[Senate Hearing 108-780]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-780

                LIABILITY, LICENSING AND THE FLU VACCINE
      MARKET: MAKING DECISIONS TODAY TO PREVENT A CRISIS TOMORROW

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

                                HEARING

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                           NOVEMBER 16, 2004

                               __________

                           Serial No. 108-46

         Printed for the use of the Special Committee on Aging


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                       SPECIAL COMMITTEE ON AGING

                      LARRY CRAIG, Idaho, Chairman
RICHARD SHELBY, Alabama              JOHN B. BREAUX, Louisiana, Ranking 
SUSAN COLLINS, Maine                     Member
MIKE ENZI, Wyoming                   HARRY REID, Nevada
GORDON SMITH, Oregon                 HERB KOHL, Wisconsin
JAMES M. TALENT, Missouri            JAMES M. JEFFORDS, Vermont
PETER G. FITZGERALD, Illinois        RUSSELL D. FEINGOLD, Wisconsin
ORRIN G. HATCH, Utah                 RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina       BLANCHE L. LINCOLN, Arkansas
TED STEVENS, Alaska                  EVAN BAYH, Indiana
RICK SANTORUM, Pennsylvania          THOMAS R. CARPER, Delaware
                                     DEBBIE STABENOW, Michigan
                      Lupe Wissel, Staff Director
             Michelle Easton, Ranking Member Staff Director

                                  (ii)

  
?

                            C O N T E N T S

                              ----------                              
                                                                   Page
Opening Statement of Senator Larry E. Craig......................     1
Statement of Senator Herb Kohl...................................     3

                                Panel I

Lester M. Crawford, D.V.M., acting commissioners, Food and Drug 
  Administration, U.S. Department of Health and Human Services...     4
Mitchell L. Cohen, M.D., director, Coordinating Center for 
  Infectious Diseases, Centers for Disease Control and 
  Prevention, U.S. Department of Health and Human Services, 
  Atlanta, GA....................................................    22

                                Panel II

Peter R. Paradiso, vice president for New Business and Scientific 
  Affairs, Wyeth Pharmaceuticals, Collegeville, PA...............    54
Frank A. Sloan, Center for Health Policy, Law and Management, 
  Terry Sanford Institute of Public Policy, Duke University, 
  Durham, NC.....................................................    68

                                Appendix

Prepared Statement of Senator Susan Collins......................    91
CDC Responses to Questions from Senator Wyden....................    91
Statement of the American College of Physicians..................    93
Statement submitted by the World Health Organization.............    98
Statement of Paul Strauss, United States Senator, District of 
  Columbia (shadow)..............................................   106

                                 (iii)

  

 
LIABILITY, LICENSING AND THE FLU VACCINE MARKET: MAKING DECISIONS TODAY 
                      TO PREVENT A CRISIS TOMORROW

                              ----------                              --



                       TUESDAY, NOVEMBER 16, 2004

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The committee convened, pursuant to notice, at 2:34 p.m., 
in room SD-628, Dirksen Senate Office Building, Hon. Larry 
Craig (chairman of the committee) presiding.
    Present: Senators Craig, Kohl, Wyden, and Carper.

     OPENING STATEMENT OF SENATOR LARRY E. CRAIG, CHAIRMAN

    The Chairman. Good afternoon and welcome, everyone, to this 
hearing of the Special Committee on Aging.
    On September 28, this committee held a hearing entitled, 
``Combating the Flu: Keeping Seniors Alive.'' The hearing 
stressed the seriousness of the disease and the importance of 
flu vaccines. With 36,000 deaths last year, we cannot 
underestimate the danger that influenza poses to seniors and to 
at-risk populations. At that hearing, we were told we could 
expect to have more flu vaccine this year than ever before.
    Unfortunately, those expectations changed dramatically a 
week later when Chiron announced they would be unable to 
provide the 48 million doses of vaccine they had anticipated. 
This announcement dealt a strong blow to the United States 
preparedness for this year's season. Chiron's alarming 
situation is, I hope, more than a wake-up call that better 
long-term flu preparedness is imperative.
    As we heard at the September hearing, this is especially 
true in light of the fact that scientists around the world now 
estimate or believe that we are especially close to a strong 
endemic strain of flu that could strike not just this country 
but the world.
    Since October, we have seen outstanding efforts on the part 
of public health officials, manufacturers, private providers, 
retailers, and all of those who have worked so hard to minimize 
the effects of this year's shortage. I would like to 
congratulate the countless individuals who took immediate 
action to be sure that the most vulnerable in our country get 
the vaccine they need. Today, we will hear about that in an 
update from the CDC and from the FDA on continuing this effort 
to that end.
    Just as important as the swift reaction to this year's 
shortage is the challenge to make swift decisions to avoid the 
same problem next year and the year after. We have absolutely 
no time to waste in addressing this issue and making the 
necessary changes to ensure an adequate supply of vaccine in 
the future. But many questions have yet to be answered, and 
that is why I decided to hold a hearing now in November during 
a lame duck session of Congress.
    Flu manufacturers are now making decisions in order to fill 
orders for the next year. We can't wait until Congress is in 
full swing in February to address next year's supply 
challenges. By then, it will be nearly too late, especially if 
Chiron Corporation is unable to start production next year. Flu 
is a worldwide killer and the need for vaccine is clear, and 
yet the market has dwindled to the point that the pull-out of 
just one company has devastated the U.S.'s supply.
    The reasons for this dilemma are many. Today's hearing is 
not about pointing fingers and laying blame. This is about 
looking at the current situation and gathering the information 
necessary to make needed policy decisions that will address the 
flu vaccine problem in 2005 and beyond. In conversations with 
vaccine manufacturers, health officials, and other 
stakeholders, three main areas of concern come up time and time 
again: Liability, licensure, and the stability of the vaccine 
market. This afternoon, we will hear from four experts that 
will speak to each one of these issues, I hope.
    Senator Evan Bayh, who may be joining us later, and I 
introduced legislation earlier this year to further address 
some of the long-term issues. For example, our legislation, S. 
2038, would encourage an increase in vaccine production 
capacity by offering a tax credit for companies to invest in 
the construction of or the renovation of production facilities. 
I would like to think we could get that through this year. That 
is probably very unrealistic. But certainly very early passage 
of it in this next session of Congress is something that many 
of us will seek.
    So I want to thank you for taking time to participate in 
the hearing today. Before closing, I would like to comment that 
I found it very disturbing that my staff and I had a difficult 
time finding appropriate witnesses to speak to these subjects. 
The combination of liability concerns and reluctance to openly 
question the regulatory review and approval process has acted 
to deter participation in this and other hearings on the topic. 
Certainly in an open public policymaking process, all should be 
willing to come forward to be open and frank in what I believe 
is a critical health care discussion for our nation. Yet, 
frankly speaking, many were very hesitant.
    I want to thank all of you who are here. I have great hope 
that today's discussion will be a help to lawmakers as we move 
forward to address this issue. I should note also that the 
interest in this topic is not limited to just those of us as 
U.S. citizens. The World Health Organization held an 
unprecedented summit meeting last week on flu vaccine 
manufacturers and nations and encouraged them to ramp up plans 
for dealing with the growing threat of a flu pandemic. They 
will be submitting written testimony about the summit for this 
committee.
    We have two panels this afternoon. On our first panel, we 
will hear from Dr. Lester Crawford, acting commissioner of the 
Food and Drug Administration. We will also hear from Dr. 
Mitchell Cohen, director of CDC's Coordinating Center for 
Infectious Diseases.
    On our second panel, we will hear from Peter Paradiso, vice 
president for New Business and Scientific Affairs for Wyeth 
Pharmaceuticals, and Dr. Frank Sloan from the Center for Health 
Policy, Law, and Management at Duke University. Dr. Sloan also 
chairs the Institute of Medicine's Committee on the Evaluation 
of Vaccine Purchase Finance in the United States.
    Dr. Leyton Reid of Alloy Ventures was scheduled to join us 
today but unfortunately could not make the trip from California 
here because of family commitments.
    So we thank all of you for being with us, and before I turn 
to our panelists, let me turn to Senator Kohl, a valuable 
member of this committee. Senator, welcome.

               OPENING STATEMENT OF SENATOR KOHL

    Senator Kohl. Thank you, Senator Craig, for holding this 
important hearing today. The flu vaccine shortage our country 
is facing has been a wake-up call for all of us. Throughout 
Wisconsin and across the nation, flu shot clinics have been 
canceled. Health care providers have scrambled to find supplies 
of vaccine to serve the most high-risk individuals. Families 
and senior citizens have worried about their health and the 
health of their loved ones.
    Wisconsin has done its best to deal with the problem. State 
and local health officials have worked hard to assess the 
vaccine supply and distribute vaccine to the most needy areas. 
Healthier people have, for the most part, foregone their flu 
shots so our more vulnerable citizens could get the protection 
that they need. But we still face many challenges, we know, as 
the flu season has only just begun, and so these efforts will 
need to continue.
    While we deal with the immediate shortage, we know we need 
to make sure that we don't treat this as a one-time freak 
accident. The shortage has exposed systemic problems, some of 
which have been known for years. They must be addressed. If we 
don't act quickly, then we put ourselves at risk of the same 
situation and even worse happening again.
    So I am pleased to join Chairman Craig and Senator Bayh in 
sponsoring the Flu Protection Act. This legislation takes an 
important step toward shoring up the flu vaccine market and its 
distribution system. It has incentives that will help encourage 
more companies to invest in the flu vaccine market. It will 
encourage States and the CDC to develop plans for dealing with 
distribution, whether in a time of shortage or in a potential 
pandemic. It will educate all Americans about the need to be 
vaccinated, keeping people healthy and fostering a stable 
vaccine market.
    In a few months, development must begin for next year's flu 
vaccine. So that means that we must act quickly to address the 
holes in the current system. I hope and I expect that this 
hearing will shed more light on the steps we need to take and 
that Congress will move quickly to take those steps.
    Thank you, Mr. Chairman.
    The Chairman. Herb, thank you very much.
    Now let us turn to our first panelist and our first speaker 
is Dr. Lester Crawford, as I mentioned, acting commissioner for 
the Food and Drug Administration. Doctor, welcome back to the 
committee.

 STATEMENT OF LESTER M. CRAWFORD, D.V.M., ACTING COMMISSIONER, 
  FOOD AND DRUG ADMINISTRATION, U.S. DEPARTMENT OF HEALTH AND 
                         HUMAN SERVICES

    Dr. Crawford. Thank you very much. Mr. Chairman, I am Les 
Crawford, acting commissioner of the Food and Drug 
Administration. As you know, we are responsible for the 
regulation and oversight of vaccines. I want to assure the 
committee and the public who are listening today that FDA takes 
their concerns about vaccine safety and availability very 
seriously.
    FDA has many important responsibilities related to vaccine 
safety. Before a vaccine is licensed, the FDA monitors the 
safety of investigational vaccines. Later, when a manufacturer 
submits a vaccine license application, we conduct more 
extensive reviews. If we determine that a vaccine is safe, 
effective, and that quality and consistency of manufacture have 
been demonstrated, we will license the vaccine. We also inspect 
the manufacturing facilities every 2 years.
    Influenza vaccine is unique in that its active ingredients 
change almost every year. This presents special manufacturing 
challenges. We work closely with manufacturers to facilitate 
the production of influenza vaccine. We begin working with 
manufacturers at the earliest stages of vaccine development. 
FDA and manufacturers conduct tests to assure the safety and 
efficacy of the vaccine because of the complexity of the 
manufacturing process. FDA's Center for Biologics Evaluation 
and Research performs lot release testing on bulk vaccine lots. 
As a further safeguard, we also evaluate information on vaccine 
testing performed by the manufacturer.
    There has been a very significant increase in flu vaccine 
production over the past 10 years. However, with the increasing 
volume of doses needed each year and the decline in the number 
of influenza vaccine manufacturers, we have a very fragile 
infrastructure in the influenza vaccine market. For the 2004-
2005 flu season, only three manufacturers began production of 
influenza virus vaccine for the United States market. Chiron 
Corporation and Aventis Pasteur produce inactivated influenza 
vaccine. MedImmune, Incorporated manufactures FluMist, a live 
attenuated influenza vaccine administered intranasally.
    On the morning of October 5, 2004, the British Medicines 
and Health Care Products Regulatory Agency announced a 3-month 
suspension of Chiron's license to manufacture influenza 
vaccine. FDA immediately dispatched a senior team of scientists 
to the United Kingdom to meet with company officials and the 
regulatory agency for England and also to inspect Chiron's 
Liverpool manufacturing facility.
    On October 15, 2004, after completing its inspection, the 
FDA determined that it could not adequately assure that 
Chiron's vaccine met our safety standards. As a result, Chiron 
will not supply any influenza vaccine to the U.S. market for 
this season.
    In coordination with others at the Department of Health and 
Human Services, we have been actively exploring all viable 
options to secure additional doses of flu vaccine to provide 
more Americans protection against the flu. Through these 
efforts, we have been able to increase the available supply of 
licensed flu vaccines for the U.S. population to 61 million 
doses for this flu vaccine.
    Coupled with that initiative, we have been contacting 
manufacturers around the world in an effort to identify 
increased supplies of antiviral medications that will provide 
further protection and treatment for Americans during this flu 
season. Next year, Aventis Pasteur Corporation believes they 
have the capability of producing the same or more doses of 
influenza vaccine. In addition, MedImmune has indicated that it 
has the capability to produce ten million doses of FluMist for 
the 2005-2006 flu season, and as much as 40 million doses by 
the year 2007.
    We will continue to help Chiron address as quickly as 
possible the manufacturing problems they experienced during 
this year's production process and are working closely with 
MHRA in Great Britain in this regard. In addition, FDA has also 
been encouraging foreign licensed manufacturers to apply for 
U.S. licensure and we are working to help them achieve this 
goal.
    Looking further ahead, we must develop more efficient ways 
to produce flu vaccine so we have flexibility to deal with 
shortages or unexpected problems. In each of the last two 
budgets, the Department has requested $100 million to shift 
vaccine development to new cell culture technologies as well as 
to provide for year-round availability of eggs for egg-based 
vaccine. We urge Congress to fully fund the $100 million 
requested for the fiscal year 2005 budget.
    To help manufacturers overcome challenges such as the 
vaccine development problems Chiron is experiencing, FDA has 
been investing its energy and resources in the important 
initiatives such as the Current Good Manufacturing Practices 
for the 21st Century, known as the CGMP initiative. Under this 
initiative, FDA is working with industry to encourage the use 
of advanced technologies as well as quality systems and risk-
based manufacturing processes to avoid the problems such as 
those that Chiron experienced.
    Once again, thank you for the opportunity. I look forward 
to the rest of the hearing.
    The Chairman. Doctor, thank you very much.
    [The prepared statement of Dr. Crawford follows:]

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    The Chairman. Now, let us turn to Mitchell Cohen. Dr. Cohen 
is director of the Coordinating Center for Infectious Diseases, 
Centers for Disease Control and Prevention. Welcome to the 
committee.

 STATEMENT OF MITCHELL L. COHEN, M.D., DIRECTOR, COORDINATING 
CENTER FOR INFECTIOUS DISEASES, CENTERS FOR DISEASE CONTROL AND 
   PREVENTION, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, 
                          ATLANTA, GA

    Dr. Cohen. Thank you. Chairman Craig, Senator Kohl, I am 
pleased to be here today to discuss CDC's efforts to address 
the current influenza vaccine shortage.
    I thank the committee for your continued interest in 
influenza, an important public health issue affecting our 
nation as a whole and our nation's elderly in particular. 
Influenza is a contagious respiratory disease that can cause 
mild to severe illness and at times can lead to death.
    While most healthy people recover from the flu without 
complications, some people, such as older people, young 
children, and people with certain health conditions, are at 
high risk for serious complications from the flu. Each year, 
influenza causes more than 200,000 hospitalizations and an 
estimated 36,000 deaths. Many of those deaths occur among the 
elderly.
    Vaccination is the primary strategy for protecting 
individuals who are at greatest risk for serious complications 
and death. In the face of this season's influenza vaccine 
shortage, CDC, State and local health officials, practitioners, 
and vaccine manufacturers have worked tirelessly to protect our 
most vulnerable populations. We deeply appreciate the 
cooperation and the collaboration of all those who have helped 
to meet this challenge.
    We also want to express sincere appreciation to the many 
people across the country who have made a sacrifice and stepped 
aside and not gotten their vaccine so that the limited doses of 
vaccines could be given to those at highest risk. Despite those 
concerted efforts, we cannot guarantee that all persons in the 
targeted high-risk groups will receive vaccine this year.
    In general, CDC's efforts have concentrated on increasing 
vaccination coverage levels, increasing public demand for 
vaccine, increasing vaccine supply from domestic vendors, and 
improving core and developing innovative public health 
strategies.
    Given the current shortage of influenza vaccine, our No. 1 
objective this year is to ensure vaccination of the groups at 
greatest risk, although our long-term goal is to ensure a 
stable annual supply of influenza vaccine for all people who 
want it and to encourage more people to want it.
    Current reports indicate that influenza activity in the 
United States has been low in comparison with last year, when 
influenza activity began early in the fall and resulted in more 
widespread outbreaks earlier in the season than usual. However, 
it is impossible to predict the level of influenza activity 
even at this point in the year. We must remain vigilant in our 
monitoring of the situation.
    When on October 5, CDC learned that almost half of the 
nation's inactivated influenza vaccine supply would not be 
available for the flu season, we began activities to address 
the situation through established public health actions and 
instituting innovative strategies. For example, CDC took 
immediate steps to work with partners to target the 
distribution of the remaining inactivated vaccine toward the 
most vulnerable populations; to identify available vaccine from 
other countries that might be used this season; to develop 
recommendations for the use of antiviral medications during the 
season and increase the agency's stockpile of these 
medications; to increase surveillance for influenza disease and 
outbreaks to provide early warnings of hot spots and perhaps to 
target our response; to develop and disseminate strategic 
communication messages to facilitate the public health response 
to the vaccine shortage and to inform the public of ways to 
reduce the transmission and severity of disease; and to assess 
the effectiveness of the strategies to target vaccine to high-
risk groups and the response to influenza outbreaks. My written 
statement provides additional details of these and other of 
CDC's actions.
    I would be remiss, however, to discuss influenza without 
mentioning pandemic influenza. Influenza pandemics are uncommon 
events. There have been three in the 20th century and their 
timing cannot be predicted. However, pandemic preparedness is a 
public health priority because of the potential to cause 
substantial numbers of deaths and tremendous social disruption 
over a very short period of time. In a large measure, current 
preparedness efforts are responsive to growing concerns about a 
very large avian influenza epizootic in Asia that has involved 
poultry, wild birds, and mammals. Importantly, much of what we 
are doing now in this challenging flu season to deal with this 
influenza shortage will help in our preparedness for the 
inevitable pandemic that will occur.
    Flu has been and will remain a serious concern to the 
health and well-being of all Americans, but particularly older 
Americans. CDC, along with the other Department of Health and 
Human Services agencies, looks forward to working with Congress 
on the future opportunities to strengthen the fragile vaccine 
system which protects our nation's health.
    This concludes my opening remarks and I will be happy to 
answer any questions that you have.
    The Chairman. Thank you both very much.
    [The prepared statement of Dr. Cohen follows:]

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     The Chairman. Let us proceed with questions, and again, we 
thank you for being here.
    Dr. Crawford, it has been reported that millions of doses 
of Chiron vaccine had to be destroyed, but there was doubt as 
to whether they had actually been contaminated. Could any of 
those doses have been saved? That would be my first question. 
Could you have tested the vaccines for safety? Is your 
regulatory system flexible enough to adapt the review process 
in the current situation?
    Dr. Crawford. The situation on the vaccine produced by 
Chiron Corporation in Liverpool, England, this year was the 
following. We were notified in August of some problems with the 
manufacturing process, which essentially means that you take a 
contaminated product that occurs because of what is called 
bioburden--and remember, the vaccine production comes from 
chicken eggs and they are not sterile and so that leads to a 
burden of bacteria that has to be reduced over time. They were 
having difficulty getting it reduced in 9 of 100 lots they were 
producing.
    So we were notified that this was a problem. They were 
continuing to work with the nine lots, but it looked like they 
were beyond reclamation. So we went into a mode of 
consultation, we and the Centers for Disease Control and 
Prevention, and separate of the British government was doing 
the same kind of thing, a little bit later, but they were 
basically performing the same kind of operation.
    At the end of the day, the British concluded on October 5, 
which was the final date on which the corporation was to report 
to the Food and Drug Administration what were the prospects for 
the entire production, the British concluded that they could 
not guarantee that contamination did not occur in the remaining 
91 lots. We immediately dispatched a team and did one of the 
most in-depth inspections any government has ever done because 
we recognized that this would critically diminish our vaccine 
stores.
    At the end of that time, I received a report and the 
essence of the report was that the nine vaccine lots in 
question are beyond reclamation and we cannot guarantee that 
the remaining 91 lots aren't incubating some contamination of 
some kind or another. Recognize that the bacteria that was 
found in these nine lots, which is a bacteria called Serratia 
marcescens, essentially is like a sentinel finding. In other 
words, if you find it, you know that there could be 
contamination across all of the lots of vaccine and certainly 
within that lot. Among the other kind of contaminants would be 
viruses that you can't detect, bacteria that have long 
incubation periods.
    In short, there had been a breakdown in production, a 
systematic breakdown. So by the power vested to me, I had to 
make the conclusion that we could not guarantee the safety of 
any of the lots of vaccine and therefore ordered them not 
introduced into production here or anywhere else, for that 
matter.
    The Chairman. So it is obvious your conclusion was that the 
balance, the 91, had a high risk of contamination?
    Dr. Crawford. Absolutely. Yes.
    The Chairman. So it was obviously your opinion, then, that 
nothing could be salvaged from that?
    Dr. Crawford. That is correct.
    The Chairman. Medical science or the technology of the 
laboratory today does not allow that kind of a determination on 
a lot-by-lot basis?
    Dr. Crawford. No, the--thank you for the question. 
Actually, what would have to happen is you would be taking 
something that was in all likelihood contaminated and you would 
be trying at the end of the process to decontaminate it. You 
would have to have something like either very strong 
antibiotics, and since antibiotics do not work against viruses 
and some of the other things we would be concerned about, you 
would have to have either chemical decontamination with a 
mercury-containing product or you could try cold filtration one 
more time.
    But even at the end of that time, based on our mathematical 
models and the conclusions that we had drawn based on FDA's 
experience with these kind of things, we still could not assure 
the American people that if we gave this vaccine, there 
wouldn't be illness problems. It most likely would have been 
something like abscesses, but it could have been a systemic 
infection that could have been quite serious, indeed.
    The Chairman. The process you are describing for us is, I 
think in all modern terms, an antiquated or an old process, is 
it not?
    Dr. Crawford. The process of the production of the 
vaccine----
    The Chairman. That is what I am speaking of.
    Dr. Crawford [continuing]. Is decades old and it is a very 
old process. As I mentioned earlier, if I may----
    The Chairman. Please.
    Dr. Crawford [continuing]. We do believe that we need to 
get away from this egg-based production facility--I mean----
    The Chairman. To cell-based, is that not correct?
    Dr. Crawford [continuing]. To a cell-based operation which 
would produce the product starting from the beginning without 
this contamination. It just doesn't make any modern scientific 
or laboratory sense to start with a contaminated product which 
has this bioburden, as we call it, and then try to 
decontaminate it over the cycle of production. It is much 
better to have something more modern. These cell-based 
technologies for producing vaccine do exist, but the state of 
them are such that they can't get enough volume, not enough 
virus production to get it done.
    The Chairman. My time has run out and I am pleased that we 
are joined by my colleague from Oregon. Ron, welcome. Before I 
turn to Ron for any opening comments, you were the first here. 
Would you like to ask questions, Herb, of this panel and then 
we will move to Ron?
    Senator Kohl. OK. Thank you very much, Mr. Chairman.
    Will you say again how many doses are available this year 
and how many would we normally need?
    Dr. Crawford. We have 61 million doses available this year. 
We had been shooting for 100 million doses for this vaccination 
season. This amount has been increasing considerably as we 
move, particularly as the Centers for Disease Control and 
Prevention moves to encourage Americans to get the vaccine. We 
would like to have--I think Dr. Cohen would want to speak to 
this, but we would like to have 100 million or more, but only 
about in the late 1990's, we were actually using about half of 
what we were projecting for this year. But it is a good thing 
that we want to move to 100 million. We just weren't able to 
have them in the market this year.
    Senator Kohl. I don't think I fully understand. We have 61 
million doses available.
    Dr. Crawford. Yes.
    Senator Kohl. How many did we use last year?
    Dr. Crawford. Dr. Cohen, will you----
     Dr. Cohen. It was about 85 million doses last year. It is 
projected that in the United States, there is probably, under 
the previous guidelines, about 185 million people who would 
benefit from immunization. Now, without having anywhere near 
that amount of vaccine, we had to hone the recommendations to 
those people who were the most vulnerable. In doing that, it 
probably reduced the number of people for whom the vaccine 
would be indicated to about 90 million.
    Now, as I had mentioned, it varies from different priority 
group to priority group what rate of immunization you achieve, 
but generally across the board, we only immunize less than 50 
percent of the people for which the vaccine is recommended. So 
based on the figure of 90 million and knowing that less than 50 
percent of people actually seek vaccine, we estimated that we 
would need between 42 and 50 million doses this year to meet 
what would be projected demand.
    Senator Kohl. Well, if we have 61 million doses available 
and you are projecting a usage of maybe 50 million, so are you 
suggesting that based on previous records and usage in other 
years, the 61 million doses should cover most all of the people 
who will appear at a clinic for a dose?
    Dr. Cohen. Well, there are actually several issues that 
come to play. One is that on October 5, when we found out about 
this, 33 million of those doses had already been distributed 
and we do not know how much of that vaccine was used in 
individuals who were not high-risk patients. So we don't know 
exactly how much of that amount of vaccine was available. So 
that is one of the things that confound that.
    Also, the ability to move vaccine from an area in which 
there is a high need for it to an area where there is less need 
doesn't always work as well, so you have distribution problems 
that may make you unable to give vaccine to all of those people 
who really would be indicated to receive it.
    Senator Kohl. I want to spend all my time just getting an 
understanding and clearing this up. In the last several years, 
is the dosage, the vaccine use, about 85 million?
    Dr. Cohen. It has increased over the last several years and 
I think that is one of the things that----
    Senator Kohl. What has been the number? Can we get a 
number? Does it vary between 75 and 80 million? Is that a fair 
assessment?
    Dr. Crawford. Yes, that is. Between 70 and 85 million is a 
fair----
    Senator Kohl. Are you saying that we have 61 million flu 
shots available?
    Dr. Cohen. That is correct.
    Senator Kohl. So there is not--while there is a shortage, 
it is not as though 75 percent of the people who want or who 
are normally expected to get vaccinated won't be able to. It is 
more like 20 percent of the people who normally would show up 
for a vaccination conceivably may not get it if the 
requirements are comparable to what we have had in the last few 
years. Sixty-one million doses, 75 to 80 million requests in 
the last several years, so that is what we are talking about, 
is that right, Mr. Crawford?
    Dr. Crawford. That is correct. Additionally, because there 
is this shortage, we have engaged the companies that 
manufacture the antiviral medication that can be used both as a 
treatment for flu and as a prevention for flu and we have 40 
million doses of that that have been committed by the companies 
from around the world that manufacture the pill.
    Senator Kohl. One last question. FluMist, do we use FluMist 
now?
    Dr. Crawford. Yes, we do. It has been on the market since 
last year. They were not able to sell last year all of their 
production, so they scaled down to only two million doses this 
year, which is about what their market was last year, as I 
understand it, and they have now, since we have engaged them in 
discussion, they have been able to increase that to a total of 
three million doses for this year, and that is included in that 
61 million total.
    Senator Kohl. My last question, is FluMist as effective as 
vaccine?
    Dr. Crawford. Dr. Cohen? FDA approved it on the basis 
that--it is a modified live virus, not a killed virus. It is as 
effective, but it can only be used in healthy people between 5 
and 49 years of age. Even if you are between 5 and 49 years of 
age and you have some disability that might affect the 
immunizing potential, such as diabetes or lack of immune 
competence or something like that, you should not be taking the 
FluMist vaccine. It is only for healthy people in that narrow 
age range.
    Senator Kohl. Thank you, Mr. Chairman.
    The Chairman. Herb, thank you.
    Now let me turn to Senator Ron Wyden. Ron, if you would 
like to make an opening comment, fine, and then you can proceed 
with your questions.
    Senator Wyden. Mr. Chairman, thank you. I will spare you 
and them, our guests, any opening filibuster and just begin, if 
I might, with you, Dr. Crawford.
    It seems to me getting good flu vaccine out to the American 
people is Public Health 101. The fact that it is not getting 
done is, to me, a signal that a significant part of our public 
health system is really dysfunctional. I want to just ask you a 
couple of questions because I am concerned not just about the 
crunch this winter, but the prospect that this will get 
repeated again and again if we don't have in place the kinds of 
policies to ensure that that is not the case.
    When the number of flu vaccine companies producing vaccines 
for the United States fell to two, why didn't one of our many 
agencies in the government essentially say, ``Look, we have got 
a coming crisis on our hands and bring the relevant people, the 
companies, independent scientists, consumer advocates, the 
relevant people in to, in effect, put together a plan to make 
sure a shortage doesn't happen? They could give you their 
recommendations. Some might take legislation, some might not. 
Some might take money, some might not. But why didn't that 
happen in this case, because certainly there was an early 
warning that we were going to have this kind of situation. Tell 
me why, in your opinion, that didn't take place.
    Dr. Crawford. As you may know, we began that process early 
in this decade and the key event was a Congressional hearing in 
June 2002 on the fragility of the vaccine supply. I testified 
at that hearing and estimated that by this year, we probably 
would be down to one company wanting to do business in the 
American market and how that put us at an unbelievably 
vulnerable spot.
    We began a process. That is where we asked for this $100 
million to try to convert from the egg-based to the cell-based 
and Congress responded with half that amount and then a promise 
to try to do more as we needed it. So that effort is now 
beginning.
    Also, the National Institutes of Health cranked up its 
research in flu vaccine production from apparently a small 
amount to about, I think it is $282 million per year this year. 
So the research started, but it takes, as you know, three to 
five years to get what you want, and what we want is to get 
away from that kind of production.
    The other thing we talked about was how do we incentivize 
the industry in order to want to enter the market. I think we 
said that probably five producers of flu vaccine in the world 
by 2004. There actually now are six, but not all of them want 
to enter the U.S. market. The incentivization never was figured 
out at all.
    We looked at our regulations and we believe these Good 
Manufacturing Practices, which is the method, as I mentioned, 
that we use to regulate the flu vaccine industry either here or 
wherever it is if they want to be in this market, can be 
streamlined and sophisticated. We have started on that process. 
We are not done with it. We are done with it for drugs and we 
should be done with it for vaccines next year.
    But the middle part of it is what incentive is there for 
companies to enter this market, something FDA has little 
control over, but we did signal it in 2002.
    Senator Wyden. I think what concerns me is that if we use 
that model, if somebody comes to the Congress and says, ``Well, 
there is going to be a problem, we need some money, and we 
ought to look at incentivization, as sure as the night follows 
the day, we are going to have this exact problem with respect 
to other vaccines, Doctor.'' That is not what I am talking 
about.
    What I am talking about is why we don't have one agency as 
the point or lead to have the companies, scientists, and 
consumer groups say, ``This is what we need and we need it 
within 90 days.'' I mean, we are capable in this country of 
going to war in a hurry. Well, this is a need for a domestic 
mobilization, and pardon me if I don't think somebody coming to 
the Congress and talking about incentivization and some money, 
I don't think it is a plan.
    I am going to have further contacts with the agency about 
this because it just seems to me when you are dwindling down to 
where we are, it is going to take a lot more than coming up to 
a Congressional committee, talking about some money and talking 
about some incentivization. To me, what I have just essentially 
outlined is also a way to hold the Congress accountable. To me, 
if the public health community, the companies, the scientists 
and consumer groups say, this is what we need, we need it 
within 90 days, and then the Congress and the executive branch 
don't act, then you know you can hold somebody accountable.
    What you have described when everybody is off talking about 
incentivization doesn't strike me as a program.
    Let me, if I might, ask you about one other area. The State 
of Illinois, the city of New York, and other States have 
purchased, as you know, a significant number of doses of flu 
vaccine from European distributors in the hope that they can 
bring the vaccines into the country and get them to the most 
vulnerable. The Governor of Illinois sent you all a letter in 
October of this year asking the agency what needs to be done. I 
understand you need data from the manufacturers, Aventis and 
GlaxoSmithKline. Are these companies cooperating with you at 
this point?
    Dr. Crawford. Yes. Just quickly on what you said earlier, 
we would welcome all the help we can get. Whatever FDA can do 
within its authority, we will try to do, but----
    Senator Wyden. Would FDA like to be the lead agency? I 
mean, what I just basically described is what amounts to a 
public health SWAT team.
    Dr. Crawford. Yes.
    Senator Wyden. When you see a problem, you essentially 
bring the relevant people and agencies and you put together the 
program, say we need it within 90 days, and if Senators like us 
then don't vote for it, you have somebody that you can go to 
and you know how to do it. Would FDA take the lead in what I 
just described?
    Dr. Crawford. Well, we would need to do it with CDC, who is 
here. Dr. Cohen is from CDC. So we would be a partnership. We 
have good diplomatic relations and we will work hard together.
    Senator Wyden. Dr. Cohen, do you want to go on record as 
saying you are interested in something along the lines of what 
I said, what amounts to, with FDA, what amounts to a public 
health SWAT team where, in effect, when you see a problem like 
we saw several years ago with flu vaccine, we take a different 
approach?
    Dr. Cohen. I think that you are pointing out a very severe 
problem that has been recognized for almost the last decade, 
and it is not just flu vaccine.
    Senator Wyden. Right.
    Dr. Cohen. We are in a very fragile circumstance for all 
our vaccines where we have one or two or three producers, and 
it relates to a whole variety of issues that have economic and 
other considerations as to why companies don't want to produce 
vaccines and we would be very happy to work and look at all the 
possible solutions to try to resolve this issue. It is an 
important public health problem.
    Senator Wyden. Let me then go the next step and flesh it 
out, but the fact that the two of you would be willing to have 
your agencies look at heading this up is constructive. Just so 
we are clear on the record, Dr. Crawford, with respect to those 
two companies cooperating on the matter of getting the data, 
given the fact that we have got a significant number of cities 
and States, in effect, going out of their own volition, I am 
interested in whether this data has been forthcoming.
    Dr. Crawford. Yes. You are right. There are a number of 
Governors that have been able to find in distribution channels, 
generally wholesalers, a certain number of doses of vaccine. 
This amount could be up to as much as 750,000 doses. We are 
evaluating that. They were sold from these manufacturing 
facilities and have been in circulation for a while. We have to 
be sure they have been refrigerated correctly and also they 
were produced in a safe way. Then we have to figure out a plan 
for bringing them into the country. None of that has come into 
the country yet, but it is still available and we should have 
some action on that very shortly, indeed.
    The other thing is that FDA has gone around and asked every 
known manufacturer around the world if they had spare doses. We 
have come up with approximately six million doses that we are 
in the final stages of evaluation. The manufacturers of those 
doses have been completely cooperative and we should be able, 
again, within a very short amount of time, to make a 
determination on them and hopefully some or all of that product 
could be here by the end of this year.
    Senator Wyden. One last question if I might, Mr. Chairman. 
I am just puzzled on one point. Has the agency contacted Glaxo 
specifically on this matter of documentation, Dr. Crawford?
    Dr. Crawford. Yes, we have.
    Senator Wyden. My understanding was that the agency had 
not. The reason I ask is that I was concerned that there had 
been some delay because my understanding was that FDA was 
waiting to decide to authorize this because they were waiting 
for CDC to give a recommendation or a direct authorization. But 
that is not your understanding?
    Dr. Cohen. No. In fact, we have been working very closely 
with FDA and a number of these companies because this is not a 
licensed product in the United States and under current rules 
and regulations, this would have to be used as an 
investigational new drug. So we have been working very closely 
to handle all of those regulatory activities that are required 
to be able to bring the drug in and use it under those 
considerations.
    Senator Wyden. How long, gentlemen, will it take for these 
Governors and cities to get the approval to bring the vaccines 
into the United States that they want? How long is this going 
to take?
    Dr. Crawford. We are evaluating them as fast and as hard as 
we can. I can't really say, but we have been at it for a few 
days. Normally, we can make some determination within two to 
three weeks.
    Senator Wyden. So within two to three weeks, these 
Governors and mayors--I know the city of New York wants to do 
it--they ought to have an answer?
    Dr. Crawford. Yes, they should.
    Senator Wyden. Mr. Chairman, you have been very generous. 
If I could submit some additional questions in writing on this, 
it would be very helpful.
    The Chairman. All right. Thank you.
    Senator Wyden. Thank you.
    The Chairman. Ron has followed a line of questioning that I 
would like to pick up now for my second line because I think it 
is very important. I said early on in my opening statement, it 
appeared to me that the situation we are involved in is a 
liability issue, a licensure issue, and a stability of the 
market issue, a combination of all of those put together.
    You have talked about the licensing process and I wish, Dr. 
Crawford, you would pursue that with me a little bit more. As 
you reach out to foreign companies, encouraging them to enter 
the market, are they refusing to? Is the market too 
complicated? Is the process too long? Is it too expensive? Why 
aren't they here now if they are reputable, credible 
manufacturers in other places in the world?
    Dr. Crawford. As I mentioned, there are only like six major 
manufacturers. There is only one company that manufactures 
influenza vaccine in the United States and that is in a 
Pennsylvania plant. The company that ran into difficulty is an 
American-owned company, but the facility is in England.
    The Chairman. But you said in your opening statement, ``We 
are encouraging foreign producers.''
    Dr. Crawford. We are, and we are telling----
    The Chairman. What in that encouragement is an impediment 
to them that they wouldn't come rushing to this market?
    Dr. Crawford. It is, as I understand it, a business 
decision. If your plant is in Germany, which the 
GlaxoSmithKline plant is, obviously, if you can get rid or sell 
most of your production run in Germany or close by, then you 
are probably going to do that. If you need the American market 
in order to make ends meet or to expand, then you might 
consider the U.S. market.
    The Chairman. Does FDA accept the German licensure process?
    Dr. Crawford. We do not accept it exactly. We have----
    The Chairman. How long is theirs and how long is yours?
    Dr. Crawford. Well, it is about the same. It doesn't take 
very long to get through that. They just have to indicate an 
interest in coming to the U.S. market, and we can't force them 
to do that under our law.
    The Chairman. No, I appreciate that. I just wondered if 
there are obstacles out there beyond a pure business decision, 
costs and problems and complications involved that would 
suggest to them that this was a market not to come to.
    Dr. Crawford. There have been a number of things that have 
been mentioned during this crisis. One is liability concerns in 
the United States. There are liability concerns in all 
countries, but that has been something that is mentioned. I am 
not qualified in that area to say whether that is right or 
wrong. I think it probably is a factor.
    Another thing that has been mentioned is FDA is very 
serious about regulation, as are most Western countries, and 
maybe the way we do the regulation is an impediment, and that 
is why we are examining these Good Manufacturing Practice 
regulations. We want to modernize them in such a way that we 
get the same protection perhaps quicker with less burden on the 
industry. I mentioned that is a process that is ongoing. So we 
are refining what we do as best we can in order to make the 
market more attractive. I think that could also be a factor, 
although I don't think it is much different than it is in any 
other Western country.
    Then the third thing would be basically the profitability 
of the industry, which has been mentioned. The FluMist vaccine, 
for example, took a lot of doing to develop. There was a cost 
of development and it was greeted with a lot of enthusiasm. But 
the cost per dose if you buy it at the maximum discounted rate 
based on the volume of your purchase, I believe is lower than 
$20 per dose. If you compare that to a prescription for a new 
drug that is under patent, you know, perhaps a company--most of 
these companies also manufacture pharmaceuticals--it makes 
sense to me, although, again, I am not an expert in that area, 
that you can make more profitability out of a pharmaceutical 
than you could a vaccine.
    The Chairman. You mentioned your Clear Pathways. Are there 
any performance measures that point to the success of your 
Pathways initiative? I want to ask a couple of questions on 
that.
    Dr. Crawford. Yes. The critical path that we are--process 
that we are under now is essentially a way that FDA can reform 
all of the regulatory programs it has in place, from foods to 
vaccine to drugs and so forth, and do it on a continuing basis. 
It is basically the first kind of scientific self-improvement 
for a regulatory agency in the world and so I think it does 
represent the new FDA.
    I point out that we have just started with the rudiments of 
it in 2002 and the first successes happened in the drug area 
this particular year. So it is not very far along and it is not 
reaping the benefits that I feel confident that it will in the 
years to come.
    The Chairman. What are the challenges that you have already 
identified in this approach and what do manufacturers tell you 
their challenges are? Can you spread for us the timeline of 
this kind of an initiative?
    Dr. Crawford. Are you talking about just vaccines or all 
things?
    The Chairman. Well, let us focus on vaccines today. I mean, 
that----
    Dr. Crawford. Well, with vaccines, I think the industry is 
well aware that we are reforming these regulations and we will 
be asking for public input. That primarily means the academic, 
scientific, and industrial communities. We will be taking those 
commentaries next year in a way to try to fashion something 
that is both medically sound, adequately protects the public 
health, and also represents the special needs and interests of 
the industry. I think by engaging in this along the critical 
path approach, we will attract interest from the vaccine 
community and those pharmaceutical companies that formerly 
produced biologicals, as we call them, might be hopefully 
attracted to cranking those areas of their portfolio up again.
    We are going to engage them as carefully and as well as we 
can, but I have to tell you that that industry has contracted 
over time and it is--I don't think anyone is particularly 
optimistic about it returning to the number of suppliers that 
we had before unless something unforeseen happens.
    The Chairman. Well, I think we have recognized that. Both 
Senator Bayh and I recognized that. That is why we want to 
build initiative or incentives into the system, because I think 
I agree with you. Streamlining the process and doing all of 
that and trying to more clearly identify the market is one 
thing. Being able to provide some level of protection for those 
companies who invest in the market from a financial standpoint 
or incentive is another thing. Of course, last, to make the 
process a thorough, responsible one, as you will do, but to not 
make it so cumbering that it costs tens of millions of dollars 
more than it might somewhere else. That in itself is a 
disincentive and I hope that this Pathways process that you are 
about, or that you are under, will do so. By the way, the $100 
million is in the budget.
    Dr. Crawford. Thank you, sir, very much.
    The Chairman. So you are going to get that kind of money. 
Next year, we expect large volumes of vaccine produced by the 
cell process, OK?
    Dr. Crawford. Thank you, sir. [Laughter.]
    The Chairman. All right. We expect that kind of return.
    Dr. Cohen, we have been lucky that, so far, we have had 
what appears to be a mild flu season at the very early stages 
of it. Historically, does a mild start mean a generally mild 
season?
    Dr. Cohen. Influenza, unfortunately, is one of the most 
unpredictable diseases. Last year, we had an early flu season 
and it ended early, as well. This year, we could have a mild 
season or it could be severe. The onset of it doesn't predict 
the severity or the amount of disease.
    So far, worldwide, the virologic tests that have been done 
have shown a very low level of flu activity. Of the over 6,000 
specimens that have been submitted to the surveillance 
laboratories, less than one percent actually have flu virus 
isolated from them. The good news there is that all of the 
isolates appear to be the isolates that are present in this 
year's vaccine. They are related very closely to the Fujian 
strain of Influenza A.
    So we are keeping our fingers crossed, but it is very 
unpredictable and we always have to look at this very, very 
closely.
    The Chairman. In the discussion you had with Senator Kohl 
about the volume of vaccines that will be available versus what 
is an average of usage, what happens if a worst case scenario 
develops? What is your plan at this moment if we get into a 
tremendously bad flu season and we are simply well beyond--
assuming that we have had reasonable distribution to the most 
vulnerable of our society of the 60 million doses and we get to 
a very substantial situation? What do we do? What is your plan?
    Dr. Cohen. Well, there are several things that we have done 
in preparation. One is that we have developed guidelines for 
the use of antiviral drugs, and, in fact, we have stockpiled 
enough antiviral drugs. There is enough Rimantadine, for 
example, to treat five million people. This would be used in a 
focused way, hopefully to control outbreaks that might occur in 
institutional settings, such as in nursing homes. So we have 
those efforts.
    There are antiviral drugs that are available in the 
pipeline that can be described by practitioners, as well. These 
can be used to prevent disease and they also can be used to 
treat disease. If they are used within the first 24 to 48 
hours, they can shorten the illness. So that is one approach.
    The other approach is some of the things that our mothers 
taught us growing up that prevents disease transmission. So we 
have been pursuing a number of educational campaigns, trying to 
encourage people to do things that would interrupt transmission 
of disease. For example, cough hygiene, for example--if you 
cough or sneeze, to cover your cough; to wash your hands before 
you eat, after you sneeze; all of those things that would 
prevent you from becoming ill--keeping your fingers out of your 
nose, your mouth, your eyes, those kinds of things. Then 
particularly in times like this, if you have a sick child or 
you yourself are sick, you don't want to send your child to 
school to spread disease or you don't want to go to work to 
spread disease.
    So there is a variety of specific things that we can do to 
try to prevent or make people better more quickly, and there 
are things that people can do to protect themselves and others.
    The Chairman. Is that process or public awareness campaign 
underway? Is there now a timeline of implementation of it? 
Obviously, the antivirals are important, but I agree with you. 
What do we do? I think that question will get asked and you 
should be able to respond before it is asked in the 
circumstance we are now in. To be able to not meet the demand 
is one thing. We now know that is at hand and we hope for a 
very limited season. But there ought to be a very large public 
effort out there with our public health officials to make sure 
that the rest of the story is told.
    Dr. Cohen. One of the other areas, we often see 
transmission of influenza in institutional settings and long-
term care, obviously where we have many of the elderly or 
disabled people who are very vulnerable. We are providing 
guidance, as well, to those kinds of institutions. We are 
working closely with their trade associations, trying to tell 
them the things that they can do to try to prevent transmission 
of the disease. Again, a lot of these relate to hygiene and 
sanitation, the use of antivirals, the rapid use of diagnostic 
tests to say, ``Yes, we really do have influenza and we need to 
implement things to try to stop it.''
    The educational campaigns have been ongoing. There have 
been various activities. For example, we have provided much 
information on our website. During the early part of this 
episode, there were over 300,000 visits a day to the website. 
We have been putting out public information, video and audio 
information, and there will be a series of print information 
that initially was encouraging people about the appropriate use 
of vaccines and foregoing vaccines if they were not high-risk, 
but will then change into the things that people can do to 
protect themselves and protect others from transmitting 
disease.
    The Chairman. My last question of both of you before I turn 
to my colleague who has joined us, in your views, what is the 
top priority that Congress should be working on to address the 
issue of the vaccine shortage. Dr. Crawford.
    Dr. Crawford. Well, I think this research funding and also 
following through on what we are doing with it, because 
remember that the idea is that this is not basic research, this 
is applied research that we want to do to try to get a system 
together using experts in other countries from around the world 
so that we can produce this vaccine without going through this 
laborious egg process which is going to continue to get us into 
trouble. I believe that if we get this done so that the cell 
culture type of way of producing the vaccine can be mass 
produced and we can get enough vaccine to get the job done, I 
believe it stands to be more profitable. I think it might 
energize the industry. I think it is the kind of thing we in 
the government are going to have to do for them in order to get 
it going.
    So I would say that is the long-range thing. These things 
like incentives and these things like FDA improving its 
regulatory process are not necessarily going to result in the 
kind of explosion of interest that you and I would like to see 
because it doesn't really give them the technology to do what 
we are going to ask of them----
    The Chairman. But it won't hurt.
    Dr. Crawford. It won't hurt.
    The Chairman. All right.
    Dr. Crawford. It absolutely will not hurt.
    The Chairman. Therefore, I don't want you to back away from 
what you are doing.
    Dr. Crawford. No, sir, I won't.
    The Chairman. I came to this city 24 years ago, and at that 
time, one of the first things I heard was that the cost of 
health care today, or the cost of new medicines today on the 
market was a very laborious process that FDA puts everybody 
through. Now, it has ensured over time, without question, 
historically safe medicines. There is no doubt about that in 
anybody's mind. But the question remains, is there a better, 
cleaner, less expensive, more time sensitive way of getting 
this job done----
    Dr. Crawford. Absolutely.
    The Chairman [continuing]. Still making it safe for the 
American public, and that is your challenge and I trust you 
can--you will work toward that. We will have you back next year 
to see how the pathway is working.
    Dr. Crawford. We hope to work with you and the committee on 
that.
    The Chairman. Certainly. Thank you.
    Dr. Cohen.
    Dr. Cohen. Senator, I am not sure there is one answer. When 
I look ahead, I see that what we need is we need more vaccine. 
We need more domestic production of vaccine. We need to 
convince people that these vaccines are important in protecting 
their health, so we need greater demand. So there are a number 
of things that we potentially can do, and I think we have to 
work together to look at what kind of a package to put together 
that gets us there, to where we have more vaccines and more 
people who want the vaccines so there is greater demand, there 
is a greater economic benefit for companies to want to enter 
into a domestic vaccine production.
    The Chairman. I am always amazed by the fact that in the 
generation I grew up in, my mother never questioned the 
importance of my childhood vaccinations. They simply got done, 
and we largely eliminated a variety of crippling and death-
causing illnesses around this country as a result of that.
    Today, that number and that desire and the demand on the 
part of new parents is amazing to me, the drop and decline in 
the understanding, the sensibility of it, and that is an 
educational process that I think we were much more engaged in 
as a country 40 or 50 or 60 years ago than we probably are 
today. We have simply got to get back to doing that. It does 
improve public health. Thank you.
    Senator Carper, welcome.
    Senator Carper. Mr. Chairman, thanks very much to our 
witnesses. I am conducting an orientation for new Senators this 
week and I am helping to cohost and co-lead and I need to 
return to join. Our session is just about to conclude, and I 
apologize. I had a couple of questions I wanted to ask. I would 
like to maybe be able to ask them for the record, if I could, 
to submit them in writing?
    The Chairman. Sure. Fine.
    Senator Carper. I would appreciate your following up on 
those. Thanks very much.
    The Chairman. Thank you very much. Gentlemen, thank you.
    Let us move to our second and last panel. Gentlemen, thank 
you for being here and we thank you for your patience. Let me 
introduce this panel to the committee.
    Dr. Peter Paradiso, Vice President for New Business and 
Scientific Affairs, Wyeth Pharmaceuticals, we welcome you. Dr. 
Frank Sloan, Center for Health Policy, Law, and Management, 
Terry Sanford Institute of Public Policy at Duke University, we 
thank you for being here.
    Dr. Paradiso, please proceed.

 STATEMENT OF PETER R. PARADISO, VICE PRESIDENT, NEW BUSINESS 
AND SCIENTIFIC AFFAIRS, WYETH PHARMACEUTICALS, COLLEGEVILLE, PA

    Mr. Paradiso. Good afternoon, Mr. Chairman and members of 
the committee. My name is Peter Paradiso and I am vice 
president for New Business and Scientific Affairs at Wyeth.
    Wyeth has been in the business of researching and 
manufacturing vaccines and biologicals for more than 100 years 
and I have been part of that effort for the last 20 years. We 
are proud of the contributions of our products to the public 
health.
    As important as these products are to society, the vaccine 
enterprise has become increasingly difficult. The shortage of 
flu vaccine is but a symptom of a larger problem. To address 
flu vaccine supply and the limited number of manufacturers, you 
need to understand the reasons there are so few manufacturers 
of vaccines of any type.
    Some of the unattractive facets of the vaccine business are 
not inherent but are the result of government policies, some 
justifiable and others more questionable, that have had an 
impact on the development and the subsequent supply of 
vaccines. These barriers can hinder existing vaccine companies 
and act as disincentives for new participants. These derive in 
part from a mindset intolerant of even theoretical risk, and 
therefore often skew the risk-benefit ratio to the point where 
the benefit is forgotten.
    One of the biggest changes that has occurred in the vaccine 
industry in the time that I have been working in this field is 
the changing regulatory and compliance environment. In our 
company, almost all of the new hires in vaccine research over 
the last several years are involved in FDA compliance-related 
issues. Manufacturers----
    The Chairman. Doctor, would you pull that mike down a 
little bit and maybe a little closer to you? I am 59 years old. 
Something is happening. Thank you. [Laughter.]
    Mr. Paradiso. Manufacturing facilities that are licensed 
for new products are outdated within 2 years and require 
significant and seemingly continuous large investments.
    Using our new Prevnar vaccine as an example, this product 
is manufactured in two facilities that were licensed in 2000. 
More than $300 million of capital has been invested in the 
existing Prevnar facilities in the last 3 years. In the same 
period, operating expenses have nearly doubled due largely to 
the need to update facilities and systems to meet evolving 
standards of FDA's Good Manufacturing Practices.
    Due to the diligence of the FDA and the efforts of 
manufacturers, the safety record of vaccines' manufacturing and 
supply is exemplary, so it is hard sometimes to understand why 
we need to have still higher standards.
    In the case of Wyeth's inactivated influenza vaccine 
FluShield, continued investment was not sustainable. The fact 
is that our influenza vaccine business had lost money in four 
of its previous five years and significantly more investment in 
manufacturing was required. We had eight million unsold doses 
of vaccine at the end of 2002 when we exited the business. We 
announced that we would exit the injectable fluid business and 
focus our resources on the new intranasal vaccine FluMist that 
we were developing in collaboration with the MedImmune Company. 
FluMist was licensed in 2003, but unfortunately, not for any of 
the high-risk groups for whom flu vaccine is recommended. As a 
result, millions of doses of FluMist went unused in 2003, even 
in the face of a severe early epidemic and vaccine shortages.
    While Wyeth no longer makes an influenza vaccine, we are 
still in the vaccine business and I would now like to address 
some of the marketplace challenges in pediatric vaccines.
    Roughly 60 percent of the U.S. market is one customer, the 
Federal Government. This customer has the legal power to 
control prices. The government-fixed price for tetanus is so 
low that no company has bid to provide the vaccine to the 
government for many years. While it is an obligation of the 
government to be a prudent purchaser, it is also an obligation 
of government to protect the public health. By overemphasizing 
the former, one risks jeopardizing the latter.
    Another poorly understood risk for the vaccine business is 
liability. Vaccines are given to virtually every young child in 
this country and many diseases and afflictions manifest 
themselves in young children. The likelihood that any of these 
conditions would occur in temporal proximity to immunization is 
high just because of the frequency with which immunizations are 
given. Vaccines have been accused of causing epilepsy, multiple 
sclerosis, attention deficit disorder, cancer, auto-immune 
disease, learning disability, Gulf War syndrome, and even the 
AIDS epidemic. Today's allegations linking vaccine to autism 
are but the latest in a long history of accusations, none of 
which have been proven to have scientific validity.
    In 1986, Congress created the Vaccine Injury Compensation 
Program administered by the Department of Health and Human 
Services. Although that statute has been helpful, it needs to 
be reformed to reflect today's realities.
    There is a widespread perception that this program 
completely shields companies from liability, but that is not 
the case. Today, companies that produce childhood vaccines have 
been served with over 350 lawsuits, some of them massive class 
actions. These suits allege that vaccines cause autism. In May 
2004, the Institute of Medicine issued a report concluding that 
there is sufficient evidence, scientific evidence, to reject a 
causal relationship between autism and vaccines. Despite this, 
we estimate that the companies involved in this litigation have 
spent more than $200 million collectively in outside legal 
costs and the first case has not yet gone to trial.
    These and other issues confront companies as they decide 
whether to enter or remain in the vaccine business. There are 
constructive steps that Congress can take.
    For example, Senators Bingaman and Smith have introduced a 
bill that would remove the price caps on children's vaccines 
and allow CDC to develop a stockpile of pediatric vaccines to 
utilize in the event of shortages. Senators Craig and Bayh have 
introduced a bill that would provide tax incentives for 
upgrading or building a new vaccine facility and also offers a 
method of purchasing unsold doses of flu vaccine at the end of 
the year. These would be positive steps.
    The FDA, as we heard, has announced a project which they 
call GMPs for the 21st Century. I would urge the FDA to make 
review of vaccine CGMPs the top priority.
    Finally, the liability burden facing companies needs to be 
addressed. Senators Frist and Gregg made an attempt to do so 
last year and a new start needs to be made in the next 
Congress.
    I am very excited about the scientific possibilities for 
the future of vaccines, but recent events serve as a reminder 
of the fragility of this enterprise.
    Thank you for your attention and for this opportunity to 
appear before the committee.
    The Chairman. Doctor, thank you.
    [The prepared statement of Mr. Paradiso follows:]

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

STATEMENT OF FRANK A. SLOAN, CENTER FOR HEALTH POLICY, LAW, AND 
  MANAGEMENT, TERRY SANFORD INSTITUTE OF PUBLIC POLICY, DUKE 
                     UNIVERSITY, DURHAM, NC

    Mr. Sloan. Thank you. Mr. Chairman, I appreciate the 
opportunity to appear before you today. I recently chaired the 
Institute of Medicine's Committee on the Evaluation of Vaccine 
Purchase Finance in the United States. The full report, 
``Financing Vaccines in the 21st Century: Assuring Access and 
Availability,'' was released in August 2003 and is published by 
the National Academies Press.
    Although the report applied to childhood and adult vaccines 
in general, the findings and recommendations of the report have 
even greater force today than in late 2003 given the 
substantial shortage of flu vaccine the United States is 
currently experiencing. Although each shortage is unique, the 
current shortage follows a pattern of shortages for flu and 
other vaccines. While short-run solutions may be devised 
specifically for flu, the recent crisis represents an important 
wake-up call and presents an opportunity for consideration of 
longer-run and more comprehensive reforms.
    The charge to the IOM committee was, (1), examine current 
arrangements for purchasing and distributing vaccines. (2), 
identify strategies to ensure access to vaccines and offer 
incentives for the development of new vaccines. (3), develop 
recommendations to guide public decisionmaking.
    The committee was hampered by lack of data, including data 
on vaccine manufacturing and R&D costs and on liability costs. 
We heard that these were issues, but never could get 
quantitative estimates.
    The national immunization system has made important 
progress, as our report documents. Yet despite many successes, 
many problems remain. Structural and financial problems plague 
the vaccine supply system, which are not unique to flu vaccine. 
For example, recent unprecedented shortages in 8 of the 11 
routine childhood vaccinations caused serious delays in 
immunization.
    The committee was concerned about the degree of 
concentration of firms that produce vaccines for the U.S. 
market. From 1966 to 1977, half of all commercial vaccine 
manufacturers stopped producing vaccines and this exodus has 
continued. Today, only five companies produce all vaccines 
recommended for routine use by children and adults, and only 
three of these are U.S.-based firms. Eight critically important 
vaccines have only one supplier. A long-term shut-down in 
capacity of any of these companies could be devastating. 
Experts suggest it could take years to replace vaccine license 
and available to the public in sufficient quantities.
    The current situation with flu vaccine brought about by a 
dearth of suppliers is a harbinger of shortages to come. There 
are also delivery problems in vaccines to the public, 
particularly for childhood vaccines. Also, many adults, an 
indeterminate number, do not have insurance coverage for 
recommended vaccines.
    A strong relationship exists between the system for 
purchasing and providing vaccines to the public on the one hand 
and stability and growth of the United States supply system on 
the other. The thrust of public policy for childhood vaccines 
has been to concentrate purchasing power in the Federal 
Government. The government uses its purchasing clout to 
negotiate substantial discounts and enforce price caps. Further 
growth of the government market share, in fact, seems as likely 
to create disincentives for private vaccine companies to 
develop new vaccines and to provide vaccines on a continuous 
and as-needed basis. Lack of adequate financial incentives are 
responsible for the vulnerability to shortage we are currently 
experiencing.
    The committee considered several strategies ranging from 
incremental changes in the current system to comprehensive 
changes. Each alternative, and there were seven in total, has 
pluses and minuses and each is worth considering. But in the 
end, the committee recommended one of these seven alternatives.
    The approach ultimately selected was a unified approach to 
vaccine finance and is contained in the committee's three 
recommendations. The first proposes a substantial redesign of 
the system for purchasing and financing vaccines. The 
recommendations state the current system for purchasing and 
distributing vaccines should be replaced by a vaccine mandate 
subsidy and voucher system. The mandate would require that all 
public and private insurance plans cover immunizations that, 
(1) yield benefits in excess of cost, and (2) only for those 
groups for which benefits exceed costs, and (3) for 
immunizations with substantial spillovers or externalities, 
both health and financial.
    The mandate addresses several concerns, the major one being 
that many vaccines not only benefit the person being 
vaccinated, but others, even strangers, as well. The mandate 
would apply to all private insurers, both State regulated and 
self-insured employer plans, and to all public insurance plans. 
The subsidy provision means the Federal Government assumes 
responsibility for paying for the vaccines that are mandated, 
at least in part. Health plans will receive payments from the 
Federal Government for vaccine purchase and administrative 
fees.
    While the funded mandate would cover everyone who is 
insured, the voucher provision would cover everyone who is 
uninsured. Under this plan, uninsured children and adults would 
receive immunizations from the health care providers of their 
choice and the government would reimburse providers for each 
vaccine plus an administration fee.
    The committee proposed that a subsidy amount be determined 
for vaccines not yet available as a way to stimulate their 
development and licensure. The amount of subsidy would be based 
on the total societal benefit of the vaccine, not 100 percent 
of value, but some percentage of that amount that at a minimum 
reflects the health and financial benefits accruing to others 
than the person being vaccinated.
    The expectation is that, on average, this approach will 
increase the prices of vaccines. While this may be a tough sell 
in today's fiscal environment, it is important to place this 
spending in context. The entire global market for all vaccines 
is about the same as one of several blockbuster drugs.
    The subsidy should be based on an objective benchmark, the 
actual savings to society resulting from the discovery and use 
of the vaccine. The subsidy should be set by an independent 
body by a completely transparent process and a methodology 
consistent across all vaccines. In my opinion, this should not 
be a fixed government price, however is a fixed dollar subsidy 
reflecting social benefit rather than either production or R&D 
costs.
    The committee also recommended changes in the composition 
of decisionmaking process of the Advisory Committee on 
Immunization Practices, and as a third recommendation, called 
for a public process of stakeholder deliberations to explore 
the full implications of the proposal and address technical 
design issues. There have been some public meetings since the 
release of the report, but to my knowledge, there has been no 
refinement of either the IOM Committee's recommendation or an 
in-depth exploration of the alternatives examined in the 
report.
    Events since the release of report, in particular the 
experiences with flu vaccine both this year and in the previous 
year, point to the need for change. Hopefully, as short-run 
solutions for the shortage of flu vaccine are examined, the 
current shortage will also be seen as an occasion for 
consideration of longer-run reforms affecting flu as well as 
other vaccines.
    Thank you for the opportunity to speak before the committee 
today.
    The Chairman. Doctor, thank you very much. I will search 
out your report and read it and examine it.
    Mr. Sloan. Thank you.
    [The prepared statement of Mr. Sloan follows:]

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    The Chairman. Dr. Paradiso, President Bush recently signed 
legislation that makes some changes in the Vaccine Injury 
Compensation Program. Are you familiar with that?
    Mr. Paradiso. Yes.
    The Chairman. In this last tax bill, there was an 
expansion. What will this do to the current liability situation 
that is within the compensation fund? Will it help? We believe 
it would. That is why we did it. Have you evaluated it? 
Secondarily, you said it needs to be reevaluated again, I 
believe in your comments, or some adjustments made in it. Would 
you address those two issues?
    Mr. Paradiso. Yes, I would be happy to. First of all, I 
have to tell you that I am not an expert on the compensation 
program. The issue with the compensation program, however, is 
that plaintiffs' attorneys have found ways to circumvent that 
system and as a result, cases that would normally have come 
before the system are now going to the courts. I mentioned in 
my testimony that the latest example of that is the lawsuits 
currently facing manufacturers relating to causes of autism. We 
have now 350 lawsuits, as I mentioned, that are not in the 
Vaccine Injury Compensation system. It is really these methods 
to circumvent the system that need to be taken care of.
    I think some of the changes that have been made have been 
on the basis of adding vaccines to the system, and that is a 
fairly regular upgrading of the compensation system, but it 
hasn't addressed, I think, some of the basic issues that has 
led to these lawsuits.
    The Chairman. Have you found the regulatory intolerance for 
risk that you mentioned a result of legislative confines or as 
a result of administrative rulemaking? Has Congress passed laws 
that do more harm than good, in your opinion?
    Mr. Paradiso. I think the environment that I spoke of that 
is totally averse to theoretical risk or risk in general----
    The Chairman. How about zero? That is what everybody wants 
nowadays, the perfect environment.
    Mr. Paradiso. As a result, when you are faced with 
regulations that talk about current Good Manufacturing 
Practices, you are really not talking about a fixed set of 
regulations. You are actually talking about an interpretation 
of regulations and setting the standard for the definitions for 
Good Manufacturing Practices is not easy and can be expanded 
more or less depending on where the technology takes you and 
depending on how strict and how risk averse you want to be in 
that interpretation.
    In an environment where, as you say, zero risk is 
tolerated, the regulatory agencies are put in a position where 
they are responding, to a certain extent, from what they are 
hearing from the public and perhaps from Congress. I think the 
result has been a good faith attempt to raise the standards and 
improve the safety of vaccine products, but I think in my 
experience over the last 20 years, what has happened is that 
those requirements have become quite onerous.
    So for us, in developing a new vaccine or in keeping a 
vaccine on the market, what is required has taken some quantum 
leaps over the last at least 20 years that I have been in the 
business and it just makes it harder and harder for us to stay 
with products and to develop new products.
    The Chairman. Let me ask this question in as constructive a 
way as I can because it is a bit hypothetical, although it is 
based on the reality that both Evan Bayh and we thought we saw 
in the marketplace and what we have tried to do in addressing 
the legislation that you mentioned.
    You also mentioned that you as a company have gotten out of 
the flu vaccine market. Walk me through, let us say, a 
comparative process where we would give tax credit for the 
constant updating that you are talking about and/or after CDC 
makes the projections into the market on an annual basis as to 
volumes necessary and, of course, you all determined the active 
virus involved and you begin manufacturing and the season 
didn't materialize. So we negotiate a compensation to move that 
product off the shelf and out of the market, obviously, at the 
end of the season. Would that have kept--this is very difficult 
to ask because I know you can't say, ``Well, of course it 
would, but would it have helped a company like Wyeth stay in 
the market?''
    Mr. Paradiso. Let me start by just addressing the flu 
vaccine business itself.
    The Chairman. If you would, please, because that seems to 
be the most complicated.
    Mr. Paradiso. It is, and there are things that are distinct 
about the flu vaccine business from other vaccines.
    The Chairman. Yes.
    Mr. Paradiso. The greatest distinction is that it is a 
seasonal vaccine business. So the vaccine changes 90 percent of 
the years, so there is no shelf life.
    The Chairman. It is a new product.
    Mr. Paradiso. So at the end of the year, you throw away 
what you don't use. So if there is a delay or there is an issue 
with vaccine supply and you can't sell the doses in January, 
February, and March. So that is No. 1.
    Second, the paradigm, in this country has been to vaccinate 
in October and November. When Thanksgiving comes, vaccination 
stops. So in some of the years leading up to 2002, when vaccine 
was really not in a shortage but rather coming later in the 
season, vaccine was coming out in November and December. There 
was enough for supply but vaccination had stopped by that time 
and so doses were left unsold. In other years, there is 95 
million doses made--that was the year 2002--and the demand was 
only for 80 million doses. Excuse me, 95 million doses were 
made and the demand was only for 80 million.
    Third it is a very hard market to predict. It is very hard 
to predict what the season will be in terms of timing and 
severity. It is very hard to predict how many people are going 
to want to get vaccinated every year and whether vaccination is 
valued in any particular year.
    So it really is hard to say what it is that would 
incentivize people to stay in the flu business. I think, 
obviously, any help as you suggested with tax credits or 
otherwise that would help defray the cost of upgrading the 
manufacturing process and keeping facilities in compliance 
would be useful.
    But I think it is important that any way to ensure that the 
doses that we predict or that the CDC predicts are going to be 
required for a given year will, in fact, be utilized. If there 
is a safety stock, if you want to project 25 percent above 
that, then there needs to be some incentive for manufacturers 
to over-produce in a given year because the way it is now, if 
you are over-producing and you can't sell it by the end of 
November or early December, as we said, ``That vaccine will not 
be used.''
    So it is not a simple problem for flu, but I think there 
are things that can be done, as you suggested.
    The Chairman. Well, I am beginning to learn that in the 
time that I have spent with this issue over the last couple of 
months, holding the hearings later and, of course, as the whole 
situation developed. It is a relatively complicated process, 
but it does appear there are some looming problems.
    As I said in my opening statement, the issue of liability, 
the issue of licensure and regulatory process, this constant 
moving to the assurity of a zero risk environment that all the 
world wants nowadays but never has existed and never will exist 
is a great problem, and so we will try to put our finger in a 
couple of those holes to see if we can shore up the dike a bit 
and I thank you for being here today.
    Dr. Sloan, in one of your evaluations as to how we do 
traditional benefit-cost standards so we result in the Federal 
participation, you talked about involving--well, let me see if 
I can find the language here. The amount of the subsidy would 
be based on total societal benefit of the vaccine, not 100 
percent of the value, but some percentage of that amount that, 
at a minimum, reflects the health and financial benefits 
accruing from other than the persons being vaccinated. How do 
you justify, then, a subsidy to somebody who is 80 years old, 
not in the workforce and not really contributing to the 
productivity of society? How do you put a social value to that 
one?
    Mr. Sloan. OK. When that person gets sick, very sick with 
the flu, the person ends up in the hospital. The person ends up 
going to physicians, costing the Medicare program thousands of 
dollars. That cost is not borne by the 80-year-old but is borne 
by all of us who contribute to the Medicare program. These are 
called financial externalities. These are substantial. So for 
an insured population, or even an uninsured one, because if an 
uninsured person ends up in the hospital, that hospital care 
will be covered one way or another, not by that individual, or 
at least a large part of it not by that individual.
    So it is not only the health externalities, like in the 
nursing home where we talk about people making other people 
sick, but it is because we have assumed a social obligation. We 
have taken on a social obligation to care for people who get 
sick. That is a burden that we all share and the individual 
does not have the incentive.
    If somebody has an income of $20,000 a year and you said, 
``Well, now you are at risk for a hospitalization and we are 
going to charge you $10,000, and then for those three or four 
physician visits we are going to charge you another $500, they 
would look at this differently than having just the front-end 
Medicare deductible for the hospitalization.''
    The Chairman. That was valuable. I knew where you were 
going, but I thought that was important for the record. There 
are a variety of ways of measuring social values in this 
country and we have taken them on in a variety of aspects of 
who the contributors are or what the costs are as it relates 
to, if you will, the social or the policy obligation that this 
country has assumed.
    You commented on a fragmented system for financing, but is 
that causing the shortage this year?
    Mr. Sloan. Not in flu vaccine. It is causing other 
shortages. One of the problems that we heard as a committee was 
that this isn't shortage of vaccine but the shortage of 
vaccinations. Pediatricians in particular had patients who had 
various sources of financing and they couldn't figure out who 
in the world is covering them, whether the patient is covered. 
They are having to store vaccines in different bins in their 
refrigeration area, et cetera, and it just is a hassle to 
figure all of this out.
    So some of them are saying, let me just refer these 
patients to health departments, and then a lot of people in our 
country don't know where a health department is or it is an 
inconvenience to go and so they don't get the vaccine.
    The Chairman. How do we increasingly involve the government 
in this business and yet avoid the very thing that I heard Dr. 
Paradiso say, and that is in relation to the government being a 
large consumer and a price-fixer of product and, therefore, 
driving down the profitability and taking the incentive out of 
the marketplace?
    Mr. Sloan. Well, in my view, we don't want a price-fixer, 
and anything--if our program, if there was some worry that our 
plan would lead to price fixing, we certainly don't want to 
lead to price fixing.
    The Chairman. In your discussions about your program, did 
you get to that point? Was that a part of your discussions at 
any point in time?
    Mr. Sloan. Certainly, the idea that the government would 
set the price. I mean, maybe there would be a maximum price. If 
we thought, for example, the flu vaccine was worth $300 a dose 
and a manufacturer wanted to sell the vaccine for $305 a dose, 
the government at some point should say, ``Well, this is just 
way overpriced.'' But we would rely on competition to set the 
price of vaccines, so HMOs and the Medicare HMOs would 
negotiate the prices. So what we are talking about is a subsidy 
for the vaccine.
    The Chairman. Am I right in asking this question, that it 
appears that more vaccine production is now going on overseas 
than it is here in the United States?
    Mr. Sloan. That is true, and we have----
    The Chairman. Why is that happening?
    Mr. Sloan [continuing]. Lost a lot of vaccine----
    The Chairman. Are other countries losing the same amount of 
contributors to the market as we, or are we driving them out?
    Mr. Sloan. I don't know whether they have--there is a lot 
of production--currently for flu, there is no shortage abroad 
and we have a shortage here, so there is clearly some supply 
out there. What our analysis is that in the United States, for 
the U.S. market, it is much more attractive for a 
pharmaceutical manufacturer to make a blockbuster drug like a 
Lipitor which is taken every day than it is to supply vaccine 
on a seasonal basis to people who maybe don't realize the value 
of what they are getting.
    One of the problems is the public isn't very educated in 
the value of this vaccine. Maybe they don't care completely 
because if they go to the hospital, they are subsidized and all 
that. But there is a lack of awareness of the importance of 
vaccines. If you look at the cost-benefit ratios, in those 
terms, vaccines are a very attractive investment.
    The Chairman. Gentlemen, I am out of time and I apologize. 
There are other questions that I wanted to ask. Let me ask this 
closing question of both of you. Is there something that you 
haven't said yet that you want to say for the record on this 
issue? Dr. Sloan?
    Mr. Sloan. We found very little in our study about 
liability, but in another area that I have studied--I have 
looked at no-fault for neurologically impaired infants and we 
heard the same story in Florida and in Virginia, where the 
State legislature had thought that they had capped the problem 
by establishing a no-fault program. For the trial bar, it was 
much more attractive to bring a tort suit than it is to file a 
no-fault claim and they found ways around this, and I do think 
that we do need to study it.
    The Chairman. More attractive meaning more profitable for 
them?
    Mr. Sloan. Profitable.
    The Chairman. Thank you. That is what I thought you said.
    Mr. Sloan. The problem is that we don't have the good data 
or liability, in this one case just spoken about today we hear 
the figure 350 lawsuits, but we really haven't seen the whole 
panoply of lawsuits that are out there. I mention this because 
you said that the hearing has ``liability'' in its name.
    The Chairman. Yes.
    Mr. Sloan. We also need to be looking at the incentives. We 
need to provide more incentives for pharmaceutical 
manufacturers to produce vaccine and sell vaccine in the United 
States.
    The Chairman. Dr. Paradiso.
    Mr. Paradiso. Yes. I would like to comment just that I 
think the overriding factor here is valuing the vaccines. We 
made some comments here about assigning value. We talk about 
vaccines in terms of cost-benefit. I think you had a comment 
about the cost should be equivalent to the benefit. Well, in 
fact, for vaccines, that is the paradigm we use, where we try 
to match the actual cost of the vaccine to what we are going to 
be saving as opposed to saying, we are going to be saving an 
incredible number of lives. We have to assign a value that is 
proportionate to that compared to everything else we do from a 
public health perspective. I think if we do that, then we will 
understand that the value of vaccines is incredible.
    We have just had an experience with our Prevnar vaccine. It 
is a vaccine for pneumococcal disease in babies. That vaccine 
was introduced in the year 2000 and it has had a dramatic 
impact on pneumococcal invasive disease in young children, 
including meningitis, in the last four years, so that the 
disease is greatly reduced in that population.
    But over and above that, and unexpectedly, it turns out 
that those children were spreading that disease to their 
parents and to their grandparents, and in the last four years, 
there has been a significant decline in pneumococcal invasive 
disease in the elderly in particular who are at high risk for 
pneumococcal pneumonia. In fact, those percentages are 30 or 40 
percent reductions in invasive pneumococcal disease in a 
population that is not vaccinated.
    This is a story that is happening now. It is a story that 
happened with polio. It is a story that happened with smallpox 
and measles. It is a continuous story with vaccines. So we need 
to understand the importance of this venture from a value 
perspective and treat it that way, and I think if we do that, 
then we will help that enterprise.
    The Chairman. Thank you. I guess I would also say that it 
is living proof that little kids really are Petri dishes, if 
they are. I have accused mine of being that on occasion. 
[Laughter.]
    Gentlemen, thank you very much for your time with us today. 
We are going to continue to pursue this until we get it right.
    Mr. Paradiso. Thank you very much.
    Mr. Sloan. Thank you very much.
    The Chairman. The hearing is adjourned.
    [Whereupon, at 4:08 p.m., the committee was adjourned.]


                            A P P E N D I X

                              ----------                              


              Prepared Statement of Senator Susan Collins

    Mr. Chairman, I want to commend you for holding this 
hearing to examine the current flu vaccine shortage and to 
discuss ways to remedy our vaccine supply problems in both the 
short and the long-term.
    Influenza results in approximately 36,000 American deaths 
and more than 200,000 hospitalizations each year. It is 
particularly appropriate that the Aging Committee is holding 
today's hearing since the elderly are disproportionately 
affected, and are at particularly high-risk of complications 
and even death from influenza. Seniors account for nine out to 
ten deaths and one out of two hospitalizations related to the 
flu.
    This issue is not new to the Aging Committee. I recall 
that, on September 28, the Senator from Idaho chaired a hearing 
in conjunction with National Adult Immunization Week at which 
both federal health officials and the CEO of Chiron (pronounced 
``Kyron'') testified that the U.S. should have plenty of 
vaccine available for the upcoming flu season. Ironically, this 
was one week to the day before the announcement that United 
Kingdom health officials had revoked the Chiron Corporation's 
license to manufacture the flu vaccine in its Liverpool 
facility, effectively cutting our supply of vaccine in half.
    Clearly, Congress must take action to increase and 
strengthen the nation's supply of flu vaccine. While long-term 
measures are needed to increase our nation's capacity to 
manufacture vaccine, I believe that action must also be taken 
without delay to maximize the value of the existing vaccine 
supply. This is particularly true given the fact that even the 
most aggressive efforts to increase supplies of new vaccine 
will have little effect on the current shortage due to the long 
period of time necessary to produce more vaccine.
    To that end, on October 26, I joined Senator Jack Reed in 
sending a letter to Secretary Tommy Thompson urging that he do 
all that he can administratively to optimize the utilization of 
the existing vaccine and to increase the available supply. We 
were particularly concerned that the Centers for Disease 
Control not adopt a ``one size fits all policy'' and urged that 
they consider each state's unique needs in allocating new 
shipments of vaccine. I was therefore pleased by the 
Department's announcement on November 9 that they would be 
working with state health departments to ensure that the 
remaining vaccine reaches those people at highest risk for 
complications from influenza.
    In addition, I have also signed on as a cosponsor of the 
Emergency Flu Response Act, which gives our health agencies the 
tools they need to respond to the current flu vaccine shortage 
and to maximize the effectiveness of our reduced vaccine 
stocks. I understand that the Chairman has also introduced 
legislation to improve our nation's preparedness to combat 
influenza. I therefore look forward to working with him next 
year on a comprehensive plan that addresses not just the short-
term problems with this year's flu vaccine supply, but that 
also revitalizes our efforts to ensure adequate supplies of all 
vaccines.
    Again, I commend the Chairman and thank him for holding 
this important hearing.
                                ------                                


             CDC RESPONSES TO QUESTIONS FROM SENATOR WYDEN

    Question.What justification does CDC have for not buying 
the many doses of vaccine available from wholesalers in Europe? 
That vaccine is available now unlike the vaccine from 
manufacturers which may not be available till January, which 
may be too late to protect some of the highest risk patients.
    Answer. In the United States, it is illegal to use any drug 
that is not approved by the Food and Drug Administration (FDA). 
Therefore, to allow treatment of patients with an unapproved 
drug, FDA may permit its use under an Investigational New Drug 
application (IND), which must be approved by FDA before an 
unapproved drug is released for use in the United States. These 
FDA requirements are designed to ensure the protection of human 
subjects and require that certain safety, efficacy, 
manufacturing, shipping, and storage process date be available.
    The influenza vaccine available from Europe is not licensed 
for use in the United States. In order for it to be given to 
individuals in the United States, the manufacturer or some 
other sponsor must submit product information and an 
Investigational New Drug Application (IND) to FDA. FDA reviews 
the data and determines whether the product is safe for use in 
people. For more information about INDs, see http://
www.fda.gov/cber/ind/ind.htm.
    On December 7, 2004, the Health and Human Services (HHS) 
Secretary Tommy Thompson announced that the influenza vaccine 
manufactured in Germany was safe enough to be used in the 
United States and that as many as four million doses would be 
available to alleviate the U.S. shortage. Secretary Thompson 
announced that the government was immediately buying 1.2 
million doses of the vaccine, called Fluarix, which will be 
available in January.
    Question. Has CDC provided states or other entities 
assistance in locating doses available in the world market and 
what is CDC's role in helping these entities in making doses 
available in the U.S.?
    Answer. Two manufacturers of influenza vaccines licensed 
for use in Europe have vaccine which is under review for use in 
the United States as Investigational New Drugs (IND). Because 
these vaccines are not licensed in this country, they will have 
to be administered under special protocols with written consent 
that must be approved by an Institutional Review Board (IRB) 
and the FDA. CDC is working with these companies to develop 
protocols for the use of these vaccines so they can be made 
available to states that choose to offer them under the CDC- 
and manufacturer-sponsored INDs. In addition, states that have 
identified and/or purchased vaccine from foreign distributors 
can choose to submit their own IND protocol to FDA for review 
and approval to allow them to import and administer these 
vaccines.

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