Dr. COOPER. At this point in time, it is our feeling that despite the added burden that would be placed on States and the great need for responsibilities and even some additional sacrifice by all sectors of the population, including individuals, this program can still go forward.

I think it is in the nature of a preventive public health program and we are quite willing to modify our views on the availability of appropriate data.

Mr. MAGUIRE. May I ask one final question?

Can you invisage any set of circumstances in which you would advise that we not proceed with this mass innoculation?

Dr. COOPER. Yes, certainly.

Mr. MAGUIRE. If so, what would they be, and at what point would we have to make this judgment.

Dr. COOPER. I think that we could make that judgment any time before we started based on the availability of information that it would be inimical to the public interest to give it and that could be based on a whole range of things, including that the vaccine was poor, contaminated, the lots available were no good, it had some effect on the population or subsets thereof, a large enough dimension I don't know about at the moment that would be inimical to the public interest.

Mr. ROGERS. Thank you, gentlemen. Thank you very much for your presence here today.

I might state that the Chair plans to continue. We would like to cover the testimony of Dr. Sabin and Dr. Salk and we have promised one witness we would because of their demand that they had arrangements with the Chair to try to testify before 12:15. So we will excuse the Government witnesses at this point.

Thank you for your presence.

The next witness is Mr. Ivan Husovsky, who is the president of Merrell-National Laboratories, accompanied by Hon. William P. Rogers, Esq.

We welcome you gentlemen to the subcommittee, and we are glad to see our former colleague in Government here.

STATEMENTS OF IVAN HUSOVSKY, PRESIDENT, MERRELLNATIONAL LABORATORIES, DIVISION OF RICHARDSON-MERRELL, INC., AND WILLIAM P. ROGERS, COUNSEL

Mr. HUSOVSKY. Thank you, Mr. Chairman, I am Ivan Husovsky, president of Merrell-National Laboratories. With me is our counsel, William P. Rogers. We appreciate the opportunity to present our comments respecting the Government's proposed nationwide immunization program.

Following the March 24, 1976, announcement by President Ford concerning the program, Merrell moved rapidly to assure that it would be in a position to contribute significantly to this vast public effort. Immediately, we made plans to divert and redeploy our manpower and equipment, and we began to reorient our entire normal ongoing production program at our Swiftwater, Pa., biological facilities.

Without the benefit of a contract with the Government, or, at that time, even the assurance that Congress would appropriate the necessary funds so that the program could be implemented as announced by the administration, we took steps to assure that we could increase our production capacity for the vaccine. The company made significant investments for additional equipment such as for refrigeration, incubation, inoculation, and holding tanks. We installed a second incinerator with an appropriate crew. We proceeded with the reassignment of permanent employees, the hiring of numerous new temporary personnel and implemented a number of other steps to assure that we could meet the anticipated substantial increase in our normal production volume of the influenza vaccine.

Having taken these measures, we are confident that we will be able to meet the production levels expected of us.

Because of the magnitude and complexity of the program, it is understandable that many questions of concern to the manufacturers remain unresolved.

For example: of primary importance, we still do not know whether we will receive indemnification for potential liabilities arising from this massive Government program; we have not as yet been officially advised of the potency of the vaccine to be used, nor of the precise age groups to be vaccinated; the specific amounts of monovalent and bivalent vaccine required from each company has not yet been determined, and the form and content of labels and package inserts are yet to be specified; as we understand it, a final decision has not yet been made as to whether any of the B/Hong Kong vaccine will be used in conjunction with or included in the nationwide program. Because of the difficulties which could arise in assigning liability if both the B/Hong Kong and A/Swine are given during the same general time period, Merrell has concluded that it cannot make its supplies of B/Hong Kong available for use unless it is subject to indemnification on the same basis as we expect to obtain under the swine flu program. We feel so strongly in this regard that we have offered to provide to the Government our entire inventory of close to 5 million doses of the B/Hong Kong vaccine at a nominal charge, so it can be included within the indemnification provided under the proposed bill.

As you probably know, satisfactory resolution of the indemnification question is essential to our continued participation in the program. We need full protection against potentially vast liabilities and associated costs not attributable to our own fault, which might arise from the vaccine program.

Finally, I think it is evident that we have demonstrated our willingness to cooperate fully in the program. However, it is necessary that we know by early July that indemnification legislation will be passed, because it is impractical for us to continue to produce massive quantities of the vaccine without such assurance.

If I may, I would now like to ask Mr. Rogers to expand upon the legal considerations related to the indemnification bill.

STATEMENT OF WILLIAM P. ROGERS

Mr. WILLIAM ROGERS. Thank you, Mr. Chairman and gentlemen. I appreciate the opportunity to discuss the problems which have created the need for legislation indemnifying the manufacturers of the vaccine to be used in the Government's national immunization program. We believe as a matter of law that there are risks of substantial liability inherent in such a program which Merrell should not have to assume.

To begin with, let me say that Merrell is prepared to give its full cooperation to this vital public health program, as has already been shown by its performance to date.

I want to emphasize that nothing I say here today is intended to

risks in at the vaccine in itself poses any unusual or unacceptable

risks in the voluntary mass immunization program planned by the Government.

There are, however, at least two factors which make this immunization program unique.

The first is its unprecedented size. The largest previous flu vaccine program is believed to have involved only about one-fourth of the number of people to be inoculated in the current program.

The second is that this program is almost entirely governmental. The Government is in control of all key aspects of the program; that is, planning and development of the vaccine specifications, clinical testing, labeling, the content and communication of warnings to recipients of the vaccine, and the direction and supervision of the inoculation process.

By contrast, Merrell's participation is limited to manufacturing the vaccine in accordance with the Government's specifications and delivering it as provided in the contract.

As this committee knows, recent developments in products liability law impose extremely heavy burdens on the drug manufacturers. Courts and juries have tended increasingly toward holding the manufacturer to a standard of almost absolute liability.

In this program Merrell is not in the traditional role of the manufacturer. It merely performs the mechanical act required in producing the vaccine to Government specifications. All of the customary functions and responsibilities associated with the manufacturer's role have been taken over by the Government. Nonetheless-absent legislation there is a substantial risk that courts and juries still

may charge Merrell with responsibilities that traditionally go with manufacturing the vaccine.

Given the size of this program, many people receiving the vaccine undoubtedly will develop subsequent ailments which may bear no relationship to the inoculation other than having followed it in time. Many of these people undoubtedly will sue for damages and name both the Government and the so-called "manufacturer" as defendants. The risks of both monetary judgments and legal costs cannot now be calculated, or even estimated with any accuracy. However, it is clear that very substantial risks are involved which we believe Merrell should not be required to take.

Significantly-and this underscores the seriousness of the matterMerrell's insurers have recently notified it that they will withhold any coverage with respect to liability arising from this nationwide program. In the initial congressional hearings on the program earlier this year, it was assumed that problems respecting the manufacturer's potential liability for the Government's portions of the program could be resolved contractually. The Government's attorneys and those of the manufacturers have made sincere efforts to accomplish such a result. But I think everyone now agrees that the proper apportionment of responsibilities, can be firmly established only by indemnification legislation. This is because limitations on the scope of Government tort liability and, as I pointed out earlier, the nearly absolute iability of vaccine manufacturers imposed by some courts, makes any contractual protection of doubtful value.

Under the Federal Tort Claims Act, the Government may not be held liable for any claim based upon the Government's performance of a discretionary function. Some courts might regard the Government's activities in connection with the preparation and communication of a vaccine warning, or the establishment of vaccine specifications, as discretionary. Further, court interpretations of the Tort Claims Act cast doubt on whether the Government can be held liable under theories of strict liability in tort or breach of warranty. In cases where such limitations bar recovery against the Government, plaintiffs would sue the vaccine manufacturers. In the Reyes and Davis cases, the vaccine manufacturers were held responsible for the adequacy of warnings, even though they had no control over the administration of the vaccine or the communication of the warning. In light of these developments, Merrell understandably feels it would be unwise to participate in a program it neither conceived, tested, directed, or controlled without obtaining adequate protection for the potential liabilities resulting therefrom.

In that regard, we would suggest an addition to the bill which will clarify the scope of the indemnity. We believe that the bill should specify that the authorized indemnification extends to attorneys' fees and other costs incurred by the manufacturers in defending against covered claims, as well as in any litigation which might prove necessary to recover indemnity from the Government.

Further, we believe that the contract language should make it clear that the manufacturer will be indemnified in all cases except where there has been a separate and clear finding that a judgment for the plaintiff is based solely on negligence of the manufacturer in not meeting the Government's specifications.

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Merrell believes that statutory indemnification along the lines set forth in the bill before this committee, with the above stated provisos, is the only available means to provide an adequate level of protection under the unique circumstances of this year's immunization program. Without such protection, the company simply cannot justify its participation in the program to its stockholders in light of the risks of substantial uninsurable financial loss which would be involved.

Thank you, Mr. Chairman.

Mr. ROGERS. Thank you very much.

I might say we will have other manufacturers testifying so we will be able to go into some of these questions in greater detail at that time. I think we will adhere to the 5-minute rule, if there are any questions.

Mr. WILLIAM ROGERS. I would be glad to take some questions for 10 or 15 minutes, if the committee would like. I wouldn't want to shut off questions.

Mr. ROGERS. Mr. Carter.

Mr. CARTER. Thank you, Mr. Chairman.

Your company will guarantee purity and efficacy of the vaccine which you manufacture?

Mr. WILLIAM ROGERS. Yes, sir. That is right, Dr. Carter.

Mr. CARTER. All right.

Ip 1957 and 1958, we had Hong Kong flu. Did your company manufacture a vaccine at that time or since that time, for prevention of the Hong Kong flu?

Mr. HUSOVSKY. We have been manufacturing flu vaccine all along. Mr. CARTER. Did you ask for indemnification then?

Mr. HUSOVSKY. At that time? Prior to this time?

Mr. CARTER. Yes.

Mr. HUSOVSKY. No; we have not.

Mr. CARTER. We had Asian flu, then, I believe, Hong Kong flu probably in 1967 and 1968 and Asian flu in 1957 and 1958. Did you ask that the Government take over the liability?

Mr. HUSOVSKY. No, sir, at no time have we asked for the Government to take over the liability.

Mr. CARTER. You did manufacture that vaccine?

Mr. HusoVSKY. Yes, sir.

Mr. CARTER. How is this case different?

Mr. HUSOVSKY. This situation is quite different in our opinion, and it is different mostly because of the size of the program. Under normal circumstances, in most vaccination programs in regard to flu vaccine, there is a doctor-patient relationship which is a normal type of relationship from year to year and we have no worry whatsoever about liability.

Under normal circumstances we are conducting our clinical trials, we prepare and submit for approval to the government labeling, we warn the patient-it is a program that is under our control. This, as Mr. Rogers and Assistant Secretary Cooper have pointed out, is a mass program which is primarily a government program. There are going to be circumstances where just because of the size of the program some of the doctor-patient relationship is not going to exist where, by pure coincidence, people happen to die on the same day