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OCR for page 164
Appendix
B
A VACCINE SUPPLY PUBLIC INSURANCE OPTION
A vaccine supply public insurance program would provide one
solution to the vaccine supply problem caused by manufacturers'
concerns over unknown but potentially large liabilities.* This option
would not require controversial tort law reform. It would involve
creation by Congress of a statutory mechanism to provide the
manufacturers with insurance coverage against total costs (beyond a
specified, manageable amount), including legal expenses and amounts
paid after settlements and judgments, resulting from the manufacture
and sale of vaccines in accordance with regulatory standards.
It appears that such insurance is difficult to obtain at premiums
considered by manufacturers to be reasonable. The federal
yu-ve'~l-lil-lerlc cuuid Ovine such coverage to tne manufacturers in two
ways. The government could simply obtain bids for such insurance on
the commercial market and then pay whatever premiums are required.
Alternatively, it could create a specialized insurance corporation to
provide the insurance.
There are no precise institutional analogies. The swine flu
statute, although not specifically providing insurance, effectively
performed the same function h~c~all.c:- the f=~=r=1 m^~=rnm~n~ =~=l~m~A _
primary liability.
A ~ ~ ~ ~ ~ _ A ~1 41 1 ~ ~ _ ~- ~ ~
~ ~ ~ w _ _ a s&~ ~ & _ ~ ~ ~ ~ ~ ^
A close analogy is the Price-Anderson Act, designed to encourage
the construction of nuclear reactors. It requires owners of nuclear
reactors to carry the maximum amount of private liability insurance
available (determined to be at least $60 million per nuclear
occurrence), provides for indemnification by the federal government in
the amount of $500 million per occurrence, and limits total liability
per occurrence to $560 million.2 In administering the program, the
Nuclear Regulatory Commission is instructed to make use of the
*Manufacturers in certain industries have formed captive insurance
corporations to provide their liability coverage (e.g., the ladder
manufacturers formed Safe Step Insurance Corporation of Bermuda). A
similar arrangement by vaccine manufacturers could provide access to
insurance; however, it would not provide long-term security of vaccine
supply because overwhelming financial losses could bankrupt the
insurance corporation, removing the coverage it had offered.
164
OCR for page 165
165
facilities of private insurance organizations to "the maximum extent
practicable. n3 Fees are charged to owners of nuclear power plants
under this program.4 ~ ~ ~ ~ ~~ ~ - - -
Power Co. v. Carolina Environmental Study Group, Inc.5
This statute was held constitutional in Duke
The specialized government corporations that have been created to
provide depositors with insurance against the risk of failure of
financial institutions also could be used as models. The Federal
Deposit Insurance Corporation for banks, the Federal Savings and Loan
Insurance Corporation for savings and loan institutions, and the Small
Investor Protection Corporation for brokerage houses are government
corporations with independent boards of directors, funded by fees
assessed on the covered institutions, and backed by lines of credit
from the federal government. Although the insurance they provide is
not liability insurance, their organizational forms could be adapted
to provide coverage for vaccine manufacturers.
The implementation of such a program would require a large number
of technical decisions that Congress could delegate either to an
administrative official or to a specialized corporation, with such
guidance as Congress chose to provide. For example, to minimize the
cost and administrative changes required to implement such a program,
it probably would be desirable to leave the manufacturers with a basic
level of liability up to amounts that do not create unmanageable
risk. The firms could then continue to handle claims within these
limits. The amount of such a "deductible" should be varied according
to formulas that reflect the level of the manufacturer's business in
the vaccine market.
Other decisions would involve the allocation of responsibility for
and control of the defense of claims, the provision of information by
the manufacturers to the insurance carrier or government corporation,
the powers of the carrier or corporation to inspect or control the
operations of the manufacturers to minimize risk, the terms and
conditions under which new manufacturers would become eligible for
coverage under the program, the level of fees or premiums charged to
the manufacturers, the amount necessary for a reserve fund, and the
extent and form of the manufacturers' continuing liability for
negligence in the production process.
This option would enable Congress to protect vaccine manufacturers
who have acted in accordance with regulatory standards from the risk
of large losses, thereby ensuring continuation of the vaccine supply
from private manufacturers. It would not require that Congress first
resolve issues of tort law reform.
REFERENCES
sec. 2210.
sec. 2210(g).
1. U.S. House of Representatives, Committee on Energy and Commerce,
Subcommittee on Health and the Environment. Hearings held
December 19, 1984 on H.R. 5810, Washington, D.C.
2. 42 U.S.C. sec. 2210.
3. 42 U.S.C. sec. 2210(g)
4. 42 U.S.C. sec. 2210(f).
5. 438 U.S. 59 (1978).
Representative terms from entire chapter:
insurance corporation
