Firms Seeking an AIDS Vaccine Ask Protection : If Serum Is Discovered, They Say, Threat of Lawsuits Could Block Distribution

Twelve years ago, four drug companies engaged in developing a vaccine for swine flu gave the government an ultimatum: Unless they were granted immunity from all lawsuits arising from their product, the firms said, they wouldn’t sell the vaccine to the public.

The threat worked. The Justice Department assumed full responsibility for the more than 4,000 lawsuits that were filed during the following decade. And of the approximately $100 million paid in damages to Americans suffering from the vaccine’s unanticipated side effects, the drug companies have paid not a penny.

Now, in light of heightened public concern over the AIDS crisis, the pharmaceutical industry is trying again. In the past few months, in discussions with policymakers and in a series of public statements, pharmaceutical officials and industry legal experts have warned that if a vaccine for AIDS is developed, companies may be unwilling to bring it to market without some protection against lawsuits arising from its side effects.

Pointing to the unique legal problems that have battered vaccine makers over the past decade and made it impossible for companies to get insurance against lawsuits, drug companies have argued that the unknown risks associated with any new AIDS vaccine could make it foolhardy for them to attempt to sell it commercially.

“It’s absolutely clear to me that there are decisions already being made on (AIDS) research priorities for liability reasons,” said Paul Destefano, chief corporate counsel for Genentech Inc. of South San Francisco, one of several companies that claim to have been frightened away from pursuing AIDS vaccine work. “Vaccines have ceased to be a high-priority development project here. They have been de-prioritized.”

Not everyone finds the argument convincing. Some critics, citing the fact that commercialization of a vaccine for AIDS--if it is possible at all--is at least a decade away, have accused the industry of using the AIDS issue as a straw man for a broader campaign to weaken liability laws.

“These are nothing but scare tactics,” said Eugene Pavalon, former president of the American Trial Lawyers Assn. “Groups that are seeking special privileges and immunities are always making statements designed to scare the public.”

But given the emotional sensitivity of the AIDS issue, and with clinical vaccine trials already under way, the drug industry’s complaints have come under serious consideration from legislators determined to avoid answering another industry ultimatum.

“All the experts agree that the development of a vaccine against AIDS will be a difficult scientific task,” said John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee. “My concerns are that liability problems, with or without foundation, do not inhibit the development, testing and, ultimately, the distribution of any potential vaccine. Everyone concerned must begin to address this issue now in a reasoned climate to ensure that scientific progress continues and the federal government is not held hostage by public demand. I don’t intend to see a repeat of the swine flu fiasco.”

The problem facing drug companies is that, for a number of reasons, vaccines attract a far greater share of liability suits than other drugs.

First, because they are administered to healthy people, side effects are far easier to detect and far more significant to the person being immunized than is, for example, an adverse reaction to a drug given a terminally ill patient.

“It is very hard to explain to someone (who suffers side effects from the vaccine) that his odds of getting sick were greater without the vaccine,” said Peter Huber, a liability expert with Science Concepts Inc. in Washington.

Second, because individuals are often urged or required by the government to participate in vaccination programs, courts have tended to view injury claims more favorably than in instances where a patient took a drug by choice.

Finally, because vaccines are generally given to large numbers--even millions--of people, the possibility of unanticipated adverse reactions is much greater than a drug given only to a narrow patient category.

“These circumstances cause the manufacturer of a vaccine known to have certain adverse effects to engage in a gamble with very large financial stakes,” according to a recent National Academy of Sciences report on the vaccine industry. “If an increasing number of courts impose liability, the costs will be enormous because claims average several million dollars per case. The only way to eliminate risk is to stop manufacturing the vaccine.”

That is precisely what has happened with pediatric vaccines. A spate of large liability judgments in the mid-1970s caused insurance companies to withdraw their coverage and the ranks of firms involved in vaccine manufacturing to dwindle.

Today, the healthiest sector of the vaccine business is in the veterinary area, where the likelihood of lawsuits over adverse effects is somewhat smaller.

“The industry is a shambles,” said Peter Huber. “We’re down to sole suppliers for five or six of our major vaccines. It’s just not the kind of litigation buzz saw that any (company president) wants to walk into.”

The companies that remain in the vaccine business have raised their prices to cover anticipated legal expenses. In the case of vaccines that have been used for years and have well-known side effects--polio vaccines, for example, actually cause the disease in one in every 3.2 million children inoculated--that calculation can be made with relative accuracy.

But in the case of new vaccines, such as that for AIDS, the risk is unknown. As a result, even though the challenge of developing an AIDS cure has attracted a large number of drug companies back into vaccine development, some companies--most notably biotech heavyweights Genentech and Chiron Corp. of Emeryville, Calif.--have said they are evaluating their entire vaccine programs to see if they are financially feasible.

Others have steered clear of the effort. “Hypothetically, if we were going to be licensed for an AIDS vaccine tomorrow, we’d know we couldn’t get insurance, and we would have a real problem figuring out how to cost out our potential legal exposure,” said David Williams, president of Connaught Laboratories Inc., one of two major U.S. vaccine makers. “The whole thing would have to be seriously considered. . . . I don’t think we have the financial resources to put that much at risk.”

Whether these doubts add up to an emerging crisis in AIDS research is an open question. “I think that the same companies that may publicly say they aren’t working on an AIDS vaccine are, in fact, privately working hard and waiting to see what happens,” said J. J. Finklestein, president of Viral Technologies Inc., a Washington firm working on an experimental AIDS vaccine.

“The payoff is so great for a company that can develop a vaccine that the incentive to go forward with research is overwhelming,” said Henry Waxman (D-Calif.), chairman of the House health and the environment subcommittee. “Removing the liability question would only increase what is already an enormous profit potential.”

“Ultimately, everyone would like the government to ensure all sorts of private activity and have the taxpayers sign a blank check,” said Jeffrey Axelrad, a Justice Department official who for the past decade has been involved in cleaning up the liability suits left from the last time the government stepped in to help the vaccine industry. “That’s what happened in the swine flu case.”

Nonetheless, helping out vaccine makers would hardly be an unprecedented action for Congress.

In 1976, in the face of what federal health officials believed to be an epidemic of swine flu, the government agreed to stand as the defendant in all liability lawsuits in exchange for a crash industry program to develop a swine flu vaccine. And in 1986, in response to the perilous state of the makers of childhood vaccines, Congress set up a fund to pay for out-of-court settlements in liability suits over pediatric vaccines.

Neither example, however, is considered an adequate model for dealing with potential problems in selling an AIDS vaccine. Part of the swine flu compromise was that the industry sell its vaccine at cost, an unacceptable requirement for an industry that has poured millions into AIDS research.

At the same time, the swine flu experience has not been considered a success from the government’s point of view, since the vaccine’s alleged links with Guillain-Barre syndrome triggered a barrage of lawsuits that even today, 12 years after the fact, the Justice Department is still fighting.

“That was disaster,” Waxman said. “We didn’t know what we were getting into.”

As for the Childhood Vaccine Act, the no-fault settlement plan drawn up by Congress is based on side-effect profiles that have emerged over many years of vaccine use. If an AIDS vaccine is developed, no one has any idea how many unanticipated injuries it would cause.

“There is no pharmaceutical that doesn’t carry with it some risk for an individual,” said Peter Barton Hutt, a drug industry lawyer with Covington and Burling in Washington. “The issue is whether the benefit outweighs the risk for the population as a whole.”

With such arguments, the industry intends to press anew its case for tort liability reform. “An issue like AIDS provides us some unique opportunities to enhance our position and present a better case to Congress,” said Williams. “The public pressure to bring a AIDS vaccine to the market is there.”