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recent germ-warfare attacks are cause for concern, but so is one
proposed government response: the move to federalize vaccine production,
a recommendation contained in two independent reports released earlier
this month by the Institute of Medicine (IOM) and the Gilmore Commission,
the federal advisory panel on terrorism.
The IOM calls
for the creation of a National Vaccine Authority that would have
sweeping responsibilities, including market research, establishing
priorities, control of intellectual-property rights, the conduct
of in-house research and development, and the support of clinical
trials of candidate vaccines. Similarly, the Gilmore commission
recommends "the establishment of a government-owned, contractor-operated
national facility for the research, development, and production
of vaccines for specified infections." Dismissing private-sector
involvement as inadequate, it argues that "direct government
ownership or sponsorship is likely to be the only reasonable answer
for producing vaccines" for such diseases as anthrax and smallpox.
But industry
officials see things differently, emphasizing that the crisis in
vaccine development and production is largely of the government's
making. A former senior executive at a vaccine company described
the problem thusly: "You've got a booming demand for vaccines
that people think cost only pennies, coupled with increasing regulatory
burdens that cost companies millions. In short, the current shortage
situation was, unfortunately, predictable."
The debate
is not merely a garden-variety dispute between industry and government
over how best to supply a specific product or service. It has major
implications for the future of pharmaceutical development, not only
within the United States but internationally as well.
The recent
appearance of cases of inhalational anthrax in humans — the
first in this country in a quarter century — coupled with the
rising fear of further use of biological agents, has fueled interest
in vaccines against various exotic diseases. Moreover, the media
have seized on the possibility of terrorists obtaining and using
smallpox virus, considered by many experts to be the most feared
and potentially devastating of all infectious agents. It spreads
from person to person, primarily via droplets or aerosols coughed
up by infected persons, via direct contact, and from contaminated
clothing and bed linens. Smallpox is fatal in approximately a third
of previously unvaccinated persons who contract the disease.
The German
government has bought six million doses of vaccine, and pressure
is mounting in the United States for widespread, or even universal,
vaccination. (Routine smallpox vaccinations ceased in the U.S. in
1972.) Health and Human Services Secretary Tommy Thompson has promised
that the government will obtain 300 million doses of the vaccine,
enough to immunize every man, woman, and child in the country.
Federalizing
vaccine production would obviously ride the political currents that
are expanding government control over a host of activities that
touch on national security, but the history of government manufacture
of pharmaceuticals is far from encouraging.
Consider the
decades of production of human growth hormone for short children
by the National Pituitary Agency. This program, conducted from 1963
to 1985 under the auspices of the National Institutes of Health,
was an extremely careless operation. The hormone was prepared from
human pituitary glands recovered from cadavers, and the absence
of rigorous collection guidelines and purification procedures permitted
contamination with the agent that causes Creutzfeldt-Jacob disease,
the human equivalent of "mad-cow disease." As a result,
several dozen recipients have died a lingering and gruesome death.
If this had
been a private operation, competition, and the threat of liability
would have encouraged frequent updating of the drug's isolation
and purification with state-of-the art technologies, and would have
required rigorous adherence to government regulation. But when government
is itself the manufacturer these forces are attenuated, and the
backstop of government safety regulation is weakened. The nation's
drug regulator, the Food and Drug Administration, is a sibling agency
of the National Institutes of Health; their common political interests
precluded vigorous and uncompromising oversight over the NIH's production
of human growth hormone.
The recent
history of the privately produced anthrax vaccine might appear to
support more government involvement. The controversial vaccine has
been characterized as "perhaps the most shunned and controversial
shot ever produced." Its producer, the Lansing-based BioPort
Corporation, has had repeated difficulties meeting FDA requirements.
It has been cited for problems ranging from quality control to record
keeping, and its production of the anthrax vaccine was suspended
by FDA in 1998 (though that suspension may soon be lifted).
But BioPort
is hardly a representative pharmaceutical company. It is the sole
supplier of the anthrax vaccine for the Defense Department, and
one of its four board members is a former member of the military's
Joint Chiefs of Staff. More important, until late 1998 it was not
a private-sector operation at all; its facility belonged to the
Michigan Department of Public Health. Many, if not all, of BioPort's
problems date from the time when it was a state-run institution.
According to the General Accounting Office, FDA inspectors were
permitted only limited access to the plant, and FDA itself was not
promptly notified about important changes in the vaccine manufacturing
process. In 1990 alterations were made in the filters used to purify
the vaccine, a change that could affect the vaccine's safety and
efficacy, but by the time FDA learned of this change, there were
no more pre-1990 batches of the vaccine to compare against the later
product. In 1993, the state public health department added several
new fermenters, for which FDA repeatedly requested documentation.
But not until seven years later, by which time BioPort had taken
over the facility, was that documentation submitted to federal regulators.
In short, the
anthrax vaccine's problems appear to originate not within BioPort,
but from its prior history of government production — and from
the absence of competition to make such products. Leaving aside
BioPort's manufacturing problems, the design of the anthrax vaccine
is antiquated. What we should be seeing (and encouraging) are biotech
companies scrambling to use gene-splicing technology and recent
knowledge about the organism to make purer, safer, more effective
vaccines. A federal move to take over vaccine design and production
could replicate, on a far greater scale, the problems of both the
current anthrax vaccine and government-produced human growth hormone.
Federalization
of vaccine production would be ominous for the future of pharmaceuticals
generally. In recent years, the industry's long-term survival has
become increasingly imperiled by the controversy over drug prices.
But the old saw about pharmaceuticals is especially true today:
The first dose costs hundreds of millions of dollars to produce,
while the rest cost pennies apiece.
New drugs are
hugely expensive to develop and test; the time from discovery to
marketing may well take 12-15 years, at a cost of $200 million or
more. The undertaking is a gamble with extraordinarily poor odds;
thousands of drugs must be tested in order to produce one successful
product, and even among drugs that are ultimately approved for marketing,
only one in three generates revenues that cover development costs.
For that reason, blockbuster drugs are doubly important — they
not only advance public health, but also cover the costs of the
industry's countless scientific and commercial flops.
Another challenge
to the pharmaceutical industry is the integrity of intellectual-property
rights for its products. For example, when Health and Human Services
Secretary Tommy Thompson recently encountered difficulty negotiating
what he considered a sufficiently discounted price for government
purchases of the antibiotic Cipro for treatment of anthrax, he threatened
to break Bayer's patent. Not surprisingly, he ended up getting a
better price, but his extortionate tactics have sent an unmistakable
message to an industry that this year will spend in excess of $30
billion on research and development: If you come up with something
of tremendous worth, something that society vitally needs, the government
just might decide to invalidate your patent.
Moreover, Thompson's
action encouraged the growing opposition, international as well
as domestic, to drug patents. Unlike many poor countries, the United
States cannot plead poverty in its dealings with Bayer. Yet if the
United States, with its wealth and its reputation for respecting
property rights, could act so cavalierly in its quest for a better
deal on Cipro, then what is the lesson for other countries?
The answer
wasn't long in coming, from pre-Thanksgiving international trade
negotiations in Doha, Qatar. The World Trade Organization expanded
the ability of less developed nations to override drug patents and
authorize cheaper generic copies in the name of public health. Prior
to Doha, poorer countries could override a patent in the face of
medical emergencies; now, however, they might be able to do so on
almost any public health pretext. In the words of one exuberant
delegate (from a country whose generic drug industry stands to benefit
greatly from the new policy), this is a development which "even
six months ago … was unthinkable."
A country's
ability to disregard patents in the face of public-health emergencies
might offer quick medical relief, but it dangerously undermines
the prospect of treatments for future crises. It makes good health
seem like bad business. Why should any company take the risk of
investing vast sums in developing new drugs, if the more successful
and important the drug, the more likely that its patent will be
invalidated? And if that incentive for companies to invest is destroyed,
then we are left with a system in which government must become not
only the major purchaser of drugs, but also the major source of
drug research and development.
That is not
an inviting prospect. Governments may be good at certain things,
but they are rarely good at technological innovation. We may admire
most postal employees for their steadfastness in the face of the
anthrax threat, but we can't look to the U.S. Postal Service for
breakthrough communication technologies or other innovations; they
didn't introduce Express Mail, after all, until years after FedEx's
breakthrough introduction of overnight mail, and their version is
still far less reliable. Do we really want a postal-service model
for developing new medicines?
All of this
brings us back to the proposals to federalize the vaccine industry.
At best, the proposal is unnecessary; more likely, it will be dangerously
counterproductive. Government can adequately address real and potential
emergencies by contracting for large purchases of vaccines or by
guaranteeing minimum sales. But making vaccine research, development
and production a wholly government-operated — or even government-directed
— enterprise would do little to advance either the safety of
current vaccines or the development of new ones. Far better to remove
the regulatory and other disincentives that currently make vaccine
development so unattractive and uncompetitive.
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