Vaccines: The Ultimate Form of U.S. Outsourcing

News from Britain's regulators suspending operations at Chiron Corporation — the world's second-largest maker of influenza vaccines — will lead to serious rationing of flu shots available to the American people.

Only French-based Sanofi-Aventis can now be relied upon to provide at least some protection to the American people. So much for those Americans who called for boycotts of French-made products in the wake of the Iraq War.

And yet, this shortage is no laughing matter. Year after year, the world has witnessed deadly and widespread influenza epidemics that might have been prevented — or at least sharply curbed — if only there were enough vaccine.

In 2003, about 36,000 Americans died of flu — and many millions more contracted what is hardly a common cold: Real influenza will knock you off your feet.

And that's just influenza. Politicians can talk about weapons of mass destruction and bioterrorist threats, but the real specter of death we face every day has to do with infectious scourges we know all too well —such as AIDS, TB and malaria.

There are also newly emerging infectious epidemics lurking behind the scenes, as the world experienced with the SARS epidemic of 2003.

What is especially astounding about this state of affairs is to what extent the United States depends on non-U.S. sources for what could be life-and-death matters on a major scale.

Obviously, the point here is not to badmouth foreign sources of production. In an integrated global economy, they are part and parcel of modern civilization. The real issue here is to maintain a sufficient domestic production capacity that safeguards U.S. supplies at all times.

The crux of the problem is the short-sightedness of the U.S. pharmaceutical industry — as well as the willingness of the U.S. government to go along with the nonchalance and complacency of U.S. manufacturers in this sector.

The U.S. Secretary of Health and Human Services, Tommy Thompson, called the recent fiasco over producing enough flu vaccine for this winter "very disappointing." That's an understatement of epidemic proportions.

Simply put, the United States does not have any vaccine manufacturers at home because that sector of the industry is viewed as not profitable enough by U.S. pharmaceutical companies.

They prefer to spend their funds on developing — and marketing — plenty of "me-too" drugs that ultimately do little to keep this nation's people healthy. But they are surely great for companies' bottom line.

The other argument that U.S. pharmaceutical companies like to raise about their absence from the vaccine market is that the liability risk is too high. In short, if you do something wrong, those trial lawyers will sue your socks off.

Unfortunately, that argument is a convenient excuse that plays on prevailing stereotypes. If the argument really held water, surely those foreign manufacturers would not be so stupid as to market their products in the United States, given the presumed liability risks.

But the U.S. dependence on outsourcing vaccine production is even harder to comprehend if you look at it from the vantage point of the American people.

Collectively, they spend a world-record 15% of the nation's GDP on healthcare. No other nation comes even close to the $1.6 trillion Americans shell out for healthcare each year.

Pharmaceutical companies are among the major beneficiaries from this spending bonanza. Still, when it comes to doing their part in potentially protecting the nation's survival, they have one short answer. It's "Nyet!"

Pharmaceutical companies are private-sector enterprises — and therefore should be free to engage in businesses they choose to, right? Well, up to a point. Put yourself in the shoes of a business that depends on one big customer for much of its business.

That would describe the relationship between pharmaceutical companies and the U.S. government, which provides a major part of the industry's revenues via Medicare, for example.

Now imagine your best customer really wants you to produce an item — even one you are not so hot about. In the give-and-take of commercial relationship, it is a well-known business practice to accommodate your big client.

Perhaps the most apt parallel in this regard is the defense sector. There, the U.S. government would never think of depending solely on non-U.S. suppliers for critical defense goods.

In fact, the government goes too far in the defense area by showing too little openness for foreign purchases. Why then this happy-go-lucky attitude on flu vaccines?

Sure enough, Americans can all count on politicians and industry leaders alike claiming that all of this is a case of bad luck. We wish it were so easy. Lest one forgets, there were severe shortages of flu vaccines in the United States in 2003.

Now Americans are in for a repeat of that crisis, if not worse. The nation has only its short-sightedness to blame for it all.

Outsourcing clearly has its benefits as part of any economic equation — but not to the point of depending on it 100% in a truly critical area such as public health. That is not only bad economic management. It's deadly!

Operating as the U.S. pharmaceutical industry presently does is the equivalent of the U.S. oil industry saying that it will shut down domestic oil production (because it is more expensive to produce here) — and rely completely on imports.

Nobody in his right mind would do that. In fact, the government has a strategic petroleum reserve. Maybe it’s time to learn from that idea — and have a strategic vaccine “reserve” — meaning a dependable domestic production infrastructure — as well.