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Executive Summary

Lederle DTP vaccine prices will remain at current levels until the company sees a decline in lawsuits as a result of the vaccine injury compensation fund, Lederle President Robert Johnson told a Senate Appropriations Committee hearing March 15. The company currently builds an internal $2.62 surcharge into each vaccine dose above and beyond the federal government's $4.56 excise tax to fund the National Childhood Vaccine Injury Act, which went into effect Jan. 1, 1988. As a result of the two surcharges, Lederle DTP vaccine prices have increased approximately 25% since Dec. 31, according to price data from the Centers for Disease Control. The increase is in spite of a 50% ($2.62) per dose reduction on Jan. 1 in Lederle's internal liability surcharge. The March 15 hearing was called by Sen. Dale Bumpers (D-Ark.) to determine if manufacturers' price increases since the end of 1987 are justified in light of the government-sponsored National Vaccine Injury Compensation Program. Merck declined an invitation to give testimony at the hearing. Explaining Lederle's decision to maintain its own liability surcharge on top of the government excise tax, Johnson noted that in spite of the excise tax, the industry "still has the open door question." He said that until the company "has experience otherwise, we can only make our best guess as to what the future awards will be." Johnson asserted that "those who feel they can receive full compensation for their alleged damages by pursuing their rights in court will no doubt continue to do so. The funds being sought will do little to relieve the pressure of this kind of litigation. We have hundreds of suits now pending before us, and we fully expect most of those cases to remain within the tort system." In his opening statement, Bumpers directed two questions at the childhood vaccine manufacturers: "Can the failure of the pharmaceutical companies to lower their prices -- and the action of one company to raise prices -- be justified in light of the reduced risks to them resulting from the Vaccine Injury Compensation Act?"; and "What can we expect from the manufacturers as to vaccine prices once the Vaccine Injury Compensation System is operational?" The senator declared: "While the Congress anticipated the need for some additional funding to cover vaccine surcharges until the positive effects of the compensation system were reflected in reductions in prices, I am appalled by the response of the manufacturers to these surcharges and to the compensation system." Bumpers noted that "two manufacturers" that collect their own surcharge to pay vaccine injury claims "have only modestly reduced these 'internal liability charges.'" Merck, he noted, "has actually increased the price of its vaccine and also implemented the full federal surcharge on MMR vaccine." The price of MMR vaccine "will increase by more than 50% from 1987 to 1988" as a result, Bumpers asserted. Merck disputes the price fitgures, asserting that MMR-II has increased in price 35%. Merck says it has never collected liability charges for its vaccine since it carries liability insurance over its entire product line. Also testifying, Rep. Waxman (D-Calif.) predicted that the compensation program should make manufacturer's liability charges unnecessary. Waxman also asked that the Senate committee give special consideration to those children who had cases pending before the compensation law took effect. "It was with great reluctance that the health subcommittee in the House moved to separate these children from the trust fund created by excise taxes, but it was necessary to do so in order to keep the trust fund solvent and the excise tax affordable," Waxman said.

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