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NO-FAULT VACCINE COMPENSATION SYSTEM MODELED ON HIGH SCHODL ATHLETICS INSURANCE PROGRAM COULD REDUCE TORT LIABILITY CLAIMS, INSTITUTE OF MEDICINE REPORT SUGGESTS

Executive Summary

A private-sector no-fault insurance system for vaccines to reduce tort liability claims could be modeled on a recent program established by high school athletic associations. The athletic model is suggested in an lnstitute of Medicine report, "Vaccine Supply and Innovation." Under this approach, the report explains, "an insurance contract would be established whereby health care providers (through insurers [e.g., manufacturers]) would, before a vaccine is administered, guarantee to tender within a set period to a person seriously affected by a vaccine the claimant's net economic loss." The criteria of eligibility would be predetermined in the insurer's contract, and "the claimant would be given a set period to accept the tender or to choose to pursue the claim under tort law," the report states. The system, which runs under the auspices of the Natl. Federation of High School Athletic Assns., has been in effect in over 40 states since the 1983-1984 academic year, the report notes in an appendix. Through part of 1984, "six eligible claims were filed and all opted to accept the insurance offer rather than pursue tort claims." The use of the athletic model for vaccine compensation was outlined in a Septemmber 1984 article in Vaccine by University of Virginia Law Professor Jeffrey O'Connell. The no-fault approach is one of 10 options for a vaccine injury compensation system described in the report. The study, prepared by the institute's Cmte. on Public, Private Sector Relations on Vaccine Innovation, is intended to aid the ongoing congressional debate on vaccine compensation. According to the report, the cmte. concluded "that its most useful contribution" in recommending "solutions to the problems of providing just compensation for vaccine-related injuries and maintaining vaccine supply and innovation . . . would be to identify and evaluate a series of options available to those seeking alternatives to the current system." The cmte.'s report concludes that the "common tort law system is not able to provide predictable, rapid, and equitable compensation for vaccine-related inj uries." Several bills to establish vaccine compensation systems are currently pending in Congress, including measures introduced by Sen. Hawkins (R-Fla.) and Reps. Broyhill (R-NC) and Madigan (R-111.). The Reagan Administration also has developed a compensation proposal ("The Pink Sheet" July 22, T&G-5). The report observes that a private no-fault insurance scheme would offer more certainty of payments to injured individuals than the tort system and could reduce the number of tort claims. In addition, such a system could be adopted immediately. In the article in Vaccine, O'Connell suggested that the number of claims would increase but the size of awards would be significantly reduced. The institute report also points out that among the disadvantages of such a program are that "universal availability of compensation would not be guaranteed" and manufacturers would remain at risk from "tort claims for unavoidable injuries." The athletic assn. model is the only private sector solution to the liability issue addressed in the report. The cmte. recognized that federal govt. intervention is a likely outcome. A number of the options prepared by the cmte. include use of the private system in tandem with a federal public insurance program. The public insurance program "would involve creation by Congress of a statutory mechanism to provide the manufacturers with insurance coverage against total costs (beyond a specified, manageable amount), including legal expenses and amounts paid after settlements and judgments, resulting from the manufacture and sale of vaccines in accordance with regulatory standards," the report states. Noting that private insurance is "difficult to obtain at premiums considered by manufacturers to be reasonable," the cmte. report explains that "the federal government could provide such coverage to the manufacturers in two ways." The government "could simply obtain bids for such insurance on the commercial market and then pay whatever premiums are required" or, alternatively, "it could create a specialized insurance corporation to provide the insurance," the report states. Other compensation/liability options noted by the cmte. include: (a) a vaccine supply public insurance program operating in conjunction with either a supplementary compensation system or no-fault insurance; (b) a supplementary (non-exclusive) compensation system; (c) a compensation system with restricted tort options; (d) a mandatory claim review by a compensation board with tort option; (e) a change in tort law limiting mfr. liability either by eliminating "failure to warn" as grounds for action restricting liability to misconduct during manufacturing; or (f) federal assumption of liability for all vaccine-related injuries. (EDITORS' NOTE: For a summary of options presented in the report, see box, p. 7.) The report asserts that "the primary objective in designing a system to provide payments to individuals with vaccine-related injuries is to find an approach . . . that (1) provides predictable, rapid, and equitable compensation for those injured; (2) ensures that no party is shielded from action for suspected misconduct; and (3) reduces or removes disincentives to vaccine manufacturing." The compensation system "envisioned by the cmte. would be created by federal legislation," the report states. "It could be established within an existing government department or as a new entity. lt would be empowered to raise and distribute funds to compensate persons with vaccine-related injuries," the report continues. Mfrs. and health providers, according to the cmte., should be subject to legal action only if there is "evidence of misconduct." Injury "resulting from a vaccine that has been correctly manufactured and administered in accordance with recommended medical practices should be treated essentially as a no-fault injury," the report declares. Funds for a compensation system would come from a vaccine surcharge, the cmte. suggested. "The surcharge should be based on the best available actuarial judgments about vaccine risks, and should be reset at least annually to reflect previous over- or underestimates of needs," the report asserts. "If the surcharge fund becomes exhausted at any time, the federal government should be obligated to lend the compensation system enough money to pay claims, and the system obligated to make sufficient adjustments in its future surcharges to repay the loan." The cmte. also recommended that a natl. vaccine commission be created "to advance the control of infectious diseases by promoting the continued innovation, production, and use of vaccines and to ensure that this goal is achieved in a socially responsible and just manner," the report states. The report identifies several possible operational modes for the commission but states that the cmte. "favors establishment of the commission as a congressionally chartered, non-profit corporation." This option would allow the commission to serve "an intermediary role between federal agencies, industry, and health professionals without the perception of control by any of these groups," the report observes. The commission would require a budget of $1 mil. annually to maintain "a minimum level of effective activity," IoM estimates. Possible areas of activity for the proposed commission, according to the cmte. report, include evaluating the potential applications of advances in basic biotechnology to vaccine development, and monitoring the training of personnel needed to ensure continued vaccine innovation. Other duties of the advisory body, the report suggests, could include monitoring the availability of existing vaccines to anticipate problems resulting from production difficulties or commercial decisions affecting supply; monitoring the need for improvement of existing vaccines and setting priorities in this area; and evaluating legal issues related to vaccine development and use. Chart omitted.

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