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UNIVERSAL GOVERNMENT PURCHASE OF VACCINES WOULD BE AUTHORIZED IN LEGISLATION INTRODUCED BY SEN. RIEGLE; VACCINE REGISTRIES CALLED FOR BY COMPANION BILL

Executive Summary

Sen. Riegle (D-Mich.) will be the Clinton Administration's point-man on vaccine purchasing legislation in the Senate. The Michigan Democrat introduced S 733 on April 1 to give the Department of Health & Human Services the authority to act as sole purchaser of pediatric vaccines, and Riegle will be faced with moving the bill through the Senate Finance Committee. A draft of the bill states that the HHS secretary would "negotiate a reasonable price for vaccines...that fairly takes into account" the excise tax on vaccines and several costs incurred by manufacturers. Manufacturers bidding for federal contracts would provide HHS with data on their costs for production, research and development, handling and shipping. The companies would also be required to report on marketing costs, profit levels sufficient to encourage future R&D and the cost of maintaining adequate capacity for control of disease outbreaks. The purchasing authority bill is half of a two-part legislative package entitled the Comprehensive Child Immunization Act of 1993. The companion bill (S 732), which was introduced by Sen. Kennedy (D-Mass.) on the same day, would set up a nationwide immunization tracking system via the granting to states of monies to establish vaccination registries. The estimated cost of enacting both bills would be approximately $1.5 bil. in 1995. Cosponsors of the Kennedy part of the package include Riegle and Sens. Simon (D-Ill.), Wellstone (D-Minn.), Metzenbaum (D-Ohio) and Mikulski (D-Md.). S 733 cosponsors include Kennedy, Metzenbaum, Wellstone and Mikulski. Introducing the Immunization Act, Riegle said that he will hold hearings before the Health for Families/Uninsured Subcommittee of the Finance Committee, which he chairs, "to solicit comments from the manufacturers on how to improve this legislation." At an April 1 press conference, Riegle said the hearings would be held "within the next five or six weeks, and we hope to move the legislation as rapidly as we can this year." Expected cosponsors of the legislation in the House include Reps. Dingell (D-Mich.), Waxman (D-Calif.), Slaughter (D-N.Y.) and Clayton (D-Mo.), all of whom spoke in favor of the legislation at an HHS press conference called by Secretary Shalala on April 1 to announce the initiative. While the dais at the HHS introductory press conference was packed with key Democratic health figures, the prospects for the legislation are complicated by the two-bill structure. The Kennedy part of the bill establishing the tracking-registry system is basically noncontroversial. The Riegle part of the bill is clearly the more controversial section and has a tougher route through the Finance Committee. None of Riegle's co-sponsors are on the Finance Committee. An important Finance Committee Republican, Sen. Danforth of Missouri, immediately responded negatively to the Riegle proposal. Danforth questioned the three-to-one ratio of government expenditures for purchase of vaccines to delivery and education functions. He intends to introduce legislation "that makes better use of any additional resources" later in April. According to HHS estimates published April 1, federal outlays for the purchase of childhood vaccines under S 733 would be $1.1 bil. in 1995 and similar annual amounts out to 1998. The price negotiation process between HHS and the suppliers would include a stipulation that "the Secretary shall enter into contracts when feasible with multiple manufacturers of the same recommended childhood vaccine." The vaccine purchasing bill would also contain a clause prohibiting vaccine manufacturers from charging "additional shipping and handling charges" for vaccine distribution. Shalala indicated April 1 that the government intends to rely mainly on vaccine manufacturers for distribution. She said that "much" of the proposed $1.1 bil. would be for "the purchasing program," not distribution. "The distribution is now handled by the drug companies themselves...they do have a delivery system," she concluded. The purchasing authorization bill also includes a provision for reauthorization of the National Vaccine Injury Compensation Act of 1986, which was allowed to lapse in 1992. Outside the Clinton package, Rep. Matsui (D-Calif.) introduced a stand-alone bill (HR 1576) to extend the vaccine trust fund March 31. HHS estimates that the cost of setting up the national vaccination registry as proposed in the Kennedy bill would be $382 mil. in grants from 1995 through 1999 to help states set up vaccination registries. These registries would track children from birth to monitor vaccination levels. The $1.5 bil. in spending proposed in the Immunization Act would be in addition to the $300 mil. appropriation already proposed in the Administration's economic stimulus package for increased funding for immunization action plans in place in 87 cities and counties ("The Pink Sheet" Feb. 15, 1993, p. 6). Funding for the proposal will be provided for in the administration's health care reform plan to be released in May. S 732 would also provide some funding towards improving community outreach and education, extending clinic hours, and improving vaccine distribution channels. Some funds would also be spent in 1993 and 1994 to cover start-up costs of the national vaccination registries. The administration plans to phase out the comprehensive vaccination program if immunization services become universally available as part of a national health care reform program. As such, it appears as a form of short-term price controls to address the vaccination issue until a health reform plan is implemented. Three of the sponsors of the proposal are from Michigan, which already provides vaccines free of charge to all of its children. Dingell acknowledged that "we do not, even though we have this [program]...have a 100% rate of immunization." He concluded: "This means that other steps will have to be taken other than just the availability [of vaccine]." Riegle estimated that there are 120,000 children in Michigan who do not receive the required immunizations by the age of two. A Centers for Disease Control & Prevention evaluation of different national vaccination plans states that "immunization coverage is higher" in the 11 states with universal vaccine purchase. "However," the report concludes, "the differences are not great." The report finds that "differences in median coverage rates for the individual vaccines vary from 9% to 12% with the universal purchase states always higher." CDC adds that "differences may not be solely a function of the purchase policy since the health care delivery systems in states with universal purchase...are very different from other states." Ironically, two new childhood vaccines were approved the week the Child Immunization Act was introduced. Lederle received approval for Tetramune March 31 and SmithKline Beecham's ActiHIB was cleared by FDA on April 1 (see related items, T&G-4). If the Administration plan does nothing else, it will make more difficult the pricing decisions for Lederle and SmithKline Beecham on the new combined vaccines. Lederle-Praxis President Ronald Saldarini told an April 1 press conference that the administration proposal "throws into doubt" Lederle's investment in vaccine research. "The actual process of reconsideration" of which projects to pursue "has already begun," Saldarini said. If Lederle had to sell vaccines exclusively at the price currently offered to the federal government, the firm would "reconsider the business immediately," Saldarini said. SmithKline Beecham said that it is "freezing" plans to build a new $10 mil. pediatric vaccine manufacturing facility in North America until the language of implementation of the vaccine proposal is settled. Merck pointed out that it is developing a "new vaccine that combines existing vaccines into one shot, reducing costs of health delivery and injection pain for children." Merck is working with Connaught to develop the vaccine ("The Pink Sheet" June 22, 1992, T&G-9). SmithKline is also working on a childhood combination vaccine. In a March 31 letter to Shalala, Saldarini highlighted five steps being taken by Lederle "to address the real problem of low immunization rates, which is the woefully inadequate delivery, outreach and tracking system found in most states." These include the development by the company and CDC of a software package meant to allow physicians to participate in a national tracking system and Lederle's cooperation with a study being conducted by HHS on the economic consequences of a universal purchase program.
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