States Urged to Try Price Gougers

Tommy G. Thompson, secretary of the U.S. Department of Health and Human Services, on Thursday urged state officials to aggressively prosecute cases of price gouging of scarce flu vaccine supplies.

“It is extremely disturbing to learn of reports of price gouging by immoral individuals looking to make a quick buck off of a public health challenge,” Thompson wrote in a letter to the 50 state attorneys general. “I am encouraging the attorney general of each state to thoroughly investigate reports of price gouging and prosecute those engaging in this immoral and illegal activity to the full extent of the law.”

More than half the hospitals in a survey released Wednesday said they knew of flu vaccine being marketed at extremely high prices, in some cases up to 10 times the wholesale cost. On Tuesday, Kansas Atty. Gen. Phill Kline sued a Florida supplier for allegedly trying to sell flu vaccine in Kansas City at exorbitant rates.

The Centers for Disease Control and Prevention is compiling reports of gouging and will give the information to the National Assn. of Attorneys General, as well as state prosecutors, Thompson said Thursday.

The shortage of flu vaccine emerged suddenly Oct. 5 when British health authorities shut down a Liverpool factory owned by Chiron Corp. of Emeryville, Calif. The surprise closure eliminated nearly half of the U.S. supply for the coming flu season.

Although the government is in talks with foreign suppliers of flu vaccine, Food and Drug Administration requirements make it unlikely that significant quantities of the unlicensed foreign dosages could be approved for this year. “It doesn’t look promising,” Thompson said.

Looking to the future, Thompson suggested that Congress should regularly purchase up to 100 million doses of flu vaccine annually, making the United States a more attractive market for suppliers. Such a strategy would be intended to guarantee “that we have a ready source of vaccine year after year.”

Later, a Thompson aide explained that the idea was similar to that of Project BioShield, in which Congress has agreed to spend billions of dollars for drugs and vaccines to combat biological attack and other weapons of mass destruction.

“It would guarantee a market for flu vaccine, which would then, one, keep manufacturers in the business and, two, encourage new manufacturers to come in,” said Tony Jewell, a spokesman for Thompson.

Meanwhile, Chiron was hit with two shareholder lawsuits seeking class-action status. The suits, filed in U.S. District Court for the Northern District of California, allege that the company misled investors about its ability to deliver flu vaccine. Chiron shares plunged 30% in the first seven trading days after the Oct. 5 announcement.

Chiron said Wednesday that the Securities and Exchange Commission had launched an informal investigation of events surrounding the vaccine shortage, apparently in an effort to determine whether the company kept investors properly informed.

Chiron’s shares rose 9 cents to $31.96 in Nasdaq trading Thursday on news the company submitted a marketing application to the FDA for an inhaled form of cyclosporine that would prevent organ rejection in lung transplant patients.

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Times staff writer Denise Gellene contributed to this report.