Vaccine Supply and Innovation: Summary (1986)

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FOR LIBRApy Jor VACCINE SUPPLY AND INNOVATION SUMMARY Committee on Public-Private Sector Relations in Vaccine Innovation Division of Health Promotion and Disease Prevention Institute of Medicine LIBRARY National Research Council £101 Constitution Avenue N.W. Washington D.C. 20418 NATIONAL ACADEMY PRESS Washington, D.C. 1986 neRA nine WAS-NAZ APR 9 1986 LIBRAK y

RMN AB! Vili 1436 Samm Cl NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competencies and with regard for appropriate balance. This report has been reviewed by a group other than the authors according to procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The Institute of Medicine was chartered in 1970 by the National Academy of Sciences to enlist distinguished members of the appropriate professions in the examination of policy matters pertaining to the health of the public. In this, the Institute acts under both the Academy's 1863 congressional charter responsibility to be an adviser to the federal government and its own initiative in identifying issues of medical care, research, and education. The study summarized here was supported under contracts with the Food and Drug Administration (223-83-1109), the Department of the Army (DAMD17-83-G-9558) , and the Centers for Disease Control (200-83-0609) , and grants from Lederle Laboratories, the Merieux Institute, Inc., and Merck Sharp & Dohme. Additional support was provided by the National Research Council (NRC) Fund, a pool of private, discretionary, non- federal funds that is used to support a program of Academy-initiated studies of national issues in which science and technology figure significantly. The NRC Fund consists of contributions from a con- sortium of private foundations including the Carnegie Corporation of New York, the Charles E. Culpeper Foundation, the William and Flora Hewlett Foundation, the John D. and Catherine T. MacArthur Foundation, the Andrew W. Mellon Foundation, the Rockefeller Foundation, and the Alfred P. Sloan Foundation; the Academy Industry Program, which seeks annual contributions from companies that are concerned with the health of U.S. science and technology and with public policy issues with technological content; and the National Academy of Sciences and the National Academy of Engineering endowments. Preparation of this summary from the full report, Vaccine Supply and Innovation, was supported by a grant from the Carnegie Corporation of New York. The full report is available from the National Academy Press, 2101 Constitution Avenue, NW, Washington, DC 20418. A limited number of copies of this summary are available without charge from the Director, Division of Health Promotion and Disease Prevention, Insti- tute of Medicine, National Academy of Sciences, 2101 Constitution Avenue, NW, Washington, DC 20418. Publication No. IOM 85-02a Printed in the United States of America

COMMITTEE ON PUBLIC-PRIVATE SECTOR RELATIONS IN VACCINE INNOVATION JAY P. SANFORD (chair), School of Medicine, Uniformed Services University of the Health Sciences MARSHALL H. BECKER, Department of Health Behavior and Health Education, University of Michigan, Ann Arbor ROGER B. DWORKIN, School of Law, Indiana University, Bloomington BERNARD N. FIELDS, Department of Microbiology and Molecular Genetics, Harvard Medical School JERE E. GOYAN, School of Pharmacy, University of California, San Francisco HENRY G. GRABOWSKI, Department of Economics, Duke University SAMUEL L. KATZ, Department of Pediatrics, Duke University Medical Center EDMUND KITCH, University of Virginia School of Law, Charlottesville LOUIS LASAGNA, Sackler School of Graduate Biomedical Sciences, Tufts University Medical School MARTHA L. LEPOW, Department of Pediatrics, Albany Medical College DAVID W. MARTIN, JR., Genentech, Incorporated, South San Francisco DONALD N. MEDEARIS, JR., Department of Pediatrics, Harvard Medical School THOMAS C. MERIGAN, JR., Division of Infectious Diseases, Stanford University School of Medicine EDWARD A. MORTIMER, JR., School of Medicine, Case Western Reserve University JANE SISK, Office of Technology Assessment, United States Congress GENE H. STOLLERMAN, School of Medicine, Boston University THOMAS H. WELLER, Department of Tropical Public Health, Harvard School of Public Health CONSULTANT LAWRENCE M. DeBROCK, Department of Economics, University of Illinois, Champaign Lii

GOVERNMENT-INDUSTRY LIAISON PANEL ROBERT F. ACKER, National Foundation for Infectious Diseases DAVID W. BARRY, Burroughs Wellcome Company A. JOHN BEALE, Wellcome Research Laboratories, United Kingdom JOHN H. BRYANT, National Institutes of Health FRANCIS R. CANO, Lederle Laboratories JAMES P. CARLOS, National Institutes of Health PINYA COHEN, Merieux Institute CIRO C.A. de QUADROS, Pan American Health Organization DAVID A. ESPESETH, United States Department of Agriculture LEONARD D. FENNINGER, American Medical Association JEROME GOLD, Wyeth Laboratories GEORGE F. GRADY, Massachusetts Public Health Biologics Laboratories MAURICE R. HILLEMAN, Merck Sharp & Dohme Research Laboratories ALAN HINMAN, Centers for Disease Control NEIL HOLLANDER, Blue Cross/Blue Shield Association DAVID L. HUXSOLL, United States Army Medical Research Institute of Infectious Diseases DONALD R. JAFFEE, Parke-Davis WILLIAM S. JORDAN, National Institutes of Health JOEL KAVET, Department of Health and Human Services JEFFREY P. KOPLAN, Centers for Disease Control ROBERT E. LOUIE, Cutter Laboratories SUSAN H. MATHER, Veterans Administration DONALD P. METZGAR, Connaught Laboratories, Limited, Canada JOHN R. MITCHELL, Michigan Department of Public Health GARY NOBLE, Centers for Disease Control PAUL D. PARKMAN, Food and Drug Administration CORNELIUS W. PETTINGA, Eli Lilly and Company M. SUSAN UEBER RAYMOND, Center for Public Resources MICHAEL A. RIDDIOUGH, Springfield, Virginia DAVID ROBINSON, United States Army Medical Research and Development Command JOHN ROBBINS, National Institutes of Health PHILIP K. RUSSELL, Fitzsimons Army Medical Center MARTIN H. SMITH, American Academy of Pediatrics GASTON S. TAWIL, Pan American Health Organization KENNETH S. WARREN, The Rockefeller Foundation DONALD A. YOUNG, Health Care Financing Administration INSTITUTE OF MEDICINE STAFF ROY WIDDUS, Study Director ENRIQUETA C. BOND, Director, Division of Health Promotion and Disease Prevention MARK BELLO, Writer CYNTHIA HOWE, Research Assistant EVE K. NICHOLS, Editor JUDE C. PAYNE, Research Assistant GAIL E. SPEARS, Administrative Secretary iv

CONTENTS Introduction . . . « « « «© « «© «© © «© © © © © ww ew Overview of U.S. Vaccine Situation ..... «eo. Vaccine Availability: Major Barriers and Impediments Impediments to Vaccine Innovation ..... «+. « « « Economic Characteristics of the Vaccine Industry .. Vaccine Injury . . . « « « « «© « © © © © «© © © © © Current Status of Liability Law . .......«e « Consequences of Uncertainty Over Liability Laws .. . Proposed Action: National Vaccine Commission... . Proposed Action: Fair, Consistent Approach to Compensation and Liability ........ +e... ll 12 14 L5

INTRODUCTION Some of the greatest triumphs of modern medicine, such as the global eradication of smallpox and the nearly complete conquest of paralytic polio in the United States, have been achieved with vaccines. But these victories and the growing potential for greater health protection from vaccines notwithstanding, the future of immunization efforts in this country is in a shadow. A precarious dependence on a handful of domestic suppliers raises a distinct possibility of vaccine shortages. Also in question is the adequacy of incentives for improving existing vaccines and developing new ones, whether for diseases still common in the United States or those that ravage the developing world. This situation not only has persisted but has probably grown worse over the last decade, aggravated by a number of problems including the unresolved issues of liability and compensation for vaccine-related injury. Recognizing the threat that vaccine supply problems pose to public health, the Institute of Medicine appointed a committee of experts in law, public policy, vaccine manufacture, and several health fields to examine the condition of research, development, supply, and promotion Of vaccines in the United States. On the basis of this examination, the Committee on Public-Private Sector Relations in Vaccine Innovation recommended changes to lessen the danger of vaccine shortages and to ensure steady progress toward vaccine improvement and innovation. Although already recognized as serious, the problems under investigation took on even greater urgency during the committee's 2-year study. In early 1985, the nation experienced its first major vaccine shortage. Two manufacturers having difficulty in securing liability insurance suspended distribution of DTP (diptheria-tetanus- pertussis) vaccine. Supplies from the sole remaining manufacturer of the childhood vaccine were interrupted because of technical production problems. Although short-lived, the shortage of DTP vaccine under- scored the potential perils in the nation's system for producing and distributing vaccines. Viewing the situation as a cause for grave concern, the committee identified several major problems that jeopardize vaccine supply and innovation in the United States:

2 o The number of domestic manufacturers decreased by more than half during the last 2 decades, leaving vaccine production highly concentrated and market competition very limited. Supplies of most important vaccines depend on a single supplier. © The nation's system for the development and use of vaccines is highly fragmented and lacks the coordination needed to attain important public health goals. © The common law tort system is not able to provide predictable, rapid, and equitable compensation for vaccine-related injuries. This inability subjects injured claimants to potential injustices, and it threatens vaccine production. Manufacturers are becoming increasingly uncertain and apprehensive about the extent of their responsibility beyond proper manufacturing and labeling. Oo Vaccines (especially those for adults and those not mandated) are not used enough in the United States, perhaps because disease prevention is undervalued by individuals and by society, as is indicated by inadequate reimbursement for it. On the basis of this assessment and in light of the inaction that greeted previous studies that raised similar concerns, the committee made two major recommendations: © Although solutions to vaccine supply problems should presently seek to use the facilities and expertise already existing in the commercial vaccine industry and federal agencies, a national vaccine commission should be created to bring cohesion and direction to the nation's uncoordinated system for vaccine research, development, and use. © Political decision makers must act rapidly to satisfy the pressing need for a consistent and equitable approach to resolving issues of liability and compensation for vaccine-related injury. To aid in this process, the committee identified a range of possible approaches and the factors to be considered in the design of workable solutions. The committee believes that any solutions must include a compensation system. The committee emphasized that until action is taken to correct the problems that beset vaccine development and immunization efforts, public health will continue to be at risk, and many of the disease prevention benefits promised by new technologies will go unrealized. OVERVIEW OF U.S. VACCINE SITUATION By introducing a modified disease agent, an altered pathogen, into the body, vaccination galvanizes the immune system against future infection and disease. This principle was applied centuries ago in China and Africa, where it was found that rubbing smallpox scabs against the skin caused a mild case (benign infection) of the disease, thereby conferring immunity. The principle and techniques of imnuni- zation have been refined greatly since then, and today widespread

3 vaccination, particularly among children, is the most powerful weapon against devastating infectious diseases. Major successes include the following: Oo The last confirmed cases of smallpox were reported in 1977; in 1980, the World Health Organization announced global eradication of the disease. © In the United States, reported cases of rubella dropped from 57,686 with 29 deaths in 1969, to 2,325 with 4 deaths in 1982. o The incidence of measles in the United States decreased from 894,134 reported cases with more than 2,250 deaths in 1941, to 1,497 reported cases and 2 deaths in 1983. © Paralytic poliomyelitis, which afflicted more than 57,000 persons in the United States in 1953, is now extremely rare. o The incidence of pertussis (whooping cough) in the United States dropped from a high of 265,269 reported cases with more than 7,500 deaths in 1934, to fewer than 2,000 cases with only 4 deaths in 1982. Although it provides health benefits to society and individuals, vaccination is not without risk; a small number of severe reactions are probably inevitable with present-day technology. Because of this limited but real potential for injury, vaccine manufacturers are subject to stringent standards and licensing requirements, which specify testing and production procedures and are administered by the Office of Biologics Research and Review (OBRR) of the Food and Drug Administration. The process of vaccine innovation, from basic research to commer- cial availability, is complex and fragmented. Ultimately, however, adequate vaccine supplies depend almost entirely on the willingness of a few manufacturers to continue production. In contrast, fundamental research, which undergirds vaccine innovation and is an essential first step toward production, is conducted primarily in federally funded laboratories, such as those at universities, the National Institute of Allergy and Infectious Diseases, and the Department of Defense (for diseases that endanger military personnel). These studies, typically costly and time-consuming, characterize disease-causing viruses, bacteria, and parasites and determine how the pathogens disrupt the physiology of the human “host.” If basic research suggests that available techniques hold the potential for producing a new safe and effective vaccine, industry assumes the next step of the evaluative process. Manufacturers assess the feasibility and cost of development and production and weigh these factors against market considerations, which include the vaccine's ranking among other health care priorities and how much it will be used. A manufacturer's decision to proceed to the next step--testing in human beings--requires OBRR approval. If the regulatory agency grants a Notice of Claimed Exemption for Investigational New Drug, an IND, the manufacturer and collaborating scientists must conduct three sequential phases of clinical research to establish the vaccine's efficacy and safety.

4 After completing the third phase of research, in which the vaccine is administered to hundreds or thousands of people, the manufacturer may decide to seek a license to market the product. Before ruling on the license application, the OBRR reviews the results of testing, conducts its own evaluation of the vaccine, and may convene its advisory board for additional input in the licensing decision. If the OBRR is satisfied that the product is safe and effective and that directions for use are adequate, a license is granted. All vaccines licensed in the United States have been evaluated through this procedure. In addition, all vaccine manufacturers must be licensed by the OBRR. Even after licensing, regulatory surveillance continues in order to identify rare adverse reactions to the vaccine and to assess the quality of the marketed product. Because the number of individuals inoculated during prelicensing trials is insufficient to identify rare adverse reactions, manufacturers are required to report such events to the OBRR. After licensing, the OBRR also requires manufacturers to submit data and vaccine samples for each new production lot, and the agency may conduct periodic inspections of production facilities. Several national advisory groups make recommendations for vaccine use. These groups include the Immunization Practices Advisory Committee of the U.S. Public Health Service, the Committee on Infectious Diseases of the American Academy of Pediatrics, and the Committee on Immunization of the Council of Medical Societies, a unit of the American Colleges of Physicians. The Department of the Army oversees efforts to develop vaccines needed to protect military personnel and others from pathogens not generally encountered by the U.S. civilian population. These include the many infectious agents of tropical regions and those that might be used as biological weapons against our forces. As in the civilian sector, production of vaccines that guard the health of military personnel depends on the willingness of commercial industry to undertake final development and production. For vaccines that are available, recommendations for use are made by the Armed Forces Epidemiological Board. Recent scientific advances offer great promise of new ways to fight diseases that have long seemed unconquerable. Steadily growing knowledge of the immune system and developments in all branches of biotechnology, especially in genetic engineering, have spurred the hope of developing vaccines to combat meningitis and diarrheal diseases as well as malaria and the other parasitic diseases that inflict a heavy toll of death and suffering in the tropics. with current technology, vaccines against these diseases may be technically feasible within a decade. The Institute of Medicine committee observed that scientific and technological advances cannot be considered in isolation. To achieve the potential of these advances, the serious problems that beset current development and production efforts must be overcome or at least reckoned with. These include technical production problems, which have assumed greater importance with the decrease in the number of vaccine manufacturers; high research and development costs, which

5 include the considerable expense of clinical testing; the risk of litigation, which can significantly dampen the appeal of developing new vaccines; and limited sales, in part the result of undervaluation, by both individuals and society, of immunization and other preventive approaches to health care. VACCINE AVAILABILITY: MAJOR BARRIERS AND IMPEDIMENTS The few vaccine manufacturers licensed in the United States consti- tute a very specialized industry that depends both on high technical expertise and substantial investment. The production process is vulnerable to a variety of technical problems, any one of which can jeopardize vaccine supplies. Examples of such problems are microbial or chemical contamination, variations in vaccine potency, instability of the components used in the vaccine formulation, and undesirable biological activity that could result in injury. Because of the specialization involved in large-scale vaccine production, a firm's decision to halt production of a particular product can have far-reaching and long-lasting impact. Disbanding of production teams with a unique blend of expertise and, perhaps, disassembly of facilities represent losses that cannot be reversed easily. Such losses would hamper response if a vaccine shortage developed or if supplies of a particular vaccine were urgently needed for military personnel. Although some licensed foreign manufacturers and three institutions in the United States owned by state governments (Illinois, Massachu- setts, and Michigan) can help supplement domestic supplies of certain products, vaccine availability is nearly totally dependent on the decisions and actions of the nation's few commercial manufacturers. Two of those manufacturers produce only one vaccine each. Supplies of most childhood vaccines depend entirely on single producers. Two commercial companies nearly dominate pediatric vaccine production and distribution, and these firms do not directly compete in this, the largest market, because they concentrate on different vaccines. The sole-supplier situation underscores the nation's vulnerability to disruptions in vaccine distribution. Production by more than one firm is not adequate protection against supply interruption, however. The shortage of DTP vaccine in 1985 resulted when two of the three domestic suppliers withdrew from the market and the remaining manufacturer encountered production difficul- ties. To cope with the shortage, the Centers for Disease Control (CDC) recommended delaying the usual fourth and fifth booster shots of DTP vaccine until supplies returned to normal. Alternatives to the CDC recommendation were extremely limited. Although the federal government stockpiles some vaccines, no supplies of DTP vaccine were in reserve at the time of the reported shortage. Moreover, the small-scale stockpiling program serves as a hedge against brief supply interruptions, not the acute shortages that would result if a sole supplier ceased vaccine production and distribution.

6 The committee could not identify any contingency plan for correct- ing shortages that would result if all domestic firms discontinued production of a major childhood vaccine. The committee regards this situation with grave concern. Severe disruption of supply and the associated drop in immunization levels would foster resurgence of the infectious disease. Such a situation is not without precedent. In Japan, England, and Sweden outbreaks of whooping cough occurred after child immunizations slumped. The option of relying solely on foreign manufacturers for vaccine supplies is not practicable. Geographic distance, language differ- ences, political considerations, and differences in regulatory requirements could result in delays or discontinuation of vaccine distribution. In addition, most foreign manufacturers are reluctant to compete in the United States, identifying the uncertain liability situation as one of the reasons for their reluctance. Adequate supplies of vaccines could be ensured if the federal government assumed the role of “manufacturer of last resort," or if it entered into guaranteed contracts with manufacturers of needed vaccines. The prospect of federal vaccine production poses many complex policy questions, however. There would be issues of competition between government and industry, as well as questions about the government's liability for vaccine-related injury. The committee did not consider itself a proper forum for resolving such issues, but it did identify other questions relating to potential federal production. For example, it is uncertain whether the government bureaucracy guiding production decisions would be subject to market pressures that often lead to innovation and application of new technologies. The Institute of Medicine committee believes that, at present, solutions to the problem of ensuring vaccine supply should seek to use the facilities and expertise already existing in the commercial vaccine industry. To provide cohesion and guidance to the many disparate factors that influence vaccine supply, the committee recommends creation of a national vaccine commission (discussed further below). In addition to other responsibilities, such a body would develop contingency plans for ensuring the availability of vaccines. These plans should include the possibility of direct federal involvement in vaccine supply if commercial manufacturers determine that continued "open market" operation is not economically feasible. IMPEDIMENTS TO VACCINE INNOVATION Although available vaccines and widespread immunization have greatly diminished the destructive toll once inflicted by many serious infectious diseases, these achievements should not lead to complacency about the continuing need for innovation. Vaccines are not yet available for many devastating diseases in the United States and other countries. The attack on many tropical diseases has barely begun. In

7 addition, some available vaccines are not as good as they could be and should be replaced by safer, more effective preparations. Vaccine innovation evolves from a firm foundation of scientific research. Most of this basic research is supported by the federal government, which has allocated limited funds for studies of infectious disease and vaccine development. MTherefore, a rational method for establishing health care priorities is needed to guide allocation of limited research funds. (The two volumes of the Institute of Medicine report, New Vaccine Development: Establishing Priorities [1985, 1986], provide a quantifiable approach for comparing the health impact of diseases and for setting priorities among vaccine development proj- ects). Until recently, the federal government's dominant role in support- ing research on infectious diseases, although critically important, may have deterred industrial participation in this phase of vaccine Gevelopment. Collaborative efforts were troubled by subsequent problems in establishing property rights, but changes in government funding policies, as they pertain to the assignment of patents, may be reducing this obstacle to industry's involvement. The willingness of manufacturers to produce a new or improved vaccine also depends on evidence of an appropriate market, which may only partially reflect the true public health benefits that a new product offers. One possible cause of the underutilization of a vaccine--and the consequent inadequate market size and poor commercial development incentives--is a relative disregard for preventive care in the United States. Rather, the medical system and reimbursement poli- cies emphasize treatment. Another reason why a vaccine'’s true health benefits and profit potential may not be realized is the distinction between societal and individual welfare. The total benefits that accrue to society, such as reduced transmission of disease, are greater than the sum of benefits to vaccinated individuals. Behavioral research indicates that widespread diffusion and adoption of new medical technologies are largely determined by the responses of so-called "opinion leaders" in the relevant medical communities. This suggests that broad, unfocused efforts aimed at promoting awareness and adoption of new health care approaches, including new vaccines, are less effective than efforts that concentrate on professionals whose views and actions are likely to influence the practices of others in the medical field. The receptiveness of the general public or a specific group to a new vaccine is believed to be influenced by perceptions of disease susceptibility and consequences of infection, as weighed against the cost of actions (financial, social, psychological, etc.) necessary to reduce the perceived danger of infection. According to this “health belief model,” efforts to maximize public participation in immunization programs should begin with a survey of intended vaccine recipients to obtain information on their perceptions of the disease and the vaccine. Promoters of the vaccine can then develop a public information campaign that attempts to modify the views, which may be based on erroneous notions, that are most likely to hinder acceptance of immunization.

8 ECONOMIC CHARACTERISTICS OF THE VACCINE INDUSTRY Although available data are incomplete, certain conclusions can be drawn about the current economic situation of the U.S. vaccine industry. During the past 2 decades, the number of domestic manufacturers has declined by more than half. According to industry figures for the 1970s and early 1980s, the pharmaceutical companies that continue to produce vaccines are allocating smaller proportions of their research and development budgets to vaccines and other biologics. (Data are not yet available to determine whether this trend continued after 1982). Another indicator of diminishing commitment to vaccine innovation is the slowdown in the number of new products introduced. Between 1975 and 1983, new vaccines were introduced at a rate of less than 1 (0.77) per year, as compared with an annual rate of 1.5 new product intro- ductions between 1965 and 1974. Typically, decline in the growth of an industry and in the number of manufacturers signifies one of two events in the industrial life cycle. Either the industry has matured, responding to changes in demand and enhancing efficiency, or it is experiencing problems, which often stem from distorted incentives. The vaccine industry is characterized by several economic disin- centives that can discourage production and innovation. For one, the complexity of vaccine development, production, and quality control requires large investments. For example, the Institute of Medicine Committee on Issues and Priorities for New Vaccine Development estimated total development costs for each of several candidate vaccines to be between $20 million and $30 million, with a significant portion--perhaps half--borne by industry. The cost of research and development in relation to anticipated sales also can discourage innovation. Total vaccine industry revenues amounted to $170 million in 1982. In this regard, vaccines generally compare unfavorably to Other pharmaceutical products (e.g., drugs), where the likelihood of recouping similar research and development and production outlays from sales is usually more secure. Industry's perception that vaccines historically have received less effective patent protection than drugs presents another obstacle to innovation. However, recent changes in patent law and in government funding policies should enhance protection of vaccine innovation, although it is too early to assess the effects of these changes. Compared with issues concerning patent protection, industry apprehension over liability and the risk of litigation undoubtedly represent a much more powerful economic disincentive. The risk of litigation has clearly decreased the interest in involvement in the vaccine industry, as evidenced by the withdrawal of two DTP manufac- turers, and it has contributed to skewed costs. Data supplied by manufacturers to the Institute of Medicine indicate that vaccine operations, accounting for 5 to 15 percent of total pharmaceutical sales, are responsible for a disproportionate share (about 40 percent) of liability claims and for a majority (about 60 percent) of the

9 companies’ costs for insurance and other items related to product liability. Additional economic disincentives exist on the marketing side. The need for a vaccine to deliver lifelong or long-lasting immunity with One Or few doses is at odds with the general business goal of multiple Or repeat sales, and prospects for export sales are poor. Bulk purchases by the government at prices below market levels constitute a significant portion of vaccine sales, but the impact of these purchases on industry profits is not clear. VACCINE INJURY Today's vaccines provide excellent protection to individuals and society against their target diseases, and they are safe for the over- whelming proportion of recipients. They are not, however, universally effective or completely safe; no preventive or treatment measure is. Serious adverse reactions are rare, but they can occur even when a vaccine is properly manufactured and labeled. A major difficulty in assessing the frequency of true adverse reactions to vaccines, besides their rarity, is the fact that cause and effect cannot always be established in individual instances. Any one of four possibilities could account for an adverse event: 1. The vaccine may have caused the disorder. 2. The vaccine may have triggered or precipitated manifestations of an underlying disease that was destined to appear, regardless of vaccination. 3. Concern about fever or other minor reactions to vaccination may have prompted close examination that led to recognition of existing but previously unnoticed symptoms. 4. The timing of vaccination simply may have coincided with the appearance of an unrelated disease problen. Establishing the cause of an alleged reaction in an infant is especially difficult. To provide maximum protection against life- threatening infections, administration of childhood vaccines typically begins during the first few months of life, when inherited or birth- related neurological and developmental abnormalities are not yet evident and when disorders that may cause central nervous system damage are particularly likely to occur. Moreover, this is the age group in which sudden infant death syndrome (SIDS) is most frequent. In many instances, vaccination is mistakenly suspected as the cause of a serious disorder that has an entirely different origin. Understandably, close timing between appearance of the disorder and vaccination makes the vaccine suspect, but the association may be mere coincidence. For example, many of the severe injuries that are alleged to result from inoculation with pertussis vaccine have been shown to be caused by other conditions, even though they followed closely behind immunization. Temporal association does not necessarily prove Causation, and most explanations of the concept involve complex

10 epidemiological principles that are difficult to comprehend. In lia- bility cases, lay jurors are confronted with this unfamiliar concept, as well as a seriously damaged person and agonized family, who trace the onset of disability to the approximate time of vaccination. It is not surprising that juries are sympathetic to the plaintiffs in such cases. Precise estimates of the risk of vaccine injury often are not possible because serious or permanent reactions to vaccines occur once in many thousands or millions of doses administered. Consequently, very large populations--much larger than the hundreds or thousands of people studied during prelicensing trials--must be studied to identify these reactions and to determine their frequency. Although such information is desirable, the cost of obtaining it in controlled prospective studies may be prohibitive, making studies of this type a low public health priority. The following example illustrates the scale of studies required to provide precise estimates of the risk of vaccine-related injury. If 300,000 people were immunized with a particular vaccine and 8 developed serious reactions that were not found in the unvaccinated control population, the incidence of adverse reactions would be estimated to be 27 per million doses. However, the number of persons with injuries is so small that it could represent sheer chance occurrence, and the actual risk could be greater or smaller. According to statistical calculations, there is a 95 percent probability that the true rate of serious reactions lies somewhere between 12 and 53 cases per million doses. Furthermore, there is a 5 percent chance that the rate might be either lower than 12 or higher than 53 per million doses. Conse- quently, the estimate of 27 per million doses is hardly precise, even though the study involved 300,000 persons. Moreover, such studies may pose ethical problems. Evaluations for adverse reactions to a licensed vaccine, for example, might require withholding the vaccine from some persons for comparison purposes and, therefore, denying disease protection for the “control” subjects, who are required for a scientifically valid study. Well-controlled, carefully designed epidemiological studies do provide valuable information. Only from this kind of research can conclusions be drawn about the causes and rates of adverse reactions, and individuals vulnerable to such reactions be identified. Unfor- tunately, only a few studies have approached the necessary criteria. Current systems for reporting adverse reactions to the Food and Drug Administration and the Centers for Disease Control provide useful information, but are not an adequate basis for estimating the incidence of serious reactions. The same limitation would apply even if the systems were mandatory. Short of total suspension of vaccine use, there is no way to eliminate the rare but serious injuries caused by current vaccines, properly manufactured according to approved procedures and administered in accordance with recommended medical practices. The committee emphasizes the need to extend awareness of symptoms and conditions (contraindications) that make immunization with a specific vaccine inadvisable because of increased susceptibility to adverse reactions.

1l Every effort should be made to promote the availability of the best current information that explains the risks and benefits of vaccina- tion. The committee cautioned, however, that responsibilities for identifying vaccine-associated risks, for promoting awareness of contraindications to vaccination, and for accomplishing the many steps required for vaccine improvement are presently poorly defined and poorly coordinated. CURRENT STATUS OF LIABILITY LAW Under well-established legal principles, a vaccine manufacturer is not liable for injuries caused by a properly manufactured and labeled vaccine. According to these principles, a vaccine that is “properly prepared, and accompanied by proper directions and warning, is not defective, nor is it unreasonably dangerous," despite the associated unavoidable risk of injury (American Law Institute, 1965). In recent years, however, a few courts have acted contrary to these principles and have found manufacturers liable for such injuries. These rulings may reflect the fact that the injured individuals had been urged (Or required) by the government to participate in the immunization program and appeared to have no other recourse for compensation. These recent cases have generally been decided on the basis of the "duty-to-warn" doctrine, which holds that before using an unavoidably unsafe product the user must be informed of the potential risks associated with the product. Application of this doctrine raises a question--whose responsibility is it to inform prospective vaccine recipients of potential risks? In the case of medicines administered by physicians or other health care providers, courts have generally placed this responsibility on the health professional. For vaccines, however, some courts have ruled that the duty to warn rests with the manufacturer, even though the manufacturer is not involved in adminis- tering the vaccine and has complied with the requirements of proper production and labeling. It is unclear whether the courts that have interpreted the law in this way would permit manufacturers to avoid this responsibility through a formal agreement, between the manufac- turer and purchaser, stipulating that the vaccine purchaser is required to provide proper warning prior to administration. More recently, other legal theories of liability, which go beyond the duty-to-warn doctrine, have been advanced. In two cases, now being appealed, the plaintiffs prevailed by asking juries to rule on issues of social benefit and harm, as well as on the underlying scientific factors that contribute to public policy decision to use a particular vaccine. In one of these cases, the jury awarded punitive damages. Although punitive damages have not been a significant factor in litigation concerning vaccine-related injury, affirmation of this verdict by the court of appeals could significantly affect future vaccine litigation. Punitive damage awards, which can be almost unlimited in amount, would greatly increase the magnitude of financial risk for vaccine manufacturers. Whether such a legal situation will evolve is uncertain, but the recent ruling demonstrates the highly

12 unpredictable way in which courts have ruled on questions of manufac- turer responsibility. The committee is not aware of any cases in which health care providers were held liable for vaccine-related injury, except in situations involving failure to follow accepted medical procedures. The committee currently does not recommend any change in the rules applicable to health professionals because liability for improper administration is appropriate.* It recognizes, however, that if any proposal limiting recovery against manufacturers were adopted without provision for reasonable compensation, lawsuits might be redirected from the manufacturer to the administering professional. This could discourage health care providers from participating in immunization programs. Such a situation would require careful monitoring. Tracking shifts in litigation and recommending remedial action would be one of the functions of the proposed vaccine commission. CONSEQUENCES OF UNCERTAINTY OVER LIABILITY LAWS The courts’ unpredictable handling of claims alleging manufacturer liability for vaccine-related injury has created a state of confusion. As a result, vaccine manufacturers have no guidelines for assessing the limits and magnitude of their liability. Compounding the organiza- tional and scientific deterrents already discussed, the apprehension of manufacturers about the possibility of costly and often protracted litigation jeopardizes the nation's vaccine supply. Causation is difficult, if not impossible, to determine with certainty in specific cases. Consequently, litigation is usually the only option for injured individuals seeking compensation. In the committee's judgment, this has led to a situation in which jurors and judges may be inclined to view tort awards as a means of providing compensation, irrespective of misconduct or scientific considerations. For the manufacturer of a vaccine known to pose a small but unavoidable risk of injury, this means a gamble with very large stakes. With claims averaging several million dollars for each case and an increasing number of courts imposing liability, manufacturers face the prospect of incurring enormous costs. The only way to eliminate the threat of such heavy losses is to discontinue vaccine production. If a firm chooses to continue marketing a vaccine, its only options are to attempt to settle claims, a strategy that could produce a general expectation of liability, or to resist claims in litigation, with the risk that unfavorable outcomes could establish liability. The cost of either strategy would be high, even if claims are defended success- fully, and would have to be passed on to consumers through price increases. To gain a clearer picture of the impacts of the current liability situation, the committee undertook an informal survey of vaccine *The committee recognized that malpractice claims, in general, represent a major concern of the medical profession, but it did not feel that the malpractice issue was within the scope of its charge.

13 manufacturers, soliciting pertinent information on claims, settlements, and provisions (e.g., insurance) for dealing with such matters. Most firms (four out of six) responded to the survey, on the condition that commercially sensitive information be published in aggregate form. This condition and the incomparability of some data did not allow the committee to assemble a totally comprehensive picture, but the follow- ing summary does characterize some of the consequences of the current situation. As of the spring 1984, 166 suits were pending against the four responding manufacturers. During the previous decade, the firms spent a total of $2 million for cases that had either been settled or fin- ished with the appeal process, and spent an additional $1.8 million on legal defense, not including the costs some respondents incurred for the salary and expenses of "in-house" counsel. A follow-up survey conducted in the spring 1985 revealed that about 65 additional suits had been filed during the intervening year. Only a few of the previously filed cases had been settled, some for amounts of about $1 million, and some verdicts were being appealed. Legal costs during the previous year ranged up to “several million dollars" for some manufacturers. Information supplied by two manufac- turers indicated a sharp increase in the number of claims filed. The two firms' experiences varied considerably, but the number of reported Claims filed against them in 1983 was twice the total for 1980. Over the past 2 decades, pharmaceutical companies have been withdrawing from vaccine manufacturing and marketing. The liability situation and the resultant costs and difficulty in securing insurance are increasingly prominent factors in decisions to discontinue vaccine operations. These decisions suggest that current or anticipated expenses from liability for vaccine-related injury are seen as an unreasonable burden or an unacceptably risky financial gamble when compared with the revenue potential of vaccines. The future behavior of the courts and the responses of manufac- turers cannot be predicted with certainty. The committee is concerned, however, that manufacturers’ apprehensions engendered by the current state of legal confusion will further exacerbate the well-documented problems that jeopardize vaccine supply and innovation. Withdrawals from the market left the nation, in 1984 and early 1985, dependent on one manufacturer for polio and DTP vaccines, and on another for measles, mumps, and rubella vaccines (subsequently a DTP manufacturer rejoined the one that was transiently sole distributor). Should these manufacturers conclude that the risk of litigation is unreasonably high and decide to halt production, vaccine shortages could lead to a resurgence of these serious diseases. In addition, the same fears that threaten to interrupt vaccine supply serve as a deterrent to the development of new vaccines or improving existing ones. Moreover, uncertainty over liability litigation is likely to discourage new or foreign vaccine manufacturers from entering the U.S. market.

14 PROPOSED ACTION: NATIONAL VACCINE COMMISSION The lack of a formal mechanism to promote cooperation in the inno- vation, production, and use of vaccines limits the benefits obtainable from existing immunization programs and hampers the development of new programs. The problems associated with absence of formal guidance are primarily those of omission rather than commission. Such problems include delay or inefficiency in achieving public health goals and failure to tackle problems that are not the direct responsibility of an existing group. Existing agencies and organizations have performed adequately, but the overall results have not been satisfactory. For example, many of the problems and concerns identified by this committee were also voiced by two other study groups (the National Immunization Work Groups in 1977, and the Office of Technology Assess- ment in 1979). These groups presented recommendations or options for correcting the public health dangers they identified. No political body assumed responsibility for evaluating and implementing either group's proposals. The problems remain unsolved, and the threat to public health continues unabated. To overcome this inertia and the difficulties that result from the nation's fragmented approach to vaccine innovation, production, and use, the committee recommends establishment of a national vaccine commission. The commission's objective would be (1) to advance the control of infectious diseases by promoting the continued innovation, production, and use of vaccines, and (2) to ensure that this goal is achieved in a socially responsible manner. The commission would moni- tor all aspects of immunization efforts in the United States. One of its primary responsibilities would be early identification of potential problems affecting vaccine supply. It also would help educate and inform the public, physicians, and government decision makers about the effects of various immunization actions and policies. When necessary, the commission would become an impartial broker to promote the avail- ability of needed vaccines and to coordinate collaborative activities for which no suitable mechanism exists. A variety of possible modes of operation for the commission were identified, some of which have been the subject of previous proposals. It could be established within either the executive or legislative branches, be affiliated with an existing independent entity, or created as a federally chartered, nonprofit corporation. Each of these possi- bilities has certain advantages and disadvantages. Based on its analysis of the options and its knowledge of the fate of previous recommendations, the committee favors establishment of the commission as a congressionally chartered, nonprofit corporation. However, certain other organizational and institutional arrangements would allow the commission to achieve its purposes. The committee suggests that the national vaccine commission should be supported at least in part by federal appropriations. The commis- sion should report at least annually to Congress and the President, as well as when immediate action is required to avert threats to the public health. Recommendations for membership on the commission's board of directors should be sought from groups representing health

15 care providers, lawyers, pharmaceutical companies, insurance companies, public interest organizations, universities, and the international health community. Representatives of relevant government agencies would be appointed as liaison members. The commission's mode of operation and its initial activities should be determined by the commission itself. Specific activities might include: © identifying production problems and commercial decisions that pose a threat to vaccine supply; o determining the need for vaccine innovation and improvement, assessing current research addressing these needs, and setting priorities for vaccine development; © monitoring vaccine needs in developing countries and promoting efforts to meet these needs; o evaluating biotechnological advances that could potentially hasten progress in vaccine innovation and production; © promoting and evaluating efforts designed to increase knowledge of the public health benefits of immunization programs and participa- tion in them; © monitoring the supply and training of the specialized personnel necessary for vaccine innovation; and © monitoring and evaluating legal issues that affect vaccine development and use. The committee recognizes that the creation of a national vaccine commission should not be undertaken without due consideration; however, it emphasizes the need for rapid action. Failure to act on earlier proposals has contributed to the growing severity of problems that now jeopardize vaccine supply and innovation. PROPOSED ACTION: FAIR, CONSISTENT APPROACH TO COMPENSATION AND LIABILITY Current legal methods for handling claims of liability for vaccine- related injury suffer from two major deficiencies. First, injured individuals and their families are subjected to protracted, costly proceedings with uncertain results. The committee believes that the small number of individuals who suffer serious adverse reactions to vaccination are deserving of compensation for a number of reasons. Immunization often is mandatory; when not required, it is often encouraged by the government. Therefore, vaccine recipients and their families lack the option of not participating and avoiding the risk of injury. Moreover, vaccination programs accomplish a public good. In some cases, the principal goal of immunization programs is to protect society from outbreaks of infectious disease. The individual incurring vaccine-related injury is, in essence, an unavoidable casualty of public health efforts, and, therefore, especially deserving of compen- sation. The adjudicative procedures now used for resolving issues of