As go vaccines, so goes the pharmaceutical industry? We are hearing virtual panic among doctors worried that their patients won’t be able to get a flu shot this year. Even some good free-market physicians have called for nationalization of the vaccine supply.
We urge them to think again about the consequences of getting the government any more involved in the vaccine industry.
How could the U.S. have been pushed into the corner of relying on a supplier in the U.K. to produce half of our supply? Chiron Corp. in Liverpool recently was cited by British authorities when they found some of the vaccines had abnormally high levels of bacteria. It takes up to eight months to make vaccine, which is grown in chicken eggs, and there’s no time to make millions more doses in time for the winter flu season.
AEI’s Scott Gottlieb writes in today’s Washington Times that, “It is looking more and more like the violations?were process problems, not widespread contamination of shots?Early word is that only a very small portion of the 50 million doses were actually contaminated.”
But it’s too late. The Centers for Disease Control says that an average of 36,000 people die every year from the flu. Tens of thousands of people are now at risk. Global news coverage would make any purchaser leery of buying the vaccine, and lawyers would be ready to sue in an instant for anyone with an adverse reaction.
This crisis is the result of a series of policy decisions dating back a decade. In 1994, First Lady Hillary Clinton led an effort to enact the Vaccines for Children program, and the government now purchases 60% of all pediatric vaccines.
The government has dictated prices to manufacturers that are often below costs, and many suppliers have been forced out of the market, unable to make a profit at 15 cents a dose, in some cases. At the same time, the cost of manufacturing and the cost of complying with increasingly burdensome regulation have gone up.
Other manufacturers watched and saw that this clearly is not a good business to be in.
The Manhattan Institute held a forum in 2002 to analyze the problems, and it forecast today’s shortages. At that forum, Wayne Pisano of Aventis said that just two decades ago, there were a dozen companies making vaccines, most of which have left the market or been driven out by a variety of pressures.
Henry Miller, M.D., of the Hoover Institution said this “should be the golden age of vaccine development” because new biologic technologies are available. “But there is scant enthusiasm for vaccine development in the drug industry.”
This is a clear warning to those who would try to impose price controls on the pharmaceutical industry. They would predictably force many companies out of business, supplies would be dislocated and even vanish, and, most importantly, research for tomorrow’s medical miracles would dry up.
And what was the president talking about during the debate Wednesday night when he said that we were going to be able to get supplies of flu vaccine from Canada? Apparently, a Vancouver company called ID Biomedical has 1,500,000 extra doses of flu vaccine available and is negotiating with HHS to provide the surplus to the U.S.
Two obstacles: The vaccine would still need speedy approval for U.S. use by the FDA and, even then, it would only represent a fraction of the 48 million-dose shortfall. Read more.
I was disappointed to read Milt Freudenheim’s article Wednesday in The New York Times, “Bush Health Savings Accounts Slow to Gain Acceptance.” He implied that HSA sales are sluggish, and they just aren’t catching on.
I sent a letter to the paper explaining that HSAs are very new, just launched January 1, and it takes time for people to learn that this new option is even available. He should be impressed that insurers and financial services institutions so quickly responded by providing a product to sell on the first day.
Most companies can’t offer HSAs until next year because they negotiate the contracts for their employees’ health coverage a year in advance. Many companies, in fact, this summer reopened their 2005 contracts that had already been completed to include HSAs. Individual sales are already strong.
Markets take time to adjust to a new idea and a new offering, both on the buyer and the seller side. What we are seeing is the beginning of success as vendors and customers negotiate and help shape this new product. A slow start is a good thing, and certainly not a sign of failure.
As benefits expert Dick Matthews writes: “Give it 12 to 18 months and watch the explosion.”
RECENT NEWS ARTICLES AND STUDIES:
? New papers on the presidential candidates’ health care plans
? Infectious politics
? HSA man vs. healthzilla
? Reimportation blues
? Shopping for drugs: 2004
? Employers’ responses to a play-or-pay mandate
NEW PAPERS ON THE PRESIDENTIAL CANDIDATES’ HEALTH CARE PLANS
A plethora of papers this week examine the health initiatives of the presidential candidates. We provide links below to many of them.
? Heritage offers a point-by-point description and analysis of the Kerry and Bush agendas. Heritage’s bottom line: The Kerry initiative is “fraught with unintended consequences” like crowding out private coverage options, shifting costs to taxpayers by expanding Medicaid, and accelerating the growth of federal control over health care. A separate paper says President Bush “would reinforce the private sector’s capacity to expand health coverage?to increase personal control and private ownership.”
? Americans for Tax Reform produced a paper saying that the average taxpayer would pay “nearly $10,000 over the next decade in higher taxes” if the Kerry plan were enacted.
? The National Center for Policy Analysis estimates that the cost per newly insured individual would be at least twice as high under the Kerry plan as under Mr. Bush’s proposal. John Goodman also writes that the cost of the Kerry plan, estimated to be from $653 billion to $1.5 trillion, could not be financed by simply imposing tax increases on the rich. The hikes would yield only $278 billion, “an amount equal to only one-third to one-fifth of what is needed.” NCPA also writes that Mr. Kerry’s tax increase on the rich would hit small businesses much harder than big corporations.
The Heritage Foundation on President Bush’s plan: www.heritage.org/Research/HealthCare/bg1804.cfm
The Heritage Foundation on Sen. Kerry’s plan: www.heritage.org/Research/HealthCare/bg1805.cfm
Americans for Tax Reform: www.atr.org/pdf_oct04/atr-kerry-healthtax.pdf
Source: The Wall Street Journal, 10/14/04
The Wall Street Journal explains that the shortage of flu vaccine is not due just to one allegedly faulty manufacturer in England but to a series of bad policy decisions in the U.S., from price controls to excessive regulation, that have “driven all but a handful of companies out of the vaccine business.” The editorial cites legislation advanced by former First Lady Hillary Rodham Clinton in the early 1990s to get the government to buy 60% of all pediatric vaccines, “forcing huge discounts and imposing price caps.” (The vaccine crisis would be a harbinger of larger dislocations in the pharmaceutical industry if price controls were to be imposed, as many in Congress are proposing.)
Scott Gottlieb, M.D. writes in Forbes that there is good news in emerging technologies for vaccine development that could allow production costs to decline through more efficient manufacturing processes. Vaccines now are made in chicken eggs, “a practice that has changed little since the first flu shot was introduced in the 1940s.” But new biologic technologies would allow vaccines to be grown in cell cultures that can be produced more quickly and less expensively. Gottlieb, a former FDA official, predicts this new technology will become a higher priority in the FDA as regulators focus on certifying the new processes.
Full text of Journal editorial (subscription required): online.wsj.com/article/0,,SB109770761633444720,00.html
Full text of Gottlieb article: www.forbes.com/investmentnewsletters/2004/10/11/cz_sg_1011soapbox.html
HSA MAN VS. HEALTHZILLA
Author: David Gratzer
Source: The Wall Street Journal, 10/12/04
The Wall Street Journal editorial page ran a double header on health care the day before the third presidential debate. David Gratzer of the Manhattan Institute wrote in a commentary that, in the decade since the failure of the 1994 Health Security Act, the U.S. forged ahead with expansions of Medicaid, greater regulation of health insurance, and support for managed care, “but did little to address the woes of the system.” He compares the initiatives in Sen. Kerry’s plan to those offered by President Bush and concludes about Mr. Bush’s plan: “A decade after Hillarycare, there is an alternative that places Americans, not government bureaucrats, in charge of their own health care.”
The lead editorial says “Americans are being offered a real choice of health care visions this November. We believe Mr. Kerry’s leads inevitably toward the kind of low-innovation, low-quality government systems found in Europe and Canada. Mr. Bush’s, meanwhile, would make health insurance more portable and flexible, while preserving a market for the kind of medical progress promised by the deciphering of the genome.”
Full text of Gratzer op-ed: www.manhattan-institute.org or online.wsj.com/article_email/0,,SB109753892260742566-IVjgINllaJ3npytZnmHbqeCm4,00.html
Full text of Journal editorial (subscription required): online.wsj.com/article/0,,SB109753819933842535,00.html
Author: Roger Pilon
Source: The Wall Street Journal, 10/11/04
Cato’s Roger Pilon, whose support for drug reimportation has been used to advance pending legislation in Congress, writes in The Wall Street Journal that the issue is not as simple as a “morality play” with “greedy drug companies…gouging seniors.” He argues that the market should be allowed to work because “Americans are subsidizing socialized medical systems abroad.” Pilon says that pharmaceutical companies should negotiate no-resale contracts with countries that impose price controls and that they should be free to limit their sales to these countries. But, he concludes, “The last thing we want, however, is the bipartisan Dorgan-Snowe Senate bill,” which would prohibit companies from “limiting supplies or raising prices abroad?The bill would actually import foreign price controls, and that would be the end of future R&D and the miracle drugs it produces.”
SHOPPING FOR DRUGS: 2004
Author: Devon Herrick
Source: National Center for Policy Analysis, 10/11/04
“Patients can cut [prescription drug] costs substantially by becoming aggressive consumers,” writes Devon Herrick of the National Center for Policy Analysis. “In fact, seniors can reduce the cost of some common drug therapies by more than 90 percent if they use the same buying techniques they routinely use when shopping for other goods and services.” In this update of an earlier study, Herrick recommends that consumers can use several strategies to save on prescription drug costs including drug substitutions, generic medications, price comparisons, pill splitting, and mail-order pharmacies. FDA data previewed last week confirms the conclusion of Herrick’s original study “that patients can save more money on prescription drugs by becoming smarter consumers than by importing them from Canada.”
Full text: www.ncpa.org/pub/st/st270/
EMPLOYERS’ RESPONSES TO A PLAY-OR-PAY MANDATE: AN ANALYSIS OF CALIFORNIA’S HEALTH INSURANCE ACT OF 2003
Author: Anna D. Sinaiko
Source: Health Affairs Web Exclusive, 10/13/04
A new study by Anna Sinaiko, a doctoral candidate at Harvard University, examines the potential effects of California’s newly-enacted employer health insurance mandate (SB 2) and finds that the average uninsured worker in California could see a wage reduction between 5 and 19 percent if the legislation were to be implemented. “In the best-case scenario, workers will value health insurance at more than its cost, and the combination of health insurance and lower wages will make workers better off without any adverse effects on employment or product prices,” writes Sinaiko. “A more likely scenario is that some of the cost of health insurance will be passed to consumers, some felt by workers as unwelcome wage reductions, and some avoided by firms as they restructure their workforces.” This is a wake up call for California voters who will be asked to consider a ballot initiative November 2 that would repeal SB 2.
Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at www.galen.org.
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