Friday, October 22, 2004

How To Make Fibs And Influenza People

The Bush Administration is lying (can you believe it?) about their role in the flu shot shortage. Check out this fantastic blog post from the O'Franken Factor website written by James Norton: Truth, Lies, And the Flu. Mr. Norton has another great article about this at Flak Magazine.

Rather than reiterate Mr. Norton's excellent points I decided to dig a little bit deeper myself (a helluva dig for me since I don't, uh, "dig" science).

Over the last two weeks, President Bush has made and remade the belligerent point of laying the blame on trial lawyers (such as a certain V.P. candidate) for the current paucity of alternative flu shot providers. But this is yet another lie. The real reason that fewer drug companies are in the flu shot business is due to the laws of supply-and-demand. Until a few years ago, supply outweighed demand.

In July of 2003, Chiron acquired PowderJect Pharmaceuticals for $878 million. Prior to the deal, Chiron was the third-largest producer of global influenza vaccines (Chiron's own outdated vaccine does not have FDA approval). Thanks to last years record number of immunizations (in 2003 over 83 million Americans were issued flu shots, the highest immunization rate ever for influenza), Chiron recovered nearly a quarter of the money they spent on the acquisition, and, as a result, they're now number two (as for tomorrow: who-the-hell-knows-now).

But the flu shot business wasn't always such an beaucoup moneymaker. Before the flu shot blizzard of 2003, vaccine manufacturers were forced to eat a good chunk of their own flu shots, with over 12 million alone destroyed in 2002 alone. Too much supply and not enough demand translated into underwhelming profits. In 2000, four companies manufactured flu shots for the United States. But now there are only two (or maybe one, now).

So why did Chiron decide to takeover PowderJect and enter this thinning marketplace? For sound business reasons; demand began to overtake supply.

On February 12, 2004 (Chiron Statement) Chiron President and CEO Howard Pien presented a statement to the House of Representatives Committee on Government Reform which explained why. It was largely due to "significant changes in the dynamics of the U.S. influenza market." The key changes being: (1) "The recommendations of the Advisory Committee on Immunization Practices (ACIP) on influenza immunization were broadened to include individuals between 50 and 64 years of age and healthy children between 6 and 23 months of age, significantly expanding the potential market for influenza vaccine." (2) "Pricing of influenza vaccines has reached a level that allows manufacturers to invest in maintaining facilities to meet FDA standards and in expanding manufacturing capacity in order to meet increased demand." (3)Reimbursement rates for providing influenza injections have been increased to levels at which physicians are encouraged to proactively immunize patients."

What did Mr. Pien ultimately want? "Guaranteed purchase of influenza vaccine by the federal government." They didn't get that. But they did get this: "The National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health (NIH), has issued a task order under an existing contract to Chiron Corporation of Emeryville, CA, for the production of an investigational vaccine based on an H9N2 strain of avian influenza virus that has infected humans and has the potential to trigger a modern-day pandemic." A new demand for a new supply.

Why might possibly the Bush Administration be interested in artificially inflating demand?

Wouldn't you know it? Chiron has its own political action committee. According to Susan L. Thomas of the East Bay Business Times, "Slightly more than 1,000 of Chiron's employees, who must meet certain grade levels within the firm, are eligible to contribute to C-PAC. According to the latest campaign contribution reports filed with the election commission, Chiron has raised about $30,000 and doled out $5,000. CEO Pien gave $5,000, the maximum allowable. Chiron executives William Green, Linda Short, Craig Wheeler and Bryan Walser ponied up the same. Marguerite Baxter, out of Chiron's D.C. office, gave $4,900. Where has Chiron's PAC money gone? Rep. Joe Barton, a Texas Republican who is chairman of the House Committee on Energy and Commerce, pocketed $1,000. Missouri Rep. Roy Blunt, also a Republican member of the House Committee on Energy and Policy, received $1,000, too. Blunt is the House majority whip."

To be fair and impartial, C-PAC did make some small contributions to prominent Democrats as well, including Governor Dean and Senator Kerry. But that's just good business. You can't put all your flu vaccines in only two baskets.

But the future doesn't look quite as rosy for Chiron anymore. As Paul Elias of writes, "Chiron Corp.'s aggressive plan to dominate the U.S. flu vaccine market is in tatters and the company's financial future is clouded as the public health crisis it caused continues to mount. After the acquisition, Chiron announced ambitious plans to increase production from 26 million shots made in 2002 to 50 million for this flu season. The company vowed to spend $100 million upgrading the Liverpool factory and analysts were optimistic the company would be able to cut production costs, raise prices and sell more vaccine as the U.S. government continued its campaign to inoculate nearly 200 million Americans. The company also hoped to capture a significant share of the flu vaccine market to put it in a dominant position once it rolled out a new manufacturing process in the next several years. The new technology Chiron is developing would create vaccines in giant brewers vats, replacing the millions of chicken eggs vaccine makers needed each year. Chiron and Aventis Pasteur are the only two major suppliers of flu vaccine in the country -- a duopoly Chiron and analysts had counted on to boost profits."

It's a fact that since 2001 the Bush Administration has succeeded in significantly increasing demand for influenza immunization. Yet - perhaps for immediately obvious political reasons - Secretary of Health Tommy Thompson doesn't consider the present situation a "crisis." Nor does he even blame Chiron. Mr. Thompson recently explained to the media, "What we have to do now is make sure next year Chiron gets the necessary capital to modernize the plant so we don't have this problem next year."

Well, then, what does Mr. Thompson's dismissal say about the recommendations of the Center for Disease Control over the last four years. Was this some sort of drummed up, make-believe terror alert? Is there or is there not a legitimate concern about influenza epidemics? Fatalities due to influenza have grown tremendously since the Clinton years. But do your own conspiracy theorizing. More than a few (let us say...somewhat questionable) websites, such as No More Fake News, speculate that the rise in deaths is due to the reclassification of data used in CDC mortality rates. Their conclusions might be over-the-top, but they do raise valid questions.

Is there or is there not a legitimate concern about influenza epidemics or pendemics? Hard to tell, when - par for the course - everyone in the Bush Administration is lying.


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