NCPA - National Center for Policy Analysis

In Search of Vaccines

March 8, 2002

Why are there nationwide shortages of vaccines for children's diseases -- in a rich country that spends 13 percent of its gross domestic product on health care? Hint: The government cut their prices.

  • Health care professionals are scrambling to find vaccines for such serious childhood diseases as diphtheria, whooping cough, measles, mumps and chicken pox.
  • Federal and state governments combined buy more than half of the country's childhood vaccines.
  • With all that purchasing clout, governments are able to obtain vaccines for diphtheria, tetanus and whooping cough at 60 percent of the market price; 55 percent for vaccines covering measles, mumps and rubella; and as little as 38 percent for some other vaccines.
  • As a result, the number of vaccine manufacturers has dropped from 37 in the mid-1960s to just four major manufacturers today -- with only two headquartered in the United States.

In the 1970s and 1980s, the open-ended threat of tort suits scared pharmaceutical companies out of vaccine manufacture.

Congress responded in 1986 by setting up a system of no-fault compensation for people injured by childhood vaccines. Then lawmakers put the government more deeply in the market.

Now, in 15 states, the government provides free vaccines to every child -- no matter how wealthy or well-insured the parents are.

With profit margins slim, the few remaining manufacturers maintain just enough production capability and inventory to meet demand -- if all goes well. But in a process as complex as manufacturing vaccines, it rarely does -- thus, shortages.

Source: Ira Carnahan, "Duh!" Forbes, March 18, 2002.

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