RE: can you believe it?

[Guest guest]

Government contracts are hateful in the eyes of vaccine makers because it locks

in prices regardless of how urgent the demand. They want to side-step the

government and deal directly with the market through insurance companies, etc. I

wonder what price people will be willing to pay in a vaccine emergency? I'll bet

the vaccine industry already knows.

Quote:

'But they also pointed out that with the government purchasing half the vaccines

in the US, that had a negative impact on vaccine innovation, because it

discouraged people from taking risk. The government was basically unwilling to

provide a price that made the risk worthwhile. So they're really advocating

getting the government out of the vaccine purchasing, and try to do that more

through private insurance rather than have the government as a big purchaser. So

they see government purchasing as a big barrier toward innovation, and it

discourages a lot of new smaller companies from coming in.' Gilmartin

Merck CEO

[ ] can you believe it?

Pediatric Vaccine Stockpile at Risk

Makers Hesitate to Supply Government

By Brown

Washington Post Staff Writer

Sunday, April 17, 2005; Page A01

Just three years after the largest and most serious shortage of childhood

vaccines in two decades, the federal government's stockpile of childhood

vaccines, designed as a buffer against shortages, is nearly empty -- and

without immediate prospects of being filled.

Three of the four companies that produce the shots recommended for every

American child told the federal government last year that they would not

sell their products to this little-known but important piece of the nation's

public health infrastructure.

Although opinions differ, it appears that the Pediatric Vaccine Stockpile

has become an innocent bystander wounded in the government's crackdown on

deceptive accounting practices.

No one has accused the vaccine manufacturers of wrongdoing. However, they

can no longer treat as revenue the money they get when they sell millions of

doses of vaccine to the stockpile because the shots are not delivered until

the government calls for them in emergencies. Instead, the vials are held in

the manufacturers' warehouses, where they are considered unsold in the eyes

of auditors, investors and Wall Street.

Today, the stockpile contains 13.2 million doses of vaccine, less than

one-third of the goal of 41 million doses. It is supposed to hold supplies

of eight shots that together protect against 11 childhood diseases. However,

for two of those products -- including the workhorse DTaP, which protects

against diphtheria, tetanus and pertussis -- it contains no doses. The

vaccine is not in storage in company warehouses or anywhere else. It simply

does not exist.

Created by Congress in 1983, the stockpile is supposed to contain enough

vaccine to supply the nation's needs for six months. Its virtual collapse is

an acute embarrassment to the Department of Health and Human Services, the

Centers for Disease Control and Prevention, and the vaccine makers.

The stockpile has never reached its full target amounts, but its depleted

state now means the nation could not easily weather another big vaccine

shortage, potentially putting the health of millions of children at risk.

Only two vaccines -- measles, mumps and rubella (MMR), and varicella

(chickenpox) -- are warehoused in the desired amounts.

Memories are still fresh of 2001 and 2002, when the country did not have

adequate supplies of five vaccines that together protect against eight

diseases. That shortage did not lead to an increase in death or disease, but

it did require physicians and clinics to ration and temporarily change the

routine schedule of shots.

In testimony before Congress, Walter A. Orenstein, then head of CDC's

National Immunization Program, called the situation " unique and

unprecedented. "

Last winter, the United States experienced a shortage of influenza vaccine.

That product is not in the pediatric stockpile, but the near hysteria that

erupted when contamination in a factory cut the supply of flu shots in half

was further evidence of how vulnerable the nation is to the decisions and

fortunes of the few remaining U.S. vaccine makers.

Although there have been informal discussions among the CDC, HHS, the

Securities and Exchange Commission, vaccine companies and congressional

staffers, there has been no concerted effort to find a solution that will

persuade the companies to resume sales.

" If it was up to me, I'd start the meeting at 1 o'clock, lock the door, and

wouldn't let anyone leave until they had found a solution, " said Jerome O.

Klein, a pediatrician at Boston University School of Medicine and a member

of the National Vaccine Advisory Committee.

Klein's frustration is starting to be reflected in Congress.

" It's inexcusable that even though the administration had the money for

this, they haven't made any progress, " Rep. Henry A. Waxman (D-Calif.) said

recently. " I don't care how they solve it -- they should just solve it. "

The ranking Democrat on the Committee on Government Reform, Waxman said he

is willing to sponsor legislation to carve out a legal exception that would

allow companies to " recognize " revenue from sales to the vaccine stockpile

-- if such a radical step becomes necessary. One of the companies, however,

said its problem is not with " revenue recognition " but with the details of

managing the vaccine inventory.

Other parties were reluctant to discuss possible solutions or who, if

anyone, is to blame for the empty shelves. The SEC, which enforces

accounting practices, would not speak on the record. HHS officials would not

make available the person talking to the SEC on the matter. The department

referred questions to its subordinate agency, the CDC, whose officials said

important decisions about the stockpile are being made at the department

level.

The firms that have stopped selling vaccine to the stockpile provided some

information. Merck & Co. Inc., the one company still making new contracts

with CDC, was silent.

The stockpile's usefulness is not theoretical. The government has gone into

it nine times since 1984, the year after it was established. This was done

to get vaccine for immediate use in a disease outbreak, or to prevent supply

disruptions when a manufacturer had production problems or shut down a

plant.

In January 2002, the government withdrew 700,000 doses of MMR vaccine when

Merck, the manufacturer, had problems at a factory. In August 2003, CDC used

46,000 doses to fight a measles epidemic in the Marshall Islands.

In both cases, the government took out vaccine stored by the manufacturer

but owned by HHS under a " buy-and-hold " contract. That long-standing

arrangement benefits the government because it includes a provision to

prevent the stockpiled vaccine from expiring and having to be discarded.

While the government owns the vaccine, the companies are paid to store and

rotate the stock. When a vial's shelf life falls below 12 months, it is sold

on the open market and immediately replaced by newly made product.

Historically, companies could list as revenue the money they got for vaccine

sold to the stockpile this way. That is no longer true.

Although the vaccine makers may use income from the sales any way they want,

in accounting terms the money can no longer be " recognized " as revenue.

Because the amounts of vaccine are large -- the stockpile has a target of 10

million doses of DTaP, for example -- excluding those sales from the bottom

line makes some companies unhappy.

The accounting change came after the SEC issued a bulletin in December 1999

seeking to clear up confusion about revenue recognition.

Booking phony, theoretical or incomplete sales is the most common way

companies make themselves look more profitable than they are. According to

the Huron Consulting Group, over the past five years problems with revenue

recognition were the leading reason U.S. corporations had to amend or refile

financial reports. There were 253 such restatements last year, a record.

The SEC does not believe it created new accounting standards with its

bulletin, but it gave companies a timetable for compliance. Accounting giant

Pricewaterhouses, which audits all four vaccine makers, sent clients

an analysis in January 2001 noting that " we expect the implementation . . .

to have a significant impact on the revenue recognition reporting practices

of a number of [companies]. "

The vaccine situation came to a head late last summer when CDC asked the

manufacturers to make new sales to the stockpile. Three said no. Only Merck

said yes.

Sanofi Pasteur (formerly Aventis Pasteur) wrote on Aug. 26: " Almost 2 years

ago, AvP raised the 'revenue recognition' issue with CDC. . . . We

understood from our conversations that we were the first manufacturer to do

so. . . . We stated then that short of SEC changes in the interpretation of

Staff Accounting Bulletin # 101, and/or changes to the stockpile terms, that

AvP would be out of the stockpile business. "

Wyeth, which had previously sold vaccines against polio and Haemophilus

influenzae type b to the stockpile, did not mention revenue recognition when

it, too, declined. Nor did GlaxoKline, which had never participated.

GlaxoKline told CDC on Aug. 31 it would not sell DTaP, DTaP-hepatitis

B-polio vaccine or hepatitis A vaccine until " the structure for a . . .

stockpile agreement can be resolved. "

A GlaxoKline senior vice president, Pernock, said that accounting

issues are not a sticking point but that " costs associated with managing and

rotating inventory " are.

All three companies say they support the idea of a stockpile. A Sanofi

Pasteur vice president, Phil Hosbach, termed its diminished state " really a

threat to public health. "

Without a solution, the stockpile is likely only to get smaller, and its

failure to meet its purpose even more glaring.

Neisseria meningitidis bacteria cause about 2,800 infections a year in the

United States, many in college-age adults. Ten to 15 percent of those

infected die, and up to 20 percent are made deaf or otherwise permanently

disabled.

In January, the Food and Drug Administration approved a vaccine against N.

meningitidis infection. Next month, CDC will add it to the list of shots all

American youngsters should get -- which means it, too, should be stockpiled.

[Guest guest]

I certainly have a very different view of vaccine makers than I did 2 years

ago!!

Sweetie