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this year.

Mr. HAGAN. Today, we are in trial in two suits but neither one involved a vaccine.

Mr. ROGERS. I was trying to restrict this to vaccine. Mr. HAGAN. We are not in trial at the moment on any vaccines. Mr. ROGERS. Will you be next year? Mr. HAGAN. We will be this year. But not at the moment. Mr. ROGERS. How many do you anticipate in trial this year. Mr. HAGAN. If they are not settled we should try two or three Mr. ROGERS. So the other vaccine products are not a very significan't cause of lawsuits?

Mr. HAGAN. No, the awards could be high because the type of thing you get involved with is encephalitis and that sort of thing and the injuries are severe. It had potential for a very high verdict.

Mr. ROGERS. What have been the payments for such suits? Could you supply that for the record for the last 5 years? I realize you would not have it with you.

Mr. HAGAN. We will be pleased to.

Mr. ROGERS. Let us know what that rate is. We went into some of this before, but I am trying to refresh my memory.

About how many doses are you now manufacturing of all your vaccines? Could you give us just a general estimate?

Mr. HENDRICKSON. We would rather not give those figures out here but we would be happy to supply them to you.

Mr. HAGAN. We are in the same position.
Mr. ROGERS. Why is that? Is this a trade secret?
Mr. HAGAN. In my case it is. In addition I don't know.

Mr. ROGERS. That is really a secret. If you would supply it for the record. I guess that I will get it eventually. I doubt if it would make much difference to your competitor. Does it really? Is that a great secret really?

Mr. MARKOE. I would be pleased to give you the information. Mr. ROGERS. I am not pressing you for it.

Mr. MARKOE. I think it could be to the people responsible for the production and the marketing. They would

consider this proprietary. It is highly competitive information. There are only four of us and it is a pretty tight group.

Mr. ROGERS. I would think everything would be known.
Mr. MARKOE. Surprisingly, it is not.

Mr. ROGERS. I won't press, but if you would let us know for the record. I think it would be helpful if you would also supply a statement for the record as to any suggestions you might have for future immunization programs, any criticisms you have on how the matter was handled before and what you think should be done in the future.

This would be helpful to the committee in trying to fashion some legislation. Thank you. We are grateful to you for your patience and for being here today.

The committee stands in recess for 5 minutes.

[The information requested was not available from all four of the manufacturers at the time of printing.)

[Brief recess.]
Mr. ROGERS. The subcommittee will come to order.

Our next panel is a panel of insurers. We have T. Lawrence Jones, president, American Insurance Association; William 0.

Bailey, president, Aetna Life & Casualty; and Henry U. Harder, president, Chubb & Son, Inc.

Your statements will be made a part of the record in full and you may proceed. STATEMENTS OF T. LAWRENCE JONES, PRESIDENT, AMERICAN

INSURANCE ASSOCIATION; WILLIAM O. BAILEY, PRESIDENT, AETNA LIFE & CASUALTY; AND HENRY U. HARDER, PRESI. DENT, CHUBB & SON, INC.

Mr. JONES. Thank you, Mr. Chairman, for this opportunity to appear before you. I am T. Lawrence Jones, president of the American Insurance Association. We have some attachments to our state ments which I assume will be included in the record.

Mr. ROGERS. Without objection, they will be made part of the record following your statement (see p. 440).

Mr. JONES. În the interest of saving time, perhaps I can just simply open the discussion here by saying, with respect to the earlier testimony and the earlier questioning, that in the course of developing an insurance program for the manufacturers, working with the manufacturers and with the Department of Health, Education, and Welfare, we offered the Department three alternatives that contemplated enactment of the legislation then pending before your subcommittee. Two of those alternatives contemplated a retro spective premium.

The Department first chose alternative two, which included a retrospective premium arrangement, and we have virtually completed the commitments necessary to fill out that coverage when the Department advised us that they were changing their approach, that all the circumstances were changing, and that they did not want to go that way.

Mr. ROGERS. Do you recall when that judgment was made?

Mr. JONES. Yes. I believe it was July 30, 1976. You will find the discussion of this process at the top of page 5 of my statement, Mr. Chairman. Indeed, by the afternoon of Monday, August 2, commitments had been made to insure 90 percent of the $50 million primary insurance coverage which the initial program called for, but commitments to the additional or excess layer of coverage were proving hard to secure.

But at that time, HEW advised us that they were changing their approach, and they stated to us very frankly that they needed a fixed price. The reason was that they had an appropriation and they needed to know what the price would be. From then on, we approached their various proposals and needs from the standpoint of a fixed price, and we no longer brought up or developed any other retrospective rating proposal.

We felt that the retrospective plan was probably the best way to go under the circumstances, but we understood perfectly HEW's problem and the reason they made the decision, and we don't think they acted incorrectly under their circumstances and facts.

This was an entirely new program in our eyes, operating in a climate that was relatively new in terms of litigation and awards against pharmaceutical products on the part of juries and courts. These circumstances required the program that was actually enacted, and pursuant to the law, we developed an insurance pro

gram, and were able to fulfill the commitment we made to it. We reported to you on that on September 13, 1976, and all the materials relating to it are here.

We think your committee made an appropriate decision under the circumstances. It was necessary to support the program, and we were glad to fulfill our responsibility. I must stress, however, that it was done with a great deal of difficulty and that we had to go into the world market to fill out the $220 million total insurance coverage over and about the 242 million retention on the part of each manufacturer.

The choice of going with a fixed price approach was made by the client, HEW, on the basis of the limitations that they felt that they were governed by.

We would be perfectly willing to approach any future program on a retrospective basis or on a service basis. Certainly there is more experience at this point to justify approaching it on a retro spective basis than there was in the first instance, but still we think that the experience that has been put before this subcommittee confirms beyond any doubt that our concerns were not exaggerated about the different number and type of claims that would arise out of the swine flu program as distinguished from ongoing vaccination programs. In past immunization programs, people sought to get vaccinated, and we were not as concerned about informed consent or warnings, because they were actually seeking it and were going through the formal procedures with their own physicians. Moreover, tim, had been taken to properly develop the vaccine and distribute it in accordance with an unhurried program.

[Testimony resumes on p. 487.]
Mr. Jones prepared statement and attachments follows:]

Statement of T. Lawrence Jones, President

American Insurance Association
Swine Flu Immunization Program

Oversight Hearings
Subcommittee on Health and the Environment of House
Interstate and Foreign Commerce Committee

September 16, 1977

My name is T. Lawrence Jones and I am president of the American Insurance Association, an organization of 145 insurance companies writing property and casualty insurance throughout this country. We appear today to report to the Subcommittee the events which took place between the Subcommittee hearings on July 23 and September 13, 1976 and thereafter. We will report the course of those events leading to the development of the final insurance program for the vaccine manufacturers and to the securing of the underwriting committments necessary to fill out the program, as insurance industry representatives observed and recollect them. We also describe subsequent preparation for claims handling.

On September 13, 1976, this Subcommittee heard Henry U. Harder, president of Chubb & Son Inc., and Kenneth A. Greiner, vice president of Johnson & Higgins, report on the actions of the insurance industry subsequent to the passage of Public Law 94-380 on August 10. Their report appears at pp. 329-340 of the subcommittee's published hearings on the Swine Flu Immunization Program. (Supplemental hearings before the Subcommittee on Health and the Environment of the House Committee on Interstate and Foreign Commerce, 94th Cong., 2nd Sess., Serial No. 94-113

(1976)).

As Mr. Harder informed the Subcommittee, each manufacturer would receive two policies, one for $5 million and one for $50 million, and that such insurance would be excess over what was understood to be a retention of $2.5 million of liability for each manufacturer's own account in accordance with

its contract with the government.

For the entire first layer

of coverage ($20 million excess of such total retention) the premiums totalled $2.4 million. For the second layer of coverage, $200 million in all, the premiums totalled $6.25

million.

The coverage provided was, and is, basically for each manufacturer's liability imposed by law for personal injury or death arising out of the Swine Flu Program as such legal liability is limited by the manufacturer's contract with the government and by P.L. 94-380.

The hearing transcript contains copies of the two insurance policies and identifies the insurers who subscribed to either or both policies, setting forth the amounts of their subscriptions.

It shows that a substantial percentage (17.035%) of the second layer of coverage was subscribed by Lloyd's, London and various British and other foreign insurers.

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