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VACCINE FLAT TAX OF 50"/DOSE RECOMMENDED BY ADVISORY COMMISSION

Executive Summary

VACCINE FLAT TAX OF 50"/DOSE RECOMMENDED BY ADVISORY COMMISSION on Childhood Vaccines at its Dec. 2 meeting in Rockville, Md. The commission voted seven to two to recommend to HHS Secretary Shalala "a uniform, flat tax rate on the sale of all vaccines covered by the [National Vaccine Injury Compensation] Program at a rate of $.50" per vaccine dose. The motion also stated that the tax would "apply at the time the covered vaccine is added to the Vaccine Injury Table." The levy was calculated to "yield the necessary revenue to pay all estimated awards in a year -- about $65 mil.," commission member Richard Verville of the D.C. firm White, Verville, Fulton & Samer, said. Currently, vaccine excise taxes are based on the relative risk of each vaccine to cause an injury that would bring the matter before the Vaccine Injury Compensation program. The rationale behind the 500 recommendation is that flattening out the tax rate not only would simplify the decision-making process by eliminating the need to determine relative risk but also create a more level playing field. The recommendation stipulated that the tax "be applied to vaccines grouped by the general category of disease they are intended to prevent." For example, a polio vaccine that targets three antigens would still count as one vaccine. The two commission members who voted "no" did so mainly because of the added risk they associated with the whole-cell pertussis vaccine. Rosemary Morris called the whole cell vaccine "too damaging" for a flat tax to be justified. Attorney Curtis Webb, of Webb, Pedersen & Webb, Twin Falls, Idaho, said he saw the tax policy as a possible way of encouraging the development of safer vaccines, but he questioned whether a higher pertussis vaccine tax would make a difference because customers do not generally choose vaccines based on price. He acknowledged that his "disagreement may be an academic one." The commission recommended unanimously that the VICP's "current trust fund balance" be maintained. Verville said the current balance would be sufficient to: "support a reserve to fund three years of awards"; "permit borrowing from the trust fund to pay pre-1988 awards"; and "finance administrative costs." The commission unanimously voted to recommend that "the Secretary, in conjunction with the Department of Justice, the Court of Federal Claims, the petitioners' bar and other interested parties, explore the proposals...regarding...timing, amount, and conflict issues under the VICP." These proposals include: "the detachment of attorneys' fees and costs from the combined attorney fee/pain and suffering/lost wages pre-1988 cap"; and "the provision of a process of interim payments to petitioners and their attorneys." The chief area of concern leading to the recommendation was "the effect of the pre-1988 cap on the ability of petitioners... to receive full and adequate representation." A conflict can arise when the $30,000 maximum payment must be divided between attorney fees and compensation for pain and suffering and lost wages. Commission member Amy Fine, Association of Maternal and Child Health Programs, said this problem mainly occurred in complicated cases. The "timing" issue mentioned in the recommendation was "the effect of unanticipated delays from the time of the filing of the claim to the time of final payment of the claim for both petitioners and their attorneys," Fine said. Earlier in the week, the Internal Revenue Service set a de minimis exemption from collection of vaccine floor stock tax for "any person that holds vaccines subject to a total tax of $1,000 or less," according to a Nov. 29 Federal Register notice. The floor stock tax was mandated by the 1993 Omnibus Budget Reconciliation Act as a one-time tax to make up for the lapsing of the Vaccine Excise Tax during fiscal 1993. The law did not specify a de minimis exemption, but IRS decided one was needed to simplify collection, given the large numbers of doctors and clinics likely to be affected. Separate members of a "controlled group" must pay the tax if the aggregate owed by all members of the group exceeds $1,000. The Nov. 29 regulation requires the floor stock tax "to be paid without assessment or notice on or before Feb. 28, 1994," using IRS Form 720, based on the amount of vaccine held in stock "at the last moment of Aug. 10, 1993."

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