Flu Vaccine: Recent Supply Shortages Underscore Ongoing 	 
Challenges (18-NOV-04, GAO-05-177T).				 
                                                                 
Influenza is associated with an average of 36,000 deaths and more
than 200,000 hospitalizations each year in the United States.	 
Persons who are aged 65 and older, people with chronic medical	 
conditions, children younger than 2 years, and pregnant women are
more likely to get severe complications from influenza than other
people. The best way to prevent influenza is to be vaccinated	 
each fall. In early October 2004, one major manufacturer of flu  
vaccine for the United States announced that its facility's	 
license had been temporarily suspended and it would not be	 
releasing any vaccine for the 2004-2005 flu season. Because this 
manufacturer was expected to produce roughly onehalf of the U.S. 
flu vaccine supply, the shortage resulting from its announcement 
has led to concern about the availability of flu vaccine,	 
especially to those at high risk for flu-related complications.  
GAO was asked to discuss issues related to the supply, demand,	 
and distribution of vaccine for this flu season in the context of
the current shortage. GAO based this testimony on products we	 
have issued since May 2001, as well as work we conducted to	 
update key information. 					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-177T					        
    ACCNO:   A13733						        
  TITLE:     Flu Vaccine: Recent Supply Shortages Underscore Ongoing  
Challenges							 
     DATE:   11/18/2004 
  SUBJECT:   Children						 
	     Health care services				 
	     Hospitals						 
	     Immunization services				 
	     Infectious diseases				 
	     Physicians 					 
	     Swine influenza					 
	     Women						 

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GAO-05-177T

United States Government Accountability Office

GAO Testimony

Before the Subcommittee on Health and the Subcommittee on Oversight and
Investigations, Committee on Energy and Commerce, House of Representatives

For Release on Delivery

Expected at 9:30 a.m. EST FLU VACCINE

Thursday, November 18, 2004

             Recent Supply Shortages Underscore Ongoing Challenges

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

GAO-05-177T

[IMG]

November 18, 2004

FLU VACCINE

Recent Supply Shortages Underscore Ongoing Challenges

  What GAO Found

The current vaccine shortage demonstrates the challenges to ensuring an
adequate and timely flu vaccine supply. Only three manufacturers produce
flu vaccine for the U.S. market, and the potential for future
manufacturing problems such as those experienced both this year and to a
lesser degree in previous years is still present. When shortages occur,
their effect can be exacerbated by the existing distribution system. Under
this system, health providers and vaccine distributors generally order a
particular manufacturer's vaccine and have limited recourse, even for
meeting the needs of high-risk persons, if that manufacturer's production
is adversely affected. By contrast, providers who purchased vaccine from a
different manufacturer might receive more of their order and be able to
vaccinate their high-risk patients.

The current situation also reflects another concern: the nation lacks a
systematic approach for ensuring that seniors and others at high risk for
flurelated complications receive flu vaccine when it is in short supply.
Once this year's shortage became apparent, the Centers for Disease Control
and Prevention (CDC) took a number of steps to influence distribution
patterns to help providers get some vaccine for their high-risk patients.
These steps are still playing themselves out, and it will take more time
to assess how well they will work. Problems have not been totally averted,
however, as there have been media reports of long lines to obtain limited
doses of vaccine and of high-risk individuals unable to find a flu
vaccination in a timely fashion.

We shared the facts contained in this statement with CDC officials. They
informed us they had no comments.

                 United States Government Accountability Office

Messrs. Chairmen and Members of the Subcommittees:

Thank you for the opportunity to be here today as you discuss the nation's
response to problems with the supply and distribution of influenza
vaccine. This year's loss of roughly half of the country's supply of flu
vaccine highlighted what has become a growing problem-the fragility of the
vaccine production and distribution system. We have been monitoring this
issue for a number of years, and we are starting new work for the House
Committee on Government Reform to analyze this year's situation in greater
detail. My testimony today focuses on (1) the challenges in ensuring
adequate supply to meet demand for vaccine and (2) the mechanisms in place
to target high-risk populations when, as happened this year, a vaccine
shortage occurs.

My remarks are based on reports and testimony we have issued since May
20011 as well as work conducted to update key information. Our prior work
on flu vaccine included analysis of information provided by and interviews
with Department of Health and Human Services (HHS) officials, vaccine
manufacturers, medical distributors and their trade associations,
companies that provide flu vaccinations at retail outlets and work sites,
physician and other professional associations, and other purchasers. We
also surveyed physician group practices and interviewed health department
officials in all 50 states about their experiences in the 20002001 flu
season. In September and November 2004 we updated this work with analysis
of information provided by Centers for Disease Control and Prevention
(CDC) officials, one major manufacturer, and other sources. We obtained
information on (1) the available doses and demand for the 2002-2003 and
2003-2004 flu seasons, (2) the status of this year's flu vaccine, and (3)
CDC activities, including actions taken following the announcement that
one major manufacturer could not supply any vaccine for the U.S. market
this year. We conducted all of our work in accordance with generally
accepted government auditing standards.

In summary, the current situation demonstrates the challenges of ensuring
an adequate and timely flu vaccine supply. Only three manufacturers
produce flu vaccine for the U.S. market, and the potential for future
manufacturing problems such as those experienced both this year and to a
lesser degree in previous years is still present. When shortages occur,
their

1See "Related GAO Products," at the end of this testimony, for a list of
our earlier work related to flu vaccine.

effect can be exacerbated by the existing distribution system. Under this
system, health providers and vaccine distributors generally order a
particular manufacturer's vaccine and have limited recourse, even for
meeting the needs of high-risk persons, if that manufacturer's production
is adversely affected. By contrast, providers who purchased vaccine from a
different manufacturer might receive more of their order and be able to
vaccinate their high-risk patients.

The current situation also reflects another concern: the nation lacks a
systematic approach for ensuring that seniors and others at high risk for
flu-related complications receive flu vaccine when it is in short supply.
Once this year's shortage became apparent, CDC took a number of steps to
influence distribution patterns to help providers get some vaccine for
their high-risk patients. These steps are still playing themselves out,
and it will take more time to assess how well they will work. Problems
have not been totally averted, however, as there have been media reports
of long lines to obtain limited doses of vaccine and of high-risk
individuals unable to find a flu vaccination in a timely fashion.

                                   Background

Influenza is associated with an average of more than 200,000
hospitalizations and 36,000 deaths each year in the United States. Most
people who get the flu recover completely in 1 to 2 weeks, but some
develop serious and life-threatening medical complications, such as
pneumonia. People who are aged 65 and older, people of any age with
chronic medical conditions, children younger than 2 years, and pregnant
women are more likely to get severe complications from influenza than
other people.2

For the 2004-2005 flu season, CDC initially recommended in May 2004 that
about 185 million Americans-about 85 million in high-risk groups and over
100 million in other target groups-receive the vaccine, which is the
primary method for preventing influenza. Groups at high-risk for
flurelated complications included people aged 65 years or older; residents
of nursing homes and other chronic-care facilities; people with chronic
conditions such as asthma and diabetes; children and adolescents aged 6
months to 18 years who are receiving long-term aspirin therapy;

2Influenza and pneumonia rank as the fifth leading cause of death among
persons aged 65 and older. Persons aged 65 and older are involved in more
than 1 of 2 hospitalizations and 9 of 10 deaths related to influenza.

pregnant women; and children aged 6 to 23 months. Other target groups
identified in the May 2004 recommendations included persons aged 50 to 64
years and people who can transmit influenza to those at high-risk, such as
health care workers, employees of nursing homes, chronic-care facilities,
and assisted living facilities, and household contacts of and those who
provide home care to high-risk individuals.3 Not everyone in these
high-risk and target groups, however, receives a vaccination each year.
For example, based on the 2002 National Health Interview Survey and other
sources, CDC estimates that only about 44 percent of individuals at
highrisk and about 20 percent of individuals in the other target groups
were vaccinated.

It takes about 2 weeks after vaccination for antibodies to develop in the
body and provide protection against influenza virus infection. CDC
recommends October through November as the best time to get vaccinated
because the flu season often starts in late November to December and peaks
between late December and early March. However, if influenza activity
peaks late, vaccination in December or later can still be beneficial.

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

In a typical year, manufacturers make flu vaccine available before the
optimal fall season for administering flu vaccine. For the 2003-2004 flu
season, two manufacturers-one with production facilities in the United

3See HHS, Centers for Disease Control and Prevention, "Prevention and
Control of Influenza: Recommendations of the Advisory Committee on
Immunization Practices (ACIP)," Morbidity and Mortality Weekly Report,
vol. 53 (2004). CDC also recommended a vaccination for anyone who wanted
one.

States and one with production facilities in the United Kingdom- produced
about 95 percent of the vaccine for the United States. A third U.S.
manufacturer produces a flu vaccine that is given by nasal spray and is
only approved for healthy persons aged 5 through 49 years. This nasal
spray vaccine is not recommended for individuals at high risk for
flurelated complications. According to CDC, this manufacturer produced
about 4 million doses of the nasal spray vaccine for the 2003-2004 season.

Flu vaccine production and distribution are largely private-sector
responsibilities. Like other pharmaceutical products, flu vaccine is sold
to thousands of purchasers by manufacturers, numerous medical supply
distributors, and other resellers such as pharmacies. These purchasers
provide flu vaccinations at physicians' offices, public health clinics,
nursing homes, and at nonmedical locations such as workplaces and various
retail outlets. Millions of individuals receive flu vaccinations through
mass immunization campaigns in these nonmedical settings, where
organizations such as visiting nurse agencies under contract administer
the vaccine.4 In a typical year, most influenza vaccine distribution and
administration are accomplished within the private sector, with relatively
small amounts of vaccine purchased and distributed by CDC or by state and
local health departments.

For the 2004-2005 season, CDC had estimated that about 100 million doses
of flu vaccine would be available for distribution through this network.
On August 26, 2004, one major manufacturer announced a small quantity of
its flu vaccine did not meet sterility specifications and that
distribution of its vaccine would be delayed until after further tests
were completed. On October 5, 2004, this manufacturer announced that the
regulatory body in the United Kingdom, the Medicines and Healthcare
Products Regulatory Agency (MHRA), had temporarily suspended the company's
license to manufacture flu vaccine in its facility in Liverpool, England.
The manufacturer stated that this action prevented the company from
releasing any vaccine for the 2004-2005 flu season-effectively reducing
the anticipated U.S. supply by nearly half. This sudden disruption of the
supply set off the chain of events the nation has experienced in the past

4Data collected by states through the CDC Behavioral Risk Factor
Surveillance System during 2002 indicate that among persons aged 18 years
or older reporting receipt of flu vaccine, about two-thirds reported
getting their last flu vaccination at a health care facility, such as a
doctor's office, health center, or health department, while about
one-third reported getting vaccinated at a workplace, community center,
store, or other location.

  Challenges Exist in Ensuring an Adequate and Timely Flu Vaccine Supply

6 weeks, and has focused national attention on the flu vaccine supply and
distribution system.

Ensuring an adequate and timely supply of vaccine is a difficult task. It
has become even more difficult because there are few manufacturers. As we
are witnessing this year, problems at one or more manufacturers can
significantly upset the traditional fall delivery of influenza vaccine.
These problems, in turn, can create variability in who has ready access to
the vaccine.

Matching flu vaccine supply and demand is a challenge because the
available supply and demand for vaccine can vary from month to month and
year to year, as the following examples illustrate.

o  	In 2000-2001, when a substantial proportion of flu vaccine was
distributed much later than usual due to manufacturing difficulties,
temporary shortages during the prime period for vaccinations were followed
by decreased demand as additional vaccine became available later in the
year. Despite efforts by CDC and others to encourage people to seek flu
vaccinations later in the season, providers still reported a drop in
demand in December. The light flu season in 2000-2001, which had
relatively low influenza mortality, probably also contributed to the lack
of interest. As a result of the waning demand that year, manufacturers and
distributors reported having more vaccine than they could sell. In
addition, some physicians' offices, employee health clinics, and other
organizations that administered flu vaccinations reported having unused
doses in December and later.

o  	For the 2002-2003 flu season, according to CDC officials, vaccine
manufacturers produced about 95 million doses of vaccine, of which about
83 million doses were used and about 12 million doses went unused.

o  	For the 2003-2004 flu season, shortages of vaccine were attributed to
an earlier than expected and more severe flu season and to higher than
normal demand, likely resulting from media coverage of pediatric deaths
associated with influenza. According to CDC officials, this increased
demand occurred in a year in which manufacturers had produced about the
same number of doses used in the previous season-about 87 million doses
total-and that supply was not adequate to meet the demand.

If production problems delay or disrupt the availability of vaccine in a
given year, the timing for an individual provider to obtain flu vaccine
may depend on which manufacturer's vaccine it ordered. This happened in
the

2000-2001 season, and there are reports of similar problems this season
after one manufacturer that had previously stated it expected to supply 46
million to 48 million doses announced that it would not deliver any flu
vaccine to the U.S. market. Those who ordered from this manufacturer did
not receive their expected vaccine-a different situation than those who
ordered from the other manufacturer, which reported sending its vaccine on
schedule beginning in August and September. As a result, one provider
could have held vaccination clinics in early October that would be
available to anyone who wanted a flu vaccination, while another provider
may not yet have had any vaccine for its high-risk patients.

Shortages of flu vaccine can result in temporary spikes in the price of
vaccine. When vaccine supply is limited relative to public demand for flu
vaccinations, distributors and others who have supplies of the vaccine
have the ability-and the economic incentive-to sell their supplies to the
highest bidders rather than filling the lower priced orders they had
already received. When there was a delay causing a temporary shortage of
vaccine in 2000, those who purchased vaccine that fall-because their
earlier orders had been canceled, reduced, or delayed, or because they
simply ordered later-found they paid much higher prices. For example, one
physician's practice ordered flu vaccine from a supplier in April 2000 at
$2.87 per dose. When none of that vaccine had arrived by November 1, the
practice placed three smaller orders in November with a different supplier
at the escalating prices of $8.80, $10.80, and $12.80 per dose. On
December 1, the practice ordered more vaccine from a third supplier at
$10.80 per dose. The four more expensive orders were delivered
immediately, before any vaccine had been received from the original April
order.

With the severely reduced vaccine supply this year, opportunities exist
for vendors who have vaccine to significantly inflate the price of
available supplies. CDC is collecting information on allegations of such
price increases and is providing information to respective state attorneys
general. To date, CDC officials report receiving and forwarding over 100
reports of alleged price gouging that they received from 33 states.

Following the 2000-2001 flu season, HHS undertook several initiatives to
address supply and demand of flu vaccine and to protect high-risk
individuals from flu-related complications when vaccine is in short
supply. Actions taken include the following:

o  	Extending the optimal period for getting a flu vaccination until the
end of November, to encourage more people to get vaccinations later in the
season.

o  	Expanding the target population to include children aged 6 through 23
months.

o  	Including the flu vaccine in the Vaccines for Children (VFC) stockpile
to help improve flu vaccine supply. For the 2004-2005 flu season, CDC had
originally contracted for a stockpile of approximately 4.5 million doses
of flu vaccine through its VFC authority-of which 2 million doses were
ordered from the manufacturer whose license was temporarily suspended and
therefore will not be available. CDC officials said the remaining 2.5
million doses intended for the stockpile will be apportioned as they
become available.

o  Taking steps to identify additional sources of influenza vaccine from

  Challenges Persist in Targeting Flu Vaccine to High-Risk Individuals

foreign manufacturers that, once approved for safe use, could help
increase the flu vaccine supply in the United States.

Our work has also found continuing obstacles to delivering flu vaccine to
high-risk individuals in a time of short supply. During the fall 2000
vaccine shortage, for example, targeting limited doses to high-risk
individuals was problematic because all types of providers served at least
some high-risk individuals. Some physicians and public health officials
were upset when their local grocery stores were offering flu vaccinations
to everyone when they, the health care providers, were unable to obtain
vaccine for their high-risk patients. Many physicians reported that they
felt they did not receive priority for vaccine delivery, even though about
two-thirds of seniors-one of the largest high-risk groups-generally get
their flu vaccinations in medical offices.

For the 2004-2005 flu season, despite early indications that one
manufacturer was having production difficulties, CDC published guidance in
September 2004 stating that it did not envision any need for tiered
vaccination recommendations or prioritization of vaccine for those at
higher risk of flu-related complications. Following the suspension of one
manufacturer's license and the announcement it would not supply any
vaccine to the U.S. market this season, CDC revised its recommendations
and took steps to mitigate the vaccine shortage.

Although HHS has limited authority to control flu vaccine distribution,5
upon learning that nearly half of the nation's expected flu vaccine supply
was in jeopardy, it took steps to help direct the available vaccine to
help providers get some vaccine for their high-risk patients. In
particular, CDC officials have worked with the remaining major
manufacturer, as well as state and local health departments, to assess
needs, prioritize customers, and make plans to distribute the remaining
vaccine.

CDC also convened its Advisory Committee on Immunization Practices (ACIP)
to reassess and revise the recommended vaccination priorities for the flu
season.6 The revised priority groups for the 2004-2005 flu vaccine include
the estimated 85 million people in high-risk groups, but they do not
include many of the other target groups. In addition to high-risk
individuals, the revised priority groups include an estimated 7 million
health care workers and an estimated 6 million household contacts of
children aged 6 months or younger, for a total population of about 98
million in the revised priority groups.

While CDC can recommend and encourage providers to immunize highrisk
patients first, it does not have direct control over the distribution of
vaccine (other than the generally small amount that is distributed through
public health departments); thus, CDC cannot ensure that its priorities
will be implemented. As these actions play out, more time is needed to
gauge the success of CDC's efforts to mitigate the current flu vaccine
shortage.

Despite the efforts by CDC and others, many high-risk individuals appear
to be experiencing problems getting a flu vaccination. Media across the
country are reporting that some seniors are waiting hours for flu
vaccinations and others are so frustrated they are traveling to Canada or
Mexico to get vaccinated. There are other media reports of anxious seniors
unable to get vaccinated in a timely fashion. How many high-risk
individuals ultimately get vaccinated against influenza this season
remains

5Under the Federal Food Drug and Cosmetic Act, FDA ensures compliance with
good manufacturing practice and has limited authority to regulate the
resale of prescription drugs, including influenza vaccine, that have been
purchased by health care entities such as public or private hospitals.
This authority would not extend to resale of the vaccine for emergency
medical reasons. The term health care entity does not include wholesale
distributors. CDC has a role in encouraging appropriate public health
actions.

6See HHS, Centers for Disease Control and Prevention, "Interim Influenza
Vaccination Recommendations, 2004-2005 Influenza Season," Morbidity and
Mortality Weekly Report, vol. 53 (2004).

to be seen. We are beginning new work to analyze this year's vaccine
shortage and the federal response.

Concluding Observations

Agency Comments

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

We shared the facts contained in this statement with CDC officials. They
informed us they had no comments.

This concludes my statement. I would be happy to answer any questions the
Chairmen or other Members of the Subcommittees may have.

Contact and Staff 	For further information about this testimony, please
contact Janet Heinrich at (202) 512-7119. Jennifer Major, Terry Saiki,
Stan Stenersen,

Acknowledgments and Kim Yamane also made key contributions to this
statement.

Related GAO Products

Infectious Disease Preparedness: Federal Challenges in Responding to
Influenza Outbreaks. GAO-04-1100T, Washington, D.C.: September 28, 2004.

SARS Outbreak: Improvements to Public Health Capacity Are Needed for
Responding to Bioterrorism and Emerging Infectious Diseases. GAO-03769T,
Washington, D.C.: May 7, 2003.

Infectious Disease Outbreaks: Bioterrorism Preparedness Efforts Have
Improved Public Health Response Capacity, but Gaps Remain. GAO-03654T,
Washington, D.C.: April 9, 2003.

Flu Vaccine: Steps Are Needed to Better Prepare for Possible Future
Shortages. GAO-01-786T, Washington, D.C.: May 30, 2001.

Flu Vaccine: Supply Problems Heighten Need to Ensure Access for High-Risk
People. GAO-01-624, Washington, D.C.: May 15, 2001.

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