Supply and Demand

How U.S. Got Down to Two Makers Of Flu Vaccine By David Brown:

Flu shots are essentially commodities -- identical products made by numerous companies and differing only in price. Because much of the vaccine is bought in huge orders by government agencies, the price is low.

Over three seasons, Wyeth lost $50 million from unsold flu vaccine. It was also facing millions of dollars in required improvements to keep its plant up to standards required by the Food and Drug Administration.

...nobody wants to invest hundreds of millions of dollars and five-to-seven years in building an egg-based vaccine plant when the whole industry is on the verge of switching to a radically new way of making the product...

But technology and science aren't the only things waiting to mature in the world of flu vaccine, experts said. So is social policy.

Gregory Poland, of the Mayo Clinic, favors a system of incentives: Vaccine makers would make a given number of doses of flu vaccine for the private market at their own risk; a given number for government purchase; and an additional amount that the government would agree to buy back at a specified price if there were unsold stocks at the end of the season.

In Federal vaccine policy needs a booster (via Alex Tabarrok), Henry I. Miller blames the bureaucrats:

The fundamental problem is that government regulatory policies and what amounts to price controls discourage companies from investing aggressively to develop new vaccines...

Federal bureaucrats, who seem not to understand the concept of carrots and sticks, can do much to encourage greater production of more vaccines long-term. For example, the CDC, the largest domestic purchaser of vaccines, uses its buying clout to compel deep discounts for purchases.

Arbitrary and excessive regulation also blocks progress....The safety and efficacy of [other] vaccines have been amply demonstrated by regulatory agencies in these countries, with more than 20 million doses administered. Yet the FDA refuses to recognize the foreign approvals.

Moreover, the FDA has a history of removing safe and effective vaccines from the market based merely on perceptions of excessive side effects -- a prospect that terrifies manufacturers.

With Few Suppliers of Flu Shots, Shortage Was Long in Making By DENISE GRADY

This article was reported by Denise Grady, Lizette Alvarez, Gardiner Harris and Andrew Pollack and was written by Ms. Grady...

One reason companies have given up making vaccine, industry officials and other experts say, is the difficulty in meeting regulations for quality control and safety. A change in the approach to regulating vaccine production might also have contributed to problems in meeting the standards...

But Dr. Goodman of the F.D.A. defended its policies, saying that they were the "gold standard" for safety worldwide and that if companies could not measure up or chose not to, it might be better for them to pull out...

Many experts say one way to avert vaccine shortages is to charge more for vaccines, so that more companies will want to produce them. To some extent, that was already starting to happen...

Dr. Robert B. Belshe, director of the center for vaccine development at Saint Louis University, said many experts in infectious diseases and vaccination believe that ultimately, the only way to control influenza will be to vaccinate nearly all school-age children every year...

There seems to be general agreement that the shortage is a problem caused by keeping the price down. As for vaccinating all kids, that's probably a non-starter because of paranoia & Christian Scientists etc., not to mention the cost. What about Reuven Cohen's suggestion of targeting superspreaders (via Tyler Cowen)