<html><body>Assuring Vaccine Supply April 15, 2004 Unedited transcript prepared from a tape recording <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD> <DIV class=BodyText>10:45 a.m.</DIV></TD> <TD> <DIV class=BodyText>Registration</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>11:00</DIV></TD> <TD> <DIV class=BodyText>Panelists:</DIV></TD> <TD> <DIV class=BodyText>Stephen Cochi, Centers for Disease Control</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>William Egan, Food and Drug Administration</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Philip Hosbach, Aventis Pasteur</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Paul Offit, Children s Hospital of Philadelphia</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Moderator:</DIV></TD> <TD> <DIV class=BodyText>John E. Calfee, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText>1:00 p.m. </DIV></TD> <TD> <DIV class=BodyText>Luncheon</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>2:00</DIV></TD> <TD> <DIV class=BodyText>Adjournment</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR></TBODY></TABLE> Proceedings: DR. CALFEE:  I'd like to welcome you all here to the American Enterprise Institute.  I'm Jack Calfee.  I'm an economist.  And I, along with Ximena Pinell and the rest of our organization, have organized this conference on Assuring Vaccine Supply.  In a sense, you could say that this session was motivated by the shortages--which at the time appeared to be fairly severe but in retrospect turned out not to be so severe--in the flu vaccine roughly last November.  Is that right. We're very fortunate in having probably as well chosen a selection of four speakers as one could possibly imagine.  I will introduce each of these gentlemen briefly when they take their time. We're going to start off with Phil Hosbach of Aventis Pasteur, one of the largest vaccine manufacturers in the world.  And after him will be Steve Cochi from the Centers for Disease Control.  Then Bill Egan from the Food and Drug Administration, and finally Paul Offit from Children's Hospital of Philadelphia.  Very brief bios for these speakers. Phil Hosbach is a vice president at Aventis, where he's responsible for immunization policy as well as new product development in this area.  He's been with Aventis for I guess close to two decades now, working almost that entire time on vaccine.  Is that right? MR. HOSBACH:  Correct. DR. CALFEE:  Phil is probably, more than anyone else--probably as much as anyone, represents the intersection between private firms in this market and the major public players, especially the Centers for Disease Control and the Food and Drug Administration.  And with that introduction, Phil, why don't you start? MR. HOSBACH:  Thanks, Jack.  I have some prepared remarks, but I want to clarify for folks that where I'm speaking from is Aventis Pasteur's perspective, not all manufacturers.  I just wanted to make that clear. So first of all, I want to thank the American Enterprise Institute for hosting this forum.  It's an extremely valuable meeting because it considers how an industry-government dialogue can strengthen vaccine development and can identify steps to make this happen. To assure a dependable vaccine supply and meet America's public health needs, it is crucial to use all available expertise in determining immunization policies.  This includes utilizing industry as a full participant in formulating and implementing vaccine policy.  Vaccine industry expertise is significantly under-utilized in the decision-making process.  It is important that policy makers consider the views and experience of industry at the outset of the process. Vaccine development is extremely complex, and with only three or four manufacturers, the pool of experts is very small.  Vaccines are not pills.  They involve the growth of living organisms, which adds greatly to the complexity of the development and production.  Manufacturers have access to vaccine production information regarding the time frames needed to implement specific policy changes.  In addition, manufacturers also are in direct contact with health care providers and are in a strong position to understand how policies will be accepted or not accepted, and applied or not, at the clinical level and particularly in the private sector. A number of organizations have recognized the importance of industry participation in the policy making process.  FDA's Vaccines and Related Biologics Products Advisory Committee is a good example of an advisory group that values industry perspective and allows full participation throughout the discussion period.  Although there is currently no industry representative on NVAC, the committee has historically included industry representatives.  On the other hand, ACIP has no longer included manufacturers as full participants in its working groups in developing immunization policies and immunization recommendations.  So obviously, there is still more work that needs to be done. There are, however, positive developments that need to be acknowledged.  For example, on influenza vaccines, the dialogue has greatly improved vis-a-vis production and distribution.  Manufacturers advise the CDC how many doses of influenza vaccine it plans to produce.  In addition, Aventis Pasteur proactively notifies CDC should any issue arise.  If we're having any problems or any difficulties, we are on the phone immediately with the CDC to give them a heads-up and see if there's anything that can be done jointly through the manufacturers, through the CDC, or through the FDA.  Last year, when there was unprecedented late-season demand, Aventis Pasteur advised the CDC of the situation and the sudden surge in demand, and set aside their remaining doses to ensure that the CDC could help us ensure that those doses reached those that were in greatest need. Now, the influenza summit, which several participants here just attended, is another good example of all sectors meeting to resolve influenza issues.  We need to see more examples of how the public sector, the private sector, and industry can work together as part of the immunization enterprise. Today I'd like to address some key challenges confronting the vaccine industry that have implications for public health.  And the three are:  Number one, communication and cooperation with the U.S. government; number two, current good manufacturing practices and the emerging regulatory environment; and then thirdly, ensuring adequate vaccine stockpiles.  So let me tackle the first one, in terms of communication, coordination, and cooperation with the U.S. government. Aventis Pasteur's goals include ensuring our manufacturing capability, capacity, and new product launches are in harmony and in synch with government recommendations and guidelines.  We need to understand how various government agencies interpret rules, guidelines, and recommendations to help us achieve business and public health goals.  Some rules and regulations are quite clear, but others are subject to interpretation.  In fact, on occasion requirements have actually been changed after clinical trials were under way.  There are examples of clinical protocols that are subject to being changed after the FDA's 30-day review period, which complicated the clinical trial process and also complicate keeping subjects in clinical trials. Clinical development does have a number of challenges in the pre- and post-licensing phases.  FDA is making parameters stricter, the statistical parameters, and are requesting larger sample sizes to fulfill those parameters.  In post-licensure there is also the requirement for larger and larger studies.  Now, these are probably good things.  However, there are unintended consequences, such as the effect of saturating clinical study sites that can handle large population sample sizes, and increases product development time lines, the collection of data, and also increase the costs. Now, from a different perspective:  One practical challenge is that the regulatory authorities do not always have insight into the day-to-day aspects of the manufacturing process.  There's enormous talent inside regulatory agencies, but product development and manufacturing process are very specific.  It takes years to understand the specific challenges in vaccine production, even for our own engineers or R&D scientists and manufacturing teams. To remedy this problem, Aventis has urged that Congress expand funding for CBER, which is responsible for regulatory approvals of biologics.  Funds will be used to keep CBER scientists up to date in vaccine technology.  We believe that the more informed regulatory authorities are about the nature of biologics manufacturing, the more likely they will be comfortable accelerating important vaccine development, thereby reducing potential supply problems. Government agencies also need to recognize the impact of the decisions on the development process.  I'm going to give you two specific examples of how our industry could have provided added value by being part of the process. First example.  In 1999, CDC issued a journalist statement with the U.S. Public Health Service, the FDA, AAP, and AAFP calling on government agencies and vaccine manufacturers to reduce preservatives in all childhood vaccines.  Policy guidance was issued with relatively short notice and urged manufacturers to move away from preservatives and towards single-dose packaging versus the multi-dose vials. Now, regardless of your views on vaccine preservatives, the decision was indeed made on very short notice and without adequate industry consultation.  Because the views of vaccine development and production experts were not solicited in advance, government agencies did not fully understand the decision would dramatically affect product development and vaccine supply.  Reformulation of our diphtheria, tetanus, and acellular pertussis vaccine to meet the new policy requirements took approximately two years and reduced the total output of vaccine initially by approximately 25 percent. Had there been sufficient consultation with and notice to manufacturers, the shift to preservative-free vaccines could have been made without disruption in supply.  In the absence of evidence of a safety issue, regulatory changes that require production alterations should allow ramp-up time for the producers to meet new guidelines without disrupting product supply. Now, that said--it's not that this isn't a good thing that we're moving away from those preservatives--it's important to maintain public confidence in vaccines. Now example number two has to do with government requests for proposals, or RFPs, as they're known.  RFPs for vaccines for clinical studies for pandemic influenza and also for biodefense procurement are sometimes problematic.  Let me give you some examples of the influenza RFPs specifically related to pandemic influenza. The RFPs that we've received have requested that vaccines be produced in preservative-free, single-dose vial presentations.  Now, this would result in clinical study and stability data that would only be relevant to single-dose vials.  However, an actual global pandemic, if it were to occur here in the short term, would require the use of multi-dose vials.  A more pragmatic approach would consider what would be needed in a real-life scenario.  Globally there is insufficient capacity--and I do mean globally, around the entire world.  When there's going to be a pandemic, there is going to be a great deal of demand and a great deal of supply is needed, and there is insufficient capacity to produce enough pandemic vaccine in single-dose vials or syringes.  The government needs to be realistic when requesting bids for these types of projects. Item number two.  Current good manufacturing practices in the emerging regulatory environment.  It's critical that industry works collaboratively with the government regarding current good manufacturing practices and on process validation requirements to further expedite the licensing of manufacturing facilities.  Industry must work with the government to both streamline and accelerate this process.  We often build a factory after we receive promising results and prior to receiving a license.  We need to identify methods to expedite validation, but without compromising quality and safety.  Vaccine production and launch could be delayed pending validation of that process, of the buildings and the equipment.  The sooner validation can occur, the more quickly manufacturers can respond to the recommendations that will precede a launch. In fact, FDA noted that there are important challenges to product development for biologics as well as drugs and medical devices.  In its March 16, 2004 report, Innovation or Stagnation: Challenge and Opportunity, the FDA called upon academics, product developers, and patient groups to work with the agency to identify opportunities to modernize tools for speeding approvable innovative products to improve public health.  The report also called for an opportunities list to make the critical path faster, predictable, and less costly.  These are important steps, but we still have a lot of work to do. Second, there needs to be more extensive consultation about these current good manufacturing practices when they are on the drawing board.  The process should include more public-private dialogue.  Now, this has started to occur over the past year with the FDA GMP Reform Initiative, so we're making some progress.  But still, again, there's a lot of work to be done.  AvP recognizes the importance of current good manufacturing practices in vaccine production, especially as it relates to safety and effectiveness.  Yet what appears to be a minor policy change regarding vaccine manufacturing can result in incomplete or overly complex solutions that delay vaccine production. This underscores a point I made earlier, that government, health care providers, and the general public need to understand that vaccine development involves an increased emphasis by the FDA on CGMPs, requires an ongoing investment in facilities, process validation, and also the hiring and training of personnel with specialized expertise.  I'll give you some examples in that area. In response to stricter interpretation of CGMPs, Aventis has hired a large number of employees devoted solely and exclusively to developing compliance reports, validation reports, preparing electronic submissions for BLAs, writing up response to data requests, et cetera.  The result has been that in our quality operations and regulatory affairs areas, we've increased the employee population by 162 percent since 1995.  There has also been a substantial increase in personnel devoted to generating an ever-increasing amount of documentation on compliance. So what should be done to improve the process?  Well, we need to focus on improving in the following areas.  They are facilities, processes, and product licenses. Under facilities, it requires time to secure approval for a facility, as I mentioned earlier.  On average, the validation process for a new building can take one to two years.  In fact, to speed up the process, Aventis recently disassembled a plant that was built in Sweden in modular form and shipped it across the ocean, via container, to the U.S., and we reassembled it here in the United States.  That's hopefully going to save us some time in the launch of a new product.  However, we still need to review and improve this process.  We need to do something about trying to compress some of the time, and I think that FDA certainly wants to work with us on those issues. For the process--a process as simple as cleaning vials requires validation.  People don't think of these things when you're not close to it.  If we upgrade to a new piece of cleaning equipment, we just simply replace the old equipment with the same model of that equipment, we have to revalidate the entire vial-cleaning process.  That's before we can even bring vials in to be filled for a vaccine.  It sounds simple enough, and it has to be done.  But it requires validation and it takes time.  So how can we accelerate this process without creating supply interruptions? As far as product licenses, we need to consider how we can safely accelerate the clinical development of products more efficiently to expedite the availability of new products to patients.  Again, I think FDA agrees with that with the recent publication on March 16th that I mentioned earlier. Now, lastly, I'd like to touch on area three, and that is ensuring adequate vaccine stockpiles.  Now, many of you may have recently seen in yesterday's newspapers the talk about flu vaccine stockpiles.  That's only just one stockpile.  There are also important pediatric vaccine stockpiles that need to be implemented.  Congress has set aside the funding and the money, but we're unable to tap into it at this point in time.  Let me tell you why. I think we're all in agreement--industry and government and recommending bodies--that it's important to establish stockpiles for routine vaccines to ensure sufficient supply in case of supply interruptions.  Unfortunately, we are blocked in completing this task due to recent SEC accounting regulations that determine when a company can recognize revenue from a stockpile.  Now, it would seem that--and this is, really, because of Enron and all the other things that were occurring in terms of tricky accounting going on, but you would think that it would be a no-brainer to create some sort of an exception for vaccines, because of their urgency and their need.  It is best for manufacturers to hold onto and maintain and rotate those stockpiles to save the government money and to act more efficiently.  However, by us holding onto the vaccine and rotating it to realize those cost savings and those efficiencies, we cannot recognize it on an accounting basis because of an SEC ruling. What we need to do is fully engage in the stockpile issue with the government.  The SEC issue points out the importance of communication among government agencies.  Problems like this--in fact, I personally believe is a no-brainer--should be promptly resolved in the interest of public health. So, to summarize.  Industry and their expertise are under-utilized in policy making.  Manufacturers need to be brought back to the table as a valuable resource.  We need to be there for the full discussion.  We can't just be treated as consultants.  Greater industry participation will ensure informed policy development and effective policy implementation. The private sector needs to have more direct involvement and be allowed greater opportunities to engage in substantive dialogue and to provide input.  First, we need to bring back an industry role to NVAC and ACIP working groups.  By limiting the industry role, important public health solutions could be overlooked and the public sector-private industry will be out of synch. Industry would like to be an active participant in immunization enterprise and prefer not to be relegated solely to the role of information supplier.  And it seems to have really just changed in the last four or five years, because going back and looking at all the public health successes in vaccine development, vaccine delivery, and vaccine launches, there was a lot of good collaboration, a lot of good partnerships, which now seems to be occurring more at arm's length. We need to recognize and address concerns about actual conflicts of interest.  That's something that we really need to acknowledge.  And as far as industry, we should accept responsibility for developing, proposing and industry code of conduct. So I would be interested in hearing the views of the panelists on how industry could play a greater role in the overall process.  And I thank you for your time. DR. CALFEE:  Thank you very much, Phil.  You covered a lot of territory. We're very fortunate in having Steve Cochi here from CDC.  He is not here merely to deal with the issues raised by Phil--but I'm sure there are a lot of things he wants to talk about--but to talk more generally about the role of the CDC. Steve, this past January, was appointed as the acting director of the Immunization Program at the CDC, which means that right now he's more or less, I would say, the federal government's point man on vaccine supply and vaccine distribution.  Traditionally the CDC has played a very large role in the vaccine market generally and especially in the distribution of vaccine and, of course, in monitoring the nature of the various vaccination programs, but especially the flu vaccine episode, which occurs every year and which involves, according to the CDC's and others' estimates, on the order of 20- to 30,000 deaths, many of which could be prevented if vaccination were more complete. So Steve, take over. DR. COCHI:  Thanks, Jack. Now, I'm not going to deal specifically with the influenza vaccine issue, although we can get into discussion and questions about that.  But I am going to talk about some of the general underlying problems, issues, and preconditions that have led to vaccine supply shortages in the past several years and some of the proposed solutions and efforts to prevent these vaccine shortages in the future. There was a run on vaccine shortages that began late in the year 2000 and carried forward right into the summer of 2002.  This is just a very small sampling of the media attention that was generated as a result of shortages of multiple vaccines. A little bit about the current U.S. vaccine market--these are data that are provided by the manufacturers through the CDC's biologics surveillance system.  In the year 2002, which is the year in which we had the most recent final information, a little bit over 25 million doses.  About two-thirds of that vaccine is used for children, to take care of the 11,000 infants that are born every day in the United States.  And that market includes about 20 million doses of the diphtheria, tetanus, acellular pertussis vaccine; close to 20 million doses of polio vaccine each year; and about 12 million doses of the combined measles-mumps-rubella vaccine.  The majority of the adult vaccine market consists of the influenza vaccine.  There was about 81 million doses distributed in 2002, and this past season was just slightly higher than that. Now, the breakdown between the private sector and the public sector is shown in this pie chart, with the private sector, which is in orange, through health insurance and paying parents, accounting for about 43 percent of the total vaccine market.  And the rest of the distribution is through the Vaccines for Children Program, which is an entitlement program which covers poor children in the United States and Native Americans and children who get their services at federally qualified health centers--that's about 41 percent; and then through the 317 Immunization Grant Program, which is a discretionary program run by the state immunization projects, about 11 percent.  That's federally funded.  And then state funds account for an additional 5 percent of the total vaccine market. Now, the problem, as I said, that led to multiple vaccine shortages a few years ago--it began late in 2000 with a decreased availability of the tetanus-diphtheria vaccine when a manufacturer decided to get out of the market, then expanded to include multiple other vaccines, the DTaP vaccine, the pneumococcal conjugate vaccine, the PCV-7, the measles-mumps-rubella vaccine, and varicella or chickenpox vaccine.  It affected both the public and the privately purchased vaccines.  Most providers and many children were affected.  This table shows the vaccines listed along the left-hand column, the start of the shortage, and the resolution of the shortage, in the far-right column, as announced in CDC's Morbidity and Mortality Weekly Report. And I added at the bottom here, although I didn't add influenza vaccine, I did add the most recent vaccine shortage, which is, again, a shortage of the pneumococcal conjugate vaccine which began in the December of last year and still ongoing, and probably will continue at least through the summertime. Now, it's important to dispel the myth that shortages of these vaccines are necessarily linked directly to the cost of the vaccines.  This slide shows that there were supply problems, shown in the yellow bars, for vaccines whose federal contract price is relatively low, in the case of DTaP and MMR vaccine, and also for the more expensive vaccines such as the pneumococcal conjugate vaccine, PCV-7, and that we had no supply problems with other vaccines that have a lower federal contract price, like IPV, the HIV vaccine, and hepatitis C vaccines, which are shown in the red bars. And it's also important for a historical perspective that vaccine supply concerns have been a problem that has dogged this country for decades.  Here's a report from the Institute of Medicine from 1985 that quotes "the history of previous ad hoc groups convened to address problems related to vaccine availability has been discouraging."  So this is a complex problem and needs some very innovative thinking to address and to solve. Phil indicated that vaccines are unique--they have very unique manufacturing properties as compared to drugs and the fact that they are biological products produced from living cells that require growth in complex conditions.  Each lot has to be tested for purity and potency and there's a lengthy production time.  Add to the uncertainty that the manufacturers face in the vaccine industry.  They're regulated differently than drugs, and safety is paramount because recipients, including and especially healthy children--children are by and large healthy, and so the safety standard is extraordinarily high.  All of these taken together, I think, make it much more difficult for the pharmaceutical industry to invest in vaccine manufacture as compared to the manufacture of drugs, which are far more profitable. So the point I'm getting to is that the causes for the vaccine supply shortages that have occurred in recent years are multi-factorial and they're complex and it's difficult to determine which are the most important, because it really depends very much on the particular vaccine, often.  There are two types of factors involved.  There are immediate and specific causes of shortage, and then there are underlying contributing factors that I'd like to get into. First, the immediate and specific factors.  A decision to stop production of a particular vaccine, especially if there are very few manufacturers who participate in the market for that particular vaccine, can have tremendous consequences.  And this is what happened back in late 2000, when Wyeth decided to get out of the DTaP/Td business.  If the other manufacturers and the organizations involved in vaccines were aware earlier about that decision, it would have been possible for the other manufacturers to adjust their supply to prevent spot shortages that occurred.  So that's one example. Renovations that Merck performed in their vaccine filling suite for MMR and for varicella vaccines, since they are the only U.S.-licensed manufacturer of these vaccines, created shortages of these vaccines in 2001, extending into 2002. A large initial demand for a newly introduced vaccine, the pneumococcal conjugate vaccine, and unanticipated production and filling problems that that manufacturer, Wyeth--which is the sole supplier of the vaccine--experienced is what led to shortages both in 2001-2002 and now the more recent shortage that we are still enduring right now. Then there are problems complying with the good manufacturing practices for some manufacturers that happen periodically.  And then changes in vaccine recommendations regarding use of thimerosal, as Phil alluded to, can lead to disruptions in the supply of vaccines. Now we get on to some of the contributing underlying factors.  I think one very major and fundamental factor is society's, in a relative sense, low valuation of preventive measures as compared to curative measures.  Being in the business of prevention, this is a longstanding uphill battle to get people and get society to understand and truly believe in the notion of an ounce of prevention is worth a pound of cure.  We still struggle with trying to grapple with that concept. The high complexity and cost of vaccine development, approval of the manufacturing process, is certainly a barrier for industry to flock to the vaccine market.  The relatively small number of manufacturers that are in the market, the lack of investment in some manufacturing facilities and incentives to upgrade older production facilities.  And legal barriers, as I alluded to earlier, to communication of a given manufacturer's business decisions, and also issues about communication of vaccine production problems and proprietary information can cause big surprises and disruptions. CDC has tried to respond to these various supply shortage situations by issuing interim Advisory Committee on Immunization Practices recommendations.  This is CDC's advisory committee to recommend immunization policy in the U.S.  And monitoring orders and inventories and distribution, and where possible activating the vaccine stockpile, which has been done, particularly with the MMR vaccine.  There are other examples of this. Now, this slide is just to remind me to say that these shortages that we have experienced in recent years have, by and large, not affected immunization coverage, which is what's plotted in these lines, in any material, measurable way.  But what has been affected is delays in children receiving age-appropriate immunization, which puts these children at risk during that period of time for coming down with the diseases that we're trying to prevent. Now, the U.S. General Accounting Office conducted an investigation in 2001 and 2002, after a congressional request, and published a report in September of 2002.  This just highlights a couple of the major recommendations.  First of all, that CDC should develop a strategic plan for expansion of the National Stockpile Program, which up till this time involved only the measles, mumps, rubella vaccine, polio vaccine, and DTP vaccine--not the newer vaccines that have become routinely recommended since the '80s. And secondly, that FDA should ensure widespread distribution of compliance guidelines to manufacturers, consider revising fast-track and priority-review guidelines.  And I imagine that my colleague Bill Egan may speak to some of these issues as well as other regulatory issues. With regard to the National Vaccine Stockpile Program, this actually was initiated back in 1983, but it was a very small stockpiling program that, as I said, involved a few vaccines at that time.  The goal, fast-forwarding up to the present time, is to have a six-month total national supply of all the pediatric routinely recommended childhood vaccines.  And this is a dynamic inventory with storage and rotation, as Phil alluded to.  This stockpile has been utilized on at least nine occasions since 1983, most recently last year to manage a measles outbreak in the Marshall Islands, which is a U.S. trust territory in the Pacific. And currently, CDC's purchased target quantities for a six-month supply of the inactivated polio vaccine, MMR, and varicella vaccines, and we have partial target quantities of HIV, hepatitis B, hepatitis A, and the pneumococcal conjugate vaccine.  DTaP purchases are pending.  And the stockpile buildup with a full vaccine delivery is scheduled to be completed, fully funded by 2007, but there are issues, including the SEC regulations that Phil alluded to. Now, the final thing that I wanted to inform you about is that the National Vaccine Advisory Committee, which is a committee that advises the Department of Health and Human Services on immunization issues, also spent a lot of time and effort in examining the vaccine supply shortage issues and published a report last year that we published in the MMWR in March of last year, and then the Journal of American Medical Association also published a compendium in December of this past year.  And the major recommendations coming out of that analysis and report I wanted to highlight for you. First of all, strategies to be implemented in the immediate future:  Increasing CDC funding to expand the National Vaccine Stockpile Program; increasing support for FDA's Center for Biologics Evaluation and Research, which I'm sure Phil would welcome with open arms; reiterating the role of the NVAC and the National Vaccine Program Office--the head of that office, Bruce Gellin, is here with us today; and prioritizing vaccine development and distribution.  Requiring advance communication, where possible, from manufacturers who are planning to cease manufacturer of vaccines, to minimize disruptions in the vaccine supply and help the other manufacturers to adjust their production accordingly.  Increasing the availability of vaccine supply status information.  And initiating a campaign emphasizing safety, efficacy, and the benefits of vaccination.  Because I think underlying all of this is the fact that, in our society, the value of vaccines is really under-valued, very much under-valued. And secondly, there were some recommendations on strategies that may require some additional study, namely, evaluating appropriate incentives for manufacturers to sustain the vaccine supply and stimulate development of new vaccines, and streamlining and strengthening the regulatory process and FDA activities, including supporting international harmonization of the regulatory process and reviewing the implementation of good manufacturing practices to assure science-based decisions about vaccine safety and efficacy.  And I'm sure that Bill is going to go into this in more depth. This is just the picture of the report from the National Vaccine Advisory Committee as it appeared in March of last year. And finally, just to give you some highlights of recent CDC efforts to address both the NVAC recommendations and the GAO report.  We've completed a Stockpile Strategic Plan, and as I indicated a few minutes ago, we're building up that stockpile for all of the childhood vaccines.  We have a Vaccine Management Business Improvement Project to develop operating procedures for stockpile management based on that strategic plan, and operating procedures we hope will address all the aspects of stockpile management, from the target quantity adjustment all the way to release procedures and notification. We received an FY 2004 budget allocation of $200 million from Congress to provide funding for continued stockpile development, and this year also, as well as next fiscal year, a $40 million budget to develop an influenza vaccine stockpile, or some may call it a strategic reserve, of between 4 and 4.5 million doses of influenza vaccine to prepare for this upcoming influenza season, to help to deal with potential shortages that may occur this upcoming season.  And finally, we hope that by 2007, the stockpile will be completely operational for all of the recommended childhood vaccines. So in summary, how can vaccine shortages be prevented?  Well, one measure is to expand the vaccine stockpiles.  Secondly, to increase support for the regulatory agencies, particularly the FDA and CBER.  Maintaining and strengthening liability protections is very important in terms of allowing us to focus on the value of vaccines and dealing with the under-funding that still currently exists, even in the public sector, for the delivery of currently recommended vaccines.  And a national campaign to emphasize the benefits and value of vaccines and to greater recognition in our society of the importance that these tools play as one of the leading public health success stories in the modern era.  And financial incentives for manufacturers as well as streamlining, where possible, the regulatory process. So thank you very much. DR. CALFEE:  Thank you very much, Steve.  Before we move on to Bill to give definitive answers to a large number of questions, I wanted to ask you just a couple of things, and also one or two for Phil. Has any nation solved the vaccine supply problem?  Do other countries have shortages? DR. COCHI:  That's a very good question.  And indeed, this is a global problem that is going to require global solutions, not just solutions that the U.S. can do to take care of its own needs.  Because there are relatively few large manufacturers in the world, and we have to find better ways, I think, of dealing with a global supply of vaccine and perhaps greater flexibility so that that supply can address changing circumstances that may only affect one or a small number of countries. DR. CALFEE:  Does this mean that sometimes the Germans and the French and so on, they also have to wait for their childhood vaccines sometimes? DR. COCHI:  Well, we have the same problem.  In fact, just to take a good case in point, the pneumococcal conjugate vaccine shortage.  The U.S. accounts for the great majority of the current market.  It's a newly introduced vaccine.  But Wyeth is the only worldwide supplier of that vaccine, and so the shortages that have occurred have affected the entire industrialized world.  Many industrialized countries use this vaccine. DR. CALFEE:  Another question.  The flu vaccine, you throw it away at the end of the season, or whoever has it throws it away.  So I gather that your stockpiling plan for the flu vaccine isn't literally a stockpile.  Is that right?  It's just that you'd buy some extra that would not go out in the field?  Is that what the plan is? DR. COCHI:  That's right.  That's why I think maybe calling it a strategic reserve may be a better way to characterize it, because the flu vaccine is really unique, as you're pointing out, in that from year to year we have to generally move to a different vaccine.  So this is a strategic reserve that we hope will both encourage greater overall production and supply of vaccine for this coming year, as well as provide a reserve that we could titrate out as needed over the course of the upcoming influenza season to deal with potential shortages. DR. CALFEE:  Phil, will it make a difference? MR. HOSBACH:  Setting aside stockpiles?  I think it will.  In terms of ensuring when there's a potential problem or a surge in uptake for something like flu or a potential problem with a pediatric vaccine, I think this can fill the gap.  I think managing the stockpile is going to be complex as new products are introduced, as combination vaccines come on board.  That will be a complex issue.  But I think it's going to be helpful. DR. CALFEE:  One or two other things.  ACIP, which is the Advisory Committee on Immunization Practices, I gather they are the committee that decides what vaccines are recommended, mainly for children.  Is it only for children, ACIP? DR. COCHI:  Both children and adults. DR. CALFEE:  Children and adults.  But basically, when a parent takes their kid to the doctor and the doctor says your kid needs this, this, this--that's all ACIP recommendations, is that right? DR. COCHI:  As well as the American Academy of Pediatrics and the American Academy of Family Physicians.  It's a cooperative relationship to ensure harmonization of their recommendations in the U.S. DR. CALFEE:  And Phil, how did it come about that there's no industry representative on the-- MR. HOSBACH:  There is industry representation on the ACIP at the physical meeting.  But what had happened in years past on the working groups that really get down to the nitty-gritty of the things that need to be done to accomplish and achieve or implement recommendations, industry used to be full participants.  Now we're brought in as consultants, are not part of the full dialogue or discussion.  We're asked to provide some information and then leave. DR. CALFEE:  Why? MR. HOSBACH:  I'm not sure.  At this point in time I think there are some balances that need to occur in terms of how industry is viewed, how industry performs and behaves in these working groups.  And that's why, you know, our suggestion of perhaps development of a code of conduct may be helpful and allow us to be re-embraced as partners and collaborators in the entire process.  I mean, you'd want to have an expert on board when you're making critical decisions like this, and there are very few experts out there. DR. CALFEE:  Who appoints the members of ACIP?  Is that a CDC-- DR. COCHI:  CDC recommends membership, but it's the Department of Health and Human Services that approves-- DR. CALFEE:  Okay, it is an HHS appointed-- DR. COCHI:  HHS, yes. DR. CALFEE:  One final question for Phil.  Do you folks ever advertise your vaccines, especially the child and flu vaccines.  You know, a direct-to-consumer ad out there saying you're 70 years old, 10,000 of your peers died last year from the flu, don't you think you ought to get a vaccine? MR. HOSBACH:  Yeah, I think we try and we support things in a lot of ways.  I mean, in terms of pediatric vaccines, again, it's not as profitable as drugs, so we aren't on the television.  But we will do things in pediatric journals.  We will make sure that we put out public service announcements or support those through third parties.  I think a lot of times people don't tend to listen too much to the manufacturers or to the government, but they'll listen to third-party experts.  So we try to help fund those things so they get those important messages out for public health. AUDIENCE PARTICIPANT:  [Off microphone, inaudible.] DR. CALFEE:  You're with Chiron, is that right? AUDIENCE PARTICIPANT:  Yes. DR. CALFEE:  Okay, thank you.  Well, I imagine when we get to our last speaker, Paul Offit, that he may offer some remarks on why it is that there are fewer vaccine suppliers in the U.S. than there are in some other nations. Bill Egan from the FDA is the acting director of the Office of Vaccines Research and Review, which is part of FDA's fabled CBER division, the Center for Biologics Evaluation and Research, which includes biotechnology drugs along with vaccines.  Bill has been with CBER at least since 1996--is that right?  Or longer than that? DR. EGAN:  Since 1977. DR. CALFEE:  Since 1977.  Bill knows a lot about biologics and a lot about vaccines in general.  And on a number of the issues that have been raised so far, he probably knows about as much as anyone does.  So Bill, please take over.  DR. EGAN:  And I don't have the solution to the shortages.  Certainly, I think the stockpiles are very, very relevant, and they will be helpful.  Certainly, I think many things that Dr. Hosbach recommended that FDA needs to do for simplifying processes will help to make the industry more attractive to the extent that that will prevent shortages, I don't know.  There are many, many factors that go into shortages. Let me just present a few kind of background facts that are relevant to shortages. And I think here, right now, we need to distinguish between vaccine availability and shortages in the developed world and those that exist in developing countries.  There's a very, very different dynamic that has governed some of the shortages that we see here for Prevnar or flu vaccine and what might occur for meningococcal polysaccharide vaccine in sub-Saharan Africa. I think we also need to appreciate that there's a long lead time for vaccine manufacture, on the order of a year.  From the time that a vaccine manufacturer decides that they're going to manufacture a lot of vaccine, a batch of vaccine, until the time that that vaccine actually gets to the market is about a year, whether it's 11 months, 10 months, 9 months, 8 months, in some cases, or 13 or 14 or 15 months in others, is kind of irrelevant.  It's on the order of a year.  It's not days.  It's not weeks.  So, if something happens, there is the ability--one can't turn on a dime.  It takes time to respond to changes. Secondly, manufacturers do not maintain themselves large stockpiles or buffers.  You know, 40 million doses kept in reserve in case is a manufacturing problem.  There are many reasons for that, some of which are economic.  And an excess production capacity for vaccines is not often present.  Capacity is usually designed towards what one feels the market is going to be.  You don't build twice as many plants and have them sit idle.  Again, I bring this up because it takes time to address changes in the vaccine dynamic. What I want to stress is there are many causes of shortages, and I'm going to try and go over a few of them.  Some of them are manufacturing issues.  Right now, we're experiencing a shortage in the pneumococcal conjugate vaccine.  And as a result, we're recommending two doses of vaccines instead of the usual four.  This will get caught up with and ameliorated, but right now there's an existing shortage of the pneumococcal vaccine.  It's a manufacturing issue.  These things do arise. And if there's a limited production, and something happens during that production, you go into a shortage.  And there's only one manufacturer, but it's not clear that if there were two or three, whether a shortage would exist for some short term anyway because manufacturers are manufacturing what they think the needs are, not in great excess, and it takes time to meet these. Recently, there was a recall of rabies vaccine.  This did not lead or is not leading to a shortage, did not lead to a shortage, but it could have had it not been sort of coincidental that there's a second manufacturer who had released vaccine right about the time that this, that this recall was occurring.  So we could have had one.   Fortuitously, thankfully, we did not. As Dr. Cochi remarked, there was previously another manufacturing issue with the MMR vaccine from Merck that was ongoing in the filling suite.  This was not where you expect to see shortages arising from, the capacity of the fill, but I'll say that it happens again, and again, and again.  This was not the first or only time that something related to a filling suite has led to a shortage, a temporary shortage. DR. CALFEE:  For us amateurs, the filling suite, you mean that you already have the vaccine-- DR. EGAN:  That's where you have the vaccine, and it's in a big container, and you put it in little vials or in the syringes. DR. CALFEE:  This is the bottling Coca-Cola. DR. EGAN:  The bottling Coca-Cola, except it's a vaccine.  It goes through a line into something.  Problems can arise there.  This brings about an interesting lesson for the stockpile.  If the stockpile is in the form of unfilled bulk and the problem is in the filling suite, the stockpile doesn't do you any good.  The stockpile has to be in the form of ready-to-release vaccine.  So that's one cause. Problems arise during the manufacture.  These happen.  They're going to happen.  Try, as you may, they will happen.  You want to minimize and prevent them, prevent their impact, but they will happen.  Shortages can occur because of unanticipated demands. We saw a shortage, in part, this year, the 2003-2004, influenza vaccine.  That should be 2003 and '04.  What happened?  Well, the previous year, last year, the previous season, there was a production of and 12 million doses were returned.  They went unsold.  That's a large financial loss to the manufacturer. The same thing happened the year before that, although not as extensive, but it was still millions of doses of vaccine that went returned.  That's a loss in revenue to the companies. This year, not surprisingly, having seen 12 million doses returned last year and millions before, they decreased the amount that was made slightly this year.  It wasn't a 12-million-dose decrease, but the was a slight.  All of a sudden come November, the end of November/December, there was an unanticipated demand.  This followed the unfortunate and very tragic death of a number of children--I guess what got most play was in Colorado--and all of a sudden demand spiked. You can't just turn out 5 million new doses of vaccine in a few days or a week.  Efforts were made to get additional vaccine.  CDC, HHS purchased additional vaccine, but much of it went unused.  There was another manufacturer that entered the market, Metamune.  They had 3 million doses that went unused while we had the shortage. A while back, CDC had--a manufacturer left the market, and CDC purchased 10 million additional doses.  They also went unused.  So it's an issue of shortages and shortages at a particular time.  So it's a timing issue.  There may have been enough vaccine, but there wasn't enough vaccine the minute that it was wanted, the week that it was wanted, the two weeks that it was wanted.  A week later, a month later, it wasn't wanted.  So if you would have ramped up production, it would have gone unused.  And the demand issue is particularly acute with influenza vaccine.  With some of the other vaccines, the demand is pretty knowable, but flu, it's less so. Manufacturers exit markets.  One can think of simple explanations for this--you know, they don't make money.  There are complex explanations, why don't they make money, and there's a whole host of things that can be involved. Now, we had the DTaP shortage in 2001.  Wyeth exited the DTaP market.  There were several other manufacturers, GSK and Aventis Pasteur, but the exit was not really anticipated.  And given the time it takes to decide to make additional vaccine and when you can get it on the market, which may be on the order of a year, there was a shortage for a while. Now, why did this happen?  Again, there were a host of reasons.  Certainly, there were some regulatory issues that were related to GMPs and keeping up with GMPs.  This costs money.  It's an investment.  You want to recoup the investment.  You think about whether or not you can.  In the case of DTaP, you have to consider combination vaccines and combinations of DTaP, like Pediarix, DTaP with IPV and hepatitis Bank that are coming on the market, and what do you think is the likelihood that these combinations will take over?  Where do you see yourself positioned in one year, two years, three years?  Should you put the money in?  Can you recoup it? So it becomes complicated.  It's hard to imagine that having combination vaccines might lead to shortages, but as they get developed, and if particular companies for some of their products don't have the alliances or the ability to make competing combinations, some of these model valents or die-and-try valent antigen vaccines, they'll lose market share.  And depending on how precipitously one leaves the market, you could have shortages or not have shortages. Now, Wyeth also exited the flu market, but there was no shortage.  There was a sufficient lead time and other manufacturers could account for that, those doses.  A few years back, King Pharmaceuticals exited the market, and there was a shortage for a while.  Vaccine became available in December, but for the time when people wanted it, in October/November, there was a shortage.  I mean, CDC went and purchased 10 million doses, and most of that went unused.  So, again, the shortage was very, you know, was time-limited. One of the nice things to have is that if manufacturers are going to leave a market, that there is some kind of notice so that others can take up that slack if there is a second manufacturer, which is not the case right now for the pneumococcal conjugate of MMR.  And it was very nice to hear, at a meeting that we had about shortages, that Wayne Pisano, from Aventis Pasteur, did promise to give, that if the company goes out of the market, they'll give sufficient notice. So people come in, leave the market, and people come into the market, and at times they do.  We do have new manufacturers.  We do have new manufacturers that are interested in flu and other vaccines.  Some of these are existing manufacturers that want to expand their portfolio.  Some of them are manufacturers for overseas that want to come into the U.S. market.  Some are totally new manufacturers. Now, there are many concerns for companies coming into the market, and we have to wonder whether it's attractive, whether we can keep manufacturers because, I mean, certainly you're going to have a shortage as everybody leaves, and everybody will leave when it's no longer attractive to stay there. And there are a number of concerns.  Many of them are regulatory, and I think Dr. Hosbach touched on many of these.  It's a difficult business.  It's an expensive business, and oftentimes it's not as certain.  Guidelines, and policies, and what will be needed is not always as certain as you would  like it.  These are certainly some of the things that need to get addressed. There are pricing concerns.  Setting prices for new vaccines, you know, like FluMist or Prevnar or, from Merck, the human papilloma virus, if this gets approved, there will be one set of prices; you know, combination vaccines like Pediarix, the pricing concerns there, but also the legacy vaccines, the tetanus, the diphtheria, inactivated flu, are there pricing concerns there that tend to make manufacturers go out of the business? There are certainly liabilities, and this was a major concern in the 1980s with the whole-cell pertussis vaccine, where many people were attributing SIDS--Sudden Infant Death Syndrome--to the whole-cell pertussis vaccine, and that undoubtedly drove many companies out of it, the liability and potential liabilities.  These liabilities exist today.  Certainly, the issues that surround autism and vaccines, either the MMR vaccine in autism or Thimerosal that was in vaccines and autism. There's concern now for cancers and SV40 from polio vaccines that were made in the '60s, '70s, '80s.  These liabilities, they don't go away.  They can stay with you for a lifetime.  And there are many, many more where people have alleged associations of things with vaccines: multiple sclerosis, diabetes.  You can go on and on as to all of the things that have been attributed to vaccines. I think companies also have to worry about their image.  Many of the companies, you know, these are companies making drugs and vaccines.  If vaccine were a small part of the business portfolio, and they're being negatively portrayed as things that are harmful, is it worthwhile to stay in there if that may tend to tarnish the image?  I don't think that's been a concern to date, but it's something that I worry about. Also, we have to think about vaccines for the developing world, not just the ones that are here.  And here there's a whole other set of concerns.  I mean, they're very much economic ones, but we're also dealing with different vaccines: oral polio vaccine in the developing world, IPV for the developed world, whole-cell pertussis vaccines in the developing world, acellular pertussis vaccines in the developed world, different presentations, the increased use or the almost exclusive use of multi-dose vials that contain preservatives in the developing world, single-dose vials free of preservatives in the developed world, combination vaccines that are used in the developed world, many single-antigen vaccines that are used in the developing world. Also, often, vaccines that are, in a sense, often for the developed world, but are extraordinarily important for the developing world-malaria, TB vaccines--how do these get developed and maintained? I'll mention some of the counterbioterrorism vaccines.  Many of these are being developed.  The government is sponsoring development.  The government is also involved in purchase, but what happens after one is developed and one is purchased?  What is the incentive for new and improved vaccines once something is bought and stockpiled?  Will there be an incentive for their development?  Will the stockpile be changed as something better comes along and how much better?  And if that gets replaced, what happens then to the innovator who's been stockpiling this stockpile? Now, the issue came up recently [audio break].  That's part of the issue.  In Europe, there may be multiple manufacturers, but there's also very much more government control about which vaccines will be used, and the selections that may be made; whereas, you may have more of a sort of a free market in the U.S. But shortages can occur with two, three, four manufacturers.  That's what happened with the DTaP.  And certainly with a very large number of manufacturers--10, 15, 20--the impact of any problem will be blunted, that's for sure, but there are tradeoffs.  I mean, how many manufacturers can we afford to have?  Certainly, if we have a large number of manufacturers, the prices will go up.   There's a large overhead concerned with the vaccine manufacturing process.  Think of what it costs to manufacture one dose of a vaccine and then what happens if that was now a million doses or 10 million, but you have a relatively fixed market.   In the U.S., there are about 4 million children born each year.  Depending on the vaccine, they get 2 to 5 doses, so 8 to 20 million doses of a particular vaccine.  By and large, one manufacturer can make that for the country. Now, if you have 10 manufacturers splitting that, you've just increased the overhead, the cost of production by a factor of 10, but the market is the same.  Now, we can develop that extra capacity if people want to buy it and throw it away.  You can develop stockpiles and increase capacity, but we need to pay for it, and it's a social societal question: do we want that insurance policy, and how much are we willing to pay for that insurance policy? So I don't have the answers.  These are just some random thoughts of my own on vaccine shortages, and I do want to stress these are my own thoughts, not those of the FDA, not Health and Human Services, not the U.S. Government. [Laughter.] DR. CALFEE:  Thank you very much, Bill. I have one follow-up question before we move on to Paul Offit. When I, and some of my friends and contacts, think about FDA regulation, we often end up looking at the GMPs as being the sort of dark side of FDA regulation.  And when Phil Hosbach mentioned that they replicated a Swedish factory by essentially dismantling it and bringing it back to the U.S. and putting it back together, again, I was reminded of reading about an episode in which Intel wanted to replicate one of their chip manufacturing factories. And the way they did it--and I've forgotten where the new factory is going to be, but it was someplace in Asia, maybe it was India--and the way they did it was they essentially built a perfect replica of what they had done in the U.S. to make sure everything worked exactly right.  Because, as you know, chip manufacturing is extraordinarily complicated, and you need error rates that are extraordinarily small, et cetera.   And then I read about the GMPs and the fallout from the GMPs and some of the very large drug recalls that we've had, the extraordinarily large fines, a half-a-billion here, three-quarters-of-a-billion there, a-quarter-of-billion there, and so on.  And yet, in almost every case, the drugs themselves that were produced from these factories that have been subject to various disciplines and regulatory actions, the drugs themselves almost invariably are deemed to be safe to use.  Typically, the FDA will require even that the manufacturing facilities be shut down, but at the same time, it will reassure physicians that they don't need to worry about any of the products that came out of those factories. And then I think about the Intel situation in which they're going to great lengths, with no regulatory oversight whatsoever, merely to preserve the reputation for safety and so on, and I was thinking about Aventis and their competitors and their rather profound desires to maintain a reputation for safety.  And Paul Offit could tell us about the legal consequences of not maintaining a reputation for safety. I'm just wondering whether it might be possible for you folks to lean a little bit more on private incentives than you have in the past and maybe to streamline your regulations and get things done faster. DR. EGAN:  Gosh, that was a long question. [Laughter.] DR. EGAN:  I think the plant was built in Sweden not because Aventis felt like building in Sweden.  I think that's where the company is, is located. MR. HOSBACH:  No, actually, we're located in France.  We built it in Sweden because it made it much faster for us to put it up.  It saved time on our end, and we still have to wait on your end for the validation.  So I think that's--we sped up our part of the time line. DR. EGAN:  I mean, after you bring these things back, they do get validated when they get reassembled, but I mean there are companies that manufacture modular manufacturing suites, and other companies buy them.  They don't always just build them right on site.  They can be assembled, disassembled, and then validated. Yeah, I mean, we don't--manufacturing standards and ways, they change over time.  We certainly don't make vaccines the way we did in the 1920s.  I mean, I've seen all of the pictures of that.  That' changed dramatically.  Is there a value added by having FDA have some oversight of manufacturing practices?  You know, I think there is.  Phil can address this as well. Is it sometimes, can it be too heavy-handed?  Probably.  This is, again, it's a very, very complex issue, and you almost have to go into specifics to really answer it. DR. CALFEE:  Well, I didn't expect a definitive answer right now, but I thought I'd raise the question, and maybe we'll get back to this later on, since a number of the shortages have involved GMPs. Our last speaker is Paul Offit, who is today's representative from the academic world.  Paul is a professor at a medical school, which means he has multiple titles and multiple responsibilities.  He is the Chief of Infectious Diseases and the Director of the Vaccine Education Center and the Henle Professor of Immunologic and Infectious Diseases at the Children's Hospital of Philadelphia, in addition to being a Professor of Pediatrics at the University of Pennsylvania School of Medicine. He is a former member of ACIP, and he has long played a prominent role in what you could think of as the vaccination business, generally, but obviously especially childhood vaccines, but he also happens to have done some work on the impact of tort liability and vaccines, which is how I ran into his name because I saw the same Wall Street Journal op-ed that is in today's package. So, Paul, with that introduction, please take over. DR. OFFIT:  I would just like to say that the views I'll express today represent only my views and not those of the Children's Hospital of Philadelphia. [Laughter.] DR. OFFIT:  Just kidding. Actually, what I thought I'd do since, it's hard, frankly, to say anything new given the thoroughness of what's been said already, is go through sort of a little-known, and certainly less-remembered incident, that occurred about 50 years ago because I think in that incident were both the seeds of why we have, at least in part, why we have vaccine shortages today, and also arguably even the seeds of what provide, at least in part, a solution.  It involves the development of a polio vaccine in 1955. And at that time, in the late '40s and early 1950s in the United States, polio was a severe and occasionally fatal disease.  About 15- to 20,000 children every year were paralyzed by polio.  Eighty percent of those who were paralyzed were paralyzed permanently, and 2- to 3,000 children died every year from polio. Polio not only affected the muscles that were required for movement of arms and legs, but also affected the muscles that were required for breathing, and this was a typical site of many both children and adults in what were then called negative pressure ventilators or iron lungs.  And children who were affected by this virus often were unable to handle secretions from their upper respirator tract and aspirated those secretions and died of pneumonia. So there was an interest, a tremendous interest, certainly publicly and privately, in trying to develop a vaccine to prevent it.  And this vaccine was developed, in large part or almost solely, through the work of the National Foundation, and I'll get to that in a second.  But the trial that was done, and it was done in 1954, was done giving three doses of vaccine to 420,000 children.  Two hundred thousand children were inoculated with placebo and about 1.2 million children were observed in uninoculated controls at a cost of about $7.5 million.  It wasn't the time, frankly, and it remains today the largest clinical trial of a vaccine and arguably of a product ever performed. The children who participate in that trial got the chance of getting that little polio pioneer button in the corner, they got a lollipop, and they got a chance to avoid the devastating consequence of polio.  Children, by the way--I don't know how many of you are pediatricians--but children don't smile after they get shots like that, so I'm not sure how they got that picture. [Laughter.] DR. OFFIT:  So now what happened was, frankly, through the National Foundation's work, the polio vaccine was ready to be sold in this country.  And five companies stepped forward at the time to sell it: Eli Lilly, Parke-Davis, Wyeth, Pitman-Moore and Cutter.  And they distributed the number of doses that are shown here on this slide.  It happened on April 12th, 1955--ironically, 10 years to the day after the death of probably polio's most famous victim, Franklin Delano Roosevelt. Now, two weeks after that vaccine was released, this headline appeared in the New York Times, "One Firm's Vaccine Barred, Six Polio Cases Are Studied."  And as they looked at these six children who got polio, what they found was that, although there were five companies that made vaccines, all of these cases were traced to a vaccine that was made by one company, Cutter Laboratories of Berkeley, California, and these are data actually that were generated several years later by Neal Nathanson and Alexander Langmuir and reported in the American Journal of Hygiene. But Cutter had made eight lots of vaccine, as shown here.  Six of those lots, seen on the bottom part of this slide, were associated with children getting the vaccine, and then the incidence of paralysis immediately following that vaccine or within a month or so of that vaccine was about 15 cases per 100,000, which is roughly what was the expected background rate of polio. However, for two lots of vaccine, the rate was almost eightfold higher.  And what happened was Cutter inadvertently and unknowingly had failed to make the soft vaccine correctly, and the soft vaccine was made by taking live, fully virulent polio virus and killing it with a chemical formaldehyde.  They didn't effectively kill it.  So, ostensibly, what happened was that children were inadvertently inoculated with live, fully virulent polio virus and were paralyzed by that vaccine. Cases also occurred in family and community contacts, as essentially there was a mini epidemic of polio created by a vaccine that wasn't effectively inactivated.  As the dust settled on this incident, there were about 120,000 children that were inoculated with live polio virus.  About 40,000 developed abortive polio, 164 people were permanently paralyzed, and 10 were killed.  I think it was arguably the worst vaccine disaster, and arguably the worst pharmaceutical disaster in the history of the United States. Now, what happened was that, within two years of that event, Melvin Beli, who I don't know if you remember him, but he was a very influential lawyer from the 1950s to the 1990s in this country, took the case of this little girl shown on the left-hand portion of the slide, Ann Gottsnagger [ph], who had received Cutter's vaccine and been paralyzed by that vaccine and took Cutter to court. He sued Cutter on two bases: one, that they were negligent, that they lacked the exercise of ordinary care in the preparation of that vaccine and, two, that they had breached an implied warrantee, a warrantee that implied that a vaccine that's designed to prevent paralysis shouldn't cause paralysis or, said another way, that a vaccine that is said to be inactivated shouldn't contain live, virulent polio virus. Now, when that case went to court, the 12 jurors that sat in that courtroom heard pieces of information which surprised them. First, if you look at this slide, and this, although it was published by Neal Nathanson in 1963, these data were actually available and shown in the courtroom in 1957.  If you look at the bottom portion of the slide, you can see that if you look at the number of cases that would have been expected to, where you would have expected to see paralysis within a certain period of time after the vaccine was given because polio was still an epidemic and highly contagious disease in the United States is shown on the left side, as compared to the number that were actually observed following the vaccine.  You can see that the number observed versus the number of expected for Cutter was very high.  It was a ratio of 7 to 1.  That wasn't true with the other vaccines, with the exception of the Wyeth vaccine, which had a ratio of about 11 to 2. Now, there were two subsequent studies that were done, one in 1955 by Neal Nathanson and another in 1957.  They were never actually published, but they're actually available through the National Archives and Records Administration, where Wyeth also made a vaccine that paralyzed children.  It was at a rate much lower than that caused by the Wyeth vaccine, but there were clearly children who received one particular lot, Lot 236 of Wyeth vaccine, that were paralyzed by the vaccine, which is to say it wasn't only Cutter's problem. The second thing that the jury heard was that actually all of the companies had a problem in activating the live virus.  And the percentage of lots that had live virus in it that were either incinerated or reinactivated are shown on this slide, but the point being it wasn't just the Cutter incident.  It was I think more appropriately called the scale-up incident.  We just didn't have in place at the time a method to make millions and millions of doses safely, as compared to the hundreds or thousands of doses that were made in Salk's vaccine or made by Salk in Salk's laboratory, and so it was a process of evolution is basically what it boiled down to. And the reason that there wasn't a problem with the massive field trial had largely to do, ironically, with the inclusion of what was then called Merthiolate and what today is called Thimerosal, which had an actually deleterious effect on one of the virulent types of virus that was in the vaccine.  Actually, the Thimerosal helped to kill the polio virus that was in the vaccine.  See, Thimerosal never gets the kudos that it deserves. [Laughter.] DR. OFFIT:  And so it wasn't just Cutter's problem.  It was a process of evolution, and we hadn't quite been there yet.  The safety tests were inadequate to detect live virus, and the best way to detect live virus, as it turns out, was to put the vaccine into the arms of children. Now, the jury heard this story and actually made an interesting decision.  They found that Cutter was not negligent in the production of vaccine, but that they had breached an implied warrantee, that the vaccine that's designed to protect against polio shouldn't cause polio. They basically felt that Ann Gottsnagger shouldn't have to pay for insurance to protect her against getting polio, when she gets the polio vaccine.  Rather, the company should essentially assume that insurance for her and pay for it by, if insurance rates go up, increasing the price of their vaccine, and arguably distributing the cost then of that vaccine to all those who benefit from its use, and that was certainly I think a fair conclusion. But that case, interestingly, was the birth of absolute liability for pharmaceutical companies; meaning fault without negligence.  There had been absolute liability for food products, for beverage products, for other human consumables, but not for pharmaceutical companies.  This was the seminal case. So this ruling held companies liable for harm that was caused by their products, but also, and I think the critical flaw in the ruling was that it also held companies responsible for harm that was not caused by their products. And probably the best examples are Bendectin, which was--I don't know if any of you are old enough to remember this--but this was an antinausea drug that was given in the 1960s and 1970s in this country to prevent the severe nausea associated with pregnancy that was claimed to cause birth defects, even though there was 28 separate studies that showed that it didn't, still, hundreds of millions of dollars in lawsuits later, that didn't matter. And then breast implants which, as you know, were claimed to cause connective tissue diseases, these sort of chronic or longstanding rheumatologic diseases, which resulted in a settlement of about $4.75 billion for Dow-Corning, and ultimately they're filing for bankruptcy, even though there have been seven clear studies that showed that there is no causal relationship between silicone breast implants and connective tissue diseases. What happened, however, vaccines, however, for the next 20 years were not hurt by that ruling.  Between 1955 and 1975, difficult vaccines continued to be made, tested and sold.  And I think probably the best examples include the measles vaccine, which I think we finally got right on the third try.  You know, the first two tries were associated with problems, and similarly the rubella vaccine, which I think ultimately we finally got right on the third try, and that's medicine.  Medicine is a process of evolution.  You always don't get it right the first time.  You learn as you go.  I think we've become less tolerant of that, but it didn't affect vaccines certainly for the next 20 years. Where it killed vaccines, but was ultimately rehabilitated by a program I'll talk about in a second, was in 1974, when there was a publication in the Archives of Diseases in Children by Kulenkamp, claiming that in a report of 36 children who had received the whole-cell pertussis vaccine, that 22, within a short period of time of getting that vaccine, had seizure disorder or had mental retardation, which he claimed was caused by that vaccine. Now, many subsequent studies I think have shown that there is no clear evidence that the whole-cell pertussis vaccine caused brain damage, but it didn't matter.  Because when the media paid attention to that report, both in England and then as it traveled to the United States, there was a flood of litigation against vaccine makers, claiming that the pertussis vaccine caused Reye's Syndrome, as Bill alluded to, Sudden Infant Death Syndrome, seizure disorders, mental retardation, unexplained coma, sudden death, I mean, pretty much anything that one could imagine. And the result was that the DTP vaccine increased from the cost of 17 cents per dose to $11 per dose.  I mean, 95 percent of that increase was on the basis of litigation costs.  And just to give you a comparison, the DT vaccine, which was also a combination vaccine that didn't include the pertussis component, during that same period of time increased from 15 cents a dose to 44 cents a dose.  So it was the pertussis vaccine that was responsible for that increase. And the number of companies that made the whole-cell pertussis vaccine decreased from 9 to 1.  And what then was born was a program that I think is frankly a model for how one can protect companies that are doing good things like making vaccines, of doing things that are societal important, from the ravages of the tort system, and that was the National Vaccine Recompensation Program, which was born in 1986.  It's a nonadversarial system funded by a federal excise tax, frankly, on every dose of vaccine. The system, however, isn't perfect, and Bill also alluded to this.  There is an excise tax on every dose that is not trivial.  For some vaccines, it's almost half the cost of actually making the vaccine.  And protection against liability is incomplete.  There is certainly amassing litigation against vaccine makers for the inclusion of Thimerosal in the vaccine, claiming that it caused a variety of neurologic disorders, including autism. And I think the Lyme vaccine is an example of what can happen to a vaccine in the 21st century.  This vaccine was made simply by taking a bacteria, which causes 15,000 cases of disease a year in the United States, some of which results in permanent harm to the brain or permanent harm to the heart, and just stripping off one of the outer-surface proteins, a very simple, safe way to make a vaccine. That vaccine was tested before licensure in 20,000 people who were followed for two years.  But when it came to market, there was very quickly a question about its safety, and lawsuits were filed claiming that the vaccine caused chronic arthritis, even though there was no evidence that that was true in the 20,000 people who had been studied prior to its licensure. And publicity that then followed these lawsuits, I think, in part, caused that vaccine to be discontinued.  There were other reasons, but if you talked to people about what their perception of Lyme vaccine was, in part, it was that they feared that that vaccine was unsafe, and it killed the product.  I live in Philadelphia, which I believe is the heart of the personal injury lawyer in this country, but you know I get calls periodically from lawyers in the City of Philadelphia who make a living suing GlaxoSmithKline for Lyme vaccine lawsuits. And I think that, in part, this explains what has happened with vaccines and vaccine shortages, and I'm going to tell you why in a second.  If you look at, as has been alluded to previously, in 1957, there were 26 companies that made seven routinely recommended vaccines for children.   By 1980, it was 18 companies making 8 vaccines.  In 2004, it's 4 large pharmaceutical companies making 12 vaccines. Seven of the twelve vaccines are made by only one company, and we've talked about the severe shortages that have resulted I think, in part, because there's not a lot of flexibility in the system.  I mean, the flu vaccine is a good example of that.  I mean, Aventis is really the only large vaccine maker.  And when there was an increased demand, there was not a lot of flexibility in the system in terms of reserves. Next, sales for vaccines were less than 5 percent of total sales for all companies.  It's something I think they could drop pretty easily.  I mean, if you look at Wyeth, when they dropped the DTP vaccine or when they dropped the influenza vaccine, it didn't hurt their stock much because it just wasn't a very large part of what they did.   And there has been a shift in research and development, frankly, away from vaccines.  That is certainly true for at least two of the four companies that I just mentioned.  And I think part of that is because the cost of doing business is greater, and part of the reason that the cost of doing business is greater is that liability is an important part of that cost.  I think, you know, if you look at what happened to Wyeth with regard to Fen-Phen, I mean, that was a huge hit for that company.  And so if you're going to take a risk trying to develop a drug or a biological, you're more likely to take it if it's going to be a big seller, something that one uses once a day or several times a day, than for a vaccine, which one uses once or maybe several times in one's lifetime. I do think that, to end on I guess a note of hope, I do think that the National Foundation model for vaccine development was an interesting one and one that one should continue to consider in developing vaccines even today.  I mean, what the March of Dimes did was they raised about $630 million between 1938 and 1962.  It's a phenomenal amount of money at that time, in those times' dollars.  They really pioneered fundraising, using celebrity spokesmen.  They were the first to do that, the first to use the poster child, and the first to make dramatic films that were shown in movie theaters when people would come up and down the aisles in between shows and collect money for the National Foundation. And what they did essentially is they performed the research and development of a polio vaccine up to the point of licensure.  And although we have talked I think, to some extent, about suggestions that focus on increasing vaccine revenues, I mean, I think as Steve said so well, increasing the notion that vaccines are an important part of what we do, and therefore prevention has to be valued, and therefore we should increase our reimbursements to those who make vaccines, either through insurance company or government reimbursements.  I mean, the March of Dimes model essentially took the risk out of research and development.  They did it right up to the point of licensure, which I think is a model that you can see, to some extent, today in the development of the AIDS vaccine through the International AIDS Vaccine initiative and the malaria vaccine through Gates. So, when I make the statement, sometimes there are those who say, yeah, but polio sold itself.  I mean, this was a very emotional very dramatic infection that was very easy to get money for.  But I would argue that there are still plenty of dramatic infections out there, and I have a list of them here.  If you look at the top of the list, Respiratory Syncytial Virus causes about 90,000 hospitalizations and 5,000 deaths a year in this country. I think if you wanted, probably you could argue that the best way to make a Respiratory Syncytial Virus vaccine would be to give it to women, and that when they become pregnant, that they would have high levels of virus-specific immunoglobulin gene in their circulation, which they would passively transfer to their newborn, who would then be protected in that first year or two of life, which is when they're more likely to be hospitalized and more likely to die.  This would mean giving a vaccine to a woman who is about to become pregnant, and there is no vaccine maker in this country that is going to do that.  And maybe, in part--this was also alluded to previously--it means extending the National Vaccine Injury Compensation Program to include the unborn child. You're going to see a papilloma virus vaccine that is being currently made by both Merck and GlaxoSmithKline.  That vaccine is going to be given to women, and some of those women are going to get pregnant, and some of those women are then going to deliver babies who have six fingers or what have you or a hole in your heart.  And you can bet that there's going to be litigation associated with that, unless there is protection. So I think that the bottom line is that, to some extent, the fear of liability, although I think is largely protected by the National Vaccine Injury Compensation Program, still, to some extent, dictates how companies make choices.  And I think that unmet medical needs, like new vaccines tend to fall way down on the list-- [Tape change: T-1B to T-2A.] DR. OFFIT:  --Compensation Fund.  I'm trying to remember exactly what vaccines it covers.  Is it the vaccine that are recommended by ACIP? PANELIST:  I think it's any vaccine that's under the Vaccine For Children's Program. DR. OFFIT:  But it's the childhood vaccines recommended by ACIP, right? PANELIST:  That's right.  Although I think that the influenza vaccine coverage, once it became part of the VFC, to extend to adults; is that true? PANELIST:  It probably will, but it's not been legislated yet, so it doesn't fall under the compensation system as of yet.  But since it got the vote for VFC by ACIP, it's now in the hands of other legislators. DR. OFFIT:  One obvious question is why we're getting any new vaccines at all.  And we have been getting some, and some of the ones, well, pneumococcal is under the Vaccine Compensation Fund because that's recommended for children, and I guess that's the answer.   We're getting vaccines because of the Vaccine Compensation Fund. Let me just, one more, I fear for vaccines, for new vaccines.  I mean, if you look I guess at our--I'll say this in two ways.  One is look at the last few vaccines that been made.  I mean, pneumococcal vaccine is one vaccine which should be a great vaccine, but yet the company struggles to make it.  The Lyme vaccine was here and gone.  The RotaShield vaccine was here and gone.  FluMist is here, and I suspect in two years will soon be gone.  It's not a great business.  And there are vaccines that are being made by the four major vaccine makers.  I should add Chiron sitting back there with his hand up--five major vaccine makers. PANELIST:  [Off microphone.]  [Inaudible.] DR. OFFIT:  Right, the fifth and the Big Four. You look at where research and development costs are being spent, and it's just I think vaccines research and development is clearly decreasing.  It certainly has for Wyeth.  I think Merck is a great company.  I love Merck, but I fear that they too are not putting the effort forth on making new vaccines beyond their current vaccines. I would argue that they are currently in the midst of making a rotavirus and papilloma virus vaccine.  I think if they had to make that decision today, I'm not sure they'd make those a vaccine.  I fear whether they'd make those a vaccine. DR. CALFEE:  The gentleman here.  Go ahead, Phil or Bill. MR. HOSBACH:  Go ahead, Bill. DR. EGAN:  Well, I was just going to mention the human papilloma virus vaccine is a vaccine that at least initially is not to be targeted to infants.  Well, I mean, the eventual target and the one I think that makes medical sense is teenage boys and girls, something like that, whether it would be lower, I don't know, but certainly it would be given to both sexes, and basically HPV, as a disease, it's an STD. DR. OFFIT:  Just one quick thing.  There was a senior executive from a pharmaceutical company who said to me recently, within the last couple months, that we don't really make decisions by our gut any more.  Our instincts are not necessarily to meet unmet medical needs.  Our instincts are to feed the numbers in and see where they come out.  And if they come out above the line, great, and if they come out below the line, then they're out, and pediatric vaccines come out well below the line. And I think the push obviously is towards drugs like Alzheimer's drugs, and cardiovascular drugs, and neurological drugs, and impotency drugs, and lipid-lowering agents, et cetera, because they're-- DR. EGAN:  Chronic diseases. DR. OFFIT:  Right, chronic diseases. DR. CALFEE:  Phil? MR. HOSBACH:  Just to comment a little bit on that.  I won't speak for Chiron, but for Aventis Pasteur, I know Chiron is investing a lot in vaccines, and we too are investing a lot in vaccines.  And I think part of the other factors that are involved is the cost now for development.  So you're developing a few of them.  So you have more dollars being put into fewer vaccines, in terms of development, and the time frame in which it takes to license them is also incredibly long, and it's getting longer. I was very fortunate, and I feel--and Bill was part of this as well--in the 1990s, in the late 1980s to the mid 1990s, it was a heyday for vaccine development.  And I was fortunate to be involved directly with the licensure of seven vaccines when I was in clinical research, and it's just slowed down significantly.  And the dollars that are necessary to develop vaccines is also a contributing factor. I do not exclude the liability issue.  I think that's huge.  Companies involved in the Thimerosal litigation so far, even though it hasn't really come to trial, we've already spent more than $100 million just in preparation for these things.  So, when these things let loose, it's going to get even worse.  But there are multiple factors in terms of the number of vaccines that are being developed. DR. CALFEE:  Why don't we open it up to questions from the audience, and we're going to also take a brief break while we all grab some food.  Why don't you grab a microphone because we're videotaping this, also, and audiotaping it. So we'll take a couple of questions, and then we're going to take a brief break while we all grab some food from the tables back there.  And then I think it will be feasible to continue the discussion following lunch. Go ahead. AUDIENCE PARTICIPANT:  [Off microphone.] [Inaudible] from Chiron [inaudible] and some of the other things that have been said about flu vaccine.   We bought Powder Ject vaccines, which is the second flu supplier in the United States, in July of this year, and that represented an $800-million investment for the company, and the primary driver was to buy the flu vaccine, the flu virion, for the U.S. market. So I think the first thing that says is that we do believe that the vaccine market can be attractive as a market, as an investment.  We believe it is something that's worth developing. DR. CALFEE:  Are you purely a vaccine company? AUDIENCE PARTICIPANT:  Yes.  We are currently a vaccine company.  We're the fifth largest vaccine company in the world, primarily producing in Europe.  We previously had one vaccine, a rabies vaccine, licensed in the United States, which was referred to earlier in Dr. Egan's talk.  We were  the second-largest manufacturer outside of the U.S.  We had not entered the U.S. market because, in the late '90s, pricing was such that it was not attractive for us, and that changed dramatically over the last couple of years.  So I think pricing is a very important factor The second thing was it was stated that manufacturers reduced their supply last year.  That is not correct.  The existing manufacturers--I can't speak for Aventis, but I can speak for Chiron--actually increased their production to the U.S. by 50 percent.  Chiron supplied about 26 million doses in 2002.  We supplied 38 million doses in 2003.  The shortage, perceived shortage of the reduction was mainly due to the exit of one manufacturer, Wyeth.  So we were actually able to increase production. We, also, when the shortage came up, were able to work with the CDC to supply additional doses, not many admittedly, but again I think that highlights Phil's point about the need for good communication between the CDC and other programs in developing, as the CDC came to us, and we were able to make some additional doses available. DR. CALFEE:  I was intrigued by what you said about pricing.  Tell us a little bit more about this rather unusual situation in which American prices were very low, and the rest of the world's prices were high. AUDIENCE PARTICIPANT:  That's an unusual situation, but pricing for flu vaccine, and Phil's probably more familiar than I am, but I believe in the late '90s, early 2000s, was about $3 a dose, and the price was actually below the European price.  The U.S. price was extremely low, and it made it unattractive for anybody to consider entering the market. With the increases in prices, which I also believe it led to the exit of some of the manufacturers because upgrading facilities didn't make sense.  With the increase in price to I believe, today, it's about $7.50 a dose, we believe it's, at least for Chiron, it's an attractive market to be in. PANELIST:  Where does that price come from?  Who sets that price? MR. HOSBACH:  I think the market and the demand really sets the price, and Clem is absolutely right.  It was a low-price vaccine, and it's now getting closer to what would be its fair value for all that it can accomplish. AUDIENCE PARTICIPANT:  I'd also point out that we are continuing to increase capacity.  It's a message that supply follows demand, and I think the CDC's work--NVAC's work--in raising demand is critical, having the recommends in place, the additional recommendations mean that manufacturers will follow. But as Dr. Egan pointed out in his talk, it takes a while for supply to catch up with demand.  It requires investment.  Chiron is certainly committed to making those investments, but I just wanted to comment, Aventis is a leading supplier, but Chiron actually is now a major supplier to the U.S. market for flu as well. DR. CALFEE:  Phil? MR. HOSBACH:  I think, just to, also, and we just came out of the Flu Summit for the past two days, and what I wanted to make clear for everyone is that last year was a very unique situation.  In fact, had there been--we only had three manufacturers, when you include FluMist and Metamune--had we had 33 manufacturers, it wouldn't have made a difference because the manufacturing season for flu had already been completed, and it does take several months to make that vaccine. So what we did is we tried to, whatever we had remaining, tried to secure it, and both Chiron and Aventis Pasteur were able to, fortunately, offer some doses to the CDC to be redirected to areas of need. AUDIENCE PARTICIPANT:  Yes, and what I would add to thought, I think you're absolutely right, and I think it just highlighted the lead times, meaning that demand, predictable demand, is the way to go.  It will be very difficult whenever there's a severe epidemic, to meet a large surge in demand.  I think the stockpiling and a lot of things that are being done are critical, but the key is high demand in routine influenza seasons, which the CDC I think is doing with its recommendations, and manufacturers will follow with supply. DR. CALFEE:  The food is ready; is that right?  Before we grab our food, on the liability, I just want to mention one little fact.  Someone mentioned Wyeth and the Fen-Phen litigation.  The last I heard, Wyeth had set aside, put in reserves, roughly $15 billion for Fen-Phen litigation.  There is very little evidence that very many people actually suffered significantly from that particular combination drug.  Fifteen billion is coming out of Wyeth's profits, which exceeds, I would guess, the total profits in the vaccine business for quite a few years.  So that gives you some idea of what liability can do if you don't have some kind of protection against that. I think the drill now is that there is food back there.  Try to avoid the stampede, and then we will reconvene in maybe 15 minutes or so and continue this discussion with questions from the audience. Is that okay with you folks? [Luncheon recess.] [Remainder of Tape 2A & B is blank.  Start Tape 3A.] AUDIENCE PARTICIPANT:  [In progress.]  --and adults, if an adult gets hepatitis B vaccine.   Because it's covered in the program, an adult can make a claim. PANELIST:  So you really want-- AUDIENCE PARTICIPANT:  A compensation program, yes. [Laughter.] AUDIENCE PARTICIPANT:  And Paul had mentioned that the compensation program is a good model and, indeed, it has been a good model, but it has its limitations.  The way the program works is that, if you feel you have an injury caused by a vaccine, you make your claim before the compensation program, and the program decides whether or not you'll be compensated based on the preponderance of the scientific or medical evidence as to whether that injury was caused by the vaccine, which is the way it should be decided. So that bona fide injuries that are legitimately caused by vaccines are compensated by the program.   However, claims for injuries that don't have any science to back them up will not be compensated, and anyone who has gone through the compensation program then has the right to go on and sue the manufacturer if they are unhappy with the outcome of the compensation program. So all of these various claims that are not backed by scientific evidence and are not compensated by the program then have the right to go on and sue the manufacturer.  So there are some limitations with benefits. PANELIST:  Can I ask you a question?  Do you have any sense of how many claims those amount to per year and how those claims do per year? AUDIENCE PARTICIPANT:  Well, the bulk of the claims that are in the system right now I think will put a different spin on what's happened historically.  I think, historically, there have not been many people that have gone out beyond the program to sue.  I mean, that's why, up until now, the program has served as a good buffer for the manufacturer.  There have been just a handful of claims. However, there is, right now, more than 3,000 petitions pending in the program, claiming that vaccines cause autism.  Typically, the program gets 100, 150 claims a year.  So that's a huge bolus of claims sitting in there.  And the scientific evidence, to this point, certainly doesn't support those claims.  So all of those 3,000 claims, if they're not compensated, can convert to lawsuits once they've exhausted the program.  And on top of that, there are already around 350 lawsuits that have already been served on the companies, in addition to the 3,000 in the program. PANELIST:  What was the final decision regarding Thimerosal?  Does that go through the fund or not? AUDIENCE PARTICIPANT:  Yes.  If you're making a claim about Thimerosal causing autism, the courts have held that you need to go through the compensation program, first.  The compensation program has not reached the end of their process in terms of determining whether there's any evidence of causation. PANELIST:  Carmen, what time frame do they have to wait in the system before they can come out? AUDIENCE PARTICIPANT:  They have to, at the end of 240 days, claimants are allowed to opt out of the program if their claim hasn't been decided.  These autism claims now, which are being dealt with in an omnibus proceeding, that omnibus proceeding has been going on for more than 240 days, and some of those people have opted out and now have filed lawsuits, even though there hasn't really been a final adjudication on this issue. DR. CALFEE:  Go ahead. AUDIENCE PARTICIPANT:  While we're on this Thimerasol issue, the Institute of Medicine reviewed the existing scientific data on Thimerasol and its role in relationship with autism back in 2001, and again reviewed eight or nine studies that have taken place since then.  Their most recent review was on February 9th, and they are scheduled to publish a report in May, next month, so-- DR. CALFEE:  And that would encompass the things, the pieces that have come out in the British Medical Journal and elsewhere; is that right? AUDIENCE PARTICIPANT:  Yes, that was MMR and autism, and it also encompasses that because they heard some new scientific data on addressing that issue.  So the report will cover both MMR and autism and Thimerasol and autism.  And based on what was presented, we anticipate that there will be more support that there is no causal relationship. MS. RUPPEL:  This is Carol Ruppel, with Every Child by Two. I don't know who can answer this.  I know Steve could, but what is the process for negotiating a price for vaccines?  The public price, which you call the discounted price, and the public and the private price. DR. COCHI:  There are a couple.  It's complex.  In the VFC program, it is done on a trimester basis.  Every four months, bids are submitted by manufacturers for their vaccines. Unfortunately, in the VFC program, there are also vaccines that are under a price cap, so they can only raise by the CPIU and some other calculations-- PANELIST:  That's legislation, right? DR. COCHI:  That's legislative, yes.  And I know that there is--someone has proposed, and I don't know if the bill has been supported, to remove those prices caps.  And I know President Bush had indicated that he'd like to see those price caps removed and cited TB as being one of those, but it would include Hib and some others.  But, for the VFC program, it's done in that way.  For other government agencies, when it's for government use, it's capped under another calculation called the FSS calculation, which is more complex than I understand, but again it's a very, very low discounted price, but it's also legislated. MS. RUPPEL:  [Off microphone.]  And for private [inaudible]? DR. COCHI:  I think in the private sector, it's really more the free market forces, in terms of the value of the vaccine, supply and demand.  I think that that's really what dictates the price on the vaccine. DR. CALFEE:  Would it be illegal for a wholesaler or someone else to buy a supply of any of these vaccines, including flu, and then promote it to the public, Bill? DR. EGAN:  Yeah, I don't know about the--what all of the limitations are in the advertising and promotion.  I mean, have people bought vaccine and then changed the price?  Yes. DR. CALFEE:  Someone buys two million doses of flu vaccine, they see how things are going, and then it's late November, and they're quite certain that there's 20 million elderly people who haven't gotten vaccinated, and maybe they would, you know, if someone were to nudge them strongly enough.  So they take it upon themselves to promote the vaccine, make it available to doctors at a price and make a profit.  And I was just wondering whether that's any barrier to that. MR. HOSBACH:  Just, and I think Clem wants to answer as well, and I'll take a first crack at it. I think the interesting thing about vaccines is that there's also a public health charge to manufacturers to keep things reasonable.  And even when it comes to wholesalers and distributors, they sometimes may behave erratically, but I think, all in all, the pressure from the public, from providers, and looking at the value of the vaccine, I think clearly keeps a lot of that in check.  I mean, this is not like an automobile where you go way, way over invoice, and you see the demand goes way up. You know, there is a supply-and-demand component to it, there is in the free market area on the private sector, but there's also good common sense and our desire to meet public health needs that also is a governor on some of the pricing. DR. EGAN:  And I know also that many of the manufacturers in their dealings with distributors go to great lengths to try and prevent what would be trying to corner a market and then raise a price. DR. CALFEE:  I see.  But it does raise the question that if someone where to engage in these kinds of activities, which I gather a lot of people wouldn't like, they might get an extra 20 million people vaccinated, and they may save 5- to 10,000 lives, and maybe we might get a net benefit, rather than a net cost. Jeff? MR. LeMIEUX:  Just to your question, Jack-- DR. CALFEE:  Again, if you can identify yourself. MR. LeMIEUX:  I'm Jeff LeMieux, from Centrists.org. It seems to me that we have a public good situation here where the market price is never going to be high enough to suit the public health need because people discount the necessity of these vaccines, and that's why people expect to pay $10 or $20 for a vaccine even if, to a scientist, we might think they ought to be paying $150 or $200 or $400 for this thing. And the same thing with the government.  The government purchases a lot of vaccines, and it has this inherent need, responsibility to the taxpayers to get the lowest possible price.  And the combination of those two market forces and government forces is that the price is going to be low, and the business is going to be unprofitable. And I'm wondering if there's sort of two solutions.  One solution would be in the context of what we have now, which is where the government says, Okay, this is the best price we can, but we're going to just pay more because we think it's in the public interest to increase the profit potential for these companies to develop new vaccines and continue to make the ones they are making or just switch to something more like a Department of Defense system, where you simply contract for the production and development of vaccines, more like a--and I don't know what goes on in Europe, but if that's more how they do it in Europe, I'm wondering if that's a viable option. PANELIST:  I don't know.  I'm not sure right now that, I mean, some of the shortages are clearly ones that arise from unexpected or unpredictable demand in manufacturing difficulties, such as the pneumococcal vaccine.  I mean, Wyeth I think legitimately did not know how much they should ramp up, how large a manufacturing capacity they should seek to put together because they didn't know what the demand for that vaccine would be, and the GMPs, I'll let you all worry about that. But on the flu and the childhood vaccines, absent the unexpected withdrawal, and absent unexpected manufacturing problems, I gather right now that the people at this table would probably predict that next year that there will be enough flu vaccine manufactured for the demand under the way the demand normally plays out in this market; is that right? MR. HOSBACH:  I want to actually go back to  the comment earlier about this being profitable or unprofitable. First of all, vaccines are profitable, and you have companies investing.  They may not be as profitable as certain drugs, but they certainly are profitable, and I think that the companies that are investing and reinvesting do see a substantial opportunity for growth in the marketplace.  I think, going back to the comment about how people value vaccines is part of the equation for sure, and I think it goes to what Paul and others were saying in terms of how we, and what Steve was saying, in terms of how this society, our society, values vaccines and really prophylactic care and preventive medicine.  That's what I think holds back on the value.  But it is a profitable business.  It's just not as profitable as other areas of the pharmaceutical industry. DR. CALFEE:  I don't know whether that answered your question, Jeff. MR. LeMIEUX:  Well, I think, if I could just say, I think the goal of government is not to try to bid the price down so much that we risk driving all of industry out of the business, but in fact the federal contracts for vaccines, where there are multiple manufacturers, now have stipulations that allow for a shared contract, where the manufacturers may actually have different prices, but there's some, there's an element of choice in the state immunization programs to select a vaccine that they prefer, not in all of the states, but in some of the states. MR. HOSBACH:  Just to comment on that.  The element of choice issue is really what's the problem.  I think we're talking about a large entity making purchases, which is essentially monopsony purchasing, which really gets that best price.  I mean, the large-volume person expects the best price, the lowest price, and in essence that's what a large purchaser is looking for, to drive that price down. Unfortunately, in the VFC program, the CDC does advocate choice and wants states to, would like the states to allow some sort of free market dynamic to occur.   Unfortunately, that doesn't occur, and there are still a number of states where there are single decisionmakers who can really drive the marketing crazy directions. I think manufacturers who have the expertise in marketing completely understand and forecast the marketplace well on the private side, but when it comes to the public sector, if you ask me how it behaves, I'm unsure at some point in time when, for example, the State of Washington may purchase 4- or 500,000 doses of DTaP a year, they may want to choose Aventis Pasteur's DTaP one year, and that's the only one they'll allow, and then the next year they'll make a decision, in their closed room, and they will come back and maybe choose another DTaP, whether it's price or something that's different. But there's a total shift in the marketplace.  That's 500,000 doses of manufacturing capacity that what am I going to do with now, from Aventis Pasteur's point?  Do I have the ability to send it somewhere else in the world or did I overmanufacture, and do I have to throw it away?  It makes things unpredictable, and so we really need to look at making the VFC program more of a full-choice program to allow it to behave more like a free marketplace, allowing us to better predict and forecast the needs of that market. DR. CALFEE:  Bill? DR. EGAN:  Well, since we have an economist at the table, maybe I'll ask a question, and, you know, this issue was recently studied by the Institute of Medicine.  They took a good long look at this.  This was reviewed again here at the AEI.  And if I recall, from the recommendations of the Institute of Medicine, one of the things was a voucher-type system from the government which would allow choice of vaccines, but pay a certain amount of money, and then certain mandates on health care organizations, but it would tend more to make it more of a free-market-type economy, and I would just like to have your thoughts and some of the thoughts that came out of the AEI meeting about that report. PANELIST:  I'll try to remember, at least what I thought. The IOM plan is very much a mixed market.  One component was to require insurance firms to cover at least most vaccines, and the idea making the vaccines very cheap and very available and to maintain low prices for vaccines. And then they tried to solve the resulting problem, which is that when you have a situation like that, you have undercut the incentive to develop new vaccines.  And there were several outstanding health economists on the committee that wrote that report, and they wanted very much to preserve those incentives.  And the plan they came up with is that some committee would determine the value of new vaccines.  And having done that, when a manufacturer produced the new vaccine and had it ready to be marketed, then, in order to preserve the low prices, but also to reward the vaccine, that's where these vouchers would come into play--essentially, to put it in very abstract terms, and I have no idea whether, I mean, I have no reason to think that an example like this was actually in the IOM report. But you could have a vaccine where the committee thinks this vaccine is worth 30 bucks a head, in terms of that it has a certain probability of preventing a certain kind of illness, and yet that vaccine would be made available for $10 a head, in which case there's a gap of $20, and that's where the vouchers would come into play.  People would essentially be given a $20 voucher, and then the other $10 would come from health insurance plans, copays or whatever, and that way you would reward the development of innovative vaccines, and that, in theory, could solve the problem. I think that's sort of a step in the right direction, but I think it would be very difficult to implement partly because the truth is nobody knows what the value of a vaccine is going to be until you actually get it into people's hands and see how it works.  There are some situations in which a vaccine is 70-percent effective, really does the job.  There are other situations in which a 70-percent effective vaccine turns out to leave quite a bit of holes, depending upon the nature of  the contagion, and those kinds of things, a lot of things that are really rather imponderable. As Metamune could tell us, if they were here--I don't think they are--it can be very difficult even to estimate the demand for a very well-known vaccine that is simply, where the main difference, not the only difference, but the main difference is the delivery method.  In this case, it was a nasal vaccine to be used instead of a shot.  And it turns out that most of the people that Metamune was aiming at were not willing to pay nearly as much as Metamune thought they would. I think that, in general, it's very difficult to know what a new product is going to be worth.  There are just dozens and dozens of examples of innovative drugs that, in some cases, have proved to be far more lucrative than an anticipated and, in other cases, far less lucrative. So I think that replacing the market mechanisms with a committee to determine the value of something is probably better than having nothing but low prices and therefore eliminating all incentives, but is far from an ideal scheme, and it remains, I'm not sure it would work out very well. We can hear from Chiron again. AUDIENCE PARTICIPANT:  Chiron keeps commenting. What I wanted to go back was the original question about the role of distributors.  I believe Chiron has a unique insight because our vaccine, the flu vaccine, is distributed exclusively by distributors at the moment.  I don't think they play a huge role in the direct to consumer or the public, but where they play I think a very important role is actually in getting physicians to order vaccines.  We use six or seven distributors that have 3- or 4,000 reps that are going into these doctors' offices, reminding them to order flu vaccine.  So I think their role in that case is actually very positive.  You tend to see the focus in the press on the distributor's "gouging," you know, raising prices in a shortage, but I think that's a relatively small part of the behavior. Now, as Phil alluded to, the manufacturers do their best to behave responsibly.  For example, with the recent shortage of rabies vaccines0--Chiron is the other producer of rabies vaccine in the U.S.--and in order to prevent "hording," we've worked with CBER and put an allocation system in place so that no distributor could theoretically corner the market. I would also like to, in terms of profitability of vaccines, reinforce Phil's point of the negativeness of a winner-take-all system.  It is very difficult to predict, when you get swings of 500,000 or a million doses, if you're a manufacturer.  And, quite frankly, I think, when you go to your senior management and say, "I might win this year, but then I may lose, you know, I have a 50-50 chance," it's not an attractive business to be in.  It's very difficult to predict, to make the investment. So I think the moves that the CDC has taken are really positive, from a manufacturer's point of view, because it stabilizes the market. In terms of the IOM report, I think they did a stunning job of outlining some of the issues with the system today.  I think they highlighted some of the issues that have arisen in terms of vaccine shortage, a great job of highlighting probably the weakness of our system in immunizing adolescents and adults, but I also think, in some ways, I wouldn't say they threw the baby out with the bathwater, but I think they forgot to recognize the benefits that the VFC system has brought to,  both in terms of public health--immunization rates have gone up.  The U.S. is the first to introduce routine infant immunization with varicella, Prevnar, adopt pediatric influenza immunizations.  There's been a lot of positives there. I'm not sure I think your description of their plan is correct, and I would say it also highlights a point that Phil made earlier about the need for industry, real consultation in developing these reports.  We did, both Phil and I, I think testified at the start of the report, but I don't think we were involved in the deliberations.  And what I would say to you is-- PANELIST:  Was there any industry person on the actual-- AUDIENCE PARTICIPANT:  Not to my knowledge on the vaccines-- PANELIST:  I don't think there was-- AUDIENCE PARTICIPANT:  --and industry.  And what I would say is I think it's a great report, but the solution is ostensibly to benefit manufacturers, and the current system, while it may be difficult, in my previous job, I used to be involved in forecasting.  It's easy to forecast because I know that there will be a private market price set.  We will negotiate with the CDC.  There will be a discount to the private market price.  But I'm not waiting until launching the product to get a price set, as you described this committee, which to me is a black hole. So I'm not sure that it's either going to encourage vaccine manufacturers to develop things.  I also have some concerns about the voucher system because it's not clear to me how that's going to work and that I can collect.  The current system--I don't mean to be simplistic, Steve--but we send the vaccine to the CDC, and the CDC pays us.  We know that it's relatively easy to collect.  We know where to go.  We know where to send the vaccine. So I'm not sure, I think the report did a great job of highlighting some of the issues.  They put together some very interesting solutions, but I'm not, I don't want to speak for industry, but from my perspective and Chiron's perspective, I'm not sure that the solutions are that workable, and I think it does highlight the point that Phil made that perhaps talking to industry we might have been able to provide some insight into whether this was attractive. PANELIST:  Now, Wyeth doesn't send a million doses of Prevnar to you folks and ask for payment, does it? AUDIENCE PARTICIPANT:  [Off microphone.]  [Inaudible.] PANELIST:  Virtual doses is what it-- [Laughter.] PANELIST:  I think it's just that, through the VFC program, in particular, there's predictability of the market.  It really stabilizes the market greatly. But what I wanted to say, I wanted to agree that some of the recommendations of the IOM report may have appeal, at first glance, but I think the feasibility of implementing many of those recommendations in the U.S. health care system is in great question.  And a lot of provisions, well, for example, the voucher system I think in the U.S. morass of care, it's just hard to imagine how that could be implemented. DR. CALFEE:  We economists sometimes have trouble getting our recommendations implemented, and that may be an example. PANELIST:  But I think the insurance mandate, the recommendation of focusing on insurance mandates, is something that we would very strongly support.  We've got a very substantial population of underinsured children and adults who are not being well-served.  In fact, in many states there's a two-tier system where the poor children are getting the benefit of vaccines like pneumococcal conjugate vaccine and near-poor children cannot be served by public clinics.  In fact, there's 19 states that have not implemented pneumococcal conjugate vaccine programs in their public clinics because of a lack of adequate financing. PANELIST:  Jack, this is no offense to you, but this is my personal opinion about one of the recommendations.  I'm not sure that I really want an economist telling me about what I should be using in terms of medicines or how I should get medical care.  To me, that's a little problematic. I mean, I throw that a little bit over to Paul, how he feels about something like that, but, personally, I don't know that I really want to have an economist dictating to me what medicine should be used for me or what health care should be used for me. DR. CALFEE:  I think what they had in mind was a recommendation as to how much public money would be added to the prices that already exist in order to reward innovation.  And the presumption is the prices would be kept too low to stimulate innovation and that the difference would be made up with public money.  And that just raises the question of how much money?  You come in with a vaccine, Chiron comes in, Wyeth comes in, you know, and you each want 100 bucks a shot. And we say, Well, we don't know.  What is it going to do?  Is it worth $100? I mean, as long as the public is paying for things, they're going to try to figure out what it's worth, but you can be sure of one thing.  If anything like this ever happens, it will not be economists who are making these decisions. [Laughter.] DR. CALFEE:  We had a question right over here. MR. QUINONES:  Alex Quinones, with Capital News Service. I was wondering what financial incentive options are available to the government to lure companies to develop and manufacture vaccines and which seem to work best. DR. CALFEE:  That's a fairly broad question.  If you were to abolish half of your regulations, Bill, I think that--I think, in a sense, that's what this IOM report is about, is about what could be done to attract firms to enter this market.  They were concerned about with the small number of firms, they were worried about liability. As I recall, they were optimistic that at least for the ACIP-recommended vaccines, the liability would not be a big problem.  That remains to be seen because we're getting a lot of leakage around the compensation fund, but I think that's what they were trying to do was to solve the problem you were referring to, which is to induce firms to enter this market and to innovate.  And we are getting a lot of small firms entering the market.  We're just not getting big firms. PANELIST:  I think just one thing, again, it just goes back to the appropriate valuing of vaccines, whether it's the government or the general public.  My own personal opinion is would the public or should the public value something that they have to take once that protects them for 1 year or 10 years or 20 years.  If they could take a pill that did that, I can tell you that it would really be a skyrocketed price.  The value to prevent something unfortunate from happening, and you only have to do it once, is something I think that is highly undervalued. PANELIST:  A couple of comments.  One is about vaccines and vaccine regulation.  I would think that a regulatory system actually fosters vaccine development.  People will go into a market, will take things, buy things, have confidence in them if they have confidence in the product.  And I think having regulatory agencies helps to do that.  One invests in the stock market because, in part, the Securities and Exchange Commission oversees it, and one has confidence in the product. So I think there is that kind of value added to making sure that you have a market that you have confidence in, that people have confidence in the product, that people aren't darting in and out with what could be bad products which could upset the market for those who have good ones.  You can come in with something that doesn't work, undercut a price, people think it's okay, take it.  It hurts the legitimate companies that have safe and effective products, and then it destroys the confidence in the market. Now, the trick is to having an intelligent regulatory agency, not regulation for the sake of regulation or needless regulation or stupid regulation, but intelligent regulation. Some of the things that government does I think, in the counterbioterrorism area, a lot has been done with regard to money that's gone into research and development, and in purchase and stockpile.  So there's been a lot of incentive there.  But much of the industry is based on need and supply, and it's not clear that you want the government in there. PANELIST:  I wish what you were saying was exactly true, and maybe it is, but our impression, when we do occasionally these focus groups at the Vaccination Education Center to try and get a sense of how parents and users of vaccines feel, and I would say that the notion that something is highly regulated never seems to make people calmer. My sense is that, if you look at companies like GNC or something, where over-the-counter products are sold, that largely are unregulated, I mean, the notion that it would be natural seems to be a much bigger seller than its more regulated, because you could argue that vaccines are I think probably the best-tested, arguably safest things we put in our body--certainly, better tested than antibiotics or better tested than cough and cold preparations, better tested than these supplemental preparations.  Yet that's not how they're viewed.  I think, in part, it's because they are biological and people don't understand biologics.  But I wish what you were saying is true because certainly vaccines are highly regulated. PANELIST:  But, at the same time, we have very uptake in immunization rates in this country, and I think that part of that is based on the perceptions that they are both effective and safe, which is true. PANELIST:  I think people get vaccines because they're told to.  I mean, I think it's because they have to get them to come into school.  For the most part, they go to their doctor, and they say, "What do I get today?"  And that's most people, and that's good.  But I think if they weren't told to get them, I'm not sure they'd get them. Look at varicella vaccine.  When that vaccine first came on the market in '95, I think the uptake was about 10 percent.  If you look at its increased uptake, and there's Merck people here who maybe can comment on this, I think it was directly related to school mandates.  You can make the same argument for seat belts.  People do it because they're told to do it not because it's-- DR. CALFEE:  You do have the--there is one unique issue here, and that's the herd immunity, where you do have the prime minister's wife who would prefer not to vaccinate her kids and let everyone else get vaccinated. Let me say just a word from the perspective of a regulatory economist, which is I have no doubt whatsoever that to succeed and to sell pharmaceuticals and vaccines in a free market, a firm needs to have a tremendous amount of credibility. I think where a free market economist would part ways, to some extent, at least, with the FDA, is the extent to which regulation is the only way to achieve that credibility.  After all, there is a tremendous amount of brand capital in the computer industry.  I mean, almost none of us are going to buy laptops from other than a small number of very reputable firms, and regulation has nothing to do with that.  Reputation determines everything.  And you get a lot of other things, whether it's automobiles, et cetera.   I mean, most safety aspects of automobiles are not regulated.  They are produced purely spontaneously. So I'm not saying that regulation does nothing.  I'm just saying that it's not the only source of credibility, but I certainly agree that without credibility, this market would not, would not work. PANELIST:  Just in terms of how people come to understand vaccines, and their credibility, and the manufacturer, I was standing in a line 2 years ago, at a grocery store, at an Acme, and in front of me were two elderly women who were debating whether or not they wanted to get the influenza vaccine because, actually, they were selling it back in the grocery store.  And the woman said, "I want to get it, but I don't want to get the Acme brand." [Laughter.] MR. WROBLE:  Hello, Cole Wroble, a private consultant. Can someone comment on direct incentives to revamp plants, existing plants.  There has been some discussion about tax credits or some kind of a, and that's a solution to the regulatory burden. DR. CALFEE:  [Off microphone.] [Inaudible.]  That's part of what the FDA's GMP initiative is about, and I know there is a major initiative underway right now. DR. EGAN:  I think it's certainly an area that we're looking at, that everybody's looking at about what needs to be done and how to facilitate change.  It's again one of these issues that's not simple. You could ask, also, in the absence of any laws, regulations, FDA, the extent to which manufacturers, what they would do in the validation because certainly it's in their best interests and would do it anyway, would be to validate the new facilities, the new processes, and how much of that is self-driven, how much of that is FDA-driven, granted that FDA oversees it, and it goes through FDA.  But what the differential in work would be between the two, and that's the area I think where we have to have a lot more dialogue. DR. CALFEE:  Either we're done or we can take one more question.  But it looks like--we'll take one last question.  It's 2 o'clock, and it's been a long-- MR. BAILEY:  My name is Charles Bailey.  I don't represent anybody.  I tried to talk to you earlier, but you said bring it here, so here I am, and I also talked to a gentleman over here earlier. That plant of yours, it's like I was kind of wondering wouldn't it have been cheaper to just leave the plant over in Sweden and bring the drugs over here?  Is it regulatory problems or what? And I've also gone to many of your talks about drug reimportation.  Is that part of the reason? DR. CALFEE:  Well, drug reimportation isn't a big deal for vaccines because our prices are so cheap here. MR. HOSBACH:  And that was really a corporate-driven decision.  A lot of the manufacturing is going on, in Swiftwater, Pennsylvania, we have a large filling and packaging plant that we're also putting there, so it's going to become part of our worldwide distribution center.  So that's one reason. I think, to take it back to the economist's point, because of the long lead times for these things, for the long lead times for development, for the long lead times to get facilities up and validated, at what point in time would an economist be able to tell us whether or not it's a cost-effective product or cost-effective at development?  You can never predict that far back, and you may stifle innovation if you were to do those types of things, when there may be some winds blowing a certain way or tea leaves in terms of epidemiology and infectious disease, where someone is willing to invest in something to take that risk, you may take that willingness away. DR. CALFEE:  Go ahead, Bill.  You can have the last word. DR. EGAN:  I don't know if this was an impression, but many of the vaccines that are licensed and used in the United States, they need not be, nor are they often, manufactured in the United States.  Some flu vaccines, for example, Aventis manufacture it here, the Chiron vaccine, although Chiron is in California, it's manufactured in the United Kingdom by Evans Powder Ject.  Many vaccines are made in France, some in Belgium, some in Germany.  They're all U.S. licensed and have to meet U.S. standards, but many are manufactured overseas. DR. CALFEE:  Yes, it's one of the reasons why there's so much confusion about the so-called reimportation debate.  Most drugs are sent abroad and then brought back.  A huge proportion of them are manufactured abroad right now, but FDA still regulates them. Well, listen, this has been a wonderful group, and I want to thank the panel.  I thought they were just absolutely splendid. [Applause.] DR. CALFEE:  And with those thanks, we will declare this at an end. Thank you very much for attending. [Whereupon, the proceedings were adjourned.]</body></html>