Free Markets and Flu - A Deadly Combo

[DAVOUT]

The demand of an item sold during a short period of the year is always difficult to anticipate, particularly if the manufacturing process is long, and if the possible overproduction is not salable the following year, which is the case of flu vaccines evolving every year.

From a business point of view, the problem is not greed at this stage, it is to find a way to cover the risk of overproduction; the cost of this risk must be included in the final price paid by the end user (directly, or indirectly if the governement manages it).

[chequita guevara]

Originally posted by notyoueither
Our situation has everything to do with nanny state inefficiencies, and is a good example that a lack of free market forces in medicine is not necessarily something good.

It also has to do with conservatives and their fellow travelors cutting funding for your health care services. They can't ge rid of state health car, cuz it's too popular, but if they cut it to the bone and let it bleed to death, then the pulic will be forced to accept private health care.

[chequita guevara]

Originally posted by Berzerker
http://washtimes.com/national/20031210-120855-1153r.htm

Why don't I just start quoting from The Revolutionary Worker?

[JohnT]

Because that would be biased?

[Ned]

Re: Re: Free Markets and Flu - A Deadly Combo

Originally posted by Whoha


dead wrong, this is a textbook case against socialism:

http://online.wsj.com/article/0,,SB106091266280731300,00.html?mod=opinion

you need a subscription for that, but here is what it says of importance:
"The root of this government role goes back to August 1993, when Congress passed Mrs. Clinton's Vaccines for Children program. A dream of Hillary's friends at the Children's Defense Fund, her vaccines plan was to use federal power to ensure universal immunization. So the government agreed to purchase a third of the national vaccine supply (the Clintons had pushed for 100%) at a forced discount of half price, then distribute it to doctors to deliver to the poor and the un- and under-insured.

The result is a cautionary tale for anyone who favors national health care. Already very high in 1993, childhood vaccination rates barely budged. A General Accounting Office report at the time noted that "vaccines are already free" for the truly needy through programs like Medicaid. Meanwhile, however, the Hillary project dealt the vaccine industry another financial body blow.

Thirty years ago, the Institute report notes, 25 companies produced vaccines for the U.S. market. Today only five remain, and a number of critical shots have only one producer. Recent years have brought shortages of numerous vaccines, including those for whooping cough, diphtheria and chicken pox.

The Institute of Medicine panel seems to assume -- probably correctly -- that it's not politically feasible simply to kill something called Vaccines for Children. But it does suggest that removing the government as a direct purchaser would allow for adequate reimbursement and help the industry to get back on its feet. So it recommends replacing existing vaccination programs with a subsidized insurance mandate for children and seniors, and with vouchers for those who lack coverage. "

Thought so. Hillary Clinton and her effective price controls have taken all the profit out of the industry forcing it to produce ONLY the estimated need because if they produce more they take losses.

Hillary Clinton -- damn you, damn you to hell!

Down with the Democrat Party. It will only bring this country to ruin.

[Mordoch]

Re: Re: Re: Free Markets and Flu - A Deadly Combo

Originally posted by Ned


Thought so. Hillary Clinton and her effective price controls have taken all the profit out of the industry forcing it to produce ONLY the estimated need because if they produce more they take losses.

Hillary Clinton -- damn you, damn you to hell!

Down with the Democrat Party. It will only bring this country to ruin.

Read my posts and the links to the CDC website I posted. While this could be discussed as a possible cause for other vaccines, it definately does not account for the state of the flu vaccine industry.

[Ned]

Mordoch, but the principle is obvious: take the profit out of an industry and you will see a decline in everything about it, from investment in new techniques, to production capacity, to having a production quota that just meets estimated demand. This is self-evident.

Even though I condemned Democrats for this kind of thinking, I must also give my generous condemnation to one tricky-****, who imposed wage price controls on this country in 1972 and kept them on gas and oil prices when it lifted them elsewhere. That led to "shortages" until Reagan, the liberator, was elected.

Long live Ronald Reagan! Long live the conservatism!

Wage, price and profit controls can and do kill economies.

[Mr. Harley]

Ned, you're discussing Hillary again . Mordoch has richly pointed out that is a red herring. Her effects on the flu vaccines are minimal. What you haven't discussed are the issues involved, namely a mature industry, razor thin profit margins, long lead in production without any ability to react to increased demand, and a heavy profit penalty for over-production.

What it boils down to is this. If you leave it solely to the free market, you will have chronic underproduction. Period, for the reasons stated above. With that being the case, do you accept the consequences of an unregulated free market? Those will include periodic shortages of the vaccine for susceptable people, including an increase of deaths in infants, the elderly, and the chronically ill.

Do you instead have the government intervene, and guarantee the number of vaccines sold per year? Of course, that means the taxpayers should (remember, I'm a fiscal radical - I believe in balanced budgets, something neither party believes in given their actions ) pay an increased tax for.

Of course, their is a third alternative, come to think about it. You have flu vaccines on a pre-order, subscription basis, just like any other product with a long production time and limited production. However, that means that if I, a healthy adult, prepay, and an elderly patient who is at high risk does not, you end up with a variant of the free market scenario above. A certain number of the elderly will die every time a flu starts spreading abnormally fast, at a level that negates the current level of herd immunity (as in it spreads faster than the slowing affect of the vaccinated).

The medical community finds that unacceptable, the hippocratic oath and such. Modern democratic societies for the most part find it unacceptable, though most seem to find paying for what they want unacceptable also (shameless troll). To successfully implement this free market scenario means that you will have to make a wholesale change to how we view personal responsibility, and compassion. Of course, in a true compassionless, free market paradigm, even if it's just bad luck, you will be out on the street. Most of those who espouse true free markets have no problem with that, until they are the one the discriminatory employer (we will all get old, and if we survive long enough at least partially disabled) or unsympathetic building owner is screwing. That's why I like regulated free markets (even if that is something like jumbo shrimp).

[Ned]

Shawnmmcc, Here is part of the problem, price controls on the purchases by the CDC:

(B) NEGOTIATION OF DISCOUNTED PRICE FOR CURRENT VACCINES.--With respect to contracts entered into under this subsection for a pediatric vaccine for which the Centers for Disease Control and Prevention has a contract in effect under section 317(j)(1) of the Public Health Service Act[247] as of May 1, 1993, no price for the purchase of such vaccine for vaccine-eligible children shall be agreed to by the Secretary under this subsection if the price per dose of such vaccine (including delivery costs and any applicable excise tax established under section 4131 of the Internal Revenue Code of 1986[248]) exceeds the price per dose for the vaccine in effect under such a contract as of such date increased by the percentage increase in the consumer price index for all urban consumers (all items; United States city average) from May 1993 to the month before the month in which such contract is entered into.

4) QUANTITIES AND TERMS OF DELIVERY.--Under such contracts--
(A) the Secretary shall provide, consistent with paragraph (6), for the purchase and delivery on behalf of States (and tribes and tribal organizations) of quantities of pediatric vaccines for federally vaccine-eligible children; and
(B) each State, at the option of the State, shall be permitted to obtain additional quantities of pediatric vaccines (subject to amounts specified to the Secretary by the State in advance of negotiations) through purchasing the vaccines from the manufacturers at the applicable price negotiated by the Secretary consistent with paragraph (3), if (i) the State agrees that the vaccines will be used to provide immunizations only for children who are not federally vaccine-eligible children and (ii) the State provides to the Secretary such information (at a time and manner specified by the Secretary, including in advance of negotiations under paragraph (1)) as the Secretary determines to be necessary, to provide for quantities of pediatric vaccines for the State to purchase pursuant to this subsection and to determine annually the percentage of the vaccine market that is purchased pursuant to this section and this subparagraph

According to this, the prices for virtually all vaccinations of children are controlled by the this statute. That is around 40%, I presume, of all vaccinations. The prices cannot go up from the prices paid in 1993, plus inflation, regardless of whether the cost to produce has gone up. From what we are told, lawsuits and insurance cost have dramatically driven the costs up - so much so that companies can no longer make any profit selling to the CDC and probably take losses instead.

Also, the CDC seems to be heavily involved in distribution of vaccines. I wonder how this could be since allegedly 90% of the vaccines are distributed privately.

Regardless, it is clear that the profit has been stripped out a vaccine industry so that they must produce only the estimated amount of vaccines or else lose money if the estimates a wrong and they overproduce. One would think that the industry would commit only about 80% of its supply at fixed prices and would keep 20% on reserve to move to regions where there are shortages, but at much higher prices. I don't fully understand this industry (especially since all children vaccines seem to be under price controls yet the CDC press release says that 90% of the vaccine market is private) but the shortages to me can only be the result of government interference in prices and distribution. If there were no restraints on prices and distribution, the industry would find ways to build in reserve capacity and inventory to accommodate on unforseen demand.

Shawn, don't you find it remarkable that prices for children's vaccines are controlled to 1993 prices plus inflation by statute! regardless of cost? I also suspect the CDC or the FDA or both are heavily involved in specifying standards for the vaccines that the CDC purchases. These standards probably prevent innovation in techniques that could reduce costs.

[DAVOUT]

From professionnal experience in the pharmaceutical industry, and other industries (automotive, books, retail), I can tell that the prices controlled by a government NEVER results in losses for the companies concerned. Price control is a very technical subject, and the cost accounting can be, and was, a very creative discipline. When it was suppressed in France, (in 1983?), for all products except the pharmaceutical drugs reimbursed by the social security, it resulted in a decrease of the price index. For the drugs under control, it is generally a trade off between products enabling the companies to show attractive profits.

The recently authorized *generic products* made only of the active molecule, provides an illustration of how it works really. The generic products are generally sold 20% below the trade marked product. Most of the trade marked products have decreased their price by 20%, after a very short time (about 3 months).

[Berzerker]

chegitz -

Why don't I just start quoting from The Revolutionary Worker?

I also linked an article from the Wall Street Journal that echoed the Times, but I see by your "rebuttal" of the Times article the WSJ will be duly ignored as well.

Thx Ned, this notion that vaccines are produced and sold in a free market is *******

[notyoueither]

Originally posted by chegitz guevara
It also has to do with conservatives and their fellow travelors cutting funding for your health care services. They can't ge rid of state health car, cuz it's too popular, but if they cut it to the bone and let it bleed to death, then the pulic will be forced to accept private health care.

Right, considering we spend more per capita on health than all but Germay and the US in the G7. Add the fact that it has not been Conservatives ruling Canada for the last 10 years. I guess if it weren't for those issues, perhaps you'd have a point.

[DinoDoc]

Zing!

[Mordoch]

Originally posted by Ned
According to this, the prices for virtually all vaccinations of children are controlled by the this statute. That is around 40%, I presume, of all vaccinations. The prices cannot go up from the prices paid in 1993, plus inflation, regardless of whether the cost to produce has gone up. From what we are told, lawsuits and insurance cost have dramatically driven the costs up - so much so that companies can no longer make any profit selling to the CDC and probably take losses instead.

Also, the CDC seems to be heavily involved in distribution of vaccines. I wonder how this could be since allegedly 90% of the vaccines are distributed privately.

You're not very bright are you? I'll repeat this for about the third time. The 40% figure involves other vaccines which are ordinarily given to children. Only a small number of flu vaccines were given to children since until just this year, it was not generally recommended as necessary by various government agencies. This means that its under 10% for flu vaccines being purchased by any governmental sources period. I've also demonstrated with 100% certainty that vaccine makers are not compelled to sell to the government, so they would not do so if they actually lost money doing so due to price controlls. Read my links and posts in this thread again for details.

[Imran Siddiqui]

I guess if it weren't for those issues, perhaps you'd have a point.