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CONNAUGHT INDEMNIFICATION FROM DTP LIABILITY BY GOVT. WOULD ALLOW RE-ENTRY INTO GENERAL VACCINE MARKET, FIRM MAINTAINING FULL PRODUCTION -- 7 MIL. DOSES IN PIPELINE

Executive Summary

Connaught could inject three million doses of DTP (diphtheria-tetanus-pertussis) vaccine into the marketplace within 60 days if the govt. would indemnify the firm, company VP-General Manager David Williams testified at a Dec. 19 hearing before Rep. Waxman's House Health Subcmte. Noting that Connaught's difficulties in negotiating adequate liability insurance have caused the firm to restrict its vaccine distribution, Williams said one "short-term solution which we feel is open to Congress at the current time is the indemnification of Connaught to enable us to supply approximately three million doses of this product to help eliminate the current shortages of DTP vaccine." He added the firm has "approximately seven million doses in the pipeline" at various stages of production. Williams told the subcmte. that his firm hopes to return to normal marketing of its vaccine. "We do have confidence that we can put together a self-insurance structure that will allow Connaught to get back into a normal supply situation," he said. Since July, Connaught has limited its DTP distribution to existing city, county, state, and hospital contracts, Williams said despite those self-imposed restrictions in firm has continued its previous production pace. "Our production during this short-term interruption has continued at its normal pace. As a result our inventory is higher now than it is in a normal supply situation," he said. "We do not have the ability to ship that product because we do not have any insurance at all for those shipments," Williams continued. "Given the potential liability risk, shipping just one dose without insurance, one [adverse reaction] case has the capability of actually wiping out Connaught as a corporate entity." The firm is making "diligent efforts" to negotiate product liability coverage, Williams said, but "it now appears unlikely that this situation will be resolved in the near future." The company reiterated its position of support for "a fair, equitable vaccine compensation system" as a long-term solution to its predicament and any threats to the natl. supply of DTP vaccine. The Centers for Disease Control (CDC) raised concern about possible DTP vaccine shortages when it recently announced a recommendation that booster shots should be delayed so that infants nationwide can be sure to receive the initial regimen of three inoculations ("The Pink Sheet" Dec. 17, T&G-8). Lederle is marketing the vaccine through normal distribution channels; Wyeth is selling the vaccine at cost to Lederle; and both Wyeth and Connaught are producing the vaccine in order to fulfill existing govt. and hospital contracts. Lederle President Robert Johnson testified that his firm has invested $5 mil. in additional production and quality control equipment in order to fill current needs. He added that "the recent, untimely but unusual occurrence where two batches of vaccine did not meet our own stringent quality control standards is a result of our own built-in safety precautions. It is unfortunate that this happened during a time of peak demand." Noting that the price of DTP vaccine has risen 700% in one year and 2,000% over the last two years, Waxman asked Johnson to explain the differential between Lederle's 20› per dose cost and its $2.80 per dose price to customers. Johnson replied that the sales price helps cover the cost of expanding, R&D, and liability costs. Liability "represents say 30-40% of the sales," Johnson said. "We have an insurance carrier, but we must set aside a reserve as well as pay a premium." He added that Lederle is covered by its carrier "until July of 1985."

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