"And then what happens?"

Questions and Observations cites an article in the Daily Oklahoman on the reasons why flu vaccine is so hard to come by this year.

By imposing a "liability without fault" concept on the industry. Tucker notes there were 26 U.S. companies making vaccines in 1967. Today there are four, and none of them make the low-margin flu vaccine. Vaccines don’t produce enough revenue to cover the potential liability resulting from the fraction of the population that has a bad reaction. Give 100 people a glass milk, Tucker points out, and a few of them will get sick from it. But that doesn’t mean the dairy industry should be shut down. "Liability without fault" replaced the notion of simple negligence, meaning that vaccine makers could be held liable only if they’d actually done something wrong – not because their vaccine caused a bad reaction. The majority is thus punished because of problems occurring to a small minority. Lawyers profit. Under liability without fault, Tucker writes, manufacturers can be held responsible for harm from their products whether blameworthy or not. "Add to that the jackpot awards that come from pain and suffering and punitive damages, and you have a legal climate that no manufacturer wants to risk."

The general rule holds. If you increase the cost of doing something, you get less of it.

One of the readers of Q and O notes:

Before 1993, manufacturers sold vaccines to doctors, doctors prescribed them to patients, and there was some markup. Then Congress adopted the Vaccine for Children Act, which made the government a monopsony buyer. The feds now purchase over half of all vaccines at a low fixed price and distribute them to doctors. This has essentially finished off the private market.

Monopsony, by the way, is a real word. It comes from the Greek mon-, one, and opsonia, the purchase of foodstuffs. It refers to a situation where there is one buyer and many sellers – the inverse, if you will, of a monopoly.

In any event, by making itself the 8,000 lb gorilla in the marketplace, the government has crowded out all other buyers who might pay more, and imposed a ceiling above which prices will not go, no matter what it costs manufacturers to make vaccines.

The general rule holds. If you decrease the reward for something, you get less of that something.