Market-based plan could fix flu vaccine dilemma

Here's an ironic update for anyone who was concerned about hisfamily's safety a few months ago when everyone was talking about adeadly bird flu pandemic and government officials said there was novaccine available.

Just recently, a pharmaceutical company announced it had developeda new, and possibly much better, vaccine to prevent bird flu. Thecompany, GlaxoSmithKline, says it's ready to produce enough vaccinefor 80 million Americans, which would go a long way toward headingoff a crisis.

Public health officials want more test results before approvingthe vaccine for widespread use, which is reasonable. But they haven'toffered the company a contingent contract to begin producing vaccinequickly if the results are favorable.

Why not? Because our country's system for producing vaccinesdoesn't allow that -- just one of many ways in which the systemremains broken. Little has changed since the Institute of Medicine,in a 2003 report, called for a new financing system to encouragecompanies to develop and distribute vaccines. That report wasfollowed by widely publicized vaccine shortages, and then by the birdflu problem, which highlighted the urgent need for action. Yet theproblem persists.

As a physician and health economist, and also as a parent, I wouldwelcome the opportunity to start protecting my family on my own.

For instance, I would be happy to buy a bird flu treatment kit formy family that would include doses of medication that we would onlyuse in a pandemic. If the medications expired and I had to buyanother kit next year, I would still be glad that I had acted toprotect my family. State Medicaid programs could make the same optionavailable to those who cannot afford to pay for this "insurance."

How about prepayment? I could buy my influenza vaccine dose inadvance, and manufacturers could be assured of a significant marketbefore production. I would receive discounted pricing from my vaccineprovider of choice.

There is a market for wine futures and "dread disease" insurance.Why not a futures market on vaccines? I could buy my dose in advanceand share in the risk of development. Manufacturers would be assuredof a significant market before taking on the costs of production.They would also receive some advance financing. That's a lot morethan a company like GlaxoSmithKline gets under the current system.

We could apply the same approach for threats besides bird flu,notably including bioterrorism possibilities such as smallpox oranthrax that are remote but present a high risk. Again, I'd bewilling to spend my own money to protect my family from thesebiological agents, purchasing the supplies myself and thereby easingthe burden on the public purse. If others joined me, we would therebyexpand the market, making it more attractive for manufacturers toproduce supplies. Government would assume responsibility for thoseunable to buy supplies privately.

If that sounds a little cold-blooded, consider the market-basedsolutions we've developed for other areas of health care. Forexample, we expect people to pay for drugs that reduce theircholesterol levels; indeed, the worldwide market for cholesterol-reducing agents totals $32 billion annually. In contrast, so long aswe continue to view vaccines strictly as a public health tool, themarket size will remain uncertain and payment rates will remain solow that companies will have little incentive to invest in producingvaccines rather than in something more profitable. This is especiallytrue for flu vaccines, since companies need to develop a new versionannually, which requires a substantial scientific investment withonly one year to possibly earn a return.

These approaches are not the only market-based alternatives to ourcurrent broken system. Once we start looking at the problem with neweyes, it's possible to identify a variety of approaches to encouragemore companies to get involved while enhancing the public health. Thebottom line is this: The current system is broken. I'm willing to payfor vaccines. You might be, too. So long as the government steps upto its responsibility to protect those unable to pay, we should stopspinning our wheels and try to find ways for each of us to take stepstoward preventing the next public health crisis.

Kevin A. Schulman is a professor of medicine and management atDuke University and director of the Health Sector Management Programat Duke's Fuqua School of Business