[Congressional Record Volume 150, Number 133 (Thursday, November 18, 2004)]
[Senate]
[Pages S11497-S11498]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. INHOFE:
  S. 2997. A bill to amend section 1928 of the Social Security Act to 
encourage the production of influenza vaccines by eliminating the price 
cap applicable to the purchase of such vaccines under contracts entered 
into by the Secretary of Health and Human Services, to amend the 
Internal Revenue Code of 1986 to establish a tax credit to encourage 
vaccine production capacity, and for other purposes; to the Committee 
on Finance.
  Mr. INHOFE. Mr. President, there was a lot of hysteria a short time 
ago about the flu vaccine and the fact it was not available to a lot of 
people. There are several problems. One, the flu vaccine production 
currently takes approximately 6 months. I am introducing a bill that 
will expedite that and will have the sense of the Senate to steer the 
NIH research dollars toward the development of faster technology. They 
are using egg cultures to grow this vaccine when it can be done through 
the cells of silk moths. It will take more research to get there and we 
will encourage them to do that.
  Second, the bill removes price controls for the purchasing of the flu 
vaccine. This happened during the Clinton administration. We should 
have learned during the Nixon administration that price controls in 
reality do not work. The result of this has been that we do not have 
many companies now that are willing to get in there and take the risk 
and develop and manufacture these vaccines. As soon as they do, they 
find out there is no profit at the other end because of price controls.
  Lastly, we allow investment tax credits.
  I have long been dedicated to quality healthcare for my constituents 
in Oklahoma and across America. I supported the Medicare bill of 2003 
to give a voluntary prescription drug benefit to seniors. I have 
championed the rural health care providers, who received some of the 
greatest benefits of the Medicare bill. In 1997, I was one of few 
Republicans to vote against the Balanced Budget Act because of its lack 
of support for rural hospitals. Back then, I made a commitment to not 
allow our rural hospitals to be closed, and I am pleased we finally 
addressed that important issue in the Medicare legislation. I also 
cosponsored S. 816, the Health Care Access and Rural Equity Act, to 
protect and preserve access of Medicare beneficiaries to health care in 
rural regions.
  I am a strong advocate of medical liability reform and am an original 
cosponsor of S. 11, the Patients First Act, to protect patients' access 
to quality and affordable health care by reducing the effects of 
excessive liability costs. There are solutions to alleviate the burden 
placed on physicians and patients by excessive medical malpractice 
lawsuits, and I am committed to this vital reform.
  I have also worked with officials from the Center for Medicare and 
Medicaid Services to expand access to life-saving Implantable Cardiac 
Defibrillators. I supported legislation to increase the supply of 
pancreative islet cells for research and cosponsored a bill to take the 
abortion pill RU-486 off the market in the United States.
  The federal government invests in improving hospitals and healthcare 
initiatives, and I have fought hard to ensure that Oklahoma gets its 
fair share. Specifically, over the past three years, I have helped to 
secure $5.2 million in funding for the Oklahoma Medical Research 
Foundation, the Oklahoma State Department of Health planning initiative 
for a rural telemedicine system, the INTEGRIS Healthcare System, the 
University of Oklahoma Health Sciences Center, the Oklahoma Center for 
the Advancement of Science and Technology, St. Anthony's Heart 
Hospital, the Hillcrest Healthcare System, and the Morton Health 
Center.
  The unexpected influenza, flu, vaccine shortage beginning last month 
highlights the need to encourage the production of flu vaccine in 
America. As you know, on October 5th, Chiron, a California-based 
biotechnology company, notified U.S. health officials that its plant in 
Liverpool, England had been shut down due to vaccine contamination. 
Almost 50,000 doses of flu vaccine were thrown away, which created a 
severe shortage for Americans just as the flu season began.
  In light of the current shortage, I have examined why America found 
itself unable to accommodate the public demand for the flu vaccine. As 
we have seen, once a vaccine shortage strikes, a rapid response is 
difficult and often impossible. Thirty years ago, more than a dozen 
American companies were in the flu vaccine business. Today only two 
companies make the vaccine for America, and only one in an America-
based company. This is no coincidence. High liability costs, tedious 
production, price caps, and the complicated United States tax code have 
kept the market bare.
  In October, President Bush signed the JOBS bill, which curbed the 
billion-dollar lawsuits that have crippled the flu vaccine industry. By 
adding flu vaccine to the list of vaccines protected by the National 
Vaccine Injury Compensation Program, VICP, a no-fault alternative must 
be used for resolving vaccine injury claims. I am encouraged with this 
progress, but more can be done to prevent a shortage in the future.
  My bill supports allocating a greater percentage of the National 
Institutes of Health budget to develop faster and safer vaccine 
production technology. The ever-changing nature of the flu virus 
results in a complicated production process. The dominant strain of the 
flu virus mutates each year, requiring a different vaccine for every 
flu

[[Page S11498]]

season. Because harvesting the flu vaccine currently takes at least six 
months and requires tens of thousands of fertilized eggs susceptible to 
contamination, this process must begin nearly a year before the flu 
season begins.
  Research should be focused on developing new technologies to allow us 
to produce more vaccine--in the same season--when we encounter a 
shortage. A company in Connecticut is developing a flu vaccine relying 
on cell lines from silk moths. This type of innovative research 
promises to shave at least one month off of production time and 
significantly reduce cost.
  My bill includes a sense of the Senate on the importance of 
allocating a greater percentage of the National Institutes of Health, 
NIH, research dollars to developing new technology in flu vaccine 
production. The encouragement of safer and faster flu vaccine 
production technology is a prudent use of existing Federal research 
dollars through the National Institutes of Health.

  Furthermore, my bill removes the suffocating price controls that have 
discouraged companies from producing the flu vaccine. The Vaccines For 
Children program, VFC, enacted under the Clinton administration, 
imposed a price cap on all vaccines purchased through Federal 
contracts. From a shortsighted perspective, these regulated prices may 
expand access to vaccines. However, in the long run this policy 
devastates the vaccine production industry and decreases the 
availability of vaccines. This occurred in 1998 when manufacturers of 
tetanus diphtheria vaccine refused to bid on Government contracts. 
Consequently, this vaccine is no longer available to children through 
the VFC program.
  Similarly, the CDC purchased nearly 12 percent of the flu vaccine 
this season, and significant quantities were purchased through the 
Department of Defense, the Veteran's Administration and Medicare. The 
price controls imposed from Federal government purchasing create a 
high-risk, low-reward business market. Price controls destroy any 
profit incentive. Manufacturers avoid this artificial environment and 
will continue to as long as the government over steps its bounds.
  The harmful effect of government price controls is especially 
pronounced in the flu vaccine market because the vaccine has a single-
season shelf life. The difficulty of predicting the demand for vaccines 
each year exposes companies great risk. A slight drop in demand can 
force them out of the market. Financial losses--from 7 million extra 
doses in 2002 and 4.5 million extra in 2003--compelled Wyeth 
Pharmaceutical Company to end its flu vaccine manufacturing.
  In addition to lifting price controls, the government can loosen its 
grip on the flu vaccine market by reforming its complicated tax code. 
Fortunately, the JOBS bill made headway in simplifying the current 
United States international tax rules. To further offset the heavy 
penalties within the United States tax code, my bill gives a tax credit 
to companies, new and old, that construct facilities to manufacture flu 
vaccine.
  Currently, ten American companies produce the 47 FDA-approved 
vaccines. An investment tax credit will encourage these existing 
companies to expand their production to cover the flu vaccine and will 
invite start-up companies to join the industry. This will better equip 
the United States market to prevent and deal with a shortage in the 
future.

  Scientific experts consider vaccination to be the most effective 
medical intervention, and we live in an age of unprecedented vaccine 
development and implementation. We cannot continue to overregulate the 
flu vaccine industry and hope companies will hang on and produce 
vaccines regardless of profit. The current national flu vaccine 
shortage reveals the need to act.
  My bill would steer NIH research dollars towards cutting-edge 
technology, remove suffocating price controls, and free American 
companies to enter the flu vaccine industry with an investment tax 
credit. I urge my colleagues to stand with me in supporting this vital 
legislation.
                                 ______