Some years ago, I briefly worked in a supermarket produce section. One of my duties was to remove spoiled fruits and vegetables from the display bins, to be discarded or donated to a homeless shelter.
The supermarket business is known for having razor-thin profit margins. Grocers face serious liability issues, with slip-and-fall lawsuits alone costing about half a billion dollars a year. Supermarkets are also groaning under the heavy burden of OSHA, FDA, local health and weight-and-measure regulations, and other crazy liberal schemes.
So with the added burden of losses on unsold fruits and vegetables, it’s no wonder that grocers have been leaving the business in droves, leading to periodic shortages of fruits, vegetables, and food of all kinds. In many cities, rates of malnutrition and even starvation have been heading ever upwards. Long lines of hungry people snaking around the block have become a common sight in front of the few remaining supermarkets.
Or at least I assume that this must be happening. After all, I keep reading article after article offering these same explanations–the cost of unsold product, misregulation, liability issues–for why the US faces such persistent flu vaccine shortages.
As I’ve written before, and will again, these explanations are mostly nonsense (with the possible exception of misregulation). I wasn’t privy to the pricing decisions of the market I used to work at, but I imagine they simply raised the price high enough to cover their losses in spoiled produce. Similarly, I imagine that vaccine manufacturers simply raise the price to cover unsold serum and the costs of liability and regulatory compliance. Indeed the price of flu vaccine has increased almost five-fold since 1996, from $1.80 to $8.50 a dose.
One explanation for persistent vaccine shortages that hasn’t gotten enough attention is the possibility of price fixing. Perhaps firms have been withholding supplies in order to raise prices, gain regulatory and liability relief; and persuade governments of the need for subsidies.
Paranoid? It was only a few years ago that many of the worlds largest drug companies admitted to engaging in a decade-long conspiracy to fix the price of vitamins. Eight firms were fined about $1.5 billion dollars by US and EU regulators. The plot was quite brazen:
[Executives] secretly met in hotels and homes around the world. Instead of competing for business, they agreed on how much of each product they would sell and how much they would charge for it.
An FBI investigation resulted in rare behind the scenes video. The video shows executives from multinational firms agreeing to fix global prices for an additive in animal feed.
Of the firms that were caught, at least three — Aventis SA (France), Solvay Pharmaceuticals (Holland), and Merck (Germany) — are major vaccine manufacturers. Aventis, of course, is one of the 2 US suppliers of injected flu vaccine.
Fortunately, as Aventis said at the time, they’ve “since put into place practices and procedures and organizational changes to ensure compliance with applicable antitrust laws.” So there’s certainly no need to worry that they’re up to their old tricks again.