Flu, health care and the feds

The nationwide shortage of vaccines for swine (H1N1) flu should give pause to advocates for a larger federal role in setting prices for the nation's health care industry. So should shortages of vaccines for seasonal flu and some childhood diseases.

The most recent official figures show that 22 million Americans have been infected by swine flu, and though the illness has generally been less severe than originally feared, 4,000 deaths have been attributed to H1N1, including 540 children.

Federal health officials told the Senate recently that they had unintentionally misled Americans about the availability of swine flu vaccine, which has been below the predicted amount. But they suggested that the shortages were due to factors beyond their control.

However, some of the problems with getting an adequate supply of H1N1 vaccine can be attributed to the unintended consequences of earlier congressional intervention. Unfortunately, Congress apparently has yet to fully acknowledge its errors or learn from its mistakes.

The federal Centers for Disease Control says the reasons for the nation's vaccine woes include "companies leaving the vaccine market, manufacturing or production problems, and insufficient stockpiles."

The first two reasons account for the shortage of flu vaccines, which cannot be stockpiled. All three can be traced to a 1993 law sponsored by Rep. Henry Waxman, D-Calif., one of the principal architects of the Pelosi health care bill recently passed by the House of Representatives.

The 1993 Vaccines for Children program gave the Centers for Disease Control power to set the price for childhood vaccines. In the 1990s, it paid as little as 25 percent of the list price, according to a 2003 study by the Institute of Medicine (IOM), a branch of the National Academies of Science.

That led a number of firms to stop making vaccines; those remaining did not invest in new technology. The IOM study said, "The desire to maximize short-term savings in purchasing current vaccine products ... is directly opposed to the goal of creating financial incentives" for commercial firms to make and improve vaccines.There is at present only one flu vaccine manufacturer in the United States, and it uses a 50-year-old chicken-egg technology that often fails. In 1996 there were eight U.S. vaccine manufacturers.

Vaccine shortages were so prevalent in the years between 2000 and 2005 that they became an issue during the 2004 presidential campaign. In 2005 Congress gave President George W. Bush $7.1 billion to develop a vaccine production base and stockpile other medicines to meet the demands of pandemic flu.

The government gave contracts to six firms to build U.S. plants to produce vaccines using a new cell-based technology. But the plants will not come on line until 2012 or later. Because of the withered size of the vaccine industry, gearing up for a pandemic has already cost billions in public subsidies and will cost more in the future.

Meanwhile, vaccine prices charged by the small number of active suppliers to the market have risen sharply between 2004 and today.

Could those problems be repeated on a larger scale? Congress reportedly is considering forcing the pharmaceutical industry to reduce its prices. The New York Times recently reported that drug companies are raising prices in possible anticipation.

As the Vaccines for Children program shows, the government's heavy hand on drug pricing could result in unintended consequences on a broader scale.

The unavailability of sufficient doses of vaccine for swine flu shows that the problem can quickly become more than academic. The absence of adequate precautions against the virus is one bad example of your federal government at work on the health care front.