ONE FLU OVER THE CUKOO’S NEST

Michael Giberson

The headline for Jerry Knight’s column today in the business section of the Washington Post reads “Got the Flu? Blame the Free Market.” Writers are not always responsible for their headlines, but the headline clearly reflects what Knight writes. If you get sick this winter, he writes, call it the “free market flu.”

Calling it a “free market flu” is just plain cukoo.

Knight blames the problem on the “free market,” and then proceeds to detail various federal government supports, limits, and controls over the vaccine market. Here are some samples from the article:

Protecting the nation from the annual, inevitable bout with influenza has been left entirely to the private sector, even though every year the flu kills many more Americans than have died in the Iraq war — 36,000 of us annually, according to the federal Centers for Disease Control and Prevention.

Other kinds of vaccines can be grown in tanks, which is much quicker. But if a drug company wanted to switch to that kind of technology for flu vaccine, Pavia said, federal regulations would treat the new version as if it were an entirely new drug, which would have to go through the lengthy Food and Drug Administration approval process before it could be sold.

That issue might be tackled with tax incentives, says the Infectious Diseases Society, which began worrying about the vaccine market long before this year’s shortage. There are already research and development tax credits, but Pavia suggests tax incentives that would be given to companies only when they bring a badly needed new product to market.

[The federal government] buys about 20 percent of the flu vaccine for the military and federal health programs. (While the prevailing view is that Americans don’t want the government dictating drug prices, the government does dictate what it pays for flu vaccine, demanding a price drugmakers say is unprofitable.)

So apparently, leaving flu vaccination “entirely to the private sector” includes restrictions on research and development, tax incentives for research and development of certain drugs and vaccines, and government purchase of 20 percent of the market at prices chosen by the government.

Knight also quotes a specialist in infectious diseases as saying that the consensus among flu experts seems to be the market has failed.

It was not explained how flu experts arrived at this conclusion. However, I wouldn’t naturally turn to medical researchers, no matter how expert they are concerning infectious diseases, for assessments of market failure. It does appear that there will be a shortage of vaccine this year, but not every shortage is a market failure.

UPDATE: The interested reader can find much more commentary on flu vaccine issues at Marginal Revolution (Search link), including Tyler Cowen’s ahead-of-its-time posting from December 11, 2003, “How to conserve flu vaccine.”