Hoover Daily Report

Avoiding Breadlines for Flu Vaccines

Wednesday, November 3, 2004

A recent New York Times article on the shortage of vaccines stated that "the heart of the problem, experts say, may be that no one person or agency is in charge of making sure the United States has an adequate vaccine supply." In fact, the heart of the problem is too much centralized government control.

No one person or agency is in charge of making sure the United States has an adequate supply of bread. Do you line up for hours for bread? No one is in charge of making sure we have an adequate supply of VCRs, TVs, or computers, yet anyone willing to pay the price can get one easily.

The reason markets work so well is precisely that no one is in charge. Instead, thousands of producers and millions of customers make decisions that mesh. If the price of bread is too low, for example, so that not everyone who wants bread at that price can get it, then producers and retailers raise the price of bread and producers make more bread at the higher price. Vaccines aren't special. It's true that flu vaccine not used this year must be thrown out. But bread not used this week must be thrown out, and there's no shortage of bread.

Indeed, the countries in the world that have done the worst are those in which one person or agency is in charge. In the Soviet Union, one agency was in charge of making sure people had an adequate supply of bread. The result was that breadlines were common. And lesser attempts at central planning, such as government-set price controls, have also caused shortages. Nixon's price controls on gasoline in 1973 and Carter's in 1979, for example, caused long lines for gasoline.

Similarly, price controls threaten the supply of vaccines. In 1993 Congress passed former first lady Hillary Clinton's Vaccines for Children program, under which the government now purchases more than half the national supply of children's vaccines at a forced 50 percent discount and then distributes it to doctors who administer it to the poor and uninsured—despite a General Accounting Office report at the time stating that "vaccines are already free" for the truly needy. One result of price control programs and liability laws has been that the number of vaccine producers has fallen in thirty years from twenty-five down to five. For some vaccines, there is only one producer.

Tommy Thompson, secretary of the United States Department of Health and Human Services, has urged state attorneys general to go after those who they think price influenza vaccines "too high." The vaccine business is already a high-risk one, due to a limited product shelf life, uncertain demand, and lawsuits. Do threats of price controls make being in the vaccine business more attractive?

The solution to our vaccine problems is not to put one agency in charge but, instead, to reduce the role of government so that the vaccine market acts more like the U.S. bread market and less like the Soviet one.