Flu Vaccine: Steps Are Needed to Better Prepare for Possible	 
Future Shortages (30-MAY-01, GAO-01-786T).			 
								 
Until the 2001 flu season, the production and distribution of	 
influenza vaccine generally occurred without major difficulties. 
Last year, however, several people reported that they wanted but 
could not get flu shots. In addition, physicians and public	 
health departments could not provide shots to high-risk patients 
in their medical offices and clinics because they had not	 
received vaccine they ordered many months in advance, or because 
they were being asked to pay much higher prices for vaccine in	 
order to get it right away. At the same time, there were reports 
that providers in other locations, even grocery stores and	 
restaurants, were offering flu shots to everyone--including	 
younger, healthier people who were not at high risk. This	 
testimony discusses issues relating to the delays in production, 
distribution, and pricing of the 2000-2001 flu vaccine. GAO found
that manufacturing difficulties during the 2000-2001 flu season  
resulted in an overall delay of about six to eight weeks in	 
shipping vaccine to most customers. This delay created an initial
shortage and temporary price spikes. Furthermore, there is no	 
system currently in place to ensure that high-risk people have	 
priority for receiving flu shots when supply is short. Because	 
purchase of the vaccine is mainly done in the private sector,	 
federal actions to help mitigate any adverse effects of vaccine  
delays or shortages need to rely to a great extent on		 
collaboration between the public and private sectors.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-786T					        
    ACCNO:   A01075						        
  TITLE:     Flu Vaccine: Steps Are Needed to Better Prepare for      
             Possible Future Shortages                                        
     DATE:   05/30/2001 
  SUBJECT:   Health centers					 
	     Health hazards					 
	     Elderly persons					 
	     Immunization programs				 
	     Immunization services				 
	     Swine influenza					 
	     Oregon						 
	     United Kingdom					 

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GAO-01-786T
     
GAO United States General Accounting Office

Testimony Before the Special Committee on Aging, U. S. Senate

For Release on Delivery Expected at 9: 30 a. m. in Portland, Oregon
Wednesday, May 30, 2001

FLU VACCINE Steps Are Needed to Better Prepare for Possible Future Shortages

Statement of Janet Heinrich Director, Health Care- Public Health Issues

GAO- 01- 786T

Page 1 GAO- 01- 786T Chairman Craig, Ranking Member Breaux, and Senator
Wyden: I am pleased to be here today to discuss problems that occurred last
fall

with shortages of influenza vaccine and report on some steps that could help
better prepare for possible future shortages.

Until the 2000- 01 flu season, the production and distribution of flu
vaccine generally occurred without major difficulties. Last year, however,
things were different. You and other Members of Congress heard complaints
from many of your constituents who wanted but could not get flu shots. You
also heard from physicians and public health departments that could not
provide shots to high- risk patients in their medical offices and clinics
because they had not received vaccine they had ordered many months in
advance, or because they were being asked to pay much higher prices for
vaccine in order to get it right away. And at the same time, there were
reports that providers in other locations, even grocery stores and
restaurants, were offering flu shots to everyone- including younger,
healthier people who were not at high risk. There were concerns that the
delay, disruption, and confusion may have prevented some high- risk
individuals from getting vaccinated at all.

Along with 28 other Members of Congress, you asked us to examine issues
relating to the delays in production, distribution, and pricing of the 2000-
01 flu vaccine. My remarks today will present the highlights of our recently
released report on those issues. 1 Specifically, I will focus on the
following:

 What circumstances contributed to the production delay, and what effects
did the delay have on the prices paid for vaccine?

 How effectively do current distribution channels ensure that high- risk
populations receive vaccine on a priority basis?

 What approaches are federal agencies taking to better prepare for possible
future disruptions of influenza vaccine supply?

In brief, we found that manufacturing difficulties during the 2000- 01 flu
season resulted in an overall delay of about 6 to 8 weeks in shipping
vaccine to most customers, which created an initial shortage and temporary
price spikes. Manufacturing difficulties could occur in the future and again
illustrate the fragility of current methods to produce a

1 See Flu Vaccine: Supply Problems Heighten Need to Ensure Access for High-
Risk People

(GAO- 01- 624, May 15, 2001).

Page 2 GAO- 01- 786T new vaccine every year. Compounding the problem is that
when the supply of vaccine is short, there is no system to ensure that high-
risk

people have priority for receiving flu shots. In considering how to better
prepare for possible future shortages, it is important to recognize that the
purchase, distribution, and administration of flu vaccine are mainly
private- sector responsibilities. Consequently, federal actions to help
mitigate any adverse effects of vaccine delays or shortages need to rely to
a great extent on collaboration between the public and private sectors.
Besides focusing on improving distribution of influenza vaccine, it may also
be beneficial to consider how to increase immunization rates against
pneumococcal pneumonia, which is one of the primary causes of deaths and
hospitalizations associated with influenza.

Annual vaccination is the primary method for preventing influenza, which is
associated with serious illness, hospitalizations, and even deaths among
people at high risk for complications of the disease, such as pneumonia.
Senior citizens are particularly at risk, as are individuals with chronic
medical conditions. The Centers for Disease Control and Prevention (CDC)
estimates that influenza epidemics contribute to approximately 20,000 deaths
and 110,000 hospitalizations in the United States each year. Here in Oregon,
and throughout the nation, influenza and pneumonia rank as the fifth leading
cause of death among persons 65 years of age and older.

Producing the influenza vaccine is a complex process that involves growing
viruses in millions of fertilized chicken eggs. This process, which requires
several steps, generally takes at least 6 to 8 months from January through
August each year. Each year?s vaccine is made up of three different strains
of influenza viruses, and, typically, each year one or two of the strains is
changed to better protect against the strains that are likely to be
circulating during the coming flu season. The Food and Drug Administration
(FDA) and its advisory committee decide which strains to include based on
CDC surveillance data, and FDA also licenses and regulates the manufacturers
that produce the vaccine. Only three manufacturers- two in the United States
and one in the United Background

Page 3 GAO- 01- 786T Kingdom- produced the vaccine used in the United States
during the 2000- 01 flu season. 2

Like other pharmaceutical products, flu vaccine is sold to thousands of
purchasers by manufacturers, numerous medical supply distributors, and other
resellers such as pharmacies. These purchasers provide flu shots at
physicians? offices, public health clinics, nursing homes, and less
traditional locations such as workplaces and various retail outlets. CDC has
recommended October through mid- November as the best time to receive a flu
shot because the flu season generally peaks from December through early
March. However, if flu activity peaks late, as it has in 10 of the past 19
years, vaccination in January or later can still be beneficial.

To address our study questions, we interviewed officials from the Department
of Health and Human Services (HHS), including CDC, FDA, and the Health Care
Financing Administration (HCFA), as well as flu vaccine manufacturers,
distributors, physician associations, flu shot providers, and others. We
surveyed 58 physician group practices nationwide to learn about their
experiences and interviewed health department officials in all 50 states.

Although the eventual supply of vaccine in the 2000- 01 flu season was about
the same as the previous year?s- about 78 million doses- production delays
of about 6 to 8 weeks limited the amount that was available during the peak
vaccination period. During the period when supply was limited and demand was
higher, providers who wanted to purchase vaccine from distributors with
available supplies often faced rapidly escalating prices. By December, as
vaccine supply increased and demand dropped, prices declined.

Last fall, fewer than 28 million doses were available by the end of October,
compared with more than 70 million doses available by that date in 1999. Two
main factors contributed to last year?s delay. The first was that two
manufacturers had unanticipated problems growing one of the two new
influenza strains introduced into the vaccine for the 2000- 01 flu season.

2 The two manufacturers with facilities in the United States were Wyeth-
Ayerst Pharmaceuticals, Inc., and Aventis Pasteur, Inc. The manufacturer
with facilities in the United Kingdom was Medeva Pharma, Ltd. Manufacturing

Problems Caused Temporary Shortages and Spikes in Price

Most Vaccine Was Not Ready During Period of Peak Demand

Page 4 GAO- 01- 786T Because manufacturers must produce a vaccine that
includes all three strains selected for the year, delivery was delayed until
sufficient

quantities of this difficult strain could be produced. The second factor was
that two of the four manufacturers producing vaccine the previous season
shut down parts of their facilities because of FDA concerns about compliance
with good manufacturing practices, including issues related to safety and
quality control. One of these manufacturers reopened its facilities and
eventually shipped its vaccine, although much later than usual. The other,
which had been expected to produce 12 to 14 million doses, announced in
September 2000 that it would cease production altogether and, as a result,
supplied no vaccine.

These vaccine production and compliance problems did not affect every
manufacturer to the same degree. Consequently, when a purchaser received
vaccine depended to some extent on which manufacturer?s vaccine it had
ordered. Purchasers that contracted only with the lateshipping manufacturers
were in particular difficulty. For example, health departments and other
public entities in 36 states, including Oregon, banded together under a
group purchasing contract and ordered nearly 2.6 million doses from the
manufacturer that, as it turned out, experienced the greatest delays from
production difficulties. Some of these public entities, which ordered
vaccine for high- risk people in nursing homes or clinics, did not receive
most of their vaccine until December, according to state health officials.

Because supply was limited during the usual vaccination period, distributors
and others who had supplies of the vaccine had the ability- and the economic
incentive- to sell their supplies to the highest bidders rather than filling
lower- priced orders they had already received. Most of the physician groups
and state health departments we contacted reported that they waited for
delivery of their original lower- priced orders, which often arrived in
several partial shipments from October through December or later.

Those who purchased vaccine in the fall found themselves paying much higher
prices. For example, one physicians? practice in our survey ordered flu
vaccine from a supplier in April 2000 at $2.87 per dose. When none of that
vaccine had arrived by November 1, the practice placed three smaller orders
in November with a different supplier at the escalating prices of $8.80,
$10.80, and $12.80 per dose. On December 1, the practice ordered more
vaccine from a third supplier at $10.80 per dose. The four more Limited
Availability During

Peak Demand Created Temporary Price Spikes

Page 5 GAO- 01- 786T expensive orders were delivered immediately, before any
vaccine had been received from the original April order.

Demand for influenza vaccine dropped as additional vaccine became available
after the prime period for vaccinations had passed. In all, roughly one-
third of the total distribution was delivered in December or later. Part of
this additional supply resulted from actions taken by CDC in September, when
it appeared there could be a shortfall in production. At that point, CDC
contracted with one of the manufacturers to extend production into late
December for 9 million additional doses. 3 Despite efforts by CDC and others
to encourage people to seek flu shots later in the season, providers still
reported a drop in demand in December. The unusually light flu season also
probably contributed to the lack of interest. Had a flu epidemic hit in the
fall or early winter, the demand for influenza vaccine would likely have
remained high.

As a result of the waning demand, manufacturers and distributors reported
having more vaccine than they could sell. Manufacturers reported shipping
about 9 percent less than in 1999, and more than 7 million of the 9 million
additional doses produced under the CDC contract were never shipped at all.
In addition, some physicians? offices, employee health clinics, and other
organizations that administered flu shots reported having unused doses in
December and later.

In a typical year, there is enough vaccine available in the fall to give a
flu shot to anyone who wants one. However, when the supply is not
sufficient, there is no mechanism currently in place to establish priorities
and distribute flu vaccine first to high- risk individuals. Indeed last
year, mass immunizations in nonmedical settings, normally undertaken to
promote vaccinations, created considerable controversy as healthy persons
received vaccine in advance of those at high risk. In addition,
manufacturers and distributors that tried to prioritize their vaccine
shipments encountered difficulties doing so.

3 The manufacturer began accepting orders under this contract in early
November and began shipping vaccine from these orders in mid- December 2000.
Prices were $2.99 per dose for public purchasers and $5 per dose for the
private sector. When More Vaccine

Became Available, Demand Had Already Dropped

Distribution of Vaccine Does Not Ensure Priority to High- Risk Individuals

Page 6 GAO- 01- 786T Flu shots are generally widely available in a variety
of settings, ranging from the usual physicians? offices, clinics, and
hospitals to retail outlets

such as drugstores and grocery stores, workplaces, and other convenience
locations. Millions of individuals receive flu shots through mass
immunization campaigns in nonmedical settings, where organizations, such as
visiting nurse agencies under contract, administer the vaccine. The
widespread availability of flu shots may help increase immunization rates
overall, but it generally does not lend itself to targeting vaccine to
highpriority groups.

The timing of some of the mass immunization campaigns last fall generated a
great deal of controversy. Some physicians and public health officials were
upset when their local grocery stores, for example, were offering flu shots
to everyone when they, the health care providers, were unable to obtain
vaccine for their high- risk patients. Examples of these situations include
the following:

 A radio station in Colorado sponsored a flu shot and a beer for $10 at a
local restaurant and bar- at the same time that the public health department
and the community health center did not have enough vaccine.

 One grocery store chain in Minnesota participated in a promotion offering
a discounted flu shot for anyone who brought in three soup can labels.

 Flu shots were available for purchase to all fans attending a professional
football game.

CDC took some steps to try to manage the anticipated vaccine delay by
issuing recommendations for vaccinating high- risk individuals first. In
July 2000, CDC recommended that mass immunization campaigns, such as those
open to the public or to employee groups, be delayed until early to mid-
November. 4 CDC issued more explicit voluntary guidelines in October 2000,
which stated that vaccination efforts should be focused on persons aged 65
and older, pregnant women, those with chronic health conditions that place
them at high risk, and health care workers. 5 The October guidelines also
stated that while efforts should be made to increase

4 See CDC, ?Delayed Supply of Influenza Vaccine and Adjunct ACIP Influenza
Vaccine Recommendations for the 2000- 01 Influenza Season,? Morbidity and
Mortality Weekly Report, Vol. 49, No. 27 (July 14, 2000), pp. 619- 622.

5 See CDC, ?Updated Recommendations from the Advisory Committee on
Immunization Practices in Response to Delays in Supply of Influenza Vaccine
for the 2000- 01 Season,?

Morbidity and Mortality Weekly Report, Vol. 49, No. 39 (Oct. 6, 2000), pp.
888- 892. Availability of Vaccine for

Mass Immunization Campaigns Created Controversy

Page 7 GAO- 01- 786T participation in mass immunization campaigns by high-
risk persons and their household contacts, other persons should not be
turned away.

Some organizations that conducted mass immunizations said they generally did
not screen individuals who came for flu shots in terms of their risk levels.
Some said they tried to target high- risk individuals and provided
information on who was at high risk, but they let each person decide whether
to receive a shot. Their perspective was that the burden lies with the
individual to determine his or her own level of risk, not with the provider.
Moreover, they said that the convenience locations provide an important
option for high- risk individuals as well as others. Health care providers
in both traditional and nontraditional settings told us that it is difficult
to turn someone away when he or she requests a flu shot.

The manufacturers and distributors we interviewed reported that it was
difficult to determine which of their purchasers should receive priority
vaccine deliveries in response to CDC?s recommendations to vaccinate high-
risk individuals first. They did not have plans in place to prioritize
deliveries to target vaccine to high- risk individuals because there
generally had been enough vaccine in previous years and thus there had been
little practical need for this type of prioritization. When they did try to
identify purchasers serving high- risk individuals, the manufacturers and
distributors often found they lacked sufficient information about their
customers to make such decisions, and they also were aware that all types of
vaccine providers were likely to serve at least some high- risk individuals.

As a result, manufacturers reported using various approaches in distributing
their vaccine, including making partial shipments to all purchasers as a way
to help ensure that more high- risk persons could be vaccinated. Others made
efforts to ship vaccine first to nursing homes, where they could be
identified, and to physicians? offices. All of the manufacturers and
distributors we talked to said that once they distributed the vaccine it
would be up to the purchasers and health care providers to target the
available vaccine to high- risk groups.

Immunization statistics are not yet available to show how successful these
ad hoc distribution strategies may have been in reaching high- risk groups,
but there may be cause for concern. Some state health officials reported
that nursing homes often purchase their flu vaccine from local pharmacies,
and some distributors considered pharmacies to be lower priority for
deliveries. In addition, many physicians reported that they felt
Manufacturers and

Distributors Reported Difficulty Determining How to Get Vaccine to High-
Risk Individuals

Page 8 GAO- 01- 786T they did not receive priority for vaccine delivery,
even though nearly twothirds of seniors- one of the largest high- risk
groups- generally get their

flu shots in medical offices. The experience of the 58 physicians? practices
we surveyed seemed consistent with this reported lack of priority: as a
group, they received their shipments at about the same delayed rate that
vaccine was generally available on the market.

Ensuring an adequate and timely supply of vaccine, already a difficult task
given the complex manufacturing process, has become even more difficult as
the number of manufacturers has decreased. Now, a production delay or
shortfall experienced by even one of the three remaining manufacturers can
significantly affect overall vaccine availability. Looking back, we are
fortunate that the 2000- 01 flu season arrived late and was less severe than
normal because we lacked the vaccine last October and November to prepare
for it. Had the flu hit early with normal or greater severity, the
consequences could have been serious for the millions of Americans who were
unable to get their flu shots on time.

This raises the question of what more can be done to better prepare for
possible vaccine delays and shortages in the future. We need to recognize
that flu vaccine production and distribution are private- sector
responsibilities, and as such options are somewhat limited. HHS has no
authority to directly control flu vaccine production and distribution,
beyond FDA?s role in regulating good manufacturing practices and CDC?s role
in encouraging appropriate public health actions. 6

Working within these constraints, HHS undertook several initiatives in
response to the problems experienced during the 2000- 01 flu season. For
example, the National Institutes of Health, working with FDA and CDC,
conducted a clinical trial on the feasibility of using smaller doses of
vaccine for healthy adults. If smaller doses offer acceptable levels of
protection, this would be one way to stretch limited vaccine supplies. Final
results from this work are expected in fall 2001. In addition, for the
upcoming flu season CDC and its advisory committee extended the optimal
period for getting a flu shot until the end of November, to encourage more
people to get shots later in the season. HHS is also

6 Under the Federal Food Drug and Cosmetic Act, FDA has limited authority to
regulate the resale of prescription drugs, including influenza vaccine, that
have been purchased by health care entities such as public or private
hospitals. Wholesale distributors are excluded from the definition of health
care entities. Additional Actions

Needed to Prepare for Future Vaccine Delays and Shortages

Page 9 GAO- 01- 786T working to complete a plan for a national response to a
severe worldwide influenza outbreak, called a pandemic. While the plan
itself would likely be

applied only in cases of public health emergencies, we believe that the
advance preparations by manufacturers, distributors, physicians, and public
health officials to implement the plan could provide a foundation to assist
in dealing with less severe problems, such as those experienced last year. 7

We believe it would be helpful for HHS agencies to take additional actions
in three areas. 8 Progress in these areas could prove valuable in managing
future flu vaccine disruptions and targeting vaccine to high- risk
individuals. First, because vaccine production and distribution are
privatesector responsibilities, CDC needs to work with a wide range of
private entities to prepare for potential problems in the future. CDC can
take an ongoing leadership role in organizing and supporting efforts to
bring together all interested parties to formulate voluntary guidelines for
vaccine distribution in the event of a future vaccine delay or shortage. In
March 2001, CDC co- sponsored a meeting with the American Medical
Association that brought together public health officials, vaccine
manufacturers, distributors, physicians, and other providers to discuss flu
vaccine distribution, including ways to target vaccine to high- risk groups
in the event of a future supply disruption. This meeting was a good first
step, and continued efforts should be made to achieve consensus among the
public- and private- sector entities involved in vaccine production,
distribution, and administration.

The experience of the 2000- 01 flu season showed how difficult it is to
change established behavior regarding when to be vaccinated. For this
reason, we believe CDC can concentrate greater efforts on education and
outreach to members of the public and providers focused on the value of
being immunized later in the winter. CDC issued guidelines to this effect,
posted similar information on a Web site, and conducted a media campaign in
select cities, but it appears those efforts had limited impact on changing
behavior. CDC could maximize the results of future efforts by assessing its
past efforts to identify the most effective means of influencing behavior.
Those means should be used to educate flu vaccine

7 See Influenza Pandemic: Plan Needed for Federal and State Response (GAO-
01- 4, Oct. 27, 2000). 8 See GAO- 01- 624 for formal recommendations to HHS.

Page 10 GAO- 01- 786T providers and the general public well before the start
of the traditional fall vaccination period.

Finally, while vaccination against pneumococcal disease is not a substitute
for the annual flu shot, it can provide protection against a major
complication of the flu if vaccine is not available. One pneumococcal
vaccination can provide long- term protection, with immunity lasting 5 to 10
years. Available data indicate that only about half of seniors have been
vaccinated, however, and the rate is much lower for high- risk people under
age 65. HCFA has ongoing activities directed toward increasing both
pneumococcal and influenza vaccination rates for adults aged 65 and older in
the Medicare program. At the same time, CDC supports state activities for
both childhood and adult immunization, although little of that funding goes
to adult immunization programs. Collaboration between HCFA and CDC in
pneumococcal and influenza vaccination programs for adults could maximize
the use of federal resources in this area. For example, CDC could focus on
increasing these immunizations in the high- risk nonMedicare population,
which would complement HCFA?s ongoing activities to improve immunization
rates in the Medicare population.

HHS responded to our first two recommendations by citing related actions
that are under way. For example, HHS told us that CDC is also working with
interested parties, including state health departments, to develop
contingency plans for vaccine distribution and has started to assess the
relative success of its various outreach and educational efforts last
season. In response to our third recommendation, HHS commented that CDC
supports efforts to use pneumococcal vaccine more widely.

This concludes my statement. I would be happy to answer any questions you
may have.

For more regarding this testimony, please contact Janet Heinrich, Director,
Health Care- Public Health Issues, at (202) 512- 7119, or Frank Pasquier,
Assistant Director, at (206) 287- 4861. Other individuals who made
contributions to this statement include Lacinda Ayers, George Bogart, Ellen
M. Smith, Stan Stenersen, and Kim Yamane. GAO Contacts and

Staff Acknowledgments

(290065)
*** End of document. ***