10/12/2004

Is the Flu Vaccine Outdated?

Recent problems have arisen due to the lack of flu shots available. In the past, there have been many different companies that make flu vaccines for the United States and other parts of the world. There were 25 makers in the 70's and now there are only 2. One of the largest factories of the flu vaccine is located in England and they have been shut down by the British regulators. That factory accounted for 46 million doses of flu vaccine for the United States. Also the flu vaccine that is given is not always dependable because there are hundreds of different types of diseases that can occur and the companies guess only one.

Another problem is how they manufacture the flu vaccine that they will use in the United States. They use a 30 year old system of using chicken eggs to yield a seed vaccine. Then after many months they can make it into a shot. Drug companies and many researchers believe they can update the system with using reverse genetics and then incubating the virus in humans and monkey cells. This will be more effective than eggs. I believe this is important because the flu virus kills an average of 36,000 American and hospitalizes another 114,000 per year.

8 comments:

Rufio said...

Maybe the reason that there are less makers of the flu vaccine because there is just less demand for the vaccine. Your article said, "vaccine-making is a risky business with high levels of liability and low profit margins that most pharmaceutical companies avoid."

We learn in class that when the cost of producing a product goes up supply shifts to the left and causes an increase in the price of the product. When product prices are high there is just less of a demand for the product.

I think that the flu vaccine has a substitute though. Just look at the amount of over-the-counter drugs that are out in the market today. Many people may be looking to these medicines that they can buy at the store to cure their flu, thus leading to less of a need for the actual flu vaccine.

Bryce Larkin said...

I understand what Rufio is saying. There are many substitutes for the flu vaccines and the profit margins are very low. On the other hand, I don't agree that there is a lesser demand for the flu vaccines. In the article, it talks about numbers greater than 100 million people needing the shots.

John West said...

There are no substitutes for the flu vaccine period. Many hundreds of thousands of senior citizens in this country depend on getting a shot every year in order to combat the deadly disease. The reason why we are seeing a problem this year is as precisely as Mr. Larkin so adequately pointed out: (1) only 2 manufacturers (2) outdated system. The Unites States government is warned every year by scientists that this very thing could happen and it finally has this year. The government needs to place "incentives" within the industry in order to make it attractive to would be manufacturers of this drug. Currently, there are no companies dumb enough to take on this mammoth of a project with such ridiculously margins in place.

Bryce Larkin said...

John, I couldn't agree with you more. The only question is how will the government make it easier to make a profit with the flu shots? I believe the flu vaccine shots have a price ceiling on them so everyone can receive the shot that wants to. The price should not have a ceiling and let the market chose the demand.

Julie said...

Bryce, if price ceilings are removed the people who will get the vaccinations will be the people who can afford them, not necessarily the people who need them most. Most senior citizens live on a fixed income and would lose in a bidding war for vaccinations.

Bryce Larkin said...

Julie, to a point you are correct. Some people would not be able to afford the flu shots. Also look at it in another perspective; businesses don't want to produce a product they can't make profit on. It is simple economics, the price goes up and companies will want to make a profit so they make more flu vaccines. The high quantity will push the price down so people can afford it.

Maudi said...

I agree that there has been a shortage of flu vaccines. I feel though that the companies will continue to make the shots because the government gives then less problems when they produce these types of vaccines that save lives.

Dr. Tufte said...

This is an industry that has just about been intentionally killed by our government. Mostly this has been by browbeating the companies into offering the vaccines at close to average total cost rather than at marginal cost. This is fairly typical of bureaucrats because ATC is more readily observable, even if it is not the best choice.

Another effect of the low prices is that lots of people get flu vaccines that don't really need them. They are recommended for certain groups because they are not completely safe. They only make sense when you have some risk factors.

This actually is a really important situation where an accurate estimate of demand elasticity would be really useful. (Of course we can't get that with something like a vaccine because people will whine too much about it being unethical). Here's why it is important. Suppose we find that vaccine demand is elastic. Then increasing the price (which is what will need to happen to get more producers involved) will seriously cut the number of people who get vaccinated (this is Julie's comment). Alternatively, if we find that this demand is inelastic, then Julie's complaint isn't material, but perhaps we need to develop a policy to subsidize the shots for poor people. I tend to think that not knowing this informatin is unethical too.