That Flu Vaccine Shortage

Lynne Kiesling

Over at Truck and Barter, Ian Cook has written the post I would like to have written about the flu vaccine shortage:

Hold the phone! You mean to say that government purchasing of vaccines at a forced discount has something to do with this? Could these be the mysterious “business reasons” that cause some companies to underproduce vaccines?

I’m shocked. Shocked, I say.

I think Ian’s right. Any time there’s a profit to be made from investing in more production capacity, and over a long enough time horizon that investment doesn’t happen, that means you should check your assumption that there’s a profit to be made from the investment. If you are forced to sell your output at a lower-than-otherwise price, that reduces your investment incentive. Voila.

And yes, the same logic applies to price caps in electric power markets and potential disincentives to investment. There are some similarities — the peaking nature of demand, the seasonality of demand, uncertainty due to weather, and so on.


25 thoughts on “That Flu Vaccine Shortage

  1. In the case of vaccines, let us also not forget the impact of the threat of class action lawsuits. In this case, there might actually be a class action lawsuit because vaccines manufactured by US companies were not available to meet the demand. Hmmm. (Calling John Edwards.)

    Of course, this situation would not be repeated if the federal government applied price controls on other drugs, would it? I mean, you could always order the drugs from Canada over the internet, assuming they weren’t out of stock.

    It should also be noted that the one alternative flu vaccine supplier is a French company. “Velly Intellesting!”

  2. The shortage of the flu vaccine this year is a direct result of our political leadership not doing their job. It has been known for the last three months that England was investigating a problem with their company. No one in our government has warned anyone nor has taken steps to impliment a plan of action to obtain the necessary amount of vaccine required to control the flu problem this year.

    While the flu is not the worse illness our communities can face, it should make us take notice that our system for quickly making any vaccine available to the general public lacks the proper facilities. What would we do if a strain of a virus started infecting the masses? Do we have the six months needed to produce only half of what is needed?

  3. What “system for quickly making any vaccine available”? We used to have one, before price controls and ATLA. It has since been “outsourced” to European producers.

    One could argue that a “Manhattan Project” could have restarted vaccine production in the US. One could also argue that the manufacturers had no incentive to do so; and, the government had no willingness.

  4. Ed,
    The constitutional duty of our federal government is to provide for the common defense of our land. While a few people may think that this statement means our military force, I hope the majority of us understand that a common defense means community health and financial security.

    Our military may be able to keep down civil unrest and destory countries, but they are useless against outbreaks of chicken pox or other wide spread illnesses. Futhermore, the safety of our country relay on our financial stablity which is refelcted by the needs of individuals and our ablity to pay for the items and services required.

    This issue is one that the current and next administration needs to address.

  5. A great example of “plans” that sell but don’t work. When we violate the laws of nature we are doomed to pay the price no matter how smart we think are (even Hillary).

    Government did fail us, it promised greedy, lazy Americans something that was not possible (i.e., a free lunch on the backs of greedy and stupid pharma companies).

    A vote for Kerry can keep this type problem alive and well.

    On a more positive note such failures allow many Americans and Hollywood the opportunity to entertain themselves with conspiracy theories. We need to impute the value ofthis entertainment before we can judge whether Hillary hurt or helped us all.

  6. Harry,

    The Constitutional duty you describe must be contained in the “living document” constitution, because I can’t find it or read it into the official Constitution of the United States.

    The official Constitution also requires that the federal government “promote” (not provide) the general welfare. It’s current approach to welfare must be in the “living document” constitution as well.

    I would agree that the federal government has failed regarding vaccines; it has failed to provide an economic environment in which private companies in the US can find the economic incentive to research, develop, certify and deploy vaccines to meet potential health problems. That has left our vaccine supply the responsibility of foreign producers who can profit in this business. Apparently Britain and France have fewer, or less aggressive, trial lawyers than we have; or, they have better tort law provisions.

    Scott Carpenter, when asked about his final thought before liftoff, said he had thought about the fact that every part of the rocket he would ride was provided by the lowest bidder. Our vaccine supply this year is being provided by the lowest bidders, one of whom has failed to provide safe vaccine.

    I guess we could just order the vaccine we need from Canada, if they have a surplus.

  7. Ed,
    The part of the constitution I am refering to is the Preamble of the Constitution.

  8. Henry,

    So was I. I believe you are attempting to read something into “common defence” that isn’t there. I don’t find “cradle to grave” welfare there either.

  9. Ed,
    The Preamble of our Constitution reads as follows;

    We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquillity, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

    Source:http://caselaw.lp.findlaw.com/data/constitution/preamble/

    Under the sworn duty of every elected official it is up to them to up hold and protect this ideas. Therefore, their goal in dealing with every issue faced by this society must adhere to this stated ideas. Common Defence in the old days meant protecting America against Small Pox, Indians, and wild animals among other things. Today, America faces threats from more than a military attack. Bio & chemical attacks, outbreak of viruses, and a host of other threats that can be delivered with just one person. Therefore, it is the duty of our government to either eliminate this problems or find a way to limit their effects. For example; One person could enter this country carrying a deadly virus of TB. The threat to the nation could be over a million infected in less than three weeks with a 100,000 dead. Does our government have the right under the constitution to do what is necessary to end the problem that is killing our citizens?

    Common Welfare and Domestic Tranquility goes hand in hand. With the sample above it would cause total roits if our government failed to ensure that everyone was injected with a cure. Left to the corporations ability to produce a cure and market it for a profit would lead to the citizens of this land to killing and robbing for the money to pay for the cure. It is even possible that a mob could destory the factory due to the inability for our country to provide the common defence and welfare of this nation.

    It does not mean that our government give away things and money to people for that is not their role; however, it is the role of our government to strick a balance between those of us that own a business and want to make a profit and those who work for people in order to make a living. Taxes, regulations, and other tools of government is used to keep those who will put their self interests above the idea of building a more prefect nation. Justice is using the power of the law to make it fair and equal society for all considering that our lifes are intergrated.

    Neither the Dems or Reps will admit this, but a business owner can make money only one way and that is through profits of sales. Additionally, employees can make money only through wages that allow them to have spendable cash. Destory the fine balance that it takes to maintain growth and everybody loses.

  10. “Equal” in our political world has two principal interpretations: equal opportunity and equal outcome. I believe in equal opportunity. However, it is manifestly obvious that equal opportunity will not produce equal outcomes, because of differences in intelligence, education, motivation, risk aversion, etc.

    My concern with government involvement in determining what profit is “fair” or “just” is that this evaluation is based in large part on the assessment of the risk involved in making the profit. My experience tells me that anything is easy (low risk) if you don’t have to do it.

    I also have a similar problem with government involvement in determining what level of compensation is “fair”, no less “equal”. We are involved in a recurring political debate about the minimum wage, yet very few people earn the minimum wage for protracted periods in our society; and, those who do are either very young or have no marketable skills. Quick service restaurants currently offer starting wages ~$2.50 above the minimum wage, because they cannot attract and retain employees with any skills and willingness to work at the minimum wage.

    You state that handing out money is not government’s role. I agree. However, a large and growing percentage of our taxes are used to fund transfer payments, from those who work hard and earn to those who don’t.

  11. “Equal” in our political world has two principal interpretations: equal opportunity and equal outcome. I believe in equal opportunity. However, it is manifestly obvious that equal opportunity will not produce equal outcomes, because of differences in intelligence, education, motivation, risk aversion, etc.

    My concern with government involvement in determining what profit is “fair” or “just” is that this evaluation is based in large part on the assessment of the risk involved in making the profit. My experience tells me that anything is easy (low risk) if you don’t have to do it.

    I also have a similar problem with government involvement in determining what level of compensation is “fair”, no less “equal”. We are involved in a recurring political debate about the minimum wage, yet very few people earn the minimum wage for protracted periods in our society; and, those who do are either very young or have no marketable skills. Quick service restaurants currently offer starting wages ~$2.50 above the minimum wage, because they cannot attract and retain employees with any skills and willingness to work at the minimum wage.

    You state that handing out money is not government’s role. I agree. However, a large and growing percentage of our taxes are used to fund transfer payments, from those who work hard and earn to those who don’t.

  12. On a national level the living standard income for our economy is based on 30% of an individuals income going toward household expense. The current country’s average is roughly $800.00/mth which means that the living standard income is roughly $40,000/yr. that still falls in the low income bracket for a faimly of four. The average wage of $10.00/hr X 40 hrs.= $400/wk or $20,800/yr. which falls about $5,000.00/ yr above poverty.

    Although people have the ability to work in a different field (i.e. Management), but what job would you want to remove from your society? The grocery store? The bank tellers? The police and fire department? We need to figure out how to make it where everybody makes money through profits not based on their title like the Old World has for years.

  13. Henry,

    I wrote a longer response, but it has been refused posting for some reason.

    Compensation in the US is largely set based on value added (or on cost of acquisition and retention), not title (with the exception of owner). However, you have been arguing that compensation should be based on cost (of living), not value. An employee’s value to an employer is largely unaffected by whether he or she is single or married and whether a parent or not; however, these factors do affect his or her cost of living.

  14. Henry,

    I wrote a longer response, but it has been refused posting for some reason.

    Compensation in the US is largely set based on value added (or on cost of acquisition and retention), not title (with the exception of owner). However, you have been arguing that compensation should be based on cost (of living), not value. An employee’s value to an employer is largely unaffected by whether he or she is single or married and whether a parent or not; however, these factors do affect his or her cost of living.

  15. Ed,
    While I used the living standard income to drive home the equal and fair point you of your argument, our history has shown that businesses, in general, do not do what it takes to level the playing field and our government has failed to act upon the problems that play on raising wages for the unskilled labor which is used to make our society fucntion.

    Equal opportunity in America has been declining steadily since 1980. The split of income between management jobs and labor has seen almost a 500% growth in management vs. the 100% growth in labor. With an income move like that is it any wonder why America has more people are wanting to be Cheifs than Indians. The outling problem people are now just starting to talk about is the fact that only a few people are actually retaining the knowledge which is used to build a society. Or do you believe we should enter into another study on the subject?

  16. Opportunity in our society is more equal than it has ever been. Outcomes are diverging. That is not a problem caused by our society, nor is it a problem caused by those who achieve. The problem is caused by those who do not take advantage of the opportunities offered in our society, but believe it is not their fault that they are not successful. It is always someone else’s fault! Horsepucky!

  17. Ed,
    Yes, people in this country has been sold on the fake idea that you can be what you want to be and get rich at it. However, reality tells us that unless you suck up and buy into this idea of higher specialized education/business system you are trash.

    You are willing to pay $100-500.00/hr. for a doctor or lawyer to tell you that they are not sure how to deal with a problem, yet you are not willing to pay $20.00/hr for people who provide you the goods and services that impact your life everyday. Try living your life for a week without utilizing anything made or provided by someone who makes under a living wage. Good luck!

    Just as we wittnessed today a bottle of flu vaccine just went from $10.00 a dose to a $1,000.00/dosage. How much you want to bet that the government will have to get involved because some SOB will start selling fake vaccine?

    Our economy should promote general welfare and put a higher price on the goods and services that effect our daily lifes instead of those professions that we may or may not need.

  18. Ed,
    Yes, people in this country has been sold on the fake idea that you can be what you want to be and get rich at it. However, reality tells us that unless you suck up and buy into this idea of higher specialized education/business system you are trash.

    You are willing to pay $100-500.00/hr. for a doctor or lawyer to tell you that they are not sure how to deal with a problem, yet you are not willing to pay $20.00/hr for people who provide you the goods and services that impact your life everyday. Try living your life for a week without utilizing anything made or provided by someone who makes under a living wage. Good luck!

    Just as we wittnessed today a bottle of flu vaccine just went from $10.00 a dose to a $1,000.00/dosage. How much you want to bet that the government will have to get involved because some SOB will start selling fake vaccine?

    Our economy should promote general welfare and put a higher price on the goods and services that effect our daily lifes instead of those professions that we may or may not need.

  19. The history of US government efforts to establish / control prices is awful. Be careful what you wish for, because you might get it.

  20. Ed,
    That is why I would like to see a political party that would bring the business leaders and workers together to fight for the common good of all Americans. Our history shows us that great steps in humanity has been made when both sides of the coin speak from the truth.

    Although government has a role in our life, it should not control our life. The problem with the Dems and Reps is that they play big business against big labor and leave out the friendship that exists between small business owners and their workers. The cold hard fact is that most employee and employers will do whatever they can to help each other in bad times as well as the good times. Maybe one day we can work on getting the big kids to realize that they are in the same boat floating through space and time.

  21. Ed,
    That is why I would like to see a political party that would bring the business leaders and workers together to fight for the common good of all Americans. Our history shows us that great steps in humanity has been made when both sides of the coin speak from the truth.

    Although government has a role in our life, it should not control our life. The problem with the Dems and Reps is that they play big business against big labor and leave out the friendship that exists between small business owners and their workers. The cold hard fact is that most employee and employers will do whatever they can to help each other in bad times as well as the good times. Maybe one day we can work on getting the big kids to realize that they are in the same boat floating through space and time.

  22. Ed, thats easy we just need to show the rich that they can pay less taxes when everyone can afford the “Jones Standard of Living.”
    Yet, it might be a good idea to define that living standard before we tell everybody what and how we expect them to act.

    Funny, thing about our cash is that it is not tried to gold; therefore, technically our living standard could just cost a dollor if we wanted it to.

  23. Ed, thats easy we just need to show the rich that they can pay less taxes when everyone can afford the “Jones Standard of Living.”
    Yet, it might be a good idea to define that living standard before we tell everybody what and how we expect them to act.

    Funny, thing about our cash is that it is not tried to gold; therefore, technically our living standard could just cost a dollor if we wanted it to.

  24. Since when is it the Governments responsibility to ensure availability of Flu Vaccine?
    I see no refernece to it in the Constitution, Bill of Rights, or the Declaration of Independence?
    And to that end, what about Health Care?
    Is this to now a Right?
    What next, will the Government be responsible for providing me with food: oh wait, they do with Food Stamps?
    Okay bad example, what about toliet paper, shaving cream, or a car?
    The Government is only responsible for providing me the opportunity to “Pursue Happiness”.
    Nowhere is it gauranteed that I will ever catch or achieve Happiness.
    I’m tired of people not willing to make their own way and expecting someone else to care for them.
    Come on people, take responsibility for your actions and lives.
    And as long as I’m on a rant:
    I also am prochoice!
    Women choose to cross your legs and never have to have the need to abort a life!
    Why should a defenseless fetus pay the price for your lack of judgment.
    Birthcontrol begins before conception..
    And for that matter coitus. (Intercourse)
    Abortion is now being used as Birthcontrol.

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