Hoover Daily Report

Vaccine Development a Casualty of Flawed Public Policy

Monday, May 5, 2003

The death toll from SARS (severe acute respiratory syndrome) continues to rise. Thousands have been stricken, and hundreds worldwide have died. With the discovery of the causative agent—a previously unknown member of the Coronavirus family—and researchers' ability to grow the virus in tissue culture, American drug and biotech companies should be burning the midnight oil to create a vaccine. But flawed public policy discourages vaccine development; even supplies of vaccines from common, epidemic infectious diseases are in jeopardy.

Producers have abandoned the field in droves. From 1967 to the present, the number of U.S. vaccine manufacturers has fallen from thirty-seven to less than ten, and the number of FDA-approved vaccines has declined from 380 to a few dozen. Consequently, the nation has experienced shortages of essential vaccines, and many school systems have been forced to waive immunization requirements as a result of insufficient supplies. The reason is that, compared to therapeutic drugs, vaccines traditionally offer low return on investment but high exposure to legal liability.

This situation is largely the result of wrongheaded public policy. For example, the U.S. Centers for Disease Control (CDC)—the largest domestic purchaser of vaccines—uses its buying clout to compel discounts for purchases. Recently, the CDC rejected Wyeth Lederle Vaccines' proposed price of $58 a dose for its pneumococcus vaccine, demanding (and getting) a discount of $10 off the proposed price. Do not expect Lederle to invest much in vaccine R&D anytime soon.

Excessive regulation also blocks progress. Consider the FDA's inexplicable position on a vaccine to prevent meningitis C, an illness that infects thousands of Americans and kills hundreds each year. No state-of-the-art vaccine against this disease has been approved for use in the United States, although three products are available in Canada and Europe. The efficacy of these vaccines has been amply demonstrated, with more than twenty million doses administered. Yet the FDA refuses to recognize the foreign approvals. In addition, the FDA has a history of removing safe vaccines from the market because of mere perceptions of side effects—a prospect that terrifies manufacturers.

What can we do to make vaccine development more attractive? First, make vaccine regulatory approvals between the United States and the European Union reciprocal, which would cut development costs and rationalize the FDA's oversight of vaccines.

Second, stop public agencies from demanding prices for vaccines that are too low.

Third, give companies tax credits to defray research and development costs.

Fourth, ensure that companies' performing government-sponsored R&D under contract can realize commercial benefits when the vaccine is produced.

Finally, indemnify reasonable damages to consumers from harm caused by vaccines, and establish a regulatory-compliance defense against lawsuits for damages. Such a defense stipulates that, after a manufacturer has met the regulatory requirements for vaccine approval, any mishap from use of the product is considered to be unforeseeable and damages would be compensated by the government.

These much-needed reforms won't come easy. Getting the government to adopt them will be like dragging a child to the doctor for a painful shot.