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National Vaccine Advisory Committee

Proceedings of the Second Workshop on Strengthening the Supply of Vaccines in the Unites States

In 2001, the Department of Health and Human Services (HHS) requested that the National Vaccine Advisory Committee (NVAC) evaluate the problems of vaccine supply and prepare a report on strengthening the supply of routinely recommended vaccines in the United States.  A working group, chaired by Jerome O. Klein, MD, was appointed to identify potential causes of vaccine shortages, develop a list of strategies to address and prevent shortages, and enlist key stakeholders to consider the applicability, feasibility and effectiveness of these strategies.  The immediate concern was an unprecedented shortage of eight routinely recommended childhood vaccines beginning in 2001 which included diphtheria and tetanus toxoids and acellular pertussis (DTaP), measles, mumps and rubella (MMR), varicella, pneumococcal conjugate, and combined tetanus and diphtheria toxoids (Td).  These vaccine shortages posed an increased risk for infants, children and adults of acquiring otherwise preventable infectious diseases.

The Working Group convened a meeting of stakeholders in February 2002 to evaluate the existing problems within the U.S. vaccine supply system and to propose strategic solutions to avert shortages in the future.  A report of the conclusions of the meeting was prepared and submitted to the Assistant Secretary for Health in October 2002 and published in the Journal of the American Medical Association in 20031.  Within the 2002 report, the NVAC presented a set of recommendations, which included, but were not limited to, incentives for vaccine development; enhanced vaccine stockpiling; streamlining the current regulatory approval process; and reinforcing the National Vaccine Injury Compensation Program.

During the intervening years, these shortages have been corrected; however, periodic vaccine shortages continue to occur.  Most recently, in the fall of 2004, one of two manufacturers supplying the U.S. with trivalent inactivated influenza vaccine was unable to deliver approximately one-half of the nation’s anticipated supply for the 2004-05 influenza season2.  This shortage and the current threat of a pandemic influenza have renewed interest in strengthening the vaccine supply in the United States.  Today, a robust domestic vaccine supply capability remains a goal of all stakeholders including Federal agencies, industry, purchasers and consumers.

To respond to the persistent issues causing interruption of the U.S. vaccine supply, the 2nd NVAC Workshop on Strengthening the Supply of Vaccines in the United States, sponsored by the National Vaccine Program Office, was held in January 2005.  Stakeholders were invited from industry, government, and various professional and consumer groups.  The program focused on four sections: utilization of vaccine stockpiles; regulatory processes; liability issues; and incentives for research, development, production and administration of vaccines.  Additionally, perspectives in managing a national vaccine supply were presented by representatives from both Canada and the United Kingdom.  Each section was organized to evaluate the recommendations of the 2002 workshop, review progress made during the intervening years in implementing those recommendations, and discuss potential strategies for achieving consistent and adequate supplies of vaccines.  This report summarizes the discussions and proposals presented at the 2005 workshop.  The intent of the Working Group is to present concrete proposals for strengthening vaccine supply based on the discussions of the 2nd workshop.  The proposals introduced during the workshop will be presented for consideration by the members of the NVAC at the June 2005 Committee meeting.  Those proposals that gain the Committees support will then be forwarded to the Assistant Secretary for Health.  Selected manuscripts from the 1st workshop and discussion from the 2nd workshop will be published in Clinical Infectious Diseases in the fall of 2005.

1 Strengthening the Supply of Routinely Recommended Vaccines in the United States. Recommendations from NVAC. JAMA 2003; 290; 3122-3128
2 Congressional Hearing: “The Nation’s Flu Short Shortage: Where AreWe Today and How Prepared Are We for Tommorrow” - 11/17, 2004

Utilizing Vaccine Stockpiles

The concept of utilizing a national stockpile of routinely recommended vaccines appears to be the most advantageous short-term solution to avoid the pitfalls of unexpected shortages.  The original goal of the Pediatric Vaccine Stockpile Program (PVSP) in 1983, was to establish a stockpile of a six-month supply of routinely recommended childhood vaccines based on a birth-cohort model.  The current stockpile has reached target quantities of MMR and varicella vaccines, and is short of target quantities of hepatitis A and B, Haemophilus Influenzae (Hib), and enhanced potency inactivated poliovirus (eIPV) vaccines.  The stockpile has been utilized advantageously on at least 12 occasions since the program’s development.  In response to a 2002 GAO report, which highlighted shortages of 8 of 11 routinely recommended childhood vaccines, the NVAC, in its 2002 report suggested expansion of the stockpile to include a larger number and sufficient quantity of routinely administered vaccines.  In response, Congress ordered the CDC to expand the existing program to include all routinely recommended pediatric vaccines.  Appropriated funds rose from approximately $160 million in FY03 to $248 for FY05, a level that is expected to be maintained for FY06.

Unfortunately, the promise of the expansion of the stockpile program recommended in 2002 remains unfulfilled because three of four vaccine manufacturers have declined to sell vaccines to the PVSP until the issue of “recognition of revenue” is resolved.  Participating manufacturers are paid by the CDC upon delivery of contracted vaccines into a stockpile.  However, these transactions are “bill and hold” sales because the stockpiles are maintained by the manufacturers themselves, a service for which a separate fee is paid.  In December 1999, the Securities and Exchange Commission’s Staff Accounting Bulletin #101 (SAB101) established criteria for the reporting of “bill and hold” sales.  SAB101 stated that revenue on such sales could not be reported as revenue until the product reached its end-user, an event that may or may not occur.  This rule can have a negative effect on reported profits and earnings.  HHS is making efforts to achieve a resolution with the SEC in this unique circumstance; however, at this time (March 2005) “recognition of revenue” remains an impediment to fulfilling the goals of the vaccine stockpile program.

The CDC’s Vaccine Management Business Improvement Project (VMBIP) has aimed to completely redesign of the national distribution, ordering, inventory and funds management system for publicly purchased vaccine.  In addition to developing a comprehensive business operating plan for the PVSP, a pilot program for ordering and distribution may begin as soon as this Fall.  In the future, the project will also develop standard operating procedures for stockpile build-up, management, reporting, and draw-down.

Proposals presented for NVAC consideration:

  1. The revenue recognition issue must be resolved as soon as possible through negotiations among SEC, HHS, and industry. The ideal option would be for SEC to allow revenue recognition to the manufacturer upon delivery of product into stockpiles as an acceptable method of accounting. If no negotiated solution can be reached, a legislative remedy should be pursued while alternative models such as a CDC-contracted off-site stockpile are explored.
  2. To provide ongoing external input to CDC on pediatric vaccine stockpile composition and appropriate target quantities of vaccine, NVAC should consider establishing an advisory workgroup with ACIP representation.
  3. To expand the scope of stockpiled vaccines beyond the routinely recommended childhood vaccines currently stockpiled through the PVSP, NVAC should consider endorsement of the VMBIP as a mechanism for more efficient and effective management of the national vaccine supply.

Regulatory Processes

The goal of the regulatory process governed by the Food and Drug Administration (FDA) is to ensure the availability of high quality, safe and effective vaccines.  There was a consensus of industry and government participants at the Workshop that progress has been made in implementing the 2002 NVAC recommendations regarding regulatory considerations.  However, the vaccine approval process remains complex, labor intensive, expensive, and time consuming.

While there is agreement among manufacturers that current regulations regarding the licensure and manufacture of vaccines are both stringent and appropriate, they are also financially burdensome.  Their enforcement has the potential to decrease manufacturer interest in staying in the vaccine market and bringing new products into that market. 

The cost of bringing a new vaccine to market has increased at a rate of 15% per year, with clinical trials costing as much as $15,000 to $20,000 per enrolled patient.  Stringent non-inferiority standards require large sample sizes; for example, trials that had previously required 75 per group now require 300 per group, resulting in increased costs for development and production.  It is felt that the current efforts to avert a rare risk of a vaccine through increased emphasis on evaluation and increased sample size in pre-licensure clinical trials have failed to substantially benefit safety assurance.

At present, the FDA review policy emphasizes current good manufacturing processes (cGMP) used in biologic production compared to the past policy which focused on characterization of the final product.  The regulatory requirements based on stipulations of cGMP are costly for both new vaccines and currently licensed vaccines.  Such regulatory changes resulting in increased costs can be factored into price determinations for the newer vaccines, but may be difficult to include in older vaccines, particularly those covered by federally mandated price caps.

Progress has been made in international harmonization, but more work needs to be done to harmonize content and format for regulatory submissions in the US and European Union.  For example, current new product licensure processes share a common all-inclusive technical document.  However, post-licensure process and equipment changes are subject to widely varying reporting and inspection requirements.

The Center for Biologics Evaluation and Research (CBER) is a national resource for vaccine development, evaluation, regulation and research.  CBER has a critical role in the translation of basic research into licensed products through applied research.  The 2002 NVAC report gave priority to increased funding for CBER to permit retaining and recruiting highly qualified scientists.  Unfortunately, funding for CBER has not increased, while responsibilities of the program have continued to expand.  There is a concern that lack of adequate resources for CBER is an impediment both to vaccine development and to assuring a secure vaccine supply.

Proposals presented for NVAC consideration:

  1. The FDA should consider changing focus from cGMP oversite of production facilities to characterization of the final product in selected circumstances where such an approach will not compromise vaccine safety.  This would maintain sufficient oversight to guarantee vaccine safety while decreasing the financial burden on vaccine manufacturers.
  2. Re-institute the system of informal consultations between manufacturers and FDA throughout the processes of development, approval and manufacture.  Although such informal contacts may not constitute final FDA policy, it would expedite the approval process and increase the efficiency of pre-licensure trials.  The FDA should evaluate which safety and efficacy issues need to be considered in pre-licensure trials and which might be determined post-licensure resulting in a lesser burden imposed on pre-licensure trials.
  3. There is need for continued harmonization of the regulatory processes to encourage product availabity in the US from manufacturing facilities abroad and to make possible increased vaccine markets abroad for American manufacturers.  Legislative mandates may inhibit international harmonization.  The specific legislative mandates that impact FDA should be identified and legislative remedies sought to remove the impediments.
  4. High priority should be given to a substantial increase in funding of CBER.  The added resources should include not only additional funds, but also rapid filling of organization vacancies.
  5. Reviewing the implementation of cGMP standards should be made at periodic intervals to assure that implementation of cGMP does not have a material negative impact on vaccine supply, except where needed to ensure vaccine safety.

Liability Issues

The National Childhood Vaccine Injury Act of 1986 established the Vaccine Injury Compensation Program (VICP) to compensate individuals suffering serious adverse events as a result of administration of covered vaccines in a manner that was rapid, simple, generous and appropriate.  The VICP was to be a no-fault program of compensation that covered vaccine administrators and manufacturers.  The goal was a simplified approach to litigation including a table of compensable injuries and relaxed rules of evidence.  The program was funded by a tax on covered vaccines including 75-cents per antigen (disease prevented).  At present there is more than 2 billion dollars in the Vaccine Injury Compensation Trust Fund.  The covered vaccines include all those recommended by CDC for “routine administration to children.”  Since program inception, over $1.5 billion has been awarded to families and individuals.  The program has successfully stabilized the market by reducing the litigation uncertainty that prevailed during the 1980s over DTP vaccine.

A recommendation of the 2002 NVAC report sought to clarify the programs enacting legislation to ensure that VICP remained a viable alternative to the tort system.  Specifically, it was recommended that the definition of “vaccine” should be expanded to include “the active ingredient as well as preservatives, additives and other excipients” in the product to be administered for immunization.

A current source of concern is the filing of hundreds of suits in the civil system alleging autism spectrum disorder from childhood vaccines.  It is feared that the unprecedented costs of litigating these suits back into the VICP may jeopardize this important program. 

Proposals presented for NVAC consideration:

  1. The National Childhood Vaccine Injury Act of 1986 as amended should require petitioners to first file with the VICP before pursuing legal remedies in the tort system.
  2. Language defining a “vaccine” should make clear that it includes the active ingredient as well as preservatives, additives and other excipients.
  3. Other process improvements incorporated into bill language under consideration in the previous Congressional session need to be enacted into law.  Such language includes:
    • Increasing the statute of limitations for injuries from 36 months to 6 years and for deaths    from 48 months of occurrence of the first symptom from which the death resulted to 6 years;
    • Increasing the payment for a vaccine-related death to $300,000 from $250,000;
    • Including as an element of compensation the payment of family counseling services;
    • Changing the rulemaking process for amending the Vaccine Injury Table by reducing from 180 days the period that the Secretary must allow for public comment on a proposed rule;
    • Providing for interim payments of attorneys' costs;
    • Clarifying when an injury is caused
    • by a factor unrelated to the administration of a vaccine; and
    • Precluding covered individuals who have not filed a petition with the VICP from filing a civil action for damages in the amount of $1,000 or less against a vaccine administrator or manufacturer in a State or Federal court for damages arising from a vaccine-related injury or death.

Incentives for Research, Development, Production and Administration of Vaccines

It is suspected that a diminishing return on capital has caused the number of vaccine manufacturers to decrease from more than 20 in the 1970s to a mere 6 manufacturers today.  This has left us with only two manufacturers providing inactivated influenza vaccine and only one manufacturer for several other vaccines including: MMR, varicella, pneumococcal polysaccharide and conjugate, meningococcal polysaccharide and conjugate, Td, diphtheria toxoid (DT), and tetanus toxoid (TT).  Although prevention of infectious diseases by immunization has been one of the great public health achievements of the 20th century, vaccines often are undervalued and many consumers, purchasers and physicians do not recognize the importance of routine immunization.  Vaccines typically are developed and produced by companies that manufacture a number of other pharmaceutical products.  Vaccines must compete with other products within a manufacturer’s portfolio.  Factors such as the relatively long research and development period, the need for maintaining production facilities to meet cGMP practices and the relatively fixed market size (since vaccines are typically given only once or a few times to an individual) may hinder the competitive position of vaccines relative to other pharmaceutical products.  It is axiomatic that publicly-held companies must identify the optimal return on investment.  New capital is available only for products that will provide an adequate return.  Low profit margin products with increased production costs may lead to withdrawal from the market.  Barriers to production of new vaccines include: an uncertain market; the complexity of the products; high-cost large scale clinical trials; and the unpredictable demand for a new product.  Financing strategies aim to sustain the availability of vaccines now and in the future and to assure access for all individuals to recommended vaccines.  To achieve these goals, the financing of vaccines must be sufficiently attractive to both maintain the interest of current vaccine manufacturers and to attract new producers.

Since the government is the largest purchaser of childhood vaccines, it has been able to negotiate prices that may be to the disadvantage of the manufacturer.  In the case of some vaccines, a price cap has been legislated for VFC purchases.  However, most price caps have been removed and today only two remain.

The 2002 NVAC report concluded that manufacturers should be able to obtain an appropriate profit for the research, development, approval and distribution of vaccines for the public well-being. Appropriate incentives were needed to encourage companies to enter and remain in the vaccine business. Pricing of a successful product must include the costs of failed products. The search for incentives for research, development and production to provide a fair return on capital needed to be innovative and not based on increased price alone. Such incentives could include tax relief for new facilities or reconstruction of old facilities or other forms of subsidy as well as guaranteed market and price.  The 2002 NVAC report was general and did not provide specific recommendations, although it did suggest that the importance of financial incentives for vaccine manufacturers required continued discussion with development of concrete proposals. 

Preventive services must be appropriately compensated.  Incentives need to be in place to encourage physicians and providers to act as champions.  Reimbursement rates that included a realistic administration fee that reflected physician work as well as professional liability and practice expenses were needed for physicians and providers to encourage compliance with vaccine recommendations.  While compensation for administered vaccines has increased since 2002, a sizable gap between reimbursement rates and the true costs remains.

Proposals presented for NVAC consideration:

  1. Increase funding for promotional and educational campaigns in an effort to increase the market.  Such campaigns could aim to:
    • increase public awareness of the need for vaccines;
    • promote increased utilization of vaccines for adolescents and adults; and
    • create a better understanding of the value of disease prevention and a state of wellness, promoting the individual’s ability to take responsibility for personal health maintenance.

    Such funding could be funneled through the CDC to the states and large cities.

  2. Remove or limit non-fixed costs to the vaccine manufacturer by:
    • changing burdensome regulatory restrictions;
    • seeking tort reform to limit product liability for approved vaccines; and
    • increasing pre-licensure discussions with regulatory authorities for limiting costs of clinical trials.
  3. Provide investment tax credits for new plant construction or the renovation of established facilities undertaken to meet FDA requirements.
  4. Remove price caps from VFC purchase of vaccines.
  5. Remove economic deterrents currently faced by practitioners by increasing compensation to adequately reflect actual costs of vaccine purchase and administration.  Vaccine administration fees should accurately reflect the work effort of the physician and medical staff and a vaccine replacement model is needed to avoid financial risk and up-front purchase costs to providers.
  6. Maintain a dialogue in the form of stakeholder workshops to continue the development of specific proposals in an ongoing effort to resolve issues surrounding the financing of vaccines administration.

Summary and Conclusions

The 2nd Workshop on Strengthening the Supply of Vaccines in the U.S. served to focus on short- and long-term solutions.  This report of the proceedings of the Workshop provides a review of the workshop participants’ discussions and proposals for consideration by NVAC.  As a follow-up to the Workshop, the Working Group will prepare specific proposals to respond to concerns regarding: the implementation of the plan for vaccine stockpiles; the strengthening of the VCIP; the streamlining of the regulatory processes for vaccine development, approval, and oversight; and the identification of optimal financial incentives to sustain the existing vaccine supply.  All interested parties recognize that the vaccine industry is a national resource and current problems in vaccine supply reflect a vulnerability of the industry.  The NVAC is committed to persevering in the development of solutions for maintaining a reliable and consistent supply of approved vaccines.


2nd NVAC Workshop on Strengthening the Supply of Vaccines in the U.S.

Wyndham City Center - Washington, DC
1143 New Hampshire Avenue, NW

In February 2002, the National Vaccine Advisory Committee (NVAC) convened a workshop discussion to evaluate the problems of vaccine supply and prepare a report on strengthening the supply of routinely recommended vaccines in the United States.

The 2002 meeting identified both immediate and contributing factors to the vaccine supply disruptions in 2001.  The summary report outlined a number of strategies, by which the existing system could be improved, including the following:

  • streamlining the regulatory processes;
  • addressing liability issues;
  • utilizing vaccine stockpiles; and
  • increasing financial incentives for research, development, production and administration.

The purpose of this follow-up workshop is to bring stakeholders together to: develop a progress report on the recommendations made in 2002; identify both continuing and new factors that may threaten a stable vaccine supply; and outline specific actions that can have a durable effect in resolving impediments to the consistent and reliable availability of licensed vaccines.


Monday, January 24th, 2005

1:00 PM

Introduction: Purpose and Goals 

Charles Helms (NVAC)

1:15 PM 

Welcome from HHS

RADM Arthur Lawrence
(Assistant Surgeon General)

1:30 PM 

Strategy: Regulatory Processes
Moderator: Walter Orenstein


Norman Baylor (FDA)
   Alan Shaw (Merck)
Lance Gordon (VaxGen)
Peter Paradiso (Wyeth)

2:30 PM

Discussion & Public Comment

3:00 PM 

- Break -


3:15 PM 

Strategy: Utilizing Vaccine Stockpiles
Moderator: Stephen Cochi


Eddie Wilder (CDC)
Phil Hosbach (santoli pasteur)

4:15 PM 

Strategy: Liability Issues
Moderator: Geoff Evans

Mark Rogers (Department of Justice)
Randy Moss (Wilmer Cutler Pickering Hale and Dorr)
John Salamone (Consumer Advocate)

5:15 PM

Discussion & Public Comment


5:45 PM 

- Adjourn -


Tuesday, January 25th, 2005

9:00 AM

Strategy:Increasing Financial Incentives for Research, Development, Production and Administration
Moderator: Martin Myers


9:15 AM

CDC Perspective

Stephen Cochi (CDC)

9:30 AM

CMS Perspective

Randy Farris
Centers for Medicaid and Medicare Services)

9:45 AM

State & Local Perspective

Richard Raymond
(Assoc. of State and Territorial Health Offices)

10:00 AM

Health Plans Perspective

Robert Scalettar
(America’s Health Insurance Plans)

10:15 AM

Provider Perspective

Robert Siegel
(St. Luke Pediatric Centers)

10:30 AM

Discussion & Public Comment


11:00 AM

- Break -


11:15 AM

An Economists View

Frank Sloan (Duke University)

11:30 AM

Industry Perspective

Andrew Macknight (GlaxoSmithKline)

11:45 AM

Project BioShield:
A Model for Civilian Vaccines?

Monique Mansoura (HHS)

12:00 PM 

Discussion & Public Comment


12:30 PM

- Lunch -


2:00 PM

Other Perspectives on Managing a National Vaccine Supply
 Moderator: Bruce Gellin


David Salisbury (United Kingdom)
Arlene King (Canada)

2:45 PM

Next Steps:Recommendations from Additional Stakeholders
Moderator: Bruce Gellin

Andrew Pavia (Infectious Disease Society of America)
John Clymer (Partnership for Prevention)
Timothy Doran (American Academy of Pediatrics)
Scott Gottlieb (American Enterprise Institute)

3:15 PM

Discussion & Public Comment


3:45 PM

Summary and Conclusions

Jerome Klein (NVAC)

4:30 PM

- Adjourn -


Last revised: April 12, 2005


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