have the resources to be able to go 
out and inspect them and do expedited approval.
    On the other hand, if they come to the market and Chiron is 
back, you have an oversupply. You have 140 million doses when 
the market has never used more than 70 to 80 million. So there 
has to be two tracks. The one is, get more people in, and the 
second is some sort of stability in the market in the short 
term while there is a supply demand imbalance while the CDC, 
the government, all of us, public, private together work to 
increase demand.
    Chairman Barton. I would assume that this is a question 
that I almost already know the answer. But you can't create--
like we have the Strategic Petroleum Reserve, because you can 
store oil indefinitely. We couldn't create a strategic flu 
vaccine reserve where we built a reserve because the shelf life 
of the vaccine I guess is fairly short?
    Mr. Mlotek. And the strains change every year.
    Ms. Coelingh. That is correct. I would like to add that, 
from my perspective, I think, every year, we are 
undervaccinating in the United States. And I can't help but 
have to go back to the fact that everyone is at risk. You know, 
we all are starting to forget that there is a high level of 
disease even amongst healthy children. We had 152 deaths among 
children last year from influenza, and many of those had no 
identified high-risk condition. So we can't take our eye off 
the ball. We can have short-term fixes. We can talk about 
strategic reserve. We can talk about buy-back programs. But in 
the long term, those may not be actually healthy for our 
industry, because if the government buys vaccine at below 
market prices and you don't get a fair return on your 
investment, that ultimately is not healthy for the industry 
overall. And so we need to make sure we have vaccine for next 
year, but remember that we have to talk about the long term as 
well. So that is where we come back to investing in the future, 
in the future vaccines.
    Chairman Barton. Do you all--and my time has expired. But 
do you all agree that this is part of a broader issue, that the 
way we do liability for immunizations and research, that it is 
not just flu vaccinations, it is the broader medical community 
and the way we address a lot of vaccinations and immunizations 
for various diseases that we need to take a look at that? Is 
that a fair statement?
    Mr. Paradiso. I would like to comment that one of the 
reasons that Wyeth is one of the few remaining vaccine 
companies that are U.S.-based and working on vaccines, is 
because it is not an easy business to be in. So you are 
absolutely right. There are, as I said before, an accumulation 
of issues that are important to our vaccine enterprise. And 
they have been important for years, and we have had these 
issues of shortages and childhood vaccines in the last several 
years. We have a shortage this year. We have had a lot of 
recommendations that I think are positive, and we talked about 
a lot of them today. And we need to move forward with them.
    And I would just like to say one other thing. I talked 
about our pneumococcal vaccine for babies that has prevented an 
amazing amount of disease in the elderly and adults because 
they have stopped that spread. Well, it is the same thing as 
Dr. Coelingh was saying; with children, probably the best thing 
you can do to protect the elderly is actually to vaccinate 
their children and grandchildren. And so while we are focusing 
all our vaccine on the elderly this year, you have to remember 
that the 36,000 deaths that occur every year in the United 
States are occurring in the face of the fact that we are 
vaccinating 65 or 70 percent of those elderly. So they are not 
able to respond as well as we would like to begin with. So even 
if we were to raise that to 75 or 80 percent, there would still 
be a lot of morbidity in that age group, and that is because 
they are getting the disease from the people who are around 
them who could be protected from influenza more readily. And so 
if we expand that population of people vaccinated, we are more 
likely to protect the most at risk. If we expand that number 
and expand the suppliers to provide that number, we will be 
more prepared to deal with a pandemic if that occurs because we 
will have more sources of vaccine.
    Chairman Barton. My time has expired. I want to compliment 
you folks on showing up and being a part of our panel. And this 
is something that the oversight subcommittee and myself as full 
committee chairman, we are going to work cooperatively with the 
stakeholders and the Federal agencies not just in the short 
term but in the long term. And my understanding is that 
Congresswoman Eshoo and others offered to work with us on a 
bipartisan basis, that, if we need to implement a legislative 
package of reforms, we will try to expedite that. And I thank 
you all for your participation.
    Mr. Walden. Thank you, Mr. Chairman.
    I know Mr. Green wanted to make one final comment.
    Mr. Green. Mr. Chairman, and, again, our chairman of the 
full committee. And I know there may be some liability issues, 
but this is just not liability. And so to pass liability 
protection for immunizations or for vaccines will not do the 
trick. There has to be a broad package. And I agree that--and 
of course the high risk are not typically the younger children 
or the grandchildren or the children of the elderly. So maybe 
we need to have a broader program like we do immunize every 
child by 2. Of course, I come from an area where we have low 
immunization rates for children, which is frustrating because 
it is marketed so much, and yet we still have problems. But, 
again, joining the chairman, both the subcommittees working 
together--I am not on Oversight and Investigations Subcommittee 
but on the Health Subcommittee, because it is part of the 
concerns about public health and the vaccines. And like him, I 
want to thank you for being here and appreciate what you do. 
Prevention is always so much better than the illness. So that 
is what we need to do on all vaccines.
    Mr. Walden. I appreciate your comments. And as at least 
currently the vice chairman of the O&I, I concur with what the 
chairman said. And obviously, we need to get back at this issue 
of the pandemic as we work on the year-to-year chasing this flu 
bug and trying to stay ahead of it.
    But in the information I have seen about what happens in 
the avian flu, if that ever converts over to where we get it, 
which could happen, you could see a pandemic where it is not 
36,000; it could be 30 million. And we have got to figure out 
in terms of research how to accelerate and how to have what we 
need as an infrastructure to deal with that.
    So we really appreciate your comments. Thank you for 
sticking with us today. Your testimony is very helpful as we 
work on this issue together.
    And, with that, the committee record will remain open for a 
period of time for members to submit questions they may have 
had and for other comments. We do appreciate it and look 
forward to working with you. And, with that, the committee is 
adjourned.
    [Whereupon, at 1:32 p.m., the subcommittees were 
adjourned.]
      
    [The Department of Health and Human Services did not 
provide material requested for the record. The Department did 
not respond to questions for the record.]
      
    [Additional material submitted for the record follows:]

        Prepared Statement of the American College of Physicians

    The American College of Physicians (ACP)--representing 116,000 
physicians and medical students--is the largest medical specialty 
society and the second largest medical organization in the United 
States. Internists provide care for more elderly and patients with 
chronic health conditions than any other medical specialty. As such, 
the College urges Congress and the Executive Branch to work together in 
a bipartisan fashion to address misdistribution and shortages of 
influenza vaccines. The current influenza vaccine shortage highlights 
many of the shortcomings of our existing system.
    The development and use of vaccinations is one of the most 
successful and cost-effective public health initiatives in history. 
Vaccines reduce future medical costs and prevent the need for more 
expensive drugs. While high levels of immunization have been achieved 
in the U.S., especially among children, our current system of 
production and distribution cannot guarantee a stable supply of 
vaccines. This recurring problem brings into question whether the U.S. 
is prepared to manufacture and distribute vaccines in the case of an 
unexpected bioterrorist attack, let alone a potential outbreak of a 
number of routine diseases.
    Going into this flu season, the public was assured that plenty of 
vaccine would be available to meet the nation's needs. The U.S. was 
expected to have 100 million doses of flu vaccine this year, up from 87 
million last winter. Now, federal health officials expect to have only 
about 56 million doses of injectible vaccine and another one to two 
million doses of nasal flu vaccine spray.
    ACP is gravely concerned about the impact these recurring shortages 
will have on the nation's health. Influenza, on average, results in 
36,000 deaths and more than 200,000 hospitalizations each year in the 
U.S. While rates of infection are highest among children, rates of 
serious illness and death are highest among people over age 65 and 
people who have medical conditions, such as chronic diseases, that 
place them at increased risk for complications from influenza.-- 
Persons aged 65 or older account for more than 9 of 10 deaths and 1 of 
2 hospitalizations related to influenza. According to the Department of 
Veterans Affairs, the nation loses $1.3 billion each year due to causes 
related to the flu, including extended hospital stays and a lack of 
productivity from missed work and school days.
    The current flu vaccine shortage points to several inadequacies in 
the U.S. vaccine production and distribution system. For one, the U.S. 
production system relies on too few providers. In 2002, children were 
endangered and the risk of a serious outbreak increased when five 
vaccines that prevent eight childhood diseases were in short supply, 
forcing more than 40 states to ration these vaccines to children 
entering school. At the time, only four manufacturers produced vaccines 
for American children, just two of which were American companies. This 
year, the unexpected suspension of Chiron Corporation's license to 
manufacture flu vaccine left the U.S. with a single supplier of 
injectible vaccine.
    The unwillingness of manufacturers to enter or remain in the 
vaccine market has much to do with uncertain returns on investment and 
the lack of government interventions to avert such problems. There is 
little economic incentive to manufacture flu vaccines since flu strains 
are constantly changing, doses cannot be used from year-to year, and 
manufacturers must bear all of the cost of surplus vaccines. As a 
result, manufacturers tend to produce fewer doses so as not to risk 
creating a costly surplus. In 2002, manufacturers lost approximately 
$120 million through unused vaccines. As a result, 12 million fewer 
vaccines were produced in 2003 to avoid repeating such a loss.
    Because manufacturing cannot begin until new virus strains are 
identified and grown, it is difficult to stockpile flu vaccine or plan 
ahead for future flu seasons. ACP appreciates that the Department of 
Health and Human Services (DHHS) has taken steps to ensure that once 
the virus is identified, resources are in place to ramp up production 
and produce enough vaccine to protect U.S. residents as quickly as 
possible. However, the vaccine industry still relies on outdated 
technology. In a report released in September 2004, the Government 
Accountability Office (GAO) noted that the current U.S. system relies 
on a 50-year old method that uses specially harvested chicken eggs to 
produce licensed influenza vaccines. Food and Drug Administration (FDA) 
officials and vaccine manufacturers have stated that this production 
process cannot be shortened to less than the current 6 to 8 months 
given the existing technology and safety standards.
    Manufacturers are also reluctant to produce vaccine because of the 
threat of lawsuits over vaccine safety. In 1986, a no-fault 
compensation system called the Vaccine Injury Compensation Program 
(VICP) was created to lower the legal risk to vaccine manufacturers and 
providers who administer vaccines, and to ensure that injured patients 
are rapidly and appropriately compensated. Recently, the VICP has 
become overwhelmed with new claims--many of which have been found to 
lack merit. This has not only delayed consideration of legitimate 
claims, but caused the spill-over of costly lawsuits into our court 
system.
    Despite the demonstrated effectiveness of vaccination in particular 
risk groups, our national distribution system also fails to ensure that 
high-risk patients will have access to vaccines first. Current 
distribution is based on the date the vaccine was ordered rather than 
who needs it most. If a manufacturer's production is disrupted, those 
providers who ordered vaccine from that manufacturer could experience 
shortages, while those who ordered vaccines from another manufacturer 
might not be affected at all. ACP is pleased that in response to the 
current shortage, the CDC is recommending prioritization of vaccine for 
those at higher risk. However, the agency currently has no authority to 
mandate that the vaccine go to priority patients or to track where it 
ends up.

                          ACP RECOMMENDATIONS

    Access to an adequate supply of flu vaccine is especially critical 
for physicians of internal medicine, since many of our patients qualify 
as high-risk for complications from influenza, due to either chronic 
health conditions or age. During previous flu seasons, much of the 
limited flu vaccine supply went to non-professional distributors, such 
as drugstores and grocery stores, who distributed the vaccine on a 
first-come first-serve basis, regardless of risk.
    ACP appreciates that the DHHS is taking positive steps to address 
the current problem and keep the public informed of measures to prevent 
and treat the flu. We are pleased that a task force has been created to 
ensure that the flu vaccine and treatment medication goes to those who 
need it most and without any price gouging. We are also pleased that it 
includes members of the public health community, physicians, law 
enforcement and prosecutors, trade associations and advocacy groups. 
ACP thanks the CDC and Aventis Pasteur for working to identify 
providers of high-priority populations, including primary care and 
specialty physicians. Finally, ACP appreciates that the American Jobs 
Creation Act of 2004 (P.L. 108-357), recently signed into law, takes a 
first step in the direction of adding the flu vaccine to the VICP. 
Adding the flu vaccine to the VICP would provide limited liability 
protections for flu manufacturers, while assuring victims compensation 
for injuries.
    Despite these positive efforts, ACP is concerned that our nation 
lacks a permanent mechanism to ensure that vaccines reach internists 
and other primary care physicians who have been clearly identified as 
providers who care for high-risk patients. To improve our nation's 
vaccination efforts and ensure that patients most in need can continue 
to access vaccines, ACP makes the following recommendations for 
immediate action and offers additional steps for the future:

Recommendations for Immediate Action

 To ensure that patients most in need receive the vaccine, 
        manufacturers of the influenza vaccine, non-professional 
        distributors of the vaccine, and appropriate government 
        agencies should ensure that limited supplies of the vaccine are 
        made available to clinicians and other licensed health care 
        providers who provide regular patient care to high-risk 
        individuals.
    --In taking steps to ensure that limited vaccine supplies reach 
            providers who serve high-priority populations, the CDC 
            should continue to recognize the role of physicians of 
            internal medicine in treating a disproportionately large 
            number of seniors and patients with multiple, chronic 
            conditions--two patient categories that have historically 
            been labeled by the CDC as high-risk. For many vulnerable 
            patients, the physician's office is the best location to be 
            immunized, especially for patients who are unable to stand 
            in line at grocery and drugstores, and who require careful 
            monitoring.
 Local public health departments should have an aggressive plan in 
        place to distribute vaccine to local providers with the 
        greatest need.
 States should thoroughly investigate reports of price gouging 
        involving the flu vaccine and prosecute those found to be 
        taking advantage of the vaccine shortage.
 To comply with emergency orders issued by state or local governments 
        mandating vaccine be administered only to persons of high risk, 
        physicians should have access to clearly communicated 
        prioritization requirements, distribution plans, and other 
        instructions. Physicians should not be penalized for failure to 
        follow emergency orders that are not clear and timely and do 
        not provide for due process to resolve situations outside the 
        physician's control.

Additional Recommendations

 The CDC should be given the authority to organize the distribution of 
        vaccines and implement a concentrated response system, 
        particularly in emergency situations.
    --Appropriate and adequate distribution plans should be formulated 
            by the CDC prior to the start of a flu season. U.S. 
            officials should not be scrambling for ways to modify the 
            distribution system to make up for shortages as the flu 
            season begins, as is the case this year.
    --A vaccine clearinghouse should be established to facilitate 
            donation of vaccine to individuals at high risk of 
            infection.
    --DHHS should be permitted to purchase vaccine from employers or 
            wholesalers who are willing to sell it.
 Additional research and development to improve surveillance of 
        strains and outbreaks and to improve current vaccine production 
        methods should be encouraged.
    --Research funding should be increased to help develop alternatives 
            to egg-grown influenza vaccines.
 The federal government should be required to build and maintain a 
        six-month stockpile of prioritized vaccines to prepare our 
        nation for vaccine shortages.
 The federal government should offer incentives to encourage more 
        manufacturers to research and produce vaccines, such as tax 
        incentives for vaccine manufacturers to expand production 
        capabilities and guarantees that the government would purchase 
        unused supply.
 Funding available for state and local efforts should be expanded to 
        boost immunization rates among adults and adolescents who are 
        underserved or at high risk for vaccine-preventable diseases.
    --Funding should be authorized under the Public Health Service 
            immunization program for the distribution of influenza 
            vaccine to qualifying health care providers, including 
            internists.
 Increase education and outreach efforts for upcoming flu seasons.
 Revise provisions governing the Vaccine Injury Compensation Program 
        (VICP) to ensure that unwarranted litigation does not further 
        destabilize our vaccine supply.
 Vaccines manufactured abroad should only be used in the U.S. if the 
        FDA has certified their safety.
    For many years, unavailability of vaccine products has presented a 
challenge to physicians and patients. The federal government must have 
a system in place to assure an adequate and safe supply of lifesaving 
vaccines in the event of a disruption in the expected supply. It is 
also critical that an adequate and appropriate distribution system be 
in place to ensure that the most vulnerable patients have access to 
vaccines before all others.

                                 
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