Glaxo’s Swine Flu Windfall

Are Incentives Still Needed for Vaccine Makers?

While swine flu has killed about 4,000 worldwide in 191 countries and send thousands home sick to suffer alone with its symptoms, the H1N1 swine flu virus may prove very lucrative for drug maker GlaxoSmithKline Plc. (GSK).

After winning another 22 government orders, GSK is producing 440 million doses at a price tag of about $3.5 billion, reports Reuters.

Deliveries should begin this week and continue through the first half of next year.

Glaxo is one of five pharmaceutical companies producing swine flu vaccines for the federal government. Selling at about $8 a dose, the same price as a seasonal flu shot, Glaxo also has an ongoing agreement with the U.S. government to sell pandemic products, reports Reuters. That will bring the Britain-based company another $250 million as will sales of the flu drug Relenza that rivals Tamiflu (Roche).

Expect the fourth quarter of the year to boosted earnings.

Rivals in flu vaccines include Sanofi-Aventis (SASY.PA), Novartis (NOVN.VX), Baxter (BAX.N), AstraZeneca, and its subsidiary MedImmune (AZN.L) and CSL (CSL.AX).

This summer Novartis got a $690 million order from the U.S. government, reports The Scientist journal.

Glaxo believes it has an edge over its competitors because it uses an unapproved adjuvant to boost the immune response. A public already wary of vaccines is already talking about controversial adjuvants.

Liability

Governments have encouraged drug makers to stay in the vaccine business, generally not considered profitable, especially in light of lawsuits.

The 1996 outbreak of swine flu that led to thousands of lawsuits from those who said the jab made them sick, the government has taken steps to head off that possibility.

Learning from that experience, last July, Secretary of Health and Human Services Kathleen Sebelius granted both the vaccine makers and government immunity from lawsuits that could result from the swine flu vaccine. Citing the 2006 Public Readiness and Emergency Preparedness Act ( PREP Act), the DHHS can invoke almost complete immunity from liability and removes the right to a trial by jury, unless the plaintiff can show willful misconduct that resulted in death and/or serious injury.

That policy echoes one the government has had in place over childhood vaccines since the 1980s when lawsuits by children injured by vaccines threatened to have the pharmaceutical companies pull out of the vaccine business.

As a financial incentive for drug makers to stay in the vaccine business, the U.S. set up a special court, the National Vaccine Injury Compensation Program (NVICP) or “vaccine court” which decides the amount injured individuals should be paid, if at all, shielding vaccine makers from liability.

Critics say those protections give vaccine makes no incentive to assure their products are safe for the public.

In fact Glaxo is on record as saying, “Clinical trials will be limited, due to the need to provide the vaccine to governments as quickly as possible. Additional studies will therefore be required and conducted after the vaccine is made available.” #