The Magazine

La Grippe of the Trial Lawyers

From the October 25, 2004 issue: Guess who's to blame for the flu vaccine fiasco.

Oct 25, 2004, Vol. 10, No. 07 • By WILLIAM TUCKER
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JOHN KERRY wasted no time jumping on President George Bush about the unexpected shortage in flu vaccines this year. Why wasn't Bush paying attention? He should have done things differently. And of course Kerry had a "plan" to solve the whole mess.

If Kerry thinks he can solve the flu vaccine problem, he need look no further than his own running mate, trial lawyer John Edwards. Vaccines are the one area of medicine where trial lawyers are almost completely responsible for the problem. No one can plausibly point a finger at insurance companies, drug companies, or doctors. Lawyers have won the vaccine game so completely that nobody wants to play.

Two weeks ago, British regulators suspended the license of Chiron Corp., the world's second-leading flu vaccine supplier, for three months. Officials cited manufacturing problems at the factory in Liverpool, England, where Chiron makes its leading product, Fluvirin. Chiron was scheduled to supply 46 million of the 100 million doses to be administered in the United States this year. The other 54 million will come from Aventis Pasteur, a French company with headquarters in Strasbourg.

So why is it that 100 percent of our flu vaccines are now made by two companies in Europe? The answer is simple. Trial lawyers drove the American manufacturers out of the business.

In 1967 there were 26 companies making vaccines in the United States. Today there are only four that make any type of vaccine and none making flu vaccine. Wyeth was the last to fall, dropping flu shots after 2002. For recently emerging illnesses such as Lyme disease, there is no commercial vaccine, even though one has been approved by the Food and Drug Administration.

All this is the result of a legal concept called "liability without fault" that emerged from the hothouse atmosphere of the law schools in the 1960s and became the law of the land. Under the old "negligence" regime, you had to prove a product manufacturer had done something wrong in order to hold it liable for damages. Under liability without fault, on the other hand, the manufacturer can be held responsible for harm from its products, whether blameworthy or not. Add to that the jackpot awards that come from pain-and-suffering and punitive damages, and you have a legal climate that no manufacturer wants to risk.

In theory, prices might have been jacked up enough to make vaccine production profitable even with the lawsuit risk, but federal intervention made vaccines a low-margin business. Before 1993, manufacturers sold vaccines to doctors, doctors prescribed them to patients, and there was some markup. Then Congress adopted the Vaccine for Children Act, which made the government a monopsony buyer. The feds now purchase over half of all vaccines at a low fixed price and distribute them to doctors. This has essentially finished off the private market.

As recently as 1980, 18 American companies made eight different vaccines for various childhood diseases. Today, four companies--GlaxoSmithKline, Aventis, Merck, and Wyeth--make 12 vaccines. Of the 12, seven are made by only one company and only one is made by more than two. "There are constant shortages," says Dr. Paul Offit, head of the Vaccine Education Center at Children's Hospital of Philadelphia. "With only one supplier for so many vaccines, the whole system is fragile. When even the smallest thing goes wrong, children miss their vaccinations."

The intersection between mass vaccinations and the tort system was bound to be messy. When you vaccinate enough people, someone, somewhere, is going to have a bad reaction. You could give a glass of milk to 100 million people and a few would inevitably get violently sick from it. With vaccines, there will be allergic reactions and a tiny but predictable percentage of people will suffer some kind of permanent damage or even die. Because of liability without fault and the generosity of the tort system, the result is huge damage awards.

The first instance of this came in 1955 with polio vaccinations. Cutter Laboratories, the California company that now distributes Cutter's Insect Repellent, made an early batch of vaccines, some of which had live viruses in them. Almost all the children in Idaho were administered the vaccine and several dozen contracted polio. In 1957, the parents of Anne Gottsdanker, an 8-year-old girl whose legs had become paralyzed, sued Cutter, with famed personal injury lawyer Melvin Belli representing them.

The jury found Cutter's actions were not negligent--the orders had been rushed, standards had not been clear, and safety precautions were still rudimentary at the time. But, using the new doctrine of liability without fault, the jury held Cutter accountable anyway and awarded $147,300. "That decision made Ralph Nader possible," Belli later claimed.