Hot Topic - Allocating the H1N1 Vaccine



Hot Topic - Allocating the H1N1 Vaccine

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In Portland, Oregon, clinic workers were mobbed by 1200 people wanting H1N1 vaccinations. In Olympia, Washington, a hospice was robbed of the vaccine intended for health care workers visiting the terminally ill. . . . If you've listened to the news lately, you can't be blamed for wondering whether it's more dangerous to contract the H1N1 flu or to try to get vaccinated for it. But, while you're wondering if flu shot riots are going to become a regular winter occurrence, economists are rolling their eyes in that irritating "know it all" manner, because to them the vaccine chaos is just another manifestation of a classic economic problem: scarcity and allocation.

Scarcity is nothing new. That's what economists study, and you're taking economics because dealing with scarcity is the perennial problem man faces on earth: How do we allocate limited resources to meet unlimited wants? Is the H1N1 vaccine scarce? Yes, most definitely, but so are lots of other things and they're not making news headlines. The challenge therefore, would seem to be to figure out why this particular scarcity has us in such an uproar.

First of all, let's be clear that this scarcity is more than just a minor annoyance. The H1N1 flu virus has proven itself to be both virulent and deadly so it's not surprising that there is great demand for the vaccine. There have been some surprises on the supply side, however. In late October, 60 Minutes documented the unanticipated difficulties that have arisen in producing the vaccine.

An Inside Look at H1N1 Vaccine Production 
Last summer, the government said there would be 120 million doses of vaccine by fall; weeks later, it revised that to 40 million. Now, just over 17 million have shipped - 14 percent of the first estimate. 

Experts agree the government decoded the virus to prepare a vaccine in record time, a real achievement. But then the project hit snags.

The vaccine took longer than expected to produce, and there were shortages of supplies, like the sprayer for the FluMist version.

. . . The virus grows in [chicken] eggs; later it is killed and refined into vaccine. The process takes three months. Most of that is testing for safety and sterility. Sanofi Pasteur has a federal contract to make 75 million doses. They will go through millions of eggs.

...Kathleen Sebelius, secretary of the Department of Health and Human Services . . . told "60 Minutes" she learned there was trouble three weeks ago when the new virus wasn't growing inside the eggs as fast as seasonal flu virus does. Some companies were getting half their usual yield. 

"Well there's no question that the numbers that they gave us which we relied on, early on, are off," Sebelius said. 

...[A French drug company says it has] figured out the slow-growth problem. Now it is getting normal yields and it has been meeting its deadlines.

by David Gelber, Michael Radutzky and Sam Hornblower, CBS, Nov. 1, 2009


Things are scarce; that's not news. Things are scarcer than we thought they'd be. Ok, that's news, but why is it headline, coming-up-next-stayed-tuned-to-your-TV-because-people-are-breaking-into-hospices news? Well, we said that the economic problem is scarcity and allocation, so let's look at the allocation part.

Scarcity necessitates rationing; it's not an option. When there is less of something than we want, we have to decide how to distribute - allocate - what's available. Economists call all the various methods of allocating scarce goods and services "rationing" - even if they don't involve ration cards like the government issued to people in World War II.

Rationing just means choosing a process to determine who gets it. And in this case, "it" is the H1N1 vaccine.

We ration most things in our economy by price. Producers put the product for sale in the market and anyone who is willing to pay the price gets the product. If no one buys, the price falls until people do; if too many people buy and supplies run short, the price rises until some people in line decide they'd rather spend their money on something else.

|Arbitrary Characteristic |Force |Price |

|Auction |Lottery |Sharing |

|Contest (physical or mental) |Merit |Someone decides |

|First-come-first-served |Need |Voting |

But, we don't ration everything this way. What about athletic and academic scholarships? They're rationed on merit. What about tables in a restaurant or seats in a movie theater? First-come-first-served. Look at the other possibilities on the list below and see if you can think of things that we ration in that way. Can you come up with other methods that don't fit into one of the categories on the list?

With the list of allocation mechanisms firmly in mind, let's go back to the news. Read the article below and see if you can figure out what allocation method or combination of methods is being used to ration the scarce H1N1 vaccine.

L.A. County Free H1N1 Vaccine Clinics Overwhelmed (by Molly Hennessy-Fiske, LA Times, October 28, 2009)

Los Angeles County's free H1N1 flu clinics opened last week amid public health officials' promises to aggressively vaccinate people at highest risk, especially the uninsured. Instead, overwhelmed clinic staff began vaccinating many people who were not supposed to be first in line for protection, officials said Tuesday.

"We thought it was important to get to as many people as quickly as possible," said Dr. Jonathan E. Fielding, the county's director of public health. . . . Fielding conceded that county officials failed to conserve vaccine supplies early on, unwilling to turn away those who had traveled and waited in line. By Tuesday, they faced a vaccine shortage, with only enough doses to stay open through Nov. 4 instead of the planned Nov. 8.

...State and federal officials have recommended, but cannot mandate, that local governments vaccinate federal priority groups first. Those groups include: pregnant women, people living with or caring for infants under 6 months old, emergency medical services personnel and healthcare workers, children and young adults ages 6 months to 24, and people 25 to 64 years old with chronic medical conditions such as heart or lung disease, asthma, diabetes or weakened immune systems.

. . . With so little vaccine on hand, many public health officials are struggling to ensure that those most in need are helped first.

...In Portland, Ore., public health officials heightened screening after clinic staff were mobbed last Thursday by 1,200 people seeking the vaccine. A spokeswoman said they ended up vaccinating some who were ineligible while denying others who qualified.

In Phoenix last weekend, county health officials restricted the 50,000 vaccines available at free clinics to children up to age 5, children with underlying health conditions, caregivers for children younger than 6 months old and healthcare workers.

In Las Vegas, where free clinics have been distributing 600 vaccines an hour, officials this week were distributing only nasal spray vaccines, and limiting them to those ages 2 to 24, healthcare workers with patient contact and caregivers of children younger than 6 months old.

Clinic staff members question those waiting in line, but as in Los Angeles, they rely on people to be honest about whether they are eligible...



Hopefully, what you came up with is that the vaccine is being allocated by a combination of need and first-come-first-served. The government used health care data to identify groups of people most susceptible to the flu. Clinics ask people in those high need categories to line up to receive the vaccine, and they make special efforts to vaccinate people who don't have insurance - which we might categorize either as another indicator of need or as an arbitrary characteristic.

Notice that there was no mention of prices in the Los Angeles article. But apparently there are places where people can pay for an H1N1 shot - or at least there used to be . . .

H1N1 Doses Confiscated From Goshen Pharmacy (reported by Stephanie Stang, WNDU, October, 29, 2009)

Indiana State Department of Health takes vaccines away from pharmacy not distributing to priority groups.

A Goshen pharmacy gets in trouble for giving out swine flue (sic) vaccinations to non-priority groups.

Wednesday the Walgreens on State Road 33 in Goshen was holding an swine flue (sic) shot clinic when the state health department confiscated 600 doses.

...The vaccines that were taken away were then re-distributed to other practices in the county.



(We probably should note that even if people were paying for their shots at the Walgreens' pharmacy, we couldn't really call it rationing by price, because the price tag in this instance didn't come from the market. The federal government is subsidizing production of the vaccine, so prices don't reflect the costs as market prices do for everyday things like gasoline.)

But that brings up another question. Since we ration so many other things by price, why not the vaccine? Actually, we didn't bring it up. A pregnant lady from Salt Lake City did. Her name is Milli and she posted that very question on the Café Hayek blog:

"Vaccine Shortage" (by Russ Roberts, Café Hayek, Oct. 26, 2009)

This weekend our health department had a mass H1N1 flu shot clinic, with 7,000 shots to give out, in 4 clinics. It started at 7am. I knew my chances were pretty small when I saw the night before people were already lined up. When I got there at 7am, I wasn't hopeful, seeing what looked like 4,000 people lined up. I went and stood at the back of the line and started to wait. After about twenty minutes one of the Health department people came up to our group and said there was no point in waiting as they would run out of the vaccine about 1,000 people ahead of me. Some people started arguing with the guy, I just left. (I later on learned that 45,000 people lined up outside one of the clinics).

One of the main concerns and problems in this to me was that it was free. It seems to me that had they charged at least 20 dollars a person, half those people maybe would not have even been there. There are people that aren't in the high risk groups getting the shots, just because they are free. I thought about it, and I would have paid and still would pay about 200 dollars for the shot. Maybe, next time I will think ahead and offer that amount to someone in line ahead of me...

One more piece of information about the vaccine allocation before we turn you loose to analyze the problem. The news is also telling us that while thousands of people are being turned away in Los Angeles and Salt Lake City, there are places in the country with too much vaccine.

On Oct. 27, 2009, local news channel WLWT reported that after 300 - 400 H1N1 vaccinations were administered at a clinic in Mason, Ohio, there was still "plenty of the vaccine left over." Likewise, KEYC in Mankato, Minnesota reported on Oct. 28, 2009, that there were 550 doses of H1N1 vaccine left over after a weekend clinic.

Local H1N1 Vaccine Surplus (Reported by Liz Foster, WGMT, October 13, 2009)

The North Central Health District, which provides public health to 13 Middle Georgia counties, has a large supply of the H1N1 vaccine on hand, after demand was not as high as initially expected

The health district distributed 2,700 mist vaccines across Middle Georgia last week, but only about 150 have been administered.

The district's public information officer Jennifer Jones tells 41 NBC News, "We were targeting ages two to four, so that wasn't a very big target group anyway and we did that because we were trying to save the vaccines we had for the most vulnerable; but we just didn't see them coming out.

Public Health Departments in Twiggs and Hancock Counties currently do not have any of the vaccine, but due to the surplus, officials are discussing delivering some to the two counties.



For the sake of the people in Twiggs and Hancock Counties, let's hope the officials do their discussing quickly!

Alright, let's recap.

. We're confronting a more-serious-than-usual scarcity - high demand for a vaccine in very short supply.

. Our government, reflecting officials' concern for those most at-risk in the population, has chosen an allocation system. Alternative allocation mechanisms could have been chosen.

. Every allocation method has costs and benefits. News reports provide evidence of the costs and benefits of the current system.

The current allocation method for the vaccine targets the limited supply for those most "at risk" individuals, but the news suggests that the plan has met with limited success in actually getting them vaccinated. Discuss the questions below with your group to identify the costs and benefits of the current plan, and to evaluate whether or not a different method of allocation would better help us reach the goal of protecting people at high risk for the H1N1 flu.

Questions for Discussion:

1. According to the news articles, who needs the H1N1 vaccine?

2. What arbitrary characteristic gives people within the need group a higher priority for the vaccine?

3. What are the hidden costs clinics bear in trying to comply with the government's allocation guidelines.

4. Are the vaccinations free to the people in the identified priority groups? Why or why not?

5. Which is more fair - requiring people to pay in time or to pay in money?

6. Do you think Milli's plan to get to the front of the line will work if clinics in her area offer another vaccination day? Why or why not?

7. Imagine what it would be like if the H1N1 vaccine were allocated by the methods listed below. For each method, consider the costs and benefits, as well as the individuals that stand to gain the most.

. Lottery

. Rule of Force (strongest decide)

. Market-Price

. Arbitrary Distinctions (ex: merit, age, beauty)

. First-come-first-served

. Government Directed

8. Suppose a pharmacy - a private company - in one county had extra bottles of cough syrup while those in the neighboring county had run out. What allocation mechanism could solve the problem without a discussion by the health department officials and how would that method solve the problem?

9. Economists often evaluate allocation mechanisms according to the following criteria.

Efficiency: Is there an optimal use of scarce resources that prevents waste and ensures the most benefit for least cost?

Equity: Are people within society treated fairly and equally?

Freedom: Is individuals' economic freedom of choice protected and fostered? Is the power of government and other interest groups constrained?

Rank the government's allocation system on these criteria. Use a 1, 2, 3 ranking where 1 is the lowest and 3 is the highest or most desirable ranking.

What allocation system do you believe would score highest on this system and why?

Why do you think economists prefer market-price rationing over other methods?

10. In 1920 Ludwig Von Mises identified and explored this problem of how to rationally allocate resources, known as the economic calculation problem, and concluded that it is impossible to rationally or efficiently allocate resources in an economy without market prices. Does the evidence in these readings seem to support or contradict his conclusion? Provide examples.

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