PAGENO="0001" REVIEW AND EVALUATION OF T~.HE SWINE FLU IMMUNIZATION PROGRAM HEARING BEFORE TER SUBCOMMITTEE ON HEALTH AND THE ENVIRONMENT OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE HOUSE OF REPRESENTATIVES NINETY-FIFTH CONGRESS FIRST SESSION ON TEE EXPERIENCES OF THE PAST 18 MONTHS OF THE SWINE FLU PROGRAM SEPTEMBER 16, 1977 Serial No. 95-50 Printed for the use of the O÷rnrn~ittne on Interstate and Foreign COffiin~rce ~0 U.S. GOVERNMENT PRINTING~ OFFICE 98-930 WASIIEGTON: 1977 PAGENO="0002" ~OMMfl1~EE ON INTERSTATE AND FOREIGN COMMERCE HARLEY 0. STAGGERS, West Virginia, Chairman JOHN E. MOSS, California JOHN D. DINGELL, Michigan PAUL G. ROGERS, Florida LIONEL VAN DEERLIN, California FRED B. ROONEY, Pennsylvania JOHN M. MURPHY, New York DAVID E. SAT~ERFIELD III, Virginia BOB ECKHARDT, Texas RICHARDSON PREYER, North Carolina CHARLES J. CARNEY, Ohio RALPH H. METCALFE, Illinois JAMES H. SCHEUER, New York RICHARD L OTTINGER, New York HENRY A~ WAXMAN, California ROBERT (BOB) KRUEGER, Texas TIMOTHY~E. WIRTH, Colorado PHILIP R.SHARP, Indiana JAMES J. FLORIO, New Jersey ANTHONY TOBY MOFFETF, Connecticut JIM SANTINI, Nevada ANDREVMAGUIRE, New Jersey MARTY IWSSO, Illinois EDWARD~J. MARKEY, Massachusetts THOMAS~A. LUKEN, Ohio DOUG WALGREN, Pennsylvania BOB GAMMAGE, Texas ALBERT GORE, JR., Tennessee BARBARA A. MIKULSKI, Maryland SAMUEL L. DEVINE, Ohio JAMES T. BROYHILL, North Carolina TIM LEE CARTER, Kentucky CLARENCE J. BROWN, Ohio JOE SKUBITZ, Kansas JAMES M. COLLINS, Texas LOUIS FREY, JR., Florida NORMAN F. LENT, New York EDWARD R. MADIGAN, Illinois CARLOS J. MOORHEAD, California MATTHEW J. RINALDO, New Jersey W. HENSON MOORE, Louisiana DAVE STOCKMAN, Michigan MARC L. MARKS, Pennsylvania ROBERT HENLEY LAMB, Associate Minority Counsel SUBCOMMITTEE ON HEALTH AND THE ENVIRONMENT PAUL G. ROGERS, Florida, Chairman DAVID E. SATTERFIELD III, Virginia TIM LEE CARTER, Kentucky RICHARDSON PREYER, North~Carolina JAMES T. BROYHILL, North Carolina JAMES H. SCHEUER, New York EDWARD R. MADIGAN, Illinois HENRY A. WAXMAN, California JOE SKUBITZ, Kansas JAMES J. FLORIO, New Jersey SAMUEL L. DEVINE, Ohio (Ex Officio) ANDREW MAGUIRE, New Jersey EDW4RD J. MARKEY, Massachusetts RICHARD L. OTTINGER, New York DOUG WALGREN, Pennsylvania HARI~EY 0. STAGGERS, West Virginia (Ex Officio) STEPHAN E. LAwTON, Counsel ROBERT W. MAHER, Director of Research and Planning Jo ANNE GussoN, Senior Staff Associate DONALD K. DALRYMPLE, Assistant Counsel WILLIAM V. CORR, Assistant Counsel STEPHEN J. CONNOLLY, Senior Staff Assistant BURKE ZIMMERMAN, Research Assistant W. E. WILLIAMSON, Chief Clerk and Staff Director KENNETH J. PAINTER, First Assistant Clerk ELEANOR A. DINKINS, Assistant Clerk FRANK W. MAHON, Printing Editor PROFESSIONAL STAFF ELIZABETH HARRISON JEFFREY H. SCHWARTZ BRIAN R. M0IR KAREN F. NELSON Ross D. AIN CHRISTOPHER E. DUNNE WILLIAM M. KITZMILLER MARK J. RAABE THOMAS M. RYAN RICHARD D. LINDSAY, M.D. (II) PAGENO="0003" CONTENTS Statement of- Page Abramson, Clarence A., senior counsel, Merck & Co. Inc 411 Ahart, Gregory J., Director, Human Resources Division, General Accoun ing Office 4 Bailey, William 0., president, Aetna Life & Casualty 438, 487 Biery, Richard M., M.D., on behalf of the United States Conference of City Health Officers 397 Bradford, Windell, Administrative Assistant to Dr. Millar, Bureau of State Services, Center for Disease Control, Public Health Service, Department of Health, Education, and Welfare 37, 96 Burnett, Michael Supervisory Auditor, General Accounting Office 4 Elsea, William R., M.D., vice president, National Association of County Health Officials (NACHO) 384 Flowers, Jesse Supervisory Auditor General Accounting Office 4 Gemmell, Mike, legislative representative, National Association of County Health Officials (NACHO) 384 Goldbloom Irwin, Deputy Assistant Attorney General, Civil Division, De- partment of Justice 68 Hagan, Charles F., general counsel, American Home Products Corp 411, 418 Harder, Henry U., president, Chubb & Son, Inc 438 Hendrickson, Robert F., vice president, operations, Merck Sharp & Dohme Division, Merck & Co., Inc 411 Jones T Lawrence president American Insurance Association 438 Jordan William MD National Institute of Allergy and Infectious Dis eases Department of Health Education and Welfare 87 96 Lamb, Frederick D., vice preside~it and legal counsel, Merrell-National Laboratories .~ 411, 426 Lloyd Douglas S M D, on behalf of the Association of State and Territori al Health Officials (ASTHO) 379 Markoe, Frank, Jr., vice chairman, Board of Directors, Warner-Lambert Co. (Parke-Davis) 411, 418 Meyer Harry M Jr M D Director, Bureau of Biologics Food and Drug Administration, Department of Health Education and Welfare 37 96 Millar, J. Donald, M.D., Director, Bureau of Stats Services, Center for Disease Control, Public Health Service, Department of Health, Educa- tion, and Welfare ~. 87, 96 Morris, J. Anthony, Ph. D., Greenbelt, Md 406 Oswald, Peter, Supervisory Auditor, General Accounting Office 4 Peterson, Neil R Assistant Chief Torts Section Civil Division Depart ment of Justice 68 Additional material submitted for the record by~- American Insurance Association: Attachments to Mr. Jones' prepared statement: Insurance proposals-alternative No. 1, 2, and 3 450 Secretary Mathews' (HEW) telex to insurance companies dated July 29, 1976 453 Swine flu vaccine program 454 Memorandum dated November 10, 1976, to each subscribing insurer-special liability insurance and special excess liability insurance for vaccine manufacturers, national swine flu immu- nization program of 1976 re claims administration procedures, proposed implementation 464 Servicing carrier agreement for insurers of the manufacturers of vaccine 469 (~) PAGENO="0004" Additional material submitted for the record by-Continued Page General Accounting Office, letter dated December 20, 1977, from Mr. Ahart to Chairman Rogers re correspondence concerning the scope of study; chronology of events and content of discussions which led to limiting the scope of evaluation of vaccine manufacturing costs; and for delayed study of vaccine manufacturing costs and agreement with requesting commit- tees, with attached letters dated September 21, 1977, to Congressman Waxman and February 18, 1977, to Chairman John E. Moss, Subcommit- tee on Oversight and Investigations 28 Health, Education, and Welfare Department: Attachments to Dr. Millar's prepared statement: Figure I-Percent of persons with history of receiving influenza vaccine, United States, 1972-77 60 Figure Il-Influenza vaccination coverage, percent by State as of June 23, 1977 61 Figure Ifl-Guillain-Barre syndrome attack rates in vaccinated and unvaccinated groups by age, United States, October 1976-January 1977 62 Figure IV-Guillain-Barre syndrome attack rate for population >17 years of age, by week of onset after A/New Jersey influenza vaccination, United States, October 1976-January 1977 63 Figure V-Guillain-Barre syndrome relative risks for population >17 years of age, by week of onset after A/New Jersey influenza vaccination, United States, October 1976-January 1977 64 Audit reports 350 "Evaluation and control of vaccines for the national influenza immuni- zation program," report by Barry, et al 97 Table 1-Tests performed on influenza vaccine loss 103 Table 2-Summary of test results on commercial influenza vac- cines 104 Table 3-Chicken cell agglutination (CCA) test results 105 Table 4-Hemagglutinin content of A/New Jersey component of influenza vaccines as determined by immunoelectrophoresis 106 Table 5-Amount of vaccine as of December 16, 1976 107 Testing and distribution chart by doses and week ending 108 Letter dated October 4, 1977, from Chairman Rogers to Secretary Califano re additional written questions with subsequent replies dated October 17, and December 13, 1977 354 National influenza immunization program vaccine contract and insur- ance costs 66 Signing of letter contracts, with attachments pertaining to 1. tax status of the self insurance retention fund; 2. production of "Shope" influenza virus vaccine; and 3. waiver of cost accounting standards. 110 Justice Department: Attachments to Mr. Peterson's prepared statement: Claims received at Department of Justice 72 List of suits 74 Correspondence between Chairman Rogers and the Department of Justice re status of the 28 positions funded by a supplemental appropriation made to meet the Department's specific request for dealing with swine flu program claims 92 Letter dated December 13, 1977, from Irwin Goldbloom, Deputy Assis- tant Attorney General to Chairman Rogers re list of all personnel in the Civil Division who are presently working on matters arising out of the swine flu program 90 Letter dated December 16, 1977, from Barbara Allen Babcock, Assis- tant Attorney General to Chairman Rogers re cost per claim of processing claims by the Justice Department under the swine flu statute 82 National Association of County Health Officials (NACHO), attachment to Dr. Elsea's prepared statement: NACHO survey on selected counties' experience with the national influenza immunization program 392 Statement submitted for the record by- Public Citizen's Health Research Group, Anita Johnson and Sidney Wolfe, M.D 493 PAGENO="0005" V Appendix-"The Swine Flu Program: An Unprecedented Venture in Preven- Page tive Medicine," report to the Congress by the Comptroller General of the United States-June 27, 1977 501 ORGANIZATIONS REPRESENTED AT HEARINGS Aetna Life & Casualty, William 0. Bailey, president. American Home Products Corp., Charles F. Hagan, general counsel. American Insurance Association, T. Lawrence Jones, president. Association of State and Territorial Health Officials (ASTHO), Douglas S. Lloyd, M.D. Chubb & Son, Inc., Henry U. Harder, president. General Accounting Office: Ahart, Gregory J., Director, Human Resources Division. Burnett, Michael, Supervisory Auditor. Flowers, Jesse, Supervisory Auditor. Oswald, Peter, Supervisory Auditor. Health, Education, and Welfare Department: Bradford, Windell, Administrative Assistant to Dr. Millar, Bureau of State Services, Center for Disease Control, Public Health Service. Jordan, William, M.D., National Institute of Allergy and Infectious Diseases. Meyer, Harry M., Jr., M.D., Director, Bureau of Biologics, Food and Drug Administration. Millar, J. Donald, M.D., Director, Bureau of State Services, Center for Disease Control, Public Health Service. Justice Department: Goldbloom Irwin Deputy Assistant Attorney General Civil Division Peterson, Neil R., Assistant Chief, Torts Section, Civil Division. Merck & Co., Inc.: Abramson, Clarence A., senior counsel. Hendrickson, Robert F., vice president, operations, Merck Sharp & Dohme Division. Merrell-National Laboratories, Frederick D. Lamb, vice president and legal counsel. National Association of County Health Officials (NACHO): Elsea, William R., M.D., vice president. Gemmell, Mike, legislative representative. Warner-Lambert Co. (Parke-Davis), Frank Markoe, Jr., vice chairman, Board of Directors. United States Conference of City Health Officers, Richard M. Biery, M.D. PAGENO="0006" PAGENO="0007" REVIEW AND EVALUATION OF THE SWINE FLU IMMUNIZATION PROGRAM FRIDAY, SEPTEMBER 16, 1977 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH AND THE ENVIRONMENT, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D.C. The subcommittee met at 10 a.m., pursuant to notice, in room 2123, Rayburn House Office Building, Hon. Paul G. Rogers, chair- man, presiding. Mr. ROGERS. The subcommittee will come to order, please. On March 24, 1976, the President announced a national program designed to offer immunization to every American citizen against a newly discovered influenza virus. This initiative came to be known as the swine flu program of 1976. Congress responded. Under the general immunization authority of the Public Health Service Act, the Appropriations Committee took a bill to the House floor providing appropriations for the swine flu program on April 5, 1976 The funding bill passed the Senate on April 9 with amendments, and the House agreed to the Senate amendments on April 12. H.J. Res. 890 became Public Law 94-268 on Aril 15, 1976. This committee was advised by HEW that new legislative authority for the program was unnecessary, that HEW could implement the program by contracting with manufac turers. This proved not to be the case. The subcommittee responded to the President's request and held our first legislative hearings on March 31, 1976 We developed legislation which, although not ultimately enacted, passed the House by voice vote on April 15 Subsequently, we held four addi tional hearings on the implementation of the program We were concerned over program operations such as the lag in the produc- tion of sufficient quantities of vaccine, changes in instructions to State and local health departments, and the establishment of dosage schedules for children The major problem which required this suboommittee's attention, however, was that of liability. The liability issue led to Public Law 94-380, the national swine flu immunization program of 1976, which was necessary to the eventu- al implementation of the program. Once this major preventive medicine program was underway, however, it was plagued by continued problems, the most unfortu- nate being the complication of Guillain-Barre, which led to the decision to terminate the campaign on December 1~, 1976. (1) PAGENO="0008" 2 At the request of this subcommittee, the General Accounting Office has conducted an extensive review of many aspects of the swine flu program. We are here today to receive that report, and to review with individuals who were involved with the swine flu program, the experiences of the past 18 months. I would note that our purpose in conducting this bearing is to learn directly of those public policy questions which have arisen or have assumed greater importance as a result of the swine flu program, and to receive whatever constructive suggestions the in. vited witnesses, and the public at large, may care to offer as possible solutions to those questions. We shall certainl7 explore, among other areas, questions related to the Government s decisionmaking process; liability issues-pro- fessional liability, product liability, and compensation for citizens who may have been injured as a result of immunization, vaccine production and testing, informed consent, program management, and cOst calculations. Because we have a large number of people wishing to be heard today, we have requested that all witnesses be as brief and concise in their oral testimony as possible. Full copies of prepared state- ments will, of course, be made a part of the record. Our first witnesses will be from the General Accounting Office; however, before we hear from GAO, I think other members of the subcommittee may have opening comments. Dr. Carter. Mr. CAWFEE. I do, Mr. Chairman, yes sir, I have. I am pleased to join you in holding oversight hearings on the national swine flu immunization program for 1976. It was indeed our Nation's first large-scale venture in preventive medicine and I believe it repre- sents an important step toward a commitment to a preventive philosophy which we have talked about a great deal. Since the swine flu program was a first step, we know that it had its shortcomings, but I hope today's hearing will not be wasted on trying to find scapegoats. Instead I invite the witnesses today to provide suggestions to help the committee address the many diffi- cult policy and procedural questions which have arisen from the swine flu program. We need to focus our attention on the future of our Nation's preventive goals and to consider what approach we should take for future immunization programs. Particularly, I hope we can focus on the following issues which should be of concern to all of us-the issue of liability, the issue of public and private roles in future immunization efforts, the issue of provider participation, the issue of Federal-State relations and future immunization efforts, the issue of vaccine research and development, and the issue of in- formed consent. I look forward to hearing from the witnesses today on these and other matters. Thank you, Mr. Chairman. Mr. RoGERs. Thank you. Mr. Waxman. Mr. WAxMAN. Thank you, Mr. Chairman. There are some in the Federal Government who think we shouldn't be holding these hearings at all. They say this hearing will undermine people's confidence in government health pro- PAGENO="0009" 3 grams. -But I feel the American people are so much more intelli- gent and sensible than they are given credit for They know the swine flu program was a blunder. That is not the issue. The issue is government credibility and government decisionmaking. The issue is why when a government program gets underway is there so much momentum that dissenting views are not listened to? I respect the fact that those responsible for the swine flu pro- gram acted in good faith. I think they made the best judgments they could. What I am concerned about is that once decisions were made to immunize our population, a public relations campaign got underway which ended up deceiving our people and leaving in its wake public distrust. The only way to restore public trust is to dig into this program and find out what went wrong In April, Secretary Califano an nounced a national immunization program We must learn from our mistakes in the past before we inaugurate a new immunization drive. I think the swine flu program was the Federal Government's "Moby Dick." I think it was a great white whale that we pursued so doggedly that commonsense was lost sight of. The program was - a terrible waste. We thought it would cost $135 million, but it looks now like it will cost us well over $1 billion. We thought a national immunization program would draw us all together in a national effort This was to be a model for future immunization programs Instead, we squandered the precious trust the public accords us. Do `you know what could be done with a $1 billion? We could provide all poor children with dental care. We could screen poor children for signs of mental retardation at an age when such a handicap is most easily treated Can you conceive of how $1 billion could help programs for the handicapped of our Nat~~ion. Or how it could be used to modernize our veterans hospitals? When I think what could be done with the funds we now must devote to cleaning up after the swine flu program I feel frustrated With all our expÚrtis~; why didn't we know better? I hope we can get answers to some of these questions in this hearing, and I want to thank the chairman for calling these hear ings so that we can look into the issue of the swine flu immuniza tion program. Mr RoGEas Mr Maquire, did you have a statement? Mr. MAOTJIRE. No, Mr. Chairman~ Mr RoGEi~s We are pleased to have as our first witnesses the representatives of the General Accounting Office, who conducted the study requested by the committee The witnesses are Mr Greg ory J Ahart, Director of the Human Resources Division, General Accounting Office, who is accompanied by Jesse Flowers, Michael Burnett, and Peter Oswald, supervisory auditots of the General Accounting Office. We welcome all of you gentlemen here Your statement will be made a part of the record in full at this point and you may proceed as desired. - PAGENO="0010" 4 STATEMENT OF GREGORY J. AHART, DIRECTOR, HUMAN RE- SOURCES DIVISION, GENERAL ACCOUNTING OFFICE; ACCOM- PANIED BY MICHAEL BURNETI', JESSE FLOWERS, AND PETER OSWALD, SUPERVISORY AUDITORS, GAO Mr. AHART. My Statement is quite brief. I will try to make it as brief as possible. Mr. ROGERS. You may proceed. Mr. AHART. Thank you. We are pleased to be here this morning to discuss our report on the swine flu program. This program as you mentioned is an un- precedented venture in preventive medicine. It was the Govern- ment's first attempt at immunization of the entire U.S. population. We monitored program events as they occurred between August 1976 and March -1977 at the Center for Disease Control-CDC--in Atlanta; the Bureau of Biologics, Food and Drug Administration; and the National Institute of Allergy and Infectious Diseases, Na- tional Institutes of Health in Bethesda, Md. We also monitored program implementation at 5 immunization projects and visited 26 maSs 4mmunization clinics within these project areas. Our report discusses considerations for future programs with respect to program justification and cost, Federal liability implica- tions, vaccine production and testing, and program planning and implementation. I will try to summarize each of these areas and we will be happy to have a copy of the full report in the record. Mr. ROGERS. We will put the report in the record as an appendix [see p. 501.1 Mr. AHART. I will briefly summarize these areas. PROGRAM JUSTIFICATION The decision to vaccinate everyone in the United States was bas~d primarily on scientific judgments that a swine flu pandemic could occur at any time, regardless of whether outbreaks, in addi- tion to the one at Fort Dix, were detected in the interim. Underly- ing this -decision were several assumptions including: One, Vaccine manufacturers could produce enough acceplable vaccine, and two, the public and private health care system could deliver the vaccine promptly to the entire population. Criticism of this decision was also based on judgments and assumptions. HEW officials said that gambling with money would be better than doing nothing and gambling with lives. In a sense, HEW lost its gamble with money. No swine flu outbreak occurred. For any future immunization effort as large or concentrated as the swine flu program, the many preventive health care questions that arose would likely have to be broadly considered again by all parties involved. When decisions must be based on very limited scientific data, HEW should establish key points at which the program should be formally reevaluated. LIABILITY CONTINUES TO BE A PROBLEM Although effective in getting the swine flu program started, we found that the legislation designed to solve program liability prob- lems: PAGENO="0011" 5 May result in profit to the insurance companies of nearly the entire $8.65 million premium paid to vaccine manufacturers for liability insurance; Leaves unresolved insurance company concerns about nonmeri- torious claim risks; and May result in indeterminable costs to the Government for litiga- tion, awards, and settlements because of potential weaknesses in the form and procedures used to obtain informed consent from persons immunized. So that resolution of the liability issue does not delay or adverse- ly affect public acceptance of future programs, we recommend that the Congress establish a national liability policy before another mass immunization program is needed. We believe two alternatives should be considered in developing the most efficient and effective way to deal with vaccine liability. First: If experience gained from the swine flu program shows that considerable money can be saved and if HEW intends to continue rigorously testing and approving every vaccine lot, then total Fed- eral assumption of the liability coverage for vaccine production should be considered. Second: The insurance industry could make manufacturers' premiums adjustable retrospectively based n claims experience. VACCINE TESTING MORE EXTENSIVE THAN IN 1975 All vaccine which was released for use in the swine flu program that we reviewed ultimately met Food and Drug Administration potency and safety standards. Almost 30 percent of the vaccine was considered subpotent, and the agency did not permit its release to the public until the minimum potency requirement was met. Tests showed that some of the trial vaccine did not meet speci- fied potency levels, and trial participants were not given the same protection as the genera! public. The potency test does not accu rately indicate the protection provided by the vaccine Because of the deficient potency test and the contmual differ- ences in manufacturer and Food and t)rŘg Administration test results, we believe that the agency should continue its own potency tests on all lots of flu vaccine until manufacturers' test results can be relied on In addition, the agency should speed up its work to Identify and resolve potency test variances with the manufactur- ers, and develop and put into practice an improved method to measure potency and relate it to the level of protection provided by the vaccine. To improve the accuracy of trial data and the protection of trial participants~ the agency should test flu vaccine intended for trial use as it would be tested for public use. POTENTIAL PROTEOTION PROVIDRI) BY SWINE F'LU VACCINE HEW officials estimated, based on past experience and trials, that the swine flu vaccine would adequatel~r protect 70 to 90 per- cent of those vaccinated. However, protection is difficult to esti- mate based solely on previous experience. PAGENO="0012" 6 Further, estimating protection based on trial results was compli- cated by problems in getting adequate antibody responses in youn- ger people and by the inactivity of one vaccine component. The duration of protection provided by the vaccine is uncertain. NOT ENOUGH VACCINE PRODUCED OR PRODUCED IN TIME HEW estimated in late March 1976 that manufacturers could produce and deliver 200 million doses of vaccine by the end of November. Primarily because of unresolved liability questions, the first delivery was delayed-from July to October. Although three of the four manufacturers said they continued to produce at full capacity during the delay and the fourth had met its original estimate, vaccine production fell short of the original estimates by about 43 million doses and required over 2 months longer to produce. In any future programs, HEW must determine in a timely fash- ion how the vaccine will be formulated and packaged and what the delivery specifications will be. If manufacturers still cannot pro- duce enough vaccine in time to meet the needs, alternative meth- ods should be sought. STATE READINESS AND IMPLEMENTATION Each swine flu grant project offered immunization to anyone medically able to take the vaccine. However, because the epidemic never materialized and demand for vaccine was less than expected, the Nation's system for mass immunization was not fully tested. Some problems in planning and implementing swine flu immuniza- tions at the local level should be considered for any future mass immunization programs. State and local immunization projects were not ready to begin the program in July as planned. They were limited by: Less than full commitment by some project directors; complex, incomplete, and late vaccine recommendations; less than expected participation by private doctors, volunteers, and others; weaknesses in project operations; and lack of State liability insurance. We could not determine whether State or local projects could be ready for future mass immunization programs. In addition, State and local agencies will need better guidance and assistance from HEW in managing projects and will, in turn, have to make consistent, firm commitments to HEW if any future mass immunization program is to succeed. The Secretary of HEW should request the Department of Defense to revise its policy so that both military personnel and equipment can be quickly mobi- lized and effectively used in civilian immunization projects. The Federal Government could: (1) Assume total liability for the program, (2) assume no liablility for program participants, or (3) assume limited liability similar to that provided under the swine flu program. Total costs for the swine flu program cannot yet be accurately determined. In some instances, accounting data is too limited to identify precise costs, and, in others, not all costs have been in- curred or determined. PAGENO="0013" 7 Expenditures from the $135 million appropriated for the swine flu program were reported by CDC to be about $103 million through September 9, 1977. Mr. ROGERS. $103? Mr. AHART. Yes, sir, out of $135, Mr. Chairman. Costs yet to be determined include: The final cost of the vaccine and vaccine storage; Department of Justice costs of litigation and Federal funds for settlements and awards for claims over $2,500 which are not recoverable from third parties. The total dollar amount of the claims and suits filed as of September 8, 1977, exceeded $1.5 billion. The Center for Disease Control is estimating costs for which limited accounting data is available. Not all of the estimates are complete. These costs include: Personnel costs of full time HEW employees detailed from other programs-estimated at $0.5 mil- lion; State and local program costs in addition to those funded by the Federal grants-estimated at $24 million; lost opportunity costs to other programs-no estimate yet; costs incurred for health care and lost earnings by individuals because of immunization reac tions-no estimate yet. Although precise costs cannot yet be determined, total costs of the program may far exceed the $135 million appropriated. This briefly summarizes the main points in our report, Mr. Chairman, and we would be happy to answer any questions you may have. [Mr. Ahart's prepared statement follows:] STATEMENT OF GREGORY J. AHART, DIRE(YFOR, HUMAN RESOURCES DIVIsIoN, UNITED Suits GENERAL ACCOUNTING Omc~ Mr. Chairman and Members of the Subcommittee, I am pleased to appear here today to discuss our report to the Congress (HRD-77-115, dated June 27, 1977) on our review of the swine flu program. This program was an unprecedented venture in preventive medicine. It was the Government's first attempt at immunization of the entire U.S. population. Faced with the possibility of an epidemic that could cost many lives and billions of dollars and offered a chance to prevent it, the Department of Health, Education, and Welfare (HEW) planned, and the Congress approved, the $135 million swine flu program. We monitored program events as they occurred between August 1976 and March 1977 at the Center for Disease Control (CDC) in Atlanta; the Bureau of Biologics, Food and Drug Administration; and the National Institute of Allergy and Infectious Diseases National Institutes of Health m Bethesda Maryland We also monitored program implementation at five immumzation projects and visited 26 mass immu nization clinics within these project areas. Our report discusses considerations for future programs with respect to program justification and cost, Federal liability implications, vaccine production and testing and program planning and implementation. I will briefly summarize each of theSe areas. PROGRAM JUSTIFICATION The decision to vaccinate everyone in the United States was based primarily on scientific judgments that a swine flu pandemic could occur at any time, regardless of whether outbreaks, in addition to the one at Fort Dix, were detected in the interim. Underlying this decision were several assumptions, including (1) vaccine manufacturers could produce enough acceptable vaccine and (2) the public and private health care system could deliver the vaccine promptly to the entire popula tion Criticism of tins decision was also based on judgments and assumptions Many of the limited facts available were used to both support and condemn the program. The validity of either position could be tested only over time. Even though PAGENO="0014" 8 the decision was a gamble, HEW officials said that gambling with money would be better than doing nothing and gambling with lives. In a sense, HEW lost its gamble with money. No swine flu outbreak occurred during the 1976-77 flu season. For any future immunization effort as large or concentrated as the swine flu program, the many preventive health care questions that arose would likely have to be broadly considered again by all parties involved. The solutions devised for the swine flu program were not intended as a pattern for future efforts. In any event, when decisions must be based on very limited scientific data, HEW should establish key points at which the program should be formally reevaluated. LIABILITY CONTINUES TO BE A PROBLEM Although effective in getting the swine flu program started, we found that the legislation designed to solve program liability problems: May result in profit to the insurance companies of nearly the entire $8.65 million premium paid by vaccine manufacturers for liability insurance; Leaves unresolved insurance company concerns about nonmeritorious claim risks; and May result in indeterminable costs to the Government for litigation, awards, and settlements because of potential weaknesses in the form and procedures used to obtain "informed consent" from persons immunized. In regard to future mass immunization programs, insurance executives stated that the Government should be responsible for both the liability and the costs of litigation, since the Government controls all key program aspects. HEW's Assistant Secretary for Health `~tated that a national policy concerning compensation will have to be developed br any future mass immunization program. So that resolution of the liability issue does not delay or adversely affect public acceptance of future programs, we recommend that the Congress establish a national liability policy beforeanother mass immunization program is needed. We believe two alternatives should be considered in developing the most efficient and effective way to deal with vaccine liability. First, if experience gained from the swine flu program shows that considerable money can be saved and if HEW intends to continue rigorously testing and approving every vaccine lot, then total Federal assumption of the liability coverage for vaccine production should be considered. Second, the insurance industry could make manufacturers' premiums adjustable retrospectively based on claims experience. The swine flu program was the first time that the Federal Government assumed responsibility and liability for informed consent. To evaluate the effect of its role will take years. HEW should monitor this process as it occurs for possible future program applications. VACCINE TESTING MORE EXTENSIVE THAN IN 1975 All vaccine which was released for use in the swine flu program that we reviewed ultimately met Food and Drug Administration potency and safety standards. Almost 80 percent of the vaccine was considered subpotent, and the agency did not permit its release to the public until the minimum potency requirement was met. Tests showed that some of the trial vaccine did not meet specified potency levels, and trial participants were not given the same protection as the general public. The potency test does not accurately indicate the protection provided by the vaccine. Because of the deficient potency test and the continual differences in manufactur- er and Food and Drug Administration test results, we believe that the agency should continue its own potency tests on all lots of flu vaccine until manufacturers' test results can be relied on. In addition, the agency should speed up its work to: Identify and resolve potency test variances with the manufacturers, and Develop and put into practice an improved method to measure potency and relate it to the level of protection provided by the vaccine. To improve the accuracy of trial data and the protection of trial participants, the agency should test flu vaccine intended for trial use as it would be tested for public use. POTENTIAL PROTECTION PROVIDED BY SWINE FLU VACCINE HEW officials estimated, based on past experience and trials, that the swine flu vaccine would adequately protect 70 to 90 percent of those vaccinated. However, prbtection is difficult to estimate based solely on previous experience. Further, estimating protection based on trial results was complicated by problems in getting adequate antibody responses in younger people and by the inactivity of one vaccine component. PAGENO="0015" 9 The duration of protection provided by the vaccine is uncertain. NOT ENOUGH VACCINE PRODUCED OR PRODUCED IN TIME HEW estimated in late March 1976 that manufacturers could produce and deliver 200 million doses of vaccine by the end of November Primarily because of unre- solved liability questions, the first delivery was delayed-from July to October. Vaccine available then could immunize only about 12 percent of the population. Although three of the four manufacturers said they continued to produce at full capacity during the delay and the fourth had met its original estimate, vaccine production fell short of the original estimates by about 43 million doses and re- quired over 2 months longer to produce. To assure that vaccine is delivered on schedule in any future programs, HEW must determine in a timely fashion how the vaccine will be formulated and pack- aged and what the delivery specifications will be If manufacturers still cannot produce enough vaccine in time to meet the needs, alternative methods should be sought. STATE READINESS AND IMPLEMENTATION Each swine Flu grant project offered immunization to anyone medically able to take the vaccine. However, because the epidemic never materialized and demand for vaccine was less than expected, the Nation's system for mass immunization was not fully tested. Some problems in planning and implementing swine flu immunizations at the local level should be considered for any future mass immunization programs. State and local immunization projects were not ready to begin the program in July as planned. They were limited by: Less than full commitment by some project directors; Complex incomplete and late vaccine recommendations Limited quantities and delayed delivery of vaccine; Less-then-expected participation by private doctors volunteers, and others Weaknesses in project operations; and Lack of State liability insurance~ Project readiness and implementation were limited by biological and liability problems beyond the projects' control Consequently, we could not determine wheth er State or local projects could be ready for future mass immunization programs In addition, State and local agencies will need better guidance and assistance from HEW in managing projects and will in turn have to make consistent flrm commitments to HEW if any future mass immunization program is to succeed. The Secretary HEW, should request the Department of Defense to revise its policy so that both military personnel and equipment can be quickly mobilized and effectively used in civilian immunization projects. We also recommend that the Congress consider the effect which inadequate liability protection might have on State participation in future immunization pro. grams. The Federal Government could (1) assume total liability' for the program, (2) assume no liability for program participants, or (8) assume limited liability similar to that provided under the swine flu program. PROGRAM COSTS Total costs for the' swine flu program cannot yet be accurately determined. In some instances, accounting data iS too limited to identif~y precise costs; and, in others not all costs have been incurred or determined. Total program costs include: Expenditures from funds appropriated for the program Expenditures from'Other Federal funding sources. ~xpenditures from State and local funds to supplement the Federal grants Lost opportunity costs to other health programs. Costs incurred for health care and lost earnings by individuals who have adverse reactions to the vaccine. Expenditures from the $135 million appropriated for the swine flu program were reported by CDC to be about $103 million through September 9 1977 Costs yet to be determined include: The final cost of the vaccine and vaccine storage Contracts tor purchasing vac cine were not signed until last month One is still unsigned Final vaccine costs will not be known until HEW Audit Agency completes its evaluation of costs included in each final contract. PAGENO="0016" 10 Department of Justice costs of litigation and Federal funds for settlements and awards for claims over $2,500 which are not recoverable from third parties. (HEW will pay settlements of $2,500 or less from the $135 niillion appropriated.) The total dollar amount of claims and suits filed as of September 8, 1977, exceeded $1.5 billion. The Center for Disease Control is estimating costs for which limited accounting data is available. Not all of the estimates are complete. These costs include: Personnel costs of full-time HEW employees detailed from other programs. (Esti- mated at $0.5 million.) State and local program costs in addition to those funded by the Federal grants. (Estimated at $24 million.) Lost opportunity costs to other programs. (No estimate yet.) Costs incurred for health care and lost earnings by individuals because of immu- nization reactions. (No estimate yet.) Although precise costs cannot yet be determined, total costs of the program may far exceed the $135 million appropriated. Mr. Chairman, this concluded our statement. We shall be happy to answer any questions that you or other Members of the Subcommittee might have. Mr. ROGERS. Thank you very much, and the committee is grate- ful to the General Accounting Office for the report and the time spent on this problem in trying to help us. Mr. Waxman. Mr. WAXMAN. Thank you, Mr. Chairman. I would like to go into the whole question of costs with you, if I might. You say in some instances the accounting data is too limited to identity precise costs. Why is accounting data too limited at this point for you to identify precise costs? Mr. AHART. I think, Mr. Waxman, that what we are talking about there is where the State and local levels put people that ordinarily would work on other programs, into this program. I don't think their accounting systems are such that they kept ac- count of all the time everybody might have spent on the program. The same is true at the Federal level, although there has been an estimate of what time other HEW employees spent on the program. Their accounting system is not such that you could pre- cisely keep the exact amount of time and related personnel costs associated with the program. Mr. WAXMAN. You are able to determine the costs to the Govern- ment for the vaccine; is that correct? Mr. AHART. That will be determined ultimately. Right now I understand the estimated cost of the vaccine is about $67 million. Contracts with three of the manufacturers have been signed. Those contracts do lay out the cost elements for which the firms will be reimbursed. They will be subject to audit by HEW audit agency and a final cost determination made. Mr. WAXMAN. Will they be subject to audit by GAO? Mr. AHART. Presumably, if we have any problem with what the HEW audit agency does and feel there is a need for us to audit they would be subject to our audit as well. Mr. WAXMAN. I find that a peculiar response. Doesn't GAO work for the Congress and isn't GAO going to be independent of the administration? Are you going to rely on the administration for the figures to determine whether it was an appropriate cost or not? Mr. AHART. Obviously if you look at the Government as a whole we rely upon the executive branch agencies a great deal for the propriety and accuracy of costs. We are a relatively small organiza- PAGENO="0017" ii tion. We feel that it is a responsibility of the management of HEW in this case to make a proper cost determination We would not spend our resources until we had some question as to the adequacy of their determination. We would not redo their work on a routine basis. Mr. WAXMAN. So HEW promotes a program for swine flu vac- cine, pays for the program costs, and would obviously be embar- rassed if they weren't doing their job. GAO, which is an arm of the Congress, is to be an independent arm of the Congress so that we can check on the administration, relies on the administration's figure for the administration's program for us to know whether the administration is doing its job. I find that a frustrating answer that you are giving me. Mr. AHART. I don't think it is quite as simple as the way you have related it. If you take a look at the organization of HEW you will find that the audit agency is established under the Office of the Inspector General, which is a statutory job. It is fully inde~pen- dent of the operating bureaus of the agency-CDC, and the Food and Drug Administration, and others-which are directly involved in the program. It is independent of the contracting authority. It is responsible to the Secretary. So there is a high degree of indepen- dence between that arm of HEW and the people who were in support of the program. I would suspect that the HEW audit agency didn't have a par- ticular point of view on whether we should or should not go for ward with the swine flu program. Mr. WAXMAN. In your report you indicate that there. were no signed contracts with HEW and the vaccine manufacturers in the beginning. I gather there were no signed contracts for a long period of time; is that correct? Mr. AHART. That is correct. Mr. WAXMAN. Now, isn't it fair to assume that the fact that the contracts remained unsigned for so long would allow the vaccine manufacturers to elude a timely audit by either you or HEW auditors. Mr. AHART. I don't think that would be the case. There were letter contracts, letters of intent, in effect, with the HEW. The final signing of the definitive contracts was held up, I understand, for two reasons. There was a question as to what the income tax treatment would be of the $25 million insurance fund which was provided each of the manufacturers under the contracts. That was finally resolved by internal Revenue Service with a ruling last April which stated that it would not be taxable. The other question was whether or not the standards of the Cost Accounting Standards Board would be applicable to the contracts as provided for in the letter contracts of September, or whether it would be waived by HEW in the circumstances. They were finally waived la.t month at which time three of the contracts, final contracts, were signed. Mr. WAXMAN. What was waived? Mr AHART The cost accounting standards promulgated by the Cost Accounting Standards Board were waived in this case Mr. WAXMAN. What were those? What exactly did HEW decide to waive? 98-930 0 - 78 -- 2 PAGENO="0018" 12 Mr. AHART. Basically the Cost Accounting Standards Board is to promulgate standards for allocation of cost to Federal contracts and these are applicable to certain contractors depending on their level of business, size of the contract and other matters. Mr. WAXMAN. Is that the process by which the Government decides what actual costs were to determine whether profits were the amount to be provided for pursuant to the contract? Mr. AHART. In case of most contracting situations that would be true. Mr. WAxMAN. How do we know what the actual costs of the vaccine were to the manufacturers? Mr. AHART. This will be done when they submit their cost re- ports and HEW goes back and audits against the records of the firms as they maintain them and then a judgment will be made as to the allowability of the costs which are claimed. Mr. WAXMAN. Is HEW going to rely on the statement of what the manufacturers say were those costs in determining what those costs were? Mr. AHART. I think in the first instance the manufacturers must come forward with their statement of what costs are chargeable to the contracts. Mr. WAXMAN. What is going to be done to look behind that to be sure that the statement that they make as to what their costs were are in fact correct? Mr. AHART. The HEW Audit Agency wil go into the manufactur- ers records and verify the information provided in the cost reports submitted by the manufacturers, verify it to the original records maintained by the four manufacturing firms. Mr. WAXMAN. Do you know whether HEW had done this yet? Mr. AHART. I don't think they have gone into any of the firms yet. Let me ask my associates if they have knowledge where that stands? Mr. WAXMAN. The contracts were only signed last month? Mr. AHART. Three of the contracts were signed in August of 1977. We don't know if they are in there yet or not. Let me ask Mr. Burnett if he has current knowledge on that. Mr. BURNETT. Yes sir; they have begun work in region 3 where two manufacturers are, I believe Wyeth and Merck. They have visited those manufacturing plants and they are in the process of putting together their report for those two. They have not begun work, as I understand it, in region 5, which would include Parke-Davis and Merrill National. Mr. WAXMAN. So we didn't have contracts until August of 1977 for any of the drug manufacturers; is that correct? Mr. AHART. They did not have final signed contracts. They did have letter contracts, letters of intent which were issued sometime during 1976. Mr. WAxMAN. Was there competitive bidding among the manu- facturers of the flu vaccine before the contracts were let out? Mr. AHART. There was not competitive bidding. In this case the contracts were on a cost basis. Competitive bidding is not feasible in that short a time frame. Also, in this case you only have six licensed manufacturers in the country to produce vaccine. You only had four currently in a position to produce and it was felt that PAGENO="0019" 13 the capability of all four would be necessary to produce the desired 200 million doses of vaccine within a time frame that would make it useful should a pandemic occur in the fall of 1976. Mr WAXMAN One thing the Congress felt very strongly about when we authorized that liability legislation was that the drug manufacturers were not to make a profit. This was a national emergency and we weren't going to allow profiteering at the ex pense of the American people during such a situation. Can you tell us for certain that no profit was made? Mr. AHART. We have not audited the contracts, Mr. Waxman. The way the contracts are written it is my understanding there will be no profit allowance on the swine flu portion of it. There will be an allowance of profit on the Victoria--A component of the bivalent vaccine and obviously I am not in a position to attest to whether there is or is not any profit on the portion of the bivalent vaccine that there should be no profit on. Mr. WAXMAN. I find it very frustrating. You represent the Gov- ernment Accounting Office, an arm of the U.S. Congress. We asked you to look into the question of how this program was being handled economically, what costs were going into it, whether the program was being carried out pursuant to the intent of Congress, and as I understand your testimony, you are going to rely on HEW to report on their own program, when they get around to it, and we don't even know to this point in September of 1977 whether profits were made or not. I assume we don't even know the cost per vaccine for each individual patient; is that correct? Mr. AHART. The estimated cost of the vaccine is somewhat less than HEW's original estimate of about 50 cents per dose. I think they are down in the range of about 80 cents per dose for the monovalent vaccine and in the range of 40 to 49 cents on the bivalent vaccine The estimates are somewhat lower than the origi nal estimate. I don't think it is unusual or unexpected that we would wait until the agency with the prime management responsi- bility made its determination before we decide whether or not there is a need for further effort. This is basically the agreement which we reached with this subcommittee quite a number of months ago, that we would rely basically on the HEW aduit agency and when they got through to make a judgment on whether there was a further need for audit and for the General Accounting Office to become involved in the audit portion of it. Mr. WAXMAN. Can you tell us how much money the insurance companies will make as a result of the swine flu program? Mr. AHART. The total premiums paid to insurance companies by the four manufacturers, and that they will be reimbursed under the contract for, was $8.65 million. It is our judgment, based on the liability protection provided by the Congress last year, that virtual- ly all of that could be profit to the insurance companies *Mr. WAXMAN~. All of it could be profit for the insurance conipa- mes? Mr. AHART. Yes; as stated in my statement. Mr. WAXMAN. In other words, they were not giving anything in return for that money? PAGENO="0020" 14 Mr. AHART. Well, it is hard to see where they are going to be reached under the liability provisions, because of the way Congress has set up the liability protection. The sole recourse is to the Government, then the Government must reach manufacturers and whatnot. If we reach manufacturers and recover more than the $2.5 million each-is that correct, Mr. Burnett? It is' possible some of the $8.6 million may have to be paid back to the Government. Mr. WAXMAN. How would that take place? Mr. AHART. Well, basically it would occur when someone sues the Government or submits a claim to the Government, it is settled or the judgment is rendered in court that the Government has the liability under the statute, and then the Government in turn feels that the real culprit in the case was negligence on the part of the manufacturer and would go against the manufacturer for recovery and the manufacturer is found to be liable. Mr. WAXMAN. I understand what you are saying. You are saying if under the remote possibility that we go back against the drug manufacturer and he is held liable, in spite of the liability section passed by the Congress, then that insurance, $8 million plus, will cover that possibility? Mr. AHART. Yes, sir. Mr. BURNETT. Only in excess of the $2.5 million which is self- insured by the manufacturers. That is the first layer that we get to. Mr. WAXMAN. ~So I think it is fair to assume the drug manufac- turers and insurance companies have ongoing relationships with each other of all of the products that they produce, isn't that correct? Mr. AHART. I assume all drug manufacturing firms would have liability insurance on a continuing basis. I don't know in this case whether it was the same firms and same companies involved as in the ongoing thing. I would suspect they would turn to the regular insurance, yes. Mr. WA.xMAN. I am not saying this is the case. If a drug manu- facturer in exchange for the $8 million which the taxpayers are paying for liability, which is very unlikely, in exchange for that $8 million gets a break on some other insurance coverage somewhere else, would HEW's accounting office or GAO's accounting office ever be able to tell us that information? Mr. AHART. I suspect not. Under the hypothetical case that you are mentioning. Mr. WAXMAN. Well, they came in together, the drug manufactur- ers and the insurance industry, and they cried to us that they would not go forward with the program to protect the American people from an epidemic, a pandemic, they said they couldn't do it, they wouldn't do it, unless we absolved them of liability. I am a bit frustrated because now we can never really seem to get somebody in Government who can dig into those records to find out once we gave Them the money how much the program is going to cost for the vaccine and for the insurance coverage, not the liability that the Government is going to assume but for the program itself for the purpose of the vaccine. Mr. AHART. What has been spent just for the vaccine? Mr. WAXMAN. Yes. PAGENO="0021" 15 Mr. AHART. Just for the vaccine I think the current estimate is $67 million. The original estimate was $100 million. The current estimate is $67 million. Mr. WAXMAN. My time is up and I hope we will have another round because there are some questions that I feel very frustrated about. I just want to make one last comment, Mr. Chairman. My frus- tration is that the GAO report doesn't seem to really be digging in and I guess my suspicion becomes even greater when I see the report of a program that I am so critical of, entitled "The Swine Flu Program, An Unprecedented Venture in Preventive Medicine" "Unprecedented" is a peculiarly favorable of describing what I consider a blunder on the part of the Congress of the United States. Thank you, Mr. Chairman. Mr. ROGERS. Perhaps General Accounting didn't want to charac- terize Congress' action that way, Mr. Waxman. Mr. WAXMAN. Obviously they don't want to offend anybody, but that is not their job. Mr. ROGERS.Dr. carter. Mr. CARPER. Thank you, Mr. Chairman. Of course we were all involved in the swine flu legislation. It alarms us no end that we had over a 1,000 cases of Guillain-Barre syndrome following this program. As a result of this we have suits pending against the Federal Government now of $1.5 billion. I can't condemn an insurance company for not wanting to insure against claims which are in realm of $15 billion by paying premi ums of $8.65 million. It doesn't seem to me to be logical, does it to you, Mr. Ahart? Mr AHART Well, of course, the $8 million in premiums or $865 million was negotiated, I presume, with full understanding of the liability protection which was afforded by the act which was passed last summer So certainly that premium does not equate with the total potential liability risk. Mr. CARTER. What premium would equate with such a risk? Mr. AHART. Well, I think the problem-I wouldn't want to speak for the insurance companies-I think the problem they had is they didn't have anyway, since this is the first time that the Govern- ment has ever undertaken a program to immunize everyone in the country-that they would have no e~~perience upon which to base a premium which they felt would be reasonable in those kinds of circumstances. Mr. cARTER. As an auditor and one familiar with the work of an actuary, would you consider taking out a policy for insuring against incidents that might happen as a result of immunizations from swine flu? Mr. AHART. Well, I think as fas as I can go in answering that question, Dr. Carter, is that I can certainly understand the con- cerns which the insurance companies would have had at the time in being asked to insure the manufacturers against liability. Mr. CARTER. Yes, sir. What do you think about manufacturers in this case, do you blame them for not wanting to assume liability, in these cases? Mr. AHART. Well, I am not here to cast blame on manufacturers, insurance companies, or anyone else. In this crash program , the PAGENO="0022" 16 companies were making judgments based on where they stood in the program and what they expected their possible risk might be. I certainly don't blame the manufacturers for being concerned about the fact that they would have potential liability by participating in the program and they couldn't get insurance companies to unsure them. Mr. CARTER. I certainly feel that they did their best, although they did make some errors. One marketed about 6 million doses of the Shope vaccine, which was really not the true swine vaccine and was not used. And, with respect to the Guillain-Barre syndrome, we had almost as many cases from those who didn't take the vaccine as those who did. As far as I can find out, no one has really found the cause this syndrome other than it seems to follow any type of injection, not just swine flu. I don't know the association. It may be a virus that has been undiscovered. But 45 million people were immunized in quite a short period of time. Whether this was helpful or not we don't know, but we do know that the most emminent scientists in the United States were here advising us to embark on this program. Of course, hindsight shows many, many things. Perhaps it was a mistake but our intention certainly was to protect the American public from what might have been a disaster. Thank you, Mr. Chairman. Mr. ROGERS. Mr. Maguire. Mr. MAGUIRE. Thank you, Mr. Chairman. Mr. Ahart, we were most careful in drafting this legislation to prevent a situation in which the manufacturers would reap unto- ward profits from this program. Today you are telling us that the insurance companies will receive $8.65 million in premium pay- ment costs which will be passed on to the Federal Government and, therefore, to the American people, and that it is very likely that that will be sheer profit. I reˇall that as we began this program, with all of the uncertain- ties that were associated with it, we had an expectation that the Congress was going to try to act responsibly in the face of the case that was being made by medical authorities and scientists and we anticipated that the manufacturers would also rise to the occasion by preparing and producing the vaccine on a very tight time sched- ule. We~ then suddenly confronted a situation in which the insurance companies~ in effect held us up for ransome. They said sorry, we won t do it without the insurance companies. It was impossible to proceed. So ultimately a very strange concoction, at least with respect to previous history, had to be devised, which is this liability arrangement which you have described and which we are all famil- iar with. I am very concerned that the party which I felt acted least responsibly in the situation now appears on the verge of reaping enormous profits. I would like to know, sir, your opinion of where the responsibility for this rather exceptional situation rests and what, if anything, can be done about it now. Is it the fault of the U.S. Congress for not drafting the legislation in a way that would have precluded this particular result? PAGENO="0023" 17 Mr. AHART. No; I don't think it is the fault of the U.S. ~ongess or probably any other one party involved in this process. As you indicated, the action was taken at a time when there was strong support for the program Something needed to be done if the pro. gram was going to go ahead. The insurance companies were not in a position, I think, to make a very good judgment on what kind of a premium would be good if they were to assume their regular liability with respect to manu- facturers. I don't think they were in a terribly good position to judge what might be the residual liability through the third party recovery mechanism of the law. I am not sure there is anybody you could point a finger at, Mr. Maguire, and say thery are to blame for it. It was something donŰ~ in concert faced with a very difficult situation. What we are suggesting in my statement and in our report is that the Congress, assuming the possibility of some future large immunization program, srnce it has a little bit more time to consid- er than they did last summer sit down and think about and perhaps establish a policy~or lia~nhty in future programs Mr MAGTJIRE On page 4 of your statement you said the msur- ance industry could ~niake manufacturers premium adjustable ret- rospectively based on claims experiences. Mr. AHART. That is correct. Mr. MAGUIRE. Do you believe that we could have done that last year? Mr AHART I am not sure if it could have been done or not Mr MAGUIRE This is the point now If we take that recommen dation ami say either we ought to do that in the future or we should have done that last year and the insurance companies come back and say I am sorry, we are not going to play ball on that basis, then where are we? Aren't we in exactly the same position? Mr. ARART. I think you are if the insurance companies would not be agreeable to entering into that kind of arrangement Mr MAGTJIRE You think they would n~t'~ Mr AnART I don't know if they would or not Mr MAGtYIRE Have you talked to them about that? Mr. AHART. I don't know if my staff has or not. Mr. Burnett, have we talked to insurance companies about that? Mr. BuRNE~rr. No, we haven't. Mr MAGUIRE Well, of course, it is a nice theory but if the insurance companies aren't buying, then we will continue to have a situation in which they will hold the American people up for ransom I am going to have to say to the American people, gee, I am really sorry, the $865 million that the insurance companies got as pure profit is something we could't figure out any way to recov er Can't we prevent that from happening in the future, is that your best judgment? Mr AHART We did lay out two alternatives The one I men tioned. The other one is the full assumption of liability by the Federal Government and that obviously--- Mr MAGUIRE That is another alternative I am pursuing the alternative that you have suggested here My next question is this is there any reason why we cannot now insist on this retrospective adjustment? PAGENO="0024" 18 Mr. AHART. I don't think we have explored that. My judgment would be without knowing anything further about it that it is a contracti~al matter between the manufacturers and their insurance companies. I don't think those have any provision for recovery. Mr. MAGUIRE. When were those contracts signed between the manufacturers and the insurance companies? Mr. ABART. I assume they were signed shortly after the passage of the liability legislation last summer. I don't know if we have the exact date or not. Mr. Burnett? Mr. BURNETT. We don't have the exact date but it would be sometime in September. Mr. MAGUIRE. This particular point would not be subject to con- tract provisions that would be entered into between the Govern- ment and the manufacturers for the supply of vaccine, i.e., the contracts which were just completed last month? Mr. AHART. That is right. Mr. MAGUIRE. Mr. Chairman, I find this an astonishing situation. I don't think that Mr. Ahart has really given us much of an option here if in fact it depends on the cooperation of the insurance companies and if in fact' they are unwilling to cooperate, but I will explore that point further when representatives of the companies appear. Thank you, Mr. Chairman. Mr. ROGERS. Well, I think it is a matter of fact that that issue was what brought about congressional action, because if the pro- gram was to proceed, the only way was to provide some method of handling the liability problem. As you recall, the manufacturers said they would not make or sell vaccine unless they were insured. Mr. MAGUIRE. A perfectly understandable position, I might say. Mr. `ROGERS. It happened to be the situation; and I would agree. Mr. ~MAGUIRE. Let me ask one more question. Mr. `ROGERS. Certainly. Mr. MAGUIRE. If the insurance companies do not cooperate either retrospectively or in the future what happens? Under GAO's analy- sis, what happens to that `free capital? Do they then invest, in other things? Do they reduce premiums to all of their subscribers? What happens to the $8.65 million-or should happen to it, in your judgment? Mr. ABART. If it is not required for-- Mr. MAGUIRE. It may be a payment of taxes in lieu of fair contractual arrangements or something. Mr. AHART. If it should not be required as a result of this program to cover liability which the insurance companies are con- tractually bound to cover, .1 assume it would be considered as profit. If it is a profitmaking, stock insurance company, it might go out in dividends, depending on what the insurance commission in the particular State has to say about the rate structure and all that. Anything could happen. I wouldn't want to speculate as to where this $8.65 million which is now held by insurance companies will finally end up. Mr. MAGUIRE. Thank you, Mr. Chairman. Mr. WAXMAN. It is profit to the insurance companies of $8.65 million, yet Congress said there shall be no profit to be gained PAGENO="0025" 19 through this swine flu program, because it was a national emergen- cy. Why can't we get that money back? Mr. AHART. My recollection is Congress said there should be no profit gained by the manufacturers. These are not manufacturers, these are insurance companies. Mr. WAXMAN. I see. I asked you earlier whether if some arrange- ment had been made between the insurance companies and manu- facturers so the manufacturers can still get a benefit, whether if that took place we would even know about it, and your answer was we wouldn't. Mr. AHART. I said the likelihood is we would not. Mr. WAXMAN. You mentioned something was waived by HEW when they finally signed contracts. Is that a renegotiation so HEW can go back and get profits that were made by the manufacturers? Mr. AHART. No; it has nothing to do with renegotiation. These are cost accounting standards promulgated by the Cost Accounting Standards Board. They are applicable under the law to defense contracts. They are applicable under the Federal Procurement Reg- ulations to most civilian contracts, civil agency contracts. There is provisIon in the law for waiver. That provision was exercised by HEW recently, I think last month, so these contracts could be signed and the waiver was premised on the fact that drug compa- nies traditionally, it is my understanding, do not allocate costs other than the manufacturing costs and perhaps some manufactur- ing overhead to individual products, individual product lines, and that they really would have no way under their accounting system to apply all of the standards which have been promulgated by the Cost Accounting Standards Board and that was the justification HEW agreed with that justification and has waived the application of the standards. Mr. WAXMAN. Are you satisfied that we are finding out whether the drug manufacturers have made a profit or not? Mr. AHART. Well, I would only spe˘ulate at this point in time that the HEW audit agency will perform a competent audit of costs against the contractual provisions. If in our judgment or someone else's judgment they do not do an adequate job then we are in the wings and we will do whatever is necessary to satisfy ourselves that the contract was reasonably complied with Mr. WAXMAN. Isn't HEW very late in giving you and us a report on the costs for this vaccine? Mr AHART Well, again, the contracts were not finalized until last month. From Mr. Burnett's statements earlier, I assume the auditors in some cases went in before the contracts were finally signed. The general provision in law on contract settlement audits is that manufacturers must retain records for a period of 3 years after final payment. They are certainly within the general statu- tory timeframe and requirements for retention of audit. records so the contracts can be audited. Mr. WAXMAN. We haye the situation where contracts were only recently signed, HEW was supposed to report back to Congress about the cost for the program and has not yet completed their report, and you tell me that you will only look into it when you have suspicion HEW is not doing its auditing job properly. PAGENO="0026" 20 Don't you have enough reason now to be suspicious something is there for you to look into? Mr. AHART. No; I think that we are perfectly willing to let the HEW audit agency do its work and then if we are not satisfied with its work, do whatever we feel is necessary. I feel very comfort- able with that. Mr. WAxMAN. When do you think we will get that report? Mr. AHART. I think Mr. Burnett said they are writing the reports on two of the contract audits at the present time. They are going into the other two manufacturers to audit costs. I will ask him when we can expect the final audit report on each of the reports. Mr. BURNETT. One of the HEW auditors in region 3 speculated the final package of all four audits would be completed by Decem- ber. Mr. WAXMAN. By December? Mr. BURNETT. Yes, sir, that is strictly his best---- Mr. WAxMAN. How long will it take you to decide whether you are going to be satisfied with their work? Mr. AHART. Mr. Burnett. Mr. BURNETT. We would probably take 1 month beyond that. Mr. WAXMAN. A month? Mr. MAGUIRE. I do have one more question before this witness leaves. Let's go back for a moment to the question of liability. Did you do any comparative analysis of that $8.65 million premium which was paid under these contracts and other kinds of insurance premi- ums by drug manufacturers to their insurance companies? The reason I asked that is I wonder whether the dollar paid was more than or less than or about the same as the dollar paid in other kinds of instances? Mr. BURNETT. We didn't do that and I don't think it is possible to do that because this is the first time that the insurance industry is insuring strictly manufacturers' negligence. Always before they covered the whole range of liability. The Government picked up most of that this time and are just talking about manufacturer s negligence that-- Mr. MAGUIRE. Precisely. Now, to the extent that the Government picked up the lion's share of the liability, would it not then follow that the premiums paid for the limited remaining elements of possible liability should be far, far less than the premiums paid in the other overall liability instance than you referred to, and is it in fact the case that those premiums are far less? Mr. AHART. I think our only answer to that, Mr. Maguire, would be that they move from a situation where they were not willing to insure at all to a situation where they were willing to insure only the manufacturer's negligence. Presumably the premium that they would have charged for a situation in which they would not insure at all would be much larger than the $8.65 million. I don't think you can find a comparable kind of problem of insurance. Mr. MAGUIRE. I think what you are saying is that the premiums that were paid for this very, very limited amount of liability may have been-I don't know this is the case, I am asking-far in excess of the kinds of premiums that are paid in other instances for total liability. Right or wrong? PAGENO="0027" 21 Mr. ABART. No; I don't think I am saying that. Mr. MAGUIRE. You don't think so? But you have no comparative data? Mr. AHART. I don't know. As Mr. Burnett points out, I don't think that kind of comparison is really possible given the vagaries of this kind of program. Mr. MAGUIRE. That is what we have been hearing for 1 solid year and it would seem to me GAO of the United States ought to be able to make some kind of projection or estimate that would give us some understanding of whether or not we are being victimized in this situation or whether we are paying reasonable fee. I don't see any data in the report, or in the statement, or in the answers to the questions that would give us any guidance on that matter. I am disappointed at that, Mr. Chairman. In your judgment, Mr. Ahard, why did it take so long for HEW and the manufacturers to sign the contracts? Mr. AIIART. I pointed out, I believe, two reasons that held up the final signing of the contracts, the three that are already signed. One is still not signed. The first reason was the uncertainty as to the income tax treatment of the $2.5 million given each manufac- turer as an insurance reserve, a self-insurance reserve. That was finally resolved in April and Internal Revenue Service ruled it would not be taxable. The other one was the need felt by the manufacturers for waiver of the cost accounting standards, as we have already discussed. Those were finally waived in August and contracts were signed in three cases. Mr. ROGERS. May I say, if the gentleman would permit, the Chair would like to question before we have to vote. Mr. WAXMAN. On the last point- Mr. Ro~s. All right. Mr. WAXMAN. That provision that HEW waived dust didn't make any sense in these circumstances because this isn t like a defense contract. Why did the manufacturers hold out at least from April to August of this year, and maybe one would assume all the way from the first time we had letters of intent, to August of this year, before they would sign contracts with the U.S. Government until that was waived? Mr. ARART. Well, if they had signed it without it being waived then they would have been subject to the standards. Presumably, it took the contracting officer that length of time to make up his mind the waiver in the circumtances was justified. Mr. WAXMAN. They didn't want to be held to some standards? Mr. AHART. They didn't feel that it was possible for them to be held to these standards based on the way they keep their account- ing records. It is not only applicable to defense contracts, the standards under the Federal procurement regulations are also ap- plicable to most civilian agency contracts as well, including HEW, unless waived. Mr. WAXMAN. The chairman has been very generous and I want to express my appreciation, but let me also say this in closing, Mr. Chairman, I consider that report an unprecedented venture in not giving Congress the information that we ought to have by an organization that works for the U.S. Congress. I just don't want PAGENO="0028" 22 GAO, who works for us, to rely on HEW to accept their figures, if and when they ever get around to giving us those figures. I think we are entitled to know whether profiteering took place and whether we are all victims, as Mr. Maguire said, of a situation where the American people will never know the true facts. I hope this is not our last hearing and, certainly, as far as I am concerned, it is not the end of the responsibility for GAO. I expect to get a full report from them later on when they look into the HEW audit and I expect them to do the audit. Mr. AHART. I don't think GAO is trying to shirk its responsibility in this at all. The agreement or the decision to await the HEW audit of the cost in the contract was a decision reached jointly with this subcommittee, with the subcommittee fully onboard, it is my understanding and -- Mr. WAXMAN. Wait a second. This subcommittee agreed with you to allow you to go ahead and rely on HEW figures? Mr. AHART. I think that is the case. Is this correct? Mr. WAXMAN. Can you clarify to me, as a member of the subcom- mittee, how that decision was made and who made such a decision? Mr. AHART. Generally we work with the staff of the committee. I am not sure whether the chairman or individual members were in on that decision or not. Mr. WAXMAN. You work for the U.S. Congress. Mr. AHART. That is correct. Mr. WAXMAN. Congressmen, not staffs of the committee. I guess we will have to go into the situation whether our own staff is giving you such laxity in doing the job that the U.S. Congressmen, the Members elected by the people, asked you to do a job to let you off the hook in doing that job. We want that job done. Mr. ROGERS. Let me say this. I don't think anybody is going to have laxity. HEW is doing an audit there; and it will be reviewed by GAO. I think GAO should give the agency the opportunity to do their audit first and then they should check it. HEW will be up next and we will question them on this matter. I was concerned about your figure of $1.5 billion in claims. Does that include the one suit for $1 billion? Mr. BURNETT. Yes; it does. Mr. ROGERS. So $1 billion of the $1.5 billion is one suit, is that right? Mr. BURNETT. That is correct. Mr. ROGERS. Does it also include the claim for $200 million that has already been dismissed? Mr. BURNETT. I don't believe so, no. Mr. ROGERS. Pardon? Mr. BURNETT. No. Mr. ROGERS. You did not include the $200 million claim? Mr. BURNETT. No. Mr. ROGERS. I guess we can get from Justice what claims are included. I think that suit was for revocation of a driver's license 5 years prior to the swine flu injection. Well, anybody can make a claim, that was a $200 million claim that evidently has been dis- missed. I think we need to begin to get some balance in what is happening. PAGENO="0029" 23 The second bell has rung. The Chair does have some other ques- tions, so we will be in recess for 10 minutes to allow Members to answer the call. [Brief recess.] Mr. ROGERS. The subcommittee will come to order, please. I think I will continue with questions at this time. Members are on their way back. One of the major frustrations of the committee and apparently to State and local health departments, and perhaps even manufactur- ers and insurers, was the undefined nature of the administrative organizational operation of the swine flu program. We were never sure with any certainty who was actually in charge. We got differ- ent answers at different times from different people, and I noticed you did not speak to the question of organization and administra tion in your report. I wonder if you could comment. Did you look at that? Mr. AHART. We did not look at it specifically. We do understand perhaps earlier on in the program there may have been some confusion in the program on the part of people who were in charge at the Federal level. We didn't enter on the scene until August 1976. At that time, it is my understanding, it was pretty clearly established that Dr. Millar was calling the shots for the program and was in charge and we didn't really see any confusion on thern-- Mr. ROGERS. Who was in charge? Mr ARART I think Dr Millar was pretty much recognized as being in charge of the program by the time we entered on the scene, so we didn't see this confusion that apparently may have prevailed earlier on in the program. Mr. ROGERS. Yes; I think that was the crucial time, early on, and it would be helpful if you could look at that for us, to see what actually went on. There seemed to be great confusion, and I think we probably need to address that in any future program so that it is very clear who has the responsibility for the program and deci- sions to be made. Now, let me ask you this: What about the Bureau of Biologics? I understand there were problems there. Did you find any? Mr AHART Let me ask Mr Oswald who was in on the origin of our work at the Bureau of Biologics to respond to that. Mr. OSWALD. Mr. Rogers, in our review at the Bureau of Biolo- gics we found that every lot of vaccine was rigorously tested for potency, for safety, and for several other contaminants that may cause problems with the vaccine. We found that about 15Ż million doses of the 55 million doses that we reviewed were subpotent, but in every case the Bureau of Biologics required that the manufac- turers increase the potency of those vaccines before they were released to the public. The testing of clinical trial vaccine was somewhat different and there are different statutory requirements for such testing. The clincial trial vaccine safety test was not performed on every lot of the vaccine before it was used in the trials. Thus, we feel that that did not afford the same protection to the public that was afforded with the vaccine that was routinely released to the public. PAGENO="0030" 24 Also, the potency tests with vaccine used in the clinical trials showed that about 29 out of 34 lots of vaccine were less than the values that were desired. This was for three of the four manufac- turers. The fourth manufacturer did meet all of the desired poten- cy requirements. The Bureau explained to us that they didn't require the manu- facturers to upgrade the potency of these vaccines because it would have delayed the program approximately 1 month, and they also felt that the differences were not great enough to disrupt the recommendations that would be made based on those potency values. Mr. ROGERS. What about the delay in establishing potency stan- dards for the vaccine? Mr. OSWALD. Excuse me? Mr. ROGERS. In establishing the potency standards for the vac- cine, were there any delays there? Mr. OSWALD. The delay was really the result of problems in determining what potency was necessary in age groups under 25 to achieve an antibody response which was considered sufficient to protect recipients. Because of some problems there, they decided that a second phase of clinical trials would be conducted. The second phase was essentially to determine what the dose must be for those under 25 and that delayed the vaccine recommendations. Mr. ROGERS. What about delay in the consent form? Mr. BURNETT. We didn't have so much problem with the delay in the consent form as with the content of the form. I don't know exactly what you are referring to when you say delay. Mr. ROGERS. Wasn't it July before it was determined what should be included on the consent form? Mr. BURNETT. It was delayed until about July, yes, but the vac- cine recommendations were not available then anyway. Mr. ROGERS. It is my understanding that the consent form had to be changed. Why shouldn't we have a procedure in place where we know what has to go into a consent form? It seems to me that was not well done, that we had forms already printed and then had to redo the forms? Mr. BURNETT. They did not redo all those forms, no. They intro- duced a second page to the original form. Mr. ROGERS. Just added another page? Mr. BURNETT. That is correct. They did that after the legislation required them to go through the National Commission for the Protection of Human Subjects. Mr. AHART. I think there was a delay in getting the final form put together. I think what Mr. Burnett is saying is that was not the controlling delay in the sense that it happened to delay the program because since the final vaccine recommendations were not available anyway, the program couldn't start. We did have as pointed out in my statement, quite a bit of problem with the content of the form itself even as supplemented after the review by the National Commission-in not laying out candidly all the risks which the people might be taking by allowing themselves to be injected. PAGENO="0031" 25 Mr. ROGERS. Did you discuss this with the Bureau of Biologics, or with whom? Mr. BURNETT. CDC is the one. Mr. ROGERS. What about the manufacturers? Mr. BURNETT. No; the manufacturers were not involved in put- ting together the infored consent form. Mr ROGERS They were not, they had no input at all into what the-- Mr BURNETT I don't believe so Mr ROGERS As to what the consent form should have in it? Mr BURNETT No The Federal Government was responsible for that aspect of the program. Mr. ROGERS. So as far as you know, there was no contact with the manufacturers on that? Mr. BURNETT. As far as I know, no, there wasn't. Mr ROGERS Did you question the manufacturer on that? Mr. BURNETT. No. Mr ROGERS Did you question the manufacturers on anything? Mr BURNETT No, sir, we did not Mr ROGERS You mean you have not talked to the manufacturers at all? Mr. BURNETT. No. Mr. ROGERS. Why not? Mr AHART Mr Chairman, in the arrangements that we worked out with this subcommittee and the other subcommittees that si?ned the joint request to us, it was understood we would work with the Federal components that had responsibility for this pro.. gram, we would not become involved directly in the manufacturers operations The interest there was on the cost of the program, as opposed to the consent form or anytb~nig like that We would leave the audit to HEW and then later go in, if necessary in the context of those agreements there was really no need for us to talk to the manufacturers or get involved in their records or substantive dis cussions with them. Mr ROGERS What about the delay in signing the contracts? Mr AHART We have monitored the delay in the signing of the contracts We have not directly involved ourselves in them There were letter contracts that had been signed, last year, which would control the suJ~stance of the final contracts, subject to these things that needed to be ironed out Mr ROGERS As a matter of fact, isn't it true that one of the reasons the contracts hadn't been signed is that the cost figures had not been agreed upon? Mr AHART My understanding is that the two principal things were the income tax status of the self insurance funds which were provided under the contracts and the ~pplicab1hty of the cost ac counting standards to those contracts Those were the two factors that had the greatest impact on delay in the finalization With the exception of the Parke-Davis contract, which is still not signed, which is still open on the question of whether or not they will be reimbursed for the Shope vaccine which they manufac. tured, which, I think, amounts to $12 million The contracting officer in this case has made a determination it will not be reim- PAGENO="0032" 26 bursed. I think that determination went out last month and Parke- Davis has 30 days within which to respond to that proposal. Mr. ROGERS. Well, in monitoring the contracts, it is my under- standing you have not checked into costs. Mr. AHART. That is correct, we have not. Mr. ROGERS. Would it be a normal process to do so, though? Mr. AHART. Our contract audit work is very selective. We obvi- ously don't audit all contracts of the Federal Government. In this particular case, pursuant to the agreements we felt we had with this subcommittee and the others involved, we will await the HEW audit completion. We will take a look at what we feel the qualities of that audit are. If we feel it is necessary or someone feels it is necessary, then we would involve ourselves directly. Mr. ROGERS. Now, I have some concern about that. Dr. Hyde, who was the staff man, is no longer with the subcommittee. I think it might be helpful if we could have a letter of understanding of whatihe GAO audit would be. Mr. AHART. I am not sure we have that with us, I think---- Mr. ROGERS. No; I understand you may not have it. Mr~ AHART. I do think we have an exchange of letters with at least one or more of the subcommittees which lay out the sub- stanee of this understanding. [See letter dated December 20, 1977, p. 28, this hearing.] Mr. WAXMAN. Mr. Chairman, the sŘb~committee made a request to GAQ for information about this program, but I also sent letters as a Member of Congress to GAO asking for an audit of the prog~am. I was never informed by GAO that there was an under- stanthng that you wouldn't do certain things and that understand- ing Was with my own subcommittee. Does GAO have an obligation to infOrm a Congressman that they are not going to pursue a matter even though a Congressman requested it? Mr. AHART. Yes, we certßi˝ly do have that responsibility. I would be very much surprised if it hadn't been done in the case of your request. If it hasn't been done we certainly were deficient in that regard. Our principal concern I think in this case had to be with the four subcommittees that jointly requested that we do the work and we worked out the basic relations with them. We did issue a separate report to you on the concerns you had over and above, perhaps to some extent duplicative of the subcommittee's interests. We issued that to you I think on June 27, the same date we issued our full report to the Congress in response to the requests of the subcom- mittees. Mr. WAXMAN. I am being informed for the very first time you had an understanding with the subcommittee that I am a member of and I understood the chairman to ask you to furnish us a letter. Is your understanding all reduced to writing so it is very clear for a COngr~ssman now to see what understanding his subcommittee had with GAO? ~Mr. AHART. As I indicated to the chairman, I think there was an exchange of correspondence or letters back from us, which confirm the understandings we had reached. In negotiating the scope of our review with the people that we are speaking of, the four subcom- mittees, obviously we could not bring all four subcommittees into PAGENO="0033" 27 the room and get them all to vote on that, but we did in our usual way deal with the principal staff members and reach agreements on what would or would not be done. Mr WAXMAN So your understandings with the subcommittee are based on a written document exclusively or were there conver sations? Mr AHART There were conversations which in my recollection, and I could verify this, were reduced to a written document which we sent to the subcommittees so there would be no misunderstand- ing of the agreements reached. Mr. WAXMAN. There were no copies ever sent to other Members of Congress who had made requests to GAO on their own behalf as Members of Congress. Mr. AHART. I will be happy to check our records in your personal case, Mr. Waxman, to see what we did or did not tell you and what we did or did not send you and be glad to furnish to you copies of the correspondence with the subcommittee which lay out the charter, the scope we agreed upon with them Mr WAXMA1~t I can assure you when you send it to me, that will be the first time I will see them, and I also want to say for the record, what gives me additional reasons for concern was, that the staff person you were negotiating with, happened to be a very strong proponent of the swine flu program and the swine flu liabil- ity section of that program. I feel a sense of frustration as a Member of Congress and a member of the subcommittee and as one of four interested enough to be here at a hearing on swine flu to have been treated the way I have been by the GAO I am also a member of the Government Operations which looks into the GAO for operation of Government and perhaps an inquiry into the GAO and swine flu ought to be required I don't know where it ends, if I as a Member of Congress don't find out this information how are my constituents ever going to know? How are the American people going to know if we blunder with a program like this and can't explain what we did and why we did it and. how we did it? Is there a cover Up? I think that becomes a legitimate question. S S Mr AHART Well, I can only assure you, Congressman Waxman, we tried to be as responsive to your interests and to the subcom mittee's interests as we possibly could be If we have failed to meet all of your interests, then I really can't.-~-.-~ The following letter with attachmentswas received for the record:] 98-9300-78--3 PAGENO="0034" 28 UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 HUMAN RESOURCES DEC 2 01977 The Honorable Paul G. Rogers Chairman, Subcommittee on Health and the Environment Committee on Interstate and Foreign Commerce House of Representatives Dear Mr. Chairman: During hearings before your Subcommittee on September 16, 1977, you requested copies of all correspondence between our Office and the congressional committees requesting our study of the swine flu program. The specific correspondence requested concerned the scope of our study. Subsequent to those hearings, we met with your Subcommittee staff on September 21, 1977, to discuss the chronology of events and the content of discussions which led us to limit the scope of our evaluation of vaccine manufacturing costs. We also sent a letter to Congressman Waxman on September 21, 1977, concerning the same subject (see enclosure I). In addition to the above actions, we sent for the hearings record, a copy of our February 18, 1977, letter to Congressman Moss (see enclosure II) which discussed reasons for the de- layed study of vaccine manufacturing costs and our agreement with the requesting committees. We trust that this information will assist the Subcommittee in finalizing its hearings of September 16, 1977, on the swine flu program. Sincerely yours, 1._i Gregory J. Ahart Director Enclosures - 2 PAGENO="0035" 29 EN~LOSURE I ENCLOSURE I UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON D.C. Z0548 SEP21 1977 HUMAN RV~SOURC5S B-l64031(5) The Honorable Henry A. Waxman House of Representatives IDear Mr. Waxman: During the swine flu program hearings on September 16, 1977, you stated that you had not received responses to questions you had directed to us on several occasions. As promised, we reviewed our files and found that on January 5 and February 4, 1977, you and Congressman Andrew Maguire wrote to Chairman Paul C. Rogers raising a number of issues regarding the swine fl~ program. Chairman Rogers, in turn, forwarded these letters to us and requested that we respond to him. In a March 8, 1977, letter to Chairman Rogers (see Enclosure I), we responded to ~ll the questions raised in your two letters. On February 24 and March 3, 1977, you corresponded directly to us requesting information concerning vaccines. We responded to you by letter dated June 27, 1977 (see Enclosure II). ~ou also questioned why we had not audited the drug - companies' records to determine the actual costs to manu- facture the monovalent and swine flu/A-Victoria vaccines. As I stated to you, we had agreed with Dr. Lee Hyde of the Sub- committee staff to assess the adequacy of the Department of Health, Education, and Welfare's efforts to aSsure that the drug companies were reimbursed for costs and profits permitted under the legislation authorizing the swine flu program.. This agreement is the same as we had reached in earlier discussions with staff representing Chairmen Brooks, Dingell, Flowers, and Moss who jointly signed an August 30, 1976, letter asking us to review various aspects of th~ swi. flu program. ~nc1.oeures No. I and II to this letter not printe~ PAGENO="0036" 30 B-l64031(5) public Law 94-380 which authorized the swine flu program stipulates th~t contracts for procurement of the vaccine fro~n a vaccine manufacturer shall be renegotiated to effect the elimination of manufacturer ~rofit on monovalent vaccine and limit the manufacturer's profit on bivalent vaccine to an amount not exceeding a reasonable profit, pursuant to criteria determined by the Secretary ofthe Department of Realth, Education, and Welfare. As I stated in testimony, contracts fQr purchasing the vaccine were not signed until last month. One is still unsigned. The Department has initiated its efforts to audit the signed contracts and we plan to fulfill our agreement and evaluate the adequacy of the Department's efforts. We will provide you with the results of our assessment. Sincerely yours, - Gz.~a~ J. ~Jarc1 Gregory 3. Ahart Director Enclosures - 2 -2- PAGENO="0037" 31 ENCLOSURE II ENCLOSURE II COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON, D.C. 20548 B-16403l (5) / February 18, 1977 The Honorable John E. Moss Chairman, Subcommittee on Oversight and Investigation Committee on. Interstate and - Foreign Commerce House of Representatives Dear Mr. Chairman: I received your letter of February 8, 1977, requesting immediate clarification of three issues raised subsequent to our briefing of your office on January 31, 1977, on the results of our review of the swine flu program. The issues concerned the total program cost, the execution of contracts with the vaccine manufacturers and access to manufacturers' records by the General Accounting Office. I believe the following response will clarify these issues. We plan to discuss the first two issues in greater detail when we report to the Congress on our review. The first issue concerns the cost of the program. Of the $135 million appropriated for the swine flu program, the Center for Disease Control se~ aside $100 million for the purchase of vaccine, $26 million for grants to States and $9 million for its administrative and other expenses. The amount set aside for the purchase of vaccine was based on an estimated 200 million doses to be purchased at an average cost of $0.50 a dose. Vaccine production ceased as of January 15, 1977. Only about 157 million doses were manu- factured and it is expected that the unit cost per dose will be less than $0.50. Therefore, as of February 15, 1977, the Center had obligated only about $66 million for vaccine purchases. All of the funds set aside for grants to States and for administrative and other expenses have been or will be expended. In our review of the swine flu program we have identified program costs which have not been paid for from the $135 million appropriated. In some cases accounting data is too limited to identify the precise amounts involved and in others the actual costs are indeterminable. HRD-77-52 PAGENO="0038" 32 ENCLOSURE II EHCLOSURE II B-164031( 5) Examples of these costs are as follows: --personnel costs of full-time Department of Health, Education, and Welfare (HEW) employees detailed from other programs, --Department of Justice costs of litigation and settlement not recoverable from third parties for claims over $2,500 (HEW will settle * claims for $2,500 or less), --funds expended from State and local revenues in addition to the Federal grant funds, such as: - a. direct appropriations for program costs (e.g., Pennsylvania appro- * priated $1.4 million and has expended over Sl million), b. personnel costs of full-time employees detailed from other programs, and c. additional costs for swine flu liability insurance, --lost opportunity costs to other programs, and --lost work from reactions. You also asked of the status of the contracts for the purchase of the vaccine. As of February 14, 1977, none of the vaccine manufacturers had signed final contracts. Interim letter contracts had been signed by all four manufacturers by September 22, 1976. Three of the four manufacturers and the Center have agreed to all cost ele- ments of the final contracts. No elements may be added. Contract signing has been delayed since January 1977, pending an Internal Revenue Service ruling on whether to tax as income $2.5 million included in each contract for self-insurance retention funds. These funds are reim- bursable to the Government, plus interest, less the amount of claims expenses incurred by the manufacturers. PAGENO="0039" 38 tNCLOSURE II ENCLOSURE II B-16403l( 5) In addition to this delay, Parke, Davis and Company and the Center are still in dispute concerning a $1.2 million cost for Shope vaccine (a vaccine'developed for another type of influenza) produced which could not be used in the program. The contract officer told us that the Center can make a unilateral determination of the price it will pay for Parke-Davis vaccine. Parke-Davis then has the option to either agree to this price and sign the contract or refuse to sign and make a claim against the Federal Government for the disputed amount. Your third question concerned our access to the vaccine manufacturers' cost data. No action can be taken to ascertain the validity of drug company cost data until the vaccine contracts, which specify the cost elements for which the compa˝ieswill be reimbursed, are signed. At that time, HEW is required to audit cost data validity. We plan to monitor .its efforts to the extent considered necessary. Also, at the request of the Chairman, Sub- committee on Energy and Environment, House Committee on Small Business, we agreed to assign &taff to assist the Subcommittee in its study of manufacturing costs and profits in the production of the swine flu vaccine. The vaccine contracts contain standard clauses providing for access to vaccine manufacturers' records. Several manufacturers, including one which manufactured swine flu vaccine, have recently denied our access under these clauses in other contracts. This matter is presently being litigated in the courts. I trust that this information will be useful to your continuing investigation of the Swine flu program. Our report, now delayed until April, should provide more detailed information on some of these and other important program issues. Sincerely yours, ACTING Comptroller General of the United States Mr. ROGERS. If I may continue my questioning. You make certain recommendations. For instance, you say that to assure that vaccine is delivered on schedule in any future pro gram, HEW must determine in a timely fashion how the vaccine will be formulated and packaged, and what the delivery specifica.. tions will be. That was one of the biologic's problems I was talking about in getting everything set so we could move rapidly.. Now, you also.state that if the manufacturers still cannot prorn duce enough vaccine in time to meet the needs, alternative meth ods should be sought. By that do you mean that the Government should go in and produce vaccine? PAGENO="0040" 34 Mr. AHART. Well, there are two possibilities there. We do have two firms other than these four which are licensed to manufacture vaccines that are not currently in production. Perhaps that would offer some capability. There is always the option of going to Government operated production facilities, should that be considered necessary by the Congress or others. Mr. ROGERS. But that is an alternative you feel should be consid- ered? Mr. AHART. We think it ought to be thought about if there are going to be any further programs of this nature where you are trying to immunize everyone in the country within a short period of time. Mr. ROGERS. I noticed you also recommended that the Congress consider the effect which inadequate liability protection might have on State participation in future immunization programs. You suggest that the Federal Government could, (1) assume total liability for the program, (2) assume liability for the participants or, (3) assume limited liability similar to that provided under the swine flu program. As I recall, this problem came up because of a court suit, the Reyes case, where an eight-month-old child had been vaccinated and the court held that the child had not been given a proper warning by the nurse who had administered the vaccine. As a result the lawsuit held the manufacturer liable for not giving the warning. Do you recall that as being approximately correct? Mr. AHART. I am not personally familiar with that case. Mr. OSWALD. That is correct. Mr. ROGERS. I think that is correct. Now, that was why the manufacturers said: "We will not do it without insurance." That is why insurance companies, as I under- stand it, said: "We won't insure on a mass scale unless the Govern- ment assumes the responsibility of warning." I have seen statements which say that the money paid to the insurance companies will never be called upon to be paid out. What is the potential liability of the companies for the ~8.65 mil- lion? Mr. AHART. Well, as the legislation was worked out in the Con- gress, there was the decision made that the companies would at a minimum-and this is where it came out-be held liable for their own negligence in the matter. So this was a residual that is the only thing for which they could be held liable. They felt they needed protection from insurance on that and got it. Now, with the Government having undertaken the responsibility for informed consent and with the Government also having tested and approved each lot of vaccine that the manufacturers produced, before it was released to the public, it struck us at least that there is not too much potential to reach the manufacturers on a negli- gence charge under those kinds of circumstances. Mr. ROGERS. You realize that it is not only a negligence charge which would be the basis for liability of the manufacturers? Are you under the impression it is only negligence? PAGENO="0041" 35 Mr. AHART. Let me ask Mr. Burnett to comment. I thought that that is what the manufacturers residual liability was, the way the legislation was worked out; is that correct? Mr. BURNETT. Yes, I believe so. Mr. ROGERS. Only negligence, you feel? Mr. BURNETT. Are you speaking of breach of warranty? Mr. ROGERS. Sure. Mr. BURNETT. Yes, as the second part. I believe that comes down to negligence also. Mr ROGERS Any obligation or responsibility in connection with the program includes all actions in connection with the manufac ture and distribution of the vaccine other than the actions involv- ing a duty specifically assumed by the United States under the program. What are the duties specifically assumed by the United States; to warn? Mr. AHART, To warn; yes. Mr. ROGERS. What else? Mr. AHART. Distribute the vaccine. Mr. ROGERS. Well, the manufacturers also distributed the vac- cine. Mr AHART To whom? The manufacturers distributed the vac cine ~to HEW. Mr ROGERS I understand Also if a specific lot just happened to be bad.. Mr. BURNETT. Yes, - Mr. ROGERS. If there is anything wrong with a specific lot of vaccine that is the responsibility of the manufacturer? Mr. BURNETT. Mitigated perhaps, and we don't have any feel for that, it will just be up to the courts to decide, but mitigated perhaps by the fact that the Bureau of Biologics tested every batch of the vaccine before it was released Mr ROGERS Well, I understand that But if it is the product liability there-- Mr. AHART. There would be* product liability. Whether or not in a court case it would be found that that was attributable solely to the company's action and hold them solely~ accountable, we can't speculate on that. Mr. ROGERS. As a matter of fact, then, we are not limited just to negligence in going against insurance companies for product liabil- * ity. Mr. BURNETT. Yes. Mr. Roa~s. I think you ought to look at that again. Now, what coverages are the manufacturers getting for the in- surance premium? Is it $8 million, or is the total responsibility of the insurance company up to $25 million or more? Mr AHART I think the total coverage for the $865 million is about $220 milli~n. Mr ROGERS So they have a potential liability still o~ $220 mil lion? Mr. AHART. That is correct. Mr. ROGERS. Is that still subject to liability for all of the claims filed within the time period given by the statute of limitations? PAGENO="0042" 36 Mr. ARART. It will be subject to, first of all, all the claims that are filed against the Government and then beyond that whatever portion of those claims the Government feels it could make a case of liability on the part of the manufacturer and go against the manufacturer for reimbursement? Mr. ROGERS. Yes. Mr. AHART. Then, if that should absorb the total $2.5 million of each firm's self-insurance fund, then as I understand it the insur- ance coverage provided by the insurance companies could be reached. Mr. ROGERS. So, perhaps it is premature to say as yet that there will be no call on that fund; in fact there may be a call up to $220 million? Mr. AHART. That is correct. I think we put it in our statement this way, and I will repeat it, "may result in profit of nearly the entire--" Mr. ROGERS. I would agree. Mr. AHART. There is that possibility. Mr. ROGERS. But also there may be a liability up to as much as $220 million. Mr~ AHART. That is the total coverage, yes sir. Mr~ ROGERS. I would hope that the General Accounting Office would continue to monitor the program, and we will make an official request that this be done. I agree with the gentleman from California, that I think you should discuss the program with all participants. Did you have discussions with insurance companies at all? Mr. AHART. Mr. Burnett. Mr. BURNETT. Yes, with representatives of the insurance indus- try. Mr. ROGERS. You have made inquiry of them? Mr. BURNETT. Yes, sir. Mr. ROGERS. Are there any participants you have not visited with? Mr. BURNETT. Beyond the manufacturers? No, we have not talked to manufacturers. Mr. ROGERS. The manufacturers were really the only ones you did not contact? Mr. AHART. That is correct. Mr. ROGERS. I would hope that you would do that in the followup audit. Thank you so much for your presence here. We are grateful. Mr. Walgren, did you have any questions? Mr. WALGREN. I just wondered, I don't know whether these should be addressed to GAO, how much unused vaccine is presently existent and in whose hands? Mr. AHART. Let me see if we have that information. Mr. Flowers, do we know how much vaccine is yet unused? Mr. FLOWERS. They produced 157 million and have administered about 45 million, so out of the total 157 million produced-- Mr. BURNETT. About 110 million left, and as we understand it, there is some still with the States and HEW has possession of some. PAGENO="0043" 37 Mr. WALGREN. So the States have some, HEW has some, and do the manufacturers still have any? Mr. BURNETT. That, I couldn't tell you. Mr. ROGERS. I expect HEW can probably get into this for us. Mr. WALGREN. OK, thank you, I think theywould probably know better. Mr. ROGERS. Thank you for your presence today. You have been most helpful and we will formalize a request for continued investi- gations. Thank you. Our next witnesses will be the Department of Health, Education, and Welfare, Dr. J. Donald Millar, Director of the Bureau of State Services, Center for Disease Control, accompanied by Dr. Harry M. Meyer, Jr., Director of the Bureau of Biologics, Food, and Drug, and also by Dr. William Jordan, National Institute of Allergy and Infectious Diseases. We welcome you gentlemen to the committee. Your statements will be made a part of the record in full. Before you begin, I might say that I wrote to the Secretary reminding him of the requirement for the liability alternative study which was due on August 12. We did get a response yesterday; a first draft of the report outlining some options with no recommended procedures or no formal cost recommendations It is my understanding, from the letter, that costs studies are to be completed by October 15. Dr. Millar. STATEMENT OF J. DONALD MILLAR, M.D., DIRECTOR, BUREAU OF STATE SERVICES, CENTER FOR DISEASE CONTROL, PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH, EDU- CATION, AND WELFARE, ACCOMPANIED BY WINDELL BRAD FORD, ADMINISTRATIVE ASSISTANT TO DR MILLAR, HARRY M MEYER, JR, M D, DIRECTOR, BUREAU OF BIOLOGICS, FOOD AND DRUG ADMINISTRATION, AND WILLIAM JORDAN, M.D., NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES Dr. MIUAR. Thank you, Mr. Chairman. I also have with me on my left, Mr. Windell Bradford of my administrative staff. Mr. ROGERS. We welcome you. Dr. MIUAR. I am grateful for this opportunity to appear before you to review our experiences in trying for the first time in history to prevent the widespread death and disability from a flu pandem- ic. I hope this review can be constructively used to address the obviOus problems which confront any future attempt at a major national effort in preventive medicine. Mr. Chairman, you have very aptly designated and described these problems and I won't repeat them. I think that our challenge is to address these problems and resolve them in advance, such that national health emergencies in the future can be met head on and in time. Much attention has been given to the controversial aspects of the swine flu program and I would like at this point to cite some of what I believe to be the undersung positive accomplishments of the program. PAGENO="0044" 38 The first is the immunity provided. Under the circumstances, a remarkably significant proportion of Americans were immunized. Among those designated as having a high risk of dying from flu, over 40 percent received the vaccine protecting against both swine flu and A-Victoria flu. That is more than twice the coverage level ever previously achieved among this most important group of indi- viduals. In the general population above the age of 18, 32 percent were immunized. This is several times higher than was accomplished in 1957 and 1968, the only previously attempts at immunization in the face of a pandemic. You will recall that in both of those instances immunizations had hardly begun when the pandemic stormed across the country and those efforts had very little effect on the outcome. A second very positive achievement is the remarkable perfor- mance of State and local health departments. Almost without ex- ception, they proved capable of a rapid Herculean effort in re- sponse to national needs. It has been popular in recent years to impugn the ability of health departments to move rapidly and effectively. However, in spite of delays in the availability of vac- cine, complicated immunization schedules, specific shortage of some types of vaccine, and continuous media emphasis on these and other problems, the health departments established programs which immunized more people in 2Ż months than in any previous immunization program in this country's history. Third, a major milestone was achieved by requiring the nation- wide use of information-consent procedures. There seems now to be widespread acceptance of the notion that individuals presenting themselves or their children for immunization should understand both the risks and the benefits of the procedure. Other positive aspects of the program include the manufacturers' record production of 150 million doses of flu vaccine. Prior to release of the vaccine, these were subjected to the largest field trials in the history of flu vaccines. A system was established for the first time to monitor illnesses following immunization. There was a five-fold increase in surveillance for influenza disease and the implementation of the program directly involved an impres- sively wide array of American institutions, public, private, and voluntary. As the historical evidence emerges, I feel that the national influ- enza program will prove to have been an appropriate response to the facts at hand at the time the decisions were made, and in the words of the GAO report, "an unprecedented venture in preventive medicine." There were numerous well-publicized legal, logistical and admin- istrative problems in implementing the swine flu immunization program requiring special solutions. Some problems were brought to this committee as they emerged. There are two developments which may be viewed as major nega- tive outcomes of the program. Both have already been referred to. The unexpected discovery of an apparent association between influenza immunization and the Guillain-Barre syndrome. This syndrome is an uncommon condition of unknown cause character- ized by transient "ascending paralysis." Although the cause of the PAGENO="0045" `39 snydrome has never been known, two-thirds of the persons with this condition report an illness or other health event in weeks preceding onset. At least 150 different such antecedent conditions have been listed. For the first time we observed a small but finite statistical association between influenza immunization and this syndrome. Following the report of five cases in two States, in November 1976, an intensive investigation was initiated. Neurologists in each of the 50 States were asked to identify all cases of the syndrome that they saw during the period October 1976 through January 1977. As Dr. Carter has already noted, a total of 1,053 cases of the Guillain-Barre syndrome were found. Of these, 515 were in persons who had received swine flu vaccine and 505 were in persons who had not received flu vaccine. Analysis revealed that recipients of swine flu vaccines experi- enced the syndrome at a rate several times higher than ordinarily expected. It appears that one case of the Guillain-Barre syndrom above the expected incidence was observed for each 100,000 flu vaccinations. Because so little was known previously about the frequency of this syndrome, an interpretation of these findings is very difficult. One thing, however, is clear. Had we not established monitoring systems and had not over 40 million doses of vaccine been given in so short a time, an apparent association of this low order of magni- tude would not have been discovered. Even this appartent association of flu vaccine with the Guillain- Barre syndrom, unexpected and undesirable though it is, has opened important avenues of research which may help unravel this mysterious syndrome which has frustrated physicians for over 50 years. The second major negative outcome of the program is the series of claims already referred to due to illnesses following vaccination Of these, many relate to the Guillain-Barre syndrome. Because of the need for swift action in initiating the program, the Federal Government assumed, via Public Law 94-380, unprec- edented responsibility for liability for illness following vaccination Unquestionably, the Federal Government will thereby be in volved in the long process of reviewing, litigating, and settling these claims. It is my understanding that the Justice Department will appear before you today to discuss this current situation. I would like to turn now to the costs of the program. Congress appropriated the sum of $135 million to carry oui the program. Approximately $1026 million has been obligated Of the balance, $12 million was reappropriated by Congress for use in other public health programs. The balance available from the original appropri- ation is due to the amount and the provisional unjt. cost of the vaccilTes, both of which are less than originally estimated. While the final cost of vaccine and storage haS not been determined, we anticipate that sufficient funds will be available. Only with respect to the claims that may or may not be allowed in the future is there any possibility of significant cost to the Government beyond what was budgeted. PAGENO="0046" 40 Please recall that at the outset of the program, serious complica- tions caused by influenza immunization were not known, hence major financial claims were not expected. The combination of the prodigiously rapid output of immunizations plus a system for moni- toring illness after vaccination brought to light an apparent low risk of the Guillain-Barre syndrome. This apparent statistical asso- ciation has been a key factor responsible for many of the claims filed. There are four aspects of the swine flu program I feel have distinct ramifications for future activities. The first is the decision- making process. The GAO has examined the process in 1976 and makes a concrete recommendation that formal points be preestab- lished at which the basic policy decision is reevaluated in light of new information or lack of it. Such reevaluations in effect were made for the national influenza immunization program through a series of congressional hearings and almost daily they were made by professionals trying to operate the program in the face of seem- ingly qnending problems. We agree formalizing a system of preplanned periodic policy evaluation deserves serious consideration. Second are issues of compensation and liability. The most pressing questions in the wake of the program are those which provoked Public Law 94-380; that is, who is liable if someone is injured by immunization, and what recourse does that person have for compensation for the injury? Congress made it abundantly clear that Public Law 94-380 was not to be considered as a precedent for the future. Indeed, it directed an examination of alternatives for a careful permanent solution. HEW is preparing a document to be presented by October 15, as you have already heard. At this point I would like to note the three policy objectives which must be pursued in making the necessary changes. First of all, we must assure that vaccines are available to protect the citizens who need and want the protection. The refusal of the manufacturers to provide new vaccine without assurances that their liability be limited was the prime impetus for last year's law. Health care professionals, if they are to continue to immunize people, also must be assured that if they administer the vaccines carefully they will not be held liable for injuries resulting from immunization. Since immunization confers direct benefits to society and not exclusively to the individuals, we must develop means of compen- sating those rare persons who are injured by the vaccine. Finally, no medication is free of some inherent risk. We must expand our efforts to define these through more systematic surveil- lances of illness following vaccination via methods such as those introduced in the swine influenza immunization program. Effective solutions on a long-term basis to these problems do not lie in time consuming, costly, and often inequitable adversary pro- ceedings in the courts. A societal responsibility exists to provide a fair settlement ot persons injured without the necessity for litiga- tion. I would like to turn now to the matter of informed consent. Irrespective of the liability and compensation issues, persons re- PAGENO="0047" 41 ceiving vaccine should receive meaningful information on the bene- fits and risks of immunization. To do this is not simple. Complex medical information must be presented in language understandable py persons without medical backgrounds. Furthermore, a balanced picture of both risks and benefits, in- cluding the risk of not being immunized, is required. At the present time these needs are compounded by a third, the need to provide this information in a way which reduces a liti- gant's ability to prove in court that he was not adequately warned about the risks of immunization-it goes almost without saying that few people sue if after failing to be immunized they are subsequently ill. Concurrent review of the program as done by the GAO was helpful and their report was carefully considered and generally sound, in our opinion. One of the weaknesses of the report, in my opinion, is that it porceeds almost exclusively from the position that the function of the information consent process is to defend the Government in court. They question the adequacy of our procedures in this re- spect. However, I believe they have underemphasized the role of the procedure in providing information on which a reasonable person could make a reasonable choice. We must regain a balanced per- spective on this, otherwise the construction of statements which are adequate documents for legal defense will fail completely to provide a lucid understanding of the information needed by a person to be immunized or a parent of such a person. Fourth, an outcome of significant ramifications for the future is the fact that an epidemic did not occur. We knew that this outcome was possible and said so repeatedly. In the past, all discoveries of major variations of flu viruses were made in conjunction with pandemics. We now have one example in which a major variant appeared that produced one human epidem- ic at Fort Dix and did not spread further. Unfortunately, that knowledge doesn't help much. However, we do know that influenza pandemics take a large toll of lives and huge financial outlays for medical care. We also know that another pandemic of some sort is inevitable. It is too early yet to presume that it will not be swine flu. Therefore, we are taking the necessary steps to maintain the existing supplies of swine flu vaccine for future use if needed. In closing, Mr. Chairman, I concur in the importance of ponder- ing our recent experience-which in many ways was arduous and frustrating-especially in the context of previous responses to threats of influenza pandemics. In 1957 and again in 1968 the country moved cautiously but the influenza virus did not In 1976, the country moved quickly but the influenza virus did not Some would say that the virus is ahead three touchdowns to none. Nevertheless, faced with a similar chal- lenge again, I hope we will not shirk the necessary prudent deci- sive action. For if we wait until all questions are answered and all implications are clear, we will always find ourselves too late with too little in the fight against influenza. Thank you, Mr. Chairman. I will be happy to try to respond to any questions. [Testimony resumes on p. 65.] [Dr. Millar's prepared statement and attachments follow:] PAGENO="0048" 42 STATEMENT OF 3. DONALD MILLAR, M.D., DIRECTOR, BUREAU OF STATE SRVICES, CENTER FOR DISEASE CONTROL, PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH, EDUCATaON, AND WELFARE Introduction and Background. Mr. Chairman and members of the Committee, it is a pleasure to appear before you to review our experience in attempting, for the first time in history, to prevent the possibility of widespread death and disabi.~ lity from a potential influenza pandemic. ]~t was this Committee which, on March 31, 1976, heard the evidence of the emergence of a new strain of swine influenza-like virus (labeled A/New Jersey/76) and our concerns that this strain ~a!~ produce an influenza pandemic. It was this Committee which helped to lead efforts throughout the summer months to resoFve the.impasse of liability protection for influenza vaccine manufacturers and health workers involved in the program. tt was also this Committee which investigated our initial difficulties in providing an adequate supply of influenza vaccine to the States in hearings last September~ It, therefore, seems appropriate to me that in this forum we begin a review of the past 18 months' arduous and in many ways frustrating experience. I hope this review can be constructively used to address issues which will confront any future attempt at a major national effort in preventive medicine. These issues include liability and the need for compensation for injuries resulting from vaccination, informed consent, public information and research, and their complicated interactions in the rapidly changing atmosphere of a potential epidemic. The challenge is to address these issues and resolve them in advance in such a way that national health emergencies can be met headon and in time. I In Act III, Scene 2, of Shakespeare's Julius Caesar, Mark Anthony eulogizes Caesar saying, "The evil that men do lives after them, the PAGENO="0049" 43 good is oft interred with their bones!" One concludes that at the present moment those aspec~s of the National Influenza Immunization Program perceived as negative are still uppermost in the minds of the public. The successes accomplished by the program, if not "interred with the bones " are at least attracting far less atten- tion than its problems. Major Accomplishments. Because of this, I would like to now cite some of the undersung positive accomplishments of the Natiot~al Influenza Immunization Program of 1976. 1. The first is the immunity provided to our people, especially those at "high risk" of dying from influenza. In the light of the problems, delays, and controversies swirling around this program from its inception, a remarkably large proportion of Americans were immunized. Among the group of people considered to be at "high risk" of death and disability from influenza, approximately 40 percent received the bivalent vaccine providing protection against swine flu and A/Victoria flu (Fig. I). This is about twice the coverage level ever previously achieved among this group of citizens. Furthermore, the pro- tective effect of the biv~lent vaccine against epidemics of A/Victoria influenza was documented in an outbreak in Florida; the vaccine was shown to be 83 percent effective in preventing potentially fatal A/Victoria influenza among 98-930 0 - 78 --4 PAGENO="0050" 44 residents of a nursing home there. Among the total popu- lation, above the age of 18, 32 percent were immunized. This is several times higher than was accomplished in 1968, the only previous time when influenza immunizations were provided on a large scale. You will recall that in that instance immunizations had hardly begun when the full force of the Hong Kong influenza epidemic erupted through- out the country in October. 2. Second is the remarkable responsiveness of State and local health departments in implementing the national pro- gram. Perhaps the most encouraging aspect of the 1976 program was the performance of State and local health agencies throughout the country. They proved again that they are capable of a rapid, appropriate response, and massive efforts in the face of a clear national need. It has been popular in recent years in some quarters to cri'- ticize State and local health departments and to impugn their ability to move rapidly and effectively. However, despite delays in the availability of influenza vaccine, despite the complexity of the vaccine's immunologic behavior and hence the need for various complicated immunization recommendations, despite a shortage of the only vaccine formulation suitable for young people, and despite a continuous media barrage emphasizing these and other problems, the health departments established PAGENO="0051" 45 programs which achieved an unprecedented success. More people were immunized in 2 1/2 months in the National Influenza Immunization Program than in any previous inununiza- tion program in this country's history, and that achievement is directly due to the efforts of State and local health departments (Fig. II). 3. Third, a major historic milestone in the practice of, community preventive medicine was reached by implementing the principles of informed conseni on a nationwide basis. This was achieved by requiring the use of information- consent forms and procedures for all swine influenza immu- nizatiˇns except those administered by private physicians to their individual prIvate patients. Even in these settings, physicians frequently elected to use the informed consent procedure, and thereby to be afforded the liability protection provided by Public Law 94~~38O. I believe the principle of informed consent will remain an integral element in community immunization programs even though the legal significance of the docutnents may change. There is widespread acceptance of the notion that individuals presenting themselves or their children for immunization should understand the risks as well as the benefits of the procedure. Effect~LvÓ information.docunents must be developed to promote this growing understanding. This is much easier said than done, as I shall subsequently discuss. PAGENO="0052" 46 4. Many other positive aspects of the program ~f 1976 must be recognized. The vaccine manufacturers produGed 150 million doses of influenza vaccine, more than seven tin~es their usual production. Before being offered to the publiq, the influenza vaccines of 1976 were subjected to the largest field trials in the history of influenza vaccines. As part of the National Influenza Immunization Program, a system was established for the first time to monitor illnesses which occu1~red following * immunization, a mechanism which was sufficiently sensitive to identify a condition of very low incidence. The existence * of the national program produced a profound ir~crease in surveillance for influenza disease and finally, the imple- mentation of the program directly involved an impressive range of American institutions, public, private, and voluntary. Significant reviews and evaluations of the 1976 program will continue to provide productive interpretations of the progi~am. You have discussed the intensive and concurrent review performed by the Government Accounting Office (GAO). As the histo*ical evidence emerges, I feel that the National Influenza Immunization Program will prove to have been a highly significant and appropriate effort or in the words of the GAO Report, "an unprecedented venture in preventire medicine." `Major Problems. There were numerous well publicized legal, logistical and contractual problems in implementing the National Influenza tmmunization Program. PAGENO="0053" 47 Some of these were brought to this Committee as they emerged as obstacles to tImely completion of the program. Special criteria and procedures for determining costs for vaccine contracts were required because, under Public Law 94-380,monovalent swine influenza vaccine was to be provided to the Government at cost, and a reasonable profit was permitted on the A/Victoria/75 component of the bivalent vaccine.. Like so many other aspect~ of this program, we and the manufacturers were faced with uncommon situations which required speciAl solutions, and these took time. It should be emphasized, however, that negotiation of these issues did not affect the supply of vaccine, once the basic problem of liability protection was resolved in August 1976. Letter contracts were signed in September 1976 with all four manufacturers, and production and distribution of vaccine proceeded. The signing of definitized contracts to replace the letter contracts was delayed by a combination of reasons, one being a ruling by the Internal Revenue Service regarding the taxability of the manufacturers' Self Insurance Retention Fund. The vaccine manu~ facturers' accounting mechanisms were not designed to meet the require-. ments of the Government's cost accounting standards. Therefore, a waiver was requested. Once the waiver was granted, three finalized cont~rcts were signed. The fourth contract is still being delayed because of a dispute about who pays for the production of several lots of vaccine made from the wrong seed virus. There are two major developments which must be viewed as~serious negative outcomes of the program. In the long run, however, even these may result PAGENO="0054" 48 in significant benefits in clearly defining problems o~ vaccination cam- paigns or in producilig understanding of previously mysterious disease processes. 1. Cuillain-Barre Syndrome and other illnesses f~ollowing vaccination. The most dramatic unexpected problem which arose during the program was the discovery of an apparent statistical association between influenza immunization and the Cuillain~Barre Syndrome (CBS). The Guillain-Barre Syndrome is an uncom~non condition of unknown cause characterized by a transient "ascending paralysis," i.e., the paralysis begins in the legs and later involves the trunk, the arms,.and the neck. For most people this condition is transient. However, it is fatal in 5 percent and produces rare residual paralysis in another 5 percent. Although the cause of GBS has never been known, two-thirds of persons with this condition report some health event, disease or accident in the. weeks preceding onset; at least 150 different such "antecedent conditions" have been described. To the point here, however, is the fact that we identifiea an apparent statistical association between influenza inilnunization and the Guillain-Barre Syndrome. While a specific causal link between immunization and GBS has not been defined, the epi- demiologic and statistical associations are significant. As part of the National Influenza Immunization Program, we established at the outset a system to encourage individuals PAGENO="0055" 49 and physicians to report any health problems occurring after immunization. These reports were made to local and State health authorities and from them to us. In mid-~November we, received a report from the State of Minnesota of a person who developed the Guillain~-Barre Syndrome following influenza immunization. An investigation was carried out by health officials in Minnesota to identify all cases of the syndrome which had occurred there in recent months. No evidence for an association with immunization was found. On December 2, an Alabama physician reported three cakes of the Guillain~ Barre Syndrome, all among persons living in close proximity to each other, An ~˝vŕstigation was initiated in Alabama and the investigation in MinCesota was reopened; a week later another inquiry was initiated in Nhw Jersey when a case was reported there. At about' the sante time we asked eight other States to initiate similar investigationS although no cases had been repo~ted at that time in th~se Stat~S~. By December 16, we had considerable data from four of the States; and in consultation with a number of outside experts, we decided to reco*Snend suspension of the influenza immuni- zatiˇns until a nationwide investigation could be completed. An intensive nattonwide epidemiological investigation was initiated to determine if there was a significant association between influenza immunizations and the Guillain-Barre Syndrome. PAGENO="0056" 50 The primary phase of this investigation consisted of a survey of neurologists in each of the 50 States to ide*itify all cases of the Guillain-Barre Syndrome they had seen during the period October 1976 through January 1977. A second phase of the inves- tigation, currently underway, includes the inti~icate study of immunological factors which may be associated *ith the disorder. The first phase of the investigation, which began in mid- December, resulted in reports from all 50 States, the District of Columbia, and Puerto Rico. These reports yielded a total of 1,104 cases of the Guillain-Barre Syndrome with onsets during the surveillance period. Five hundred and thirty-five cases occurred in persons who had recently received swine in- fluenza (A/New Jersey/76) vaccine, either by itself or in com- bination with A/Victoria/75 vaccine; and five hundred and thirty one cases occurred in persons who had received no influenza vaccines. Fifteen additional cases occurred in persons who had received other flu vaccines. The vaccin~tion status in 8 cases remains unknown. Analysis of these ~ata (Figs. III, IV, V) revealed that persons who received swine influenza vaccines experienced the Guillain-Barre Syndrome during the 10 weeks following immunization at a rate about 10 times higher than ordinarily expected (i.e., about one case per 1,000,000 persons per month). Viewed in another way,one extra case of the Guillain-Barre Syndrome above the expected incidence was observed for each 100,000 influenza immunizations. Because so PAGENO="0057" 51 little was known prewiously about the frequency of the GBS, a clear interpretation of these findings is very difficult. One thing is clear, however; if we had not established a monitoring system and if 40 million doses of vaccine had not been given in so short a time, an apparent association of this low order of n~agnitude would not have been discovered. The second phase of the investigation includes a detailed.immu- nologic study of randomly selected patients in specific geographic locations. The study involves a sample of 150 previously identi- fied GBS patients, all over 15 years of age, who are being compared with persons with similar characteristics who did not. develop the condition. Immunologic tests will be performed to detect any perceptible differences, The epidemiological obser-' vations will also be extended by use of a more detailed interview concerning specific information on allergy, previous neurologic disorders, other immunizations, injections, surgery, or acute illnesses immediately prior to the onset of the Guillain-Barre Syndrome and to other questions suggested by the available surveillance information. Thus, even the apparent association of influenza vaccine with the Guillain-Barre Syndrome, unexpected and undesirable though it is, has opened important avenues of research on the basic causes of the Guillain-Barre Syndrome. These may help in un- ~ave1ing the nature of this mysterious syndrome, which has frustrated physicians for over 50 years. . PAGENO="0058" 52 In addition to the reports of the Guillain-Barre Syndrome, we received reports on other instances of health problems which occurred subsequent to immunization. With the exception of the expected occurrence of fevers, muscle aches, tenderness at the site of the injection, and one non-fatal case of an anaphylactic reaction, there is no evidence that any other conditions were associated, except temporally, with immuniza- tion. In no cases did any of these other health events occur at rates exceeding normal expectations in the population. 2. Liability and Claims. The second major negative outcome of the program is a series of claims due to illnesses or deaths following vaccination. Many of these are associated with the occurrence of unexpected cases of the Guillain-Barre Syndrome. Because of the pressing need for swift action in initiating the program, the Federal Government assumed, via Public Law 94-380, unprecendented responsibility for liability in the event of injury or death due to immunization. Unquestionably, by assuming primary responsibility for claims filed as a result of the program, the Federal Government will be involved in a long and costly process of reviewing, litigating, and settling these claims. It is highly unlikely, however, that the costs will approach the billion dollar figure, which has been widely quoted. Since the Justice Department will be appearing before you today, I am sure they will provide a summary of the current situation related to claims, PAGENO="0059" 53 Summary of Current Costs of the National Influenza Immunization Program. I would like to briefly summarize the costs of the program to date. Of the $135,064,000 appropriated by Congress to carry out the National In- fluenza Immunization Program, approximately $101 million have been obligated. In addition, $12 million have been reappropriated by Congress for use in other public health programs. The balances avail- able from the original appropriation occurred primarily because both the amount and provisional unit cost of the vaccines were less than originally estimated, While the final cost of vaccine and storage have not been determined, we anticipate that sufficient funds will be available. Only with respect to claims that may or may not be allowed in the future, is there any possibility of significant cost to the Government beyond what was budgeted for the program. It should be remembered that at the start of the immunization program, serious complications were not known to be associated with influenza immuniza- tion. Hence, major financial claims logically were not expected. As noted, earlier, the combination of a system for monitoring illnesses after vaccination and a prodigious output of immunizations in a short time was required to bring the low risk of CBS to light. The discovery of this apparent statistical association during the campaign has been primarily responsible for many of the claims filed. The Future. I would like now to turn to four aspects of the National Influenza Immunization Program which have distinct implications for future PAGENO="0060" 54 programs against potential epidemics. 1. The Decision-making Process. Given the imprecise nature of our understanding of influenza, *what lessons are there for us in making decisiQns in the future? HEW Secretary Joseph Califano is publicly committed to looking very carefully at this question. The GAO has examined the decision process in 1976 and makes one concrete recommenda- tion: That formal decision points be pr~established at which *the basic policy decision is to be periodicafly reevaluated in light of new information (or lack of it). Such reevaluations were made in effect for the National InfluenZa Immunization Program through a series of Congressional hearings; and also they were made almost daily by CDC professionals trying to operate the program in view of the limited ~ccurance of in- fluenza, particularly swine influenza, in the early fall and the seemingly unending implementation problems. Nonetheless, serious consideration should be given to formalizing a system of preplanned policy evaluation as Suggested by GAO. 2. Compensation and Liability. The most pressing questions requiring resolution in the wake of the National Influenza Immunization Program are those which provoked the special legislation in August of 1976; i.e., who is liable if someone is injured by immupization and what recourse does a person have to obtain compensatior~ for that injury? PAGENO="0061" 55 Public Law 94-380 established a program to cope with these issues in the particular context of the threat presented by swine flu, but at the same time made it clear that examination should be made of alternative approaches so that a more carefully considered permanent solution to these questions could be found. The law calls upon the Department of Health, Education, and Welfare to report to Congress on alternative methods of allocating liability and compensating the injured. Since that time these iÚsues have received carefulattention by individuals both inside and outside the Government. An interim working draft has been submitted to Congress and a final document will be produced by October 15. I will not attempt to trace the background which led up to the legal situation that now faces us, nor to summarize the various alternatives which are potentially available. Instead, I would like to draw your attention to certain policy objectives which must be pursued if changes in the existing system are to be made. First, and most importantly, it must be our objective to insure that sufficient vaccines continue to be manufactured, distributed, and administered in the face of increased concern by manuhcturers over their liability for vaccine-related side effects. The manufacturers' refusal to supply vaccines without assurance that their liability would be limited was the primary impetus for last years' legislation protecting them against losses in the swine flu program. While this issue is currently being adequately addressed in the routine immunization programs by the Federal Government's assumption of the šluty to warn vaccinees about risks and benefits, it is entirely possible that the liability issue PAGENO="0062" 56 will surface again in the future as an impediment to vacc~ine supply. In addition, health care professionals and administering agents who also fear increased liability must be assured that if th~y perform their tasks carefully, they will not be held responsible for injuries resulting from immunization programs. Secondly, since individuals who participate in immunization programs benefit not only themselves, but also the community at large, wemust develop some means of assuring compensation for those *ho suffer vaccine- related injuries and have no other means of recovery. The Department is currently examining the structure and cost of a nuiber of compensation plans, and these will be in our October 15 report. Finally since no medication or biological is free fro~n some degree of inherent risk, we must continue and expand our ef~orts to identify the inherent risks associated with vaccination and t~ develop ways to anticipate and prevent them in order to minimize the number of persons injured. Although CDC gathers a substantial amount of data concerning immunization programs, these efforts could be broadened and made more systematic. States administering the vaccine under Federal influenza immunization grants were asked to report to CDC illnesses and injuries occurring after vaccination. Modifications of thiS system are being developed to encompass all immunization programs. Because of the difficulty in gathering data concerning the costs of various alternatives for addressing the liability and com~ensation issues, and because the Office of Management and Budget would require cost information PAGENO="0063" 57 on any recommendations involving an additional expenditure of Depart- ment funds, the Department is unable at this time to recommend a speci- fic solution for these problems. We intend to present the alterdatives in detail in our October 15 report and to outline available cost esti- mates. We hope that the data available then will be sufficiently relia- ble to allow us to recommend a particular approach to this problem. 3. Be˝ef it-Risk Inf~ormation Irrespective of solutions to the compensation and liability issues, persons receiving i~accines must receive meaningful information as to the benefits and risks of immunization. A method of accomplishing this is by ito means simple or straight forward. One aspect of the problem is the need to distill very complex medical information into language understandable by a wide array of persons Without medical kackgrounds. Another aspect is the need to present a balanced picttire of both risks and benefits, including the risks of not being immunized. At the pres- ent time, these two. needs are compounded by a third: The need to pro- vide this information in a way which minimizes a litigant's ability to prove in court that be or she was not adequately warned about the risks of immunization. It goes almost without saying that few people sue, if, after failing to be immunized, they subsequently become ill. I do not want to minimize the need to avoid costly financial losses associated with immunization, However, I believe our primary responsibility to the public is to conduct preventive health programs free of an overly defensive posture because of fear of lawsuits. PAGENO="0064" 58 One of the difficulties with the GAO report is the narrow-gauge discus- sion of our implementation of informed consent requirements. They pro- ceed almost exclusively from the position that the function of the in~ formation-consent process is to defend the Government in court. Their criticisms derive from probes at the adequacy of our procedure in re- spect to this one function while under emphasizing adequacy in provid- ing information on which a reasonable person can make a reasonable choice. We must regain a balanced perspective on the use of informed consent doc- uments. Otherwise, the construction of statements to serve as adequate documents for legal defense will fail completely to provide a lucid un- derstandable summary of the information needed by the parent or individual to be immunized. We have recently carried out field tests of information and consent procedures for other vaccines. Results are being tabulated and analyzed. I regret to report that we have not yet found totally satisfactory ways to adequately serve these conflicting needs. 4. Understanding the epidemiology of influenza,. An outcome of significant ramifications for the future is the fact that we carried out a most extensive preventive health program against an epidemic which did not occur. We knew full well that this outcome was possible and said so repeatedly. Our understanding of the behavior of influenza virus was far from complete when the decision was made. The continued absence of epidemic swine flu unfortunately has contributed very little to our ability to predict the behavior of influenza. In the past all discoveries of major variations of influenza viruses were made in association with pandemics; we now have one example in which a major PAGENO="0065" 59 new variant of influenza appeared, produced one sizeable human outbreak at Fort Dix, and did not spread in the ensuing influenza Season. That knowledge doesn't help us a great deal. However, we do know that influenza pandemics take a large toll in loss of life and large financial outlays for imdical care and income loss~ We also know that inevitably there will be another pandemic of some sort. If this pandemic is not due to swine influenza, we will have learned that not every type A influenza virus which mutates its surface antigens is explosive even when it has shown the ability to spread from man to man in environments such as military bases. It is too early to make any such presumptions regarding the next few years. Therefore, we are taking the necessary steps to maintain the existing supplies of the swine influ- enza vaccine for future use if needed. In closing, Nr. Chairman, I would like to note my commitment to the importance of learning from our recent experience with the National Influenza Immunization Program of 1976. However, in doing this, the program must be viewed in the context of Other preventive efforts, especially previous responses to threats of influenza pandemics. In 1957 and again in 1968, this country moved cautious- ly but the influenza virus did not; in 1976 the country moved quickly and de- cisively but the influenza virus did not. Some say the score is 3 to 0 in favor of the influenza virus, although for quite different reasons. Neverthe- less, faced with a similar possibility in the future, I hope we will not hesi- tate to take necessary prudent, decisive, defensive action. If we wait until all questions are answered and all implications are clear, we will always find ourselves too late with too little in the fight against influenza. 98-930 0. 78 -- PAGENO="0066" 60 Figure I Percent of Persons with History of Receiving Influenza Vaccine, United States, l972~77 50~ 40~ o 30 S HIGH RISK (ACIP DEFINITION) / 20 ______~o.~,~O/ / o-,.."----,-,o-- 10 Total Population Sept. ` Sept. Sept. ` Sept. Sept. l Sept. 1972* 1973 1974 1975 1976 1977* * SURVEY MONTH High risk data riot available Projected PAGENO="0067" PAGENO="0068" 62 Figure III Cuillain-Barre Syndrome Attack Rates in Vaccinated and Unvaccinated Groups by Age, United States October 1976 - January 1977 * Ages AGE GROUPS * Because so few persons in this age group were vaccinated the apparent difference lacks statistical significance. PAGENO="0069" 4 Cases per Million Vaccinees 3 2 FIG1~E IV Guillain-Barre Syndrome Attack Rate for Population >17 years of age, by week of onset after A/New Jersey Influenza Vaccination United States, Oct. 1976-Jan.1977 .21 DAttr~tabe Risk (for 1st 10 weeks 10.3 cases per) million vaccinees Expected Based on Attack Rate for Unvaccinated 7 8 9 10 11 12 13 14 15 16 17 1 2 3 4 5 6 WEEK AFTER VACCINATION PAGENO="0070" a, C) C C >-s A> I..--.' * ~CN. - a) ,,~ ~ 0. ~ 0- ~ - U- I E 2 ~ .~ o*._ c~ ~ (~I 64 I..- `----I--I ____ `H-' ~ ~ >~ PAGENO="0071" 65 Mr. ROGERS. Thank you very much, Dr. Millar. What has been the cost of the vaccine? Dr. MIMAR. The estimated final costs for the vaccine would be $67 million. Mr. ROGERS. What is it per dose? Dr. MILLAR. 87 cents per dose, or 42 cents per dose if self- insurance retention funds are included. Mr. ROGERS. What about the bivalent vaccine, what is the cost of bivalent? Mr. BRADFORD. Mr. Chairman, they varied somewhat between manufacturers. We could provide that. Bivalent costs more than the monovalent. [The following information was received for the record:J PAGENO="0072" 66 NATIONAL INFLUENZA IMMUNIZATION PROGRAM VACCINE CONTRACT AND INSURANCE COSTS Parke-Davis Merrell-Natl Mei~ck, SD ~ $15.09 2,439,000 $736,090 $8.58 32,700,000 $5,611,320 $ .172 $1.85 22,300,000 $4,125,500 $12.00 26,600,000 $6,384,000 $ .240 $2.80 14,100,000 $3,948,000 Monovalent Vaccine Price/SO Dose Vial Number of Doses Cost Provisional Price/SO Dose Vial Price/1O Dose Vial Number of Doses Cost Provisional Price/lO Dose Vial Total Doses Provisional Average Price/Dose Bivalent Vaccine Price/50 Dose Vial Number of Doses Cost Provisional Price/58 Dose Vial Price/1O Dose Vial Number of Doses $ .302 $2.99 2,395,000 $716,105 $ .185 $ .280 $ .299 55,000,000 40,700,000 4,834,000 `$9.43 2,200,000 $414,920 $ .189 $1.51 2,800,000 $422,800 $ .151 5,000,000 $ .168 $19.01 2,300,000 $874. 460 $ .380 $4.34 24,400,000 $ .177 $ .254 $ .300 $19.lll $20.OO1 $24.37 3,310,000 $1,265,082 3,000,000 $l,2~o,bOO 7,207,000 $3,512,692 $ .382 $ .400 $ .487 $3.97 $4.50 N/A 2,690,000 2,300,000 0 $1,067,930 $1,035,000 Cost $10,589,600 (1,000,000 Doses @l7~/dose) `117,000 Provisional Price/1O Dose Vial $ .434 Total Doses Provisional Average Price/Dose $ .397 27,700,000 6,000,000 $ .414 $ .450 N/A S~3O0,O00 7,207,000 $ .389 $ .422 $ .487 $12,069,832 $12,567,000 $4,964,887 Total Vaccine Cost $12,318,780 PAGENO="0073" Charges Not Covered in Per 1. Self-Insurance Retention Fund 2. Insurance Premiums2 3, Transportation Costs Totals Dollar Amount Pro~vided in Contract Thtal Do~ea Provided in Contract Total Contract Awards3 Total Doses of Vaccine Purchased Average Per Dose Cost of Vaccine NATIONAL INELUENZA DSfUNIZATION PROG~AN VACCINE CONTRACT AND INSURANCE COSTS (continued) Pare-Davis Merrell-Nat' 1 Merc~SD Dose Costs $ 2,500,000 2,176,648 0 _____________ _____________ $ 4,676,648 $16,995,428 3t,754,000 1 Merrell-National & Merck, Sharp and Dohine produced Bivaleitt Vaccine without profit. 2 Difference in Insurance Premiums caused by Surplus Line Taxes charged by the State where the Insurance Policies were written. Each contract provided for 15% variance in vaccine production. Th~e figures inclthde total co~mittments of the Government for vaccine (157 million doses), which exceeds estimated production projections which were contained in the contracts by 4%. 67 $ 2,500,000 2,176,693 27,087 $ 4,703,780 $ 9,668,667 ll,925~9OO $ 2,500,000 $ 2,500,000 2,181,372 2,192,709 ______ 0 $ 4,681,372 $ 4,692,709 $16,751,204 $17,259,709 62,756,780 50,562,180 $ 67.090.384 ~56J98, 860 PAGENO="0074" 68 Mr. ROGERS. I understand. What is the range of the bivalent cost? Dr. MIUAR. I am afraid we will have to provide that. It is probably here but I can't find it at the moment. Mr. ROGERS. Does anybody know from HEW? Dr. MIUAR. No. Mr. ROGERS. Does anybody know? Mr. BRADFORD. Not at the table. Mr. ROGERS. We don't have the figures? Mr. BRADFORD. Yes. We don't have them with us. Mr. ROGERS. I would think we try to be reasonable with everyone but we are going into an investigation of swine flu and you can't tell us what the vaccine costs per dose. This is one of the problems the committee is concerned with. I am going to dismiss this group and call on the Department of Justice. Please bring back sufficient information for the committee to resume questioning. Would the Department of Justice come forward. Immediately after the Department of Justice we will call on HEW. We have with us now witnesses from the Department of Justice, Mr. Irwin Goldbloom, who is Deputy Assistant Attorney General, Civil Division, Department of Justice, and Mr. Neil Peterson, who is Assistant Chief, Torts Section, Civil Division. We welcome you gentlemen to the committee. Your statement will be made part of the record in full. You may proceed. STATEMENT OF NEIL R. PETERSON, ASSISTANT CHIEF, TORTS SECTION, CIVIL DIVISION, DEPARTMENT OF JUSTICE, AC- COMPANIED BY IRWIN GOLDBLOOM, DEPUTY ASSISTANT AT- TORNEY GENERAL, CIVIL DIVISION Mr~ PETERSON. Good afternoon, Mr. Chairman, members of the subcommittee. My name is Neil R. Peterson and I am the Assistant Section Chief in charge of swine flu litigation in the Tort Section of the Civil Division of the Department of Justice. I appreciate the opportunity to appear before the subcommittee today. If I may, before I begin my remarks, I will outline their context. I am, in effect, the person with immediate responsibility for the processing of administrative claims in the Justice Department and for the defense of swine flu litigation. As such, I will explain the Justice Department's involvement with the national swine flu im- munization program of 1976. A separate witness, Mr. Goldbloom, will address the budgetary aspect of the Department's involvement in the program. Initially, after the passage of Public Law 94-380 I was involved in rendering opinions to literally hundreds of health care provid- ers, health care organizations, departments of various State and local governments, and public persons and organizations concern- ing the meaning and interpretation of the swine flu legislation and the Department's position in regard to it. The positions adopted by me on behalf of the Department during that period were coordinat- ed in some measure with representatives of this subcommittee and with the Department of Health, Education, and Welfare. This func- tion continued from August to November of 1976. PAGENO="0075" 69 By October 1976, through an agreement with the Department of Health, Education, and Welfare, the Department of Justice had committed itself to process the administrative claims which would be submitted by those persons claiming personal injury or wrongful death as a result of inoculations with swine flu vaccine. I should explain that under the Federal Tort Claims Act, whose procedures were adopted for purposes of the swine flu program, the Depart- ment of Health, Education, and Welfare would have been the agency with processing responsibility for the administrative claims. However, it appeared to all concerned at the time that much greater efficiency would be achieved if the Department of Justice were to process the administrative claims in this one instance. Accordingly, the Department has been fulfilling this function in addition to its normal litigating responsibilities. Pursuant to that interdepartmental agreement, it was further agreed that' the Public Health Service Claims Office, the office to which the claims would normally have been submitted, would refer all inquires and claims to the Department of Justice. To date the Department has received 8,865 inquiries. These are maintained on file and are associated with any later claims which are transmitted to the Department. As of September 9, 1977, the Department has received 815 claims for processing. ~The processing routine is as follows: Upon receipt of the claim, it is reviewed by an attorney to determine whether it is a valid claim. If it is not, the claimant or attorney submitting the claim is ad- vised in writing of the deficiencies of the claim and advised specifi- cally what to do to correct the deficiencies. Approximately 20 per- cent of the claims received to date have been invalid for one or more reasons Almost all such claims which have been returned to the claimant or an attorney have subsequent been returned as valid claims. Once we have a valid claim, our first act is to write the claimant or claimant's attorney to request supplementary information which we need for processing the claim. If the injured person has been treated by a physician or hospital we also request that a release of medical records form be executed and returned to us. Upon receipt of that form we correspond directly with the doctor and/or hospital involved to obtain copies of all their medical records. Upon receipt of the supplemental information from the claim ants or claimant's attorneys and of all of the medical records we refer the medical records to physicians for review. The doctors are asked to make two determinations- First: whether the injury alleged is within or without the param- eters of the warning statement which all vaccinees were supposed to have signed, or of the parameters of a reaction or sequela which could ensue after any flu vaccination; and, Second whether there was reasonable medical causation between the vaccine and the injury alleged. A claim must satisfy both conditions to be considered further, that is, it must be outside of the parameters of the warning statement or of a typical reaction, and the injury must be medically caused by the vaccine. Any claim which passes the medical criteria will then be consid- ered for legal liability. This process involves a review of applicable State law to determine whether the United States in its own right PAGENO="0076" 70 or as a substituted defendant in the stead of a program participant would be liable. At this point an appropriate recommendation is made to the Department of Health, Education, and Welfare. This recommenda- tion can take one of three courses: 1. A recommendation for denial based upon medical and/or legal reasons. 2. A recommendation for payment of the claim as submitted. 3. A recommendation for negotiation to effectuate a compromise. A dispositive letter is also transmitted to the Department of Health, Education, and Welfare compatible with the recommenda- tion. The Department of Health, Education, and Welfare then re- views the file and the recommendation and, if it agrees with the recommendation, tramsmits the dispositive letter to the claimant or the claimant's attorney. To date there have been final disposi- tions of 86 claims. Another 30 to 35 claims are in the process of having recommendations prepared, another 40, claims are being reviewed by the physicians, and another 40 to 50 claims are ready for transmittal to the physcians. In the remaining claims we have either not received the supplementary information from the claim- ant, or the doctors or hospitals have not transmitted the medical records to us as yet. Since the review process has been in operation long enough to run efficiently, the average time required for the complete Depart- ment of Justice processing is approximately 2Ż to 3 months. I mention this fact because, under the Federal Tort Claims Act, if the agency involved does not make a determination within 6 months, the claimant may go to court. Obviously, there are some claims which we cannot and will not be able to adjudicate within 6 months. However, in the vast majority of such instances our inabil- ity to reach a determination in a timely manner will be due to the failure of claimants and their attorneys to respond with supple- mental information in a timely fashion and our inability to secure prompt responses from physicians and hospitals. The Department of course has no control over these variables. Claims are currently being filed at the rate of about 20 per week and J; would anticipate this rate to increase in the future. This is not untoward or unanticipated. Many of the initial claimants were persons submitting claims themselves and their natural inclination would be to do so promptly. In cases of individuals who have retained attorneys, we would normally expect to receive their claims relatively later after the date of alleged injury. I cannot give you a precise projection of how many claims will be filed, but I would reasonably project that approximately 2,500 `claims will be filed. I have prepared one list showing the dollar amounts of the various types of claims which have been received by the Depart- ment of Justice up to September 12, 1977. I have also prepared another list showing a summary of the various types of injuries for which claims are being made. You may include these lists as exhib- its if you so desire. Mr. ROGERS. Without objection, they will be made a part of the record [see p. 72]. The other involvement of the Department has been in relation to the defense of suits filed against program participants. To date, PAGENO="0077" 71 there have been 21 such suits filed. The thrust of each of these actions, either initially or in response motions to substitute the United States and to dismiss the actions for failure to file adminis- trative claims, has been to attack the constitutionality of the swine flu legislation. These attacks have alleged deprivation of Fifth Amendment due process rights, Seventh Amendment jury trial rights, Tenth Amendment States' interest abridgement, and Four- teenth Amendment equal rights protection violations. I have pre- pared a list of these suits, listing the type of injury alleged in each, the amount of money sought, and the current status of each action. You may include this list as an exhibit if you so desire. Mr. ROGERS. Without objection, [see p. 74]. Mr. PETERSON. Briefly, we have been successful in the three cases which have been resolved to date. The original decision was in the case of Sparks v. Merck, Sharpe & Dohme Orthopedics, Inc., 431 F. Supp 411 The Sparks case is currently on appeal in the Tenth Circuit on an expedited calendar with the government's brief being due on September 24, 1977. All other litigation in Oklahoma has been stayed pending the appeal in Sparks. The case of Stephens v. Wyeth Laboratories, Inc., et al., in Alabama was dismissed on the authority of the Sparks decision. The third case decided favorably was Wolfe v. Merrill National Laboratories, Inc., in Tennessee. This concludes my prepared remarks and I would be glad to endeavor to answer any questions that you or other members of the subcommittee or staff might have. Thank you, very much. [The attachments to Mr. Peterson's statement follows:] PAGENO="0078" 72 CLAIMS RECEIVED AT DEPARTMENT OF JUSTICE PERSONAL INJURY 743 $325 671 708 61 WRONGFUL DEATH 67 $1 032 948,178 89 PROPERTY DAMAGE 6 $355 54 SUMMARY OF INJURIES CLAIMED UNDER SWINE FLU IMMUNIZATION PROGRAM NO OF CLAIMS FOR PERSONAL INJURY AND WRONGFUL DEATH INJURY ALLEGED 190 GUILLAIN-BARRE SYNDROME Including: 171 Non-fatal cases of Guillain-Barre 19 Wrongful Death cases of Guillain- Barre Th~ TOTAL II 162 OTHER NEUROLOGICAL OR POSSIBLE NEUROLOGICAL DISORDERS Including: 144 Paralysis or Numbness of Extremeties or Face 18 Specific Central Nervous System Disorders (encephalitis, meningocephalitis, pOlyneuro- ~~pathies, etc.) I~2T0TAL III 156 FLU-LIRE SYMPTOMS Inc1ud~.ng (fever, chills, nausea, dizziness, headache, muscle aches, malaise) IV 74 LOCALIZED REACTIONS AT THE INJECTION SITE Including 52 Local skin reactions on arm (rash, swelling, hematoma, marks) 22 Local nerve damage at injection sit~ 7rT0TAL V. 42 CARDIOVASCULAR DISORDERS (myocardial infarct~.on stroke vascular disease etc Including: 24 Wrongful Death cases arising from cardiovascular disorders 18 Non-fatal cases T2~ TOTAL PAGENO="0079" 73 NO * OF CLAIMS FOR PERSONAL INJURY AND WRONGFUL DEATH XNJT*Y ALLEGED VI 20 RESPIRATORY DISORDERS (Non~fatal) (pneumonia, respiratroy pain, respiratotY infection, pleurisy, etc.) VII. 23 LOSS OF CONSORTIUM Including: Claims filed separately from the main personal injury claim. VIII. 107 MISCELLANEOUS CLAIMS Including: 22, Fainting soon after vaccination 14 Dermatological reactions, general (allergic, body rash, hiveS, etc.) 9 Vision problems 24 Miscellaneous Wrongful Death clams (neither Gui1lain~Barre nor cardio~ vascular) 38 Assorted injuries (arthritis, hepatitis, pancreatitis, sexual impotence, kidney problems, hearing disorders, propery damage, etc.) !~rTOTAL Ix. 42 CLAIMS NOT STATING A SPECIFIC INJURY 816 TOTAL CLAIMS FILED AS OF SEPTEMBER 12, 1977 SEPARATE TABULATION OF WRONGFUL DEATH CLAIMS There have been 67 Wrongful Death claims filed, with the following breakdown: 24 Cardiovascular Disorders 19 Guillain~Barre Syndrome 24 Other or unstated causes 67 TOTAL Wrongful Death Claims PAGENO="0080" 74 LIST OF SUITS 1. Wayne Young v. Wyeth, et al. (4 manufacturers), USDC ED OK, $5,450,000 (personal injury, presumably Guillain'Barre). Status: Stayed pending decision in Sparks. 2. W. A. Parks v. Wyeth, et al. (4 manufacturers) USDC ND OK, $931,500.00 (personal injury paralysis). Status: Stayed pending decision in Sparks. 3. Lavesta E. Parks v. Wyeth, et al. (4 manufacturers) USDC ND OK, $238,560 (personal injury paralysis). Status: Stayed pending decision in Sparks. 4. Lawrence Baker v. Wyeth, et al. (4 manufacturers) USDC WD OK, $6,012,000 (wrongful death paralysis) Status: Stayed pending decision in Sparks. 5. Emily A. Spruell v. Wyeth, et al. (4 manufacturers) U$DC ED OK, $6,249,000 (personal injury presumably Guillain.-Barre). Status: Stayed pending decision in Sparks. 6. Marvin Ray Moore v. Wyeth, et al. USDC ND OK, $1,460,000 (personal injury - paralysis). Status: Stayed pending decision in Sparks. 7. George Jarrett, etc. v. Wyeth, et al. USDC ND AL, $2,000,000 (wrongful death Guillain-Barre). Status: Dismissed voluntarily after Stephens decision. 8. Katherine G. Wolfe, et al. V. Merrill National Laboratories, Inc., USDC MD ÂrN, $3,000,000 (personal injury Guillain-Barre). Status: Dismissed by the court. 9. Willmah L. Rieger v. Wyeth Laboratories, et al. USDC WD OK, $6,001,541.36 (wrongful death) Status: Stayed pending decision in Sparks. 10.. Donna J. Sparks v. Merck, Sharpe & Dobme Orthopedics, Inc *, et al., USDC ND OK $6,675,210 (personal injury - paralysis) Status: Dismissed by the court. On appeal in the Tenth Circuit. PAGENO="0081" 75 11. Linda J. Stephens v. Wyeth Laboratories, et al., USDC ND AL, Amended Complaint $2,000,000 (personal injury) Status: Dismissed by the court. 12. Vivian Cruson v. Merck, Sharpe & Dohme USDC WD OK, $6,176,967.20 (personal injury paralysis) Status: Stayed pending decision in ~ar)r~. 13. Cynde Baag v. Wyeth Laboratories, et al. USDC WD OK, $6,001,796.93 (wrongful death paralysis). Status: Stayed pending decision in ~arks. 14. Jack D. Vesco v. Merck, Sharpe & Dobme USDC D NV, $10,000.00 (personal injury Guillain-'Barre). Status: Briefed and stayed pending decision on administrative claim. 15. Ivo Jones v. Wyeth Laboratories, Inc., et al. USDC WD AR, $6,252,720.00 (personal injury - paralysis). Status: Briefed and waiting argument before the court. 16. Marie and Donald Ducharme v. Merrill-National USDC WD LA, $2,604,000.65 (personal injury - loss of use of the left upper extremity). Status: Argued September 13, 1977 17. Delcy N. Kimbrell v. Wyeth Laboratories, Inc., et al. USDC WD OK, $6,447,020, 00 (personal injury - paralysis). Status: Stayed pending decision in ~arks. 18. Roger A. Mitiguy v. Merck, Sharpe & Dobme .USDC D. VT, ~02,994.00 (personal injuires) Status: Briefed and waiting argument before the court. 19. Sylvia Ary v. Wyeth Laboratories, Inc *, et a).. USDC ED OK, $6,174,499.56 (personal injury - paralysis). Status: Stayed pending decision in ~arks. 20. Sharon Brashier v. Wyeth Laboratories, Inc., et al. USDC WD OK, $6,379,800.00 (severe back pain entire length of her spine). Statue: Stayed pending deicision in ~p~ar~g. 21. Lyda Bradley v. Wyeth Laboratories, Inc., et a).. USDC ED OK, $6,091,920.00 (blurred vision, bearing impaired, pain throughout body). Status: Stayed pending decision in Sparks. 98-9300-78 --6 PAGENO="0082" 76 Mr. ROGERS. Thank you very much. Now, I believe we will also have a statement about the budget question. Mr. GOLDBLOOM. We have no prepared statement but are pre- pared to answer any questions that the subcommittee might have. Mr. ROGERS. It is my understanding that a supplemental appro- priation was awarded to Justice by the Congress for the specific purpose of dealing with swine flu claims. Is that correct? Mr. GOLDBLOOM. That is correct, Mr. Chairman. Mr. ROGERS. I understand that you requested 28 positions, which were specifically funded. Are those people on board now? Mr. GOLDBLOOM. Not all of the positions have been filled. Mr. ROGERS. How many positions have been filled? Mr. GOLDBLOOM. As of the present time there are 6 attorneys working approximately full time on the swine flu claims and litiga- tion, plus a section chief, a new section chief for the Tort Section, who is working a substantial amount of his time. There are three secretaries and two law clerks working on it plus some other support personnel. I should say that we feel that our response to the swine flu claims program is more than adequate in connection with the claims that have materialized as of this date and should the claims be increased in any more appreciable amount than that indicated by Mr. Peterson, we would be able to put more resources on than we have as of now. Mr. ROGERS. Are these 6 people part of the 28 additional posi- tions that were authorized? Mr. GOLDBLOOM. Yes, they would be considered part of the 28. We should say that we had people working on the swine flu claims and swine flu matters before Congress appropriated any money specifically for that program. Mr. ROGERS. Were these six hired specifically for the swine flu program? In other words, were they personnel you already had and simply had them working on the swine flu, is that right? Or were they hired specifically for swine flu? Mr. GOLDBLOOM. Well, no, they were not hired specifically-- Mr. ROGERS. As a matter of fact, I understand you have only hired one person. Isn't that correct? Mr. GOLDBLOOM. Well, let me explain it this way, Mr. Chairman. Mr. ROGERS. Could you first give me a yes or no and then explain? Mr. GOLDBLOOM. I don't believe we have hired anyone specifically for the swine flu program. Mr. ROGERS. Even though it was authorized? Mr. GOLDBLOOM. Well, in this regard. We had made commitments as far back as last December to some 25 attorneys to come to work in the Department starting in June of this year for nonspecific assignments and it was our intention at the time of the supplemental appropriation to assign such of those attorneys who were undesignated for any specific assignment to the swine flu program as they arrived. We have designated eight of those attorneys in terms1 of their arrival date for the swine flu program. Mr. ROGERS. When do they arrive? PAGENO="0083" 77 Mr. GOLDBLOOM. 1 am sorry, sir. Mr. ROGERS. When do they arrive? Mr. GOLDBLOOM. They have been arriving periodically starting in June of this year. Some, all of them have not arrived as of yet. Mr. ROGERS. How many more individuals will you hire out of the supplemental appropriation? Mr. GOLDBLOOM. Well, to the extent that we feel that we will need attorneys to work on the swine flu litigation, we will hire them and add them to this-- Mr. ROGERS. How many slots do you still have left out of the 28 authorized in the supplemental appropriation bill? Mr. GOLDBLOOM. As I indicated, we had 11 personnel working on the program now, not including the section chief. To the extent that we would need more personnel and they would come out of that 28 positions, it would be the difference between-- Mr. ROGERS. What I am trying to get at is, will you be turning back the money or are you using the money; has the money al- ready been allocated? That is what I am trying to find out. Mr. GOLDBLOOM. The money has not been allocated to it. To the extent that we have attorneys working in the tort section, some of them may be working in other areas-- Mr. ROGERS. Have you used the appropriation, or are you going to use it, or will it be returned, since you are not having to hire attorneys? Mr. GOLDBLOOM. I don't know the answer to that. Mr. ROGERS. Who knows that? Mr. GOLDBLOOM. I don't believe---- Mr. ROGERS. Suppose we recess while I vote and you find the answer to my question for us. I want to put in the record how many attorneys have been employed using the supplemental, what you are not going to use, and what funds will be turned back. We just want to spread it on the record. The committee stands in recess for ten minutes. [Brief recess.] Mr. ROGERS. The subcommittee will come to order. Mr. Goldb- loom, you may proceed with your answer. Mr. GOLDBLOOM. If I may explain, Mr. Chairman, we prepared a supplemental appropriations request on the basis of estimates as to the amount of claims that would be forthcoming as a result of this program. Originally, when the budget request was first prepared, at the initial outset of the program, we estimated, on the basis of claims, assuming a total nationwide immunization program, we used esti- mates that were prepared by the Congressional Budget Office. Mr. ROGERS. You used our estimates? Mr. GOLDBLOOM. The estimates of the prospective, potential claims and it is my understanding that the original figure that we started to work with was some 17,200 claims. By the time, however, that the supplemental appropriations request got through the 0MB process, and was actually presented to the Congress, the program had been terminated. This was in February, I believe, 1977. At that time, we adjusted our estimates and also our supplemen- tal request for appropriation based upon the decreased number of PAGENO="0084" 78 innoculations, and based upon an adjusted number of potential claims. We figured on the basis of advice from Congress, and the basis of some 5,000 claims at that time, in February of this year. As it happens, the claims have not materialized in the same rate as we had anticipated. I think, as Mr. Peterson advised the committee this morning, there have been some 816 thus far, and we estimate some 2,500 claims in toto, even though there is no way of knowing for certain. The response of the Department of Justice to swine flu claims was, in a sense, a unique type of budgeting for the Department of Justice in that virtually all of our budgeting is based upon general- ized expectations about resource requirements for the future as we have to necessarily respond to litigation at some point down the road. In this case, we were able to come up with some estimates. We feel that our response to the claims that have been made has been more than adequate. Indeed, we think that our response in terms of our handling of the claims has, in a sense, been a bright spot of our total operation in terms of some 20,000 to 25,000 cases in the Civil Division which the Department presently administers. Now, how do we, as attorneys, in responding to litigation or claims have to meet our responsibilities? We do it by going with the ebb and flow of litigation requirements that are put on to us on a daily basis. As I indicated earlier, we had five people working full time on the swine flu matters before Congress ever gave us any supplemental appropriation. To the extent that these people were working, they were detracting from other claims and other pro- grams for which, in a sense, the Congress had given us budgetary authorization and approval. Now, I want to try to answer your question this way. We are increasing and have increased the staffing in our tort section, which is the place where these swine flu claims are being pro- cessed. We have increased over the past year, over its previously authorized strength, some six attorneys who I am not suggesting are working on swine flu claims, but are working in the tort claims field. We expect to increase our attorney strength in the tort claims section beyond what it is today. As these swine flu claims mature, have to be processed, and have to be litigated, actually litigated, there will be attorneys, and the swine flu claims will be, I am certain, satisfactorily handled from the Government's point of view. As I understand it, as of today there is only one case in court which deals with the merits of the swine flu claim. For us to devote 19 attorneys and 9 support personnel today to the swine flu mat- ters would be, perhaps, irresponsible to our other responsibilities that we have in our tort section, particulary the fact that we have tremendous disaster litigation, asbestos litigation. But if tomorrow those 19 attorneys are needed, or by next week, or the following week, they will be there. They will be reassigned and able to work on this litigation. Mr. ROGERS. Has the systems manager position been used yet? PAGENO="0085" 79 Mr. G0UBL00M. No; it has not; and let me explain, for example, in one respect why it has not. For example, there were funds allocated for computers, for the use of computers, which we have every intention of using but we have not made the commitments yet. There is a section chief assigned in the tort section, and the whole computer aspect of our response to the swine flu matters is undergoing a reevaluation But we have the anticipation of using the computer, and those funds will be utilized for the computer. Mr. ROGERS. You have used the 28 slots? You don't need 28 attorneys to handle 800-odd claims? Mr. GOLDBLOOM, There are not 28 attorneys. There are 19 attor- neys. We don't need them today. We may need them in 2 months. Mr. ROGERS. But the money is gone? Mr. GOLDBLOOM. The money is gone on the understanding that if an attorney is hired, and is working on a medical malpractice litigation, he is learning to try medical malpractice cases for the next 6 months. In 6 months, if he has to try a swine flu case--- Mr. ROGERS. You have hired 28 people that were to be assigned to swine flu. So you have hired them all, but you have not yet assigned them to swine flu? Mr. GOLDBLOOM. I want to make this clear, so that I am not misleading you. In February 1977, we had no vacancies in the civil division. We were at our fully authorized strength. We had made commitments at that point to 43 attorneys in the division, 43 attorneys who had not come to work in the Department as of that date. We could anticipate that between February 1977 and, and let us say, today, there would be resignations, retirements, people leaving for one reason or another, and there would be new attorneys coming in. Ta the extent that we needed to hire and place attor- neys in the swine flu program, based on our estimates made and which we told the Congress, those attorneys were there to be asigned to the swine flu program, which is different, I might say, from the suggestion that I believe has been made that on the day after Congress appropriated the money, and the President signed the bill, we went out and hired all those Řttorneys, that we went out and hired 19 attorneys. This is not how the process works, or functions in our hiring and allocation of attorneys program. Mr ROGERS The Congress authorized 28 positions to work on swine flu. You have six working. What happened to the others? Mr. GOLDBLOOM. Some of them may be working on aviation cases. Mr. ROGERS. But they have been hired. Have you filled all 28 positions? Mr. G0UBW0M. I don't know what our strength is today vis.-a~~vis our authorized strength. These are constantly fluctuating. Mr. ROGERS. I know that there may be differences of 1 or 2, but basically have you filled the 28 slots? Mr. GOLDBLOOM. I don't want to say that we went out and delib- erately hired. Mr. ROGERS. I want to know. I am not implying that anything is wrong. There may be, the way we are going through this. All I PAGENO="0086" 80 want to do is find out if you have used the slots that we have given you. Have you hired to fill those slots; that is all I am asking. Mr. GOLDBLOOM. We hired attorneys in the civil division of the Department of Justice. Mr. ROGERS. Did you use the slots appropriated for the 28 people in the supplemental? Mr. GOLDBLOOM. Yes; in the broad sense. Mr. ROGERS. If they are used, they are gone. Do you have any slots left? Mr. GOLDBLOOM. They are not gone. They are there. Mr. ROGERS. But the slots that were going to be filled, have been filled. You simply don't have them working on swine flu. So you have used this money for other purposes in the Department. Mr. GOLDBLOOM. Well. Mr. ROGERS. That is all I want to know. Mr. GOLDBLOOM. Well, I don't consider, Mr. Chairman, that an attorney who is not needed to work on a claims case today, because there is no need for his work today on processing claims cases, but may be learning to try medical malpractice cases and will be available to try medical malpractice, or swine flu cases in 6 months, that he is gone. Mr. ROGERS. I understand that you do not feel that way. I might tell you that the Congress might differ with you. When we autho- rize specific positions for specific programs, that money should be used in that manner. I understand your position. It is encouraging that you have not had to hire for the swine flu program because the claims have not amounted to as many as you anticipated. So I think that this is a plus. I hope that this will continue. I just wondered what was done with the money that was allocat- ed which was not used, and how the Department was using that money and allocating those personnel who are not working on swine flu as authorized specifically by the appropriations bill. Mr. GOLDBLOOM. I can assure you, Mr. Chairman, that we are working defending the Government against our liability in tort suits as well as other types of litigation. The money has not been frittered away or used in any kind of frills. Mr. ROGERS. I did not say that, but I am not sure that the Congress would have authorized those positions, had it not been for the justification of an anticipated caseload that has not yet devel- oped. That is all I am saying. So we can check on that later. You mentioned computers. Has anything ever happened with programing the computers with the various State laws and how they apply? Mr. GOLDBLOOM. My understanding is, Mr. Chairman, that in- quiries have been made, and are continuing to be made. The new section chief who has an industrial engineering background is re- viewing it. Mr. ROGERS. Is the recommendation to do this? Mr. GOLDBLOOM. I think it is. Mr. ROGERS. It has been decided? Mr. GOLDBLOOM. I don't know if it has been decided. Mr. ROGERS. Who has been the section chief? Mr. GOLDBLOOM. Up until August 15 of this year, Mr. Kruze. PAGENO="0087" 81 Mr. ROGERS. Is he leaving? Mr. GOLDBLOOM. He has been made special litigation counsel and Mr. Axelrad is now the chief. Mr. ROGERS. How long do you think it will take him to make this adjustment? Mr. GOLDBLOOM. I have not discussed it with him. I know that he is devoting his attention to it now. Mr. ROGERS. Would you let us know when this is done? I think that this could certainly have a bearing on the time element that is required to process claims, if you could get all of the information needed on the computer. How are you proceeding, as far as the applicable State law? Do you have all that information assembled? Mr. PETERSON. Mr. Chairman, in those relatively few cases where we have gotten to a question of the applicability of State law, we have used the facilities of the Department of Justice for research, but it has been done on an individual basis. Mr ROGERS It would certainly be speeded up if you computer ized the information. Mr. PETERSON. The research, initially, would not be speeded up by having the computer. We would still have to do the research and put it on the computer. Its use would be speeded in the second application to a specific set of facts. Mr. ROGERS. What is your experience as to the cost of processing each claim? Has that been broken out? Mr PETERSON That has not been broken out, sir, as a specific cost item. I know the original Congressio~ial Budget Office figures were based on Veterans' Administration claims experienced with medical malpractice Mr. ROGERS. Was that about $2,500? Mr PETERSON They said that it was about $600 per claim I would certainly estimate that our costs, so far, are substantially below that. Mr. ROGERS. If you cOuld let us have those figures for the record, it would be helpful. [The following letter was received for the record:] PAGENO="0088" 82 ~cpartment of~usth:c iI~azhIn~ton, D.c. 20530 1 6 DEC 1977 ASSISTANT ATTORNEY GENERAl. CIVO. DIViSION Honorable Paul G. Rogers House of Representatives Washington, D. C. 20515 Dear Congressman Rogers: During questioning of Mr. Neil R. Peterson of this Division at a hearing held by your Subcommittee on September 16, 1977, Mr. Peterson was asked to supply such figures as we had pertinent to the cost per claim of processing claims by this Department under the Swine Flu statute. Mr. Peterson has previously advised the Department of Health, Education, and Welfare (Center for Disease Control) that Swine Flu Program expenses (without inclusion of ancillary expenses such as equipment, space costs, a percentage of SLUC, etc.) were $89,174 for the period October 1, 1976 to June 30, 1977. Of that amount, Mr. Peterson has estimated that approximately $72,100 would have related to the processing of particular claims. As of June 30, 1977, there were approximately 590 claims pending which had been received at various times during the period pecember 1976 through June 30, 1977. These claims were in varying stages of processing. Since June 30, 1977, approximately 463 claims have been received in the Department, and they are in varying stages of processing. Since the commencement of the program, 182 claims have been fully processed by the Department of Justice and forwarded to HEW. As of this time, HEW has taken final action in 143 of the matters referred to it by the Department of Justice. Our Tort Section staff has been gearing up not only for the processing of swine flu claims but also for the impor- tant tasks involved in the handling of the issues presented. These tasks include the gathering and development of factual PAGENO="0089" 83 -2- information regarding the program, the development of expert analyses susceptible of use in the litigation, and the development of litigation positions and strategy which will be necessary when the claims mature for actual disposi- tion by the courts. Because the entire staff devoted to swine flu matters have been involved across the entire spectrum of activities as outlined above and due to the fact that our record-keeping system does not isolate costs incurred with respect to the handling of specific claims, it would be difficult to furnish you with meaningful cost figures relating to the processing of specific claims. With respect to your inquiry of December 7 to the Attorney General requesting overall program cost figures, we are attempting to isolate these costs and will endeavor to respond to you prior to January 6, 1978. Please let me know if there is any further information we can provide. ye y truly RBARA ALLEN BABCOCK ssistant Attorney General Mr. ROGERS. Have any of the records you have rejected been in relation to Guillain-Barre? Mr. PETERSON. They have not, Mr. Chairman. Mr. ROGERS. Have you adopted any position on how to deal with those cases? Mr. PETERSON. We have not taken any final position as yet, sir. Mr. ROGERS. I hear that you may be moving, Mr. Peterson. Mr. PETERSON. Yes, sir. Mr. ROGERS. To another position in the Department? Mr. PETERSON. Yes. I will be becoming a special litigation counsel for the Civil Division probably within a month. Mr. ROGERS. Don't we still need you in this program? Mr. PETERSON. The process has been established. It is an ongoing fun˘tion at this time within the Tort Section. I understand that part of my responsibilities as Special Litigation Counsel may be to actually litigate the first few swine flu cases. PAGENO="0090" 84 Mr. ROGERS. Would you have any objection to the committee asking the Attorney General that you do that? Mr. PETERSON. No, sir. Mr. ROGERS. With your background, it would be helpful. We will just write a little note to the Attorney General, telling him that we hope that we will not lose your talent in handling those cases. Mr. Waxman? Mr. WAXMAN. If you wish a member of the committee to dissent, I will be glad to do it on your behalf. I would hope that swine flu would not become a career for either of us, but I wonder if it might still be. You mentioned that there is an average of 20 claims a week? Mr. PETERSON. Yes, sir. Mr. WAXMAN. How long a period of time has that been the figure? Has that been a steady 20 a week? Mr. PETERSON. I would say for the past 2 months, at least. Mr. Waxman, the claims originally came in quite a deluge in March and April, and then they leveled off quite substantially, then they have come to their present level in July and August. Looking toward the future-I understand by reading the Wall Street Journal, yesterday, that there are certain plaintiff commit- tees forming in the city of New York, and elsewhere-I would anticipate, based upon that, that the projections I gave the commit- tee would be accurate, and there would be more cases filed in the future. Mr. WAXMAN. I understand that there is even a swine flu news- letter that has come out. So it is going to be a career for some lawyers, handling these cases over the years, it might take to get final adjudication. Is that correct? Mr. PETERSON. I would not expect the program to last substan- tially longer than 5 years for the defense of all the litigation. Mr. WAXMAN. Do you have any idea on the potential liability of the United States Government from all these claims? Mr. PETERSON. No, sir. I cannot estimate what it might be. I can tell you that there have been claims filed totaling approximately $1.8 billion, which includes, by the way, one $1 billion claim. So to that extent, that claim has skewed all of the statistics, and it is not meaningful to project any future occurrences based on the inclu- sion of that type of a claim. I would also comment that traditionally it has been our experi- ence, especially with attorneys involved, that they claim high and settle low. So the $300 million remaining is not a truly indicative figure of what the Government exposure would be in the program, even if we had to pay every claim. Mr. WAXMAN. Did I understand you correctly to say that those claims do not include the claims resulting from Guillain-Barre syndrome? Mr. PETERSON. No, it includes the claims resulting from Guillain- Barre. That is in one of the lists that I have appended to my statement, which shows the specific breakdown. Mr. WAXMAN. For death cases involving Guillain-Barre, if I re- member correctly, in the past we relied on State tort law. Mr. PETERSON. Yes. PAGENO="0091" 85 Mr. WAXMAN. Do you know whether claims are being filed more on a product liability basis as opposed to a negligence basis? Mr. PETERSON. The claims and the claim forms which are used ask claimants to describe only the nature of the injury they have received. They do not, as such, request the claimant to set forth the theo~ry upon which he is proceeding. That would not be done until the given claim would go to suit stage, where you would have the complaint filed, which would set out theories of liabilities. As a practical matter, I would estimate that most claims will be filed especially on a strict liability basis. Mr. WAXMAN. Most of them are filed on a strict liability basis. Can you foresee the United States Government going against the drug manufacturers on a negligence theory, which is the only basis by which they would be held liable, as opposed to the United States Government being held liable? Mr. PETERSON. I have been asked the question often, Mr. Waxman. To the best of my knowledge, I, at the present time, see no indication that would lead me to believe that there has been manufacturer's negligence. Mr. WAXMAN. Even if there had not been manufacturer's negli- gence, using the word "negligence" and the legal definition of that word, there still could be claims that will be successfully pressed against the United States for liability. Mr. PETERSON. Yes, there can be. Mr. WAXMAN. These would be primarily based on strict liability, which says that you did not get what you were warranted, if it is a warranty situation, because you went in for a vaccination, and you got some bad result from it. There does not need to be proof of negligence. Mr. PETERSON. There are two specific theories, Mr. Waxman, and you are combining both of them. Breach of warranty is different from strict liability. The liability, under the strict liability theory, would be under this type of program mainly on the concept of a duty to warn. Mr. WAXMAN. Under either circumstances, the Government will bear the loss and not the drug manufacturers. Isn't that correct? Mr. PETERSON. Initially, but then if we can prove negligence over against the manufacturer, then we would proceed against the man- ufacturer, or indeed for that matter, against any program partici- pant, including health care organizations, and health care provid- ers. Mr. WAXMAN. The drug manufacturers have purchased insur- ance for $8-plus million in case they are held liable. Do you think it is likely that insurance companies are going to be called upon to spend any of that money to cover claims that will be brought against the drug manufacturers for their liability? Mr. PETERSON. I see no basis at present, as I said, for an indica- tion of manufacturer liability. If that continues, obviously, then the money would not be used. Mr. WAXMAN. As a practical matter, when we passed that special law to handle the liability situation for the swine flu program, didn't we pick up for any liability that results from bad results from the program. When I say, we, I mean the United States Government. PAGENO="0092" 86 Mr. PETERSON. No, sir, not in toto because of the reservation of the cause of action over for negligence. I might point out a few of the instances in which this conceivably could have occurred, and undoubtedly has, in some circumstances. For instance, giving an injection with a dirty needle, leading to a reaction; or a dirty gun; or following inadequate swabbing of an arm to remove all the bacteria from it; or putting the needle into a nerve, a vein or an artery, and causing injury in that manner. These things are all obvious indications of negligence. The Gov- ernment, if it were found liable in those instances, as it undoubted- ly would be, would have a cause of action over against the person giving that shot. Mr. WAXMAN. So the cause of action you are talking about is not to the drug manufacturer, but to the people administering the drug, the local officials of local governments. Mr. PETERSON. No, not totally, Mr. Waxman. Mr. WAXMAN. Most of them. Mr. PETERSON. Many of them also fall in the category of volun- teers, private physicians, and nurses who volunteered to help local health care organizations, and also individual physicians who gave the shots in their own offices, but with informed consent and without charging, who would, therefore, be program participants. Mr. WAXMAN. So the suits where the Government may not be the one paying the bill for a bad result, will not be against any of the manufacturers but it will be a suit against a volunteer? Mr. PETERSON. That is the way it looks at present. In the realm of all possible hypotheticals, as the chairman mentioned earlier today, there was the possibility also of there having been a bad lot of vaccine. If such were to have occurred, then there would be the basis for a suit against the manufacturer. That is one instance in which the manufacturer would undoubtedly be sued by the United States. Mr. WAXMAN. I think that your testimony has been very helpful. You anticipate that in 5 years we will know the total liability that the taxpayers will have paid for this program. I guess, we may be back here in 5 years to discuss what could have been done with that money in some of the other worthwhile Government projects, and feel even more frustration as opposed to the upbeat tone that we got from HEW on their report of the swine flu program, that seemingly wonderful experiment in preventive medicine. Mr. ROGERS. Mr. Maguire? Mr. MAGUIRE. Thank you, Mr. Chairman. I do not have much in the way of questions, but I do have a recollection. I wonder if anyone could confirm that. I seem to remember that we had testimony, perhaps it was not directly from the justice Department, but from Dr. Cooper at HEW or some other HEW representative, that there would not be a need for any additional personnel at the Justice Department. Does anybody' recall whether, in fact, we did have such testimo- ny? Perhaps the gentleman from the Justice Department has re- searched all past exchanges, and can give an answer to that. Mr. PETERSON. The only possible suggestion I can give you, Mr. Maguire, is the type of information which is detailed in the Con- PAGENO="0093" 87 gressional Budget Office Advisory to the Congress on the cost of the administrative process in dealing with the swine flu claims. There were projections made as to payouts, and as to the admin- istrative costs incurred in processing the claims on an administra- tive level. It was originally thought that that function would be with the Department of Health, Education, and Welfare. So these projections would have applied to it as of that time. Obviously, there is no projection as to the Department of Jus- tice's involvement because we would not normally have begun our involvement until after the administrative claims process had been concluded. Mr. MAGUIRE. One final question. Mr. ROGERS. There was a supplemental appropriation request for 28 additional slots. Mr. MAGUIRE. I know that. Mr. ROGERS. They have been hired, but they have not yet been assigned to the swine flu program. They would be subject to call, I assume, if they are needed. They have hired one additional person to work on the swine flu program as of this date, but the individ- uals can be assigned as cases develop, as I understand it. Mr. GOLDBLOOM. Yes. Mr. MAGiJIRE. I have one final question on the discussion we had a year ago. There was constant emphasis on the point that the number of claims that might be filed were unpredictable, particu larly with respect to what was described as nuisance suits I think that members of this committee, of who I was one, felt that the danger of a proliferation of such suits was significantly less than what was being suggested by some of the witness from both the manufacturers and the insurance companies. I wondered, in detailing what, in fact, has occurred thus far, 815 claims and 21 suits, whether you feel that that exceeded your expectations, or did it measure up to the number you anticipated. How would you rate those numbers compared to what you might have anticipated a year ago? Mr. PETERSON. Mr. Maguire, dealing specifically with my own projection for 2,500 claims versus the 815 we actually have in the house at the present time, I would say that my projections at this date are less than they were originally. To compare my figures or my projections with what the insurance industry presented to the committee, I don't know how many claims they were projecting, but I know they gave the committee a cost estimate of up to $28 billion for the defense of what would be termed "frivolous claims." If I could assure the committee of anything, I could assure it of the fact that the cost of defending against such frivolous claims, whatever that means, by the Justice Department, would not begin to approach one 1,000th of what the insurance company projected. Mr. MAGUIRL Thank you. Mr. PETERSON. I might also say, Mr. Maguire, that those projec- tions are based upon what we know by way of hindsight. We know from hindsight that there appears not to have been what in the manufacturing industry would be called a hot lot, or a bad batch of vaccine which would injure many people because of some inherent defect in it. Mr. MAGUIRE. Thank you. PAGENO="0094" 88 Thank you, Mr. Chairman. What about suits? You commented on claims, what about suits? Mr. PETERSON. Those suits which have been filed to date, the 21 which are itemized in the list that I have provided to the commit- tee, are suits which admittedly do seek money damages, but whose primary purpose at this point is serving as a vehicle to attack the constitutionality of the statute. In my view, they do not as such constitute suits on the merits, such as you would have from the lapse of 6 months without a decision on an administrative claim, or from a denial of a claim. Those suits, eventually, if the courts uphold our position, will have to be turned into administrative claims and follow the regular claim process the same as all the other claims. Mr. MAGUIRE. Thank you, Mr. Chairman. Mr. ROGERS. The statute of limitation on claims or suits would be for what period of time? Mr. PETERSON. Two years. Mr. ROGERS. If the person were inoculated, it would be 2 years from that date? Mr. PETERSON. Yes; sir. Mr. WAXMAN. Would the gentleman yield? Mr. ROGERS. Yes. Mr. WAXMAN. Isn't that determined by State law? Mr. PETERSON. Under the swine flu statute, the procedures and provisions of the Federal Tort Claims Act are made applicable. One of them is the statute of limitation applicable to the Federal Tort Claims Act which is a 2-year limitation. Now this will differ in some respects from State law provisions. For instance, warranty actions in many States are often permitted to be filed up to 6 years after a specific sale, and some instances 20 years. But this will never be here under the swine flu program. Mr. MAGUIRE. Mr. Chairman, if I might have an opportunity to raise one more question. Mr. ROGERS. Certainly. Mr. MAGUIRE. Thank you, Mr. Chairman. In looking at the claims, we note that none of those based on the Guillain-Barre syndrome have been dismissed, as was possible in a number of other cases. In that connection, I want to ask you if you feel that the defect in the consent forms, that is not showing the possibility of neurolo- gic disorders, which I gather there was some basis for believing could be a potential side effect now prejudices the Government's position with respect to the adjudication of the claims? Mr. PETERSON. Sir, my answer will take two forms, to give you a complete answer. First of all, respectfully, although it is called such, and it has been called such by HEW and the committee, I would prefer to term that document which was signed by people as a warning statement rather than as a consent form. Mr. MAGUIRE. Fine. Mr. PETERSON. If you understand the background, what hap- pened is, the Government assumed the manufacturers' liability under the rules. This statement is in fulfillment of that duty to PAGENO="0095" 89 warn. It is not as such, specifically, an informed consent such as you would sign before an operation. Mr. MAGIJIRE. I accept that correction. Mr PETERSON With that in mind, what must be in the warning statement is often determined retrospectively in the courts, unfor- tunately. What must be in it iS determined by a balancing of the risk versus the benefit. The way the courts have interpreted this, they have said: if you have a significant risk, that is, a risk of death, for instance, although it occurs statistically only in a small number of cases, perhaps you should have that in your warning statement. On the other hand, if you have a relatively more minor reaction, in a relatively larger number of cases, you may not need to put that in your warning statement. The statement as it is phrased does include sequel up to and including death. I would certainly think that death is the ultimate injury. I would think that it would be more severe an injury than nerve damage. Morever, the incidence of neurological reactions following, the use of nonlive virus, in my understanding, is signifi- cantly less than with. other live virus vaccines~ Accordingly, I do not feel that the failure specifically to mention Guillain-Barre or neurologic disorders in the warning statement should necessarily pre3udlce the Government's defense of the cases Mr MAGTJIRE I would not have expected you to say anything else, but I am glad for that assurance. Mr. ROGERS. Let me ask you about the wrongful death claims. I see 67 claims amounting to $1,032,000,000. It is my understanding that one of those suits is for $1 billion. Is that right? Mr PETERSON I believe that is correct I discussed that with Mr Waxinan. The one claim has been filed for $1 billion. I indicated that, in my view, the filling of that claim totally threw the statis- tics out of proportion. I also indicated that of the remaining approximately $800 million in claims that we have, attorneys generally claim high, and settle low So even the $300 million is in no sense an indication of the Government's exposure even if we were to pay every claim Mr RoGERs How many cases have actually been handled to date? Mr. PETERSON. Suits on the merits, there is one currently pend- ing, which has just been filed. Mr ROGERS If you would keep the committee advised, it would be helpful. If you would let us have a rundown of the names of people working on this problem for the Department, and those who would be called on to come in as needed, it would be helpful We thank you so much. We are grateful to you. [The following letter was received for the record:] PAGENO="0096" 90 ~1niteb ~`tate~ flepartmcnt of 3fu~tIce WASHINGTON, DC. 20530 O~C13 1977 Honorable Paul G. Rogers Chairman, Subcommittee on Health and the Environment of the Committee on Interstate and Foreign Commerce House of Representatives Washington, 0. C. 20515 Dear Mr. Chairman: You previously requested a list of all per- sonnel in the Civil Division who are presently working on matters arising out of the Swine Flu Program. This information, as furnished to me by the Torts Section, is supplied below. Attorneys who currently work on virtually a full-time basis on swine flu matters are: Thaddeus Hodgdon - Wallace Kleindienst John Myers Leon Taranto Russell Welsh In addition, Section Chief Jeffrey Axeirad and Deputy Chief of the Torts Section Alexis Panagakos devote a substantial portion of their time to swine flu matters. Paralegal personnel devoting a substantial por- tion of their efforts to swine flu matters are: Estie Lipsit Sandra Manners (virtually full time) Janice McCleod Secretari~s who devote a majority of their time to swine flu work are: PAGENO="0097" 91 2 Sonia Lacks Marlene Rush Lynne Talley In addition, many other secretaries (approximately ten during the past sixty days) have done typing of swine flu correspondence on a part-time basis. I trust that this letter supplies the information which you requested. Sincerely yours, IRWIN GO LOOM Deputy Assistant Attorney General [The following correspondence was subsequently received for the record:] 98-930 0-78-- 7 PAGENO="0098" RAYBURN HOUSE OFFICE BUILDING Honorable Griffin Bell The Attorney General Justice Department Washington, D.C. Dear Mr. Attorney General: Representatives of the Justice Department appeared before the Subcommittee on Health and the Environment at our September 16 oversight hearing into the Swine Flu program of 1976. At that time, the Subcommittee received an insufficient response to our question concerning the status of the 28 positions funded by a supplemental appropriation made to meet the Department's specific request for dealing with swine flu program claims. I would appreciate your personal review of this situation: the basis for the Justice Department's specific request for handling swine flu claims; the supplemental appropriation which was made to meet that request; the actual use of those appropriated funds; and your assessment as to whether or not those funds were used for the positions and other specific purposes for which they had been appropriated. In addition, Congressman Henry Waxman has requested that the Justice Department respond to the following two questions he has posed in relation to insurance aspects of the swine flu program: 1. Even though the McCarran Act declares the business of insurance to be a state rather than a federal matter for purposes of regulation, isn't the way the insurance companies held up the Swine Flu Program an anti-trust violation which either the Justice Department or the FTC under recent case law could pursue? 92 PIIN*1YFIFTN CONGRESS COn~ve~ Ut the ~ntttb ~`tate~ B (sx ~ ot 3L~epvc~entatibe~ ~ubcomm~ttEt on ~ea1tb anb the enb~eonmene 4R(YO.NT*SSRNN~ S. VA. ot the Commfttee OIl Sntetotate Sob jIOTEtOO Cotninetee ~aGbon~tofl. ~D.(C. 20515 October 5, 1977 PAGENO="0099" 93 ~Ionorable Griffin Bell October 5, 1977 Page 2 2. Is there any way, if the action of the insurance companies constituted an anti-trust violation, that their $8.4 million profit on the program can be recaptured by the federal government? I would appreciate your written response for the hearing record by October 21, 1977. Your attention to this request is most appreciated. Kind regards. 1B~?ely youry~) Chairman, Subco$~ttee on Health and the E(ivironment PGR:rd PAGENO="0100" 94 ?JAnitcb ~tate~ ~&partment of 31u~ttce OFFICE OF THE ASSOCIATE ATTORNEY GENERAL WASHINGTON, D.C. 20530 OO~ 2 8 197, Honorable Paul C. Rogers Chairman, Subcommittee on Health and the Environment of the Committee on Interstate and Foreign Commerce House of Representatives Washington, D.C. 20515 Dear Mr. Chairman: The Attorney General has asked that I respond to your letter of October 5, 1977, regarding the swine flu claims program in the Department of Justice. Your letter raises a number of questions regarding the basis for the Justice Department's specific request for handling swine flu claims and the allocation of resources within the Department in connection with the supplemental appropriation authorized by the Congress. While I can fully understand and appreciate your concern, I have looked Into this matter and am satisfied that the Department of Justice is adequately meeting its commitments under the swine flu claims program and appropriately discharging its responsibil- Itles in the use of funds appropriated by the Congress. Permit me to place the budget request in an historical context. When the swine flu Inoculation program was first considered in the summer of 1976, the Department of Justice made certain resource estimates which were based on the anticipated massive influx of claims and litigation arising out of the inoculation of 120 million Americans. These estimates were based upon projections furnished to us by the Congressional Budget Office which predicted a potential of some 17,200 claims filed under the inoculation program as originally planned. But by January 1977, only 50 million inoculations had been administered. Thereafter, the Department's estimate regarding potential claims arising out of the program was adjusted downward to 5,0.00. Accordingly, in February 1977, the Department's budget request for a supplemental appropriation was submitted to the Congress and sought 28 positions, including 19 attorneys for the processing of swine flu cases and the handling of PAGENO="0101" 95 related litigation. At this juncture, I wish to stress that all of our estimates were made in good faith, thought to be conservative, and premised upon the facts available to us at the time. In retro- spect, it is clear that the projections on which the request was based were inaccurate. If you desire to review the details of the original estimates, I would be pleased to make them available to you. As indicated by Department witnesses in testimony before your Committee on September 16, 1977, as of September 9, 1977, only 816 claims had been filed. At that time, Mr. Neil Peterson, one of the Department's witnesses, furnished the Committee with a complete listing of all of the pending litigation and the status of the claims being processed by the Department. Mr. Peterson also detailed that while the level of claims receipts differed quantitatively with that which was anticipated, so too did the pacing and substantive nature of the claims. Specifically, we did not anticipate claims involving the Guillain-Barre syndrome nor did we anticipate the extent of procedural delay which has attended the filings. At the present time, in addition to the Section Chief of the Torts Section who is devoting a considerable amount of his time to the swine flu claims, there are five attorneys and seven support personnel whose work i~ largely devoted to swine flu claims and litigation. I am advised by Assistant Attorney General Babcock that the resources assigned to these matters arefully adequate to discharge our responsibilities. We expect that in due course additional personnel will be required and we will supply them from the resources that the 1.977 Supplemental made available. Nevertheless, there are presently only six cases pending before the courts which pose a question on the merits of liability for injury. It is important to note that these cases are only six of over 4,000 pending cases in the Torts Section and some 24,000 cases pending in the Civil Division at large. This is, perhaps, an appropriate opportunity to interject another point I believe to be germane. Many of us were new to our positions at the Department of Justice, including myself and Ms. Babcock. In the months following our arrival, we have had occasion to question and re-evaluate the efficacy and suitability of certain inherited commit- ments and priorities. As might be expected, we have Identif led some PAGENO="0102" 96 ..3~ new areas of litigative concern which occasionally differ~ with those targeted by our predecessors Unfortunately one of our major pro~lems has been that of insufficient resources in the litigating divisions and too often we find ourselves in the unenviable position of robbing Peter to pay Paul Thus we have not applied all of the funds earmarked for the Torts Section in the swine flu supplemental to that program For example some of the monies have been redirected to the Frauds Section of the Civil Division in an effort to respond to new HEW initiatives to uncover and prosecute widespread misuse of the Medicare/Medicard programs. Conversely, had the impact of the swine flu program been greater than we projected it would have been necessary to reassign personnel from other programs to handle the workload It is our experience that the requirements of litigation behoove us to assign our resources where they are most critically needed There is no failproof way of accurately predicting the specific requirements for attorneys for use in litigation such as that arising out of the swine flu program Our judgment was based on estimates To the extent the attorneys have been hired and are obtaining training and experience in other related areas of litigation they will provide a reservoir of talent and resoures for use in the swine flu program when additional attorneys are required. Finally, you also ask whether the activities of the insurance companies involved in the Swine Flu Program may have violated the federal antitrust laws and, if so, whether their profits on the pro~ram could be recaptured by the federal government. The Department is not sufficiently familiar with the activities of the insurance companies in this Program to express any views on whether serious antitrust questions are raised. However, we will make an inquiry into the matter to determine whether a formal investigation Is in order and will be certain to apprise you of our findings Very truly yours MICHAEL J. EGAN ASSOCIATE ATTORNEY GENERAL Mr ROGERS Are the HEW people ready to come back now? We will pick up where we left off Would you give us the cost for the bivalent vaccine? STATEMENT OF J. DONALD MILLAR, M.D., HARRY M. MEYER, JR, M D, AND WENDEL BRADFORD-Resumed Dr MIUAR The cost for the bivalent vaccine will vary company by company. These are provisional figures. Nonetheless, the range for the bivalent vaccine is from 38 to 49 cents PAGENO="0103" 97 Mr. Roorn~s. Would you, for the various companies, put the costs in the record? [See p. 66.] Now, it is my understanding, that in accordance with the law and the agreement with the manufacturers, they were willing to manufacture the swine flu vaccine and produce it at cost. Produc- tion of A-Victoria vaccine, which had been an ongoing program with them, would be permitted to have profit. Is that correct? Dr. MIUAR. I understand that two audits are underway and a third is beginning shortly. Mr. ROGERS. What have those audits shown to date? Dr. MILIAR. There are two companies who chose to produce the bivalent vaccine at no profit. Mr. ROGERS. Could you name those companies? Dr. MILLAR. Merck Sharp & Dohme, and Merrill-National. Mr. ROGERS. They are not asking for profit? Dr. MIUAR. No. You may be interested to know that there is a substantial difference, of course, in the range of expected costs for monovalent vaccine, the range for those vaccines is 15 to 30 cents per dose. Mr. ROGERS. Fifteen to thirty cents. If you would supply for the record the name of the various companies, and could you let us have the potency values of those vaccines? I am not asking you to do it now, but for the record. Dr. MILLAR. We will provide those for the record. [Testimony resumes on p. 109.] [The following information was received for the record:] The four influenza vaccine manufacturers participating in the National Influenza Immunization Program were: Merck Sharp and Dohme, Merrill-National Laborato- ries, Parke, Davis and Company, and Wyeth Laboratories. With respect to the potency of the vaccines produced, attached is a report entitled "Evaluation and Control of Vaccines for, the National Influenza Program' by Barry, et al. Summaries of the tests run and their results can be found in tables 1, 2, and 3 of that report. EVALUATION AND CONTROL OF VACCINES FOR THE NATIONAL INFLUENZA IMMUNIZATION PROGRAM (By David W. Barry, Ronald E. Mayner, Division of Virology; Jules M. Meisler, Division of ~ompliance; and Edward B. Seligmann, Jr., Division of Control Activities; Bureau of Biologics, Food and Drug Administration, Bethesda, Md.) ACKNOWLEDGEMENTS The authors wish to thank Mrs. Eva Brown for performance of the CCA tests, Dr. H. D. Hochstein for endotoxin analysis, and Dr. Joan C. May for the thimerosal and formaldehyde assays. ABSTRACT The National Influenza Immunization Program of 1976 offered an ideal opportuni- ty to test the capability of the United States system for producmg and distributmg maximum amounts of inactivated influenza virus vaccine of carefully regulated quality. The four licensed manufacturers were able to porduce and distribute over ten million doses of vaccine per week over a 14 week period. Assays showed that these vaccines were comparable to or exceeded the quality of vaccines produced in recent years under less stressful circumstances. Because of the extensive clinical trials conducted as part of the program it was possible to make an unprecedented evaluation of the significance of various labora- tory tests of vaccine in relation to their pertinence in predicting immunogenicity and reactivity for man. This experience demonstrated the superiority of immunodif. fusiOn methods as compared to the standard chick cell agglutinin method of vaccine potency assay. Qualitative differences in immunogenicity between whole virus and PAGENO="0104" 98 disrupted virus vaccines were recognized that are not measured by in vitro potency tests. The results also indicated that influenza viral components are responsible for most febrile vaccine reactions. INTRODUCTION The safety, purity and potency of monovalent A/New Jersey and bivalent A/New Jersey, A/Victoria vaccines is controlled by licensing procedures for manufacturers of influenza vaccine and by lot by lot testing of these vaccines by the manufacturers and the Bureau of Biologics (BoB) of the Food and Drug Administration. The composition and immunogenicity of experimental A/New Jersey and A/Victoria influenza vaccines have been the subject of extensive clinical trials during the spring, summer and fall of 1976. The experimental vaccines may now be compared to licensed influenza vaccines released for use in the National Influenza Immuniza- tion Program (NIIP).The large number of licensed lots produced for the 1976-1977 influenza season and the magnitude of testing by the manufacturers and the BoB have permitted accurate determinations of the various components of influenza vaccines and have allowed us to examine the validity of our current procedures for the testing and evaluation of these vaccines. We have, in addition, been able to gain experience with a newer method of potency testing which may be a more accurate and reliable in vitro correlate of influenza vaccine immunogenicity. The NIIP of 1976 has also provided us with precise information concerning the maximum production capability of manufacturers of influenza vaccines in the United Sates as well as the capacity of the government to evaluate and distribute these vaccines. Since the availability and administration of sufficient quantities of an effective vaccine of prime importance in the prevention of deaths during inj- luenza epidemics, a careful review of the time course of vaccine production, testing, and distribution this year may provide data which will guide us in preparing for future pandemics. MATERIALS AND METHODS Vaccines. Influenza vaccine manufacturers participating in the NIIP were: Merck Sharp and Dohme (MSD), Merrell-National Laboratories (MN), Parke, Davis and Comany (PD) and Wyeth Laboratories. MSD and MN produce zonally purified whole virus vaccines and PD manufactures a zonally purified, polysorbate-80 and ether- disrupted virus vaccine. Wyeth disrupts the virus with polysorbate-80 and tri-N-butylphosphate after chromatographic purification. Samples of bulk lots were shipped or delivered to the BoB as part of normal testing and evaluation-for- approval procedures. Only these tests which had been completed by December 16, 1976 are included in the present report. Chick Cell Agglutination (CCA) potency testing. CCA determinations were per- formed as previously described (1) and modified (2) to include a standard reference- Reference Influenza Vaccine for CCA Assay Lot 1975. Test vaccine to reference (V/ R) ratios thus obtained were multiplied by the assigned value of Reference Vaccine (2400 CCA units/ml) and the results expressed as CCA units/per adult dose (0.5 ml). Laurell Rocket Immunoelectrophoresis Test. Quantative immuno-electrophoresis (IEP) was performed according to the method of Laurell (6) as modified for hemag- glutinin (HA) quantitation (7). Briefly, 1% agarose (Induboise, A 37) slabs containing hyperimmune goat antisera to bromelain-pruffied A/NJ/76 hemagglutinin (8) were cast in plexiglass templates. Vaccines were treated with Triton X-100 R (0.4% fmal concentration) for 30 minutes at room temperature and lOp! aliquotas were dis- pensed into 3 mm diameter wells punched into IEP slabs. Duplicate samples were electrophoresed for 8 hours at 350v, 40 ma at 0.1 mfd using an Ortec R power supply (Ortec Inc., Oak Ridge, TN). Plates were fixed and stained for 15 minutes in 0.1% Amido Black in 2.5% acetic acid and 35% methanol. Gels were destained in tap water and rocket-shaped zones of antigen-antibody complexes were measured. Esti- mates of sample HA content were calculated by least squares regression based on four dilutions of a standardized reference vaccine. Total protein. Protein determinations were performed according to the method of Lowery et al. (3) using crystallized bovine serum albumin (Sigma Chemical Co.) as a standard. Because thimerosal increases the amount of protein detected by this method at a rate of 0.74 ~.&g protein/pg thimerosal (R. E. Mayner, unpublished observations), this amount was calculated and subtracted from the absolute protein values. Limulus amebocyte lysate (LAL assays). Assays for endotoxin were performed according to methods previously describe (4) using a single lot of lysate #2, Refer- ence Endotoxin Lot #1B, and Reference Influenza Vaccine for Endotoxin Assay, lot #E-1. This vaccine contained 1.043 pg endotoxin/0.5 ml dose using the present PAGENO="0105" 99 lysate lot #2 (Mean of 186 tests). Four replicate tests were performed on each vaccine and on each of the references. The geometric mean of the test vaccine was cthriaed by that of the reference vaccine to obtain the concentration of endotoxin in the test vaccine relative to that m the reference vaccine In addition the concentra tion of endotozin in the test vaccine was expressed in ~ig per 0.5 ml dose of vaccine by means of parallel titration of the Reference Endotoxin. Formaldehyde assays. Quanitiation of free formaldehyde was performed according to the colorimetric method of Nash using Hantzsch reagent (5). Thimerosal. The thimerosal content of vaccines was determined as mercury by the cold vapor atomic adsorption method (9 10) using a Coleman MAS-50 mercury analyzer (Perkin-Elmer Co., Norwalk, CN). Vaccine samples were cold digested in a mixture of 5% potassium permanganate and concenrated sulfuric acid prior to analysis. Other Tests. Sterility and guinea pig and mouse general safety tests were per- formed as prescribed in the Code of Federal Regulations (11). Production time figures. The number of lots received during a given week were summarized for that week as were the lots approved for release by the BoB. Manufacturers were contacted to determine the week during which an individual lot had been shipped from its factory, warehouse or distribution center to a location designated by the Center for Disease Control (CDC) Vaccination rates were obtained from the CDC weekly assessment report on influenza immunization. The mean time required for production, testing, and distribution was quantitated by comparing the cumulative number of doses in each stage at weekly intervals. RESULTS Tests performed on each lot of influenza vaccine by the manufacturer and the BoB are indicated on Table 1. The manufacturer performed all tests on each bulk lot and on samples of final container material where applicable. All lots were tested by the BoB for sterility, guinea pig and mouse safety, identity, potency, formalde- hyde, endotoxin and protein content. Random analyses of thimerosal and virus inactivation were also performed by the BoB. Barium, polysorbate and tri-N-but7l- phosphate analyses were performed by the manufacturer only when the material had been used in vaccine production. Some of the tests, such as sterility, virus inactivation and guinea pig and mouse safety tests require six to seven days for completion whereas it was possible to complete the other tests in one day All lots subrn~tted to the BoB passed sterility, guinea pig and mouse safety, identity and inactivation tests. The quantity of various components of the influenza vaccines are shown on Table 2 Protein determinations showed a wide diversity of values with a low mean value of 36.9 rig/dose for the MN monovalent A/New Jersey vaccine to a high of 193.1 J.Lg/ dose for the Wyeth. monovalent vaccine. A similar range was noted for the bivalent A/New Jersey-A/Victoria vaccines. Mean formaldehyde concentrations ranged be- tween 21 and 156 pg/dose and were consistent with the individual manufacturer's license protocol for the production of influenza vaccine Thimerosal values were all within the required range of 50 ▒ 10 ~&g/0.5 ml dose~ Endotoxin levels were generally lower than in vaccines studied previously (12) with mean levels ranging from a low of 0.007 ,.&g/dose to a high of 0.082 ~&g/dose. Results of the potency testing by chicken cell agglutination (CAA) techniques showed that all monovalent vaccines had a mean somewhat greater than the minimal limit of 200 CCA units/U 5 ml adult dose The range was rather narrow with a low of 208.8 for MSD and a high of 231.6 for Wyeth. Likewise, all of the bivalent vaccines contained somewhat more than the minimum fequirement of 400 CCA units Since CCA testing is the most common source of differences in results between the manufactnrers and the BoB, since it is the mast common cause of rejection of a lot, and since it has been relied upon as the measure of vaccine potency a more detailed analysis of CCA testing is presented in Table 3 Significant differences may be noted between the results of both MSD and MN in 4esting their monovalent vaccines and MN in the testing of their bivalent vaccine when corn pared to The testing performed by the BoB No significant differences between PD and the BoB were found in the testing of monovalent or bivalent vaccines however, wide differences were noted between BoB results and those of Wyeth. In Table 4 data are presented indicating the amount of A/NJ hemagglutinin~ in the monovalent and bivalent vaccines produced by the various manufacturers. As was true for the vaccines used in the clinical trials, MSD vaccines contained signifi- cantly more and Wyeth significantly less hemagglutinin than vaccines produced by the other manufacturers Values for each individual manufacturer showed little variation as indicated by the relatively small standard errors~ PAGENO="0106" 100 The number of vaccine lots submitted to the BoB and the number volutarily withdrawn by the manufacturer from consideration for release as of December 16, 1976 are shown in Table 5. These voluntary withdrawals were based on the finding by the BoB of lots which tested below the minimum requirement of 200 CCA units for the monovalent or 400 CCA units for the bivalent vaccine. No lots were with- drawn for failure to meet requirements other than CCA. The 11.6% withdrawal figure is consistent with rates of withdrawal occurring during previous years. These withdrawn lots represent the equivalent of approximately 17,000,000 doses; however, most of the lots withdrawn were subsequently fortified with virus concentrates and then resubmitted to the BoB as a new lot. Therefore, the withdrawal of lots because of low potency did not appear to diminish substantially the total equivalent number of doses (150,034,580) submitted to the BoB by December 16. As mentioned previously, safety, sterility and inactivation tests require 6 to 7 days to complete, and were performed by both the manufacturer and the BoB on the bulk lots. The manufacturer also tested final container material for safety, sterility and identity. Sequential testing would therefore have caused undue delay in the availability of influenza vaccines. To circumvent this difficulty, concurrent testing by the manufacturer and the BoB was initiated and this resulted in a minimum of delay. Mean time intervals of vaccine testing, shipping and administration are indicated in Table 6, which shows that an average of 16 days elapsed between the receipt of a lot by the BoB and its approval; only an additional 5.8 days elapsed between approval of the lot and shipment of the final container to the destination designated by the CDC. There was an additional 49.7 day mean interval between initiation of shipment by the manufacturers and actual administration to recipients. In figure 1 data are presented illustrating the production capacity of the United States influenza vaccine manufacturers. This was in the range of approximately 10,000,000 doses per week for a period of over 14 weeks. The figure also illustrates that the testing capacity by the BoB and the distribution capacity of the manufac- turer roughly paralleled this rate. The rate of administration of vaccine in the program was in the range of 4,000,000 to 5,000,000 doses per week. DISCUSSION The BoB has been engaged for a number of years in research designed to evaluate the safety, purity, potency and effectiveness of inactivated influenza vaccines, and extensive laboratory analysis of those used in the NIIP has expanded our knowledge of the viral and non-viral constituents of these vaccines. These studies demonstrat- ed, for example, that monovalent A/New Jersey and bivalent A/New Jersey-Al Victoria vaccines contain approximately the same amount of protein as earlier zonally purified vaccines (12) and considerably less than in non-zonally purified vaccines (13) manufactured before the late 1960's. Only Wyeth vaccine, which is chromatographically but not zonally (14) purified contained small amounts (5-7.5 ,.Lgm/dose) of ovalbumin by single radial immunodiffusion (15, R. E. Mayner, unpub- lished observations), and also contained higher levels of total protein than the other manufacturers' vaccines. Clinical trials, however, demonstrated that Wyeth vaccine induced extremely low rates of adverse reactions, confirming Salk's earlier observa- tions (16) that some component of the virus and not contaminating host protein was responsible for the acute systemic and febrile reactions sometimes observed after influenza immunization. Some influenza vaccines produced in the past few years, including the Reference Influenza Vaccine for Endotoxin Assay (lot #E-1), have contained more than 1.0 ,.~g of endotoxin/0.5 ml dose. Although a number of clinical studies have also shown a lack of correlation between the amount of endotoxin in recent influenza vaccines and the adverse reactions in humans follwing their use (12,17,18,19), manufacturers have been encouraged to institute a variety of measures to decrease the probability and quantity of bacterial contamination during influenza vaccine production. The finding of low levels of endotoxin in present influenza vaccines gives evidence of the success of their efforts. Although the Reference Influenza Vaccine for Endotoxin Assay contains 1.043 ,~g of endotoxin per 1200 CCA units of virus and therefore might be expected to have considerably higher values of endotoxin than present vacCines which contain only 200 to 400 CCA units of virus, calculations of the nanograms of endotoxin per CCA unit will indicate this is not the sole explanation for, the near absence of endotoxin in present vaccines. The reference endotoxin vaccine has 0.87 ng of endotoxin per CCA unit, whereas the present vaccines contain between 0.03 to 0.36 ng per CCA unit and therefore only about one-third to less than one-thirtieth the proportionate amount of endotoxin as vaccines used in the recent past. PAGENO="0107" . 101 With the introductiofl of a standard reference into the ccA test, this measure of potency became more reliable (2), but difficulties in obtaining equivalent results between laboratories have nevertheless occasionally occurred. The present data confirm this finding and indicate that significant differences sometimes occurred between the CCA results obtained by MS]) and MN and the BoB However the actual difference in means between the BoB's results and those of MN in the testing of their monovalent vaccine, `for example, is only 7% of the total CCA unitage of the vaccine, well within the coefficient of error of the test (20). On the other hand, the large standard `deviation obtained both by the BoB and Wyeth during the testing of representative numbers of both monovalent and bivalent vaccines indicated difficul- ties on the part of both parties in the precise and consistent determination of potency of this manufacturer's vaccine. In spite of the generally good correlation of CCA results between the BoB and the manufacturers the test nevertheless remains an indirect one, dependent in part on the affinity of a particular strain of influenza virus for chicken red blood cells. The number of viral particles in preparations containing the same CCA unitage has consequently been found to vary widely (21) A direct measure of the viral hemag glutmin content of inactivated influenza vaccine as suggested by Schild et al (22) would enable us to circumvent these difficulties We have found that the adaptation of the rocket' electrophoresis test of Laurell (7) to the quantitation of influenza HA is easy to perform and yelds accurate and reproducible results in our laborato- ry. In addition, the relevance of the results of this test to human immunogenicity has been well demonstrated by the fact that vaccines, such as those produced by `MSD, which have a high HA/CCA ratio are also those which are most immunogenic in individuals with little prior antigenic experience with influenza, either through natural infection or immunization (23). The quantity of HA however, is not the sole determining factor in the induction of hemagglutination-inhibiting antibody in such individuals since split-product vaccines containing similar amounts of HA as a whole virus product induce lower levels of antibody in immunological `virgins" (23) Since the HA/immunogenicity ratios for each individual `manufacturer's vaccine `are fairly constant for each age group with its differing antigemc experience it is now theoretically possible to predict with a fair degree of certainty the immunogenicity of particular influenza vaccines for a population of defmed age and prior influenza experience. Manufacturers of influenza vaccine as well as the BoB have now begun using the immunoelectrophoresis test as a laboratory meastire of potency of A/New Jersey and other antigens. Should the test continue to yield accurate, reproducible, reliable and relevant results, then consideration will be given to the use of immunoelectrophoresis as the official test of influenza vaccine potency In responding to the threat of the A/Hong Kong (H8N2) epidemic of 1968, manu- facturers produced only about 10 million doses per month (24); similarly about 50 million doses were prepared in the 5-month period before the 1957 epidemic (25). Past experience had indicated that 3 to 4 months elapse between the first receipt of a strain and the production of a significant number of doses (24) Manufacturers were given approved A/NJ/8/76 seed stocks on February 20 1976 Although the exact amount of lead time now required by the manufacturers. to produce sufficient basic stocks of allantoic fluid vaccine concentrates this year cannot be accurately calculated because of the delays engendered by the requirement for the passage of indemnification legislation (26), it may be estimated to be in the range of 1-2 months This estimate is supported by the fact that over 5000 doses were available as early as April 1976 for the clinical trials conducted under the auspices of the US. Public Health Service (27, 28). The ability of the manufacturers to then produce, test and distribute 10 million doses of vaccine per week for at least several months is now well established. There appear to be several reasons underlying the greatly increased production this season compared to past epidemic seasons. One of the most important was the early production and use of a high-growth recombinant in this year as opposed to 1957 or 1968 when such recornbinants were not used (29). This recombinant, which retained the HswN1 surface anti?enic characteristics was produced by Dr. Edwani Kilbourne of the Mount Sinai School of Medicine by recombining A/Ft. Dix/741/76 with A/PR/8/34 and was supplied to the manufac- turers on February 27, 1976. It produced a much higher titer of virus when grown in the allantoic cavity of embryonated eggs and therefore allowed for a more favorable dose per egg ratio than had been possible with the original A/NJ/8/76 virus even after a number of egg passages. Other factors which also contributed to increased vaccined production were the assurance of a market for all vaccine produced, and greatly increased efforts including production timetables which involved 24 hour per day, 7 day per week schedules. This experience in dealing with the logistical problems of producing, testing and distributing over 150 million doses of vaccine PAGENO="0108" 102 should be useful in estimating the capability to provide vaccines when future pandemics occur. REFERENCES 1. Miller, G. L., Stanley, W. M. Quantitative aspects of the red blood cell aggluti- nation test for influenza virus. J. Exp. Med. 79:185-195, 1944. 2. Tauraso, N. M., O'Brien, T. C., Seligmann, E. B. Problems of influenza vacine standardization. Bull. WHO 41:479-506, 1969. 3. Lowery, 0. H., Rosenbrough, N. J., Farr, A. L., et al. Protein measurement with the folin phenol reagent. J. Biol. Chem. 193:265-275, 1951. 4. Hochstein, H. D., Elm, R. J., Cooper, J. F., et al. Further developments of limulus amebocyte lysate test. Bull. Parenteral Drug Assoc. 27:139-148, 1973. 5. Nash, T. The colorimetric estimation of formaldehyde by the means of the Hantzsch reaction. Biochem. J. 55:416-421, 1953. 6. Laurell, C-B. Quantitative estimation of proteins by electrophoresis in agarose gel containing antibodies. Ann. Biochem. 15:45-52, 1966. 7. Mayner, R. E., Barry, D. W., Feldman, M.D., Blackburn, R. Quantitation of the hemagglutinin content of formalinized infuenza vaccines by polyacrylamide gel electrophoresis and immunoelectrophoresis: Problems and perspectives. Given at the Symposium on Vaccination Against Influenza, London, April 29-30, 1975. 8. Brand, C. M. and Skehel, J. J. Crystalline antigen from influenza virus enve- lope. Nature (New Biology) 238:145-147, 1972. 9. Official methods of analysis of the AOAC. Association of Official Analytical Chemists, 12th Edition, 1975, p. 451. 10. Rains, T. C. and Menis, 0. V. Determination of submicrogram amounts of mercury in standard reference materials by fiameless atomic absorption spectrom- etry. J. Assoc. Off. Analy. Chem. 55:1339, 1972. 11. Code of Federal Regulations, Title 21, Sections 610.11, 610.lla and 610.12. 12. Barry, D. W., Mayner, R. E., Hochstein, R. D., et al. Comparative trial of influenza vaccines, II. Adverse reactions in children and adults. Am. J. Epid. 104:47-59, 1976. 13. Peck, F. B. Purified influenza virus vaccine. JAMA 206:2277-2282, 1968. 14. Reimer, C. B., Baker, R. S., Van Frank, R. M., et al. Purification of large quantities of influenza virus by density gradient centrifugation. J. Virol. 1:1207-1216 1967. 15. O'Brien, T. C., Maloney, C. J., Tauraso, N. M. Quantitation of residual host protein in chicken embryo-derived vaccines by radial immunodiffusion. AppI. Micro- biol. 21:780-782, 1971. 16. Salk, J. E. Reactions to concentrated influenza virus vaccines. J. Immunol. 58:369-395, 1948. 17. Wright, P. F., Sell, S. H. W., Thompson, J., et al. Clinical reactions and serologic response following inactivated monovalent influenza Type B vaccine in young children and infants. J. Pediatr. 8&31-35, 1976. 18. Inactivated Influenza Vaccine, General Safety Test. Federal Register 39:27916-27918, 1974. 19. Inactivated Influenza Vaccine, General Safety Test. Federal Register 39:40014-40016, 1974. 20. Barry, D. W., Mayner, R. E., Staten, E. et al. Comparative trial of influenza vaccines I. Immunogenicity of whole virus and split product virus in man. Am. J. Epidem. 104:34-36, 1976. 21. Dunlap, R. C., Brown, E. R., and Barry, D. W. Determination of the viral particle content of influenza vaccines by electron microscopy. J. Biol. Stand. 3:281-289, 1975. 22. Schild, G. C., Wood, J. M., and Newman, R. W. A single-radial-Immune- diffusion technique for the assay of influenza haemagglutinin antigen. Bull. WHO 52:223-231, 1975. 23. Ennis, F. A., Barry, D. W. Laboratory studies of vaccines used in clinical trials. J. Inf. Dis. 24. Murray, R. Production and testing in the U.S.A. of Influenza Virus Vaccine made from the Hong Kong Varient in 1968-69. Bull. WHO 41:495-496, 1969. 25~ Murray, R. Some problems in the standardization and control of influenza vaccine in 1957. Am. Rev. Resp. Dis. 83:160-167, 1961. 26. Public Law 94-380. 94th Congress, S. 3735, August 12, 1976. 27. Seal, J. R., Sencer, D. J., Meyer, H. M., Jr. A status report in National immunization against influenza. J. Infect. Dis. 133:715-720, 1976. 28. Parkman, P. D., Galasso, G. J, Top, F. H., Noble, G. R. Summary of clinical trials of influenza vaccines. J. Infect. Dis. 134:100-107, 1976. 29. Kilbourne, E. D. Future influenza vaccines and the use of genetic recombin- ants. Bull WHO 41:643-645, 1969. PAGENO="0109" 103 Table 1 Tests Performed on Influenza Vaccine Lots Manufacturer Stireci, of R~n1no~~ Sterility (7)* Guinea Pig Safety (7) Mouse Safety (7) Identity Inactivation (6) Potency (CCA)t Formaldehyde Endotoxin (LAL)i~ Proteins Thimerosal Barium" Polysorbate" Tri-N-Sutyl Phosphate" Final Container Sterility (7) Guinea Pig Safety (7) Mouse Safety (7) Identity Sterility (7)# Guinea Pig Safet~š Mouse Sašety (7Y Identity~ Inactivation ~6) Potency (CCA ` Formaldehyde Endotoxirt (LAL)~ Protein~ Thimerosal Barium" Imnurtoelectrophoresis~ * Number in ~are~theses indicates minimum number of days T Chicken cell agglutination teat. 4 Limulus amebocyte lysate test. ž Not required by regulation. Not applicable to all manufacturers. # Test applied to all lots by BoB. to perform test. Bulk Lot Bulk Lot PAGENO="0110" Table 2 Summary of Test Nesuita on Commercial Influenza Vaccines Monovalent .~/NJ/76 Vaccines Manufacturer* Total Proteint Formaldch~rdet Thimerosalt Endotoxint CCAI MSD 67.1 ▒ 9.7k (142)" 3.2 (142) 149 (10) .023 (14o.) 208.8 ▒ l0.d (1i7) MN 36.9▒ 7.7 (73) 2.1. (71) 51 (12) .0140 (72) 219.6 ~ 18.0(78) PD * 143.7 ▒ 11.2 (3) 10.5 (2) )t5 (1) .082 (3) 226.8 ▒ 1.2 (5) Wyeth 193.1 ▒ 37.6 (8) 15.6 (6) 51 (5) .007 (8) 231.6 3 (iO) . Bivalent A/NJ/76 A/Victoria/75 Vaccines MSD 157.14 ▒ 19.0 (10) 3.9 (9) . 51 (2) .01i2 (9) 1~30.8 I 26.14 (io) MN 91.6▒ lIi.9 (10) 5.2 (10) 51 (i) .020 (10) * 1426.0▒ ;~i.6 (10) PD 51.0▒ lt.6 (28) 11.2 (26) 19 (7) .058 (28) . 1436.8▒ 32.li (29) Wyeth 2142.3▒ 22.7 (16) 15.1 (16) 146 (5) .009 (16) * 14143~3▒ (1.2 (:1(i) * Abbreviations for manufacturers are: MSD-Nerclc Sharp & Dohme; MN..Merre11.~Nationa]. Laboratories; PD-?arke, Davis and Company. ~ pem/0, 5 ml adult dose. ~ Chicken Cell Agglutination (CCA) units per 0.5 ml adult dose. Indicates one standard deviation. Number in parentheses indicates muitherof lots tested by BoB. PAGENO="0111" Tab1r~ 3 Abbreviatione for manufacturers as indicated inTable 2. + Indicttes number Of eamples tested. 1 All values in terms of CCA units/O.5 ml adult dose. When mean value of manufacturer and BoB ~re compared; NS indicates differences not ui~nificant. Manufacturer ` s Results Chicken Cell Agg1ut~nn.tJon (CCA) Tc~t R~ults I4onovalent A/NJ/76 Vaccines .i1~inc~ iluniLer1 Mean:i ▒(SD) ~ Number Mean ~ne Bureau of Biolog~cs' Rcsultn ~4~I 19 213.6 9.6 201.6 21,0.0 II? 206.8 10.8 199.2 226.0 <~05 Ut) Pt) 72 5 236.11 222.0 18.0 12.0 200.11 - 280.8 202.8 229.2 78 219.6 * 5 226.8. 18.0 1.2 199.2 205.2.- 279.6 273.6 <.001 NS Wyeth 10 261,.Q * 1l1,.14 217.2 - 328.8 10 231.6 . 314.8 199.2 291.6 NS. . Bivalent A/NJ/76 A/Victoria/75 Vaccines Mf~~ 10 li29.6 13.2 14o8.o 14147.6 10 1430.8 26.1' 1402.0 - 1,87.2 NS "fl 10 )~Rn.~ 30.0 ~,28.h - 537.6 10 1,26.0 21.6 1103.2 1i69.2 <.001 PD 29 1,28.1, t~4 ,14 14o8 .0 14614 ~ 29 1436.8 32.14 399.6 516.0 I'Iyet;h 16 565.2 78.0 1~75,2 7140.14 . 16 ),I,8.8 . 61.2 399.6 608.14 <.001 :* C;' statistically PAGENO="0112" Table 1~ Hemagglutinin Content of A/New Jersey Component of Influenza Vaccines as Determined by Immunoelectrophoresis * Abbreviations for manufacturers as indicated in Table 2. ~ Indicates *riunthÚr of samples testel. All values given in terms of pg A/N.J hemagglutinin/O.5 ml adult dose. Monovalent A/NJ/76 Vaccines * Manufacturer Number Meani Bivalent A/NJ/76 - A/Victoria/75. Vaccines SD. SE . Number Mean SD * c~ . . MOD MN . PD Wyeth )~1~ * 68 5 . 10 35.~ jP<.OOl 15.!j ~NS 11i.~j . lp<.ooi l2.~j 5.68 2.86 .76 *7]t . * . .86 .36 .3~ .21t .. . . . . 9 U 28 15 - * 36.~. l9.9~ i6.~. 8.~ p<.00l p<~ p<.OOl h.31s 3.06 2.18 L50 L.~ ~ .~ . ~ * PAGENO="0113" 107 Table 5 Amount of Vaccine as of December 16, 1976 Monovalent Bivalenc Total. Number of lots tested 154 78 232 Number of Doses 104,791,826 45,242,754 150,034,580 Number of lots withdrawn. 14 13 27 Percent of lots wjthdrawn 9.0 16.7 11.6 TABLE 6 Interv~iS During ManufactUre, Testing ani Distribut~fl of infl~nza Vacc for. the Dat~ona1 :nfluenca r~nizuticn ?rogran Event Receipt of lot ~cy BoB 0 Release of lot by BoB 16.0 ShIpment of fina. container by manufaC~Urer Distribution and Administration 98-930 0-78 --8 PAGENO="0114" TESING AND D~STRIBUT!ON 150- / / 140- /* ,-. / / 130- ,/ ./ 1' / 120- / .110- / 1/ / / b. f / LU ii 4~ Cl) 0/ / ~ ~ 80- .d/ ~ 70- // p L ~i ~ 60 ~/ ~ (i~ ,~ j~ 50-( Q//~~) - q~/ ~0 I .-~i IQ I *~1 I 471 /~ / i//I I I I. / lot! / _~__-#cp (vt~L tLL~I~I ~L1.LJ_J~_1 9/10 9/24 10/8 10/22 11/5 11/19 12/3 WEEK ENDING 108 12/17 12/31 PAGENO="0115" 109 Mr. RoGERS. One of the major criticisms of the program, was the decisionmaking process. Who was involved in reviewing policy. I believe that you have alluded to the problem in your testimony. Would you elaborate on that a little? What steps have been taken to try to correct that problem? Dr MIUAR Under ordinary circumstances, the process involves the answer to two questions. What will the vaccine contain, and who will receive the vaccine? Under ordinary circumstances, these questions are addressed by two different processes; the Bureau of Biologics in association with certain outside consultants addresses the question of what should be in the vaccine, and the CDC in consultation with its outside consultants addresses the question of who should receive it. Generally speaking, the latter occurs after the Bureau of Biologics has made a determination concerning con- tent of the vaccine. However, in situations where there is a significant change in the virus, such as occurred in 1957 and 1968 and 1976, there have been significant additions to this process in one form or another. In 1957 and 1968 the Surgeon General's staff, task forces, or analogues thereto, were asked to deal with the broader policy issue: Should there be some government support for vaccination and how universal should that vaccination be? In 1976 this additional policy process involved largely the hierar- chy of HEW, a special panel of advisors to the President and, of course, congressional action. The eventual program which was pro- duced by those decisions was very similar to the program recOin- mended by the CDC to HEW, based on its consultation with the Advisory Committee on Immunization Practices. Mr. ROGERS. Mr. Waxman? Mr. WAxMAN. Thank you, Mr. Chairman. Dr. Millar, the report that you gave earlier states that on the basis of historical evidence submitted, "I feel that a national influ- enza immunization program will prove to have been a highly sig- nificant and appropriate effort and a positive venture in preventive medicine." I believe your testimony, if anything, could be termed upbeat. It reminds me of the characterization of prohibition of alcoholic bev- erages in the 1920's as a noble experiment, but let's not forget that that experiment failed. Would you term the swine flu program a success, a `successful program sponsored by the taxpayers of this country? Dr. MIUAR. I think the swine flu program represents an appro- priate response to the facts that were before the decisionmakers in February and March of last year. The problem is that one still did not know what all the ramifications of a major variant of the influenza virus, were. One can only say at this point that whereas we had previous experiences in which major new variants always occurred in conjunction with pandemics, we now have one experi- ence of something different than that. We have that additional information with which to confront the next such challenge. I was not at that point involved in the deci- sionmaking process, but I feel very strongly that there was no acceptable alternative to the course of action that was taken. PAGENO="0116" 110 Mr. WAXMAN. Let me explore some of the details of the program with you. As I understand it, signed contracts with the vaccine manufacturers have only been entered into as of August of this year. Is that correct? Dr. MIUAR. That is correct. Signed contracts in the sense of final contracts have only recently been signed with three of the compa- nies. However, letter contracts have existed since early in the program with all the companies. I must apologize to the committee for not having with me a contracting expert, but it is my impres- sion that letter contracts are quite meaningful documents, and indeed we would be happy to provide those, for the record, if that is desirable. Mr. ROGERS. I think that it would be helpful to have those for the record. [Testimony resumes on p. 346.] [The following information was received for record:] THE SIGNING OF LETrER CONTRACTS As indicated in the testimony, most of the special contractural requirements of Public Law 94-380 were met by the middle of September 1976, and the Department and manufacturers were moving toward signing contracts. Several issues, however, were difficult to resolve. They are summarized below: 1. Tax status of the self insurance retention fund. The manufacturers were concerned that if this payment of $2.5 million was taxable in the year it was received (1976), most of it would be required to meet the tax imposed. HEW agreed to seek a ruling on this from the Internal Revenue Service. This ruling was request- ed on November 17, 1976, and a decision was received on April 8, 1977. In essence, IRS ruled that the fund was taxable in the year it was used and not the year it was received, Since this fund could only be used to meet certain legal expenses as specified by Public Law 94-380 and the provisions of each contract, the effect of this ruling was that the fund would always be offset by expenses, resulting in a "tax wash-out." A copy of this ruling is enclosed. 2. Production of "Shope" influenza virus vaccine. This issue related only to one manufacturer (Parke-Davis and Company) and involved the question of Government payment of costs incurred in the production of approximately 6.0 million doses of vaccine, at a cost of about $1.2 million, produced from a laboratory strain of the influenza virus (Shope) which was not approved for use in the 1976-77 program. On November 22, 1976, Parke-Davis submitted a request for payment to the Depart- ment. After a review of the facts was completed on August 24, 1977, the Secretary found that the production of the vaccine could not be explained by any of the reasons provided by Parke-Davis. Therefore, the Government could not consider the costs involved as legitimate costs under the contract. These costs have been disal- lowed by HEW and Parke-Davis has appealed the HEW decision to the Armed Services Board of Contract Appeals (ASBCA) which has been designated by the Secretary to hear appeals of this nature. The ASBCA will review the facts and circumstances surrounding the Parke-Davis claim for payment and the HEW deci- sion and will render a final opinion of the allowability of the ?roduction cost. Once the final judgment has been rendered, a "definitized contract' can be signed with Parke-Davis replacing the existing "letter contract" presently binding the Govern- ment and this vaccine manufacturer. 3. Waiver of cost accounting standards. The normal procedure for procuring vaccine is to negotiate a price based on established catalogue or market prices. A supply contract is then awarded on a firm, fixed price basis. The cost accounting standards are not applicable when this procedure is used. Enactment of Public Law 94-380 required the cost of swine flu vaccine to be determined on a retrospective basis through audit to preclude (or in the case of Al Victoria/75 antigens, to limit) payment of profit. Because of this requirement, the contracts could not be awarded on a firm, fixed price basis, but rather a cost- reimbursement contract was called for. In this type of contract, the price is not established based upon catalogue or market price, and the cost accounting standards become applicable. For reasons discussed below, application of the cost accounting standards was ultimately considered inappropriate. PAGENO="0117" ~111 Significant standarils normally included in cost type contracts are: Consistency in estimating, accumulating, and reporting costs; consistency in allocating costs in- curred for the same purpose; allocation of home office expenses to segments; capital- ization of tangible assets; accounting for unallowable costs; cost accounting period; use of standard costs for direct material and direct labor. The use of many of those standards is generall1 predicated on accumulating and reporting costs consistent with the manufacturers normal cost accounting practices. The vaccine manufacturers, prior to the swine flu program, did not accumulate or report costs on a product-by-product basis. Therefore, their normal accounting prac- tices did not lend themselves to the kind of cost accounting generally associated with these unusual cost type contracts. Although the manufacturers did take steps to establish accounting systems to be able to isolate and report costs of producin swine flu vaccine, in order to use the actual cost accounting standards, they woul have had to reestablish their entire accounting system. In addition, it is important to understand that those standards are on a way to calculate costs, not the only way. The Department, therefore, elected to permit the manufacturers to establish special cost accounting procedures for the swine flu program without modifying their cost accounting system on a company-wide basis. Such a step would have been excessively costly to the manufacturers and the Government, and was not justified for this one-time special procurement. In conducting the audits referred to in the answer to question number 4, the Department will, of course, verify that costs have been accounted for in accordance with generally accepted accounting principles and practices. Faced with these outstanding issues and the need to proceed with vaccine deliv- eries, the Department and the manufacturers agreed to sign "letter contracts" until such time as the outstandin~ issues were resolved and "definitized contracts" could be signed. Copies of these `letter contracts" are attached. They contain binding provisions governing all legal aspects of the procurement of vaccine, although there was mutual agreement on the need for further negotiation or clarification on the issues outlined above. Agreements on two of these issues resulted in "definitlzed contracts" with all manufacturers except Parke-Davis in August 1977. PAGENO="0118" 112 ~ DEPARTMENT OF HEALTH EDUCATION AND WELFARE OFFICE OF THE SECREJARY WASHINGrON,D.C. 20201 OFFICE OF THE GENERAL COUNSEL ~OV 1 1 `976 Mr Jo ~n Withers Assistant CcilTnissioner Technical 1~x~n 3042 Internal Revenue Service 12th & Constitution Ave N W hashington D C 22024 Dear Mr W thers The Department of Health Education and Welfare is in the process of negotiating contracts with four pharmaceutical manufacturers to obtain swine flu vaccine to iirpl~uent the National Swine Flu Lirrn.snization Program of 1976 (P L 94-380) Although the Department currently has contractual documents obligating the manufacturers to deliver and the Coverortent to pay the reasonable costs for the vaccine these documents cont~snplate a mere definitive contractual ariangcnent containing agrec- ments iegaxding the various cost aspects of the contracts We currently intend to provide the manufacturers with a total of $10 000 000 to be used for self-insurance purposes As a result of the insurance industry's refusal to provide liabii ity coverage belov a prescribed minimum of $2, 500, 000 for each manufacturer, the pharmaceu- tical manufacturers have been forced to beccme self-insurers for that anount. Since the authorizing legislation contemplater, in effect, a cost-type contract for the swine flu program, any costs incurred by the contractors for self-insurance are reimbursable by the GDvernment. After studying numerous ajproaches to the mechanics of the self-insurance aspect, the Department and the nvinufacturers concluded that the best method and possibly the only practicable method was to provide the isnufacturers with a fund for self-insurance which could only be used for specified p~rposes and w0uch was required to be returned to thc. Goveriiaent, less any authorized expenditures by August 31 1985 Since this approach ~e~u1d provide the manufacturers with a total of $10 000 000 we felt that it s~ould be in the best interest of both the Govermaent and the public to have this rroney placed in ccsmercial hanks earning interest at prevailing cx,nmercial rates. The atthchc~1 proposed contract article was written to reflect this approach. PAGENO="0119" 113 The question has been raised, however, whether the manufacturers would have to pay tax on either the funds provided for self-insurance or the earned interest. Although the parties negotiated the clause šertaining to the self-insurance fund with the understanding that it would not be taxable income, this Department cannot, of x)urse, speak authoritatively on tax matters. Accordingly, we requert a determination by the Service whether the funds to be provided the contractors, or the interest earned thereon, would be considered taxable income if those funds are administered in accordance with the attached contract article. Since we have reached agremncnt with our contractors on all of the other contract clauses, we would appreciate an expeditious response. If you desire any additional infor- mation please contact either me or Mr. Ronald B. Guttiwuin (FTS 245-7744) nrj staff. Copies of this letter have been sent to counsel for the four manufacturers, and we will, of course, furnish then with copies of the reply we receive from the Service. Sincerely yours, William H. Taft, IV General Cc~insel AttacFut~ant PAGENO="0120" 114 ARTICLE XV B.1 The cost of the premium for the liability insurance which is solely attributable to this Program is not included in the vaccine price. (See Article IX B; Payment.) In the event that the insurance premium for liability insurance, or any part thereof, is refunded to the contractor under any retrospective, experience- rating plan or similar rating plan, it shall be refunded to the Government not later than thirty (30) days after receipt by the contractor. B.2 Any money provided to the contractor by the Government for a self-insurance retention fund ~Fund') (see Article IX B; Payment) shall be segregated in a separate account in a federally insured commercial bank with assets in excess of $100,000,000. Said Fund shall be invested in an interest bearing arrangement or arrange- ments, e.g., Certificates of Deposit, at the bank's prevailing interest rates. In the event any payment by the contractor is required to be made from the invested principal of the Fund, prior to the stated maturity date or dates of such invested principal, the total proceeds of such liquidated investment or invest- ments shall be deemed to apply first to principal and secondly to interest. To the extent such total proceeds PAGENO="0121" 115 are less than the original invested principal, the difference shall be charged against all other accrued interest due the Government. Payments shall be made only from the principal of said account and only for self-insurance losses and related expenditures of the contractor as follows: (1) All sums which the United States shall have the right to recover from the contractor as damages because of personal injury or death under ~ection 317(k) (7) of the Public Health Service Act (42 U.S.C. 247(b)), and any costs of litigation or attorney fees incurred by the contractor attributable thereto; and (2) All payments made by the contractor for expenses (other than office expenses or expenses for salaries of employees of the contractor) incurred in the investigation, negotIation, settlement, or defense of any claim or suit alleging personal injury or death arising out of a vaccination received under the National Swine Flu Immunization Program of 1976 and made pursuant to section 317(k) (7) of the Public Health Service Act (42 U.S.C. 247(b)). PAGENO="0122" 116 Such losses and related expenditures are more particularly described in the insurance policy between the contractor and its respective insurers. Any interest earned on the Fund shall be reinvested with the balance of the principal remaining in the Fund. Any amount provided the contractor by the Government for the Fund which is not expended by August 1 1985 including accrued interest to such date, shall be returned to the Government not later than August 31, 1985. B.3 In the event the contractor is required to pay a claim by the Government pursuant to section 317 (k) (7) of the Public Health Service Act (42 U S C ~47(b)) after the contractor has returned the unexpended amount provided for self-insurance, including accrued interest, such claim shall be deemed satisfied up to the amount of prin~ipßl returned to the Government. Therefore, the tot.al of the payment made from the Fund by the contractor and the credits provided to the contractors by the Government, after the unexpended principal and accrued interest have been returned to `the Government, shall not exceed $2,500,000. PAGENO="0123" 117 B.4 It is the understanding of the parties to this contract that since the Fund may only be expended for the reasons stated in B.2 above, and since the unexpended principal of the Fund, including accrued interest, shall be returned to the Government under the circumstances set forth above, they do not constitute income to the contractor. PAGENO="0124" 118 8 APR 1977 Zir. Wil1ia::~ ti `Zaft, IV Ur Jim Ranso~ Ceneral Counsel ~epartr~eitt of nealth, ~.ducatiort, (202) 566~4495 and ~~e1farc 330 Iudcpet~dence Avcniue, S.%. T.r.C.2.I ~as.~ington, b.C. 2O╗=~l ~`eor Lr. -~ait; ~.tnis is in reply to your letter dated over'bcr 17, 197~ in ~thich you request thforn~-tion rc,~rdir;~ the trans- fer of cortidn úui.Os in the facruil ecttin~ describeJ balow. Fursuant to Fublic Low ~o. 94.3~0, 94th Con~. , 2n.. Sos s., (Au1 us t 12, 1976), the Federal governr,en t instituted the t~ational Swine Flu lr~r.urtization Froi~ram ot 197( (Pro~,ra~u) authorizinj the Secretary of Health, Lducation, and ~lelfare (HEw') to contract for thu proc~irer~er~t of swine flu vaccine. As repilred by Public Law to. 94~3~'3, the United States assures liability, under the Federal Tort Claims Act. r~ubuc Law No. 69-506, ~9th Cong., 2d. Sass., (July ld, 1966), for claims submitted after Seš.tember 30, 197~, for personal tajury or death arising out of the ad- ministration and use of the vaccine based upon the acts or ot~is~ions of a m~inufacturer, If a payment is T:~aC~C by the United States to a claimant, the United States iaey recover from a manufacturerthot portion of the de~a~es paid and expenses incurred resulting from the failure of a manufacturer to perform its obligations under the procuretior.t contract, or Iron its negligence. Under the program each manufacturer obtained in- surance coverage from a coi~riercia1 insurer for claims and related expet&ses incurred in excess of 2.5 mil1~.o~. dollars. It was deterratned that the additional coe~. fur co~erage of the first 2.5 million dollars would be in excess of 3.2 million dollars. Since any reasonable insurance presiua incurred by the manufacturers to cover the first 2.5 million dollars of potential liability would be an allow~Lblc cost under the cost criteria governing th~ contracts, 111W determined that the establishi~ent PAGENO="0125" 119 Mr. ~illiar ii. Taft, IV of an insurance fund for the manufacturers with Fundc advanced by the United States would be less costly than obtainin~ insurance to cover the first 2.5 million dol' lars of Itability trot' commercial insurers. The insuxance fund aL,reement provides that: (1) the manufacturers must place the amounts advanced by the United States in a ae&retated account in 8 federally- insured commercial bank; (2) the fund must be invested in an interest-beartn~,, arrangement; (3) payment fror~ the fund must be made only from tt~e invested principal of the fund; and (4) payments may be made only for specified losSes and related expenditures. Payments fror~. the principal of the fund are limited to: (1) suns that the United States has the rtcht to recover from a manufacturer as dana~es under the program; and (2) payr.~ents made by a manufacturer for elerrell-National Lo1~orator1es ~`1 0 ~C~'C'T*IPON 40 _________ Div. of Richsrdson-Me.rrell Company %i'.a. Řs~. Amity. Rood Letter :;~;~" Cincinnati, Ohio 45215 ~ ?~2.-i2~.a?__ L_ .,....J ~ say O~ ~ (`54Y TO &o5t.t.y5...~ Of ~`~4ets0uS [J 15, ,t,~., s.,,.4 se.s.sw.~., . ..~....4,. `A ,. .b,b 2. 15., b,,, ~`d ks ,p.,$.d 5...,,. ;~ .4 (t'~ ("I ~ (J ps .45, ~ .~ .5. P.O,., .,j d..s. ~ s, 5* s,l.s..,y.,,,,, ...sAd, by *s. .5 th* AsIA...,,0 `s'5.4,; *5 ~.šA:.š b~5 55,55. 54_55;~,.4 5., *.s.sd....t, As *y ~ .,,..ps~f hi, .....d'..o,.,,, A copy *i `A,,f,,,,b,,,,,,d~ ~, ly s,p..c,. s.c.,.. .4,5, ,,y~,4,, , oh. ,s.,,, ,,.d ~ I..ttJlt Of (0(4 ACO1Q'NL(OG5M~~4T TO U PZCE,VED At 101 ISSUING otsta 100* 10 TAt h~eP 05.5 DNiC S CUs:. .o&s *sSutt so *1yT~i0sy Cf 504 0115*. II, by ..o,. .4 `Ii, ,..J...o po.. ,.~.. 5. .hc'.~.,c.4., .5.*ly c..Ac.,,,4. Is,h "coy. ..yo, ~*d~ by ~ As.. ,,,.k., ,*f.,.~,, A~ ,.4.,.s,s~, ..d A.. ,.o~.o...l, ,.d ..s.,....o p's..' 0 4* .p.oo~ h~,,*.d ds',,moU.4 ~ ~ 7Jr~zc,-fi,-- -~" .050 10 Mc~Irscy~cs.s Or ccth4oct:/cr4ps K. T.'., C'.,;, ~.` . ip,cd p.....' so ._Ar.ti~1~ !Cban oLt.C JrQyisjQfla,._ ~ -. 11. Cho#g.. `55'U* bI.,,l. 12,,. ~ to ,~..*osysb,.p4 ,,,t,,.'1,,4.,. (b~ 1., .,t.... .....l....Ô ,,.,,,,y/,,,., .. d,(..d , ,p1,y h. ods'.o4.N&... .4,t~t, 4y~I. ,, ,At,.. I. p'yi'sQ .5,., .pp'.p,.'b,. ~.o. .0 or l..sk blob 1). 0 ~s.. $opp,c,,s,l Ays,,oo,r 4 c5y 54.04.' l....th~t.ty.l o.od.(,~ 5,...,,, `"4 ..s';y,,,,,y IsIS .,bkO 3. All processing on vaccine lots Roe. 2449 and 2450 is ordered sco~ed as of January 10., 1977, and vaccine material shcll be maintained in bulk ccncentrate form with sufficient safety measures to be taken to preserve the materIal, pendir~ further notification from the Got'e~nnent to resur.e processing. This Xodifica~on cnnfirms telephone notification to Contractor on January 10, 1977, and confirming telegra:n of January 11, 1977. "p.,' ,.o..'.d ".s.s *11 ls'~'o..J t."!.o,* `I s'. .`.`....o ~ Aol I, s,%p..,5~.. ~hoy.4, ~oos_.s"░.'~'~s4o4 454***f5~ *,4 o c~.ss~'e ;."*.e ~c. ,;cee.s ~ COIltIeClCd CfC;',~* Is KOok;) 10 oar.,.. lea DOCUo;p.l c'.D IOuea,j.....,.Coci,b 10 assuoo Cr c7~. I ______________ ~ Vice President & Coucoel "5. `!..O.'t V~, AQ'..IOACSINC (`?.LL* I 1,i,s. I',,,l, 4 (4*4 2/24/77 John 1., Williams . 2/10/77 PAGENO="0181" 175 1 fl$~i~ ~v~(; .~.. -,A~.L. .~,.. .~.%.. M N .. LI A,H~ .A$'E Ut FED. PEOC PEG. (4$ CER.E-IE.IO$. fi~tIcE4T/E10(TT1CATb0N NO. T2 EFELCILVE DATE 3 EPOOISITION/PARCI$ASt kQuESl `do. ~ PsotcT PLO (if .Ip/.IAEilf) I: MC~ificat1on No, 5 1/31/77 $ ISSUED IT CODE ~. ~ ADMINISTERED IT (if MEyt UPyM P5th 3) CODE GO Center for Disease Control I 255 East Paces Ferry Road, NE Same as shown in Block 5. Atlanta, Georgia 30305 OR~C~~ .~PA1.. COot L F.4C1WE COOL [~_ S. NAME AND ADDIESS . AMENDMENT OF 0 DOKTATION MO. Merrell-NCtiOflal Laboratories ($i~.u, `SO. Division of Richardson-Merretl Company ~ (SIN P1MW 5) Ctnclnn:tf, Ohio 45215 O~~11Mo. ~ I... DATED......~ ~~~___(E,.hl.cW APPlIES ONLY TO AMENDMENTS 01 SOLICITATIONS D~~N EAMMINd ~EIk,EEELMEA 4EINEd.dEE ,.I IsA's bI.sk 13. Tb. Asp, ETd dUPE ~TMIA4 EM ,,~pE pP oS...D A .AMPd,d. A ,,l,.EINd.d. ON.'.. .~.T EEAEAMI*d5E ~~ipT pP hi. ,,,.Td.,.,I pA,~ I. lb. SEA, MEd dsIE .p.'iEMd MEN. .NI(pil.I.IN. ME pMEEdEd. by .`y pEN. .II.~I~g ..l.,d.. plEy EiEiE5 .~d .,E.l.iE5.. ._.SKpUE ~I lbs ,y,.Td,,y.IT, (b)Iy MSTKPI*dgiES ,.,,,plEE TAlE ~ OP sEES ,.py .1 h~pN.lEAb.llill.d, ,} ly SEyMEIS 1KIE~' El T~l.~Els .h.h .C..d.P ~ ph. spl,p.TsTs, p.~4 ~p~p4p~pyl ...`b.~.. FAILURE OF YOUE ACKNOWLEDGEMENT TO PP RECEIVED AT THE ISSUING OPEICE FELON TO THE ROME AND DATE SPECIFIED MAY RESULT $14 SELECTION OP VOUF OFFER, II. by PIHEE AT `hi, .,I.ydyl4U yEA dEELl~ PP INPII4E P~EFEI sI~..dy ,~b'iE*d, 14111 INPYQE llM~ A. ,,,d. by PLI.~l.'E NI ISP.,, y'*'LdO slAb ~ pIT.. .,k.. `.1e'." N IN. IpliElTPIiAT ,pd Phi. EEMT4EEEI'I, EEd 4 p1.01 EU IN. ppyyipg NELI HEW EAT. `p.pE.d. `~ 0. ACCOUNTING AND APIHOPRIATION DATA (if `~)~ , - 1$. THIS SLOCE APPLIE( ONLY TO MODIFICATIONS OF COT4TRACTS/OPDEES . (sl (~J N.., CNPE9E OIdPI 1,0*4 pATEIPEI TN ~ Th Chyyg.. ~1 lolA i~ bI.EA ED yNd. IE III EAR,. EyI.Eb.I.d EUTIIKIIIPIdTI, (Al [J Tb. sb,.s ...b.,d EPE$INIIEAdTT p .od.E,d p .INI lb. sdE,.Ei,IoUP~ .h.TM, (EllA .,,h,Eg..A pOyiE9 OCE,, EppEPpl,PIiPT HElp. .ls.( ..~ I~lh I, bE,,b 2. ,, This S.pyIlEl~EMI Agl..P..EI i~ ,yTp,pd ITT. pAIEA~YI 1K EI.II.Mily PP - El pod,f.., ID. pbp.š EL,,b.IEd OUTINPE pp s~l soD I, bIppA 2. ID. DESCRIPTION OP AMIS'ODMENTIMODFLCATION The target date for contract definitizstlon, set forth in Subparagraph B of Arttcle XXII DEFINITIZATION, as established by Modification No, 4, dated December 17, 1976, is further extended hereby to March 1, 1977. - This confirms verbal agreement between Contractor and ContraCting Officer of 1/31/17. E..ppl,. p'..d.d b.p..E, p01 Ij,., pAd TPOdiTiAEE El lb. dpol.sM IpIpSNP.4 UP WINS S. N~ EEIPP,PP,. ,bpIlE.d, IMENIT .MSAT5TW NOd I, 1,11 PIll. ETd.SPET, ~ ~CONTEACTOR/OFPEE0EIS NOT REQUIRED 0 CONTRACEORHOFFEEOE IS REQUIRED \O SIGN THIS DOCUMENT AND RUDRN._.....,..COPISN TO ISSUING OFFCE NAME OP CONTEACTOEIOFFEEOE NAME *110 11111 OF SIUNPS (Ey$'E PPJLPPPI/ LS.sI.I.1.NP P''YO NEIAPIiEPH IN ~I5U( I \I LIE. EPIP ~NPMEEy IF. DolE MONEt. 1/31/77 John L. Williams PAGENO="0182" 176 5 fl"~' C ION C (~ flo NI (l( pp/hi Nodifi ation No 4 12/17/76 _____________________________________ - (I/U.s hi))) DF[ P00 Center for Disoase Control 5 Fast Paces Ferry Rd N F Atlanta Ga 30305 Same as shown in Block 5 ORIGINAL cOsITUCTOR (01)1 L_........._..____J 1 1(1111) COil, e C] SOLICITATION NO ________________________ Ii~errell-Natfona1 Laboratories Division of Richardson-Mcrrell Company `I". I~ Anlity Road Letter Cincinnati, 01140 45215 ,~ 200-76-0425 L_. _i ONT50! L~.L..... (Soo Ii.~ `I TI. .hU,~ .i*.b.'.d &5RSIIRI.RSI s'ss*hihi ISS os NIh so bI.,k 2 TI. Is.. ,od d.I. y..T..d `s .s..yI .10/.'. ..o'd.d. C] ~ OR.','. 1*5111 sRks...I.dgo ,.,.,p' .5 1., ...odos.U p,., II, Is... ."d do. .51.so.Isd .1. ..b..NIsT. `s ..o.sd.d, by ~s. ,RS~ I,lI's.og .s.I',his l's) 5, .`g...g `hi .ss.o.oy.._,__..p..oRI TI,, s,s'ssds,~,I. Is) By 051N-I.dg.IIg ,.,.,yIRI Tb,; ,...Bd.y.ssl ~s* sok ,spy b~ ~ .,bo.".d, ., 3,) )y..s.ssI. .0.o NI T.l;950. so,) l.,NIo, RU.. .hi*.UI,Rs .od .o,.d,o..I .o,sb*,~ PAIIURT OR TOSS ACKP)OWL500TMINT TO SR SICRITTO AT THE ISSUING OffiCE RHO1 TO TIRR HOUR AND 5*15 SPRC'TIRO OAT RESULT IN IRITCTIGN Of TOUR OTTIT II. by ..`T .o,*ds.*N d~,',s'~ ,h,,go so SR., .I,.dy ,ob'IslT~d .,sIs ,h.,,g. ..Ry b. T*Ed~ by I.I.g'ss. * ACCOUNUNG AND APPSOPRIAIION DATA (If ~,qs~,/) -. - 05* ~ ~ ALtT3'~ri3'at on for Letter Contracts by the Secretary 9/1/76 Th.Ch's TI .o, I, I..! d~ 1! [J 13. ~bo,. Uoob.I.d ,,,.I~,d/U'd,, ,s T.Ud.(UdIU TS's$ Is, 5dhi,)I~I.~sI~sos5.I (s.sh lL SIU~QR' 1* pITyT) sHss, SPPSUPTAIAII dAIs, .51,) *,I ~,th is bIT.1 2. C] I ~) lIly Cho's. O'd.' l$i$~1I~d Rs,,LAOSIIU ,_._____ -~ -- The target date for contract definitization, act forth in Subparagraph B of Article XIII - DEFINITIZATION, as established by Ilodification No. 3 of Decembor 2, 1976 is further extended hereby to January 1, 1977. This confirms Contracting Officer's telegram of December 16, 1976. .~. ..,o,.o,... .....~... ..o,,.. .. ..... ., . ......~. ....,.d. `s's.lo Rd,T,.d `ssd `sITu by.,..od ,0..R. CONTRACTO~/OyrESORiS NOT STOUIRRO o coNTRAcToS/ouRRoS IN 5TOUlRRD~TO SIGN THIS DOCUMENT AND SRTR)54.....,...,..,,..CO#I1 S TO 551545 OPTICS lAS OP CQNTUcTO,,05y55QR RD. ST 55 OS Its NAIlS AND THIS 01 SIGNRR(Tjp:.:frshi) OATS 50010 TN. NA OICOHTSACTUIGOPFCRS(Tppo.Pfr'Ust) UTT TIdNIRS PAGENO="0183" 177 M~N~ ~~u~uenMuaN1mOrnnc.~ *~N ~ CCI.~jTRACT - I Modification No. 3 _______________ - 7, 01(1*01 DMf 3. .100ISIIIOIO,PtIf(llASf 0*0111*1 NO 4 ftOilC? NO 14/ ~ 12/2/76 ________________ (101* 6. ADMIN,Slt010 oft (ff.lho- ii.... 01.4 1) ((flIt Center for Disease Control N.E. 44(41141 shown 0 s0tbOT*1 ION NO Merrell-NattOnal Laboratories Division of Richardson'Merrell Company ~1tD_~____- -~--(koA4.6fl ~,o.,. (II(. Letter Contract 0*11. Am ty 00 000OfC*TION Of ~" (~incinnati, Ohio 45215 tX)couTo.cf/.R41sse _J.Q~-794~E~ L J DNUD_!L.P~L~_ (lo ?4..h ii) 1*1*1 ILOCK APPIIL$ ONlY 10 1100110111.1$ 06 $O1*CI1AIIONL o ~* ~ ~ 0*0,11.... ...i,4.4.l 0.4.., 0.0 II. fthoho.. ..d do' .po.foo s.. .....p'~ os... C.! ~"░" 0 ..` 060$ 6I1$,l~1d4* ,I.~pl of 1k.. o.01.d.'l,l p.,,, 1.11.0 ho. `.0041' .,NO.dO1k. ~.fki$10*, j,,, ....d.d. k, ..., .16,. l.f'.s~ o.o.d. 1.1kv 41pO.g ..d .,..o.l.g............101 of 4.60 .*.~lm.s, flolk, O.6011oldllf.f ..~$f of Ohs ...*.d...0.l 00 .`.k e~py .44,.* .4., vh~.'f4d* ,50,16, ooo.N elf,. .4 $log.~. ,k.0. olud ifflo. o.l..,l.l.o. ..d,......do.'I ..,ob... Th001I Of 00*5 *C(P4OWLf001MtNf TO U SICIIVTD Mffff ISSUING 001(1 P50410 5,1 4*41 AND OA14 .41(11110 MAY 11*1.111 IN 011(1*066 OP YOU (OPts. ft. by oAfs of ho. ..oid.os po. dos. I. obo.g. 6, ,l,,.h..dy ,o41os.d. o.k ,f.'.~ ..~ 1.. ...dpbp wf,.... po.id.4 o,ob NffQ000 loft.. ~ .1 IA 1., .,lis.looO*d ho. o'.od.slf. .00 ,o.A.d p.66. $1k* .fo.I~ ko.s.d d~f. `p'.'4.d. * AccouNlIwo AND AP~OOP*IA1ION DATA (If~41~7~..;d) . * THIS MOCK APPLIES ONLY 10 MOOIFICATION$ OP CONTOACYS/OfDERS (~J 11. Ch..~. O.d..i. l.o.d ~ byhe~tcx~1ary~iJlLl6 Ifs Ch...s.. *1.41.0 bOO IT if. .`.O N lh .b.s. .o'bo.d .o'o../..d... 0 ~. .~ ,o..b.,d .,olsoi/od.. 6, ..o.DKAdN ,,f.d lb. .dooo~f'.fl.o oh...'., (,ool... ,lsng.. I.. ~ ~5'., Opp'.p0*fifI d~l.. 00) of .0*. 0 No.1. IS. (1 0 Ci. $opplooot.I Ago'.ol II .......d 0.10 polo.,, lo .VIf.0*ly .1 .odifl., 11.. .b.o~ ..,..b...d 101f..Ol *4. 1, bOok If. * EI1SCIIPIION Oft 000NDME$1,MOOIIICAII014 Subparagraph B Of ARTICLE XIII DEFINITIZATION of reteienced contratt is deleted hereby and the following is substituted therefor: B. The schedules for definittsation of this contract are set forth below: Negotiation of price On or before November 10, 1976. Target date fot~ defiflitisation On or before December 15, 1976. This confirms verbal agreement reac~sed in telecon of December 1, 1916, between Contractor's Vic*.,. PrÚsident and Counsel6 Frßdsric D, Lamb, and John L, Williams, Contracting Officer, Center for Disease control. `IplOs poold.d ~ .1 to., ..d ..,.dp.,., .4 k,d.o...o',,f.o.nd 00*14,4. bo'lol.ooh.Yg.d, soIl. `.d...,.d ood 41 $10 5s.es641o.I. (Opotf~c1oooontooot~ $01 010111010 o cowieAcT0010mobs s otO,M'~ oIo~,0IuS pocuooPe APOD 0t1u*4o..o......COP411I ~~too. (10*000*0* ruNO~,h AIlS OOIASI) f' ~ - 1.NAMLANII 11111 0* lIONEl (i~p~ ;,~r `- r.Y:..Y00.~Y_.1~_.~~*0_ o6i.~bi~~fficti (t~t ~ 0 MUSILk 0150 ` 14&'~.o.'...~A 12/2/76 David K. Rowe PAGENO="0184" 178 AMEN ~E~1 0' S~LIC~TA ON?M~Ui~~l,, T~1 O~ ~T~A~T 21l1EC1lV,0A1~]ii~OUlSLOONPU~C~.S1 *305101 NO. ~P~aCl No Ij ..p~i,,.,ei,T" .g,aasj.cation [10/29/76 1 ___________________________________ coin;~1~ ~_Jo. ADMINISTE*W DY (3/ sib.. SI*N, *101 3) (`J,~~ 1 iF:w, PHS I Center for Disease Control Same as shown in Block 5. 255 East Paces Ferry Road, N. E. Atlanta, GA 30305 (01)11 j C.lOIflYU~ --____________________ 0 SOtKIT*TiO5 so. Merrell-National Laboratories 3~ 19 Division of Richardson-Merrell ~ě/ Inc. 1~~e~"Cnt~act ~ Amity Road ~CON1EACI/9~yJ~ NO 20O~2Fo~fl425 i" Cincinnati, OH 45215 L_ ...J DATED ______________- (Y~ 51*1 U) Oi.CCOUI1i~i~I~DbPPROPRIAI(ONDblA (if ~.qiŘodj 101* bLOCK APPLIES ONLY 10 MQDIIICATIONS Of CONTSACTN/OIDKDS 0 11W. Cbs.g, ON.' ,o.d po,oYtI, Th.Chs.g....tfolh.. blob 12,,,s.d.DIb,.bo.osb,..d,.Mls.$1s,d.., lb El lb. sb.,, .s.b...d ,oi.oI/,.d., .i .11*1 , .,Y.,~ ID, ~d,.i,,sYMl,, 511091. (~,b.s ,(y.g,, ` P~ljIY9 050. ~s.'59l0YINo do.. .5.1 ol NOD A. blob 3. Yb., S,pplooool *90.0,11 is ,o,,,d .0. N ,.,L.!1..c...a~,?jc) ~ II .od.by, ho ,bo, ..o~od ,,Y0,,l ,, ~1 (olD is blob 3. 2 *YSCYPIION OF AMEYISMINY.MOOIPICAIION The purpose of this modification is to revise Article IX - Payment of the Letter Contract.. Article; IX of the Letter Contract is deleted in its entirety, and the following Article IX Payment is substituted theref or: ARTICLET.I( - PAYMENT: A. Payment shall be made within 30 days for all vaccine which has been accepted. Each in- voice O~ voucher shall, as a minimum, identify the appropriate Delivery Order for which the delive~.y was made, the vaccine type and amount delivered, the unit price, the total price, and the vaccine lot number(s). All payment shall be on a provisional basis pending defini- tization of a contract. The following prices shall be used for provisional payments for vaccine: 10-dose vIals 50 dose vials Bivalent Vaccine Monovalent Vaccine $ $ 3.97 1.85 $19.11 $ 8.58 ,oi.iNtd ho,.., .11 t,.,.,~,t .o.a...,. 91*. dioo,0 .,Y~o,,d ., blob 0,,. b,,.'slo. ,hs.5.d, .0*9 ~ s.d Nil Ny,, s.d .fl.*l o ~ NOT EEQUI005 [~JCONT.AC1o,/00PERo* (S *0051135 ic1 sios FlItS DOCUMENT AND DDYUIPI....A.,....,COIYLS TO $59510 OffitE -. fto.DoYr NT1N~11 COY*RACT1NOOPR1Cě (lIp. .P~,ii U. L!ic~.1residentat,c~.~ i╗=~ L John L.WiUisms [Jm..b... osb,..d yNiiit,b.Y I. ,oi,.d.d,s .*I,yh is blot. (3. lb. ho. s.d dit. spo.P,d ii .siop.I OF... .. ..Y..dAP. ~ OP..,., ~ ,,bhi..(.d~. .,,,ipi ,( hi, ,.y,,d,.,,I p.,. .5. h~i s.d do. .poifi.d I,. Yb. ,slipy,l,o, 05, .is..d.d, by 5,, ~Yh* Y.1*9i19 s.th,d,: * (.)by l91.Os,ld,,iSiYiY9..,.........,,P.N,Y Ni. ,os.d.o.l; (b) Dy .,ko,.Wdgi,g .o,ipl,l (.1 ,s.od.,,.o .~..,(. ,.py .51*1 .3.. ,.b.Y.ll.d, St.) Uy"p" ON SI .h..h io(..ds, iI,l~~Ys~ . It., ,s2,pisl,Yy .~d ,.,.ds.,lo-b.., FAILURE 0010*3 ACKydOWLEDGEMENT IOU RECEIVED AT TOE ISSUING OFFICE PEIOR TO TIlE SOUR AND 1011 SIICIFIEDJIAY USULT IN REJECTION Of TOOK OFFER. If. by .yI~ ,F Yb.. ,s..d,..o ~ss do,,s, .b..g. so sUo&.op .sb..F,d, ..oh .t.o~. S.f *. 101. by NI~5.ls sf,., pysid~ oht,I,,,,., ,.frY,. ,.,b,. ~,Io.... I. ,b. .,(.,i,iis. s.d Ni, .oo,,dsoI, ,`d .~ s.....d pylo SUM op.,.'g Is., s.d do. .p..iE.d. PAGENO="0185" 179 OR 36 ilitY 19661 9 .,,~ ~ CONTINUATION SHEET Modification~ No. 2 p PROC RIG (&I 0*1 I-lb 101 Itetter Contra~ct 2OO-76-042~ 2 * I (1* o'u*ob 0, COIIIRACROR otichers shall be submitted to the following address: Center for Disease Control Bureau of State Services Immunization Division 1600 Clifton 1~oad, N. S. Atlanta, GA 30333 Payment for splf-insurance retention and Insurance Premium on Liability shall be made ithin 30 days of receipt of contractor's inv.oice for same. The vaccine prices do not in- jude the costs for self-insurance ($2,500,000) or premiums for liability insurance $2,166,250) which are solely attributable to the National Swine flu Immunization Program 1976, or the surplus lines tax for said liability insurance. PAGENO="0186" 180 `:~~: ~U~:: `(;~k~. ".." I_S ~ %.sISSs..Mh.l ) i~;~~N░. 1 ___________________ Coot U ADMDUISSUD ST If ,.h.' thU. l.A sI (10*1 enter for Disease Ccntrol "-255 East Paces Ferry Road, N. I. Same as shown in Block 5. OR~G~"AL ((lOt MCI)!)) (01(1 r -i Merrell-National Laboratories ____________ ~ ,. Division of Richardson-Merrell Company ~:;`~~"` Amity Road ______________ Cincinnati, OH 45215 L J 0 Th. 5.* ,,..U,..d .A..(,T..~. ....4.d.. l..?T' .bl.,kTS 0. hl4 .~d A.'. T..P'.d I.. .~o.1 01.. 0 *".`~ 0 `.` ~ .O'..'.k~. ,.`.,pI A h. ~ ~ `.4~ h~ ..d U.'. .~,f.d ..t. A.'~'.. (`((l~'~~dd 1. ." .4,)'. ((5.'., ~Th'.d. .h.th `.(,d.. ~I'(~ .A('.".. ~1I4 (~`.~(`~~M .1~I(H( 1))),),, C~ TOtS UC)NOwtTTGSAOIT TO ST STCEIV(D AT TNT 5)4)50 OfFICE Pt~! 0 TUE HcIIS AND s~tt 5150140 NAY SESUIT (P4 SE)TCTIOTA OF TOtS 0(1(5 I.(,.,,,.'.(O..,...d'I.,, ... d..',I. .h..~...4. (~~MM( .,b.'..d. .,th .1.1145 .T.T ..YS b~ 545T51 75X0943 PHS (Influenza Imrnunization) 6-6140/6944 (26.11) INCRE.\SE $2.700,000.00___________________________________________ THIS SOCS UPPUTS 0011 TO .IOTIITICUVOHS OT COP4T0ACTS.'0ID(~S mo..,. Od.' .. ..`.d m. co..., .., s'. (5'. (2 ... `o~. ,4~ .4... ....b.od TI.. h... ....h.~.4 ..TH.dT.ld.~.,...4f..d f.4..T 5. ,d....Y.,,, (5.45'I'.d( 5. (h4545% 5YD(4 MC(*. 4545*5SMESN dos .0.)~~ (`.4 NAth (2 AMSP4DUINT 05 0 5O1k~*T(0(4 NO. 0450 - (OT( 01.1k 9) M0DW(CATIOPI ,,, Letter (~ C0NT*ACT/ˇ4~11~ NO. DAT,D.9/l3L7.6_._(.S~bl,* H) *~-- - APPUOPOIATION D*TA (II 1(4.1(1.4) ~F Lb m, D.pp'DooHoI A901'.Y, . 5YT5'~4 PlY .11(151)1. ,UhU.4p II ~ The following changes are made hereby to referenced contract: 1. ARTICLE III - QUANTITIES~ia modified to read as follows: The number of doses, by vial size, to be furnished under the contract is: Monovalent Bivalent 10-dose vials 22,300,000 10-dose vials 2.,.7.OQ,000 2,690,000 50-dose vials ~~jQQ,~O ~0-dose vials ~~lO~l~OOO 3,310,000 `)J5. 55,000,000 6,000,000 Variation in Quantity: A variation in the total quantity supplied hereunder will be accepted, provided ChiC such variation Is not in excess of 15% of tha contract quanti- ty as specified above, and is available for delivery prior to the final delivex) date (January 15, 1977). 2. The last sentence of Subparagraph B, Delivery Schedule, of ARTICLE IV - DISTRIBUTION, is changed to read, "All deliveries shall be completed on or before January 15, 1977. 0 C00T(MCTO~O5'P5O, `S T(OT T000IE(D [~J coaw.c,o,tou,.O. IS 1104(1(0 TO SIGN TICS DOCUMENT ADS S,TUIIN..A.....COSPISS TO (1(1450 4(1(15 / ~- `- 1. I (`t C'~ (1. Lht 7. UNDID ~ 01 AID.S'.A ~ . - jr .// f~/-., ~ 1 Ft UPS) (IN C)' (11.405 (((p111 p1,.,? )T.5(1IS ~ ~S . F. --L?F~j c C) `, \-~l;~-~. Lt~/?~..JI JohnL. Williams - "cl ` .- - NAME ~CC,MTACHNG 01(010 flU...1)'..!) PAGENO="0187" 181 - SW ~. ~ meG ~os'n TAPO*SDPOIM~,~' I, CONT$NUAflON SHEET Modificat ion No. I \~S'OC. ~ ~ cu -to ~ : Letter Contrs~t 2OO-76-O4~5 2 IOOSCCN'~'CI0* 3. The last sentence of Subparagraph A, ARTICLE XIV - LIMITATION ON CONTRACTOR'S PROFIT, i. changed to read: "The Secretary of health, Education, and Welfare has. issued cfiterta for the determination of the costs of the contractor for the vaccine delivered under iki contract and for the determination of a reasonable profit on the A/Victo*iaIlS vaccine, end crieeris is as set forth in Attachment A." 4. The following sentence is added to Subparagraph B of ARTICLE XIV - LIMITATION ON CON~~ TRACTOR'S PROFIT: "In the event the contractor is required to pay a claisby the Government pursuant to Section 317(k)(7) of the Public Health Service Act after the contractor has refunded the unexpended amount retained for self-insurance, such claims shall be deemed satisfied up to the amount of such refund." 5. ARTICLE XVI LIMITATION OF GOVERNMP~T'S LIABILItY is change to read as follows: "The contractor is not authorized to make expenditures or to incur obligations, in per- formance of this contract, which exceeds $11,500,000.00. In the event of a termination of this contract, the Government's liability shall not exceed $17,500,000.00." 6. The AVAILABILITY SCHEDULE is deleted and the AVAILABILITY SCHEDULE attached hereto is substituted therefor. . . . I 7. The SCHEDULE A - COST AND PROFIT ~RIT~RIA FOR THE PROCUREMENT OF SWINE FLU VACCINE is deleted and the revised AMENDMENT A - COST AND PROFIT CRITERIA FOR THE PROCUREMENT OF SWINE FLU VACCINE attached hereto is substituted therefor. PAGENO="0188" 182 ~4~AILABILITy SCI!EDIJLE The quantities by package size listed below shall be available for delivery on the dates shown: A. BIVALENT VACCINE 200 CCA Units Total 10-Dose 50.-Dose Available 4,810,000 2,690,000 2,120,000 September 30, 1976 1~19Q~ 000 ________ ~d9O1O00 October 11, 1976 6,000,000 2,690,000 3,310,000 B. MONOVALENT VACCINE- 200 CCA Units~er dose - Total j~.-Dose 50-Dose Mai~h1e 7,770,000 3,130,000 4,640,000 September 30, 1976 5,350,000 1,900,000 3,450,000 October 11, 1976 5,900,000 1,580,000 4,320,000 October 22, 1976 5,980,000 1,590,000 4,390,000 November 1, 1976 5,000,000 1,700,000 3,300,000 November 11, 1976 5,000,000 1,700,000 3,300,000 November 18, 1976 5,000,000 1,700,000 3,300,000 flovember 26, 1976 5,000,000 3. 000,000 2,000,000 December 3, 1976 5,000,000 3,000,000 2,000,000 December 17, 1976 _~OOO,Qoo ~,~Q0Q,00o _ZlL000~ 000 January 12, 1977 55,000,000 22,300,000 32,700,000 The contractual commitments regarding quantities and/or shipping dates kre' conditioned upon the Bureau of Biologic& reviewing, testing and releasing submitted lots of the vaccine under the following time schedule: a. CCA release of the bulk vecejite within 7 days following receipt of the samples by the Bureau of Biologice for testing. b. Release of the final container vaccine within 3 days following receipt by the Bu~au of Biologics of the final protocol. It is understood that if any lot is not accepted by Bol, the above schedule shall be adjusted accordingly. PAGENO="0189" 183 COST AND PROFIT CRITERIA FOR THE PRO~URENENT OF SWINE FLU VACCINE Pursuant to ž317(J)(3) of the Public Neaith Service Act (42 U.S.C. 247(b)), as amended by the National Swine Flu immunization Program of 1976 (P.L. `94- 380), I hereby prescribe the following criteria for renegotiation to eliminate any profit realized from procurement of swine flu vaccine under the Swine Flu Program. 4 1. "Profit realized" from any procurement shall be the amount by which the amount paid by the Government to the contractor in the procurement ex- ceeds the costs to the contractor of performing the contract. 2. The contractor will be paid its costs in performing the contract as follows: a. All direct and indirect costs actually and reasonably incurred by the contractor resulting from its participation in the Government's procurement of vaccine for the Swine Flu Program shall be reimbursed by the Government. The amount of such costs shall be determined in accordance with reasonable methods of allocation, practices and pro- cedures applied on a basis ~onsistŔnt with those applied by the con- tractor in preparing his proposal and reviewed by the Department's audit agency. b. Reimbursable costs shall include, but not be limited to: 1) Costs resulting from the production of vaccine that fails, through no gross negligence of the contta~tor, tomeet the specifications of the contract because it is refused certification by the Bixreau of Biologics of the Food and Drug Administration~ 2) Costs incurred prior to execution of the contract in order to meet the reasonably anticipated delivery, dates for the vac~ine * under the Program. 3) Imputed interest on working capital, at rates determined by the * Secretary of Treasury pursuant to P.L. 92-41, 85 Stat. 97. 4) Actual atid unrecoverable costs due to interruption of production or sale of other biologic.als in order to devote staff and facili- ties to the production of vaccine for the Program. 3. Profit will only be allowed on A/Victoria/75 vaccine and Shall be negotiated at arm's length based on the contractor's degree of risk, difficulty and complexity of performance, type of contract, and cooperation with the Government in meeting the needs of this health emergency., 4. My insurance premium amount which is included in the price of any pro- curement of swine flu vaccine under the Program and which is refunded to * the contractor under any retrospective, experience-rating plan or similar rating plan shall in turn be refunded to the Government. PAGENO="0190" ~ANDAIDO5M2&1~iT 966 G1.k. TB LiD ADM,?..S?BLfICN 61~. `.?c..k.O .Iš'1. 1116.10? 2 BIPECTIVI DAlI ~.._ZQ02_&~25 - CODE ___________________ Center for Disease Control 255 East Paces Ferry Road, N.E. atlanta, GA 30305 SAME *160 *005EDD CODE I E.4CILJTY C?)DE P. D.$COUN? lOB lION?? PAYIB'S None: Net - 30 days I . *Delivery shall be V.0.5. ,, ~, Merrell-National Laboratories Destination within Consisree so~ Div of Richardson Merrell Company Premises to th points show úP°do) Amity Road on Delivery Orders Cincinnati OH 45215 II WIN?? OCID I p 1 hq~p J .q~ 1)10 ADD ú26 S$0NW IN BLOC ...Ôa... $j~6~ 10IMAR~FOV CODE1 j As directed on Delivery Orders. . 2. PAYMENT WILL BE MADE DY - COOE~ - Center tor Disease Control Pinancial Management Office Atlanta, CA 30333 WosO ADVuT1EID. ~) NBGOT;ASD, PuUu*?41 ~ "~ :~ ::`: ::~ I ,._ NDP?UED/SIBVICCS ~. I,. OVAISSY lIST S. IS. INS ISICI $ LeOSBIT INYLUENZA VIRUS VACCINE, Monovalent, 200 CCA units, A/New .lersey/76 strain, and Sivalent, 200/200 CCA units, A/New Jersey/76-A/Victoria/ 3/75, to bi supplied in accordance ~ich the Scope of Work, Delivery Schedule, and terms set forth herein. . - . TOTAL AMOUNT OP CONTRACT $ CONTRACTING OFFICER WILL CO EIPLFTE SLOCP 22 05 26 45 APPIJ~,UILE L.~ COH16*OOI $ NICORATED AOIUMIP0T (C...'.U.'.' .fqINNd II ~w 5~. ~j aWAID ~ A sIN .vp.1~.1t. .$. aS,. ~sNS) Va..~' AIM AIINlN,~? .ssd `INN.I.......L...LW.n S.0N...R.TI.~I ~AMDM s$NDl IN $.$k05... 1M.b.. ~ ~ldI$~ ~ `511,111$ ,,d a.... *II ~ ~, ~*,l*~s *uI 6* ~ 15.15, lN'.S.M. *dd*..s. 10,1.551 ..4. by ,s. `b.,b .H*..s,' INM,,1 ... DM11 nM aS 1,? ~ .$.*l, ?~ .o, dMo.n.'nl,d$.,.. lb. ..,Is~ ...d nb, I 5l,~Il 11 ~l*II b. ~ I'd 55~ b.ssIN,d SnnsN.SWn1. Iby sSINsS .$Isb ~ IRS. InlIn.,A,, ININSINI SI lINd byl$s ?M~~ SSnS1.N5I' .1*.. ..,.d#..'..a.lhI S. .1 ~ 1$. S.n...-..'. .AIs.slsn S.d ys* .d~. INS ~ IN. sIN.SUMSSS. ND II) 116$ P5.8.5I'. ~I~*l*~Ill516. (I'I,IIII.*ll$ ,R..o.,,. SI ~ INSINISMS? d.ya*sS A sINS.. ~ ~ hs..n. (LIflf(On,.,iI IAsod hs,,,s) -.AIi~ŃNTsAacI )~ / . .~ . . 1) ~ ~ BlAME MW 1151 Cl NONES (~m p,,,~jA U. Ball $~C~4S 21 I'4i~CONT,ACDNG ~ (Tip. .,p,.~ 55. 0,', ~ -`S š hJ?~,/( "~r)i$p. L,~i%P.W%1~ qJ'~~iL 184 AWARD/CONTRACT ) a. S.ouI$mos,PUICNAS( 6ECU($T `lOud NO, - a. COllIERs PCI IIAVI')VAL Td?V$INNDI* ~ ISO. 2 AND 0* DM6 `*0. I. $; 6. ADM*II$TIIID BY CODE 1?. SEINS*P (1/ ~ AIm `61113 lj 1 lOS DISh. ~ONU0N Seme as shown in Block 5. I uwuut.. kI.~i * 75X0943 PNS (Influenza Immunization) 6-6140/ 6944 4591 (26.11) $14,800,000 -So PAGENO="0191" 185 `s*D ~ 16 IIJLY 166 ~ ~ ft ~ CQNT1NUATIO~1 ~ et er r,,ntra t 2 tO `ac. st~ - No. 200-76- 0~25 ~& -~`~-~r-------- -~ f~~Ut MT'O~~t LIoar~T~ S idE I SCOPE 07 CON RACT: contractor ihell manufacture and distribute influenza vaccine in accordance with the cifications set forth below during the contract period to the points and in the quanti- a specified on Delivery Orders issued by the Center for Disease Control. The only obli' ions or responsibilities of the contractor in connection with theNational Swine Flu unization Program of 1976 are contained in this contract. There are no warranties, cx- as or implied, Imposed on the contractor except me stated in this contract. rcEII - SPECIFICATIOySC . .~ Vaccine: . . The vaccine shall be Influenza Monovalent A/New Jersey/76 (Swine) and Sivalent A/New Jersey/76 (Swine) - A/VictOria/)/75 aanufactur5d under a current escablishuient and product license as set forth belov. Fornulation standards, speciftcations and applicable tests of the vaccine shall be as set forth in the approved produce license or aS otherwise directed by the Food and Drug Adoiniscracion. Ptoduct L~icensure: . : - The vaccine supplied under this contract shall be praduced. under U. 1. Establishment License No/el and Amendm~flc to the pfoduct license for influenza vaccine issued by the `ureau of Slolagics. t~, during the contract period of performance, the product or ~tablishnent license ii suspended or revoked for any reason, production ~f the vaceime shell be diacocttinucd until such tiete,es the license is renewed, lvi the event produc-' tion is suspended for the above rcasor tht Governacic shall sot hi held liable for failure to procure the guaranteed Sini-ud conr!tined in this Contract Shelf tife Deliveredvaccine shall have in expiration date th~rocrgh ~Ugustl,-t977. The Governucet agrees to ~tske all appropr-iac~ steps to seeto it that all ~persons who are responsible for administering vaccine a~s not~f ted that~thi vftdciiie~uit sot be edniniscered after August 1, 1977. . . . ~pntainers: - `*` :- Vaccine shall be contained in vials of 10-dole and- 50-dose capacity, with 2rn1 overfill in the 5O-do~e vial and 0.9m1 overfill in the 10-dose vial. Ten-dade vials shall have an internal neck size no smaller than about lam in diaaeter~ SO-dose-vials, about 13mm. Vials shall bi supplied with stoppers made of eonpyro~enic, high-'grsde tubber. Cap use for the vials vil1-~cch the diameter of the necks. Vaccine dosage will be0.Ssl. i~be~: Labeling of vials shall be in accordance with 21 CVR 610.60. lp'addision, the color *f label for the monovelgat vaccins shall b. red With black or White msCkiflgi, and the coldr of the biva1e~t vaccine ~kail be blue with black or white carki~qs. Lot number *11 be specified on ea~t via), label toat of the labels shall be su~p1ied by the uverneent, PAGENO="0192" 186 ,,~ %; .~I$ $.I~~OI ~,_,, ~ CONT'NUATION ~ SHEET `--`~-~--`~ [.ett.r ~ncrzc: I No. V)0..lg.0425 ` ~ 10 UtRR~L I sMIa?ML tA3~RAT~ s ``* Caps shall be metallic color. _ * , Tar shipping purposes, vials shall be packaged as follows: iQudose vials 10 vials per package'nesteC 3O~'dose vials 20 vials per package iesced Each package shall be labeled in accordance with Paragraph 55.2.2.2 Internediate Contatpers of Federal Standard 123D. In addition to the requirements of the referenced Ys4eral Standard, th. following is required: A. labeling shell show appl,tcable lot numbers. 1. Apaste~on label shall be attached to each package. Label shall conform to the sample supplied with RYE'. C. Package inserts shall be placed in each intiroediate package, a total of 10. inserts per package. Text of the package insert shall be supplied by the Government. . - Preservation, packaging, and psckiig shall furnish a degree of protection to preclude damage to' containers and/or contents th*reof under normal shipping condLtt~ns, handling, etc., and shall conform to applicable carrier rules and regulations, tnctudLng astriets ha*~dling overseas~ shipments. ~, Vaccine shall be shipped under refrigeration at a temperature between 20 and 13C (340 to 60░F~. Packing, and- packaging shall be such that this temperature is m.a'.ntathed during shipment and that shipments shall arrive at destination in undamaged condition.. ~gfttng Provisions: . *. . . .~ - Shipping containers: Containers shalt be marked in accordance with Federal Standard Nugber 1230, January 22, 1973, and shalt contain as a minimum the following: a. Quantity and Unit 4. Contractor Name and Ad6ress b.~ Purchase Ordgr Number -e~ Cross Weight, C. Item Name 1. Lot Number(s) III QUANTtT~: ` * *. `` * ie mamber of doses, by vial sizes, to be furni*hed under ths contract tea ~j1~~valent Vaccine . IJ~!gt$n Vacc~tns , 10-dose vials 13,600,000 10-dame vials 2,100,000 SC-dose vials 26~,400~00O $0'dase vials L~J00 60,000,000 PAGENO="0193" 187 I No. - 4 ~ HERPELE UATiot~~ tf Variation in Quantity: A variation in the total quantity s~tpplied hereunder will be accepted, provided that such variation is not in excess of 151 of the contract cuancity as specified above, and is available for delivery prior to the final delivery date (Deceeber 3, 1976). The contractor shall notify the Government as availability of addi- tional quantitites as soon as this status becomes known to the contractor. ARTICLE IV- DISTRIBUTION: A. Delivery Points: The contractor shall deliver the vaccine, P.0.3. Destination, Within Consignee's Prom- ises, as directed on delivery orders, to approximately 200 points in the 50 states and Trust Territories. B. Delivery Schedule: Deliveries shall begin ~n or before October 1, 1976, with the total amount of bivslent and monovalent vaccine to be delivered in accordance with the attached Availability Schedule. All deliveries shall be completed on or before December 3, 1976. C. Overseas Delivery Requirements: Oversees shipping and delivery methods sho,1l be utilized for delivery to those points located outside the Continental United $tates. Time of Delivery: Delivery shill be made at destination within 10 days after receipt of written or tele- phonic order, but subject to the conditions noted on page 10, "Availability Schedule." E. Shipments shall be made in incrementS of 10,000 doses. P. The contractor shall not be required to deliver any vaccine under this contract (1) un- til it has obtained insurance in an amount not less that $55 million covering potential liability to it arising out of its participation in the influenza ims*unization prograts; and (2) unless the criteria issued by the Secretary of Health, Education and Welfare in- clude,, as sli.owable costs, the items set forth in Schedule A attached hereto. ARTICLE V - DELIVERY TERMS: De]ivory shall be made P.0.3. DESTINATION, UPTIIIN CONSIGNEE'S PREMISES, as defined below: The term, "P.0.8. Destination, Within Consignee's Premises," to which this contract is subject, means: . .* (a) Delivery, free of expense to the Government to within the doors of the Consignee's premises specified in the contract or delivery instructions. (b) That it shall be the responsibility of the contractor to do the following: (1) Pack end mark in such canner as to afford adequate protection against normal transportation hazards and secure prompt delivery to the consignee, and coaply with all packingand marking specifications of the contract; (2) Properly prepare and distribute commercial bills of ladIng; . / (3) Make delivery laid down within the doors of the consignee's premises specified in the contrJct or delivnr.y instructions; 98-930 0 - 78 -- 13 PAGENO="0194" 188 --m~cc~ C UEPPEU !:T!P Pt L \`9 irs (4) Pay and bear all transportation and accessorial charges for such delivery laid down within the doors of the consignee's promises specified in the contract or delivery in truct ions (5) Be respo~sible for any loss or damage occurring before delivery is laid down within the doors of the consignee's premisos specified in the contract or delivery instructions. A~TlCIF VI - RETLRN OF ~ACC~N~ No requirement to accept unused vaccines at end of the contract period will be placed on contractor ARTIClE VII - METHOD OF ORDERINC Vaccine shall be ordered by Delivery Orders, each of which will designate the vaccine ordered, quantity required, and destination. Orders may be placed by telephone and con- firmed in writing. ARTICLE VIII flSPECTIOI ~ND ACCEPTA~CE ots of vaccine sill be suboitted by the contractor to the Bureau of Biologics for ravie in~ d testing Folic ing re].ase of the lots Bureau of Biologics will send a notificati n ci approval to the project officer at the Center for Disease Control. Final, inspection ~hall be made at consignee's locations. Final acceptance/rejection will be made by the Center to: Disease Control. Defective or damaged material received at consignee's locations will be rejected in accordance with Article 5 of the General Provisions. ARTIClE IX - PAYMENT Payment shall be made for all vaccine which has been delivered and. ~ccepted. Each invoice or voucher shall, as a minimum, identify the appropriate Delivery Order for which the de- livery was made, the vaccine and amount delivered, the unit price, the total price, and the lot number(s); All paycents. shall be on a provisional asis pending definitization of a contract. Vouchers shall be submitted to the following address: ` - Center for Disease Control . . * Financial M,~naEement Office 255 East Paces Ferry Road N E Atlanta GA 30305 ARTICLF X - PROJECT OF IC,~ e Center for Disease Control Atlanta Georita will designate an individual to perfore az ~roject Officer during the period of perforronce of the contract. The Project Officer shall be responsible for guidance in re ard to the technical aspect of the contract provide a point for liaison between the ranul'acturcr and other GovernmBnt agencies (Federal, State, and locti) aid be the it ral focil šoint to addresr tochni ml and lokistici problems relating to the perforin ii it c-i r'iis c ncr~ct The Project Offtc r shall nt t*Ve thu PAGENO="0195" 189 *DAPD 0c'~' ? ~ CONIINUATION SH~'T Let tet Contract 6 tO nOt 1*G~ 4' CF* `l~* 0 No. 2OO~?6-. 0425 `did o o ~ 0* ~EIhL1L hAtIui~~At LAau~1iOPk$ :thority to make any commitments or authorize any dhanges which affect the contract price, ~rms, or conditions; any such changes shall be referred to the Contractiflg Officer for :tion. . ~TIC1.E XI PROJECT DIRECTOR: he Contractor shall designate an individual who `411 serve as the point of contact `egarding the technical performance of the contract. This individual shall have the ~uthority necessary to conit the company and shall be assigned responsibilities con~ ruent with requirements of the contract. The Government reserves the right to pprove the Project Director and any successor to that position. tTICLE Xtt~ DELINEATION ~P RESPONSIBILITIES OF TIlE GOVERNMENT AND THE CONTRACTOR: The parties recognize that the Government has initiated, planned, and is arranging for the implementation of the in(3uenza immunization program. because of the need to have the vaccine tested, manufactured, and delivered within a relatively short period of time in order that the population may be inoculated in an attempt to prevent an influenza epidemic, the Government ha,s assumed certain responsibilities as specified hetein wh~h would ordinarily devolve upon the contractor. It is the intention of the parties thai the contractor will be responsible solely for the performance of its obligations under Paragraph C herein. It is the purpose of this Article to delifleate the separate re~ sponsibilities of the Government and the, contractor. In the li~ht of the cišcumstancea described in Paragraph A hereof, the Cover~ment shall be responsible for: (1) - The adequacy of the standards and ipecifications for the vaccine required to be delivered under this contract, including their compliance with all applicable requirements of law and regulation. . (2) The safety and suitability of materials provided to the contractor by the Governren under or in connection with this contract. (3) The investigation and determination of the safe and effective dosages and adequate directions for the use of the vaccine. * (4) The investigation and determination of the risks and benefits of Lnoculatio* with the vaccine. (5) The development of am adequate statement of information respecting the risks end benefits rcferrmd.to in subparagraph (4). (6) The taking of all `appropriate steps to assure tjtst each individual to be i*onutensd (or, where appropriate, a parent or guardtau of such iadtvidual) is sdeqtssiely imiormed of such risks and benefits.' . (7) `The content of the labeling of the vacciqe, including its compliance with afl sp.' plicable requirements of law and regulation. (8) The taking of all appropriats steps to. assure that *ach person. responsible for ad~ ministering the vac:ine has adequate notice of the labe~tng of. the vaccine, proS `rided that nothing herein shall ~init the responsIbility which the manufacturer otherwise has to assure that labeling is included i~ and delivered with each ship. PAGENO="0196" c a C 5 No O4~) 0 IA ,lERrrtt hAT ~` i~ (9) The arrangements for the implenentation of the influenza i~zunization arogram, Ln- cluding the issuance of appropriate guidelin~s and information. The contractor shall use due care and comply with all applicable laws and ragulations in the manufacture and handling of the vaccine in accordance with the specific~tiona herein. IiTJCLF XIII - DEFINITIZATION: A fixed price, redeterminable type contract is contemplated. To accomplish this result, the contractor agrees to enter into negotiation promptly with the Contracting Officer aa to a definitive price for the vaccine which shall be incorporated in a definitive contract. The schedules for definitization of this contract are set forth below: Negotiation of price - On or before November 10, 1976. Target date for definitization - on or before December 1, 1976. If agreement on a definitive contract to supersede this letter contract is not reachjd by the target date set forth in B, above, or any extension thereof by the Contractin! Officer, the Contracting Officer may, with the approval of the Head of the Procurement Activity, determine a reasonable price subject to appeal by the contractor as provided in the clause "Disputes" of this contract. The contract shall be governed by: (1) All clauses, terms, and conditions contained in this letter contract except which by their nature are applicable only to a letter contract. (2) All clauses required by law as of the date of this letter contract. (3) Such other clauses, terms, and conditions as may be mutually agreed upon. ~TICLE XIV - LIMITATION ON CONTRACTOR' S PROFIT: In accordance with the provisions of P.L. 94-380, the contract price for the vaccine delivered under the contract shall be subject to renegotiation to eliminate any profit realized by the contractor on the swine flu vaccine and to linfit the profit realized by the contractor on the A/Victoria/75 vaccine to a reasonable profit. 1~he Secretary of Health, Educatio9, and Welfare will issue criteria for the determination of the costs of the contractor for the vaccine delivered under this contract and for the determina- tion of a reasonable profit on the A/Victoria/75 vaccine. Any insurance premium amount of which is included in the price of the vaccine delivered under this contract and which is refunded to the contractor under any retrospective, experience-rating plan or similar rating plan shall be refunded to the Government not later than 30 days after receipt of the refund by the contractor. Any amount retained by the contractor for self-insurance retention which is included in the price of the vaccine delivered under this contract shall be segregated in a separate account in a fed- erally insured commercial bank with aseets in excess of $100,000,000. Said self-insurance retention shall be invested, to the extent poenible, in certtlicatea of Deposit at the said bank's prevailing interest rate. Any interest earned on the Certificates of Pepo~1t 190 PAGENO="0197" 191 qi.& $~~V~C!S úC~'SftA~,O$ I CONTINUATION SHEET Letter (.~ntract N'C~ Cl ~` No 200-760425 1 1 10 -- -- MERR11L.~ATIQflM (~R~TI?H~ - :111111 shall be added to said self-insurance retention fund. Payments from the separate account shall be made only for self-insurance as provided herein and any amount, including inter- est, in the separate account not so expended on or before August 1., 1985, shell be refund- ed to the Government not later than August 31, 1985. It is the understanding of the par- ties that, since the contract shall be subject to renegotiation to eliminate any profit realized by the contractor on the swine flu vaccine and to limit the profit realized by the contractor on the A/Victoria/75 vaccine to a reasonable profit, the self-insurance re- tention fund and interest thereon shall not constitute income to the contractor. For the. purposes of this Article, the contractor shall maintain and make available to the Secretary or his authorized representatives the records specified by the Articles of this contract entitled "Accounts, Audits, and Records"; Examination of Records by Comptroller General (Clause 10 of the General Provisions, SF-32); and Examination of Records by Department of Health, Education, and Welfare (Alterations to SF-32). ). In the event the Contt~acting Officer determines that the contractor haŔ realizÓd any profit on swine flu vaccine or tias realized more than a reasonable profit on A/Victoria/ 75 vaccine, the contract price shall be adjusted in accordance with the requirements of Paragraph A of this Article. Failure of the parties to reach agreement on the renego- tiation of the contract price shall be subject to Clause 12 of the General Provision, * entitled "Disputes." The contractor shall make any necessary refunds to the Government not later than thirty days after receipt of the ContraÓting Officer's final decision. However, if the contractor takes an appeal from the Contracting Officer's final dectal.on, it may withhold the funds in question until said appeal is decided. In the event that * the decision on appeal is that the Government is entitled. to a refund, such refund shall be made within thirty days from the date of the decision, with accrued interest at the rate determined by the Secretary of the Treasury pursuant to Public Law 92-41, *5 Stat. 97 from the date of the contractor's receipt of the Contracting Officer's final decision. &RTICLE XV - COOPERATION IN PROCESSI~C AND DEFENSE OF CLAIMS~~ SUITS: ~. Pursuant to the provisions of provisions of P.1. 94-380, the contractor shall cooperate with the Governzient in the processing or defense of any claim or suit brought against the United States under the Federal Tort Claims Act based upon alleged acts or emissions of the contractor. . . B. While any such claim is under consideration by the Department of Health, Education, and Welfare's Claims Officer, the contractor shall furnish information requested by the Claims Officer or his representatives as is reasonably necessary to enable the claim to be considered and determined. - * C. Should any action be filed against the United States under thb Federal Tort Clams Act based upon alleled acts or omissions of the contractor, the Contractor shall render all reasonable cooperation to the Government in the defense of Such action as may be re- * quested by the Department of Justice or cognizant United States Attorney. Such coopera- tion shall include, where appropriate, making records and personnel of the contractor available for pretrial proceedings and for the trial of th~_sctjon, AnTtCLE XVI - LIXIT."TON OF COVER~.'~NT'S LIABILITY: The contractor is not authorized to make expenditures Or to imcbr obligations, La perfosmence of this contract, wh~~h exceeds $14,800,00o. In the event of a termination of this contract, the Government's liability shall not exceed $14,800,000. / PAGENO="0198" 192 udDflD~C~M36.JUL~9'6 CONTINUATION SHEET Letter Contract 10 ,~ ~ ,~i a,~ -isis' No. 200-76-0425 ~ ~, c~~~co' MERRELL-HATIOIIAL LA3i~RA1~RiES ~RTICLE XVI!- GENERAL PROVISIONS AND ALTERATIONS: - - `he General Provisions (SP-32), 4pril 1975 edition are hereby incorporated in this contract, md are altered as follows: -. Clause 21a, Snail Business Subcontracting Program, is applicable if this contract :xceeds 5500,000.00. ~. Clause 22a, Labor Surplus Area Subcontracting Program, is applicable if this contract exceeds $500,000.00 : 3. The a:tached clauses, listed below, are added to and made a part of the General Provi- sions: A. Listing ~f Employment Openings B. MinoritY Business Enterprises Subcontracting Program C. Unsolicited Samples, Descriptive Literature, or Brand Name Reference D. Examination of Records by Departnent of Health, Education, and Welfare B. Tederal, State, and Local Taxes, HEW-328 F. Employment of the Handicapped C. Termination for Convenience . ~-. - H. Price Reduction for Defective Cost or Pricing Data * -. - I. Subcontracting Cost or Pricing Data . : -. .7. Audit .~ K. Accounts, Audits, and Reaords - L. Disclosure Statement - Cost Accounting Practices and Certification M. Cost Accounting Standards . N. Cost Accounting Standards - Exemption for Contracta of $500,000.00 or Less - - Certifications . . . 0. Preaward Equal Opportunity Compliance Reviews P. Clean Air and Water . -. Q. Equal Opportunity Clause ` . PAGENO="0199" 193 s "s cu o~ws to.7 CONT~NUAt1ON SHEET Lett~r ~ontra c ~. $OC. NO~ " š~" ~ 1 I NO. 200-76'0425 1.0 at OP ottao* 0* C0P4tMC~CP ~ LA3CRAT~!tS AVAILABILITY SCHEDULE `he quantities by package size listed below shall be available for delivery on the dates hown: ~* !~V~LE~T VACCINE - 200 CCA Units per dose Available Oat, 1, 1976 * Oct. 1, 1976 Oct. 1, 1976 OcÚ. 8, 1976 * Oct. 18, 1976 Oct. 26, 1976 Nov. 3, 1976 Nov. U, 1976 Nov. 18, 1976 * $oV. 26, 1976 __________ __________ Dec. 3, 1976 Total _ Dose SO Dose 6,000,000 2,700,000 3,300,000 Excess, if any * Monovalent Vaccine - 200 CCA Units per Dose ~Toš~l _i0 Dose - 5,000,000 1,700,000 5,000,000 1,700,000 5,000,000 1,700,090 5,000,000 1,700,000 5,000,000 1,700,000 5.000,000 1,700,000 5,000,000 1,700,000 3,000,000 1,700,000 Excess, if any _________ 13,~0O,0t10 50 Dose 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 26,4˘0,0ˇO 40,000,000 ~he contractual comaitnents regarding quantities and/or shipping dates are conditioned pon the Bureau of Biologice reviewing, testing and releasing submitted lots of the ~eccine under the following tine schedule: e. CCI release of the bulk vaccine within 7 days following receipt of the samples by the Bureau of Biologics for testing. b. Ralease of the final container vaccine within 3 days following receipt by the Bureau of Biologica of the final protocol. is understood that if any lot is not accepted by BOB the above schedule shall be *d~usted accordingly. PAGENO="0200" 194 Sc1IEDUJi; A COST AND PROFIT CRITERIA FOR THE PROCUREMENT OF SWINE FLU VACCINE Pursuant to ž3l7(1)(3) of the Public Health Service Act (42 U.S.C. 247(b)), as amended by the National Swine Flu Immunization Program of 1976 (P.L. 94-380), I hereby prescribe the following criteria for renegotiation to eliminate any profit realized from procurement of swine flu vaccine under the Swine Flu Program. 1. "Profit realized" from any procurement shall be the amount by which the amount paid by the Government to the contractor in the procurement exceeds the costs to the contractor of performing the contract. 2. The contractor will be paid its costs In performing the contract as follows: a) All direct and indirect costs actually and reasonably incurred by the contractor resulting from its participation in the Government's pro- curement of vaccine for the Swine Flu Program shall be reimbursed by the Government. The amount of such costs shall be determined in accordance with reasonable methods of allocation, practices and procedures applied on ~ basis consistent with those applied by the contractor in-preparing his proposal and reviewed by the Departoent's audit agency. b) Reimbursable costs shall include, but not be limited to: 1) Costs resulting from the production of v~ccine that fails, through no gross negligence of the contractor, to meet the specifications of the contract because it is refused certification by the Bureau of Biologics * of the rood and Drug Administration. 2) Costs incurred prior to execution of the contract in order to meet the reasonably anticipated delivery dates for the vaccine under the Program. - 3) Imputed interest on working capital, at rates determined by the Secretary of Treasure pursuant to P.L. ~2-41, 85 Stat. 97. 4) Actual and unrecoverable Costs due to interruption of pro- duction or sale- of other biologicals in order to devote staff and facilities to the production of vaccine for the Program, 3. Profit will only be allowed on A/Victoria/iS vaccine and shall be negotiated at arm's length based on the contractor's degree of risk, diff i- culty and complexity of performance, type of contract, and cooperation with the Government in meeting the needs of this health emergency. PAGENO="0201" 195 GENERAL PROVISIONS (Supply Contract) 1. DEFINITIONs As used throughout this contract, the following terms shall have the meaning aet forthbelow: (a) The term `head of the agency" or "Secretary" as used herein means the Secretary, the Under Secretary, any Assistant Secretary, or any other head or assistant head of the executive or military department or other Federal agency; and the term "his duly authorized representative" means any person or persons or board (other than the Contracting Officer) authorized to act for the head of the agency or the Secretary. (b) The term "Contracting Officer" means the person executing thin contract on behalf of the Government, and any other officer or civilian employee who is a properly designated Contracting Officer; and the term includes, exceptaaother- wise provided in this contracš the authorized representa- tive of a Contracting Officer acting within the limita.of his authority. (c) Except as otherwise providedin this contract, the term "subcontracts" includes purchase orders under thin contract. 2, CHANGEs The Contracting Officer may at any time, by a written order, and without notice to the sureties, make changes, within the gen- eral scope of this contract, in any one or more of the following: (I) Drawings, designs, or specifications, where the supplies to be furnished are to be specially manufactured for the Government in accordance therewith; (ii) method of shipment or packing; and (iii) place of delivery. If any such change causes an Increase or decrease in the cent of, or the time required for, the perform- ance of any pact of thework underthis costract,whetherchanged or not changed by any evils order, an equitable adjustment shall be made in the contract price or delivery schedule, or both, and the contract shallbemodifiedinwritingaccordingly. Anyclaimby the Contractor for adjustment under this clause must be asserted within 80 days from the date of receipt by the Contractor of the notification of change: Provided, however, That the Contracting Officer, if he decides that the facts justify such action, may re- ceive and act upon any such claim asserted at any time prior to final payment under this contract. Where the cost of property made obsolete or excess as a result of a change is included in the Contracter's claim for adjustment, the Contrasting Officer shall have the `right in prescribe the manner of dieposition of such property, Failure in agree to any adjustment shalt be a dispute concerning a question of fact within themeaning of the clause of thin contract entitled "Disputes." However, nothing in this clause shall excuse the Contractor from proceeding with the contract as changed. 8. Exra*p Except as otherwise provided in this contract, no payment for extras shall be made unless such extras and the price therefor have been authorized In writingby the Contrasting Officer. 4. VAIUATION IN Qrm,wmw No variation in the quantity of any item ca)led for by tbtecon- tract will be accepted unless such variation has been caused by conditions, of loading, shipping, or packing, or allowances in inanufact,lring processes, and then only to the extent, if any, specified elsewhere In this contract, 5. XNsz'acuorc (a) All supplies (which term throughout this clause includes without limitation raw materials, compooente, intermediate assemblies, and end products) shall be subject to Inspection and test by the Government, to the extent practicable at all times and places includingthe period of manufacture, and in any eventprior to acceptance. (b) In case any supplies or lots of supplies are defective in material or workmanship or otherwise not in conformity with the ~equiremente of this contract, the Government shall have the right either to reject them (with or without instructions as to their disposition) or to require their correction. Supplies or loin of supplies which have been rejected or required to be corrected shall be removed or, if permitted or required by the Contracting Officer, corrected in place by and at the expense of the Contractor promptly after notice, and shall not thereafter be tendered for acceptance unless the former rejection or requirement of correc- tion is disclosed. If the Contractor fails promptly to remove such supplies or lots of supplies which are required tube removed, or promptly to replace or correct such supplies or loin of supplies, the Government either (i) may by contract or otherwise replace or correct such supplies and charge to the Contractor the cost occasioned the Government thereby, or (ii) may terntinate this contract for default as provided In the clahee of thin contract `entitled "Default." Unless the Contractor corrects or replacea such supplies within the delivery schedule, the contracting Officer may require the delivery of such supplies at a reduction in price which is equitable under the circumstances, Failure to agree to such reduction of price shall be a dispute concerning a question of fact within the meaning of the clause of thin contrast entitled "Disputes." (c) If any inspection or testis made by the Government on the promises of the Contractor or a subcontractor, the Contractor without additional charge shall provide all reasonable facilities and assistance for the safety and convenience of the Government inspectors in the performance ~f their duties. If Government inspection or test Is made at a point other than the premises of the Contractor or a subcontractor, it shall be at the expense of the Government except as otherwise provided in this contract: Provided, That in case of rejection the Government shall not be liable for any reduction in value of samples used in connection with such inspection or test. All inspections and teats by the Government shall be performed in such a manner as not to unduly delay the work. The Government reserves the right in charge to the Contractor any additional coot of Government inspection and teat when supplies are not ready at the time such inspection and testis requested by the Contractor or when rein~pection or retest is necessitated by prior rejection. Acceptance or rejection of the supplies shall be made as pmmptly as practicable after delivery, except as otherwise provided in this contract; but failure to inspect and accept or reject supplies shall neither relieve the Contractor from responsibility for such oupplies an are not in accordance with the contract requirements nor impose liability on the Government therefor. (d) The Inspection and test by the Government of any supplies or lots thereof does not relieve the Contractor from any responsi- bility regarding defecto or other failures to meet the contract requirements `which may be discovered prier to acceptance. Except as otherwise provided in this contract, acceptance shalt be conclusive except as regards latent defects, fraud, or such gross mistakes as amount to fraud. (e) The Contractor shall provide and maintain an inspection system acceptable to the Government covering the supplies hereunder. Records of all inspection work by the Contractor shall be kept complete and available to the Government during STANDARD FORM 32 (Rev. 4-75) Prsscdbed byGSA. FPR(41 OcR) 8-lAbS 32-109 PAGENO="0202" I 8, 0 8 ~ 81 ~i~h 8: I ~ I I I 1' PAGENO="0203" 197 * tontractor shall not beliable for any excess costs If the failure to log Officer, who shall reduce his decision to writing and mail or perform the contract arises out of causes beyond the control and otherwise furnish a copy thereof to the Contractor. The decision without the fault or negligence of the Contractor, Such causes of the Contracting Officer shall be final and conclusive unless, max include, but axe not restricted to, acts of God or of the public within 80 days from the date of receipt of such copy, the Con- enemy, acts of the Government in either its sovereign or con- tractor mails or otherwise furnishes to the Contracting Officer tractual capacity, fires, floods, epidemics, quarantine restrictions, a written appeal addressed to the Secretary. The decieio~ of the strikes, frei~ht embargoes, and unusually severe weather; but Secretary or his duly authorized representative for the determi- in every case the failure to perform must be beyond the control nation of such appeals shall be final and conclusive unless do. and without the fault or negligence of the Contractor, If the terinined by a court of competent jurisdiction to have been failure to perform is caused by the default of a subcontractor, fraudulent, or capricious, or arbitrary, or so grossly erroneous and if such default arises out of causes beyond the control of beth as necessarily to Imply bad faith, or not supported by substantial the Contractor and subcontractor, and without the fault or evidence. In connection with any appeal proceeding under this negligence of either of them, the Contractor shall not be liable clause, the Contractor shall be afforded an opportunity to be for any excess costs for failure to perform,.unless the supplies heard and to offer evidence In support of its appeal. Pending or services to be furnished by the subcontractor were obtainable final decision of a disputo hereunder, the Contractor shall proceed from other sources in sufficient time to permit the Contractor to diligently with the performance of the contractsnd in accordance meet thorequired delivery schedule, with the Contracting Officer's decision. (d) If this contrEct is terminated as provided In paragraph (b) This `Disputes" clause does not preclude consideration of (a) of this clause, the Government, in addition to anyotherrights law questions to connection with decisions provided for to para- provided in this clause, may require the Contractor to transfer graph (a) abeve: Provided, That nothing to this contract ahailbe titie and deliver to the Government, in the manner and to the construed as making final the decision of any administrative extent directed by the Contracting Officer, (I) any completed official, representative,orboardon a question of law. supplies, and (Ii) such partially completed supplies andmaterlals, parts, tools, dies, jigs, fixtures, plans, drawings, lnforroationi 13 NOrms ANDA5S85TANCE REGARDING PATENTAND and contract rights (hereinafter called "manufacturing ma- CoPYRIGHT INI'sINGEdENT torials") as the Contractor has specifically produced or ape- The provisions of this clause shall be applicable only If the cificaily acquired forthe performance of such partofthlscontract amount of this contract exceeds $10,000. ashen been terminated; and theContractor shall, upon direction (a) The Contractor shall report to the Contracting Officer, of the Contracting Officer, protect and preserve property to promptly and In reasonable written detail, each notice or claim possession of the Contractor In which the Government has an of patent or copyright Infringement based on the performance of Intereat. Payment for completed supplies delivered to and en- this contractof which the Contractorhasknowledge. cepted by the Government shall be atthe contract price. Payment (b) In the event of any claim or suit against the Government for manufacturing materials delivered to and accepted by the on account of any alleged patent or copyright infringement Government and for the protection and preservation of property arising out of the performance of this contract or out of the use shall be in an amount agreed upon by the Contractor and Con' of any supplies furnished or work or services performed here- tracting Officer; failure to agreeto such amount shallbe adisputs under, the Contractor shall furnish to the Government, when concerning a question of fact within the meaning of the clause of requested by the Contracting Officer, all evidence and information this contract entitled "Disputes." The Government may withhold in possession of the Coptractor pertaining to such suit or claim. from amounto otherwise due the Contractor for such completed Such evidence and tofortnation shall be furnished at the expense supplies or manufacturlngmaterlale such sum as the Contracting of the Government except whom the Contractor has agreed to Officer determines to be necessary to protect the Government indemnify the Govermnent, against loss because of outstanding liens or claims of former lien holders. 14. BUY AMERICAN )SCT (a) If, after notice of termination of this contract unde*' the (a) In acquiring end products, the Buy American Act (41 U.S. provisions of this clause, it is determined for any reaeon that the Code 10 a-d) provides that the Government give preference to Contractor was not to default under the provleioqu of this clause, domestic source end products For the purpose of this clause, or that the default was excusable under the provisions of this (I) "Components" means those articles, materials, and sup- clause, the rights and obligations of the parties shall, If the con- plies, which are directly incorporated to the end products; tract contains a clause providing for termination for convenience (ii) "End products" means those articles, materials, and of the Government, be the same as If the notice of termination supplies,which arete be acquired underthis contract forpublic had been issued pursuant is such clause. If, after notice of termi- use;, and nation of this contract under the provisions of this clause, it is (Iii) A "domestic source end product" means (A) an un- determined for any meson that the Contractor was not in default manufactured end product which has been mined or produced under the provislone of this clause, and If this contract does not to the tlnitšd States and (B) an end product manufactured In contain a clause providing for termination for convenience of the the United States If the cost of the components thereof which Goversrsnent, the contract shall be equitably adjusted to cocnpen- are mined, produced, or manufactured to the United States ex- eats for such termination and the contract modified accordingly; coeds co percent of the cost of all Its components. For the failure to agree is any ouch adjustment shall be a dispute con- purposes of this (a) (lil)(B), componenta of foreign origin of corning a question of fact within the meaning of the clause of this the same type or hind as the produc~ referred to in (b)(ii) or contract entitled "Disputes." * (lii) of this clause shall be treated as components mined, pro- (f) The rights andremedies of the Government providedto this dttced, or manufacturedin the United States. clause shall not be exclusive and are in addition is any other (b) The Contractor agrees that there will be delivered under rights and remedies providedby laworunderthiscontract, this contract only domestic source end products, except end (g) As used In paragraph (c) of this clause, the terms "sub- products, contractor" and "subcontracters" mean subcontractor(s) at (i) Which are foruse outside the United States; any tier. (II) Which the Government determtoes are not mined, pro- * duced, or manufactured to the United States to sufficient and 12. Dzs~urss reseonablyavailablecomsnercialqriantitle$antof a satisfactory (a) Except as otherwise provided to this contract, any dispute quality; concerning a question of fact arisingunder this contract which (iii) As to which the Secretary detsrsnines the domestic Is oct disposed of by agreement shall be decided by the Contract- preference to be inconsistent with the public interest; or $ STANDARD FORM 32 (Rae. 4-75)~ PAGENO="0204" `4 I ~ U4nu ~.1 do ~?th ~iIt i~Iif ~ ~ ~ h I 0 ~ H I I PAGENO="0205" 199 or Is threatened with, litigation with a subcontractor or vendor as a result of such direction by the contracting agency, the Con- tractormay request the United Statestoenter into such litigation to protectthe Interests of the United States. 19. OFFICIALs Non To BENEFIT No member of or delegate to Congress, or resident Commir- abner, shall be admitted to any share or part of this contract, or to any benefit that ~pay arise therefrom; but this provision shall not be construed to extend to this contract If made with a corpo- ration for itsgeneralbeneflt. 20. COVENANT AGAINsT CONTINGENT FEEs The Contractor warrsnts that no person or selling agency has been employed or retained to solicit or secure this contract upon an agreement or understanding for a commission, percentage, brokerage, or contingent fee, excepting bona fide employees or bona flde established commercial or selling agencies maintained by the Contractor for the purpose of securing business. For breach or violation of this warranty the Government shall have the right to annul this contract without liability or In Its discre- tion to deduct from the contract price or consideration, or other- wise recover, the full smount of such commission, percentage, brokerage, or contingent fee. 2L UTILIZOTION OP SMALL BusINEss C0NCEaN5 (a) It Is the policy of the Government as declared by the Con- gress that a fair proportion of the purchases and contracts for supplies and services for the Government be placed with small business concerns, (b) The Contractor agrees to accomplish the maximum amount of subcontracting to small business concerns that the Contractor finds to be consistent with the efficient performance of this contract. 22. UTILIZATION OFLABOR Suarnus AREA CoNcERNs (a) It is the policy of the Government to award contracts to labor surplus area concerns that (1) have been certified by the Secretary of Labor (hereafter referred to as certified-eligible concerns with first or second preferences) regarding the employ- ment of a proportionate number of disadvantaged Individuals and have agreed to perform substantially (I) in or near sections of concentrated unemployment or underemployment or in persistent or substantial labor surplus areas or (II) in other areas of the United States, respectively, or (2) are noncertifled concerns which have agreed to perform substantially in persistent or suls- stantial labor surplus areas, where this can be done consistent with the efficient performance of the contract and at prices no higher than are obtainable elsewhere. The Contractor agrees to use his best efforts to place his suboontracts in accordance with this policy. (b) In complying with paragraph (a) of this clause and with paragraph (b) of the clause of this contract entitled "Utilization of Small Business Concerns" the Contractor in placing his sub- contracts shall observe the following order of preference: (1) Certified-eligible concerns with aflrst preference which are also smsll business concerns; (2) othercentlfled-eliglbieceneeraswlth a first preference; (3) certIfied-eligible concerns with a second preference which are also small business concerns; (4) other certified-eligible concerns with a second preference; (5) per- sistent or substantial labor surplus area concersa which are alas small business concerns; (6) other persiateator substantisllabor surplus area concerns; and (7) snail business concerss which are notlabersurplusarea concerns. 23. UTILIZATIoN OF Mrzccsrrv BusINassENnEarsIsEa (a) It is the policy of the Government that minority business enterprises shall have the maximum practicable opportunity is participate in the performancsof Governmentosntracts. (b) The Contractor agrees to use his beet efforts to carry out this policy in the award of his subeontracts to the fullest extent consistent with the efficient performance of this csntract. As used in this contract, the term "minority business enterprise" means a business, at least 50 percent of which Is owned by minority group members or, In case ofpubllcly-ownedbualneeaes, at least 51 pereent of the stack of which Is aaned by minerity group members. For the purposes of this definition, minority groupmembersare Negroes, Spaulah-speaklngAmerlcanperasfla, Amerbcan-Orlentala, American-Indians, American-Esklsncs, and American Aleuts. Contractors may rely on written representa- tions by subcontractors r~gsrdlag their status as minority heal- nessenterprloeeinlieuofsnlndepsndsntlnvestlgatlOn. 24. PRICING OFADJU5T)OENT5 When costs are a factsr In any determination of a contrast price adjustment pursuant to the Changes clause or any other provision of this contract, such costs shall be in accordance with the contract cost principles and procsderes In Part 1-15 of the Federal Procurement Regulations (41 CFR 1-15) or Section XV of the Armed Services Precureenent Regulation, as applicable, whlcharelneffectonthedateofthlscontract. 25. PATI0ENTO?INTERESTONCONREACIEN5'CUIMa (a) If an appeal Is filed by the Centrsctorfroenaflnal decision of the Contracting Officer under the Disputes clause of this con- tract, denying a claim arising under the contract, simple Interest on the amountoftheclalmflnallydeterminedowedbytheGsvern- meat shall be peyable to the Csntractor. Such interest shallbe at the rats determined bythe SecretaryoftheTreasurypursuantto Public Law 92-41,85 Stat. 97, frean the date the Contractor fur- nishes to the Contracting Officer his written appeal under the Disputes clause of this contract, to the date of (1) a final judg- ment bye court of competent jurisdiction, or (2) mailing to the Contractor of a supplementalagreementfor execution eithercon- firming completed negotiations between the parties or carrying out a declabonof aboard ofcontraotappesla. (b) Notwithstanding (a), above, (1) Interest shall be applied only from the date payment was doe, If such date in later than the filing of appeal, and (2) Interest shall not be paid for any period oftime that the Contracting Officer determines the Con- tractor has unduly delayed In pursuing his remedies before a board of contract appeals or a court of competent jurisdiction. PAGENO="0206" Clause 21(a) SMALL BUSINESS SUBCONTRACTING PROGRAM FPR 1-1 710-3(b) (a) The Contractor agrees to establish and conduct a small busi- ness subcontracting program which will enable small business con- cerns to be considered fairly as subcontractors and Suppliers under this contract In this connection, the Contractor shall (1) Designate a liaison officer who will (1) maintain liaison with the Government on small business matters, (ii) supervise compliance with the Utilization of Small Business Concerns clause, and (iii) administer the Con- tractor's "Small Business Subcontracting Program " (2) Provide adequate and timely consideration of the potentialities of small business concerns in all "make- or-buy" decisions (3) Assure that small business concerns will have an equitable opportunity to compete for subcontracts, par- ticularly by arranging solicitations, time for the prep- aration of bids, quantities, specifications, and deliv- ery schedules so as to facilitate the participation of small business concerns Where the Contractor's lists of potential small business subcontractors are excessively long reasonable effort shall be made to give all such small business concerns an opportunity to compete over a period of time (4) Maintain records showing (i) whether each prospec- tive subcontractor is a small business concern, (ii) procedures which have been adopted to comply with the policies set forth in this clause, and (iii) with re- spect to the letting of any subcontract (including pur- chase orders) exceeding $10 000 information substan- tially as follows (A) Whether the award went to large or small business (B) Whether less than three or more than two small business firms were solicited, (C) The reason for. nonsolicitation of small business if such was the case (D) The reason for small business failure to receive the award if such was the case when small business was solicited. 200 PAGENO="0207" 201 The records maintained in accordance with (iii) above may be in such form as the Contractor may determine, and the information shall be summarized quarterly and submitted by the purchasing department of each individual plant or division to the Contractor's cognizant small business liai- son officer. Such quarterly summaries will be considered to be management records only and need not be submitted routinely to the Government; however, records maintained pursuant to this clause will be kept available for. review by the Government until the expiration of 1 year after the award of this contract, or for such longer period as may be required by any other clause of this contract or by applicable law or regulation. (5) Notify the Contracting Officer before soliciting bids or quotations on any subcontract~ (including purchase orders) in excess of $10,000 if (1) no small business concern is to be solicited, and (ii) the Contracting Officer's, consent to the subcontract (or ratification) is required by a "Subcontracts" clause in this contract. Such notice will,~ state the Contractor's reasons for non- solicitation of small business concerns, and will be given as early in the prpcurement cycle as possible so that the Contracting Officer may give SBA timely notice to permit SBA a reasonable period to suggest potentially qualified small business concerns through the Contracting Officer. In no case will the procurement action be held up when to do so would, in the Contractor's judgment, delay perfor- mance under the contract. (6) Include the Utilization of Small Business Concerns clause in subcontracts which offer substantial small busi- ness subcontracting opportunities. (7) Cooperate with the Contracting Officer in. any studies and surveys of the Contractor's subcontracting procedures and practices that the Contracting Officer may from time to time conduct. . (8) Submit quarterly reports of subcontracting to small business concerns on either Optional Form 61, Small Bust- ness Subcontracting Program Quarterly Report of Partici- pating Large Company on' Subcontract Committmentsto Small Business Concerns, or such other. form as may be specified in the contract. Except as otherwise provided in .this contract', the reporting requirements of this subparagraph (8) do not apply to small business contractors, small business subcontractors, `educational and nonprofit insti- tutions, and contractors or subcontractors for standard commercial items. PAGENO="0208" 202 (b) A "small business concern" is a concern that meets the per- tinent criteria established by the Small Business Administration and set forth in ž 1-701 of the Federal Procurement 1~egulations. (c) The Contractor agrees that, in the event he fails to comply with his contractual obligations concerning the small business subcontracting program, this contract may be terminated, in whole or in part, for default. (d) The Contractor further agrees to insert, in any subcontract hereunder which may exceed $500,000 and which contains the Utili- zation of Small Business Concerns clause, provisions which shall conform substantially to the language of this clause, including this paragraph (d), and to notify the Contracting Officer of the names of such subcontractors. PAGENO="0209" 203 Clause 22a LABOR SURPLUS AREA SUBCONTRACTING PROGRAM FPR 1-1.805-3(b) (This clause is applicable if this contract exceeds $500,000.00) (a) The Contractor agrees to establish and conduct a program which will encourage labor surplus area concerns to compete for subcon- tracts within their capabilities. In this connection, the Contrac- tor shall: (1) Designate a liaison officer who will (i) maintain liaison with duly authorized representatives of the Government on labor surplus area mattei~s, (ii) super- vise compliance with the Utilization of Concerns in Labor Surplus Areas clause, and (iii) administer the Contractor's "Labor Surplus Area Subcontracting Pro- gram"; (2) Provide adequate and timely consideration of the potentialities of labor surplus area concerns in all "make-or-buy" decisions; (3) Assure that labor surplus area concerns will have an equitable opportunity to compete for subcontracts, particularly by arranging solicitations, time for the preparation of bids, quantities, specifications, and delivery schedules so as to facilitate the participa- tion of labor surplus area concerns; (4) Maintain records showing procedures which have been adopted to comply with the policies set forth in this clause. Records maintained pursuant to this clause will be kept available for review by the Government until the expiration of 1 year after the award of this contract, or for such longer period as may be required by any other clause of this contract or by applicable law or regulations; and (5) Include the Utilization of Concerns in Labor Sur- plus Areas clause in subcontracts which offer substan- tial labor surplus area subcontracting opportunities. (b) A "labor surplus area concern" is a concern that (1) has been certified by the Secretary of Labor (hereafter referred to as a certified-eligible concern) regarding the employment of a propor- tionate number of disadvantaged individuals and has agreed to per- form substantially in or near sections of concentrated unemploy- ment or underemployment, in persistent or substantial labor surplus 98-930 0 -78 --14 PAGENO="0210" 204 areas, or in other areas of the United States or (2) Is a noncer- tifted concern which has agreed to perform a substantial propor- tion of a contract in persistent or substantial labor surplus areas A certified-eligible concern shall be deemed to have per- formed a substantial proportion of a contract in or near sections of concentrated unemployment or underemployment in persistent or substantial labor surplus areas, or in other areas if the costs that the concern will incur on account of manufacturing or produc- tion in or near such sections or In such areas (by itself, if a certified concern, or by certified concerns acting as first-tier subcontractors) amount to more than 25 percent of the contract price A concern shall be deemed to have performed a substantial proportion of a contract In persistent of substantial surplus areas (by itself or its first-tier subcontractors) if the costs that the concern will incur on account of production or manufacturing in such areas amount to more than 50 percent of the contract price (c) The Contractor further agrees to insert, In any subcontract hereunder which may exceed $500,000 and which contains the Utili- zation of Concerns in Labor Surplus Areas clause, provisions which shall conform substantially to the language of this clause, in- cluding this paragraph (c), and to notify the Contracting Officer of the names of such subcontractors PAGENO="0211" 205 Clause 24 PRICING OF ADJUSTMENTS When costs are a factor in any determination of a contract price adjustment pursuant to the "Changes". clause or any other provision of this contract, such costs shall be in accordance with the contract cost and prof It criteria contained in Appendix A of this contract. PAGENO="0212" 206 MODIFICATIONS TO GENERAL PROVISIONS, STANDARD FORM 32 (Supply) Disabled Veterans and Veterans of the Vietnam Era (This clause is applicable pursuant to 41 CFR 50-250 if this contract is for $10,000 or more.) (a) The contractor will not discriminate against any employee or applicant for employment because he or she is a disabled veteran or veteran of the Vietnam era in regard to any position for which the employee or applicant for employment is qualified. The contractor agrees to take affirmative action to em- ploy, advance in employment, and otherwise treat qualified disabled veterans and veterans of the Vietnam era without discrimination based upon their disability or veterans status in all employment practices such as the following: employ- ment upgrading, demotion or transfer, recruitment, advertising, layoff or ter- mination, rates of pay or other forms of compensation, and selection for training, including apprenticeship. (b) The contractor agrees that all suitable employment openings of the con- tractor which exist at the time of the execution of this contract and those which occur during the performance of this contract, including those not - generated by this contract and including those occurring at an establishment of the contractor other than the one wherein the contract La being performed but excluding those of independently operated corporate affiliates, shall be listed at an appropriate local office of the State employment service system wherein the opening occurs. The contractor further agrees to provide such report~ to such local office regarding employment openings and hires as may be required. State ~nd local government agencies holding Federal contracts of $10,000 or more shall also list all their suitable openings with the appropriate office of the State employment service, but are not required to provide those reports set forth in paragraphs (d) and (e). (c) Listing of employment openings with the employment service system pursuant to this clause shall be made at least concurrently with the uSe of any other recruitment source or effort and shall involve the normal obligations which attache to the placing of a bona fide job order, including the acceptance of referrals of veterans and nonveterans. The listing of employment openings does not require the hiring of any particular job applicant or from any par- ticular group of job applicants, and nothing herein is intended to relieve the contractor from any requirements in Executive orders or r~gulations re- garding nondiscrimination in employment. (d) The reports required by paragraph (b) of this clause shall include, but not be limited to, periodic reports which shall be filed at least quarterly with the appropriate local office or, where the contractor has more than one hiring location in a State, with the central office of that State employment service. Such reports shall indicate for each hiring location (a) the number of indi~riduals hired during the reporting period, (2) the number of nondisabled - veterans of the Vietnam era hired, (3) the number of disabled veterans of the Vietnam era hired, and (4) the total number of disabled veterans hired. The reports should include covered veterans hired for on-the-job training under PAGENO="0213" 207 38 U.S.C. 1787. The contractor shall submit a report within 30 days after the end of each reporting period wherein any performance is made on this contract identifying data for each hiring location. The contractor shall maintain at each hiring location copies of the reports submitted until the expiration of one'year after final payment under the coi~tract during which time these reports and related documentation shall be made available, upon request, for examina- tion by any authorized representatives of the Contracting Officer or of the Secretary of Labor. Documentation would include personnel records respecting job openings, recruitment, and placement. (e) Whenever the contractor becomes contractually bound to the listing provi- sions of this clause, it shall advise the employment service system in each State where it has establishments of the name and location of each hiring loca- tion in the State. As long as the contractor is contractually bound to these provisions and has so advised the State system, there is no need to advise the State system of subsequent contracts. The contractor may advise the State sys- tem when it is no longer bound by this contract clause. (f) This clause does not apply to the listing of employment openings which occur and are filled outside the 50 States, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands. (g) The provisions of paragraphs (b), (c), (d), and (e) of this clause do not apply to openings which the contractor proposes to fill from within his own organization or to fill pursuant to a customary and traditional employer- union hiring arrangement. This exclusion does not apply to a particular opening once an employer decides to consider applicants outside of his own organization or employer-union arrangement for that opening. (h) As used in this clause: (1) "All suitable employment openings" Includes, but is not limited to, openings which occur in the following job categories: production and non-production; plant and office; laborers and mechanics; super- visory and nonsupervisory; technical; and executive, administrative, and pro- fessional openings that are compensated on a salary basis of less than $25,000 per year. This term includes full-time employment, temporary employment of more than 3 days' duration, and part-time employment. It does not include openings which the contractor proposes to fill from within his own organiza- tion or to fill pursuant to a customary and traditional employer-union hiring arrangement nor openings in an educational institution which are restricted to students of that institution. Under the most compelling circumstances an employment opening may not be ~uitable for listing, including such situations where the needs of the Government cannot reasonably be otherwise supplies, where listing would be contrary to national security, or where the requirement of listing would otherwise not be for the best interest of the Government. (2) "Appropriate office of the State employment service system" means the local office of the Federal/State flational system of public employment offices with assigned responsibility for serving the area where the employment PAGENO="0214" 208 opening is to be filled, including the Distric of Columbia, Guam, Puerto Rico, and the Virgin Islands. (3) "Openings which the contractor proposes to fill from within his own organization" means employment openings for which no consideration will be given to persons outside the contractor's organization (including affiliates, subsidiaries, and the parent companies) and includes any openings which the contractor proposes to fill from regularly established "recall" lists. (4) "Openings which the contractor proposes to fill pursuant to a custom- ary and traditional employer-union hiring arrangement" means employment open- ings which the contractor proposes to fill from union halls, which is part of the customary and traditional hiring relationship which exists between the con- tractor and representatives of his employees. (i) The contractor agrees to comply with the rules, regulations, and relevant orders of the Secretary of Labor issued pursuant to the Act. (j) In the event of the contractor's noncompliance with the requirements of this clause, actions for noncompliance may be taken in accordance with the rules, regulations, and relevant orders of the Secretary of Labor issued pur- suant to the Act. (k) The contractor agrees to post in conspicuous places available to employees and applicants for employment notices in a form to be prescribed by the Director, provided by or through the Contracting Officer. Such notice shall state the contractor's obligation under the law to take affirmative action to employ and advance in employment qualified disabled veterans and veterans of the Vietnam era for employment, and the right~ of applicants and employees. (1) The contractor will notify each labor union or representative of workers with which it has a collective bargaining agreement or other contract under- standing that the contractor is bound by terms of the Vietnam Era Veteran's Readjustment Assistance Act and is committed to take affirmative action to em- ploy and advance in employment qualified disabled veterans and veterans of the Vietnam era. (m) The contractor will include the provisions of this clause in every sub- contract or purchase order of $10,000 or more unless exempted by rules, regu- lations, or orders of the Secretary issued pursuant to the Act, so that such provisions will be binding upon each subcontractor or vendor. The contractor will take such action with respect to any subcontract or purchase order as the Director of the Office of Federal Contract Compliance Programs may direct to enforce such provisions, including action for noncompliance. 10/8/76 PAGENO="0215" 209 MINORITY BUSINESS ENTERPRISES SUBCONTRACTING PROGRAM PPR 1-1.1310-2(b) (This clause is applicable if this. contract exceeds $500,000.00.) (a) The Contractor agrees to establish a!ad conduct a program which will enable minority business enterprises (as defined in the clause entitled "Utilization of Minority Business Enterprises") to be con~ sidered fairly as subcontractors and suppliers under this contract. In this connection, the Contractor shall: (1) Designate a liaison officer who will administer the ContractOr' s minority business enterprises program. (2) Provide adequate and timely eonsideration of the potentialities of known minority business enterprises in all "make-or-buy" decisions. (3) Assure that known minority business enterprises will have an equitable opportunity to compete for subcontracts, particularly by arranging solicitations, time for the preparation of bids, quantities, specificati9ns, and de- livery schedules so as to facilitate the participation of minority business enterprises. (4) Maintain records showing (i) procedures which have been adopted to comply with the policies set forth in this clause, including the establishment of a. source list of. minority business enterprises on the source list, and (iii) specific efforts to identify and award con~ tracts to minority business enterprises. (5) Include the Utilization of Minority'Business Enter- prises clause in subcontracts which offer substantial minority business enterprises subcontractIng opportun- ities. . (6) Cooperate with the Contracting Officer in any studies and surveys of the Contractor's minority business enter- prises procedures and practices that the Contracting Officer may from time to time conduct. . (7) Submit periodic reports of subcontracting to known minority business enterprises with respect to the records referred to in subparagraph (4), above, in such form and manner and at such time. (not more ofteti than quarterly) as the. Contracting Officer may prescribe. PAGENO="0216" 210 (b) The Contractor further agrees to insert, in any subcontract hereunder which may exceed $500,000, provisions which shall con- form substantially to the language of this clause, including this paragraph (b), and to notify the Contracting Officer of the names of such subcontractors PAGENO="0217" 211 ALTERATION TO SF-32, General Provisions UNSOLICITED SAMPLES, DESCRIPTIVE LITERATURE, OR BRAND NAME REFERENCES: Where procurement is effected under specifications or purchase descriptions (other than "brand name or equal") and the Government does not specifically request bid samples, descriptive literature, or references to brand names, models, or part numbers as an integral part of the bid, bids which are ac- companied by any of the foregoing will be rejected unless it is clear from the bid or accompanying papers that the samples, descriptive literature, or references to brand names, models, or part numbers are not intended to qualify the bid and that the bidder proposes to furnish items fully in accordance with the specifications or purchase descriptions. Where offers contain un- solicited material such as samples, descriptive literature, or references to brand names, models, or part numbers, the Government will not be respon- sible in any way for determining whether the items which are offered meet the Government's requirements set forth in the applicable specifications or purchase descriptions. EXAMINATION OF RECORDS BY DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE: (Applicable to negotiated contracts only.) The provisions of the clause included herein, entitled "Examination of Records by the Comptroller General," are extended to provide equal rights to duly authorized representatives of the Secretary or of the Contracting Officer. PAGENO="0218" 212 ALTERATIONS TO SF 32 GENERAL PROVISIONS (Supply Contract) (See Federal Procurement Regulations, Subpart 1-11.4 Regarding Use.) FEDERAL STATE AND LOCAL TAXES ( ) E ept m y be otherw p v d d th p y b the ho d f o d t obta n r f d contract, the contract price includes all applicable or drawback of, any such Federal excise tax or duty. Federal, State, and local taxes and duties. (b) Nevettheless, with respect to any Federal ex- cise tax or duty on the transactibos or property cov- ered by this contract, if a statute, court decision, written ruling, or regulation takes effect after the contract date, and- (1) Results in theContractor being required to pay or bear the burden of any such Federal excise tax or duty or increase in the rate thereof which would not thw hvbe pybl ht t property, the contractprice shall be increased by the amount of such tax or duty or rate increase: Provided, That the Contractor if requested by the Contracting Officer, warrants in writing that no amount for such newly imposed Federal excise tax or duty or rate in- crease was included in the contract price as a con- tingency reserve or otherwise; or (c) No adjustment pursuant to paragraph (b) above will bemade under this contract unless the aggregate amount thereof is or may reasonably be expected to be over $100. (d) A used paragr ph (b) above th term co tract date" means the date set for the bid opening, or if this is a negotiated contract, the date of this con- tract. As to additional supplies or services procured by modification to this contract, the term "contract date" means the date of such modification. (e) Unless there does not exist any reasonable basis to sustain an exemption, the Government, upon request of the Contractor, without further liability, agrees, except as otherwise provided in this contract, to furnish evidence appropriate to establish exemption from any tax which the Contractor warrants in writing was excluded from the contract price. In addition, the Contracting Officer may furnish evidence to es- tablish exemption from any ta~x that may, pursuant to this clause, give rise to either an increase oc de- crease in the contract price. Except as otherwise provided in this contract, evidence appropriate to establish exemption from duties will be furnished only at the direction of the Contracting Officer. (f) The Contractor shall promptly notify the eon. tracting Officer of matters which will result in either an increase or decrease in the contract price, and shall take action with respect thereto as directed by the Contracting Officer. (2) Results in the Contractor not being required to pay or bear the burden of, or in his obtaining a refund or drawback of, any such Federal excise tax or duty which would otherwise have been payable on such transactions or property or which was the basis of an increase in the contract price, the contract price shall be decreased by the amount of the relief, refund, or drawback, or that amount shall be paid to Government, as directed by the Contracting Officer. The contract price shall be similarly decreased if the Contractor, through his faultor negligence or his failure to follow instructions of the Contracting Officer, is required to PAGENO="0219" 213 ALTERATION TO SF-32, GENERAL PROVISIONS EMPLOYMENT OF THE HANDICAPPED (a) The contractor will not discriminate against any employee or applicant for employment because of physical or mental handicap in regard to any posi- tion for which the employee or applicant for employment is qualified. The contractor agrees to take affirmative action to employ, advance in employ- ment and otherwise treat qualified handicapped individuals without discrim- ination based upon their physicial or mental handicap in all employment practices such as the following: employment, upgrading, demotion or trans- fer, recruitment, advertising, layoff or termination, rates of pay or other forms of compensation, and selection for training, including apprenticeship. (b) The contractor agrees to comply with the rules, regulations, and rele- vant orders of the Secretary of Labor issued pursuant to the Act. (c) In the event of the contractor's noncompliance with the requirements of this clause, actions for noncompliance may be taken in accordance with the rules, regulations and relevant orders of the Secretary of Labor issued pursuant to the Act. (d) The contractor agrees to post in conspicuous places, available to em- ployees and applicants for employment, notices in a form to be prescribed by the Director, provided by or through the Contracting Officer. Such notices shall state the contractor's obligation under the law to take af fir- mative action to employ and advance in employmei~t qualified handicapped em- ployees and applicants for employment, and the rights of applicants and em- ployees. (e) The contractor will notify each labor union or representative of workers with which it has a collective bargaining agreement or other contract under- standing, that the contractor is bound by the terms of section 503 of the Rehabilitation Act of 1973, and is committed to take affirmative action to employ and advance in employment physically and mentally handicapped indivi- duals. (f) The contractor will include the provisions of this clause in ~very sub- contract or purchase order of $2,500 or more unless exempted by rules, regu- lations, or orders of the Secretary issued pursuant to section 503 of the Act, so that such provisions will be binding upon each subcontractor or vendor. The contractor will take such action with respect to any subcontract or pur- chase order as the Director of the Office of Federal Contract Compliance Programs may direct to enforce such provisions, including action for noncom- pliance. Revised 6/8/76 PAGENO="0220" 214 TERNINATION FOR CONVENIENCE OF THE GOVERNMENT (a) The performance of work under this contract may be terminated by the Government in accordance with this clause in whole, or from time to time in part, whenever the Contracting Officer shall determine that such termination is in the best interest of the Government. Any such termin- ation shall be effected by delivery to the Contractor of a Notice of Termination specifying the extent to which performance of work under the contract is terminated, and the dates upon which such termination becomes effective. (b) After receipt of a Notice of Termination, and except as otherwise directed by the Contracting Officer, the Contractor shall: (1) Stop work under the contract on the date and to the extent specified in the Notice of Termination; (2) Place no further orders or subcontracts for materials, services, or facilities, except as may be necessary for coin- pletion of such portion of the work under the contract as is not terminated; (3) Terminate all orders and subcontracts to the extent that they relate to the performance of work terminated by the Notice of Termination; (4) Assign to the Government, in the manner, at the times, and to the extent directed by the Contracting Officer, all of the right, title, and interest of the Contractor under the orders and subcontracts so terminated, in which case the Government shall have the right, in its discretion, to settle or pay any or all claims arising out of the termination of such orders and subcontracts; (5) Settle all outstanding liabilities and all claims arising out of such termination of orders and subcontracts, with the approval or ratification of the Contracting Officer, to the extent he may require, which approval or ratification shall be final for all the purposes of this clause; (6) Transfer title to the Government and deliver in the manner, at the times, and to the extent, if any, directed by the Con- tracting Officer, (i) the fabricated or unfabricated parts, work in process, completed work, supplies, and other material produced as a part of, or acquired in connection with the per- formance of, the work terminated by the Notice of Termination, and (ii) the completed or partially completed plans, drawings, information and other property which, if the contract had been completed, would have been required to be furnished to the Gov- ernment; PAGENO="0221" 215 (7) Use his best efforts to sell, in the manner, at the times, to the extent, and at the price or prices directed or authorized by the Contracting Officer, any property of the types referred to in (6) above: Provided, however,, that the Contractor (i) shall not be required to extend credit to any purchaser, and (ii) may acquire any such property under the conditions pre- scribed by and at a price or prices approved by the Contracting Officer: And provided further, that the proceeds of any such transfer or disposition shall be applied in reduction of any payments to be made by the Government to the Contractor under this contract or shall otherwise be credited to the price or cost of the work covered by this contract or paid in such other manner.as t'he Contracting Officer may direŔt; (8) Complete performance of such part of the work as shall not have been terminated by the Notice of Termination; an'd (9), Take such action as may be necessary, or as the Contract- ing Officer may direct, for the protection and preservation of the property related to this contract which is in the pos- session of the Contractor and in which the Government has or may acquire an interest. At any time after expiration of the plant clearance period, as defined in Subpart 1-8.1 of the Federal Procurement Regulations (41 CFR 1-8.1), as the definition may be amended from time to time, the Contractor may submit to the Contracting Officer a list, certified as to quantity and quality, of any or all items of termination inventory not previously disposed of, exclusive of items the disposition of which has been directed or authorized by the Contracting Officer, and may request the Government to remove, such items or enter into a storage agreement `covering them. Not later than fifteen (15) days thereafter, the Government will accept title to such items and remove them or enter into a storage agreement covering the same: Provided, that the list submitted shall be subject to verification by the Contracting Officer upon removal of the items or, if the items are stored, within forty-five (45) days from the date of submission of the list, and any necessary adjuAtment to correct the list as submitted shall be made prior to final settlement. ` (c) After receipt of a Notice. of Termination, the Contractor shall sub- mit to the'Contracting Officer his termination claim, in the form and with certification prescribed by the Contracting Officer. Such claim shall be submitted promptly but in no event later than one.year from the effective date of termination, unless one or more extensions in writing are granted by the Contracting Officer upon request o'f the Contractor made in writing within such one~year period or authorized extensiton thereof. However, if the Contracting Officer determines that the facts justify such action, he may receive and act upon acy such termination claim'at any time after' such one-year period or any extension thereof. Upon failure of the Contractor to submit his termination claim within the time allowed, the Contracting Officer may, subject to any review PAGENO="0222" 216 required by the contracting agency's procedures in effect as of the date of execution of this contract, determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall thereupon pay to the Contractor the amount so determined. (d) Subject to the provisions of paragraph (c), and subject to any re- view required by the contracting agency's procedures in effect as of the date of execution of this contract, the Contractor and the Contracting Officer may agree upon the whole or any part of the amount or amount to be paid to the Contractor by reason of the total or partial termination of work pursuant to this clause, which amount or amounts may include a reasonable allowance for profit on work done: Provided, that such agreed amount or amounts, exclusive of settlement costs, shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. The contract shall be amended accordingly, and the Contractor shall be paid the agreed amount. Nothing in paragraph (e) of this clause, pre- scribing the amount to be paid to the Contractor in the event of failure of the Contractor and the Contracting Officer to agree upon the whole amount to be paid to the Contractor by reason of the termination of work pursuant to this clause, shall be deemed to limit, restrict, or otherwise determine or affect the amount or amounts which may be agreed upon to be paid to the Contractor pursuant to this paragraph (d). (e) In the event of the failure of the Contractor and the Contracting Officer to agree as provided in paragraph (d) upon the whole amount to be paid to the Contractor by reason of the termination of work pursuant to this clause, the Contracting Officer shall, subject to any review re- quired by the contracting agency's procedures in effect as of the date of execution of this contract, determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall pay to the Contractor the amounts determined as follows: (1) For completed supplies accepted by the Government (or sold or acquired as provided in paragraph (b)(7) above) and not theretofore paid for, a sum equivalent to the aggregate price for such supplies computed in accordance with the price or prices specified in the contract, appropriately adjusted for any saving of freight or other charges; (2) The total of -- (1) The costs incurred in the performance of the work terminated, including initial costs and pre- paratory expense allocable thereto, but exclusive of any costs attributable to supplies paid or to be paid for under paragraph (e)(1) hereof; PAGENO="0223" 217 (ii) The cost of settling and paying claims arising out of the termination of work under subcontracts or orders, as provided in paragraph (b)(5) above, which are properly chargeable to the terminated portion of the contract (exclusive of amounts paid or payable on account of supplies or materials delivered or ser-' vices furnished by Ŕubcontractors or vendors prior to the effective date of the Notice of Termination, which amounts shall be included in the costs payable under (i) above); and (iii) A sum, as a profit, equal to 2 percent of that part of the amout determined under (i) above which represents the cost of articles and materials not processed by the Contractor, plus a sum equal to 8 percent of the remainder of such amount, bu.t:the ag- gregate of such sums shall not exceed 6 percent of the whole of the amount determined under (i)above: Provided, however, that if it appears that the Con- tractor would have sustained a loss on the entire contract had it been completed, no profit shall be included or allowed under this subdivision (iii) and an appropriate adjustment shall be made reducing the amount of the settlement to reflect the indicated rate of loss; and (3) The reasonable costs of settlement, including accounting, legal, clerical, and other expenses reasonably necessary for the preparation of settlement claims and supporting data with respect to the terminated portion of the contract and for the termination and settlement of subconttacts thereunder, together with reasonable storage, transportation, and other costs in- curred in connection with the protection or disposition of property allocable to this contract. The total sum to be paid to the Contractor under~(1) and (2). of this para- graph (e) shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. Except for normal spoilage, and except to the, e%tent that the Government shall have otherwise expressly assumed the risk of loss, there shall be excluded from the amounts payable to the Contractor as provided in (e)(1) and (2)(i) above, th~ fair value, as determined by the Contracting Officer, of property which is destroyed, lost, stolen, or damaged so as to become undeliverable to the Government, or to a buyer pursuamt to paragraph (b)(7). (f) Costs claimed, agreed to, or determined pursuant to~ paragraphs (c), (d), and (e) of this clause shall be in accordance with the contract cost principles and procedures in Part 1-15 of the Federal Procurement Regula- tions (41 CFR 1-15) in effect on the date of this contract. PAGENO="0224" 218 (g) The Contractor shall have the right to appeal, under the clause of this contract entitled "Disputes,' from any determination made by the Contracting Officer under paragraph (c) or (e) above, except that, if the Contractor has failed to submit his claim within the time provided in paragraph (c) `above and has failed to request extension of such time, he shall have no such right of appeal. In any case where the Contracting Officer has made a determination of the amount due under paragraph (c) or (e) above, the Government shall pay to the Contractor the following: (1) if there is no right of appeal hereunder or if no timely appeal has been taken,,the amount so determined by the Contracting Officer; or (2) if an appeal has been taken, the amount finally determined on such appeal. (h) In arriving at the amount due the Contractor under this clause there shall be deducted (1) all unliquidated advance or other payments on ac- count theretofore made to the Contractor, applicable to the terminated portion of this contract; (2) any claim which the Government may have against the Contractor in connection with this contract; and (3) the agreed price for, or the proceeds of sale of, any materials, supplies, or other things acquired by the Contractor or sold, pursuant to the pro- visions of this clause, and not otherwise recovered by or credited to the Government. (i) If the termination hereunder be partial, prior to the settlement of the terminated portion of this contract, the Contractor may file with the Contracting Officer a request in writing for an equitable adjustment of the price or prices specified in the contract relating to the continued portion of the contract (the portion not terminated by the Notice of Ter- mination), and such equitable adjustment as may be agreed upon shall be made in such price or prices. (j) The Government may from time to time, under such terms and condi- tions as it may prescribe, make partial payments and payments on account against costs incurred by the Contractor in connection with the terminated portion of this contract whenever in the opinion of the Contracting Officer the aggregate of such payments shall be within the amount to which the Contractor will be entitled hereunder. If the total. of such payments is in excess of the amount finally agreed or determined to be due under this clause, such excess shall be payable by the Contractor to the Government upon demand, together with interest computed at the rate of 6 percent per annum for the period from the date such excess pay- ment is received by the Contractor to the date on which such excess is repaid to the Government: Provided, however, that no interest shall be charged with respect to any such excess payment attributable to a reduc- tion in the Contractor's claim by reason of retention or other disposi- tion of termination inventory until ten days after the date of such re- tention or disposition, or such later date as determined by the Contract~- ing Officer by reason of the circumstances. (k) Unless otherwise provided for in this contract, or by applicable statute, the Contractor, from the effective date of termination and for a period of three years after final settlement under this contract, shall PAGENO="0225" 219 preserve and make available to the Government at all reasonable times at the office of the Contractor but without direct charge to the Gov~ ernment, all his books, records, documents, and other evidence bearing on the costs and expenses of the Contractor under this contract and relating to the work terminated hereunder, or, to the extent approved by the Contracting Officer, photographs, microphotogtaphs, or other, authentic, reproductions thereof. FPR 1~-8.7O1 98-930 0 -78 --15 PAGENO="0226" 220 ALTERATIONS (Continued) January 1975 PRICE REDUCTION FOR DEFECTIVE COST OR PRICING DATA (FPR 1-3 814-1(a)) If any price, including profit or fee, negotiated in connection with this con- tract or any cost reimbursable under this contract was increased by any signifi- cant sums because: (a) The Contractor furnished cost or pricing data which was not accurate, complete and current as certified in the Contractor's Certificate of Current Cost or Pricing Data; (b) A subcontractor pursuant to the clause of this contract entitled Sub contractor Cost or Pric.ing Data" or "Subcontractor Cost or Pricing Data -Price Adjustments" or any subcontract clause therein required, furnished cost of * pricing data which was not accurate, complete and current as certified in the subcontractor's Certificate of Current Coat or Pricing Data; (c) A subcontractor or prospective subcontractor furnished cost of pricing data which was required to be accurate, complete and current and to be submitted to support a subcontract cost estimate furnished by the Contractor but which was not accurate complete and current as of the date certified in the Contractor a Certificate of Current Cost or Pricing Data; or.- (d) The Contractor or a subcontractor or prospective subcontractor furnished any data,' not within (a), (b), or (c) above, which was not accurate as submitted; the price or cost shall be reduced accordingly and the contract shall be modified in writing as may be necessary to reflect such reduction However any reduction in the contract price due to defective subcontract data of a prospective subcon- tractor when the subcontract, was not subsequently awarded to such subcontractor, will be limited to the amount (plus applicable overhead and profit markup) by which the actual subcontract, or actual cost to the Contractor if there was no subcontract was less then the `prospective subcontract cost estimate submitted by the Contractor: PROVIDED, The actual subcontract price was not affected by defective cost or pricing data. (NOTE: Since the contract is subject to reduction under this clause by reason of defective cost or pricing data submitted in connection with certain subcontracts it is expected that the Contractor may wish to include a clause in each such sub contract requiring the subcontractor to appropriately indemnify the Contractor It is also expected that any subcontractor subject to such indemnification will gener ally require substantially similar indemnification for defective cost or pricing data required to be submitted by his lower tier subcontractors.)' PAGENO="0227" 221 ALTERATIONS (Continued) January 1975 SUBCONTRACTOR COST OR PRICING DATA (FPR 1-~3.814-3) (a) The Contractor shall require subcontractors hereunder to submit, actually or by specific indentification `in writing, cost or pricing data ~inder the follow- ing circumstances: (1) Prior to the award of any subcontract the amount of which is expected to exceed $100,000 when entered into; (2) Prior to the pricing of any subcontract modification which involves aggregate increases and/or decreases in costs plus applicable profits expected to exceed $100,000; except where the price is based on adequate price competition, established catalog or market price's of coimnercial items sold in substantial quan- tities to the general public, or prices set by law or regulation. (b) The Contractor shall require subcontractors. to certify, in substantially the same form as that used in the certificate by the Prime Contractor to the Government, that to the best of their knowledge and belief, the cost and pricing data submited under (a) above is accurate, complete, and current as of the date of agreement on the negotiated price of the subcontract* or subcontract change or modification. (c) The Contractor shall insert the substance of this clause including this paragraph (c) in each subcontract hereunder which exceeds $100,000 when entered into except where the price thereof is based on adequate price competition, esta- blished catalog or market prices of coninercial items sold in substantial quantities to the general public, or prices set by law or regulation. In each such excepted subcontract hereunder in excess of $100,000, the Contractor shall insert the sub- stances of the following clause: SUBCONTRACTOR COST OR PRICING DATA - PRICE ADJUSTMENTS (a) Paragraphs (b) and (c) of this clause shall become operative only with respect to any modification made pursuant to one or more provisions of this con- tract which involves aggregate increases and/or decreases in costs plus applicable profits expected to exceed $100,000. The requirements of this clause shall be limited to such contract modifications. (b) The Contractor shall require subcontractors hereunder to submit, actually or by specific identification in writing, cost or pricing data, under the following circumstances. (1) Prior to award of any subcontract, the amount of which is expected to exceed $100,000 when entered into; (2) Prior to the pricing of any subcontract modification which involves aggregate increases and/or decreases in costs plus applicable profits expected to exceed $100,000; except where the price is based on adequate price competition, established catalog or market prices, of coimnercial items sold in substantial quantities to the general public, or prices set by law or regulation. PAGENO="0228" 222 (c) The Contractor shall require subcontractors to certify, in substan- tially the seine form as that used in the certificate by the Prime Contractor to the Government, that to the best of their knowledge and belief the cost and pricing data submitted under (b) above is accurate, complete, and current as of the date of agreement on the negotiated price of the subcontract or sub- contract change or modification. (d) The Contractor shall insert the substance of this clause including this paragraph (d) in each subcontract hereunder which exceeds $100,000 when entered into. PAGENO="0229" 223 ALTERATIONS (Continued) (FPR 1-3.814-2) (a) GENERAL. The Contracting Officer or his representatives shall have the audit and inspection rights described in the applicable paragraphs (b), (c), and (d) below. (b) EXAMINATION OF COSTS: If this is a cost-reimbursement type, incentive, time and materials, labor hour, or price redeterminabla contract, or any combination thereof, the Contractor shall maintain, and the Contracting Officer or his represetnatives shall have the right to examine books, records, documents, and other evidence and accounting procedures and practices, sufficient to reflect properly all direct and indirect costs of whatever nature claimed to have been incurred and anticipated to be incurred for the performance of this contract. Such right of examination shall include inspection at all reasonable times of the Contractor's plants, or such parts thereof, as may be engaged in the performance of this contract. (c) COST OR PRICING DATA. If the Contractor submitted cost or pricing data in con- nection with the pricing of this contract or any change or modification thereto, unless such pricing was based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation, the Contracting Officer or his representatives who are employees of the United States Government shall have the right to examine all books, records, docu- ments and other data of the Contractor related to the negotiation, pricing or performance of such contract, change or modification, for the purpose of evaluating the accuracy, completeness and currency of the cost or pricing data submitted.. Additionally, in the case of pricing any change or modification exceeding $100,000 to formally advertised contracts, the Comptroller General of the United States or his representatives who are employees of the United States Government shall have such rights. The right of exsmina- ation shall extend to all documents necessary to permit adequate evaluation of the cost - or pricing data ubmitted, along with the computations and projections used therein. (d) AVAILABILITY. The materials described in (b) and (c) above, shall be made available at the office of the Contractor, at all reasonable timeS, for inspection, audit or reproduction, until the expiration of 3 years from the date of final payment under this contFact or such lesser time specified in Part 1-20 Of the Federal Procure' ment Regulations (41 CPR Part 1-20) and for such longer period, if any, as is required by applicable statute, or by other clauses of this contract, or by (1) ~4 (2) below: (1) If this contract is completely or partially terminated, the records relating to the work terminated shall be made available for a period of .3 years from the date of any resulting final settlement. (2) Records which relate to appee1a~ under the "Disputes" clause of this con- tract, or litigation or the settlement of claims arising out of the performance of this contract, shall be made available until such appeals, litigation, or claims have been disposed of. (a) The Contractor shall insert a clause containing all5 the provisions of this clause, including this paragraph (e), in all subcontracts hereunder except altered as necessary for proper identification of the contracting parties and the Contracting Of ficer under the Government prime contract. PAGENO="0230" 224 July 1974 ACCOUNTS, AUDITS, AND RECORDS (a) The Contractor shall maintain books, records, documents, and other evidence, accounting procedures and practices sufficient to reflect properly all direct and indirect costs of whatever nature claimed to have been incurred for the performance of this contract. The foregoing constitutes "records" for the purpose of this clause. (b) The Contractor's facility(ies) or such part thereof as may be engaged in the performance of this contract, and his records shall be subject at all reasonable time to inspection and audit by the Secretary or his authorized re- presentatives (c) The Contractor shall preserve and make available his records (1) until the expiration of 3 years from the date of final payment under this con- tract, or the time periods for particular records specified in 41 CPR Part 1-20, whichever expires earlier, and (2) for such longer period,, if any, as is required by applicable statute, or by other clauses of this contract, or by (1) or (ii) below: . (i) If this contract is completely or partially terminated, the records relating to the work terminated shall be preserved and made available for a period of .3 years. from the .date of any result-. Ing final payment. (ii) Records which relate to (A) appeals under the Disputes clause of this contract, (B) litigation or the settlement of claims arising out.of the performance of this contract, or (C) costs and expenses of this contract to which exception has been taken by the Contracting Officer or any of his duly authorized representatives, shall be retained until such appeals, litigation, claims, or excep- tions have been disposed of. (d) The Contractor shall insert the substance of this clause, including this paragraph (d) in each subcontract hereunder with the exceptions of (1) purchase orders not exceeding $2,500 and (2) subcontracts or purchase orders for public utility services at rates established for uniform applicability to the general public. When so inserted, changes shall be made to designate the higher-tier subcontractor at this level involved in place of the Contractor; to add "of the Government prime contract," in place of "this contract" in (B) of subparagraph (c)(ii) above. . PAGENO="0231" 225 PREAWAED EQUAL OPPORTUNITY COMPLIANCE REVIEWS Where the bid. of the apparent low responsible bidder is in the amount of $1 million or more, the bidder and his,known first-tier subcontractors which will be awarded subcontracts of $1 million or more will be subject to full, preaward equal opportunity com- pliance reviews before the award of the contract for the purpose of determining whether the bidder and his subcontractors, are able to comply with the provisions of the Equal Opportunity clause. PAGENO="0232" 226 ALTERATION TO SF-32, General Provisions CLEAN AIR AND WATER CLAUSE (Applicable only if the contract exceeds $100,000, or the contractiftg officer has determined that the orders under an indefinite quantity contract in any one year will exceed $100,000, or a facility to be used has been the subject of a conviction under the Clean Air Act (42 U.S.C. 1857C-8(C)(1)) or the Federal Water Pollution Control Act (33 U.S.C. 1319 (C)) and is listed by EPA, or the contract is not otherwise exempt.) (A) The contractor agrees as follows: (I) To comply with all the requirements of Section 114 of the Clean Air Act, as amended (42 U.S.C. 1857, et seq., as amended by Public Law 91-604 and Section 308 of the Federal Water Pollution Control Act (33 U.S.C. 1251, as amended by Public Law 92-500), respectively, relating to inspection, monitoring, entry, reports, and information, as well as other requirements specified in Section 114 and Section 308 of the Air Act and the Water Act, respectively, and all regulation and guidelines issued thereunder before the award of this contract. (II) That no portion of the work required by this prime contract will be * performed in a facility listed on the Environmental Protection Agency list of violating facilities on the date when this contract was awarded unless and until the EPA eliminates the name of such facility or facilities from * listing. (III) To use his best efforts to comply with Clean Air Standards and Clean Water Standards at the facilities in which the contract is being per formed. (IV) To insert the substance of the provisions of this clause in any nonexempt subcontract, including this paragraph (IV). (B) The terms used in this clause have the following meanings: (I) The term "Air Act" means the Clean Air Act, as amended (42 U.S.C. 1857 et seq., as amended by Public Law 91-604). (II) The term "Water Act" means Federal Water Pollution Control Act, as amended (33 U.S.C. 1251 et seq., as amended by Public Law 92-500). (III) The term "Clean Air Standards" mear~s any enforceable rules, regu- lations, guidelines, standards, limitations, orders, controls, prohibi- tions, or other requirements which are contained in, issued under, or otherwise adopted pursuant to the Air Act or Executive Order 11738, an applicable implementation plan as described in Section 110(D) of the Clean Air Act (42 U.S.C. 1857C-5(D)), an approved implementation procedure or plan under Section 111(C) or Section 111(D), respectively, of the Air Act (42 U.S.C. 1857C-6(C) or (D)), or an approved implementation procedure under Sectiot~ 112(D) of the Air Act (42 U.S.C. 1857C-7(D)). PAGENO="0233" 227 ALTERATION TO SF-32, General Provisions Clean Air and Water Clause (Continued) (IV) The term "Clean Water Standards" means any enforceable limitation, control, condition, prohibition, standard, or other requirement which is promulgated pursuant to the Water Act or contained in a permit issued to a discharger by the Environmental Protection Agency or by a State under an approved program, as authorized by Section 402 of the Water Act (33 U.S.C. 1342), or by a local government to ensure compliance with pre- treatment regulations as required by Section 307 of the Water Act (33 U.S.C. 1317). (V) The term "compliance" means compliance with Clean Air or Water Stan- dards. Compliance shall also mean compliance with a schedule or plan ordered or approved by a court of competent jurisdiction, The Environmen- tal Protection Agency or an Air or Water Pollution Control Agency in accordance with the requirement of the Air Act or Water Act and regula-. tions issued pursuant thereto. (VI) The term "Facility" means any building, plant, installation, struc- ture, mine, vessel or other floating craft, location, or site of operations, owned, leased, or supervised by a contractor, subcontractor, to be utilized In the performance of' a contract or subcontract. Where a location or site of operations. contains or includes more than one building, plant, instal- lation, or structure, the entire location shall be deemed to be a facility except where the Director, Office of Federal Activities, Environmental Pro- tection Agency, determines that independent facilities are colocated in one geographical area, PAGENO="0234" 228 EQUAL OPPORTUNITY (July 1976) (Tire following clause is applicable unless this contract is exempt under the rules, regulations, and relevant orders of the Secretary of Labor (41 CIR ch. 60).) During the performance of this corstraci, the Contractor agrees as follows: (a) The Contractor will not discriminate against any employee or applicant for enrploynrcnt because of race, color, religion, se's, or national origin. The Contractor wilt take affirmative action to ensure that applicants are ensploycd, and that eirrptoyees are treated during employnsent, without regard to their race, color, religion. sex, or national origirt. Such action shall include, but not be limited to, tire foitosving: rrrrptoynrent, upgrading, demotion, or transfer; recruitment or recrsitnrent advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. The Contractor agrees to post in conspicuous places, available to enrployees arrd applicants for employment, notices to be providest by the Contracting Officer setting forth tire provisions of this Fqual Opportunity clause. (b) `fire Contractor sviit, in all solicitations or advertiscirrents for employees placed by or on beis,slf of rise Contractor, state thu all qrualifiesl applicants will receive consideration for emptoyisrent svitlrosi regard to race, color, religion, sex, or rational origin. (c) Tire Contractor wilt send to cacti labor union or representative of workers wins utsicir ire iris a collective bargaining agreerrrent or oIlier contract or understanding, a notice, to be provided by tire agency Contracting Officer, advising the tatror rumors or workers' representative of tire Contractor's connrnrrntnrerrls under this Equal Opportsnnity ctause, and stratI post copies of tire notice in coirspicuous ptaces available to enrployces and applicants for cnnrptoyinreni. (d) Tire Contractor will conrply with all provisions of Executive Order No. 11246 of September 24, 1965, and of tire rules, regulations, and relevant orders of tire Secretary of Labor. (e) Tire Coniracior will furnish all inforrrration and reports required by Executive Order No. 11246 of Scptenrber 24, 1965, and by tire rules, regsslariorns, and orders of tire Secretary of Labor, or pursuant rherelo, and wilt pernrit access ho his books, records, arid accounts by tire contracling agency arid tire Secretary of Labor for ptrrposeu of investigation to ascertain compliance sviiir suds titles, regulahiotss, aird orders. (1) In the event of tire Contractor's nonconrphiance wills rue Eqsnal Opportunity clause of thins contract or with any of the said rules, reguiariorrs, or orders, this conrtract tray be canceled, terminated, or suspended, in whine or in part, and tIre Coniracror nay he declared ineligible for furlirer Gcnvcrrnnnrent contracts in accordance with procedures autiroriced in Executive Oritcr No. 11246 of Septerrnber 24, 1965, ansi such oilier sanctions may be inrrposed and rcnnrecties invoked as provided in Execsntive Order No. 11246 of Seprerrrber 24, 1965, or by rule. regulations, or order of tire Secretary of Labor, or as otherwise provided by law. (g) Tire Contractor will iniciside lire provisions of p.uragrapirs (a) rhrrruurgtr (g) irs every sutrcontracl or purchase order sinless exenrpsed by runes, rn'guiatinnu, or orders of tIre Secrer.sr) of L.tbor issued hiursuant to aection 204 of Executive Order No. 11246 of Sepiennuber 24, 1965, sun that such provisiosrs svihl be birrdirsg upon cacti subcontractor or vendor. Tire Coniracior will take sucir action witin nespes I to any stnhnconsracn or purchase order as the contracting agency nay direct as a meanu of enrforcing ssucir prs~so~ irrctssdirrg sanrcitons rot nonconrphiance: Pronidcd, Irons'en'er, Tirsrt in tire event tire Corriracror bcconrres involved in, sir is tirrealened with, litigation with a subconrtractor or vendor as a result of such utirection by tire conrlracting agency, tire Contractor may request the Uniled States to enter into such litigation to printed tire interests of tIre United States. PAGENO="0235" 229 CODE ADM~ONS1I5LD SY (1/ 0/or Mm bkk 0) C~D~ nier for Disease Control East Paces Perry Road, N.E. Same as shown in Block 5/ Atlanta, CA 30305 . ORIGthIAL CODE J F.4C1Li7$ COD1~ [ s. AND *00050 ~.o~'.osom oc r . ~1 o ~ Parke, Davis & Company o*mD ---(k. *00* 5) "- `e Joseph Campau at the River . * Detroit, Michigan 48232 L . .J .~/~z/~i__ ($po 100$ DICtA úP?t100 ONlY 10 AMLNDM0010 0000UCflAII000 0 1ho .0*.. .ey$~.d .01ANNI.* A oo..edod 0 loOk l~ bImb 12. 1k, boo. ,odEo*. .p.olOM ho so..i0 .J O.hoo[~ .,o,od.d. hose -0*soo0. C)l.oo o...* .eIsoo~.d. ososipt 05 hA .sottdsoosl peAs. ho boss .sd doOe spo010.dAOo Ao.~,o o. o*oed.d. $y ~s~sl0o l,0o.do *0l*0.e 4*J$y i,IiOt A..~--OOpAs.0 Otis .*.ed*.o*t (b)$yo*hflotI~d5At5 .s*$p5.l OhIO *.Od*.O* .ooh 0000010., .0.. sebss*odi os$$ Op *5*000 hS os tok edo., om0*osioo so Ohs o.IkDo'*e eM ,o.,dsm*t soobs,,. 1*01050 01105* ACKNOWI0000MIO? 50,0 5COIVID ~55,0 $001500 OSOOCE p*00o *105.005*0k DAIS SPOCIS100 MAY 515012 IN ,t)OC100N OF YOlOl OF OIL Of, by oIls,. .5 ohIo oo.odooot5 p.. d.Mo to .bmp. os,#o. h,odp ..b.l'sod, woOoohoog. osphe osdo by *00~oi. I.s.,, pto.id.d ,.ob oIe~.oo. .sI.0~ o.,hso e.Oos.,e.s 1h ,oO,.*e$i.. sod Ohio .*o'dso░░, .011. s.o.Asd p~i.s sob. .p.oi' hoe. ..od dose optolfiol. AIXOUNDONG AND APP*OPIIATION DAli' (If PApO,POI) 10$ 510CK APPlIES ONLY 10 M0000CAIIONS OP C00515ACI$/O000l$ 1.[~~miocho.N,otdssAi..odPo..oo.s. the authorization for Letter Contract hi tha Secr~ary,.I/,1/76. lb. Oo.g.o os loOk is blooD 12,,. ,od, I, Oh, ohs.. .o.,h,oedo.oO,odFoodo.. lb. oh... es01oo.d ~sk.oOdoed.o A ,oodih,d 0 s.bsoO tOo. odslolsloetio. skoog.. ~oo0. so.h.o,., 10 popi.g 505,, .ppo.peI*Is* dose, .0.10* feoO, I, bl*Ok 52. - ______________________ ~j D.ood.Y,* b~ oboss sos00s.d ooootooel .s..O *0k I, block 12. . j~scsopi,o, OF *MEPADM001Y000*ICATION The target date for definitization of the contract as established by Modification No. 7, dated Nay 13. 1977, is further extended hereby to August 15, 1977. * 055 .spe..4d,d hos,s, oil too.,..d ,o.ookoIoso 010* d.sooo0 ,,Oo.soo.4 Ableob 5,o.b..M,0o.s .hsoI~.d,*M.k oed*.p'd.od lo 000bo51550d000,0 ~c ~ NOT 50000500 o coooo*cIovoPm001 50 55*0505 150*5 1550$ 50000500 *00 *1500,..,o...COP0$l 0k II~ ~ H ,~o0I IS CON1$*CTosoopp~o~~ - . .5 IShosso'. sip.oo.. eolhooisod 0.0100) ~~ioeti, loaeou (t,p. .rp~isj ~-i0. DAIS $550410 1 1. L_L_.._L.J__LL.JL-O--- 17. 550$*lAm%~oP 05555V4. ,,N ~ ~5O0.'.01 Ci.0050IoiPko.0 0$. ~ ~ COe*0100005FC$k ft35. ~ John 1.. -Villiaas 1 .ILIIL. . . rL~~'~ -1 `~4!-~. úJIkflU)J -- PAGENO="0236" ~p~no~.'T.~s.'-.." 1. . INT.MOOTICATON ~s0 - 7 f~. WICTM san 5/13/77 $ SIOUCInoN/pisowst stoats, p.o J~. ~osct so ~ I, CODE 4. ADMINI$T5510 5! (If .4., iA., TNiA.&~j cn~ ~enter for Disease Control 255 East Paces Ferry Road, NE Same as shown in Block 5. Atlanta, GA 30305 THIS kOCkA?Pb45OP4Yi~ -- -~ -~ - The target date for definitisation of the contract, as established by Modification No. 6, dated April 12, 1977, is further estended hereby to July 15, 1977. 4, s4, p's.d.d Ms.. ~ HIs.s s.d M..ddIs.. .1 lb. ds.s.aMs.Ms.Nd I. bI.sb I ..b..,i.lws dis..d. ,.,.i. ..4..gs4s.4 N 230 CODE ____________ F4CILflV CODE L~ N*N1 AND uSD5555 MID5D5~NT CD SOUCITATION NO.__________________ Parks, Davis & Company Joseph Campau at The River S~__________ Detroit, Michigan 48232 aoomc*,mwo, Letter 0 cow~s~,amssso. 2flA..7A..hLa& L i SHIES- ($stihr&i5) ISIS ~ APPiSS ~ ,~ A.dNDMENT5 OF 0 `* b~'~ s,sb.s.d 5.1,1MM. is .ss.d.d.. ~.llftTl. A bls.b IS. Tb. baa. s.d daIs .paa4.d N. .~uyl oTN~ A ~ N aaI sTs..~ ON,.. 511151 s.bas.I.dg. .s.ppT ~I this .a..d.s.t p.ia. sth. ~ ,.~ 4.,, .p.u~ TN lb. 1kA~iA~.y~ ...ANd. N s...flb. b.1l....g s.lu.4.* .)Sv .g.ag .sd ,.l.aai.g__.__.,.pi..,l Ibis N~.Tdss.s1 (b)Sy .ak.aa4~dg..g ...44~l IN. .a..d.s..I .. saab .spy .d lb. ,U..s.b..ll.d1 ..5.) Ap ~yasaI~ lNN.s. .h.sA .511,4 I....,. NIb. .&1HT11T,T .114 slITlIdlIlsIll ...,sb.,,. PAILUES OF VOl.11 ACENOWLEDOIMEPIT TOIl SECEIVED AT THE ISSUING OPPICI P5104 TO TIlE FOul AND DATE SPLCIIIID MAY ~ISULT IN SElECTION OP TOYS OFPU. II, by ,.IT~. sIlAs .aa.d..~ p.. 4.,,..,, ,ks.g. .. .15.. .l...dy ..b'..nd. ..sh sb..g. as. b. ...ds by 551551551 TNT.,, p.s..d.d s,,b ~ ft NT.. .s*I*. T~l~~sl11~ 5. lb. s,I,~,l.li,, s.d Tb,. .....dsIAN,s.d is .*s*,,.d p.15. NIbs .psTl.g baa. s..d 4.1, ,ps..I.d. ACCOIJNTINO AND APPIOPSIATION DATA (4/ PAqUIftd) IA 51l.l1AftI1.*l5.ft~5 OP CUNTRACTG/0~D~55 This CVSVQ, U.ds. s .ss,a.d ps,sas.I N ____________________________________________________________________________ Tb. Cbal5i, us IwIb TN bloda Us.. .ME. NI. aba.. aaaba.ad aaHls.T/ssdw. I (~] I. Na.. sabs..d aul ..T/ .4. ..dTNd IL l.NME lb. ad. 5511.. abs.~gs s.o.s d.s.g. Np. Ng S~ .pp.spAsINs daIs .154M. 15111,15 bl.4 ID 0 Tb $.ppl thsHIsl Ag .aa.I s.d TN.. p. sas.l~ OUd..IIy I___________________________________________ .odI. lb abs.. samba. d AN sIT aa sal twIN bls.b ID CCNTEACIO*I0,PIIO1 IS NOT 15051555 0 CONDNACYOS(OPPESOS C mousse s TO DON TIllS DOCUMENT CCNTSACTOIIQPQICS . -. NAME AND TillS ODIN -a - `~ ~ *~OLJw~ SIGN UM ass MIuss~ - PAGENO="0237" 231 .CONTOACTOft CODE j FACILITY cooe ( NAME AND ADDNUS - AMNDMENT OP * r'Parke, Davis & Company DSOUC$AUONNO. Joseph Campau at the River DATED ( ANNAS, (Ss'eS. rn, Detroit, Michigan 48232 ~ 200-76-0426 - L J DATHD* (SebE..1 H) 0 Th. sAN. .s.b...d sdkOeD. s..ns,d.d ..0 1.41 en bA~ 2. TO. I... ..ddsl. 5540.d A. ,esp.,5 ODAsLI ~ 0 ~..s -.s,...es. 0$.,.,. .to4nNstsd$. nesipt ~t HAS .t..nds..t pAs. sA. AN s.d des .p..Ohd A St. soEdIsOs., nn sss.o.dsd, Apis..f St. $.$s.Ag .dIhNa. (.)Hy ipnA, end ..IsnkTE,....nspAs of 54. ss.sdffistHt I)$y ..AN.d~d$A5 ,..~.0 54. et.esdsest en *..I `sen .0 St. Na. ..boMsd, ..f o0 dy s.peNs IslE., s. $DAOIN ohiAS .41.4... .nOnn.nss In 0.. s&ki$eTDn end s.ss.dnsn$ nooNs... PASIUPE OP TOES ACENOND10000NHV TO N CEIVUD AT TIN TUUINO OPPICU P500 TOTOS SOUP MS DATE $flCINED MAY IDEAlLY IN IdJICTION OP YOUE OPPEH 0 Dy nOes ~004. soend..esI ys. d.des. N..,. m eND .b,.dy oNINs.d, v.41 dv..g. spy I. StsN Isp SInpyso en Doe., pesId.d p.41 ilsgnstn 5. leo., sN.. n.fs.e.s* 50* `sII*HNHS s.d ill. esends.N, ..d enntend pA*. v.5.. ep.sA~ Iss..*0dsI. epedled. 0 ACCOUNTMO AND APPHOPUIATOON DATA (If s.q.HAd) . 1. THIS SLOCK APPLIES OPIY TO 000I$CATICND OP CONTPACIH/ON000 0 mis Ch.n. Ond.. A iueed pesesnt n. *sOe.g.e .0,41 A 15.4112 e..m~d.e In Neos .edeedwvNeSIs.ds.. ~b) [~ Th. .1... ..nb...d neMns.I~sofe. is onodiOsdle n.Oee 0.. .dsAleOesi,e eDen,.. oN.. N.n~.. A peyleg na.. .pp4pde$.n NH. IN.)ss$.N A PAN 12. I.) 0 11.1. SsppIenenl.t APPI~~~n' A INDId is. punsseotIs enS.eniny.O ". I ..di$n. nO. .1... .s41essd c.e.o.... son lenS is DIeD 2. . * ~9DESCDPUON o, AMPNDMEN?/MOOIEACATESN -`p.c The target date for definitization of the Contract, as set forth in ARTICLE III. 9. `of Modification No. 5, dated March 14, 1977, is further extended to May 15, 1977. l'nIPIS.p..std.d DDAN~*0 ten.. end nendIDes,., *0 II.. d41s.sswsl,.o.ssdiob5 Y4% CONTHACTON,OPf UHOs ID NOT 500051 COH5P*C10H)CPOU*OU HAND OP CCNTDCTOg~CIPPUC) .~ *~Uis. .tp.Ŕ.*0 (Tip. .,pN~s esOedud H SIgn) ~- I ~ ~ I 1-' ~C0, Center for Disease East Paces Ferry Rd. N.E. 4ftanta. GA 30305 PAGENO="0238" 232 OF SOLICITATION/MODIflC1)N OF CONTRACT COt)E JO. ADMINISTIND IV (if ~thN' ,A*, O1.,& ~) - P00, Center for Disease Control 255 East Paces Ferry Rd., N.E. Same as shown in Block 5 Atlanta, Ca. 30305 ` L~!~..'~---~-- 2 IFFICIVI DAFT 3.P.TOUISFIION/PUFC. AS~ FlOUTS? N~. 4. UOiECT No. Ill .,fl.h.4,Ó, 3/14/77 (WiLL_________ CODL ~ ,,~J Host AND *DDICSS rparke, Davis & Company F4CII. UI C . ODE [ * -I = o: AMENDMENT OF 0 SODCIT*IION NO.. . . Joseph Campau at the River . DATTD~ -~sp.ot,~o,j (si"yi.'ie. Detroit, Michigan 48232 ~ c~ c Letter o L_ . ostto_..9J,2.2j..7 i___ (S., (`SO 0 Tb. bM', **b...d .&sINT*. I. ,...~d.d.. ,.T k'TI, ,, W..k 2. Tb, b*.. .`d d,T. p,~ib.d F.. ..,,pT .1 O#.~L, ~ 0 0.5 OF.,... ,os ~ .,..p' .Tth,. ~ p.',. ~0. b.* .`d Os. .p.AO.d 00* s&o4.S.,. ~. .*..4.d. by ,`. .10. I.I..k~ .a..J. (.)Iy ,,g,I~, .5 ..U,AMg......._-.,.y'H.f Do .,~d..,t, b)Iy ,d~,,..Iid1..g .~.p'.F 0.. ..,.,d,..,,,...I. .*py ~F ..0..kd~ (,) ly ~ ~ .h,F. ,,dyd~ * ,.l.*s, M0* ~*I~.SA,,T ..d .,Sd".,T ..,b... FAIIU,E OF YOUR AC400VILIDGEMENT TORE 11(015W AT 150 ISSUING OFFICI PFIO.~iO TNT QvT ATO Do,, SP(CIPIED AlAS FISULT IN RiaclIeN OF TOUR OFTIR. ,. by ,.*,. S b,~ ,,,sd,.U y~. dj.'. I,,bs~g. ., .0., .b,.dy ..b.,T.d, .sb RA~T3 s*y MR SAM b, NI.;: AT., .,k,~ ..I..*s.l. 1* ..I,ab.. ..d lb. ,.,,d.sA, .5 *,....sd p...' 0*.p..o, F..' ..d d.n. .p...r.d 0 UcCOUNTIPIO AND APPIOPRIATION DATA (if y.q...y.J) IT. 1115 StOCK APPIIIS ONLY TO MODIPICANONS OF C004TR.NoSIOFD,RS -- III. Cbs.g. O:d.. I, ~ ,`All~ 1h O*.g.. ..I F.M.. DIsk Ti... sd. T.b. .5,'. ,osb.,.d .ND.d/..d... TI. .b*.. ,s.b.,.d TOUs.TINIO,, ., ,pd.D,d T, ,.F..T I. .d,s,OF*T... .h,,~,. (..d. ..,ho'g.,.T p.y'.g .01.. .`ypspASk, Os.. .11.1*14,0 bt:,L Ti (J Tb.. 5.ppls..,aI Ap.......l ..I...d AU, pAlM.TlT ,.IT.sty.F F*.AF., h* *5:.. ,s.b...d TN'I',d ,...l p.M ,, bI..b TI. UI The Target Date for definitizatiou of the Contract, as set forth in ARTICL}~ Ill. B. of Modification No. 4, is further extended hereby to AprIl 15, 1977. `..p.s.d,d 5..... MT .ME ,..do.... ,T Tb, d.,,.,s ..F*..,.d M 51,5 F, ..b,sN0*. aIo~g.d. ,....A ..d..~.0 .d 0 1,5 Is., ,MT.0.e. -. fl CONTRACIOR/001IROR IS NOT REQUIRED 0 co'ovcuuo~ a nou'a io1siow v.a DOCUMENT a RERu04_c~RS to a~° ~_ `NAME OF COHTLSCT0010IFRROI 57. FF114 TfF~TRSš~F NMKT~A..~ - S p.'.~ ,STs...d N ..N) - RE ~ _~,F 2. NAME AND TITLE OF IMPIR (T7pv .P??sE) To. DAlI STONED RI. NAMrOI cOwTu.CTIwG Quits. (~~T spP..l) 1wa.a ~ John L. VilJiams .1 NMIIL_ PAGENO="0239" 233 NO. 2. RPPRCEIVE DATE J2. USORIIITSN/FUIIcHA*H REQUEST NO. 4. P~*C~t NQ./V~~)fh~i 111114 Modification No. 4 2-14-77 io sy CODE ___________Jo. ESMP4RTIIEED ST (if.A.r IA.. bAd ~) CODE. L CCenter for Disease Control 255 East Paces Terry Road, N.E~ Same. as shown in Block `5 Atlanta, Ga. 30305 CONTRACTOR - COI~tf I FACILITY cODE L NAME AND ADDRESS . AMNNDMIP4T CD 0 ~ NO. Parke, Davis & Company DATED- ,,.., ..~, Joseph. Campau at the River Letter ~`~J" Detroit, Michigan 48232 140. 200-76-0426 L.. .J DATED 9/22/76 (S.,hl.thti) TIllS hOCK APPLIES ONLY TO AMENDMINTS OF SOLICITATIONS 5. .bs.s .s..h...d ..li.UstA. I, .s.sd.d ss ssT ksth is bI.k 12. 5. h. s.d d.Is ,ps.I1.d 1. s..ipt 1 oTI.s[5 H ~ 0 A .sI `sts.'sd. OH.... ,,s,,Is.k,,s.sI.d~. .s.Ept .f this .,,.d.,~sT ptA. 1.1k, Its., s.d d.t* sp.,IlIsd A N.. .sdkIlsTA.I. Ills lslsl,d.d, by 5RSRITI.R AIIs.Il.$ s.II..ds; sily 5190119 s.d s.s.Alg..~.._Rspi.s.T hi, s "~~k (b)Ry .sk.sO~dgI., ..o.IpI.I his .S,,d.ss,,I ., .ssh sspy 4*, sR. .,b.IIT*d1 s.(I) Np .sps.A. sENT .h.d. is.ktd~s Ts 1k. 5NIkil5Ti5~ .sd .s.sdss.Ut ,s.tbs,s. FAILURE OP YOUR ACKNOWLEDGEMENT TO RE RECEIVED AT THE ISSUING OFFICE PRIOR TO TIlE HORS AND DATE SPECIFICS MAY RESULT IN REIECTION OP YOUR OFFER. II, by ,idA* of his lIR~lld'llTIf 11111 dssis To sIt..g. .s.sN. .h..dy SINIRIN5d sssh .hs.g. ss.p A. stoES by NA~,s. ITs., ps.,idsd sosh NIs9Tsst AIls. D5AIT ,*l~I*RsT 0 Th* s*IlsiT.TiD~ ~Dd hi, ss.sd..Isf, ..d A ss..i,.d p.1.. Is Ills spoof.. As. s.d dsl. s.s.i*sd. ACCOUNTING AND APPROPRIATION DATA (If p.q..ip,d) TIlES StOCK APPLIES OPISY TO MODIFICATIONS OPCONTRACTS/ONDEIS (.1 ThIs Cl...1. O.d.. A Issosd PAT5N14TT N ~ 5. Chs.g.s 5sT sIN. A bAA T2.,o s.d. 1.51* *A.ss RI11bRSsd I5ll'OIIIARdSR iA) Tb. sAss. .s.b,..d s.w.sS1/,,d.t Is ssdtfhd 5* ,*fl,sI Ills sd.AlshsThssllslsgss ~,S& *1 .h.sg.s A p.pAg 4RE. sINs `11011.. ~, Is.)IRIFIN. A bAA $5. II) 0 This DsppIss..I.I AN.s..~sI A .~I,.sd i.l. pst.ssts.SsR ssllh..ITysI H ...dIU.s Ill. sAss. .tssA,sod sssslES s.ssl AsMh Is Mssk 2. DESCRIPTION OP AMUNDMSNT/MODI?ICATION The target date for definitization of the Contract as set forth in Article 111.5. of Modification No. 3 is further extended to March 15, 1977. I ~ lP555psNAdsdh,~~i~A isssts s.d .,,dIhs.. .111.. dss..ssMssfss.sssd A Hid. Is.bpsNIsIslR dSRg.d I CONIEACTO$#OPPERCII IS NOT REQUIRED o co.ao*c~oRIoPfnoo H imsum 10 $5014 , ,sts.A .ssdss.gld.sN 1.5 Eslss *,4,lEsd. THIS 500*515 AIR MIUSH..... -. I. NEST OP CONTMCTOIEIQ,PRRCR I. ěIT5IS.RIIpss.Rs.4b.d..dRssIgD) NAME AND TI1SU OF HOlES IT.,, ipis.i ___ jIR.IRKIRIRWTIU PAGENO="0240" A~N~AH' ~ ADMINISHRRRD ~ (II.M.;La_. ú~~A 7CONHAC OH C000 [_ J HUNT AND ADDORUS r Parke,. Davis and Company 4~75 CODF L AM(NDMENT Of 0 SOUCITATION NO.-.~-. `~- . ~ Joseph Campau at The River S(,I.UA. Detroit, Michigan 48232 .T_zgp . C1) . L J DATED_ (Soe U~4 9) «t~OHC N o.Le~Usr ~fl~~-7fo~QA26 e*tte_9j2211&... (So, Mo4 OR) To. ACCOUNTING AND APPROPRIATION DATA (If `q~-Ij TT. THIS RIOCU APPLIHO ONLY TO MODIfICATIONS Of CONTRACTS/ONTIRS - - 0 Tb. Ch,og, OdRo $ LR,I,Rd POROONT To .-_._~ Tb, Ooog,, ~*Tfo,0 A blook 2,,, ood. N Tb, obo. ,oob,,.d ,,TRA0T/.(d.T. (b) 0 TN obR bRRdooORod/odTRoHdPOdNT,*,,T.,,e,,,N,,..(oob.,,b,,,.,k,P.y,,o5,,.,PT,P,R,*,~kIT,,,,.IRIlwS RD. So) ~Th. SopPI,'~RIOI AT~R.o.ol LR o,OO*d 0TH foRoot N "HoOf o~. 4-} OJ$()...G ~)(7~ N odD., Ih~ oN,. Toooo,,d .HoToT OR R*l Nb blook ID. 2.DRSCRIPTION Of AURNDMLNT/MOUIPICATION - U? 1. ARTICLE III - QUANTITIES is cancelled hereby in its entirety sod the following is substituted therefor: ARTICLE III - QUANTITIES: The number of doses, by vial sizes, to be furnished under the contract is: Bivalent Vaccine Monovalent Vaccine 10-dose viola - 25,400,000 doses 10-dose vials - 2,800,000 doses 50-dose vials - 2,3O0~O0 doses 50-dose vials -~,~,OOO doses Total - 27,700,000 doses Total - 5,000,000 doses Variation in Quantity: A variation in the total quantity supplied hereunder will be accepted, provided that such variation is not in excess of 15% of the contract quantity as specified above, and is available for delivery 1prior to the final delivery date (January 15, 1977). The Contractor shall notify the Government of availability of additional quantities as soon ss this ststus becomes known to the contractor. 2. ARTICLE VI - RETURN OF VACCINE is cancelled hereby in its entirety and the following is substituted therefor: l.00 ,~d HHASR,O of TO,, dOOR.RHT `.I.,o..d,. 5IORS fOR N,,T,To,, oh~,.d. RoORU RRRSRT.d ~IdH MT To,,, NTd ,l,.T 0 ~ NOT R100IHRD o CONTRACTOMOPHTOR 5 RIOUTRID TO TOTS OOCUM(NT AND RRTUTO_...._COPTR$ 10 551110 IS. NASH AND TITLE Of SIGNER it,p~s ..p?~T) IRA. DART sIDleD 14~i~A51 of ~flDACTHIG OiiÓR oi Robert R. Adams 1 . Director, Legal Division - - 112_30_76 - John L. Wilhiass 234 AMEN~4INT QF 5OLtCI1ATi~N/M()c~ftj~AyIot4 oF COI'flRACT [ ~ fr .~fNDME T,~OOUIHC*T~ON NO L~F2. RTTRCTIVT DATR ~3, IROUIOITION/PURCHA (o,V'~ RRO. HN0SCT NO `if .*k.,W,~ I1~1d15_~~b_,No. 3 ~ 12-30-76 I JO TSSURD DY CW)E [ a. ... .. .. (555 PGO, Center for Disease Control 255 East Paces Ferry Rd., N.E. Ssae as shown in Block 5 Atlanta, Ga. 30305 0 Tb. oN. "o'b.,,d ROhI,I.T,00 R ,00fdRd,, ROT Io~$o .H Nook 2 Tb. Too,, cod dRTR .RoooS,d To. N.y .0 Of,., 0 *~"~`. 0 ~ ,.T,.d,d OP.HR `HOT ,RSTO.OT,dQ. RI~.pT of TI/O 000.Tth,,f poco IRth~ boo Rod doT. OPROIHOd OITOR ROI.I.TOT.OO, o.. oo.d.d by Ro,RT IS, b/log o.llod,. TR)UyU000,00dNIOHio,_...............oy.,..TH..o.o,,d0000T.)b)Ry.,S.,.,Ijdg,g,,RHpT.To.., ,o,,do,TTo, ,R,h,.y,0TTS, ,f.,,obo.TT.d, R.IRIRT0,f,00T.IRT.R,TOTR,o. ,THRS odd.., ,oT.~o,. oh. ,,Io,l,T,., cd RMR,d.oo,Tcooobo., PAILUTO OP TOUR ACKNOWITOORMENT TORT HRCRY000 AT TNT ISSUING OfFICE P0101 TO TOIl 000* UPRD DATE SPRCITIRD MAY RESULT IN TEIRCTION OP YOUR OFfER. II, by o.ToR of NOR RIOROdORO TOO d.o.'. I, oh,,~, 0' RHo, ,I,.~y ObHI.TTTO. Rob ITHg, osy So ~od~ by NUNo,. I.T., p.R..d,d OOIIIT,l,OH, H ITo, o.k., ~I.I~'oo. 0 Tb. ..I,,.TRM, ROOd A.,, .o...do~O. .od .. `.o.o.d pso N Ib...p,,,.g TIMH~ lTd d.TR Rp.o,U.d PAGENO="0241" (Continued) ARTICLE VI-RETURN OP VACCINE: No requirement to accept unused vaccine The amended ARTICLE IX - PAYMENT i~ deleted her therefor: ARTICLE IX - PAYMENT: A. Payment shall be made within 30 days of t vaccine which has been accepted. Each invoic identify the appropriate Delivery Order for w vaccine type and amount delivered, the unit p vaccine lot number(s). All payments shall be definitization of a contract. The following payments for vaccine:~ For the first 26,700,000 doses Bivalent For any additional Bivalent Monovalent Vouchers shall be submitted to the following ad Center for Disease Control Bureau of State Services Immunization Division 1600 Clifton Road, N.E. Atlanta, CA. 30333 B. Payment for self-insurance retention and be made within 30 days of receipt of contract prices do not include the cost for self-incur liability insurance and applicable taxes ($2, attributable to the National Swine Flu ImmunE C. The prices of Bivalent Vaccine shall md A/Victoriaf75 Vaccine component which is cons: pursuant to P. L. 94~38O. ARTICLE XI - PROJECT DIRECTOR is deleted hereby is substituted therefor: ARIICLE XI- PRQJECT DIRECT9~: The Contractor shall designate an individual wh regarding the technical performance of the coot the authority necessary to commit the company i Government reserves the right to approve the Pr that position. Subparagraph B of ARTICLE XIII - DEPINITIZATION of December 29, 1976, is deleted hereby in its substituted therefor: 235 STANDAID PORM 38, JULY 1,66 1 - 050C. NIND CONTO Q CONTINUATION SHEET ~ 2 - 0111101 01 CoNocOol - situ ~io $UP?UE$FSEIVICI$ OVANTI1Y UNIT UNIT 11101 AMOUNT the contra llowing Is a invoice hail, as a cry was mad 1 price, 511 nal basis p e used for SO-dose `~ $ 19.01 $ 0.3$ $ 9.41 2. 3. 4. 5. 1O-d $4 $0 $1 0 f or `ii :ot Id Li re a 0, )t ra 94 be is p1cc by and t e contra or vouc ich the ice, the on a pro rices' Sb se vial 34 17 51 resa: nsurance r's invo nce ($2, 76,648.0 ation Pr tie a $.Oi Idered to tor. ubstfteted r all inimum, the the nding rovisional al~ ifty shall a vec~ine urns ~or ly turn on Liab or same. ~1 00) or pram ich are aol of 1976. ~er doae profit on reasonable profit the in its e tir ty and the ollowimg will se act. Tb any asp ject Dir as et f stirety `C ci `to `th 4 s the point dividual sh f this coat and any at in Modifies he follˇvic of contact 11 have act. The C*USt *0 ton1p~ * 64 : `: 98-930 0 - 78 -- 16 PAGENO="0242" 236 ract are L ma - On ruary 15 TRACTOR' hereby: B. 1) The cost of the premium for the liability insurance to this Program is not included in the vaccin price. In the event that the insurance premium for liability i thereof, is refunded to the contractor under atny retros plan, it shall be refunded to the Government r~ot later after receipt by the contractor. 2) Any money provided to the contractor by the Governm retention fund ("Fund") (see Article IX B; Payment) she separate account in a federally insured commercial bank of $100,000,000. Said Fund shall be invested in aq tnt or arrangements, e.g. * Certificates of Deposit, st~the interest rates. In the event any payment by t~he contia made from the invested principal of the Fund prior to e or dates of such invested principal, the tota1~ proceeds investment or investments shall be deemed to apply firs to interest. To the extent such total proceeds sre las invested principal, the difference shall be ct~arged age interest due the Government. Payments shall ~e ma4e on said account and only for self-insurance losses and reL contractor as follows: I a) All sums which the United States shall! have the contractor as damages under section 317(k)(7) of th Act (42 U.S.C. 247(b)), and any costs of Ijitigation by the contractor and attributable theret1; and b) All payments made by the contractot' fc~r expense expenses or expenses for salaries of empldyee~.of in the investigation, negotiation, settle ent, or d suit pursuant to section 317 (K) (7) of t e Public (42 U.S.C. 247(b)) or in the investigatio of a cas result in such claim or suit Such losses and related expenditures are ore patti insurance policy between the contractor a d its tea interest earned on the Fund shall be rein ested wit principal remaining in the Fund. Any amo ntprovid Government for the Fund, which is not exp nded by A accrued interest to such date, shall be r turned to than August 31, 1985. _______ 1. The Schedules for definitization ~f this con Negotiation of price and other terse and condit: Target date for definitization - On or before F Subparagraph B of ARTICLE XIV - LIMITATION ON C in its entirety and the following is substituted A5PT(~T.F XIV - TIMTTATTOM A!~ r'~~"" `S PROFIT *MaewY JNfl - !t forth below r 4fore Januar 30. 1q77 1B177. ~FIT is del. ad hereby~ whi h is solel,1 attribute See Article IX~; Payment. surance, or any~ part ective, experience-rating ban thirty (30)tdays I. nt or a self-ihsurance 1 be segregated1 in.a with assets in ~xcesa res~ bearing arrangement ank~'s prevailing tor1 is required~ to be e stated maturity date of ~uch liquidated to~ principal a~id secondi than the oriBipal net: all other a1ccrued y f~rom the principal of ted expenditures of the rut to recov from tbJ Public Health Servig. or attorney fe a incurrec (other than of!f ice e contractor) ljncurr.d fence of any cl,aim or ealth Service Act reasonably ii ly to ul rly described in the ec~ive insurer~. Any tl~a balance o~ the d t~e contract* by the gti~t 1. 1,85, ~ieiudLng th1 Governcent(.t later I ~ ~ ~ CONTINUATION SHEET ~ 2O0-76-04~ 3 I~i~ ~~1CONT~AaO* SUM NO. WWUS$/SI5VICE$ ARTICLE XIII - DPINITIZATION: 6. PAGENO="0243" 237 POEM 36. ibtv 1966 ╝) - OP SOC. Nw40 COl. IPSO. 106 GINESM SUVICIS ADMIHISTEATION CONTINUATION SHEET tb#fificat ion No. 3 I 4 ~m PEOC. 0. 1 CF - Letter Contract 200-76-04426 i~oi ouuos o, c0NT'ACTO* ITEM NO. $UPPL*$/SEEVICES p~ 8.. (Continued) 3) In the event the contractor is required to pay a cia a the Cover ent pursuant to Section 317(k)(7) of the Public He ith Servi e t (42 U.s. .247(b)) after the contractor has returned the unexpend d amount ro ided for se insurance, including accrued interest, such ci im shall e eaed satis ted up to the amount of principal returned to the overnment erefors, t total of the paymenta made from the Fund by the cont actor and th credits pr 14e4 to the contractor by the Government, after the unexpende p incipal and accrued interest have been returned to the Government, shall not ox eed $2,500, 0. 4) It is the understanding of the parties to his contr ct that since a Fund may only be expended for the reasons stated in 8.2 above si d since the unexpended principal of the Fund, including ac rued inte es , shall be eturned. to the Government under the circumstances set orth ahoy , ey do not ostitute income to the contractor. 7. The AVAILABILITY SCHEDULE is deleted hereby in ts entire y nd the atta ed~ AVAILABILITY SCHEDULE is substituted thorefor: PAGENO="0244" ~i~1abi lity ~P.~Ee 9-28-76 9-28-76 9-28-76 * 9-29-76 9-29-76 9-30-76 l0-1]~76 10-12-76 10-13-76 10-19-76 10-25-76 10-26-76 10-27-76 11-1-76 11-2-76 11-3-76 * 11-8-76 * 11-9-76 11-15-76 * 11-16-76 11-17-76 11-22-76 11-23- 76 11-29-76 11-30-76 * 12-6-76 * 12-7-76 12- 13-76 Doses_* * 10.3 11.. 6 10.3 10. 10.7 10. * 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 10. 4. Packaged In 10-close vials 50-dose vials 10-dose vials 10-dose vials 50-dose vials 10-dose vials 10-dose vials q 10-dose vials 10-dose vials 10-dose vials 1O-dose vials 10-dose vials 1O~dose vials 10-dose vials 10-dose vials 10-dose vials 10-dose vials 10-dose vials 10-dose vials 10-dose vials 10-dose vials 10-dose vials 10-close vials 10-dose vials 10-dose vials 10-dose vials 10-dose vials 10-close vials 238 L~~er Contract 2(10-76-0426 AVAILABILITY SCHEDULE Bivalent vaccine - each 0.5 ml. dose contains 200 CCA units of A/New Jersey/76 (Swine) and 200 CCA units of A/Victoria/3/75 / * expressed in units of 100,000 PAGENO="0245" 239 AVAILABILITY SCHEtWLE Monovalent vaccine - each 0.5 ml. dose 200 CCA units of A/New Jersey/76 (Swine Availability Date 12-13-76 10.0 12-20-76 18.0 11-17-76 11.0 12-2-76 11.0 *express in units of 100,000 Modification No. 3 Letter Contract 200-76-0426 :ontains La Is La La 10-dose via 10-dose via 50-dose via 50-dose via PAGENO="0246" 240 51.65$ rig) I M1flC~s.I j~~ur 5Y.~L ~rT r.vr' sc TrNLlL.~ft7r ~ f U NDU(P~I~MOO1ICA1ION NO ~ IHECTIVI DATE 3. EEOUISIUON/PUHCNASE EDGIEST NI... [4. PHO*CT NO. (1/ AI.6AI.6) Modification No. 2 I DEC 2 9197 1 ISSUED DV (.01)1: 6. ADMW4ISTIH(D DY (If isA,, s6.. 66.1 6) COIlS ~O, Canter for Disease ContibT . aSS East Paces Ferry Rd, N.E. Atlanta, Ca. 30305 Same as shown in Block 5. Cool F4CIl.lI) C0D~ [ $ SlANT AND 6101(55 AMENDMENT OP 0 SOLICITATION NO. parke, Davis and Company ~1 Joseph Campau at The River DATED (Si. 6111 1) Detroit Michigan 48232 ~CON CU0~ L.. . 061W 9~'!!L6_. (Si, 61.rd 1l5 [J 16. .6... HAsh. id M isis idid N 6,, 2 Is. ~. i.d di p PAd Iii . ps OsI [6 ...a~ [J 01..' di, d TI. Is.sss .isd d. p. S.d 6..il Di.,. .,s..d.d isy.,.*1 ~ "`M .AIs61s .6 ~ Is `s. .~.i is, is s. .65 d iTHs Di pp IsIs .6.. isis AuDI is 6)6 Np.Dis. Sills SI 51.5616 suls is 1. ii sA is. is. lASSIE OP P061 AC NOWLIDOEME Oil E1CSIVEO NE $55 HG all ICE P6101 TO (IS $016 SIC (S C (DM65 (S (ECTONOP 0 01(6 I bpdd Is ~Isd~ p614. Di Iu.usg.D. 6MA5u,III,his*Td .1.6 ...pb.m.eSpl$1551$5 p .4 d is. 6 .6 Is..I di isu.,dIS .u.usdisAMDsd is dpi.' ISIS ip,Iss.gh..'NUd4.161p.TU CCO NTING AE~0 PPROP 10 61 (If sq d) . I, TNT $LOCK APPLIES ONLY TO MOSIPICATION$ 01 CONTEACTS/OAsADS 5.) 0 This Cisiusge Osdis i.6.u.d psusssusssIT~ .~ - .-~ 16. Ou..g.s ,1 65us$., 665.6 Is. .s*d*I~ sh.AM.. *u.u.bss.d .siUsisTl.sd.I. I 0 Th. .b.u. .s.b.,.d I.uA,IT/isd.s ii ..d.Pu.d 5~ .S.d III, ids.lsi,k.Tii. ds.us~.s 5,4 is slu.... 5. p.y5.~ sffi.s. ~pp.'psI.6si 45, .54616.01, 6. SINk IS. Thu. SuisI~is.sTiI ADuii.s.uuIIS.s.T.s.d AT, susi,,VIM.'uIIsSi)Ti.I 41 USC 252(c) (7) N ..dus.. 5$. Sb... ,i.sb.s.d ~isuTissI M s~I isIS I,, 6I.sL II. 5 DISCIIPTIOYS OP AMSSDMENT/MODIYICAIIOVI Subparagraph B of ARTICLE XIII - DEFINITIZATION is deleted in its entirety and the following is substituted therefor: B The Schedules for definitization of this contract are set forth below Negotiation of price and other terms and conditions - On or before November 10, 1976. Target date for definitization - On or before January 1, 1977. ~. The price of $1.51 per 10-dose vial for Monovalent Vaccine is added hereby to ARTICLE IX - PAYMENT as set forth in Modification No. I of November 3, 1976. A H..S I. .sksi.k6.. .I~..d. ..616 ..sh..1.d 61h. 6.16.... ..4.5..$. 0 tO SIGN INS DOCUMENT NOT EWUIEW (j) CONEDACTOI/OPNEOE 5 $105510 $ION THIS DOOJMENE 610 EE1M$N,..L.,..COPSD 10 511510 0N~ I6.NATE$IODSD "~`r - - -- `~ . - `us--- 12/28/76 John 1.. Williams .~1 ~ Robert R. Adams Director. Lecal Division PAGENO="0247" AMENDMftsT OF ] $OUCsT*T.ON NO.__ -: DATED - (S,. Did 9) ~ ISStDT200_76_0426 DAYEE5.,.!L~2.LZL..... (Cs i,i.,& SE) L Is, ~ ~ ~ ~ W~~b ~ I~~AY °'C~'d Ns' .~ OF's 0 s .sNsdsd. is s's ~sI,s.Td. 3s,,,,s ~ hss"Ad~.. ssspt ~I his p,,, si.., h'sY ,,d sAd. Lp.~.I.d IsA, Ad~olIs',s~ .s.si.d,d. b, *1 A, ls.SAs'.,~ s,&Is,4s~ 5~ 59.59 `sd , ~ sf hi, ss,.d.sN, b~ 1~ .Iidgi..g *,..plYt As os.~sds.sl .ssh sspy s~ A. ,l,,ssbsil~,d~ l~ Sy~s~.s.sIs IFS, SI s A ,F5.,d5Ill5I5s.D5 Is II, 5lhSASIN.. s.d s,dhs.s `s'.bs.s 1*11511 OF YOV* AC(NQWIFDCE,rlIt TOIL Pi[CEIVED AT THE ISSUING O?TTCE 15105 TO THE lOAF AND DATE DECLIISL) NAY kAThY 514 ED~ChON OF YOL.D 011(1. II, 5 ShIA~5I A,, s..,,dSsW ys~ d....s Is sIsl..sh*.dy sAbSiflsd, s~,s ss.~, s.s~ A. "ad, by 5I*š.s.. Am' ,,sL,, ,,f,.s.s, N Ih, ,sbsmlis. md his ,s.,da,'a. sAd is `a.,.,if pus. IA. sF,h'l IAAI sAd daN 4.ShF.sd. ACCOANTMG AND APIFQPRIATIOIL DATA (IJ PSYjSSIJ NIS 5sOCk APPJLS ONLY TO MODIYICATIONS 01 CONYRACTS/OEDUS sI [J This Chssgs O.d., .s.ss.~4 p'sss's s~ ______________________________________________________ Th, Cs,,,,., s,'I AlA A bisA 12 a,.s,,d. Is A. sAss.' sss.As,.d s,.hssl/s.d.,, hi lbs sb.'. ~~~)s'ad s5'YI,~l/s,d~, is Ssd,P.id I., sYisI A. 5d,IIil~AN5,sl SIlAs (sssl ss,hs'S,,~~ s,,i',sm. spp.sp..sllss. dsls, .1sT s I.,.,h is It'll 2. I Tb.' Ss,&'ssosl Ag.,,s.5 .s .Yo.sd ITS ~SisA5Il II sAlhslily MALJIT .1~2..Lc1(1)_________________ ITYsTIIPTION NY AMYNA1,151411M05W1TA51A55 15., The following change is made to referenced contract: ARTICLE IX - PAYMENT is deleted in its entirety, and the following ARTICLE IX - PAYMENT Ls subctituted therefor: ARTICLE IX - rAYMENT: of contractor's invoice A. Payment shall be made within 30 days ,tor all vaccine which has b. a acccprs'~t. Each j~;s voice or voucher shall, as a ininiisu,a, i~ntify the appropriate Delivery Order for which t~t~ delivery was made, the vaccine type and amount delivered, the Ilnit price, the total prt,e, and the vaccine lot number(s). All payments shall be on a provisional basis pending dci mi - tization of a contract,1 The fÚllowing prices shall be used for provisional payssents for vaccine: 10-dose vial ~, 50-dose vial For the first 26,700,000 doses Bivalent 4.34 19.01 For any additional Bivalent 0.17 0.38 Nonovale~t t.hs. y.ss.dss a's., Al I.'.., s.d 551415515 silAs ds.ssasl,,l dl AlsO I. .,Assls's,. ,AsYs,d. sslAsss,d .sd A IsTI IsA. s,d.l.,l. El C 4TSACT /010101'S NOT SLAANID ~ COITRACIOR/0IITROS IS 1505555 10 SIGN YYIS DOCIJMTNT AND l(IU*N__i..,,.COP III 10 ISDUINO OFEKU 2~cE~AVt&_Cc~A Ti~r~c'ss sA 156. SAlE NONID 9. QFcO'SSATSING OiHGU (755, ssfrsalJ RoDert R. Adams Director, Legal Division j~5O'l4-76 John L. Williams - `Fs~" I ~il/5/7~ 241 ~T.s,31ficati0n No. 1 e~ at~r for Disease Control ~-.2~S F,ast Paces Ferry Rood, N, E. ,,,.,Ati4flt&3, CA 30305 Same as shown in Block 5. Parke, Davis & Company Joseph Campau at the River Detroit, NI 4823~ L . J PAGENO="0248" 242 * --a C~NID ~M~I 1░' CONTINUATION SHEET ~ 200-76-04 F 2 2 5aue~~ra shall be eubnitted to the following address: - ` - Center for Disease Control S~rcau of State Services Tr.rinizntion Division 1600 CItiton Road, N F.. Atlanta, CA 303~3 g, Payrent for self-insurance retention and Insurance Preaiua on Liability shall be made dthin 30 days of receipt of tontractor's invoice for aams. The vaccine prices do not in- dude the cost for self-insurance ($2,500,000) or p~eniums for liability insuraßce ~-2,162,5O0) which are solely attributable to the National Swine Flu Imaunization Program of 1976. : : - PAGENO="0249" S... ~s'eo P. IIPKVIVS SAW I) ts~tter contract No. 200-76-0426__... - 1331*5 IV __________________ NEW, PHD `nnter for Diessee Centre! *....~33 Hoot Paces Perry Road, N.E. *0305 ** ~;~rMIO$l crnwL_._~_:J~~ ~ Porhe, Dsvia 4 Compasy ~"ij~j, Joseph Campee at the River Detroit, Pt! 46232 243 AWARD/C - -S I,, (01)51 5. _4s,WuI, I, seas as ~am is Meek 5. L ?W~ rWW ~.urni As directed on Delivery Order.. J ``I s we we ~ ~Ms. (~ IIOOWMID, WI$~1 ~ ii::: :`:~` Center for Disease Cestrol Financial )~j~ SUSie Mlassta, GA *0333 4. *61*511150 *~NI*1mN on 75*0943 PUS (Influenza Iss,unization) 6-61*0/ 6944 4391 (26.11) $19,000,00ˇ.( - I.. INS en - IA. SUPIIII$!PISVICI$ IS. II. .15,55, en IS. * 1~. INFLUENZA VIRUS VACCINE, Monovalent, 200 CCA - units, A/New Jersey/li strain, and Divalent, 200/200 CCA units, A/New Jerey/76-A/Victoria/ 3/75, to be awpplled 4. secemdae.e with the $e~ of Mo*, 5111450,7 Cebeditle, end - .. a 1*. COWTSAC50I WIOOWATIO. al. IIW.11 4~.S ~ .l.......5WI S h*ˇ~ ~fri.) C.WIWS. 5,10 I. I..W4S ..d d.Il.. Ill .l*o~ ~. p~.IWo WI 3, wI I~* tdo.lI.d .5..' WI.' Wy ...A,.'l.' .I*sN 5.5. ..`.*d,.WI.' *104 13.5.1*. od .51,.Ass .151 p1*51 I~Ad. ,.I.WI s5.II 5. ,WI$* II~l~5PI ..`d Syll.. 1**.1*.~ 5....WI,. .)Ad* ...4I...5.d. I5)13 ~IIAlS5~ A~. *~s*~~ ~ Company 14.1510SI~ vms 5,sIßHI~ VT* rpp5l~ to. ass 5555 ~ ~g~aa~ 1Sf' II C " ,-- . . rAij~i~ii ~S. 51 OIUstSS ~i tO `~1T~L. I. PAGENO="0250" 244 S ,~, ~-e A~cAIr?OPI. ~)6~Utf~9b6 CONTINUATtON SPIEET Letter Contract 2 20 ~ ~ c'wi `-;e's No. 200-76- 0426 - 0 Cě~QI O~ CCN'S*CTO* ~TICLE I - SCOPE OF CONTRACT: - - --~ - -* -. The contractor shall manufacture and distribute influenza vaccine in aecordames vitli eb. ~pecificacions set forth below during th. contract period to the pointa and in the ~ ties specified on Delivery Orders issued by the Center for Disease Control, The only ebit. gations or responsibilities of the Contractor in connection with the Natio~a1 Swime fl~ Irnmunization Program of 1976 are contained in this contract, There are no warraacies.5 expressed or implied, imposed on on the contractor except as stated in this comtract. ARTICLE II - SPECIFIcATIONS: . ~. Type of Vaccine: The vaccine shall be Influenza Monovalent A/New .Jersey/76 (Swine) end/or.Biva1~ A/New Jersey/76 (Swine) - AlVictoria/3/75 manufactured under a current eatabliahaen~ and product license as set forth below. Formulation standards, specification, and applicable tests of the vaccine shall be as set forth in the approved product licemee or as otherwise directed by the Food and Drug Administration. B. Product Licenaure: . . The vaccine supplied under this contract shall be produced, under U. S. Eetabljs)~ij~ License No. 1 and Amendment to the product license for influenza vaccine issued b~ the Bureau of Biologica. If, during the contract period of performance, the product or establishment licens, is euspended or revoked for any reason, production of the vaedme shall be discontinued until auch tine as the license is renewed. In the event prsdi~. tion is suspended for the above reason, the Government shall not be held liable for - failure to procure the guaranteed minimum contained in this contract. C. Shelf Life: . . Delivered vaccine shall have an expiration date through August 1, 1617. The ~esii~at agrees to take all appropriate stepa to see to it that all peranea whe are r.sp~b$.. for administering vaccine are notified that the vaccine must not be administered efter August 1, 1977. - - - 0. Contaimere: S * ` : Vaccine shall be contained in viala of 10-dos. and 50-dose capacity, such 2.1 .eesf*fl in the 50-does vial and O.9ml overfill in the 10-dose vial. Ten-doae vials aheit ~* an internal neck size no smaller than about 7ma in diameter; 50-doae vials, abort ~ Vials shall be supplied with stoppera made of nonpyrogenic, high-grade rubber. C* ales for the vials will match the diameter of the necks. Vaccine dosage will beO.S ~. E. Lab~4~g: -~ S - Labeling of vials shall be in accordance with 21 CFR 610.60. Is addition, the ee~ ~ label for the monovalent vaccine shall be red with black or white markings, med she color of the bivalent vaccine shall be blue with black or white ~ ` shall be specified on each vial label. Text of the labels s.....~ be em~ Government. Caps shall be the same co]or as the via], labels - red ˇapN on son caps on bivalent vials. S PAGENO="0251" 36. JULY 1666 ~ ~ 01 ~ON1MCTQ, 1 CONTINU ATION SHEET Let No. tar Contract 200-76-0426 )tO For shipping purposes, vials shall be in intermediate packages as follows: 10-dose vials * 10 vials per package. 50-dose vials - 20 vials per package. Each package shall be labeled in accordance with Paragraph S5.2.2.2 - tnterme.diat~ Con~t$ners of Federal Standard 123d. In addition to the requirements of the reisreaced F dcxci Standard, the following i. required: A. Labeling shall show applicable lot numbÓrs. 5. A paste-on label shall be attached to each, package. Label shall. conform to the sample supplied with RFP. C. Package inserts shall be placed in each intermediate package, $ total of 10 inserts per package. Inserts aba].]. be in accordance with Sub-paragraph 201.10(i) (2) of Title 23. CF1 Part 600.3. . . . .. - Packages of 10-dos~ vials shall be packed in a shipping container containing ten. (10)'. such packages (i.e., 1,000 dames), . . . Packages of 50-doss vials shall ,be packed in a shipping container containing ft~e~S) such packages (i.e., 5,000 doses). Preservation, packaging, and packing Bha3.]~ furnish a degree of protection to precindd damage to, containers and/or contents thereof under normal shipping conditions, handling, etc., and shall conform to applicable carrier rules and regutarions, including Ó*rrieps handling overseas shipments. ` . . . . - Shipment of vaccine will be made under refrigeration to the extent that the necessary -. insulated shipping containers can be procured by Contractor and in Contractor's possession at the tine of shipment specified in the Delivery Orders placed by the Government. Said insulated shipping contaiders will be constructed of styrofoam in such a manner that when packed with coolant and vaccine the teaperaturs inside the container will remain within the range of 2' C (34' F) and 15' C (60' F) for a period of 48 hours in an external. environment of 100' F. . .. .. ` Any vaccine which Contractor is unable to ship under refrigeration due to lack of insulated shipping containers as aforesaid will be shipped to the delivery point(s~ specified, La the Delivery Orders placed by the Government by air freight, except in those instances where the specified delivery point(s) are located close enough to Contractor's warehouse in Detroit, Michigan, to enable delivery to be made by' surface transportation to laid specified delivery point(s) within approximately 24 hours. , ` ` E. Markina Provisions: . ` .. . * Shipping containers: Containers shall be marked in accordance with Federal $tandar4 Number l23D, January 22, 1975, and shall contain as a miniatß the foi1owi~g: * a. Quattity and. Unit -4. `Centractor Name and Addresg " b Purchase Order Number a Gross Weight c. Item Name 1. Le4 Number(s) *.~š' ~TI'~LE III -QUANTzrI~S The npaber of doses by vial size. to be furnished under the contr$ct is: Sivalent Vaccine ` ` . ~pv~lena ~ .. . `, i6-dose vi~i~'25 400 000 doses 50-dose vials - ~J,3O0 000 doa~ ~0'itols vials ~L~9~~!O* ~ Total - 27 700 0ˇ0doses Total - t000 000 doses C. 245 PAGENO="0252" 246 Cl NO 0' sOC 4t".G CON'S ,4~I 1~ ~ ~ATI~~ CONTINUAT;ON SHEET Letter Contract PlO (4~ c'ip ,.ie,,i I No.200-76-0426 .4 ~, oj÷j.os o~ COs'mC?ot Variation in Quantity: A variation in the total quantity supplied hereunder ~iiii be accepted, provided that such variation is not in excess of 15% of the contract ~eeatity as specif Led above, and is available for delivery prior to the final delivery date (January 13, 1977). The contractor shell notify the Government ed availability of Mdi~ tional quantitites as coon as this status becomes known to the contractor, ARTICLE IV - DT$TRIBUTIOh . . - A. Delivery Poi!c~z The contract;? shall deliver the vaccine, F.0.B. Destination, Within Consignee's Premises, as directed on delivery orders, to approximately 200 points itt tb. 50 atates~ and Trust Territories. B. Delivery Schedule: -~ -_~. _:.- Deliveries shall begin on or before October 1, 1976, with the total amount of ~ bivalent and monovalent vaccine to be delivered in accordance with the attached Availability Schedule. All deliveries shall be completed on or before January 15, 1977. C. Oversoas Delivery Requirements: Overseas shipping and delivery methods shall be utilized for delivery to those potagg -- located outside the Continental United States. D. Time of Delive~: . . ~elivery shall be rnad*atde$tinatjon;jthjn 10 days after receipt .f writtee or telephonic order, E Shiprents shall be made in minimum increments of 10 000 doses in full shippis,g conts&m~rs ARTICLE V - DELIVERY TERMS: ` .. S.. Delivery shall be made T.0.B. DESTINATION, WITHIN CONSIGNEE'S PREMISES, ma defia~d betesi: The term, "F.O.B. Destination, Within Consignee's Premises," to which this contract Em subject, means: - (a) Delivery, free of expense to the Government.to within the doors of the Coa.i~ee's premises specified in the contract or delivery inatructioss. S (b) That it shall be the responsibility, of the contractor to do the folloeiags (1) Palk and mark in such manner as to afford adequate protection against nosUt transportation hazards and secure prompt dclivery to the consignee, and eas3y with all packing and marking specifications of the. contract; S (2) Properly prepare and distribute comeercial bills of lading; . S ~ (3) Make delivery laid down within the-doors of the coniignee's premise. in the tontract or delivery instructions; S PAGENO="0253" 247 ~A U~Y ~ CONtINUATION SHeET :. r -~ NCC~ sea. ,~i' CUlL $.IÚ.'O~ I No. fi0O-76-.0426 U IAtTOS (4) Pay and bear all transportation and accessorial charges for such delivery laid down within the doors of the consignee's premises specified in the contract *~ * delivery instructions; * (5) Be responsible for any loss or damage occurring before delivery `is laid down within the doors of the consignee's premises specified in the contract or, delivery instructions.,' *..~ (TECLE VI RETURN OF VACCINE requirement to accept unused vaccines at end of the contract period wit], be placed on rntractor. ITICLE VII - METHOD OF ORDERING: eccine shall be ordered by Deli;ery Orders, each of which will designate the vaccine rdered, quantity required, and destination. Orders may be placed by telephone and con- Lrmed in writing. Orders wi]l.be in conformity with Article IV.E. ETICLE VIII - INSPECTION AND ACCEPTANCE: *` `.` ots of vaccine will be submitted by the contractor to the Bureau of Biotogics. for revieldag nd testing.' Following release of the lots, Burelu of Biologtcs will send a antification .t "zsroval to the project officer at the Center for Disease Control. Final inspection shalt made at conatgnee's locations. Final. acceptsnce/rejeÚtion will be aide by the Cactet.lir' iaease Control. Defective or damaged material received at consignee's locaUotis. wilt be ejecfsd in accordance with Article S of tied Gen~rel Provisions RTICLELX-PA'fNENT ayment shall be made within 30 days of co~ntr~ctor's invoice for all vaccine' *tCI* hs$~i" elivered and accepted. Each invoice or voucher shall, as a aintaun, ideettfy the sppii°~' nate Delivery Order for which the delivery was made, the vecciwa and ~uat delivered, the. nit price, the total price, and the lot number(s). All payments shall be eu `a' pwovistied. aais pending definitisetion of a' contract. Vouchers in accordance with the' cor*treCtor's" urrant propopal shall be submitted to the following address: , , , ` , *, 4 Center for Disease, Control , . Financial Management Office ` `. 255 East Paces Ferry Road, N~ E. `. ` . ` *. ` Atlanta, CA 30305 ` ` *., ,... ETICLE X PROJECT OFFICER: , ` . U ` ~he Center for t~isease Control, Atlanta, Georgia, will designate an individual to ~roject Officer during the period of performance of the contract. The Project 0ULea~ ěq~J~ ".respor~stbl~e for guidance in regard to the technical aspect bf the contract, `.,.nt for liaison between the manufacturer and otbe~ Government agencies (Federal, 1$ md local) and be the general focal point `to address technical and logistical. prabl*~L'.~J~ * relating to the `performance, un~er this contract, The Project Officer shalt eat ~ PAGENO="0254" 248 CONTINUATION SHEET j~ `~ 3 CIP~O~ 05 CON~55OC~ (9) The arrangements for the implementation of the influenza immunization program, Lu- eluding thi issuance of appropriate guidelines and information. The contractor shall use due care and comply with all applicable laws and regulations ir the manufacture and handling of the vaccine in accordance with the specifications hereir IT.CLE XIII - DETINITIZATION: A fixed price, redeterminable type Óontract is contemplated. - To accomplish this r.Iult the contractor agrees to enter into negotiation promptly with the Contracting Officer over the terms of a definitive contract, which will include all clauses, terms, and conditions as may be mutually agreeable. The contractor agrees to make available cost and pricing data, and data relating to his accounting system. The schedules for definitization of this contract are set forth below: Negotiation of prica and other terms and conditions - On or before Noveraber 10, 1976. Target date for definitization - on or before December 1, l976. * If agreement on a definitive contract to supersede this letter contract is not reache4 by the target date set forth in B, above, or any extension thereof by the Contracting Officer, the Contracting Officer may, with the approval of the Head of the Procurement Activity, determine a reasonable price subject to appeal by the contractor as provided in the clause "Disputes" of this contract. The contract shall be governed by: C1.L.All clauaea, terms, and conditions contained in this letter contract except which by their nature are applicable only to a letter contract. (2) All clauses required by law as of the date of this letter contract., (3) Such other clauses, terms, and conditions as may be mutually agreed upon. .`TICLE XIV - LINITATION ON CONTRACTOR' S PROFIT: . In accordance with the provisions of P.L. 94380, the contract price F oz~ the vec.cie* delivered under the contract shall be subject to renegotiation to eliminate any profit realized by the contractor on the swine flu vaccine and to limit the profit realised by the contractor on the A/Victoria/75 vaccine to a reasonable profit. The SecretaFy of. Health, Education, and Welfare has issued criteria for the determination of the coetp of the contractor for the vaccines delivered under this contract and for the detersie$tt4 of a reasonable profit on the A/Victoria/iS vaccine4 and La as Attachment A. Any insurance premium amount of which is included i~th. jrice of the vaccine dalivqred under this contract and which is refunded to the contractor under any retroepective, experience-rating plan or similar rating plan shall be refunded to the Covernmemt aQt later than 30 days after receipt of the refund by the contractor. Any amount retateed by the contractor for eelf-insuranCe retention which is included in the price of the vaccine delivered under this contract shall be segregated in a separate aqqou~t in s erally insured commercial bank with assets in excess of $1O~OOO,OO0. Said seit-iesurdflg. retention shall be invested, to the extent possible, in Certificates of Deposit at said bank's prevailing interest rate. Any interest earned on the Certificate of Deposit PAGENO="0255" 249 ,w s°. c ant `a..o ca'e~. .,.~ ~ CONTINUATION SHEET utter Contract No. 2OO-76~'O426 6 10 na ~thority to make any commitments or authorize any changes which affect the contract price, as, or conditions; any such changes shall be referred to the Contracting Officer fey tion. ~TICLE XI .- PROJECT ~IREc~Oft: ~he Contractor shall dŘignate an individual who will serve as the point of contact :egarding the technical performance of the contract. This individual shall have the tuthority necessary to commit the company and shall be assigned responsibilities con.' ;ruent with requirements of the contract. the Government reserves the right to :pprove the Project Director and any successor to that~poaition. ITICLE XII.' DELZNIATION.O~FRE~Q~jStBtLI7ZES OP TEE GOVEBNNE~T ANOTHE CONr~šrOa: The parties recognize that the Government has initiated, planned, and is arranging for the implementation of the in~uenza immunization program. Because of the need to have the vaccine tested, manufactured, and delivered within a relatively short period of `time in order that the population may be inoculated in an attempt to prevent an influens epidemic, the Government harns assumed certain responsibilities as specified herein ich would ordinarily devo~vs upon the contractor. It is the intention of the parties that the contractor will be responsible solely for the performance of its obligations under Paragraph C herein. It is the purpose of this Article to delineate the separate re..' sponsibilities of the Government and the contractor. In the light of the cišcumstancss described in Paragraph A hereof, the Government shall be responsible for: (1) The adequacy of the standards and sppcifications for the vaccine required to be delivered under thts contract, including their compliance with all applicable requirements of law and regulation. (2) The safety and suitability of materials provided to the contractor by the Qevermase under or in connection with this contract. ~` (3) The investigation and determination of the safe and effective doasgis aMM411s directions for the use of the vaccine. `. .. .. (6) The investigation and determination of the risks and benefits of inoculation ~t* the vaccine. (3) The development of an adequate statement of information respecting the risks sad benefits referred to in subparagraph (4). C .. (6) The taking of all appropriate steps to assure that each individual to be tsocŘteged (or, where appropriate, a parent or guardian of such individual) is adequately informed of such tisks and benefits. (7) The content of the labeling of the vaccine, including its compliance with all ap.' pltcable requirements of .1mw sod regulation. (8) The taking of all appropriate Steps to assure that ech person responsible dcv ad. ministering the' vaccine has adequate nbciee of the labeling of the Vaccine, *55~ vided that nothing herstn shall Limit the responsibility which the nafluf*ctUt~St otherwise has to ~~sure that labeling is included in and delivered with eme~ *h4p" PAGENO="0256" 250 ITANOASO 909M 36. JULY 966 5'. NO 09 u~~G c010o P*Gl QSNUM $I'V'CU AOMNISY9AT~ON I CONTINUATION SHEET Letter Contract I 5'. UOC* "0 CMI I-Mist No. 200-76-0426 F 8 10 669 0909919010' COPITRACTOS shall be added to said self-insurance retention fund. Payment from the separate account shall be made only for self-insurance as provided herein and any amount, including interes in the separate account not so expended on or before August 1, 1985, shall be refunded to the Government `not later than August 31, 1985. It is the understanding of the parties tha since the contract shall be subject to renegotiation to eliminate any profit realized by the contractor on the swine flu vaccine and to limit the profit realized by the contractor on the A/Victoria/75 vaccine to a reasonable profit, the self-insurance retention feed and interest thereon shall not constitute income to the contractor. In the event the contrac- tor is required to pay a claim by the Government pursuant to Section 317(k)(7) of the Public Health Service Act after the contractor has refunded the unexpended amount retained for self-insurance, such claim shall be deemed satisfied up to the amount of such refund. - For the purposes of this Article,, the contractor shell maintain and make available to the Secretary or his authorized representatives the records specified by the Articles of this contract entitled "Accounts, Audits, and Records"; Examination of Records by Comptroller General (Clause 10 of the General Provisions, SF-32); and Examination of Records by Department of Health, Education, end Welfare (Alterations to SF-32). In the event the Contracting Officer determines that the contractor has realized any profi on swine flu vaccine or has realized more than a reasonable profit on A/Victorial75 vaccin the contract price shall be adjusted in accordance with the requirements of Paragraph A? of this Article. Costs will be determined in accordance with the Cost and Profit Criteria. The contract price will be adjusted upward and downward to reflect those costs as deter- mined by the Contracting Officer and payment made within 30 days of receipt of the Contracting Officer's final decision. Failure of the parties to reach agreement on the renegotiation of the contract price shall be subject to Clause 12 of the General Provisions; entitled "Disputes." However, if the contractor takes an appeal from the Contracting Officer's final decision, it may withhold the funds in question until said appeal is decided. In the event that the decision on appeal is that the Government is entitled to a refund, such refund shall be made within thirty days from the date of the decision, with accrued interest at the rate determined by the Secretary of the Treasury pursuant tp Public Law 92-41, 85 Stat. 97 from the date of the contractor's receipt of the Comtracting Off icer's final decision. JITICLE XV - GOVERNMENT INTENTION: t is the intent of the Government that the contractor shall suffer no loss by virtue of the pplication of the Cost and Profit Criteria (other than losses resulting from its gross neglt- ence as contemplated in Paragraph 2.b.(1) of Attachment A) as a result of its participation n the Government's procurement of vaccines for the Swine Flu Progrpis and that the contractet hall receive a reasonable profit on the A/Victoria/iS vaccine supplied to the Government, RTICLE XVI - CLARIFICATION OF ATTACHMENT A: or the purpose of clarifying Paragraph 2.b.(1) of Attachment A, it is agreed that the ~w ant shall have the burden of establishing gross negligence on the part of the comtrsctot.' RTICLE XVII - CQQPERATION IN PROCESSING AND DEFENSE OF CI.AIMS AND SUITS: Pursuant to the provisions of P.1., 94-380, the contractor shall cooperate with the ~Vs1*' sent in the processing or defense of any claim or suit brought against the United $t*U under the Federal Tort Claims Act based upon alleged acts oroaissions of the costfletor. While any such claim is under consideration by the Department of Health, Education, $04 Welfare's Claims Officer, the contractor shall furnish information requested by the G3a1*s Of ficer or his representatives as is reasonably necessary to enable the claim to hi dered and determined. - PAGENO="0257" 36 JULY 1966 °* uiwcis ~o~~wuM1s0N PSTC.IG) C) 0 ~di~tao~ 01 CONT*ACTOI t ~ ~ CONTINUATION SHEET . 1~, ~ ~ "~ ~ COSTS Letter Contract No 200-16-0426 9 Should any, action be filed against the United States under the Federal Tort Claims Mt aced upon allegßd acts or omissions of the contractor, th. contractor shall render all reasonable cooperation to the Government in the defense of such action *5 sa~ be requested by t}~e Department of Justice or cognizant United States Attorney. Such cooperation shall include, where appropriate, making records end personnel of the contractor available for pretrial proceedings and for the trial of the action. ICLE XVIII - LIMITATION QV GOVERNMENT'S LIABILITY: . contractor is not authorized to make expenditurei or to incur obligatToni,' in perforesocce this contract, which exceeds $19,000,000.00. In the event of a termination of this contrac Government's liability shail not exceed $19,000,000.00. ICLE XIX -. ORDER OF PRZC~ENCE CLAUSE: : the event of an inconsistency between provisions of this contract * the inconsistency shall resolved by giving precedence in the following order: (a) the Contract Articles I through including Attachment A and the Availability Schedules; (b) Solicitation Instructions cad iditions; (c) General Provisions and Alterations of Article XX; (d) other Provisiona of ha otract, whether incorporated by reference or otherwise. ~CLE lOt - GENERAL PROVISIONS AND ALTERATIONS: * I General Provisions (SF-fl). April 1975 edition are hereby incorporated La this coatrect, I are altered as follows: ` : - lause 2la, Small Business Subcontracting Program, is applicable if this coÓtract :Sads $500,000.00. .. *. ~lause 22a, Labor Surplus Area Subcontracting Program, is applicable if this contract exceeds $500,000.00 . *. The attached clauses, listed below, are added to and made a part of the General PrvL~~ sions: . *. . . *. . * *. 3. A. Listing of Employment Openings .` . S. Minorit5r Business Enterprises Subcontracting Program . . * C. Uasolicited Samples, Descriptive Literature, or Brand Name Reference D. Exeaiination of Records by Deparrment of Health, Education, and Welfare E. Federal, State, and L.ocat Taxes, HEW-.328 - * 7. Employment of the Handicapped - . . . . C. T*rmination for Convenience S. Price Reduction for Defettive Coat or Pricing Data I. Subcontracting Cost or Pricing Data *, . . . . .1. Audit . . .. . t. Accounts, Audits, and Resorda . L. Disclosure Statement - Cost Accounting Practices a.d Certification 11. Cost Accounting Standards . N. Cost Accounting Standards - Exemption for contracu of $500,000.00 or Less - ..Certifications ., *~ . 0. Preaward Equal Opportunity Compliance Reviews Clean Air and Water Q Equal Opportunity Clause 251 1 98-930 0 - 78 --17 PAGENO="0258" 252 AVAILABILITY `SCHEDULE Bivalent vaccine - each 0.5 ml. dose contains 200 CCA units of A/New Jersey/76 (Swine) and 200 CCA units of A/Victoria/3/75 Avai4bility Date Doses~ fla~ed In~ 9-28-76 10.3 1 10-dose vials 9..28_76 11.6 ; 50-close vials 9-28-76 10.3, ,` 10-dose vials 9..29-7,6 10. 1.0-dose vials 9-~29-76 10.7 50-dosevials 930-76 10. 10-dose vials 10-11-76 10. 10-dose vials 10-12-76 10. 10-dose vials 10-13-76 10. 10-dose vials 10-l~-76 10. 10-dose vials 10-25-76 10. 10-dose vials 3.0-26-76 10. 10-dose vials 10-27-76 10. 10-dose vials 11-1-76 10. 10-dose vials 11-2-76 10. 10-dose vials 11-3-76 10. 10-dose vials 11-8-76 10. 10-dose vials 11-9-76 10.. 10-dose vials 11-3.5-76 10. 3.0-dose vials 11-16-76 10. 10-dose vials 11-17-76 10. 10-dose vials 11-22-76 10. 10-dose vials 11-23-76 ` 10. . 3.0-dose vials' 11-29-76 10. 10-dose vials 11-30-76 10. 10-dose vials 12-6-76 10. 10-close vials 12-7-76 ` ` 10. 10-dose vials 12-13-76 4. 10-dose vials * expressed in units of 100,000 PAGENO="0259" 253 ATTACHMENT A COST AND PIIOFIT CEITERIA FOR THE PROCUREMENT OF SWINE FLU VACCINE ~ ~ Pursuant to ž317(j)(3) of the Public Health Service Act (42 U.S.C. 247(b)), as amended by the National Swine Flu Immunization Program of 1976 (1?.L.- 94- 380), I hereby prescribe the following criteria for renegotiation to eliminate any profit realized front procurement of swine flu vaccine under the Swine Flu Program. - 1. "Profit realized" from any procurement shall be the amount by which the amount paid by the Government to the contractor in the procurement ex- ceeds the costs to the contractor of performing the contract. 2. The contractor will. be paid its costs in performing the contract as follows a. All direct and indirect costs actually and reasonably incurred by the conttactor resulting from its participation in the Government's procurement of vaccine for the Swine Flu Program shall be reimbursed by the -Government. The amount of such costs shall be determined in ~ accordance with reasonable methods of allocation, practices and pro- cedures applied on a basis consistent with those applied by the con- tractor in preparing his proposal and reviewed by the Department's audit agency. b. Reimbursable costs shall include, but not be limited to: - 1) Costs resulting from the production of vaccit~e that fails, through no gross negligence of the contractor, to meet the specifications of the contract because it is refused certification by the Bureau of Biologics of the Food and Drug Administration. 2) Costs incurred prior to execution of the contract in order to meet the reasonably anticipated delivery dates for the vaccine under the Program. 3) Imputed interest on working capital, at rates determined by the Secretary of Treasury pursuant to P.L. 92-41, 85 Stat. ~97. 4) Actual and unrecoverable costs due to interruption of production or-sale of other biologicals in order to devote staff and facili- ties to the production of vaccine for the Program. - 3. Profit will only be allowed on A/Victoria/75 vaccine and shall be negotiated at arm's length based on the contractor's degree of rIsk, difficulty and -~ complexity of performance., type of contract, and cooperation with the Government in meeting the needs of this health emergency. 4. Any insurance premium amount which is included in the price of any pro- curement of swine flu vaccine under the Program and which is refunded to the contractor under any retrospective, experience~..rating plait or similar rating plan shall in turn be refunded to the Government. PAGENO="0260" 254 GENERAL PROVISIONS (Supply Contract) 1. DuPIucirnoNs An used throughout this contract, the following terms shall nyc themeanlngnetforthbelow: (a) The term head of the agency' or "Secretary" as used herein means the Secretary, the Under Secretary, any Assistant Secretary, or any other head or assistant head of the exacutive or military department or other Federal agency; and the term "his duly authorized representative" means any person or persons or board (other than the Contracting Officer) authorized to act for the head of the agency orthe Secretary. (b) The term "Contracting Officer" meansthe person executing this contract on behalf of the Government, and any other officer or civilian employee who Is a properly designated Coqtractlng Qffleer; and th. term includes,pxšspt as other. wisS provided in this contract, the authorized representa- tive of a Contracting Officer acting within the limits of his authority. (c) Except as otherwise provided In this contract, the term "subcontracta" includes purchase orders under this conttact. 2. Czwcost The Contracting Officer may at any time, by a written order, and witboutsiotice to the sureties, make changes, within the get. oral scope of this contract, in any one or more of the following: (I) Drawings, designs, or specifications, where the supplies to be furnished are to be specially manufactured for the Government In accordance therewith; (ii) method of shipment or packing; and (ill) place of delivery. if any such change causes an increase or decrease In the cost of, or the time required for, the perform- -nec of any part of the work under this contract,whetherchanged not changed by any such order, an equitable adjustment shall Ic made in the contract price or delivery schedule, or both, end the contract shalibe modifledin wnltlngaccordingly. Anyclaimby the Contractor for adjustment under this clause must be asserted within 30 days from the date of receipt by the Contractor of tise notification of change: Provided, however, That the Contracting Officer, If he decides that the facts juntify such action, may re- ceive and act upon any such claim asserted at any time prior to final payment under this contract. Where the cost of property made obsolete ot excess as a result of a change Is included In the Contractor's claim for adjustment, the Contracting Officer shall have the right to prescribe the manner of disposition of such property. Failu~o to agree to any adjustment ulibll be s dispute concerning a question of fsctwithln the meanIng of the clause of thiu contract entitled "Disputes." However, nothing in this clause shall excuse the Contractor from proceeding with the contract as changed. 3, ExYnde Except an otherwise provided in this contract, no payment for extras shall be made unless ouch extras and the price therefor have teen authorized In writing by the Contracting Officer. 4. VAninTlole I~i QUANTITY No variation in the quantity of any Item called for by Ibis con- tract will be accepted unless such variation has been caused by conditions of loading, shipping, or packing, or allowantes in manufacturing procesues, and then only to the extent, if any, specified eluewhereln this contract. vsz'xcviov (a) All uopplies (which term throughout this ciauue includes without limitation raw niaterilo, components, lntsreiedlite ansensblies, and end products) shell be subject to Issspsetloa end tent by the Government, to the extent practicable at all times sad places Includisgthe period of manufectuce,and In anyeventpnlor to acceptance. (b) in cane any supplies or lots of supplies are dslsstlve Ia material or workmanship or otherwise not In conformity with requirements of this contract, the Government shelL lined right either to reject them (with or without l˝struetiase en to their disposition) or to require tlsslrsorrectleso. Supplies exists of supplies which have bees rejected or required to be eesrs~ shall be removedor, if permitted or requln~s4 by to. O~.st~ Officer, corrected in place by and at the expense of the Ceatrattor promptly after notice, and shalt osot thereafter be tendered ten acceptance unless the former rejection or requirenassst of easier- tion is disclosed. If the Contractor falls promptl3r to remove serb supplies or lots of supplies which are required to be removed, en promptly to replace or correct such supplies or lots of seppilee, the Government either (I) may by contract or otherwise seplace or coroect such supplies and charge to the Contractor the cost occasioned the Government thereby, or (Ii) may teussissots this contract for default as provided In the clause of this contract entitled `Default." Unless the Contractor corrects or ~laesg such nsppiien within the delIvery schedule, the Contrsctlsjtlffieor may require the delivery of such supplies at a redectles In price which is equitable under the circumstances. Fellure to opeei. ouch reduction of price shall be e dispute concerning a quebtioss of fact within the meaning of the clause of this contract *tltisd "Disputes." (c) If any Inspection or test Is madeby the Government onto. premises of the Contractor or a subcontractor, the CeetoedtoP without additlenal charge shalt provide all reasesteille fsslllties end assistance for the safety sod convenience of the GoverstisoPt Inspectors In the performance of their duties. If Gere~oMd. Inspection or test Is made at a poInt other than the pteěInty of the Contractor or a subcontractor, It shall be at ties e*$~e 9*, the Government except as otherwise provided IatoIopl~tsSI Provided, That In case of rejectloirtles Government ebpl( nstbe liable for any reductIon 1st vsl*o of sisiplee seed 1* conpott~op with such Inspection or test. Alt lsespscttoosa and ts~ 5y thi Government shall be performed In such a mssinevoesott~iasdoty delay the wont. The Govensuseat reserves tIe. stat he ttI5~ t~ the Contractor say additional cost of Goverasseat Inopecllse sud test when supplies ate not ready at the tires sash la~sttsi a*d test Is requested by the Contractor or when, relaspscllest er,es° Is necessitated by prior rejectloe. Aceoptasce as rojeffilen of toe supplies shall be reads as promptly as practicable after delivery, except as otherwise provided In this contract; best felisse to Inspect and accept or reject supplies shall ne&tb.en relieve the Contractor from responsibility for such supplies ~ase ush to accordance with the conTract requlrssuestts nor impose liability on the Government therefor. (ci) The inspection and toot by the Governsscsest of aay ppiies or lots thereof does not relieve the Costractorfvoen soy oecpss*i. bility regarding defects or other failures to meet ties esutseet requirements which may be discovered prior to sccl3*a000. Except as otherwise provided is this contract, icÓeptsseo 0.111 be conclusive except as regards latent defects, toned, en gross mistskesasesnsunt to fraud. (e) The Contractor shall provide sad snesisitelO system acceptable t~ the Government Covering ~J~ie hereunder. Records of all Inspectisi ~sli by top shall be kept complete and available to toe GIě~,)~!* 32-155 PAGENO="0261" I B I I t S I t a PAGENO="0262" 256 ~ontrbc~or shall not be liable for anyexceos cooteif the failure to perform the contract arises out of causes beyond the control and without the fault or negligence of the Contractor, Such causes may Include, but are not restricted to, acts of God orof the public enemy, acts of the Government In either Its sovereign or con- tractual capacity, fires floods, epidemics, quarantine restrictions, strikes, freight embargoes, and unusually severe weather; but every egos the failure to perform must be beyond the sosstsel -~nd wlthoqt the fault er negligence of the Contraotor. If the failure to perform Is caueed by the default of a subcontractor, and If such default arises out of causes beyond the control of both the Contractor and subcontractor, and without the fault or negligence of either of them, the Contractor shall not be liable for any exetOs costs for fellers, to perform, ualeee the supplies or services to be furnished by the subcontractor were obtainshie from other sources In sufficient time to permit the Contractor to meet the required delivery schedule. (d) If this contract Is terminated as provided In paragraph (a) of this dupes, the Government, In addition teanyoth.rnlghte provided In this clause, meg require the Contractor to transfer title and dellOer to thoGoverusnent, In the meaner sod to the extent directed by the Contracting Officer, (1) any completed supplies, and (II) such partially completed supplies todneaterlals, parts, tools, dies, jigs, fixtures, plans, drawings, information, and contract $glste (hereinafter called "manufacturing ma- terials") an the Contractor baa specifically produced or spe- cifically acquired for the performance of such partof this contract so has been terminated; and the Contractor shall, upon direction of the Contraffling Officer, protect and preserve property In possession of the Contractor In which ths, Government has an Interest. Paymept for completed supplies delivered to and ac- cepted by the Government shall be at the contract price. Payment for manufacturing materials delivered to and accepted by the Government and for the protection and preservation of property shall he in an amount agreed upon by the Contractor and Con- trasting Officer; failure to agreeto such amountshallbe a dispute concerning a question of fact within the meaning qf the clause of * yin contract entitled "Disputes." The Government may withhold _.om amounts otherwise due the Contractor for such completed supplies or manuf~cturlng materials such sum as the Contracting Officer determineifo be necessary to protect the Government against loss becaueaof outetsndlng lime or claims of former lien holders. (e) If, after notice of termination of this contract under the provisions of this olSose, It Is determined for any reason that the Contractor was not in default under the provisions ~t this clause, or that the default was excusable under the provisions of this clause, the rights anti obligations of the parties shell, If the con- tract contains a clauSe providing for termination for convenience of the Government, be the same as If the notice of tsomlss~tlon had been Issued pursuant to such clause. If, after notlos of terovi- ration of this contract under the provisions of this clause, It Is determined for any reason that the Contractor was not In default under the provisions of thin clause, and If this contract does not contain a clause providing for termination for convenience of the Government, the contxict shall be equitably adjusted to compen- sate for such termlnaton and the contTact modified accordingly; failure to agree to est3r such adjustment shell be a dIspute con- cerning a question of fs,ct within the meaningof the clause of this contract entitled "DispUtes." (f) The rights and remedies of the Governmsnt pmvlded in thIs clause shall not be exclusive and are In addition to any other rights and remedies provided bylaw or underthls contract. (g) As used in paragraph (c) of this clause, the t5flOs "sub- contractor" and "subcontractors" mean subcontractor(s) at any tier. 12. Drss'u'rcs (a) Except as otherwise provided in this contract, any dispute -~.ncernlng a queotion of fact arising under this contract which is not diuposed of by agreement shall be decided by the Contract- ing Officer, who shall reduce his decision Se wnltlsg end seeS er otherwise furnish a copy thereof to the Cssotrsctow, The ~en of the Contracting Officer shell be final sad eseishisive ~s, within 30 days from the date of receipt of such supg, tractor malls or otherwise furnishes to the CenlreclW a written appeal addressed So the Secretary, The dssleisg t1iee Secretary or his duly aethonised copomeetetlve flee the ~ nation of such appsele shell be leel eM ssostedve seiuIei e- teronined by a covet of eoespetsat jasisdistiva to ~_ b~sa fraudulent, or eaprieleve, er erblevasp, or se gysudy osnessees 55 ascesserily to Imply bad faith5 or set eppssisd~ seběeaslel evidence In connsetisa with a*y s1 eseesedtpi umidse' thie clause, the Contracts, shalt be afforded en egeesteafip So he heard asd to offer evidence In euppci* of Its sNeid. ~ final decision of a diepaeehsssueide,,she Cs*Isestss'etui4hpeseusd diligently with the perfesneassee of tbeeentsestaoed Ia eMcfo*se with the Contracting O1ew'eolsejat~n, (b) This "Disguise" classes fees net preclude ooasidat$ka of law questions in esansetlost with deeisleee preoldqd for So graph (a) above: ~ construed as msldssg final the decisive of say o~Itratiue official, representsUs,orbea,donaqeMionof~, 13. Novice AwDAesseeAgceffisneawepanoe,~, Cos'yaroscr INeussecoesars? The provisions of this clause shell be applicable esly V ~e amount of thie ooatractesossds$10,055, (a) The Contractsr shall repost to the Centeactisig flees, promptly and In reeseoe$e written dstsll, each notice ~ba of patent or copyrlghtlefrlagpneent based en the peat of thin contract of whickthe Contractorheakuewiedge, (b) In the event of sag claim or cult agomnet the Goussesosat on account of any alleged patent or cepyright tsstrlegestent arising out of the perfoosnence of thie contrast ii eat etsheuse of any supplies furnished or work or services pesfoassed bees- under, the Contractor shalt fu~isk to the Govsrnfnesit, vflosn requested by the Contracting Outer, all evideusesxsd I~au*4ers In posoonelon of the Contractor perteining to auth salt en elates, Such evidence end Information shall be furnished st the esfisase of the Government except where the Cosstrseter bee egseed to indemnify the Governssent, 14. Sire' AMERiCAN Acr (a) In acquirIng smsd products, the BeyAaurleen Ad (41 V'S Cods 10 a-ti) provides that the Govesmseiot glea pts~easp to domestic source end predsete For the punpeeed ShOe 4~r (I) "Components" moans those ertisice, emacelole, ~ plies, which axe directly Isceepoaated Ia the°sfl flsy~ (Ii) ░End pradsoto" mss those astillee, ~ * sepplies, which eret.bseoq,sleed uedortbtoesetreddesigbffis use; and * * ~ * 1 (iii) A "dosssstlo seams end firedeset" i~e (A~ sib en- manufactured end product which bee been astosd flrp~d In the United States sad (B) eased pasduct es5~(~~i~p the United States If the sect of the are mined, produced, or nsanufactsgsd Ia the UI$~ * cssds 50 percent of the cost of all Its esstgste*, 1~ purposes of this (a)(IlI)(B), 000spessents at dtis*sj~ ep~ot of the same type or kind as the products refereed to Se ě*4J) se (Ill) of this clause shall be treated as ccsepeosesie spfiMSjtom~ duced, or manufactured In the UnIted States, (b) The Contractor agreee that there will be feIl~cf ceedsa / thIs contract only domestIc source end predeste, essopt end products: (I) ~Vhich are foruse eetslde the United States; (II) Which the Government detsrsninee are sot sIsme wee- duced, or manufactured in the Ueitsd States Se *4 reaeenabIyavaiisblecommercialquaetjtIs~sudef$ep~~ quality; - * Is~/ (Ili) As to which the Secretory detireslisse th~41e preference to be Inconsistent with the publle Ii~suSh; 0 a PAGENO="0263" ; wrffL i-i, 09 ~8fl~9 U Dii~ Ijil 9~~1 $1 ~!~F hi; ~ ~ H~ g ;:~~° 2 *~jg~ ~ t stfl ~= I ~ ts ~a t 3 t I t S C;' PAGENO="0264" 258 * or Is threatened with, litigation with a subcontractor or vendor is a ree~)t ~f such direction by the contracting agency, bios Cost- tractormay request the United States toentor Into such litigation toproteotthelnterestaof the United States. 19. OronCiens Nor To Isleaffir No mssnber of or delegate to Congress, cc resident Cossnila- loner, shell be admitted to any share or part of this contract, or ~-to any benefit that may arise therefrom; but this provision shall not be construed to extend to this contract If mad. with a corpo- ration forltsg.niralbeneflt. 20. CovmoAwr Aosrnar Cooerunasrr Fees The Ccnttaltor warrants that no person or ..tIlsg agency baa bees emplopod or retained to Solicit or ascom this centewot ~a an agreesnept or understanding for a coslealos, pseeeate~, brokerage, or contingent fee, excepting boss dde mapleposs or bone fide established commercial or selling agencies noatetaleed by the Contractor for the purpose of securing busies... For breach or violation of this waira*ty the Gonsrnsseest shell ban. the right to apnul this contract without liability or In Its dIssg.- tion to deduct from the ccntract price or conaldaratlea, or sober- wise recover, the full amount of such fommisslea, persestage, brokerage, oršontlngsntfee. 21. Uriuzonugjo or SecststBusncoen CoNcoaNs (a) It Is Use policy of the Government as declared by the Con- gress that a fair proportion of the purchaaes and contracts for supplies and services for the Government be pieced with small business concerns. (b) The Contractor agrees to accomplish the maximum amount of subcontracting to small business concerns that the Contrsctsr finds to be consistent with the efficient performance of this contract.. 22. UTILIZATION OFL~tsoa Suzn.usAnsta CoNcERNs (a) It Is the polIcy of the Government to award contracts to labormorphos sretconcerno thee- ffl Steve been certlded*bri)re- `ecrotary-of Labor. *(heoedtsc xaieuofl.tsae. certids~altotbla.. - ..~oncerns with first or second preferences) regarding the employ. ment of a proportionate numberof dlosdvantaged Individuals and have agreed to perform substantially (I) In or near sectiossof concentrated unemployment or underemployment or In persistent or substantial labor surplus areas or (II) In other areas of the United States. respectively, or (2) are noncertlflsd concerns which have agreed to perform substantially In persistent or sub- otantinl labor surplus areas, where this can he done consistent with the efficient perfernssnce of the ccatrsst and at pudess no higher than are obtainable elsewhere. The Contreotc, agrees to use bin best efforts t~ place his sebeoatracts Is acesedaace with this policy. (b) In complying WIth paragraph (a) of this clausa sad with paragraph (b) of the clause of this contract entitled "TItllioatloss of Small Business Conoerns" the Contractor lit placing his sub- contracts shall observe the following order of preference; (1) CertIfied-eligible concerns with a first preference which are also smallbunlness ceseerns; (2) othereeetlIedhlgfflisomuesj~~ a first preference; (8) certlfled-shIgIbIa esnoersa with a seesad preferonce which are also small iseslasse concerns; (4) .~r certlfled.ellgible oeecerns with a seoeafl prefereasa; (5) per- sIstent or snbstastlal labor surplus snonasasesea whisk sea ales small buelnosacoaceres; (5) othes-peesI~egsabatas5lsllabs~ surplus area cseeorns; asd (7) ~ kasbase eeaoeson whisk are cotlaborsurpluaarsacsaoec~, 23. Unuzsesceso*gcssvySeaas (a) It Is the p~cy of the ~ea~~IhaIjshssgffip~ sstrprlsss ahek have Us. iiap~~ ~ I. participate In theperfesno~ ~_ (b) The Csatoe~r agmea he mm .is.p ~ this policy Ia lbs twied of his ~ osesistont WSk si. molest pooluesiasan .(1~ .lj~lMe As used In 11,1. i~t, lb. iscue eesl..~~ ~ muubIIflaJ░ means a besI~ at least $0 at n~ ~ age~ij bp~~ minority grouprbor, et, In at least 61 poonest of the stsskatwkjskl. .eeed group mashsse. ~r the pespees .1 group ssnsbees seaN-.., Spes~~mos~pp~, Amndcen~ Aamicen4a~ Aeeo~i~a, ned American Aleeba Csstrsctesa wig s~ on ~ sagi lions by subcesstrsotsre roperdlag lbslc-~ ~sai~ heoflo ~ 24. PRICING or AaghIsvrceec~s When ccets are a factor In any dstseeefsstlss at a atweai price adjustment pursuant to the Chsansa clause or proviolon of this contract, such costs shalt balis a.ssodssoewlcb the contract cost p?l~ciples and preeedsree Iso Past 1-15 of the Federal Procuiyessot RegulatIons (41 CFR 1-18) cc Section IV of the Armed Services Procureoisst Pogohatisa, as appthabla, which are Ineffectonthedsts of thIscostract~ 25. PAYMENTo?Isonwgs?opeCOse~,o~~aa (a) Ifs,, appeshlefitcgbyths C000rseflerfseprs fleslMlsloa of thCaoduaet~s,~(a,ua4eo~Reep~Mon at 115. con- tract, denying a claim arising under thacsntsest, sisiplelsitreat on the amountof theclalos flnsllydermuhsgo.sflg~(s~~~. ment ihall be payable to the Coetrasiset Seek Intesset ahaffi is. at the rate detes-onlnodby the SecretsrpofthsTzeaypassss,,~~ Public low 92.41, 96 Stat. 97, (rosa Uoo AssIb. (~sacturfe,- i niches to the Contracting Officer his wehi~ $seI wiles Us. Dhputes clause of thole contract, ho ties Me,.t (*)g Se~$Wg.i mont by a court of coenpstsatt junIslIetIss~ss' (I) ra~heth. Contractor of a sspphesssntsl ~ firming ceonpieled seiotlatlosie beismm ~pssthgctes~~~. costa úvcls1esstsjesedefcsofitist~ - . - - (b) Notwlthatsadisg (a), abseq (1) W *dtIuIfl~ - only free, the dais psylosat nsa de~ Usa Sling of appiel, seaS (8) 1ntesest~et~ he ~5II~-~~ - period of thee that the Centrsetheg mmM5.s~,$81~-~a tractor baa unduly delayed In poosslsg bIn ss~ b~ue ~. board of contract aeeeela or a oeet at - - ~. ~.: 3 PAGENO="0265" 259 Clause 2 1(a) SMALL BUSINESS SUBCONTRACTING PROGRAM IPR 1-1.71Q-'3(b) (a) The Contractor agrees to establish and conduct a small busi~ ness subcontracting. pr°gram which will enable small business con- cerns to be considered fairly as subcontractors and suppi.iers under' this contract. In this , conÓection, the Contractor shall: (1) Designate a liaison officer Who will (1) maintain Liaison with the Government on small business matters, (ii) supervise compliance with the Utilization of Small Business Concerns clause, and (iii) administer the Con- tractor's "Small `Business Sub4zontracting Program." (2) Provide adequate and timely consideration of the potentialities of sm~tl business concerns in all. "a*ke- or-buy" decisions. (3) Assure that small business concerns will have an equitable opportunity to compete for subcontracts, par- ticularly by arranging solicitations, time for the prep- aration of bids, quantities, specifications, and deliv- ery schedules so as to facilitate the participation of small business concerns. Where the Contractor's lists of potential small business subcontractors are excessively long, reasonable effort shall be made to give all such small business concerns an opportunity to compete over a period of time. (4) Maintain records showing (i) whether each prospec- tive subcontractor is a small business concern, `(ii) procedures which have'been adopted to coi~ly with the policies set forth in this clause, and (iii) with re- spect to the letting of any subcontract (including put- chase orders) exceeding $10,000, information eubstan- - Uallyas follows: (A) Whether the `award went to large or small business. (.) Whether leas- than three or more than two small busifless firms were solicit~. (C) The reason for~nonsolicitation of small business if such was the case. (D) The reason for small business fai1u~e to receive the award if such was the, case whan small business was solicited, PAGENO="0266" 260 The records maintained in accordance with (iii) above may be in such form as the Contractor may determine, and the information shall be summarized quarterly and submitted by the purchasing department of each individual plant or division to the Contractor's cognizant small businese~Iiai-~ son officer. Such quarterly summaries will be considered to be management records only and need not be submitted. routinely., to the Government; however, records maintained pursuant to this clause will be kept available for review by the Government until the expiration of 1 year after the award of this contract, or for such longer period as may be required by any other clause of this contract or by applicable law ńr regulation. (5) Notify the Contracting Officer before soliciting bids or quotations on any subcontract (including purchase orders) in excess of $10,000 if (i) no small business `concern is to be solicited, and (ii) the Contracting Officer's consent to the subcontract (or ratification) is required by a "Subcontracts" clause in this contract. Such notice will state the Contractor's reasons for non~ solicitation of small business concerns, and will be given as early in the procurement cycle as possible so that the Contracting Officer. may give SM timely notice to permit SEA a' reasonable period to suggest potentially qualified small business concerns through the Contracting Officer. In no ease will the procurement action be held up when to do so would, in the Contractor's judgment, delay perforrn' mance under the contract. (6) Include the Utilization of Small Business Concerns clause in subcontracts which offer substantial small busi~ ness subcontracting opportunities. (7) CoOperate with `the CQntracting Officer in any studies and surveys of the Contractor's subcontracting procedures and practices that the Contracting Officer may from Usa to time conduct. (8) Submit quarterly reports of subcontracting to small business concerns on either `Optional Form 61, Small $u°i~ ness SubcontractIng Program Quarterly Report of ParUet- pating Large Company on Subcontract Comaitteents to Small Business Concerns, or such other form as say be specified in the contract. Except as otherwise provided in this contract, the reporting requirements of this subp*ragraph (8) do not apply to small business conti'actors, aesU business subcontractors, educational and nonprofit inset- tutione, and contractors or subcontractors for standard commercial items. PAGENO="0267" 261 (b) A "small business concern" is a concern that meets the per- Uncut criteria established by the Small Business Administratton and set forth in ž t~40l of the Federal Procuremant BegulsUons. (c) The Contractor agrees that, in the event he fails to comply with his contractual obligations concerning the small business subcontracting program, this contract may be terminated, in whole or in part, far default. (d) The Contractor further agrees to insert, in any subcontract hereunder which may exceed $500,000 and which contains the Utili~ zation of Small Business Concerns clause, provisions which shall conform substantially to the language of this clause, including this paragraph Cd), and to notify the Contracting Officer. of the names of such subcontractors. PAGENO="0268" 262 Listing of Emp1o~ent O~entnts (This clause is applicable pursuant to 41 CPR 50.250 if this contract is for $10,000 or more.) (a) The Contractor agrees, in order to provide special emphasis to the employment of qualified disabled veterans and veterans of the Vietnam era, that all suitable employment openings of the contractor which exist at the time of the execution of this contract and those which occur during the per~ fortnance of this contract, including those not generated by this contract and including those occurring at an establishment other than the one wherein the contract is being performed but excluding those of independently operated corporate affiliates, shall be offered for listing at an appropriate local office of the State employment service system whereim the opening occurs and to provide such reports to such local office regarding employment openings and hires as may be required: Provided, That if this contract is for less than $10,000 or if it is with a State or local government the reports set forth in paragraphs (c) and (d) are not required. (b) Listing of employment openings with the employment service system pursuant to this clause shall be made at least concurrently with the use of any other recruitnent service or effort and shall involve the normal obligations which attach to the placing of a bona fide job order, including the acceptance of refertals of veterans and nonveterans. This listing of employment ope~ngs does not require the hiring of any particular job applicant or from any par~ ticular group of job applicants, and nothing herein is intended to relieve the contractor from any requirements in any statutes, Executive orders, or reguta~ tions regarding nondiscrimination in employment. (c) The reports required by paragraph (a) of this clause shall include, but not be limited to, periodic reports which shall be filed at least quarterly with the appropriate local office or, where the contractor has more than one establishment in a State, with the central office of the State employment service. Such reports shall indicate for each establishment (i) the number of individuals who were hired during the reporting period, (ii) the number of those hired who were disabled veterans, and (iii) the number of those hirtO who were rondisabled veterans of the Vietnam era. The contractor shall sub.. mit a report within 30 days after the end of each reporting period wherein * any performance is made under this contract. The contractor shall maintain * copies of the reports submitted until the expiration of 1 year after final payment under the contract, during which time they shall be made available, upon request, for examination by any authorized representati~es of the Con.. tracting Officer or of the Secretary of Labor. PAGENO="0269" 263 (d) Whenever the contractor becomes contractually bound by the listing provisions of this clause, he shall advise the employtent service system in each State wherein he has establishments of the name and location of each such establishment in the State. As long as the contractor is contractually bound to these provisions and has so advised the State employment system, there is no need to advise the State system of subsequent contracts. The con~ tractor may advise the State system when it is no longer bound by this con~ tract clause. (e) This clause does not apply to the listing of employment openings which occur and are filed outside of the 50 States, the Distritt of Columbia, the Comeonwealth of Puerto Rico, Guam, and the Virgin I~iands. (f) This clause does not apply to openings which the contractor proposes to fill from within his own organization or to fill pursuant to a customary and traditional employer~union hiring arrangement. This exlusion does not apply to a particular opening once an employer decides to consider applicants outside of his own organization or exnployer-union arrangement for that opening. (g) As used in this clause: (1) "All suitable employment openings" includes, but is not limi~ed to, openings which occur in the following job categories: Production and non' production; plant and office; laborers and mechanics; supervisory and non~ supervisory; technical; and executive, administrAtive, and professional open.' ings which are compensated on a salary basis of less than $18,000 per year. The term includes full.'time (employment, temporary Amploynent of more than 3 days' duration, and part..time employment. It does not include openings which the contractor proposes to fill from within his own organization or to fill pursuant to a customary and traditional employer"union hiring arrangement. (2) "Appropriate office of the State employment service system" means the local office of the Pederal.State national system of public employ.' ment offices with assigned responsibility for serving the area of the establishment where the employment opening is to be filled, including the District of Columbia, the Conssonwealth of Puerto Rico, Guam, and the Virgin Islands. (3) "Openings which the Contractor proposes to fill, from within his own organization" means employment openings for which no consideration will be given to persons outside the contractor's own organization (including any affiliates, subsidiaries, and parent companies), and includes any open.' ings which the contractor proposes to fill from regularly established "recall" or "rehire" lists. PAGENO="0270" 264 (4) "Openings which the Contractor proposes to fill pursuant to a customary and traditional employer-union hiring arrangement" means empLoy.- ment openings for which no consideration viii be given to persons Outside of a special hiring arrangement, including openings which the contractor proposes to fill from union halls, which is part of the customary and tradi-' tiona1. hiring relationship which exists between the Contractor and repre-. sentative of his employees. (5) "Disabled veteran" means a person entitled to disability compensation under laws administered by the Veterans Administration for a disability rated at 30 percentum or more, or a person whose diachargeor re- lease from active duty was for a disability incurred or aggravated in line of duty. (6) "Veteran of the Vietnam era" means a person (a) who U) served on active duty with the Armed Forces for a period of more than 180 days, any part of which occurred after August 5, 1964, and was discharged or released therefrom with other than a dishonorable discharge, or (ii) was discharged or released from active duty for service-connected disability if any part of such duty was performed after August 5, 1964, and (b) who was.so discharged or released within the 48 months preceding his application for employment ~ covered by. this clause. (h) If any disabled veteran or veteran of the Vietnam era believes that. the contractor (or any first-tier subcontractor) has failed or refuses to comply with the provisions of this contract clause relating to giving special emphasis in employment to veterans, such veteran may file a complaint with the veterans' employment representative at a local State employment service office who will attempt to informally resolve the complaint and then refer the complaint with a report on the attempt to resolve the matter to the State office of the Veterans' Employment Service of the Department of Labor. Such complaint shall then be promptly referred through the Regional Manpower Ad- ininistrator to the Secretary of Labor who shall investigate such complaint and shall talce such action thereon as the facts and circumstances warrant consistent with ~the terms of this contract and the laws and regulations applicable thereto. (i) The contractor agrees to place this clause (excluding this par4graph (i)) in any subcontract directly under this contract. PAGENO="0271" 265 LABOR SURPLUS AREA SUBCONTRACTING PROGRAM FPR 1~1.805-3(b) (This clause is applicable if this contract exceeds $500,000.00) (a) The Contractor agrees to establish and conduct a program which will encourage labor surplus area concerns to compete for aubcon- tracts within their capabilities. In this connection, the Contrac~'. tor shall: (1) Designate a liais~n officer who will (i) maintain liaison withduly auth~rized representatives.of the Government on labor su~rplus area matters, (ii) super~ vise compliance with tjhe Utilization of Concerns in Labor Surplus Areas c~ause, and (iii) administer the Contractor's "Labor Si/irplus Area Subcontracting Pro~ gram"; (2) Provide adequate and timely consideration of the potentialities of labor surplus area concerns in aU "make~or~buy" decisions; (3) Assure that labor surplus area concerns will have am equitable opportunity to compete for subrontracts, particularly by arranging solicitations, time for the preparation of bids, quantities, specifications, and delivery schedules so as to facilitate the participa tion of labor surplue area concerns; (4) Maintain records showing procedures which have been adopted to comply with the policies set forth in this clause. Records maintained pursuant to this clause will be kept available for review by the Government until the expiration of 1 year after the award of this contract, or ~or such longer period as may be required by any other clause of this contract or by applicable law or regulations; and (5) Include the Utilization of Concerns in Labor Sur~ plus Areas clause in subcontracts which offer substan-~ tial labor surplus area subcontracting opportunities. (b) A "labor surplus area concern" is a concern that (1) has been certified by the Secretary of Labor (hereafter referred to as a certified~eligible concern) regarding the employment of a propor' tionate number of disadvantaged individuals and has agreed to per~ form substantially in or near sections of concentrated unsaploy~ merit or underemployment, in persistent or substantial labor surplus PAGENO="0272" 266 areas, or in other areas of the United States or (2) is a t~onc~'~ * tifted concern which has agreed to perform a substantial propor~ tion of a contract in persistent or substantial labor surplus areas. A certified'eligible concern shall be deemed to hays per-i formed a substantial propoi~tion of a contract in or near sections of c~oncentrated unemployment or underemployment, in persistent or substantial labor surplus areas, or in other areas it the coats that the concern will incur on account of manufacturing.br produc- tion in or near such sections or in such areas (by itself, if a certified con~ern, or by certified concerns acting as first-tier s~ibcontractors) amount to more than 25 percent of the contract price. A concern shall be deemed to have performed a substantial proportion of a contract in persistent of substantial surplus areas (by itself or its first-tier subcontractors) if the costs that the concern will incur on account of production or manufacturing in such areas amount to more than 50 percent of the contract price. (c) The Contractor further agrees to insert, in any subcontract hereunder which may exceed $500,000 and which contains the Utili- zation ~f Concerns in Labor Surplus Areas clause, provisions which~ shall conform substantially to the language of this clause, in- cluding this paragraph (c), and to notify the Contracting Officer of the names of such subcontractors. PAGENO="0273" 267 MINORITY BU$INESS ENTERPRISES SUBCONTRACTtNG PROGRAM IPR L-l,13IO~2(b) (This clause is applicable if this contract exceeds $500,000.00.) (a) T~e Contractor agrees to establish and conduct a program which wtfl enable minority business enterprises (as defined itt the clause entitled "Utilization of Minority Business Enterprises") to be con~ sidered fairly as *ubcontractors and suppliers under this contract. In this connection, the Contractor shall: (1) Designate a liaison officer who will administer the Contractor's minority business enterprises program. (2) Provide adequate and timely, consideration of the potentialities of known minority business enterprises in all "make~~or~buy" decisions. (3) Assure that known minority business enterprises will. have an equitable opportunity to compete for Subcontracts, particularly by arranging solicitations, time. far the preparation of bids, quantities, specifications, and de~ livery schedules so as tO facilitate the participation of minority business enterprises. (4) Maintain records shOwing (i) procedures which have been adopted to comply with the policies set forth. in this clause, tnctudinj the e*tablisheen t of a source list of minority business enterprises on the source list,. end (iii) specific efforts to identify and award c*~. tracts to minority `business enterprises. . (5) Include the Utilization of Mtnortty~ Business ~ . primes clause in subco~tracts which offer si*stsntUt ainority business enterprises subcont~racting opportun- tue.. .,~ (6) Cooperate with, the Contracting Officer in any studies and surveys of the Contractor's minority business enter- prises procedures and practices that the Contracting Officer may from time to5time conduct. (7) Submit periodic reports of subcontracting to known minority business enterprises with respect to the records referred to in subparagraph (4), above, In such form and manner and at such time (not more often than quarterly) as the Contracting Officer may prescribe. 98-930 0 - 78 -- 18 PAGENO="0274" 268 (b) The Contractor further agrees to insert, in any subcontract hereunder which may exceed $~OO,OOO, provisions which shall con~ form substantially to the language of this clause, including this paragraph (b), and to notify the Contracting Officer of the names of such subcontractors. PAGENO="0275" 269 ALTERATION TO SF-~32, General Provisions UNSOLICITED SANPLES, DESCRIPTIVE LITERATURE, OR BRAND NAME REFERENCES: Where procurement is effected under specifications Óy purchase descriptions. (other than ~`brand name or equal") and the Government does not specifically request bid samples, descriptive literature, or references to brand names, models, or part nwnbera as an integral part of the bid, bids which are ac~ compan~.ed by any of the foregoing will be rejected unless it is clear item the bid or accompanying papers that the samples, descriptive literature, or references to brand names, models, or part numbers are not intended to qualify the bid and that the bidder proposes to furnish itess.fully in accordance with the specifications or purchase descriptions. Where offers contain un~ solicited material such as samples, descriptive literature, or references to brand names, models, or part numbers, the Government will not be respon~ sible in any way for determining whether the items which are offered meet the Governnent's requirements set forth in the applicable specifications or purchase descriptions. EXA~4INATION OP RECORDS BY ~EPARTh~T OF RE~LTR, EDUCATION, A~IDWEtPARR: $ (Applicable to, negotiated Ŕo,it~racts only.) The provisions of the clause included herein, entitled "Examination of Records by the Conptroller General," are extended to provide equal rights to duly authorized representatives of the Secretary or of the Contracting Officer. PAGENO="0276" 270 ALTERATIONS TO SF-32, CENE3AL PROVISIONS (Supply Contract) (See Federal Procurement Rc8ulauoas, Subpart 1-11.4 Regarding Line.) FEIP.ERAL, STATE ANOLOCAL TAXES (a) Except as may be otherwise proosded in this contract, the contract price includes afl applicable Federal, State, and local taxes and duties. (b) Nevegyheless, with respect to any Federal ex- cise tax or duty on the transactions or property cov- ered by this contract, if a statute, corer decision, written ruling, or regulation takes effrex after the contract dates and- (1) ResultS in the Contractor being required to pay or bear the burden of any such Federal excise tax or duty or increase in the rate thereof which would not otherwise have been payable on such transactions or property, the contract price shall be increased by the amountof such tax or duty or rate increase: Provided, That the Contractor if requested by the Contracting Officer, warrants in writing that no amome for such newly impose4 Federal excise tax or duty or rate in- crease was included in the contract price as a con- tingency reserve or otherwise; or (2) Results in the Contractor not being required to pay or bear the burden of, or in his obtaining a refund or drawback of, any such Federal excise rex or duty which would otherwise have been payable on such transactions or property or which was the basis of an increase in the contract price, the contract price shall be decreased by the amount of the relief, refund, or drawback, or that amountshall be paid to Govefnmenr, as directed by the Contracting Officer, The contract price shall be similarly decreased if the Contractor, through his faultornegliyenceor his failure to follow instructions of the Contracting Officer, is required to pay or bear the burden of, or does not obtain a refund or drawback of, any such Federal excise tax or duty. (c) No adjustment pursuant tri paragraph (b) above will be.nade undet this contract unless the aggregate amount thereof is or, may reasonably be expected to be over $lOO~ (d) As used in paragraph (b) above, the term "con- tract date" means the date set for the bid opening, or if this is a negotiated contract, the date of this con- tract, As to additional supplies or services procured by modification to this contract, the term "contract date" means the date of such modification. (e) Unless there does not exist any reseosable basis. to sustain an exemption, the Govegnment, upon request of the Contractor, without further liability, agrees, except as otherwise provided in this contract, to furnish evidence appropriate to establish e~gmption from any tax which the Contractor warrants i~writing was excluded from the contract price. In addition, the Contracting Officer may furnish evidence to es- tablish exemption from any tax that may, presume to this clause, give rise to either an increase or de- crease in the contract price. Except as otherwise provided irs this contract, evidence appropriate to establish exemption from duties will be furnished only at the direction of the Contracting Officer. (f) The Contractor shall promptly notify the Con. tracting Officer of matters which will result irs either an increase or decrease in the contract price, and shall take actiou with respect thereto as directed by the Contracting Officer. (Sb, i-~a) PAGENO="0277" 271 ALTERATION TO SF~32, CENERAL PROVISIONS P~tPLOThENT OF THE HANDICAPPED (a) The contractor will not discriminate against any employee or applicant for employment because of physical or mental handicap in regard to any posi~ tion `for which the employee or applicant for employment is qualified. The contractor agrees to take affirmative action to employ, advance in employ- meat and otherwise treat qualified handicapped individuals without discrim~- ination based upon their physicial or mental handicap in all employment practices such aS the following: employment, upgrading, demotion or trans" far, recruitment, advertising, layoff or termination, rates of pay or other forms of compensation, and selection for training, including apprenticeship. (b) The contractor agrees to comply with the rules, regulations, and rela- vant orders of the Secretary of Labor issued pursuant to the Act. (c) In the event of the contractor's noncompliance with the requirements of this clause, actions for noncompliance may be taken in accordance with the rules, regulations and, r.elevant~orders of the Secretary of Labor issued pursuant to the Act. (d) The contractor agrees to post in conspicuous places, available to em- ployees and applicants for eoployment, notices in a form to be prescribed by the Director, provided by or through the Contracting Officer. Such notices Shall state the contractor's obligation under the law to take af fir- maUve action to employ and advance in employment qualified handicapped em- ployees and applicants for employment, and the rights of applicants and em- ployees. (e) The contractor will notify each labor union or representative of workers with which it has a collective borgaining agreement or other contract under- standing, that the contractor is bound by the terms of section 503 of the Rehabilitation Act of 1973, and is committed to take affirmative action to employ and advance in employment physically and mentally handicapped indivi- duals. (f) The contractor will include the provisions of this clause in every sub. contract or purchase order of $2,500 or more unless exempted by rules, regu' lationa, or orders of the Secretary issued pursuant to section 5t13 of the Act, so that such provisions will be binding upon each subcontractor or vendor. The contractor will take such action with respect to any subcontract or put- chase order as the Director of the Office of Federal Contract Compliance Programs may direct to enforce such provisions, including action for noncom- pliance. Revised 6/8/76 PAGENO="0278" 272 TERNINATION FOR CONVENIENCE OF THE GOVERNNENT (a) The performance of work under this contract may be ternitiated by the Government in accordance with this clause in whole, or from time to time in part, whenever the Contracting Officer shall determine that such termitißtion is in the best interest of the Government. Any such termin- ation shall be effected by delivery to the Contractor of a Notice of Termination specifying the extent to which performance of work under the contradt is terminated, and the dates upon which such termination becomes effective. (b) After receipt of a Notice of Termination, and except as otherwise directed by the Contracting Officer, the Contractor shall: (1) Stop work under the contract on the date and to the extent specified in the Notice of Termination; (2) . Place no further orders or subcontracts for materials, services, or facilities, except as may be necessary for com~ pletion of such portion of the work under the contract as is not terminated; (3) Terminate all orders and subcontracts- to the extent that they relate to the performance of work terminated by the Notice of Termination; (4) Assign to the Government, in the manner, at the times, and to the extent directed by. the Contracting Officer, all of the right, title, and interest of the Contractor under the orders and subcontracts so terminated, in which case the Government shall have the right, in its discretion, to settle or pay any or all claims arising out of the termination of such orders and subcontracts; (5) Settle all outstanding liabilities and all claims arising out of such termination of orders and subcontracts, with the approval or ratification of the Contracting Officer, to ~he extent he may require, which approval or ratification shall be final for all the purposes of this clause; (6) Transfer title to the Government and deliver in the manner, at the times, and to the extent, if any, directed by the Con- tracting Officer, (i) the fabricated or unfabricated parts, work in process, completed work, supplies; and other material produced as a part of, or acquired in connection with the per- formance of, the work terminated by the Notice of Termination, and (ii) the completed or partially completed plans, drawings, information and other property which, if the contract had been completed, would have been required to be furnished to the Cov~ ernment; PAGENO="0279" 273 (7) Use his best effortS to sell, in the manner, at the times, to: the extent, and at the price or prices directed ot authorized by the ~ontractlng Officer, any property M the types referred to in (6) above: Provided, howev~r, that the Contractor (i) shall not be required to extend credit to any purchaser,~ and (ii) may acquire any such property under the conditions pre- scribed by and at a price or prices approved by the Contracting Officer: And provided further, that the proceeds of any such transfer or disposition shall be applied in reduction of any paymen4ts to be made by the Government to the Contractor under this contract or shall otherwise be credited to the price or cost of the work covered by this contract or paid in such other manner as the Contracting Officer nay direct; (8) Complete performance of such part of the work as shall not have been terminated by the Notice of Termination; and (9) Take such action as may be necessary, or as the Contract- ing Officer may direct, for the protection and preservation of the property related to this contract which is in the pos-~ session of the Contractor and in which the Government has or may acquire an interest. At any time after expiration of the plant clearance period, as defined in Subpart 1-8.1 of the Pederal Procurement Regulations (41 dR 1-8.1), as the definition may be amended from tine to time, the Contractor may submit to the Contracting Officer a list, certified aS to quantity and quality, of any or all items of termination inventory not previously disposed of, exclusive of items the disposition of which has been directed or authorized by the Contracting Officer, and may request the Government to remove such items or enter into a storage agreement coveting them. Not later than fifteen (15) days thereafter, the Government will accept title to such items and remove then or enter into a storage agreement covering the sane: Provided, that the list submitted shall be subject to verification by the Contracting Officer upon removal of the items or, if the it~ms are stored, within forty-five (45) days from the date of submission of the list, and any necessary adjustment to correct the list as submitted shall be made prior to final settlement. (c) After receipt of a Notice of Termination, the Contractor shall sub-' nit to the Contracting Officer his termination claim, in the form and with certification prescribed by the Contracting Officer. Such claim shall be submitted promptly but in no event later than one year from the effective date of termination, unless one or more extensions in writing are granted by the Contracting Officer upon request of the Contractor made in writing within such one-year period or authorized extensiton thereof. However, if the Contracting Officer determines that the facts justify such action, he may receive and act upon any such termination claim at any time after such one-year period or any extension thereof. Upon failure of the Contractor to submit his termination claim within the tine allowed, the Contracting Officer may, subject to any review PAGENO="0280" 274 required by the contracting agency's procedures in effect as of the date of execution of this contract, determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall thereupon pay to the Contractor the,amount so determined. (d) Subject to the provisions of paragraph (c), and subject to any re~ view required by the contracting agency's procedures in effect as of the date of execution of this contract, the Contractor and the Contracting Officer may agree upon the whole or any part of the amount or amount to be paid to the Contractor by reason of the total or partial termination of work pursuant to this clause, which amount or amounts may include a reasonable allowance for profit on work done: Provided, that such agreed amount or amounts, exclusive of settlement costs, shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. The contract shall be amended accordingly, and the Contractor shall be paid the agreed amount. Nothing in paragraph (e) of this clause, pre~ scribing the amount to be paid to the Contractor in the event of failure of the Contractor and the Contracting Officer to agree upon the whole amount to be p~td to the Contractor by reason of the termination of work pursuant to this clause, shall be deemed to limit, restrict, or otherwise determineor affect the amount or amounts which may be agreed upon to be paid to the Contractor pursuant to this paragraph (d). (e) In the event of the failure of the Contractor and the Contracting Officer to agree as provided in paragraph (d) upon the whole amount to be paid to the Contractor by reason of the termination of work pursuant to this clause, the Contracting Officer shall, subject to any review re~ quired by the contracting agenŔy's procedures in effect as of the date of execution of this contract, determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall pay to the Contractor the amounts determined as follows: (1) For completed supplies accepted by the Government (or sold or acquired as provided in paragraph (b)(7) above) and not theretofore paid for, a sum equivalent to the aggregate price for such supplies computed in accordance with the p*~ice or prices specified in the contract, appropriately adjusted for any saving of freight or other charges; (2) The total of -~ * (i) The costs incurred in the performance of the work terminated, including initial costs and pre.. paratory expense allocable thereto, but exclusive of any costs attributable to supplies paid or to be paid for under paragraph (e)(1) hereof; PAGENO="0281" 275 (ii) The cost of settling and paying claims arising out of the termination of work under subcontracts or orders, as provided in paragraph (b)(5) above, which are properly chargeable to the terminated portion of the contract (exclusive of amounts paid or payable oti account of supplies or materials delivered or ser- vices furnished b! subcontractors or vendors prior to the effective date of the Notice of Termination, which amounts shall be included in the costs payable under (i) above); and (iii) A sum, as a profit, equal to 2 percent of that part of the amout determined under (i) above which represents the cost of articles and materiAls not processed by the Contractor, plus a sum equal to 8 percent of the~ remainder of such amount, but the ag- gregate of such s~ shall not exceed 6 percent of the whole of the amount determined under (i) above: Provided, however, that if it appears that the Con- tractor would I~ave sustained a loss on the entire contract had it been completed, no profit shall be included or allowed under this subdivision (iii) and an appropriate adjustment shall be made reducing the amount of the settlement to reflect the indicated rate of loss; and (3) The reasonable costs of settlement, including accounting, legal, clerical, and other expenses reasonably necessary for the preparation of settlement claims and supporting data with respect to the terminated portion of the contract and for the termination and settlement of subcontracts thereunder, together with reasonable storage, transportation, and other costs in- curred in connection with the protection or disposition of property allocable to this contract. The total sum to be paid to the Contractor under (1) and (2) of thtg para- graph (e) shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contradt price of work not terminated. Except for normal spoilage, and except ~o the extent that the Government shall have otherwise expressly assumed the risk of loss, there shall be excluded from the amounts payable to the Contractor as provided in (e)(i) and (2)(i) above, the fair value, as determined by the Contracting Officer, of property which is destroyed, lost, stolen, or damaged so as to become undeliverable to the Government, or to a buyer pursuant to paragraph (b)(7). (f) Costs claimed, agreed to, or determined pursuant to paragraphs (a), - (d), and (e) of this clause shall be in accordance with the contract coat principles and procedures in Part 1-15 of the Federal Procurement Regula- tions (41 CFR 1-15) in effect on the date of this contract. PAGENO="0282" 276 (g) The Contractor shall have the right to appeal, Under the clause of this contract entitled "Disputes," from any determination made by the Contracting Officer under paragraph (c) or (e) above, except that, if the Contractor has failed to submit his claim within the time provided in paragraph (c) above and has failed to request extension of ~such time, he shall have no such right of appeal.. In any case where the Contracting Officer has made a determination of the amount due under paragraph (c) or (e) abo've, the Government shall pay to the Contractor the following: (I) if there is no right of appeal hereunder or if no timely appeal has been taken, the amount so determined by the Contracting Officer; or (2) if an appeal has been taken, the amount finally determined on such appeal. (h) In arriving at the amount due the Contractor under this clause there shall be deducted (1) all unliquidated advance or other payments on ac- count theretofore made to the Contractor, applicable to the terminated portion of this contract; (2) any claim which the Government may have against the Contractor in connection with this contract; and (3) the agreed price for, or the proceeds of sale of, any materials, supplies, or other things acquired by the Contractor or sold, pursuant to the pro- visions of this clause, and not otherwise recovered by or credited to the Government. (i) If the termination hereunder be partial, prior to the settlement of the terminated portion of this contract, the Contractor may file with the Contracting Officer a request in writing for an equitable adjustment of the price or prices specified in the contract relating to the continued portion of the contract (the portion not terminated by the Notice of Ter- mination), and such equitable adjustment as may be agreed upon shall be made in such price or prices. (j) The Government nay from t.tme to time, under such terms and condi- tions as it may prescribe, make partial payments and paymetus on account against costs incurred by the Contractor in connection with the terminated portion of this contract whenever in the opinion of the Contracting Officer the aggregate of such payments shall be within the amount to which the Contractor will be entitled hereunder. If the total of such payments is in excess of the amount finally agreed or determined to be. due under this clause, such excess shall be payable by the Contractor to the Government upon demand, together with interest computed at the rate of 6 percent per annum f or the period from the date such excess pay- ment is received by the Contractor to the date on which such excess is repaid to the Government: Provided, however, that no interest shall be charged with respect to any such excess payment attributable to a reduc~" tion in the Contractor's claim by reason of retention or other dispost" tion of termination inventory until ten days after the date of such re' tention or disposition, or such later date as determined by the Contract~' ing Officer by reason of the circumstances. . (k) Unless otherwise provided for in this contract, or by applicable statute, the Contractor, from the effective date of termination and for a period of three years after final settlement under this contract, shall PAGENO="0283" 277 preserve and make available to the Government at all reasonable tImes at the office of the Contractor but without direct charge to the Cov~ ernment, all his books, records, documents, and other evidence bearing on the costs and expenses of the Contractor under this contract and relating to the work terminated hereunder, or, to the extent approved by the Contracting Officer, photographs, microphotographs, or other authentic reproductions thereof. PAGENO="0284" 278 ALTERATIONS (Continued) ~ 1975 PRICE REDUCTION FOR DEFECTIVE COST OR PRICING DATA (FPR 1-'3.814-l(a)) If any price, including profit or fee, negotiated in connection with this con- tract or any cost reimbursable under this contract was increased by qny signifi- cant s,nns because: (a) The Contractor furnished cost or prictnR data which was not accurate, complete and current as certified in the Contractor's Certificate of Current cost or Pricing Data; (b) A subcontractor, pursuant to the clause of this contract entitled ~ contractor Cost or Pricing Data" or "Subcontractor Coat or~ Pricing Data `hist Adjustments" or any subcontract clause therein required, furnished cost of pricing data which was not, accurate, complete and current as certified in the subcontractor a Certificate of Current Cost or Pricing Date Cc) A subcontractor or prospective subcontractor furnished cost of prtei.uj date which was required to be accurate, complete and `cUrrent and to be submitS' to support a subcontract cost estimate furnished by the Contractor but Which eat not accurate, complete and current as of the date certified in Rb. Catt,ee$ef* Certificate of Current Cost or Pricing Data; or (d) The Contractor or a subcontractor or prospective subcontractor furssiahsd' any data, not within (a), (b), or (c) above, which was not accurate assrbstt*Sd; the price or cost shall be reduced accordingly and the contract shall be endifted in writing as nay be necessary to reflect such reduction. However, say reduetiai in the contract price due to defective subcontract data of i `prospective subooe~ tractor when the subcontract was not subsequently awarded to such subcontractor, will be limited to the amount (plqs applicable overhead and profit markup) by Which the actual subcontract, or actual cost to the Contractor if there was no subcontract, was less than the prospective subcontract cost estimate submitted by the Contractor:' PROV~PED, The actual subcontract price was not affected by defective cost or pricing data. (NOTE: Since the contract is subject to reduction under this clause by rea~oe of defective cost or pricing data submitted in connection with certain subceetreets, it is expected that the Contractor may wish to include a clause in each swab sob' contract requiring the subcontractor to appropriately indemnify t~ie Contractor. it is also expected that any subcontractor subject to such indemnification will .ner.' ally require substantially similsr'indesmtficstion' for de'~ective cost or prisms data required to be submitted by his lower tier subcontr~etors.) PAGENO="0285" 279 ALTERATIONS (Continued) Jmuary 1973 SUBCONTRACTOR COST OR PRICING DATA (FPR 1-3.814-3) (a)- The Contractor shall require subcontractors hereunder to submit, actually or by specific indenttftcation in writing, cost or pricing data tinder the follow- ing circumstances: (I) Prior to the award of any subcontract the amount of which is expected to exceed $100,000 when entered into; (2) Prior to the pricing of any subcontract modification which involves aggregate increases and/or decreases in costs plus applicable profits expected to exceed $100,000; except where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial qisem- Utica to the general public, or prices set by law or regulation, (b) The Contractor shall require subcontractors to certify, in substantially the same form as that used in the certificate by the Prime Contractor to the Government, that to the best of their knowledge and belief, the cest and prieie$ dste submited under (a) above is accurate, complete, and current as of the d~e of agreement on the negotiated price of the subcontract or subcontract chavsg~or modification. (c) The Contractor shall insert the substance of this clause including thu paragraph (c) in each subcontract hereunder which exceeds $100,000 when enterd into except where the price thereof is based on adequate price competition, eeta blished catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. In each such excepted subcontract hereunder in excess of $100,000, the Contractor shall insert the sub- stances of the following clause: SUBCONTRACTOR COST OR PRICING DATA - PRICE ADJUSTMENTS (a) Paragraphs (b) and (c) of this clause shall become operative only with respect to any modification made pursuant to one or more provisions of this con- tract which involves aggre'ate increases and/or decreases in cOsts plus applicable profits expected to exceed $100,000. The requirements of this clause shall be limited to such contract modifications. (b) The Contractor shall require subcontractors hereunder to submit, aetmolly or by specific identification in writing, cost or pricing data under the feUowiu circumstances. (1) Prior to award of any subcontract, th. amount of aditab is .wp*eIed$e~ exceed $100,000 when entered into; (2) Prior to the pr1cin~ of any subcontract modifieattse *ieh ~ aggregate increases and/or decreases in costs plus applicable profits exp~su~ ~ * exceed $100,000: except where the price is based on sdequate price c~Nttttee.'~ * established catalog or market prices of coemiercial items sold in ewbetsatist. * quantities to the general public, or prices set by J~aw or regulation. PAGENO="0286" 280 (c) The Contractor shall require subcontractors to certify, in substam. tially the same form as that used in the certificate by the Prime Contractor to the Government, that to the best of their knowledge and belief the cost and pricing data submitted under (b) above is accurate, complete, and curremt as of the date of agreement on the negotiated price of the aubcontract or sub.' contract chinge or modification.~~ (d) The Contractor shall insert the substance of this clause Litciudiag this paragraph (d) in each subcontract hereunder which exceeds $100,000 when entered into. PAGENO="0287" 281 AVSERATI0NS (Continued) * (FPR l-3.814-'2) (a) GENERAL. The Contrtcting Officer or his representatives aha).l have the audit. end inspscti,on rights described in the applicable paragraphs (b), Cc), and (d) betew. fb) EXAMINATION OF COSTS: If this is a coat-reimbursement type, incentive, tiop and materials, labor hour, or price redeterminable contract, or any c~inattse the*ehf,~ the Contractor sha~Lt maintain, and the Contracting Officer sr his repr.setnatives ~11 have the right to examine books, , docun'ents, and other evidence and seeevatts procedures and practices, sufficient to reflect properly all direst and isdireet coats of whatever nature claimed to have been incurred and anticipated to be incurred ~fß the performance of this contract. SUch right of examination shall include inspection at all reasonable tines of the Contractor's plants, or such parts tharehf, as may be segoped in the performance of this contract, (c) COST OR PRICING DATA. If the Contractor submitted cost or pricing data in cciv. mection with the pricing of this contract or any changeor modification thereto, unless such pricing was based on adequate price competition, established catalog or marhet prices of cormnercial items sold in substantial quantities to the general public, *r prices set by law or regulation, the Contracting Officer or his representati'qes who are ei~loyees of the United States Covernctant shall have the right to.examine all books, records,Wddcu. nents and other data of the Contractor related to the negotiation, pricing or~perfote~ancs of such contract, change or modification, for the purpose of evaluating the accuracy, completeness and currency of the cost or pricing data submitted. Additionally, in tire case of pricing any change or modification exeeeding.$lOO,000 to formally advertised contracts, the Comptroller Cenaral of the United States or his representatives who are employees of the United States Covertunent shall have such rights. The right of ezanina- ation shall extend to all documents necessary to permit adequate evaluation of th. cost or pricing data submitted, along with the co~~tputations and projections used therein. Cd) AVAII,ABILITF. The m°t.riats described in (b) and Cc) above, shall: be eisde available at the office of the Contractor at alt reasonable times for inspecties audit or reproduction, until the expiration o~ 3 years from the date of final payment under this contract or such lesser time specified in Part 1-20 of the Pederel Pscarg.' ment Regulations (41 CPR Part 1 20) and for such loner period 11 any as is es~sfted by applicable statute or by other clauses ef this contract, or by (I) mad (1) W1~% (1) If this contract is cesiptetaly or partially tesotnated, the enaltds $lpttag to the work terminated shall be made available for a parted of 3 years frem the ~ any resulting final settlement (2) Records which relate to ippeate under the "Disputed" etsese of th4$ tract, or litigation or the settlement of claims arising out~f the psrfoswanes'af ~t$ contract shall be mede available until such appeals litigation or claims hiss b*IM~ disposed of. . * * . * * (e) The Contractor shall insert a clause containing all the provisioni of this clause, including this parsgraph Ce), in all subcontracts hereunder except altered ss /neceasary for proper identification of the contracting parties and the Contractiag Off icer under the Government prime contract. PAGENO="0288" 282 July 1974 ACCOUNTS) AUDITS, AND RECORDS (a) The Contractor shall maintain books, records, documens, and other evidence, accounting procedures and practices sufficient to reflect properly all direct and indirect costs of whatever nature claimed to have been incurred for the performance of this contract. The foregoing constitutes "records" for the purpose of this clause. (b) The Contractor's facility(ies) or such part thereof as maybe engaged in the performance of this contract, and his records shall be subject at all reasonable time to inspection and audit by the Secretary or his authorized re- presentatives. (c) The Contractor shall preserve and make available his records (1) until the expiration of 3 years from the date of final payment under this con- tract, or the time periods for particular records specified in 41 CFR Part 1-20, whichever expires earlier, and (2) for such longer period, if any, as is required by applicable statute, or by other clausea of this contract, or by (i) or (ii) below: (i) If this contract is completely or partially terminated, the records relating to the work terminated shall be preserved and made available for a period of 3 years from the date of any result- ing final payment. (ii) Records which relate to (A) appeals under the "Disputes" clause of this contract, (B) litigation or the settlement of claims arising Out of the performance of this contract, or (C) costs and expenses of this contract to which exception has been taken by the Contracting Officer or any of his duly authorized representatives, shall be retained until such appeals, litigation, claims, or excep- tions have been disposed of. (d) The Contractor shall insert the substance of this clause, including this paragraph (d) in each subcontract hereunder with the exceptions of (1) purchase orders not exceeding $2,500 and (2) subeontracts or purchase orders for public utility services at rates established for uniform applicability, to the general public. When so inserted, changes shall be made to designate the higher-tier subcontractor at this level involved in place of the Contractor; to add "of the Government prime contract," in place of "this contract" in (B) of subparagraph (c)(ii) above. PAGENO="0289" 283 FPR 1-3.1203(2) (iv) 11/74 DISCLOSURE STA1~EMENT COST ACCOUNTING PRACTICES AND CERTIFICATION Any contract in excess of $100,000 resulting from this solicita- tion except (1) when the price negotiated is based on (a) estab- lished catalog or market prices of commercial items sold in sub- stantial quantities to the general public, or (b) prices set by law or regulation, or (2) contracts which are otherwise exempt. (see .4'CPR 331.30(b) and FPR ž 1-3.1203(a)(2), shall be subject to the requirements of the Cost Accounting Standards Board. Arty offeror submitting a proposal, which, if accepted, will result in a contract subject to the requirements of the Cost Accounting Standards Board must, as a condition of contracting, submit a Dis- closure Statement as required by regulations of the Board. The Disclosure Statement must be submitted as a part of the offerorts proposal under this solicitation (see (i) below) unless (i) the offeror, together with all divisions, subsidiaries, and affiliates under common control, did not receive net awards of negotiated national defense prime contracts totaling more than $30,000,000 in Federal Fiscal Year 1971 or net awards of negotiated national defense prime contracts of the type (as defined in the first sen- tence above) which are subject to Cost Accounting Standards total- ing more than $10,000,000 in either Federal Fiscal Year 1972 or 1973 (see (II) below), (ii) the offerˇr has airead ~ubmitted a Disclosure Statement disclosing the practices used in connection with the pricing of this proposal (see (III) below), or (iii) post award submission has been authorized by the Contracting Officer. See 4 CFR 351.70 for submission of a copy of the Dis- closure Statement to the Cost Accounting Standards Board. CAUTION: A practice disclosed in a Disclosure Statement shall Snot, by virtue of suchdisclosure, be deemed to be a proper, ap- proved, or agreed to practice for pricing proposals or accumu- lating and reporting contract performance cost data. Check the appropriate box below: ( ) 1. CERTIFICATE OF CONCURRENT SUBIISSION OF DISCLOSURE STATEMENT(S) The offeror hereby certifies that he has submitted, as a part of hi8 proposal under this solicitation, copies of the Disclosure Statement(s) as follows: (i) Origina' and one copy to the cognizant Contracting Officer; (ii) one copy to the cognizant contract auditor. Date of Disclosure Statement(s): Name(s) and address(es) of Cognizant Contracting Officer(s) where filed: 98-930 0 78 .- 19 PAGENO="0290" 284 The of feror further certifies that practices used in esti- mating costs in pricing this proposal are consistent with the cost accounting practices disclosed in the Disclosure Statement (s). ( ) 2. CERTIFICATION OF MONETARY EXEMPTION The offeror hereby certifies that, together with all divi- sions, subsidiaries, and affiliates under common control, ~ he did not receive net award of negotiated national defense prime contracts totaling more than $30 million in Federal Fiscal Year 1971 or net awards of negotiated national dc- fense. prime contracts of the type which are subject to Cost Accounting Standards more than sio,oqo,000 in either Federal Fiscal Year 1972 or 1973. ( ) 3. CERTIFICATE OF PREVIOUSLY SUBMITTED DISCLOSURE STATEMENT(S) The offeror hereby certifies that the Disclosure Statement(s) were filed as follows: Date of Disclosure Statement(s): Name(s) and address(es) of Cognizant Contracting Officer(s), where `filed: The offeror further certifies that practices used in esti- mating costs in pricing this proposal are consistent' with `the cost accounting practices disclosed in the Disclosure Statement (a). FPR 1-3.1203(a)(2) 3/25/76 PAGENO="0291" 285 COST ACCOUNTING STANDARDS flR 1-3.1204 (a) Unless the Cost Accounting Standards Board, or the General Services Administration in the case of nondefense contract~, has prescribed rules or regulation exempting the Contractor or this contract from standards, rules, and regulations promulgated pur- suant to 50 U.S.C. App. 2168 (P.L. 91-379, August 15, 1970), or other ßtatutory authority, the~ Contractor, in connection with this contract, shall: (1) By submission of a Disclosure Statement,discloae in writing his cost accounting prac~tices as required by regulations of the Cost Accounting Standards Board. The required disclosures must be made prior to contract award unless the Contracting Officer provides a written notice to the Contractor authorizing postaward submis- sion in accordance with regulations of the Cost Account- ing Standards Board. The practices disclose4 for this contract shall be the same as the practices currently disclosed and applied on alt other contract and subcon'~ tracts being performed by the Contractor and which con~ tam this Cost Accounting Standards clause. If the Contractor has notified the Contracting Officer that the Disclosure Statement contains trade secrets and com~ mercial or financial information which is privileged and confidential, the Disclosure Statement will not be released outside of the Government. (2) Follow consistently the cost accounting practices disclosed pursuant to (1), above in acc~mu~atir~g and reporting contract performance cost data concerning this.. contract. If any change in discl°sed practices is made for purposes of any~co4tract.or subcontract subject to Cost Accounting Standards Board requirements, the change must be app~ied prospectively to this cont~act, and the Disclosure Statement must be amended accordingly. If the contract price or cost allowance of this contract is affected by such changes, adjustment shall be made in accordance with subparagraph (a)(4) or (a)(5),' below, `as appropriate. (3). Comply with all Cost ACcounting Standards in effect on the date of a~ard of thts contractor if the Con- tractor has submitted cost ot pricing data, on the date of final agreement On price as showi~ on the Contractor's signed certificate of current cost or pricing data. The Contractor shall also comply with any Cost Accounting. Standard which hereafter becomes applicable to ~a contract or subcontract of the Contractor. Such compliance shall be required prospectively from the,date of applicability to such contract or' subcontract. PAGENO="0292" 286 (4)(A) Agree to an equitable adjustment (as provided in the Changes clause of this contract, if any) if the con- tract cost is affected by a change which, purusant to (3) above, the Contractor is required to make to his estab~ ].ished cost accounting practices whether such practices are covered by a Disclosure Statement or not. (B) Negotiate.with the Contracting Officer to dater~' mine the terms and conditions under which a change to, either a disclosed cost accounting practice or an estab~-: hiked cost accounting practice, other than a cha*s under (4) (A), above, may be made. A change to a p*actic* may be proposed by either the Government or the Contractor, provided, however, that no agreement may be ends under this provision that will increase costs paid by the United States. (5) Agree to an adjustment of the contract price or cost *hlowance, as appropriate, if be or a subcontractor fails to comply with en applicable Cost Accounting Standard or to follow any practice disclosed pursuant to subparagraphs (a)(1) and (a)(2), above, and such failure results in any increased costs paid by the United States! Such adjust~ ment shall provide for recovery of the increased costs to the United States together with interest thereon computed at the rate determined by the Secretary of the Treasury pursuant to ?.L. 92-41, 85 Stat. 97, or 7 percent per annum, whichever is less, from the time the payment by the United States was made to the time the adjustment is effected. (b) If the parties fail to agree whether the Contractor or a sub- contractor has complied with an applicable Cost Accounting Standard, rule, or regulation of the Cost Accounting Standards Board and as to any cost adjustment demanded by the United States, such faflu~e to agree shall be a dispute concerning a question of fact withth the meaning of the Disputes clause of* this contract. (c) The Contractor shall permit any authorized representdives of the head ~of the agency, of the Cost Accounting Standards Board, or of the Comptroller General of the United States to examine and make copies of'~any documents, papers, or records telattflg to contiance with the requirements of this clause (d) The Contractor shall include in all negotiated subcoflttacts which he enters into the substance of thu clause accept paragr~h (b), and shall require such inclusion in all other subcontracts*f;~. any tier, except that this requirement shall apply only to nego-' tiated subcontracts in excess of $100,000 where the pride nsgoti*tnd is not based on: PAGENO="0293" 287 (1) Established catalog or market prices of commercial items eold.in substantial quantities to the general pub~ lic; or J(2) Prices set by law or regulation, and except that * the requirement shall not apply to negotiated subcon~ tracts otherwise exempt from the requirement to accept the Cost Accounting Standards clause by reason of 1 331.30(b) of Title 4, Code of Federal Regulations (4Cfl 331.30(b)) or 9 103.1203 (a)(2) of Title 41, Cod, of Federal Regulations (41 CER 1-3.1203(a)(2)). However, if this is a contract with an agency which permits ~ contractors to appeal final decisions of the Contracting Officer directly to the head of the agency or his duly authorized repre~ sentative, then the Contractor shall include the substance of paragraph (b) as well. NOTE: (1) Subcontractors shall be required to submit their Disclosure Statements to the Contractor. However, if a subcontractor has pre~ viously submitted his Disclosure Statement to a Government Contract~ tug Of fic~r he may satisfy that requirement by certifying to the Contractor the date of such Statement and the address of the Con.~' tracting Officer. (2) In any case where a subcontractor determines that the Disclo~ sure Statement information is privileged and confidential and de. climes to provide it to his Contractor or higher tier subcontractor, the Contractor may authorize ditect submission of that subcontrac tor's Disclosure Statement to the same Government offices to which the Contractor was required to make submissiofl of his Disclosure Statement. Such authorization shall in no way relieve the Coetrac~ tot of liability as provided in paragraph (a)(3) of this cUuse. In view of the foregoing and since the contract may be subject to adjustment under this clause by reason of any failure to coiy with rules, regulations, and standards of the Cost Accounting Standards Board in connectjon wIth covere4 subcontractg, it ii expected that the Contractor may wish to includi a clause in each such subcontract requiring the ~ubcontractot to appropriately tn~'. demnify the Contractor However, the inclusion of such a ci*us. and the terms thereof are matters of negotiation an4 agtsemint between the Contractor and the subcontractor, provtd°d that thiy do not conflict with the duties of the Contractor under its com~. ~tract with the Government. It is also expected that M~ sUbeo*~ tractor subject to such tndemnificatton will generally require subitantially similar indemnification to be aub,itted by his sub" contractors. PAGENO="0294" 288 (e) The terms defined in Sec. 331.20 of Part, 331 of Tit]e4, Code of Federal Regulations (4,CFR 331.20) shall hive the same mu*Uu~s herein. As there defined, "negotiated subcontract" means "amy subcontract except a firm. fixed-price subcontract made by a con~ tractor or subcontractÓr after receiving offers from at least two firms not associated with each other or such Contractor or subeon-' tractor, providing (1) the solicitation to all competing firms is identical, (2) price is the only consideration in selecting the. subcontractor from among the competing firms solicited, and (3) the lowest offer received in compliance with the solicitation from among those solicited is accepted." PAGENO="0295" 289, COST ACCOUNTING STANDARDS EXEME'TION FOR CONTRACTS OF $500,000 OR LESS CERTIF CATION (FPR 1-3.1203(h)) If this proposal is expected to result in the award of a contract of $500,000 or less and the of feror is, otherwise ~iigible for an exemption, ho shall inidcate by checkIng the box b~Iow that the exemption to the Cost Accounting Standards clause (fPR ž i-3J2O4) under the provisions of 4 CFR 331.30(b) (8). (see FPR ž 1-3.1203(h)) is claimed. Where the of feror fails to check the box, he. shall be given the opportunity to make an election in writing to the Con- tracting Officer prior to award. Failure to check the box below or to make such an election shall mean that the of feror cannot claim the exemption to the Cost Accounting Standards clause or that the offeror elects to comply with such clause. ( ) Certificate of Exemption for Contracts of $500,000 or Less. The offeror hereby claims an exemption from the Cost Accounting Standards clause under the provisions of 4 CFR 331.3O(b)(~) and certifies that he has received notification of final acceptance of all items or work on (i) any prime contract or subcontract in excess of $500,000 which contains the Cost Accounting Standards clause, and (ii) any prime contract or subcontract of $500,000 or less awarded after January 1, 1975, which contains the Cost Ac.~ counting Standards clause. The offeror further certifies he will immediately notify the Contracting Officer in writing in the event be is awarded any other contract or subcontract containing the Cost Accounting Standards clause subsequent to the date of this certificate but `priot to the date of any award resulting from this proposal. PAGENO="0296" 290 PREAWABX) EQUAL OPPORTUNITY COMPLIANCE REVIEWS Where the bid of the apparent low responsible bidder is in the amount of $1 million or more, the bidder and hi~ known first~tier subcontractors which will, be awarded subcontracts of $1 million or more will be subject to full, preaward equal opportunity com~ pliance reviews before the award of the contract for the purpose of determining whether the bidder and his subcontractors are able to comply~ with the provisions of the Equal Opportunity clause. PAGENO="0297" 291 ALTERATION TO SF..32, General Provisions CLEAN AIR AND WATER CLAUSE (Applicable only if the contract exceeds $100,000, or the contracting officer has determined that the orders under an indefinite quantity contract'in any one year will exceed $100,000, or a facility to be used has been the subject of a conviction under the Clean Air Act (42 U.S.C. 1857C-8(C)(1)) or the Federal Water Pollution Control Act (33 U.S.C. 1319 (C)) and is listed b.y EPA, or the contract is not otherwise exempt.) (A) The contractor agrees as follows: (I) To comply with all the requirements of Section 114 of the Clean Air Act, as amended (42 U.S.C. 1857, et seq., as amended by Public Law 91-604 and Section 308 of the Federal Water Pollution Control Act (33 U.S.C. 1251, as amended by Public Law 92-500), respectively, relating to inspection, monitoring, entry, reports, and information, as well as other re4uirements specified in Section 114 and Section 308 of the Air Act arid the Water Act~j respectively, and all tegulation and guidelines issued thereunder before the award of this contract. (II) That no portion of the work required by this prime contract will be * performed in a facility listed on the Environmental Protection Agency list of violating facilities on the date when this contract was awarded unless and until the EPA eliminates the name of such facility or facilities from * listing. (III) To use his best efforts to comply with CleanAir Standards and Clean Water Standards at the facilities in which the contract is being performed. (IV) To Insert the substance of the provisions of this clause ~n any nonexernpt subcontract, including this paragraph (IV). (B) The terms used in this clause have the following meanings: (I) The term "Air Act" means the Clean Air Act, as amedded ~42 U.S.C. 18)7 et seq., as amended by Public Law 91-604). (II) The term "Water Act" means Federal Water Pollution Control Act, as amended (33 U.S.C. 1251 et seq., as amended by. Public Law 92.400)." (III) The term "Clean,Air Standards" means ~ny enforceable rules, regu- lations, guidelines, standards, limitations, orders, controls, prohibi. tioris, or other requirementS which are contained'~in, issued under, or otherwise adopted pursuant to the Air Act or Executive Order 11738, an applicable implementation plan as described in Section 110(D) of the Clean Air Act (42 U.S.C 1857C-5(D)), an approved implementation procedure or plan under `Section 111(C) or Section 111(0), respectively, of the Air Act (42 U.S.C. 1857C-6(C) or CD)), or an approved implementation procedure under Section 112(D) of the Air Act `(42 U.S.C. 1857C-7(D)). PAGENO="0298" 292 DATeD (1c *he* MO4WKATeON ~ Letter ~c°w~eac,,oeoe* No. ~ 1 A~~iTS ONLY TO AM Mt OIIOLICITATIďN$ 3 C. .b... ..~b.Nd *&AIAM. C ~ndW., .M h~C CT.A 1* The bee. eeddA. še.ffi.ibe .eeAe~t O4...~I C .~edVA. fl C .ee ne.4.dp. .eelpt el chic e.eecdeeM pAQi C C. Lee. s.4 d.c. .puIC.d biLe ..ildeDee... ..eeiLd he stiLe bC.sb ~~he*. .)Cy ~e;e~ s.d ..te.els~__~_.ceps.sf NYc esesthsesi Nh .ehs.slJNLs5 eS(sbS ~h~e eec.sds.si `siC 5..7 stiLe ei. AM54d~ e.N$ Il MCi c.c .lWceiL eLk s,ied., NCNMC I. IL. esIkfteN~s e.id s.esdssii .e.eheee SACUSI UN TOUR ACRNOCVIROG(MePN 10 IT eDcs.Wo As TNI SRCUINO ONsectetsos ~ ICR IIO1* JAiL $PLCIOILD MAY 5(5517 RN RTJRCTION CR YOUR OUSt C ~ sis.. et Cl. eleesThesi ose Abc. S. (L.oq. eN iCe. tk..4 .cbURNd USC .bes. sep be USCe~CiI. hi.. p.slded seek sisqses .s CCL. s.d... c~e,e,. C IL. ..flcshe. eel $t .seeojC..e. - C *si)~.d pise C Ce ~ Los ..d US. .p.MN.d. EERrse,t0USi~sIoi AiC~~Ife.qssedj ~ .AMN4YI ~t$ APPIISLOCLY IO~MO~ICAUďNT UN CORIIM~I#ORD(Mt . ~.) k) ms Cho.~. ~.. C .~e.e...c ~ t~e puthoItiětjonAo~. ~1att~ Contract by. ttI~3JJ$tUlt~t. The (MAgic sic Cob C bloC I5..i s.*dss, he oboe. .o~c.d cwesisetosd.. Rb) Oh. oboe. Ye,ohsi,doooiod!Ocdis sitUAte. ..llod the adobMollos tbestg~ )silh.l iho.g.i Is spIeS .RC.. ?"░"░~`~~░~ USe 05.5.01 55db C HAiL Ii. ~] This Sopplossotot Aqce.sset C .Mst.4 ho. ps..sost I. .AC0.ip of .~ -~ .sdit.s lbs cbs. sstob.,id sLotted ss..t hub It hisch RN. . D(SCCIP)ION OP AMEPIDMTRM/MOET?ICATION -S The target date for definitizatlon, set forth in Subparagraph B, Article III - DEFINITIZATION, as established by Modification No. 6 dated May 31, 1977. is further extended to August 15, 1977. . S S .5 5 5 .~ . * . . 5, *.. S .. /5 1. 1 Os poed,d heeIs~ 001.05* sod osodtheos sIts dssussA .pR~o 55 S ~ QUUNIT5O~ $51 ITUNH*D ~ S CUNM5ACYTR~OOT5UR . S ~ *R$N Is S S S hAMS RU I? . S 5 555 ~ ~ .5 5, ~ S S - 5S_j~~, . .~ )!~iSt~,.. S~ , S S ~SS 5 PAGENO="0299" 293 7nrT~r-z~ ~ Ti . H. HE H. IP~NAU $0. 4. s. 539W 39 CO ________________ *13*1*Nss~ (V.~v, ~ Center for Us,ese Control 255 East Paces Perry Road, LL $aIss as shown in hockS. Atlanta, GA 30305 7. OR ____________ WHAT AND 41901955$ ~SI3*1D5 53 r 1 Wyeth Laboratories ___________ ~ Division of American Home Products latter .~.d ISP P. 0. lox $299 (jc5.weHcYrne~No. Philadelphia, PA 19101 L J 911117$- 9. THIS ILO APPLIES Y AM ND TA S 0 ~ ~ ~ &HHHIH. Is ....d.d.. ...I.A I. blAb 2. Tb. b. AM 4.'. .p.slH.d A. ....Ip.J O4.w[j A ..N.4d 0 bIos -o'..'oIS. 09..... oHE ..bwoHIodgo ....lpT .1 thIs .Io..d,...t pA.. H ib. I..' sod 4.'. sp.dH.d A A. .&IoIMII..... .so.d.d by .soof A. IHAMo ..Tb.ds. o)*by sg.Hg sod ..To..Ag........o,A. .5 Al. ...AMo.~ (b)Dy .Ao..ts~dglHg ..o.~I .1 los so..do.rn so *soh oopy.9 A. o9*. sobolood2 o.(.) Óy ..psoHID STIN. o.l NIH,.'. oh,oll ~ I. A. ..IklwI., .,d ...odo.oT ..ob.... RAIIUHI OH TOUT ACKNOWLS000MIPIT TO ST HICEIHED AT THE GlUING OPPIC! .01011 TO TAT 901* *o DATE SPICIPIED MAY SITES? IN DEJSCTIQN OP YCUS OPPES. If. by .An of Al. .o..do..' yDI d.si.* I. .ho.~. os 09.. sbosdy ..boANd .0011 dIsO~. sloybo ..do by .0.., p..od.d .o.h HI.g..o .. HO.. ...3~s ..I...,o* 0 IIH ~I.dI.'.so sod Al. H.AAM. sod I. `oo.o.d poA. H A. .psoo.~ boo. AM 4010 .p..Hd. 0. ACCOUNT A ElATION DATA (S lTqHo II. THIS SIOCE APPLIED OEAY TO MODIPICATIONS OP CONT&ACTH/OHDSHS $01 0 This Cb..g. 0.4. .o loood po.....I H - Tb. WHIp. ~1 HIS H bAA TO.. sod. H A. SAND ..d.osW ..*odioHI... IbI Yb. .b... .o.b...d ~o.Hsol,o.d*. I~ o.dA.d I. .sH'd HIS oIfoIoIoWTIIoo dI.oI.. I..A 4.05.. HPoyH5 .5... .pr..d.ID. 4.00. HSI.IUTHAA H ONSA ST. Is) This SoppI.so~'.I Ago...o.l Is *sH.wd I.'. 92900.990 S2SH.Hp of- 0 wodIbo~ Ao 511000 000bT.Td TOIIUHIO 50 501 Sod. So bAsh 5~ 12 DSDCRIPTIQP4 C? IM If.~ The target date for defio&ittzation of referenced contract, as act 1*~th ha *?1CL* ~ DEFINITIZATION, ii extended heteby to July 1, 1917. ░~ ::i;;~~ ESOSpI A Poo.ld.d bo,.i, OIl 0..os AM oo.OIlooo.. of A. d,.oo..s ..f.,ooo.d ho hotS o~I.o.O.to.. oOso.d woOIo s.d MOOS MSODOTdOSNH. (~ ~P45 T~O?~I~ NOT 55031555 0 CONTRACTOD/CVVSSOH 1$ SSGIi~SSD SlOPS THS DOCUHISPIT MO SET%JH4...~C09IEH 53*1319* -, TAME ~p CCNTRACY~HFQYP9Q~ 57. 15$ ________ $)w.H.o if.,.... .oIfaoIosd H4~ S. THIS j.~., s 1.. PAGENO="0300" ~r11~Th#flWtrR1S1R7fl~W ~ ~frMODWKAUON PlO IMKCTM DAIS IL jSDWMTION/PUSCMAU ml~TSSTsO - iv 1w.A.~ AS~~S ~* 55USD 5Y _______________ - r~o, Center for Disease Cont~o1 ~-~35 East Paces Ferry Rd. N.E. $aee as shown in Block 5. Atlanta, GA 30305 1AN~APDSEU I ~ _____ I rW~0~h Laboratories Division of American Home Products P. 0. Box 8299. ~",~J" Philadelphia, PA 19101 J P. 115$ BlOCK APPLITS ONLY To AMINDMINTS OF SOLICITATIONS D'~ .b.v. ,~.,b., sdidlSl~T is ssMANT .1 .sT MAT bI.Ik 2. Tb. sTd div g..sllsdIN TMIPT ~l ~ A ~ 0 is KM -.511.1. OF.~.ss gd,sNT.dss .MIpT Dl lIIi~ D.1DId,T.TT p,iO~ N $11, SDNY .~d AM. ,pNIAd A H, ..IAIIMIN. ~, .,,.,d.d, by .1111. 11TSTMID5 ,IsTLId.. Dish ~I.dg. s ,sf,,..~. si. .&dstl.~ .~d *T,Td'.ll `111.11. PASUM OF YOUR ACKNOWLEDOSMENT TO 51 SICISVSD AT THE ISSUING 0511CR PHOR TO TM. HORS we DAIS SISOFIED MAT SISUST SN REJECTION OF TOSS OFFER. II, by DITU. sf III. s,sMIdII.M p511 dNi,~ ID OIls. .`~ D~.l IITD11dy TIbINTlId. .llKIlsI.5lig. I11DybD SIdE by IN.g,SI 5,5,51 51TDld.d ,s,yh I.I.g~. 11.511., .NS.s ~ I. A, .sikNIi~. .~d lii. *sldllMJ, .Ud I,,,,..~.d pA.. N H. p5...sg As., s.d AM. .ps.lH.d. y.ACCOIJSAI*IG AND APPNOPHIATION DATA (If s.I0▄PII) 1 iRIS STOCK APPUIS ONLY TO MODIFICATIONS OF CONTEACTS/OEDUS$ - `I 0 This CIIUIINU O'd.. I~ iIs~id FITSUKU ID lb. ChUISSI 01 AsH A SINS II SI .~.d. I. IS. D11.15 IUITSIS85DIHDdF51IS~ I Ti. .SMI H'S, NT .DTITSI$ INS ,dlNT II ,,I~sI III. NdH ~I*S.. dsngs (.NS.g dIN.. 5UpAg ~*cE .gpop'RSIN M.. #15*1 IwIS Slid ml. SuppINH..NI Ag~s.o.N I. .pD,T.d AN pNIDIIIII N N*INpHE~ -- I -~ S 11IIA1HFI IS. DSTT* IKIHIY,TNT CHIMed U...' FOTI 5 SODS ~. ___________ IS DISC P50W OF AMUNDMUNT MCRIPICATIOW I) U ~P ~ NOT 5505*15 0 CONTSACTOSIOFFUOS 55 5505*5010 lION 1 Ti'.l L ~ 294 ~1 .A~ --~f~1S4t) MI05ICATIOPI OP Letter ~Jcivie*cY*ii*S so. _.3~.~.7444a. 9/13/76 _-.---(*.AAMI ES) The target date for deftnitization of DtFINITIZAT!ONI is extended hereby t1 ~ SoDs # loss,,,d .gNSl5,sNTIS, d,gi,esM ,,Io.es.d Is SAsS S..sS.HINT..ITAIlTSSA, DIjbylv,. .Ipw5* ssNeAMd Si `NIB OPd.I~s5IIF,.MTlTdsS.1I. . -~ SSd AIM. SIIUSTA.1...........CCFIIS TO S IA-I I-' .505 PAGENO="0301" 1 GINtRM ~IPVIC6S ADMlM~AflON AME~'~~ENT Of lID PROC. D1~. II Cli) 1.16.101 ~ SQUCIIATIO . N/MOD1Fk/T'~4. OFc V O~R~ ~ ct~ * ~. NO 6. )I1)CIIV( DAlI ~ ~ ~u.ci*st `coulo ~o. . p*o* . . ci NO 1 ~... ~, -V 7. (0*1*6(10* ~ i -. S.RCDUR COi)E~ *66*1 AND 600*1011 .~ . r Wyeth Laboratories . I Division o~ American Home Products - *~ V 6*66*60*6*60 01 0006*01161*0*6 *10. .- -.- .6*~V6 6*6*..' ~.. (AfrO). ~ P 0~ lOX RID `~ 19101 L J ~ M0sMX~ Latt** . ~~O*4t*A~Y~ $0. 00moJ~Ut~..~-.-~- (*1 ** Itfr . 11~~$~6~6 *6~~*6*6fl~*6l6~*6lR*6*6M( 0*6o. .6*1.6111 ou1~* Dli)), ~m~d*iit p~$, .111. *6*) *adSiis .**~i) AdW~k*6lli,Ii *)*6*61*SUID .5*5*6 DAli 811(1610 MAY *60661 II) *161(160*01 YQuN 01001 l~ hy ~MW66*I*6Ad6WM 1*64,1641* 6*6~I *5 *.IA1000 *6AIDA, *6*0 0~5IF*6 *1151*1*5 p1~16~4 0.11*0.914.6 *1 1*'))' *011.6 ..l.*1g~ 1*0* ,.6.5*6I64* 6*401*0*1*6*6*). ~d A O616Y14p*641 *656. .p*5I6$I*6ll M~~*16.t V... .OC~W4D4G~ A0)0*~(2OWDAYA tllocu.ked) -, -~ 6~*~V -~ .~. V No change in obligation. II. 10)0 510Cc APPUIS ONLY 00 MOIUI1CATI005 01 COP4TDACE$/O*U)1*I (I) ~1ki, Ch~. 0.4.. 66.014 p~.o*6*~A1Js~3L2, `~C~h.5flg5R." ~ ~ou1,s,tona 111. C).~.. .o0** A 61*61 2 .,.d. Ic *1*40111I6.6111*1 l*lIN*$)lld*1. 5) 0 The .11... ,o.b.,4d cow,.d/N.4., 6, ..dskdlt ,.R.d A. .4,161*900.. .hetg.o wA'.. ,l~.g.1 A payIng o5*s5,powpal14w. dli. *6*1.01 *flh A ht*cR 11. 0 0.1. $*ppl....t.l A91l*n*U 1.1.1.166 AUt psnoo°** w5614*y .1 .~.. -, .. V~ * n.d.fl., II. .01.. 166.6.114 4*1611(1 o.soI 1,411* blok It. V 3. 010C*)PTIQN OP M)IPIDMI$T/MODIPICATION V ARTICLE III - qUANTITIEs is deleted hereby and the fOllowing is substituted therafar: ARTICLE III QUANTITIES: The number of doses, by vial sizes, to be furnished under the ceattact is: Bivslent Vaccine - 30-dose viaLs - 7.2 million doses 7. . Monovalent Vaccine 1. dose viaL,- 2.3 million doses .6... Monovalent Vaccine 3~-4ose vials- 2.3 million doses . Vsrlstion in Quantity: ú variation t*t the total qeam tt t accepted, provided that sueb variation ii not in - quantity as sp.cUted sb.vi, *~4 to ovallobla J* dat° (January 15, 1917). The *entrOat4~J(g11 of additional qusntftiss so seen as th~rWktu. - This confirms the Contracting Of ftcar'e~srbal request and (~otr - a ~ewi agreement of November 17, 1976. - 1wlpl*~ p6*6.414 h..*.. 1, 6*11 lid ~*650*)~ ~1111~4.01*66*14*1*1*4 *6 cony *~uo* is $01 ~ ~ ~ 10*51*5010 sa* 15$ 50C**S*1 *idl 4. $AML ~ ~ . S. 651 . 5 SI .. .. -.VV-*6 - 0*55*.. ilp*... ..0*owd I. s*5) - 19. 1)61 OP 1)0*15 ( ypi *1)II~S) II. 5*15 0*0*10 IS. 01 ~. a~9.*64 . , John L. WillisaN ` 295 610111 DY 1)6)11- 0. ADMIPUSIISLO DY (If .~I,y ila. I,I..k I) (.01*6 (.0. Center for Disease Control - . V - 255 `East Paces Ferry Road N.E. Same as shown in Block 5. . - Atlanta, Georgia 30305 , ORIGINAL PAGENO="0302" 296 r ~etb (3Mm .19. Div. o~ American HOme Products C." Phl$dhPA ~~o~&se) I~1L~4..#o~ `~k~ii ~ W,-rC.W.411, ~75iols Ŕ~ˇ NI t~~eini 01 $oltsi*bcN,W S S4S~.~S o ~ h aYtYYdId ~$ 0$ I. 0441002 T4~ 0.0? 0.4400 ~~id~d 40$ 00(01410105(000 ~ 0 041 HIONAM ~ OC.... 5095$ ~,k0950t$dg ..~.p$ .4 As .o.odo.t s,.. .C~ 0... s~dd.4s .4~.5(d AC. .004011..,.... ..m*4.W ... .OM.s l4t.01.~..l..41 4.)Sy sg&.g s.d .m..o~__...,,p1., ~0 C~ ....d.s.M~ 010,Mts..T.Ng,.e .m~t .0 *1. .o...d...t.. Pooh ~opp *0 0.*N~. .00~N.d. Id Np `*0.s5$ t.4'9. 04 ~0ppt* 0104 ,SYI,d .5...,.. 014. ..4..ulA. .sd .o.01.s..' ....b.,. 0*10.0 00 TOUt *CNNOW0000(.l$NT 10.0010504*00 140 Nus.o 000ICI P*49~N 00 $s~ DAlI SPICIPIND MAY $151490 P4 NCJICYION 00 Y001 OFPtN. ~*p .i,$,.s *5 C. oos.dosM p.. 4....'. do..g. *5~. .5.s04p ...b.....4. ..4 .I.N~ opi. YslUAp *44SYěN I 00005!, p.0(14.4 .m ~ .0.. o.k,s ~ 01 550 s$IU4090$ .sd CA s-,.do, 0540 (0M*.d 4?M MC. .m,.~ IC.. .54 lUll 5.5(IfAd~ I ~ ACCOUNTIAG AND APP0°P4lA5lOWDAt~q,,,,Z~░. ~ ~. S. No Change in obligation.. II. THIS OSOCK APPtI5$ ONlY TO M0010ICATIONS Of CONT$ACT$/ONDCOS - (.1 0 This Chose. 0.4.. 54*4.449059555*01 15*. ChOng.. 04004040 bI~~k 45... ~d. 010. .0... .tol*.'.d .m..5/..CA. (0) 0 TO.. .0... .Aob.4sd .$*0$tI9!451 Is ,,.~4.f.,4 5. .01.95th. doAIsIs.ti.. .O.40~.. (..tdo.. ,h..g.. I. pHPIO$ *C.. ~pp~pti.?A. 404.01),., 0,l0 I, b4,tk IT, 1d~j This SA4pt...sNI ~ A sUNHId At. p~,.s,.o N ..e.dsy ~ 41 USC_2.~24c~~Q). . S - P .`,.diO.. C~ .0*.. ~ ,04,.d,. ..t lˇ.C I, block $7. The purpose of this Modification ia to add the following price for __________ Vaccine packaged in 10-dose vials to Article XX Payment as set forth in Modification No. 1: *~oeva1ent Vaccime J~d~ee ~ $2.99 0 ~ 015001 PlOT 010141400 ~co c~oo'or*ooo e moouwoe To $40.4 MS Docusope moo ueomo.,...Lco..n or NAMI OP CONT15AcJO*,000I500 - $1. NNP~tD OCHIS 04410 ~ 0~Mc4sMS.NTM~0( 11(0 0~ ~1i~tuFP;,. ~4,..,, -~ - ... ~ ~ ~ ~ ~ is' ` o/~.ifu John L.WILLXAMS ~ I ~ Lion No. 3 HEW - CDC ~Cente~ for Disease Control 235 East Paces Ferry Rd. Atlanta, CA 30305 L `$101 PAGENO="0303" 297 ~ Lcf~ ~~`T'~'?Af' ~ tT~?~t I - SMNDMCNTIIMOeIIICATION No 3 10 ICTITE DAN 3. REOMSIflONIIMIOIASE EKH35S~cI * flO*CT NO f ii .pfl.Aks lodification Woe 2. I 1/26/77 eSuID NT. cm's. [ ~ ADMNHISI(utA NT II/ssA.~ ii.,., sL& g, (CISC ter for Disease Control Center for Disease Control 55 East Paces Ferry Road N.D. 255 East Paces Ferry Road N.E. ~tlenta, Georgia 30305 Atleeta, Georgia 30305 fl)flfl~IA$ -~ - CONTRACTOR (sAss I j 54(55.555 ClaiM ________________ NAME AND ADD~~NN AMINDMUM 05 0 tsh10~A'me NO. -. .. r Wyeth Leboretoriee Division of Americen Home Products P. 0. Box 8299 ~ Letter Philedelpbie, PA 19101 eistssa,meeene.Jthy]tr.M*L4n.u,.. I_.. . sena_S1131$-.- (tIE IdeS SLf 1Ml$ bLOCK APPUU ~ MM.Il.,ul. H~ ~IMI-IHLAA 0 a. ws .usass .sumsim L. s°w.sdsd., i.E bye. SImS It fIst b.. md dM, `s,s.5.d Is. ....Ly' S ot.uQ b,Mmdsd. 0 ems ss..es 04.,... si... ..b...l.A, ~s.,ipI .5 This ,....dss.il pAt. Tb. Us.. M.d dM. .`ss.lEhd Is Os. sslgsm... .. ......td~ S, s.*Sa. l.Ib...'s sAbude .T...S ...s4*d Ts,..s~ is 4* .sI)s.T,S,y s.d .s..ds.M .s,bs,. PA*MRE 01 yOle ACMNOWUDGEMENT TO $1 UUTNTD cy N's swede ON CI msa ~e asses's i.e DATE DIECMICD MAT IESULT IN $1110400 OF TOME 05414 A by ..M..i NI SKI. ..sds.A pm ds.*. .b..g~ msft~. &...dp ..b.Amd. sssb .Imq. i.SpW `sOS by WileS. I.y..* ps..ld.d ~ssh sI.g,.s s. bye ~ .~l I. A~ .sT,SAMNT s.d AA. .s,sdseA, nd. .......d p.s. 1~ tIs .ys.A~5*s. s.d *~. sps.A~d. I UCCOM MG ANDANTE SIANDS DATA fl[tsqs.~.d) q 155 MOCK ANTHEM OU*T TO MOOIFICATIOMI OF CoNyS.AOSAOSMESD 5*) [J ThsChssg.OTd. Mdyuss.MIs Tb. tbsp.. sT SEAS A hlssb TTss s.d. is i. ,bs.. m..bssd ..M.MTINS.T. 014* Tb's ~ ITy5yA55W5~,S55TT5T5hsTd5A.,M~.)ETibMb IsbIssU IL [~ThA S*ppl...TMI Aq...ssM is .sN,sd Mu pu..uss' Is .sIh...Iy ......444J5C452.-(c3-473-- 4 mAE.. Tb, ,bu.~ .u.s..~d ssMTsM 5. fsMh IsbI,sb IT. 5. DISCRIPTeN Of AMTNDMINTIMODIIICATION . U ubpsregrsph B. of Article XIV - LIMITATION ON CONTRACTOR'S PROFIT i's deleted hereby in tts entirety, end the following is substituted therefor: RTICLE XIV - LIMITATION ON CONTRACTOR'S PROFIT: ~. (1) the cost of the premium for the liability ieeurance which is solely attrib,etabli to this Program is not included in the vaccine price. (See Article IX I; Pfl**et.) I In the event that the insurance premium for liability insurance, or any pin there.t,j is refunded to the contractor undar any retrospective, experieece-tating plea or eimiler rating plan, it shall be refunded to the Government not later thee thirty (30) daya efter receipt by the contractor. . . . I (2) Any money provided to the contractor by the Government for a ealf-ineuranda fund ("Fund") (ace Article IX g;Payment) ehall be pagregated in a eaparete .etauflt in a federally insured commercial bank with asaeta in excess of $100,000,000. SellS 1 Fund shall be invaated in an interest bearing arrangement or irramfiemente, *.g.~ Certificates of Deposit, at the bank'a prevailing interest ratea. In the event any payment by the contractor is required to be made from the invested priacipet V .~.. (continued) ...pT.,,T,,,A,db.Te,.SITC.,STd.ITADDS.dsb,d,Ms.TT,.bMS,SuwmbI.WTsmbsWsbmtSd.*mA.mbmWd'SdAUI$IWWSS*IM fl úONTRACTOiIOIFUOR IS NOT REQUIRED 0 C0M1Cbo5/~~~101 ID 11051Mb t(~S SIGN Twa Doomust AND MTSIWL...........C0llEI To mess SItS `dAME Of CONTLSCTOI/offEEcTII-. 7. U4 LUTES Act -- ~- -ss1M -c - a~ ~ r.~. AND 1)1st 01 icNI,(7af~frusiJ lb. DAVE ~ j~~5 CONTIACTT000NCIR (bb~ flSSM5 it J i/Ji/q John L.Willieme ~. PAGENO="0304" 298 ~ T CONTINUATION SHEET EMod1~tionNo.2. r 2 00C. ItO. 41 CII) -16.10) Letter Contract .200-16-04?? oionuˇt"o* co~cuao, -~ V `eth Laboratories NO. SUPPLITS/500VICIS QUANTITY (DIeT IJIcT ernci aeoan (2) (continued) of the Fund prior to the stated maturity dat or date of such invest d principal, the total proceeds of such liquid ted inve cisc t or inves.t oats eball be deemed to apply first to principal nd secor ly o interest, to `the extent such total proceeds are lees than the orig al invested pr netpat1' the difference shall be charged against all ther ace ad iatei°st & Government. Paymanjs shall be made only fr( the ptt 19 1 of add ce~lit and only for self-insurance based and retat d expend ur a *1. the e tVC*l*.' as follows: (a) All' sums which the United States shall h we the r bt to recovet rem the contractor as damages under section 317( ) (7) of he Public Heal Act (42 U.S.C. 247(b)), and any coats of litigati o attorney f oS incurred by the contractor and attributa le there ; od (b) All payments made by the contractor for xpenses th r than offi e expenses or expenses for salaries of amp oyees of he co1~tractor) incurre~ in the investigation, negotiation, settl sent, or a! nsa of any isis or suit pursuant to sectio,~ 317 (k)(7) o the Pub ic ealth Servi e Act (42U.S.C. 247(b)) or in the in~eatigati n of a c e, easonably 1 Italy to result in such claim or suit. Such loses and re te expenditur a are more particularly described in the insur nec poli b tween the c ntractor and its respective insurers, Any intere t earned n be Fund aba 1 be reinvested with the balance of the princ pal rena in i,n the `Fun . Any amount provided the contractor by the Co ernnent r he Fund, ub ch is not expended by August 1, 1985, including ac rued mt cc to such da e, shall be returned to the Government not later han Augu t 3 , 1985. (3) In the event the contractor is required to p y a clai by the Covernm nt pursuant to section 317(k)(7) of the Public ealth Se ic Act (42 U. ,C. 247(b)) after the contractor has returned the unexpe ded amou p ovided for elf- insurance, including accrued interest, such lain she b deemed sat sf Led up `to the amount of principal returned `to the C vernment. erefore, th tetal of the payments made from the Fund by the co tractor 9 he cradita vovU.d to the contractor by the Government, af~ter t e unaxpe ed p~tncipai a interest have been returned to the Gewsromen , shall t teSed $2,5i ,OěO, (4) It i~ the understanding .f the parties to tb a contra t It Since ti Pmě, nay only be expended for the reasons eteted n'b.2 ab a, and mince t 1 ` `,~ ~, unexpended principal of the Fund, j*clud~ns ccrued i at cc, shall. to the Government under the circucsts~oces se forth a pa they do m* aSili stitut° income to the contractor. ` . .4 ;j'..j~~: :1 PAGENO="0305" 29~ ,~M1N1Cu;EATNQ. ~ ~4. ,o* ~ ~ )l/11k* sÚ~,. ~ rc.nter for Disease Control Same as ~bown in hock S. 255;.c?sces ::~;o~░~' N. S. ~ ORIGIN r ~110K5*11OM Wyeth Laboratories ~ (S,,mdo. Division of American home Products Philadelphts,PA 19101 ~ N~ i~ L J ($11 $145 H) 0 is, .11... ..mb.,.d ..liollTA, 1 ..,vA.d., .e 1104*1 bulb 12. is. 4*,.. ~ddlb 010.1$ l~ ~.pI 1 0usD ~ 0 ~ 00..... o$ .ck...'l.dg. ~;.lpT ~1lbb .osod,s.'.* p.11.14th. 4*... .°d 1111 .p$l.d A Tb, ..r.c1N1..... .....lbd. by *~$*. 01101by..I*.d1* ).)Sy Ao',~14 *.d ,10,...-...~p*1T$ lAs ~,s.d10s0. )b)Dy .Tb. `0111g `...11' .1111. .....sd..... o~ ss.4* sspy sO 14s~ .0., .vb11T.d. )s~ Ip lllTlll 11011 S* `101511. .I*.h ld5d~~ * PIl1~101l Ilk~ ,,h1*tQ1.l Ill ..~.d.e.l ....b... 1*14*111 01 Y010 AC500Wt1002MINT TO $1 UCVVID *11141 $55140 o~psa 111)0010011 1y)s~'* *1411 DATE VEC)P'SP MAY 11115$? Ill 11J(C1lOP1OP YOVI 01101. II. bp .Al.l sO lb. .111,11.10 y~ d.s4..l. lh.l~l os. .lu~ .l'.$p ..b.10d. ...l. ,h.s.p. 010 b. ..ods by 1011111. I11011~d 1*114* l.llg*10 bT~. .11.. ~ 14*1501.5011115 ..d 1., *...*.10, ..d i. ,......d P'S 110.0001.1005.1* *$ 11.. .p...lsd. U~ACC0UPISDA0 AND *P*~P1ATd~b*1* (1T~ll*P1d) .1. 1141$ ISOCK *PPt)1$ 0144*2 10 MOIMPICATIOPI$ 01 CONTPACT$/ODDIHS - )~) 0 This Ch..~e 0*1.111,511*01150.0111 -I -..- 14*. O..s.g....' I..il*AbllIS 12 III 110*51* ,b. .b~l ..,.b.*sd ~ 44*) ~ The 144*1.1 pssb.~dd .sM.sd/..d., I. lAd11d*. ..l10 thy ~d1*&1*l0l).. .4*105. )ssth 0504*0155 Il PlYi~1 4*.. ,pplop.11l11. d.s~ .s.)..l 5.0* s 4*lscb 12. K) [~ ISA Sopp)I,*$5oI Ag111.1ll 11151*15* All p5115111 11l.th$ly .,A1 u.S .C. 2~2 (c.~ (fl 0 ,.od,0.s 4*, .4*,.. ~...s.,.d 51100515 ist .114* 5 b)..k 2. ______________________________________________________________________________ )2.D($Cl'PTIOPA Of AMENKM)NI1M000)CA200 -- The purpose of this Modification is to revise Article I, Scope of contract, of the Latter Contract end to expand on Article IX, Payment. 1, Article I Scope of Contract is hereby deleted in its entirety, and the following Article substituted therefor: ~Ucle I ~Sc~aj~ Co~,š~p~: The contractor shall manufacturer sod distribute influenza *anctfle in accordance $~b the ~pscifications set forth below dsrimg the contract period to tha ~e*tipettOi~4 in the quantities specified on Delivery Orders issued b~ the Canter for Diseelt C$ftoL The only obligations or tospsflsibitite* of the contractot in coMectien uQh National Swine flu ZaniumisetiOn Progtam of 1576 are contained in this contr*$. `$$ are no warranties, expressed or implied. laeposod on the contractor except as this contract. `p - -~ ~ 2. Article IX - Payment is deleted in its enttretj, and the following Article $*IbaU*%*Od therefor: *1l0. .~pt.sd.d bo~..s)) 110111.1 ,..d11t..s sf'S. 1$ss.s'l `.b.o'.d s. ss.*,~ ~ sllslqOd, 11*50* 511h~sd .,d~ 1101s.ss .,.d ~1$T. . 0 COWTRACTO1/O?111011S NOT 110*1114* (~) coeom*cio5ioano* 1$ l10l1Il10 TO $1011 THIS 00001*141 AND ~ COPIES TO *200400541* .N5.M1PCOIAOACTCI/QPl105* 17.EDSTATI$OP*.MEl)CA' 13 NAME AND SItE 01 $4GNft1~tjps 5,41*) 010 SIGNED ~1$. oPcON10AŃ*1CK~0°(l)PPWfrf10ST. 1IJ~b41~d1I~ rice Preaident_Administratiol 10/12/76 John L, Williams . 30-101 98-930 0 - 78 .` 20 PAGENO="0306" 300 ~ j r -~-~-~----~----- ,,~ ~ ~ ,-,o to, Letter Contract 200-76-0'~17 ~, a C~t QUtVOI OR CQuTMt1C,O rticle ~X Pay~nenV . * Payment shall be made within 30 days for all vaccine which h~s been accepted. ~J~f$$i~ voucher shall, as a minimum, identify the apprOpriate Delivery Ovd,r fo~ which the 44ji~'*r~ as made, the vaccine type and amount delivered, the unit price, the total pale., bf~ *iccine ldt number(s). All payments shall be on a provisional basis pending definittggfto~eˇf contract. The following prices shall be used for provisional psymente for vacoime; vials Bivalent Vaccine $24.37 . Nono'ralent Vaccine $15.09 .uchers shall be submitted to the following address: * Center for Disease Control Bureau of State Services Immunization Division * 1600 Clifton Road, N.E. Atlanta; GA 30333 Payment for self-insurance retention and Insurance Premium on Liability shall be made ithin 30 days of receipt of contractor's invoice for same. The vaccine prices do not include in costs for aelf-insurance ($2,500,000) or premiums for liability insurance ($2,176,693.25) Ii are solely attributable to the National Swine flu Immunization Program of 1976. PAGENO="0307" 301 Wyeth W YE TI! L A B OR .4 TO R 1ú S ~ 0. Box 8299, Ph~1adet$in, Peni.syIvmMi. 19101 VICE PRE5IDENT'AOMINISTAAIION October 12, IPI$ Mr. John Wi11*~*TflSKt1~ Contracting Offtce~ Center for Disease control- 255 East Paces Fe~ry Road, N.E. Atlanta, Georgia 30305 Re: Swine Influenza Vaccine I~etter Contract No. 2O0-76~O427 Dear Hr. Williams: As requested in your letter of September 25, 1976, I-have executed and am~nclosing herewith four copies of Modification No. 1 to the above letter contract. We have made `two changes in Article IX Paynient; the p~ice for Bivalent Vaccine was changed from $24.38 to,$24.37 and the exact insurance premium amount f9r Wyeth should be $2,176,693.25. We will look forward to your return of one copy of the modification upon execution by the Govern~ sent. `215) MU 8-44~ Division of4swrka,. JI;aie Pn~d*~ts C. ~x~No# PAGENO="0308" 302 HEW, PHS enter for Disease Control 255 East Paces Perry Road, N.E. ]~pt~ GA 30305 CONTRACTOR CODEJ~ NAME AND ADDRESS r Sir:::. ~ Wyeth Laboratories .w,,y. Si.,. Piv. of American Home Products IZIP..d.) P.O. Box 8299 L Philadelphia, PA 19101 As directed on Delivery.Orders. 3. 551$ PROCUREMENT WA$ ~ ASVIUVINRD ~] PRGOTIATPR, 51*11MW! 10 4. ACCOUNINRO AND APPROPMAIP0N DATA 75X0943 PUS (Influenza Immunization) 6-6140/6944 4591 (26,11.) $12,000,000 1. XNPLUENZA VIRUS VACCINE, )~nov*tent, 200 G~ units, A/New ~ersey/76, and Bivatent, 200/200, CCA units, A/New Jersey/76~A/Victoria/3/75, to be supplied in accordance with the Scope of Work, Delivery Schedule, and t11rme set forth herein. PAGENO="0309" 303 $TaNDA5D?O*M)°)~~t*'~966 ,*o ~ 1 ~ I -----~:~~ CONTINUATION SHEET - * Letter No ~ Contract -~~!~V `I 2' tO ,a~ .AN* c. o"t'O* 0* CC'.'IAC~O1 . . . . ~;` ITICtE I SCOPE OF CONTRACT: The contractor shall manufacture and distribute influenza vaccine in accordance with the specifications set forth below during the contract period to the pointp and in the qaa*~$. ties specified on Delivery Orders issued by the Center for Disease Control. The only obt$.. gattons or responsibilities of the Contractor in connection with the National Swine Flu Issnunization Frogrsm of 1976 are contained in~thjs contract (with exception that the contractor agrees to enter into good faith negotiations to definitize the contract,) * ARJXCLE 11 - sPEšInš&TIONS: A. 7ype of Yaccine: The vaccine shall be `Influenza Monovalent A/New Jersey/76 (Swine) and/or Bivalent A/New Jersey/76 (Swine) - AJVictoria/3/75 manufa~tured under a current establishment and product license as set forth below. Formuletion,staadards, specifications and applicable tests of the vaccine shall be as set forth in the approved product license or as otherwise directed by the Food and Drug Administration. B. Product Licensure: The vaccfne supplied under this contract shall be produced under U. S. Establishment License No. 3 and Amendment to the `product license for influenza vaccine issued by the Bureau of Biologics. If, during the contract period of performance, the product or establishment license is suspended or revoked for any reason, production of the vaccine shall be discontinued until such time as the license is renewed In the event produc- tion is suapended for the above reason, the Government ehall not be held ltable for failure to procure the `vaccine contained in this contract nor ahall the contrgctor be liable for failure to supply vaccine. C. ~,he1f Life: Delivered vaccine shall have an expiration date through August 1, 1977, The ~ersmeht agrees to take all appropriate steps to see to it that all persons ~o are responsible for' administering vaccine are notified that the vaccine must not be administered afte9~ August 1, 1977. -. D. Containers: . Vaccine shall be contained in vials of 50-dose capacity,. `with 2ml overfill. Fifty-4o vials shall have an internal neck size 6.86snm-7.24mm and outside.lip diameter of l2.95nnn-13.3Anon. Vials shall be supplied with, stoppers made of nonpyrogenic, high-grade rubber: Vaccine dosage will be .5m1. E. Lsbelin~g: Labeling of vials shall be in accordance with 21CFR 610.60. In addition, the color of label for the monovalent vaccine shall be red with black or white uarkings, and,tha color of the bivalent vaccine shall be blue with black or white markings. Lot numbet shall be specified on each vial label. Text of the labels shall be supplied by the Government, ~. PAGENO="0310" 304 ~ ~ -~--~ -~ CONT1NUAT~ON ~i~y ` Letter Contract no noc *t~ ~O' ~ No. 200-~76-0427 on *UL~~ 0* C0..L~C'C* Caps shall be metallic in color. C. P~*~L~1~: For *tppthg purposes, vials shall be packaged as follows: * :.144~. ~ SO-deee viaLs 20 vials .* ... S Seek package shall be labeled in accordance with Paragraph 15.2.2.2 I ~ of Federal Standard 1231). In addition to the requirements o t e re erenemi * federal Standard, the following i. required: A. Labeling shall show applicable lot numbers. B. A past...on label shall be attached to each package. Label shall conform to the sample supplied with RIP. C. Package inserts shall be placed in each intermediate package, a total of 10 inserts per package. Inserts shall be in accordance with Sub-paragraph * 201.10(1) (2) of Title 21 CFR Part 600.3. Preservation, packaging, and packing shall furnish a degree of protection to preclude dsmage to containers and/or contents thereof under normal shipping conditions, handling, ~, etc., and shall conform to applicable carrier rulce and regulationel including carriers handling Overseas shipments. Vaccine shall be shipped under refrigeration at a temperature between t and 1S░C (34' to 60 1). Packing and packaging shall be such that this t~erntuWe is maintained during shipment for a period of up be fl honrs and that thi~nts thil arrive destination in undamaged condition. N. ~agy4~~~: Shipping containers: Centatners shall be macbed in ae~~ccs with Padea4 Number 123), January 22, 1973, aM shalt contain as a Mn~i iii. following: a. Quantity and Unit 1. dsntraccer$ienercdlMbeet **~ b. Purchaee~ Order Number a. Oross %fright " C. Item Nem~ f. $*t)~bar(s) * ~ ARTIC~EI1~I - QU~~I~IES: The nw~ber of doses, by vial sizes, to be furnisbedunder the contract is: Bivalent Vaccine 50-dose vials 8.8 million doses * Monovalent Vaccine 50-dose vials 5 million doses Variation in Quantity: A variation in the total quantity supplied hereunder wilt be gccepted, provided~that such variation isnot in excess of 157. of the contract quanUq~ specified above, and is available for delivery prior to the~final delivery date `tlanuary 15, 1977). The contractor shall notify the Governusnt of availability of ed~$s.' tional quantities as soon as this status becomes known to the contractor. 4 PAGENO="0311" 305 jes. sO OP Pa~ .l~'.O 50N5. I.*m ~ COHflNUATION SHE!T Letter ContPact ~ " ~" `~~░` 1 1 ~ os CC.~iuc'OP ART1~ ~V ~ ~elivo~Pg~~: The contractor shall deliver the vaccine P.0.8. Destination Within t~onstgn.e'e Pr~*t, Freight Charges Added, as directed on Delivery Orders, to spprexlzsetety 200 points in the 50 states and Trust Territories, 8. ~ Deliveries shall begin on or before Cc~ober 1, 1976, withthe total aeomnt of btval*ittt and monovalent vaccine to be delivered in accordance with the attached Availability Schedule, All deliveries shall be completed on or before January 15, 1977. The Govern~ mont agrees that the vaccine delivered by the Contractor shall not be administered prior to October 1, 1976. C. Ovp~s_D~]4~e;~Regu1reoejits: Overseas shipping and delivery methods shall be utilized for delivery to those points located outside the Continental United States. D. o~f ~eli~y: Contractor shall deliver vaccine to consignee. specified in the Oovsvsvnent's Delivery Orders within 15 business days after receipt of such Delivery Orders provided the * Government's Delivery Orders shalt not exceed quantities of vaccine shich hav* been released for merketing by the Goverensat's Deresu of Biologic. sad i~sith have ~n filled into final do*age for* and packaged by the Contr.ctor prier to the Centractor's receipt of ~iLSvery O~dors. . S. Shipoents shell be made in increments of $,1~ doses. Delivery ehgll be made P.0.1. *$TT*TZ~I, WIlIUW C0MI(~4EE'$ PS~US1i, P~z*, c~il~N h1~iSD,. as defined below: The term, "P.0.1, Destination, Within Consignee's hemiees, Preight Chsrpse M6.d,A ~ thie contract is subj~ct, means: (a) The Contractor shell delivir to within the dors of the Consigns.'. premises epecUie in the contract or delivery instructions. Th~ Government shall bear all transportation expenses necessary to effect such delivery and the Contractor shall include such charge. on pertinent invoices to the Government. Supportive documents of Freight Charges in excess of $50 shall be supplied with the invoices. (b) That it shall be the responsibility of the co~trector to do the following: (1) Pack end mark in such manner as to afford adequate protection Against nosmel transportation hazards and secure prompt delivery to the consignee, and coeply with all pecking and marking specifications of the contract; (2) Properly prepare and distribute ccsssserciat bills of ladiAg; (3) Puke delivery laid~dowst within the doors of the consigflee's peemise. in the contract or delivery instructions; ~ J~ PAGENO="0312" 306 -~ -~~;:~-. - ~ -- CONTINUATION SHEET pip KOC .1. ii ~ I. $ aid 0* Ot~*~Q* 0* C~i.~PdOP$ . . (4) B. responsible for any lose or damage occurring befote delivery t* laid dei~: ~- within the door, of the consignee's pramises specified in the contract or instructions. .. 4RTIC~ VI RETt~i. OF. VA~CINE: 1 til vaccine shipped by the Of feror shall, unlese received at consignee. location, in ~ condition, be shipped on a no return basis and~ the Of feror shall have no obligation at 55~ time to accept vaccine returned to it nor shall any adjustment be made In any invoices submitted by the Of feror. If any attempt i~ made by any consignee or other person to ret~e- vaccine to the Of feror the Of feror may refuse to accept such vaccine or may, at it. option, accept the vaccine for the Government's account in which event the Of feror wilt notify the Contracting Officer of the action taken and await the Contracting Officer's instructions as to disposition. ~.RTICLE VII METHOD OF ORDERING: . ~accthe shall be ordered by Delivery Orders, each of which will designate the vaccine ordered, quantity required, and de.tination. Orders may be placed by telephone and con.' firmed in writing. , &RTICI~E ~ZII IN#z~c~~O~4 4ND CcEPm,~~: . : -.` vaccine will be submitted by the contractor to the Bureau of Biologice for reviewing and t*lt~. ing. Following release of the . lots, Bureau of Itotogice will ~ a notification of appte~d ~` the project Officer at the Center for Dtoeaoe Control.. F~ß1 inspection shalt be made j~..Y - .*signee's locations. Final acceptence/rejectten will be edde by the Gunned for Diivee*e . Control * Defective or damaged material received at conslgnee~e loc~ttgns edtl be a~ec~ in accordance with Article S of the C.nevat Previsions. . . ,. -. .-~ tRTICI4E ;~ PA~J Payment shall be made for all vaccine which has been delivered .**d acceptid. $*Ch ia~e*t*. ~ ~r voucl}er shall, as a minimum, identify the appropriate Delivery Order for *ich tis. delivery was made, the vaccine and anount delivered, the unit price, the total price, -i4 the lot number(s). All payments shall be on a provisional basis pending defimitizaUen contract. Vouchers °hall be submitted to the following address: - Center for Dis.ase Control . . . Financial Management Office 255 East Paces Ferry Road, N. I. . . - Atlanta, ~ 30305 ~RTICLEX - PROJECT OFFICER: fhe Center for Disease Control, Atlanta, Georgia, will designate an individual to perform as ~roject Officer during the period of performance of the contract. The Project Officer ukedi )C responsible for guidance in regard to the technical aspect of the contract, provide a oint for liaison between the manufacturer and other Coverrm*ent agenci.. (Federal, ftc~s, rnd local) and be the general focal point to address technical and logistical probluna relating to the performance under this contract. The Projeˇt Officer shall not here dni. - ~ `i~ ~ - ~ so 0* so: ~ tOts'. Letter Contract Ito. 2OO-7'~~~~" PAGENO="0313" 307 - ~1aT~R$~C ~hc.g - dfli$flVGES*5$fl~A0M CONTINUATiON SHEET I Letter Contract I 5~OC `U'. 0' C'L ~ I No. 200-76- 0427 6 10 i~FOi3iictoscoaPaCto' "thority to make any commitments or authorize any changes which affect the contract price, ma, er conditions; any such changes shall be referred to the Contracting Officer f or I ction. .. RTICLE XI- PROJECT DIRECTOR: The Contractor shall designate an individual who will serve as the point of contact regarding the technical performance of the contract. This individual shall have the authority necessary to commit the conpany and shall be assigned responsibilities eoe* - gruent with requirements of tha contrsct. The Government reserves the tight to approve the Project Director and any successor to that position. - RTICLE XII- DELINEATION OF RIO JLIT~fi OP TIlE GOVERNMENT AND TRLc~NTBAc7Qi: The parties recognize that the Government has initiated, planned, and is arranging for the implementation of the in(luenza immunization program. Ilecauss of the need to have the vaccine tested, manufactured, and delivered within a relatively short period of time in order that the population may be inoculated in an attenpt to prevent an mt lust epidemic, the Government he,s assumed certain responsibilities ss specified herein ,.ich would ordinarily devolve upon the contractor. It is the intention of the parties that the contractor will be responsible solely for the performance of its obligations undqr Psrsgraph C herein. It is the purpose of this Article to delineate the separate re- sponsibilities of the Government and the contractor. Is the light of the cišcumstsncss described in Psrsgraph A hereof, the Government shall be responsible for: : (1) The adequepy of the standards and specifications for the vaccine required to be -. delivered under this contract, including their compliance with all applicable requirements of law and rsgulation. (2) The safety and suitability of materials provided to the contractor by the Gower*n under or in cennection with this contract. .- (3) The investigation and detsrsinatioe of the safe sad sffeetivs deesgea end edešpfls directions for the use ef the vacciae. . . (4) The investigation and determination of the risks and bea~fits of inecelatish ** the vaccine. - . . (5) The development of an adequate statement of information respecting the risks ~4 benefits referred to in subparagraph (4). (6) The tsking of all appropriate steps to assure that each individual to be imecuteted (or, where appropriate, a parent or guardian of such individual) is adequately informed of such risks and benefits. . - (7) ` The content of the labeling of the vaccine, including its compliance with all ap" - plicable requirements of law and regulation. : - (8) The taking of all appropriate steps to assure that each person responsible foil' 1 siniatering the vaccine has adequate notice of the labeling of the vmccies, peb'. - vided that nathing herein shall linit the responsibility which the eanufacgjst. - - otherwise has to assure that labeling is included is and delivered with nfl ~ o[jjlnyhlctJtine,, .~ PAGENO="0314" 308 CON;f~TI~TSHEfl ~ ~- ~ HOC. 010 dl CH~ 1.10 101 No. 200-76-0427 J.7 10 OP 00005 00 COPsIOsOCO (9) The arrangements for the implementation of the influenza imaunizetion progtam, Lw' eluding the issuance of appropriate guidelines and informatiog, :. -The contractor shall use due care and camply vith all applicable lava and regu*ac*4~ *k the manufacture end handling of the vaccine in accordance with the spacLfLcetj~ua ~*v~1*, t JITICLE ~III - DEFTH~TIZATIOM: . ..;~` A fixed price, redeterminable type contract is contempinted. To accoepliah this result, the contractor agrees to enter into negotiation promptly with the Contracting Officer over the terms of a definitive contract, which will include all clauses, terms, and conditions as may be mutually agreeable The contractor agrees to make available coat and pricing data, and data relating to him accounting system. 0. The schedules for definitization of this contract are set forth below~ Negotiation of priceand other terms and conditions - On or before Noveober 10 l97$~ Target date for definitiza~ion - on or before December 1, 1976. -. If agreement on a definitive contract to supersede this letter contraŔt is not reache'd by the target date set forth in B, above, or any extension thereof by the Contracting Officer, the Contracting Officer nay, with the approval of the Head of the Procrenenc Activity, determine a reasonable price subject to appeal by the contractor as provided in the clause "Disputes" of this contract. The contract shall be governed by: (iLAll clauses, terms, and conditions contained in this letter cactract except which by t~heir mature are applicable only to a latter contract. (2) All cisuass required by law as of the date of this letter contrec~,. (3) Such other clauses, terms, and conditions as may beisucually a$reed upon. ~RTICLE XIV LI~tflATION ON CON ACTOR'S PROPIT: t. In accordance with the ps~.visions of P.L. 94-380, the contract: price for the vac4i~is delivered under the contract shall be subject to renegotiation to eliminate any pr:~i~ realized by the contractor on the swine flu vaccine and to limit the profit raaLiz~4 by the contractor on the A/Victoria/75 vaccine to a reasonable profit. The Secretary of Health, Education, and Welfare will issue criteria for the dattrminatio~ of the costs of the contractor for the vaccine delivered under this contract and for the detarmtm*t40n1 of a reasonable profit on the A/Victoria/75 vaccine. . 3. An~P insurance premium amount of which is included in the price of the vaccine delivered under this contract and which is refunded to the contractor under any retrospective, experience-ra~jng plan or similar rating plan shall be refunded to the Government net later than 30 days after receipt of the refund by the contractor. Any amount retained by the contractor for self-insurance whiÓh is included in ~he price of the vaccine delivered under this contract and not expended on or before August 1, 1985, shall. be refunded to the Government not later than August 31, 1985. The amount refunded $b~JS I include accrued interestat the rate determined by the Secretary of the TresaW7 ~1~*ts*I to Public Law 92-41, 85 Stat 97 from the date the contractor receLved payneas ib I .~ PAGENO="0315" 309 F CONTINUAItON SHEET Government for the vaccine delivered under this contract. lvi the asset the edeted1d~.. is required to pay a dials by the Government pursuant to Section 317(k)(7) of the P*Urn. Health Service Act after the contractor has refunded the unexpended ameunt retained lop self.'insurance, such claim shall be deemed satisfied up to the ainovot of such tsfi*d. C. For the purposes of this Article, the contractor shall maintain and matte available to the Secretary or.his authorized representatives the records specified by the Articles of this contract entitled Accounts, Audits, and Records"; Examination of Records by Comptroller General (Clause 10 of the Genersl Provisions, SF-32); and Examination of Records by Department of Health, Education, and Welfare (Alterations to SF-32). D. In the event the Contracting Officer determines that the contractor has realized arty profit on swine flu vaccine or has realized more than a reasonable profit on A/Victorial 75 vaccine, the conttact price shall be adjusted in dc~cordance with the requirecertts of Paragraph A of this Article. Failure of the parties to~ reach agreement on the reaego~ tiation of the contract price shall be subject to Clause 12 of thp General Provisions, entitled "Disputes." The contractor shall make any necessary refunds to the Governttent not later than thirty days after receipt of the Contracting Officer's final decIsion. However, if the contractor, takes an appeal from the Contracting Officer's flail decision, it may withhold the funds, in question until said appeal is. decided. In the event~hat the decision on appeal is that the Goveremeni is entitled' to a ~ettatd, such refund ehall be. made withIn thirty days from the date of the decision, with accrued interest at the rate determined by the Secretary of the Treasury pursuant to Public Liv 92~4t, $5 Stat. 97 from the date of the contractor's receipt of thiCoetracUng Offices's fie4 decision. ...~TICLE XV - c PER TION TN ~ Q~ C~ ~$D~~: : A. Putsuant to the provisions of provisions of P.!.. 94~~38O, the comtrsetOr shall cooperate with the Government in the processing or defease of any claim or suit brought 05*550* the United States under the Federal Tort Claims Act based u~n alleged acts at omies~ons of the contractor. B. While any such claim is under consideration by the Department of Health, Educitioa, and Welfare's Claims Officer, the contractor shall furnish information requested by tire Claims Officer or his representatives as is reasonably necessary to enable the claim to be considered and determined. C. Shbulšt any action be filed against the United States under tub Federal Tott Claims Act based upon alleged acts or omissions of the contractor, the contractor Ohall render all reasonable cooperation to the Covernnent in the defense of such action as nay be re~ quested by the Departrrent of Justice or cognizant United States Attorney. Such coopera~ tion shall include, where appropriate, making records and personnel of the contractor available for pretrial proceedings and for the trial of the,nction. ARTICLE XVI LIMtTATIOH OF GOVERNMENT' S LIA~TLIT?: The contractor is not authorized to make expenditures or to incUr obligations, ii pert itc of thia contract, which exceeds $12,000,000.03 In the event of a termination .1 thIs ntract the Government a liability shall not exceed $12 000,000 00 PAGENO="0316" 310 JULY *966 emtoc.K~io~O,~ U1VCES AOM~4SIlATI)N CONTINUATION SHEET Letter Contract peat. lEG 4* CU) 1)6.1O* No. 2D0_76~O427 9 10 t ce ontaoA oe CON*MC*Oe ICI~ XVII- GENERAL PROVISIONS AND ALTERATIONS: 1'~e General Provisions (SF32), April L~75 edition are hereby incorporated in this contract, nd are altered as follows: - Clause 21a, Small Eusiness Subcontracting Program, is applicable if this contract xceeds $500,000.00. Clsuia 22., Labor Surplus Ar..a Subcantraciing Program, te app1ic~b1* if this contract .eessda $500,000.00 ~. The attacb~d clausea, listed bales,, are added to sad made a pert at the General Pr*e*~ sious: . A. Listing of Zuployment Opeainga I. )~norit~ Realness Enterprises S~eoetract1ng Program C. Unsolicited Sample., Descriptive Literature, or Bz'snd I~ * n. 1*nmination of Records by Department of Realth, Educatic~, and Welter. I. F.de~l, Stat,, and Local Tsxe, REW'-328 F. Employment of the )lnn4ca~p.d 6. Termination for Conveniˇnce H. Price Reduction for Defective Cost or Pricing Dats * I. Subcontracting Cost or Pricing Data J. Audit K. AceQunts, Audits, and Reeorda L. Disclosure Statement - Cost Accounting Practices and Certification H. Cost Accounting Standards N, Cost Accounting Standards - Exemption for Contracts of $500,000.00 or Less - - :.Certifications 0. Preaward Equal Opportunity Compliance Reviews * P. Clean Air and Water * Q. Equ4 Opportunity Clause tRTICLE XVIII - CQNTRACTOR'.S PRODUCTS LI4BILITY INSURANCE The contractor ohall have no obligation to deliver vaccine hereunder unless the conttactˇt is able to obtain and participate in a product. liability insurance progren covering influenza vaccine to be delivered to the Gevermeent which shall include $2,~,00O .1 .elf-insurance, $5,000,000 of primary insurance, end a sharing in pooled eircee. ineut*nCs with other influenza vaccine manufacturers to an aggregate limit of sat l°as thin $S0,0~1I~ per nanufacturir. :. *. - * . :-~ *- PAGENO="0317" AVAIL sttrr~ SCH~EDU~ Bivalent vaccine - each 0,5 ml. I dose contains 200 CCA unite of WNw Jer*e~/76 (Seine) and 200 CCA u~ita of A/Th~toria/3/73 $jy5]$flf 5~dO5 vials i.2e11 l.2.sil 311 STANDARD FORM 36. JULY .1966 ~, ~ ;~. 1~ 1~? CONTINUATION SHEET Letter Contract ~ l0J ~IJee1~ of: 104-76 ].O'l1-74 10-18-76 10-25-76 ll~-1-76 I~280i 1.2 .il l.2sil $009000 PAGENO="0318" 312 GENERAL PROVISIONS (Supply Contract) 1. DwNmoNa As used throughout this contract, the following terms shall "`have the ineanlngeetforth below: (a) Flie term "head of the agency" or ~Secretary" as used herein means the Secretary, the Under Secretary, any Assistant Secretary, or any other head or assistant head of the executive or military department or other Federal agency; and the term "his duly authorised representative" means any person or persons or bcard (other than the Contracting Officer) authorized to act for the head of the agency or the Secretary. (b) The tensn"Contractlng Officer" aneanathe person executing tltis contract on behalf of the Government, and any other officer or civilian .nployee who Is a property designated Contracting Officer; aadtheterm lncludee,eaee$aeothst" wile provided In this contrast, the authealsed segneeleta- tire of a Contracting Officer sating wi~s alas limits of his authority. (c) Except as otharwiee provided In this ceatnact, the tease "eubcontraete░ Ineludee parchane eMcee asler this continot. 2; CnunoS* The Contracting Officer may at cay tins., bye solittla esdtr, and without notice to the sureties, make changee,is*Slabttha gan oral scope of this eantrast, In any seoe or more of lea fellowlagi (i) Drawings, deelgns, or specifications, where the aepplias to be furnished as. to be specIally manufactured for the Government in aenortlastop therewith; (II) seethed of shipment er peeking; and (Ill) plate of delivery. If any such change causes en lacrosse decrease In the cost of, or the time required for, the perform- ~ce of any part of theworkunderthlo ccntract,whetberchangad `Pt not changed by any such order, an equitable adjustment ahall be made In the contract price or delivery schedule, or both, end the contract shall bemodtltedlnrrltlngaccordlngly. Anyclaimby the Contractor for adjustment under this clause most be asserted within 10 days from the date of receipt by the Contractor of the notification of change: Provided, however That the Contracting Officer, if he dgeides that the facts justify such action, may re- ceive and act upon any such claim asserted at any time prior to final payment under this contract. Where the cost of property made obsolete ot xceea sea result of a chenge Is Included In the Contractor's claim for adjustment, the Contracting Officer shall have the right to prescribe the manner of diepoeltien of ouch property, Failure to agree to any adjuatoseet dubS bea dispute concerning a question of fact within the messing of theolseee of this contract entitled "Dleputea" Noeweer, nothing latbis elauee shall excuse the Contractor from poeceedlagwlth theacatiact as change& S.Ex'zaea Excqpt as otheatrhee pvavlekd is this omtsUt,nop~iM%tler extras shall be made uolsea such catnIP have been authorised In wnitinyby the CsntPafflitfi~5t~ 4. Vzmencco no Qu*srsrrv No variation In the quantity of any Item eaSedderbydiffl~inte tract will be soseptad unless sash ra,lstlsee haw~M 1' b~ conditions of loading, shipping, or pashlag, at *ththud** manufacturing proceesee, end then only to lea dalleath lfiedelaewhere lnthlaooatraet. rospacucow (a) All supplies (which term throughout this chase inelodse se-I. PAGENO="0319" 313 r sudh 1*00? peof.1 u PAGENO="0320" i~i I I I L~ ill .II1~ ~ ~Ii~~j j.:. IS PAGENO="0321" 315 (lv) An to *54th the Senetery determines the cost to the Interpretetlene of the Seeretery .1 labor wblth ore now en sac Oevnoeouittobeonreeeooeble. hereefter be to elsa. (tho fooegelog requirements eve odudniotered In eccordonce with Executive Order No. 10595, dated December 17, 1954.) 1t EQUAL PPCOVIJNITT (The feflewiog daoo to eppileehie enleoe tote nentonet lee 10. CoNVICT Ianee ecept under the nice, osqudetloete, end reinvent saline el So Ioconueetienwlth the perfocononce of work under this contract, Secretory of labor (41 CP*,et 49).) the Ceotrector ogreee not to employ any pereon undergoing ecu- During the pefeooooeen of Sloeleotroct, tha Cetreettr teoce of lmprlocoooeot at herd labor except as provided by Publie en fellewo: Low 99-174, Septeoober 10, 1900 (18 U.S.C. 4082(e)(2)) sod (a) The Ccoetreetor will osejdtSl*do$e ageleltonfa**sn ExecutIve Order 11700, December 99, lOlL or applIcant for seiplepeest battle el ewee, eSon,.o4WIai. eee, A or net,eoel eriglo. the Onotseeter tell) take ebe*l* 44O it Cooveocr cut ouaeaoce Antr TANOAMIe CT- eooure that appliceo(e en eseedaraf nod th$ tegl*~wto are Ovaltoeo 0000nNnuoN treated derlog eonpleyooeet, iJc*t ae4eod to *4W neon t This cenfrect, to the extent that It Is of a cherocter opecllled religloo, eex, or notional origlo. Scott settee cliii lsISIAilM In the Ceotroet Work bore end Safety Stootdorde Act (40 U.tC. he limited to, the fellowlog: Eoaplcpwet, upsoediti, dSSh 827-SOS), Is subject to the following provloloooe end to all other or tratoefer; recrultuoeot or reerultoenet advertisIng; lepeR en applicable provtelone and excepflone of such Act nod the regula- tornoination rates of pay or other teen of eeeeoesoatteei aleS tloooof the Secretaryof Laborthereundor. eelectloo for trolning, leectedleg eppreotlssehip. the Cietseder (a) Overtime rsqolreouente. No Contractor or subcontractor agreso to post Ia ceoepteeous places, available to eapleties ceed coolraetlog for soy part of the contract work which nosy require applicanto for sooployeoeiet, notices to be prevldsd hi tIe (1*' or Involve the eoopleyooent of laborere, oneqheoolcs, apiorenttoea, trectiog Officer eettlng forth the provleleoe of thIn *qwt (lfle*' trateeee, watchmen, end guerdo shall require or permit soy tuotty claueo. laborer, mechnoic, apprentice, trainee, wstchoueo, or guard in, (b) The Contractor will, lee all solicltatlone uradventheeseeth any workweek in which he Is employed oo ouch work to work to for eoupleyeie placed by or on hehelf of the Contractor, state exceee of eight boon in aoy calendar day or in excoeo of forty that all qualified applteaoto will receive ceoolderatleo tee' eec' houre to ouch workweek on work eubject to the provielene of the ployzneet without regard to race, color, reltetco, coo, or neMeseS Contract Work Bonn and Safety Stardardo Act unSeen ouch osigin, laborer, noecbanlc, apprentice, trelnee, watcbooan, or guard re' (c) Tim Cootrectorwlll send to each labor uolcaor oelvee coonpeooatloo Ŕt a rate not less tbao one and eon-half times tive of worken with which he hose celleetive bin basIc rate of pay for all such henre worked In excooe of eight oneot or other contract or endorehooding, a notice, he he heun In soy calendar day or to exceen of forty boors to such by the agency Contracting Officer, ~dvIoIog Won Icier eaten eo workweek, whichever ie the greater uooober of overtmmebooere. workers' repreeeotetlup of the Qeseteq's .*evotIutsln teds (b) Violation; liabIlity for unpaid wagee; liquidated domagea. this Equal Opperteoutty eloeee,ajo4eli paeteplquof the echos In the event of soy violation of the provielone of parsgropb (a)' In cc ipicuous pipp pafls* $ !pefls cod applicants fop the Contractor sod any subcontractor responsible therefor eball as*plcyoseat. ~ he liable to any affected employee for ble unpaid wages. So Mdi- ~4) The ctogP~&'~1IieI~it1t~lRdo* at loose'- tin, such Contractor aod subcontractor ebell he 115kb ho the ~ ě~& ~*1~WW~W K1*L * otS*( / United States for liquidated denoages Sod, liquidated deseooejeo EenOtJVI oser1Iflt~*Mttai1*~1iSi4 ohell be ccooputed with respect to each lodivldoal laborer, ptj~, odI4l1aaM1itJWi~Ih4**1ka~, nor noechenic, apprentice, traInee, watchman, or guard eeopboyed Ia (e) The ~ violation of the proviolone of paragraph (a) ir the oem of 510 s-aeelo-od by $xS$N1l$S]l*J*&dlSLlkJMSe for each csleudar day on which such employee wee required or en eoeeodsd by ~ poroeltted to he employed on such work In cocoon of eight bonn and by the flee, ~4~$54, St~Ntt$tThS ~ or In excece of his otaodardworkweek of fortybonrewitheutpay- Labor, or ~ mrnt of theovortlme wagasrequired by paragraph (a). reonrole, ~ (c) Wltbbelding foruopald wagee and llqoldatod damages. Tbo of labor for 5Sttlo$~lWWI~lo~Il~tit0 ContractIng Officer may withhold from the Ooveremeot Prime witheecls ~ 3JP)i Contractor, freon any moneyo payable on accoust of work per- (f) Ia the ,e,jItIj~~Ib~~WeetlPbIlIp qtSt (los farmed by the Contractor or subcontractor, suob coxes an may Equal Oppeotualty 4* d~$~jě*tWo.ar $0 mc elton admteietrativoly he determined to be oec000ary to eatiafy any said rules, regelatlone, en oo*re, ěbs eeatoeetejot to liabilities of ouch Cootrector or euboootractor for unpaId wegee taroninoted, or suspended, be whole erie pset, eaethptcelieo and liquidated damagee ao provided In the prevlciuoo of pare- nosy be declared Insligibte for forther Goverem~eet ist$lett he graph (b). aooordaoce with procedores authenloed in Exeseileva Coder So. (d) Oubcootrecte. The Cnotractnr eball Ireort paragrapho (a) 11240 of September 84,1898, as anoended by taeeuiive Crew tin. through (d) of this clause In cli subcootrerto, end oball require 11878 of October iS, ieei, sod sob ether .eoctisite map Se M' thelrloclusloo in oil oubcontracto of any tier. pneed and recaediee Invoked so provided to Executive Ceder 21* (e) Records The Contractor ehall malotato payroll records 11240 of September 24, 1995, as noneaded by Ex.eettoe Ottien $0. csatalolog the Information specided In 20 CFR 5182(a) Such 11875 of October 13,1907, or by rule, rogotatlea, or oedoref Woo recordo oball he preserved for three years from the completion Secretaryof Laber, oraootkerwloe psvovldadhylaw. / of tim contract. lv) The Contractor wIS iaelede the pseetolone of peoaeepos (a) through (g) In eweep eelsmntt*et or p*rsttaee eodst nels 17. WAuao-Hosxxir PUOL1C Cowu**fro Arv exempted by robes, regatatieoa, en gedeee of the decvellelpv at If this contract lo for the manufacture or furnishing of labor Issued puraaa~t tp noSes, S of Eoeoatlee Oo* 4k. materials, supplies, articles, or equtpment In en eoneuat wbtcb 11844 of September 24, &S,s eaoeotdot by Emirutlee 04* so. exceeds or may exceed $10,000 end Is otberwies subject to tbo 11376 of October 13, 2897, en that Si poovlcieso will be Watob-Bestey Public Contracts Act, as amended (41 U.S. Code upon each eubecatleeoryeovsdeo. The Ceetra.torwlil na 50.48), there are hereby Incorporated by reference all repreeco- sctloo with reepart to eny e4Weeeitsot or purebana $diti~ tatl000 end etipulatino reqoired by mid Act and regulations oeeotractlog nejeeey er (beat a * mesas at issued thereunder by the Secretary of Labor, cool, repaveeuta- poerleloes, ladedieg eneetben fee oeesoreSoatI ~ tieoa sod lelpulatlees being subject to oil appliable milage and however, That In thost the Celseeter eracemen,nelenaon.4.va 4 98-OlD 0 - 78 - 21 PAGENO="0322" 316 or is threatened with, titigatica with a eubcontsaotcr or vendor small basins concern; (2) etheroeetMsd-cligitleaasn wish as a result of such direction by the contracting agency, the Con- a drst preforeecs; (2) certifted-eligiMe csaesese whit a sasead tractormay request the United States to enter into such litigation preference which are else sn,aii business conies; (4) cUter to protect the interests of the United States. certifiod-eliatbic concerns with a sensed pnsIereece; (5) per- sistent or esbstantlai labor sorpias area csncerss which see also 19. OPnoaLs Nor To Snrcnnr sail busies concerns; (0) other psceistsator eatetsatiai labor No member ef or delegate to Congress, sr resident Csnsnis- ssrpius area oseoseas; end (7) saIl basias enecerns which Scionert-shail be admitted to any share or part sf this ssnirsct, or are nit labor ssrplnearea oeaoscas. any benstt that may ariss therefrom; bat this psevisice shall ______ not be osnateued to satend to this contract if saade with a coupe- ~ Uvsuaxsooic er*sscsirr Ssnat,...,,...,. ration Qor its general itseit. (a) it is the psilsy of the (loveea*et test ~S t~ssm eaterpris theft have lice saissa iaeotkshb ~tflisli~ to 20. CovisoArsv tire Coarnoena i~ r~s~ of Getessicat S Ths Contractor warrants that no person or soiling agency has (h The Csaieaotsr sgaees to unit last diceta thiSF S been employed or retained to selicit or sure this csatraet apse tit poitcy lnchs award of it esbasosiacts Set KUM eat an agreesnent or nnderstanding for a commission, pesesotaga, consistent with tile etesiect perfsstasoe of this eSU$st. *0 brohera, or contingent fee, enosptlng hsna *05 sploysse or ~ in this cstae% the teem "aoiasst twists sa$' bone *44 octabiishsd osmmaroial or soiling agoaetso aseiatained ~sa susits, ~ a ~ ~ks~ ~ eat t~ by the Contractor for the pueposs of ssmrlng boeins.,For miacrity group msbs~ Mess of patiidp-eaese*1~iopos, breach orviolatiou of this warranty tho Govoenomat shall have at boat 51 pcowet of ites etselo of tolifok I assed icy esMeeI~ the rlf~Jc~nnul this contmct without liability or Ia lb disers- group msbers For the pmjs of this 05051*5*, SU51~ tion to from the ountract price or coasideration, or ether- grs..sp reo,shns are Nescees, Speeith'opsehisgAaeoiespossas, win reenter, the full amount of such oonusisslou, pementsgo, Aonorican-orleeotsls, Asetsaa-ledleas, Anmcisn'SSsoa, sad brobsrage,.or rsntingsnt fec. - American Alenta Ccutraotsre may rely sa webS nupsata- 2L UrrunAusow OP SMALL Susoreass Corccsares iioo,s by snbcoctrsctoos regerding their stabs as Snesity busi- (a) It lathe policy of the Governmsnt as declared by the Con- nsenterpciseslaitncfasindepeesisntinvoeolgmlse. gress that S fair proportion of the purchases and contracts for 24. Pascerec or Awusrisssors supplies and services for the Government be placed with assail When costs saw a factor in any deberasissatlca of a osatreet basins concerns. prim adjustment pursuant to the Changes clause or sy other fb) The Ctntractsr afross to accomplish the maximum amount prevision of this cnotract, ouch coetq shall he in acosrfle with nf subcontracting to smallbusisess concerns that the Contractnr the contract cost principles and procedures to Past 1-IS ef the finds to be consistent with the e*lctont performance nf this Fcdnral Prseurosnont Regulations (41 CFR 1-15) or lanka XV contract of the Armed Sorvioss Pracuresnont ltogolatlsn, as sapftsabie, 22. Uroun*riow or L.tena SunrLus A.ans Corccamcs which are in offocton the data of this contract - (a) It is the policy of the Government to award contracts to 25. PA~M524TOP Irerreasrooo Corerascrees' Cwae labor surplus area concerns that (1) have been certliied by the (a) If an appeal Is filed by the Contractor from a final dscislsn Secretary of Labor (hereafter referred to no certified-eligible of the Contracting Officer under the Disputes clause of this con- Cuncerns with Iret or second preferences) regarding the spicy- tract, denying a claire arising under the contrast, simple interest mont of a proportionate number of disadvantaged individuals and on the amount of the claim finally deteronined owcdbythefflcaoru- have agreed to perform substantially (i) In or seer sections of mrnt shnli bo payable to the Contractor. Such interest shall beat concentrated unesnpinyment or undsrempioymont or in pereistont thereto determined by the Secretary of the Treaecry pureeant to or subotantial labor surplus areas or (ii) in cthsr areas of the Public Law 92-41, 89 Stat 97, from the date the Ceootoecier dec. United States, respectively, or (2) are noncortified concerns slobs tn the Contracting Othoor his written appeal todeg the which have agreed to perform substantially in pnroistcat or sob- D(sputen clause of this street, be the dab of (I) a Sod $udg- Mantial labor surplus areas, where this can be dune osesislont mast by a court of competent jaciedlcttos, or (2) isellielgia the with the efficient porforesasso of the contrest ad at pris no Contractor of a anppb.aeetsl agtwmeat ftreasoistiesadthetat- higher thsn ar Obtainable elsewhere. Tite Csntoastor agrees to Sensing eoaopletod negotiations tetwes the pestS so sOopiog use hia best efforta to place bla suboontrack I aee000aace with cola doeisisaof a board ofooaioect$pealia this policy. (b) Netwithotsadiog (a), sheet, (1) MeastSR.b ~jIIod (b) In complying with paragraph (a) of this dease ad with aly frees the 5mb payeosat wee doe, if sect di5*tn paragraph (b) of the clause of this contract entitled 5Utliiaatica the Cling of appoai, ansI (2) inOoriet sItall net he apok fee asp of Smell Susiness Concerns" the Contractor In pbeehog his sub- period of those that the Osstiaetbg (*nrdalotloMslks~Cs- contracts shall obeerva the following order of pnefeoaace: (1) erector boss uodosiy Ostaped 1st psceslsg his rseI1~~le a Certified-eligible ssnsarns with a bat peefeseace whit on ales beard of coaluact appeals ore coast of oo*edoS,~~ S PAGENO="0323" 317 Clause 21(a) `SMALL BUSINESS SUBCONTRACTING PROGRAM PPR 1-1.110-3(b) (a) The Contrzictor agrees to establish and conduct a small busi- ness subcontraÚting program which will enable small business con- cerns to be considered fairly a subcontractors and suppliers under tb~Ls contract. In this connection~ the Contractor am; (1) Designate a liaison otfice'r ito will' (i) maintatfl liaison with the Covernient on small business mittird,. (ii) supervile compliance with the Utilizmt4oě of *001 Business Concerns clause, and (iii) adminiStOr the Con' tractor's "Small Business Subcontracting P$~Sa.'" (2) Provide adequate anti tMntv consideration of the potentialities of emaIl business, concerns ifl.afl ~hew. or-buy" tiecisions. (3) Mlure that small business concerns will haVe an equitable opportunity to compete for subcontracts, par- ticularly'by arranging solicitations, time for the prep- aration of bids, quantities, Specifications, and deIty- cry schedules so as tg facilitate the participatioS of small business' concerns. Where the Contractor's lists of potential small business subÓontractors are excesSively long, `reasonable effort shell be made to give all such small business concerns an opportunity to Úompete over a period of time. (4) Maintain records showing (i) whether each prospec- tive subcontractor is a small business concern, (ii) procedures which have been adopted to comply with the policies set forth in this clause, and (iii) with re- spect to the letting of any subcontract (including pur- chase orders) exceeding $10,000, information substan- tially as follows: (A) Whether the award went to large or small business. (B) Whether less then ties. "or more thai two small business firma wbrs scilicited. (C) The reason for nonsolicitation of 110sfl' business if such was the case. (D) The reason for small business failure to receive the award if such was the case when small business was solicited. PAGENO="0324" 318 The records maintained in accordance with (iii) above say be in such form as the Contractor may determine, and the information shall be summarized quarterly and submitted by the purchasing department of each individual plant or division to the Contractor's cognizant small business liai~ eon officer. Such quarterly summaries will be considered to be management records only and need not be submitted routinely to the Government; however, records maintained pursuant to this clause will be kept available for review by the Government until the expiration of 1 year after the award of this ~ontract,~ or for such longer period as may be required by any other clause of this contract or by applicable law or regulation. (5) Notify the Contracting Officer before soliciting bids or quotations on any subcontract (including purchase orders) in excess of $10,000 if (i) no small busines° concern is to be solicited, and (ii) the Contracting Officer's consent to the subcontract (or ratification) is required by a "$ubcontracts" clause in this contract. Such notice will state the Contractor's reasons for non~ solicitation of small business concerns, and vi]]. be givim as early in the procurement cycle as possible eo that she. Contracting Officer may give SM timely notice to pereit SM a reasonable period to suggest potentially qu*tified small business concerns through the Contracting Of (tear. In no case will the procurement action be held up when to do so would, in the Contractor's judgment, delay per!or~ mance under the contract. (6) Include the Utilization of Small Business Concerns c~Lause in subcontracta which oUer substantial small buai~ ness subcontracting opportunities. (7) Cooperate with the Contracting Officer in any studies and surveys of the Contractor' a subcontracting procedures and practices that the Contracting Officer may from time to time conduct. (8) Submit quarterly reports of subcontracting to small business concerns on either Optional Form 61, Small Busi~ nesS Subcontracting Program Quarterly Report of Partici~' pating Large Company on Subcontract Conunittmenta to Small Business Concerns, or such other form as may be specified in the contract. Except as otherwise provided in this contract, the reporting requirements of this subparagraph (8) do not apply to small business contractors, smell business subcontractors, educational and nonprofit insti" tutions, and contractors or subcontractor. for etandard commercial items. PAGENO="0325" 319 (b) A "small business concern" is a concern that ants the tinent criteria established hi as Sesli business Ad*iniSt*at*Ofl and set forth tofl-lOt of the Federal trocuremsnt S~a2*tt0$O. (c) The Contractor agrees that, in the event he fails to cafly with his contractual obligations concerning the small business subcontracting program, this contract may be terminated, in whole or in part, for default. (d) The Contractor further agrees to insert, in any subcontract bereun4er which may exceed $500,000 and which contains the Utili- zation of Small Business ConcernÔ clause, provisions which shall conform substantially to the language of this clause, including this paragraph (d), and to notify the Contracting Officer of the names of such subcontractors. PAGENO="0326" 320 Cl~uae 22a LABOR SURPLUS AREA SUBCONTRACTING PROGRAM FPR 1-1.805-3(b) (This clause is applicable if this contract exceeds $500,000.00) (a) The Contractor agrees to establish and conduct a program which will encourage labor surplus area concerns to compete for eubcon- tracts within their capabilities. In this connection, the Contrac- tbr shall; (1) Designate a liaison officer who will (i) maintain liaison with duly authorized representatives of the Government on labor surplus area matters, (ii) super- vise compliance with the Utilization of Concerns in Labor Surplus Areas clause, and (iii) administer the Contractor's "Labor Surplus Area Subcontracting Pro- gram"; (2) Provide adequate and timely consideration of the potentialities of labor surplus area concerns in all "make-or-buy" decisions; (3) Assure that.labor surplus area concerns will have an equitable opportunity to compete for subcontracts, particularly by arranging solicitations, time for the preparation of bids, quantities, specifications, and delivery schedules so as to facilitate the participa- tion of labor.surplus area concerns; (4) Maintain records showing procedures which have been adopted to comply with the policies set forth in this clause. Records maintained pursuant to this clause will be kept available for teview by the Government until the expiration of 1 year after the award of this contract, or for such longer period as may be required by any other clause of this contract or by applicable law or regulations; and (5) Include the Utilization of Concerns in Labor Sur- plus Areas clause in subcontracts which offer substan- tial labor surplus area subcontracting opportunities. (b) A "labor surplus area concern" is a concern that (1) has been certified by the Secretary of Labor (hereafter referred to as a certified-eligible concern) regarding the employment of a propor- tionate number of disadvantaged individuals and has agreed to per- form substantially in or near sections of concentrated unemploy- ment or underemployment, in persistent or substantial labor surplus PAGENO="0327" 321 areas, or in other areas of the United States or (2) is a noncer~ tified concern which has agreed to perform a substantial propor~ tion of a contract in persistent or substantial labor surplus areas. A certified~eligible concern shall be deemed to have per~ formed a substantial proportion of a contract in or near Ŕectiona of concentrated unemployment or underemployment, in persistent or substantial labor surplus areas, or in other areaŔ if the costs that the concern will incur on account of manufacturing or pro4uc~ Uon in or near such sections or iLsuch areas (by itself, ifs certified concern, or by certified 000CCTflB aCtIn$ si subcontractors) amount to more than 25 percent of tke cOed~r*ct' price A concern shall be Mewed to have p.rfonsml a proportion of a contract in persistent of substantial surplu* steas (by itself or its first~tter subcßtractors) if the costithet lbs concern wi.i1 incur on account of production or u sufacturin in such areas amount to more than 50 percent of the. sentraet price. (c) The Contractor further agrees to insert, in any pwhcostract hereunder which may exceed $500,000 and which contains the Uttli' sation of Concerns in Labor Surplus Areas clause, provisionS which shall conform substantiaLly to the language of this ctaue, i*~ cluding this paragraph (c), and to notify the Contracting Officer of the names of such subcontractors. PAGENO="0328" 322 Clause 24 / PRICING OF ADJUSTMENTS When costs are a factor in any determination of a contract price adjustment pursuant to the "Changes" clause or any other provision of this contract, such costs shall be in accordance with the contract cost and profit criteria contained in Appendix A of this contract. PAGENO="0329" 323 MODIFICATIONS TO GENERAL PROVISIONS, STANDARD FORM 32 (Supp~y) Disabled Veterans and Vete~pp~j ~e~n~pJ~ (This ciSuse is applicabl~ pursuant to 41 CPR 50-250 if this c~traet is (or $10,000 or more.) (a) The contractor will not discriminate against any employee.Ot applicant for employment because he or she is a disabled veteran or veteran of the Vietnam era in regard to any position for which the employee or applicant for employment is qualified. The contractor agrees to take affirmative action to e~ ploy, advance in employment, and othc~rwise treat qualified disabled veterans and veterans of the Vietnam era without discriminatiofl based upon their disabIlity or veterans status in all employflent practices such as the following: employ- ment upgrading, demotion or transfer, recruLtn~enš, advertising, layoff or ter- mination, rates of pay or other forms of compensation, and selection for training, including apprenticeship. (b) The contractor agrees that all suitable employment openings of the con- tractor which exist at the time of the execution of this contract and those which occur during the performance of this contract, including those not generated by this contract and including those occurring at an establishment of the contractor other than the one wherein the contract is being performed but excluding those of independently operated corporate affiliates, shall be listed at an appropriate local office of the State employment service system wherein the opening occurs. The ~ontraOtor further agrees. to provide such reports to such local office regarding employment openings and hires as may be required. State and local government, agencies holding Federal contracts of $10,000 or more shall also list all their suitable openings with the appropriate office of the State employment service, but are not required to provide those reports set forth in paragraphs. (d) mcd (e). (c) Listing of employment openings with the employment service system pursuant to this clause shall be made, at least concurrently with the use of any other recruitment source or effort and Shall involve the normal obligations which attache to the placing of a bone fide job order, including the acceptance of referrals of veterans and nonveterane.. The listing of employment opening. does not require the hiring of any particular job applicant or from any par- ticular group of job applicants, and nothing herein is intended to relieve the contractor from any requirements in Executive orders or regulations re- garding nondiscrimination in employment. (d) The reports required by paragraph (b) of this clause shall include, but not be limited to, periodic reports which shall be filed at least quarterly with the appropriate local office or, where the contractor has more than one hiring location in a State, with the central office of that State employment service. Such reports shall indicate for each hiring location (a) the number of individuals hired during the reporting period, (2) the number of nondisabled veterans of the Vietnam era hired, (3) the number of disabled veterans of the. Vietnam era hired, and (4) the total number of disabled veterans hired. The reports should include covered veterans hired for on-the-job training under PAGENO="0330" 324 38 U.S.C. 1787. The contractor shall submit a report within 30 days after the end of each reporting period Wherein any performance is made on this contract identifying data for each hiring location. The contractor shall maintain at each hiring location copies of the reports submitted until the ~~piration of one year after final payment under the contract during which time these reports and related documentation shall be made available, upon requoat, for examina- tion by any authorized representatives ~of the Contracting Officer or of the Secretary of Labor. Documentation would include personnel records respecting job openings, recruitment, and placement. (e) Whenever the contractor becomes contractually bound tothe listing provi- sions Óf this clause, it shall advise the employment service system in each State where it has establishments of the name and location of each hiring loca- tion tn the. State. As long as the contractor is contractually bound to these provf~ions and has so a4viaed the State system, there is no need to advise the State system of stibsequent contracts. The contractor may advise the State sys- tem when it is no longer bound by this contract' clause. (f) This clause does not apply to the listing of employment openings which occur and are filled outside the 50 States, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands. (g) The provisions of paragraphs (b), (c), (d), and (e) of this clause do not appiy to openings which the contractor proposes to fill from within his own organization or to fill pursuant to a customary and traditional employer- union hiring arrangement. This exclusion does not apply to a particular opening once an employer decides to consider applicants outside of his own organization or employer-union arrangement for that opening. (h) As used in this clause: (1) "All suitthle employment openings" incl'idea, but is not limited to, openings which occur in the following job categories: production and non-production; plant and office; laborers and mechanics; super- visory and nonsupervisory; technical; and executive, administrative, and pro- fessional openings that are compensated on a salary basis of less than $25,~O per year. This term includes full-time employment, temporary employment of more than 3 days' duration, and part-time employment. It. does not include openings which the contractor proposes to fill, from within his own organiza- tion or t~ fill pursuant to a customary~ and traditional employer-union hiring arrangement nor openings in an educational institution which are restricted to students of that institution. Under the `moat compelling circumstances an employment opening may not be suitable for listing, including such situations where the needs of the Government cannot reasonably be otherwise supplies, where listing would be contrary to national security, or where the requirement of listing would otherwise not, be for the best irmtereet of the Government. (2) "Appropriate office of the State employment service system" means the local office of the Federal/State national system of public employment offices with assigned responsibility for serving the area where the employment PAGENO="0331" 325 opening is to-be filled,'including the-Distric of ColumbIa, Guam, Puerto Rico, and the Virgin Islands. (3) "Openings which the c~ontractor proposes to fill from within his own organization" means employment opentngs for `which no consideration will, be given to persons outside the contractor's organization (including affiliates, subsidiaries, and the parent companies) and includes any op*tngs which the contractor proposes to fill from regularly established "recall" list.. (4) "Openings which the contractor, proposes tp fill pursuant to a custom- ary and-traditional employer-union hiring artangement" means employment open- ings which the contractor proposes to fill from union halls Which id part of the customary and traditional hirini~relationsbipwhich'eXistA between the con- tractor and representatives of his employees. (i) The contractor agrees to comply with the rules, regulations, and relevant orders of the Secretary of Labor issued pursuant to the Act. - (j) In- the event of the contractor's noncompliance with the requirements of this clause, actions for noncompliance may be taken in accordance with the rules, regulations, and relevant orders of the Secretary of Labor issued pur- suant to the Act. (k) The contractor agrees to pos,t in conspicuous places available to employees and applicants for employment notices in -a form to be prescr~b~ed by the Director, provided by or through the Contracting Of ficer. Such notice shall state the contractor's obligation under t~he law to take affirmative iction to employ and advance in employment qualified disabled veterans and vbterans *f th~e Vietnam era for employment, and the rights of applicants and employee.. (1) The contractor will notify each labor union or representative of workers with which it has a collective bargaining agreement or other contract under- standing that `the contractor is bound by terms of the Vietnam Era Veteran's Readjustment Assistance Act and' is committed to take affirmative Cotton to em- ploy and advance in employment qualified disabled' vetet~an1 and vetOranS of the Vietnam era. (in) The contractor will include the provisions of this' clamee in every *ub- - contract or purct~ase order -of $10,000 or more unless exempted by rules, regu- lations, or orders of the Secretary issued pursu*nt to the Act, so that such provisions will be binding upon each subcontractor or vendor. The contractor will take such action with `respect to any subcontractor purchase order as the Director of the Office of Federal Contract Compliance Programs may direct to enforce such provisions, including action for noncompliance. 10/8/ 76 PAGENO="0332" 326 MINORITY BUSIN!~SS ENTERPRISES SUBCONTRACTING PR(X~RAM FPR 1~1.13IO-2(b) (This clause is applicable if this contract exceeds $500,000.00.) (a) The Contractor agrees to establish and conduct a program which will enable minority business enterprises (as defined in the clause entitled "Utilization of Minority Businese Enterprises") to be con-j sidered fairly as subcontractors and suppliers under this contract. In this connection, the Contractor shall: (1) Designate a liaison officer who will administer the Contractor's minority business enterprises program. (2) Provide adequate and timely consideration of the potentialities of known minority business enterprises in all "maks.~or~buy" decisions. (3) Assure that known minority busimoas enterprises miii have an equitable opportunity to c~ete for s~cmItractC, particularly by arranging solicitations, time fOr the preparation of bids, quanttctee, specificati~, and ds~~ livery schedules so as to facilitate the participation of minority business enterprises. (4) Maintain records showing (i) procedures which have been adopted to comply with the policies set forth in this clause, including the establisi~nt of a source list of minority business enterprises on the source list, and (iii) specific efforts to identify and award con~ tracts to minority business enterprises. (~) Include the Utilization of Minority Business Enter~- prises clause in subcontracts which offer substantial minority business enterprises subcontracting opportun~ ities. (6) Cooperate with the Contracting Officer in any studies and surveys of the Contractor's minority business enter~ prises procedures and practices that the Contracting Of ficer may from time to time conduct. (7) Submit periodic reports of s**co~tracting to he~ minority business enterprises with respoct to die recetdm referred to in subparagraph (4), above, ~in much f~Ó and manner and at such time (not more often than quarterly)5. as the Contracting Officer sep panscribu. S PAGENO="0333" 327 (b) the Contractor further agrees to insert, in any subcontract hereunder which may exceed $300,000, provisions which shall eons form substantially to the language of this clause, including, this paragraph (b),. and to notify the Contracting Of fleer of the uSE of such subcontractors. PAGENO="0334" 328 ALTERATION TO SF-32, General Provisions 1JN~OLICITED SAMPLES, DESCRIPTIVE LIT1~RATURE~9R BRAND NAME REFERENCES: Where procurement is effected under specifications or purchase descriptions (other than "brand name or equal") and the Government does not specifically request bid samples, descriptive literature, or references to brand names, models, or part numbers as an integral part of the bid, bids which are ac- companied by any of the foregoing will be rejected uniess it is clear from the bid or accompanying papers that the samples, descriptive literature, or references to brand names, models, or part numbers are not intended to qualify the bid and that the bidder proposes to furnish items fully in accordance with~the specifications or purchase descriptions. Where offers contain un- solicited material such as samples, descriptive literature, or references to brand names, models, or part numbers, the Government will not be respon- sible in any way for determining whether the items which are offered meet the Government's requirements set forth in the applicable specifications or purchase descriptions. EXAMINATION OP RECORDS BY DEPARTMENT OYHEALT}I~, &)UCATZO~$) ~ (Applicable to negotiated contracts only.) The provisions of the clause included herein, entitled "Examination of Records by the Comptroller General," are extended to provide equal rights to duly authorized representatives of the Secretary or of the Contracting Officer. PAGENO="0335" 329 ALTERATIONS TO SF-32, GENERAL PROVISIONS (Supply. Contr*ct) (See Feder~1 Procurceent Regulations, Subpart l~1l,4 Regarding Use.) FEDERAL, STATE AND LOCAL TAXES (a) Except aa may be otherwise provid*d in this contract, the contract price includea'all applicable Federal, ~tace,- and local taxes and duties. (b) Nevertheless, with. feapect to any Federal ex~, cisc tax or duty on the transactions or property cov- ered by this contract, if a statute,, court decision, written ruling, or regulation cakes effect aftef the contract date, and-' (1) ~Results in the Contrattorbeing required to pay or bear the burden of any such Federal excise tax or duty or increase in the rate thereof which would not otherwise have been payable on such transactions or property, the contract price shall bi increased by the amount of such tax or duty or rate indeaae: Provided, That the Contractor if requested by the Contracting Officer, warrants in writing that no amount for such newly imposed Federal excise tax or duty or rate in- crease was included in the contract price as a con- tingency reserve or otherwise; or (2) Results in tht Cont5sctor not being required to pay or bear the burden of, or in his obtaining a refund or drawbeck of, any such Federal excise tax, or duty which would otherwise have been payable on such transactions or ~ro~erty of which was the basis of an increase in the contract price, the contract price shall be decreased by the amount of the relief, refund, or drawback, or that amount shall be paid to Government, as directed by the Contracting Officer. The contract price shall be similarly decreased if the Contractor, through his fsultbr negligence or his failure to follow instructions of the Contracting Officer, is required to pay or bear the burden of, or does act obtain * refueth or drawback of, any such Federal ~a~*se tax or duty. Cc) No adlustment pursuaet so paz*graph (b) .5cm. will be. made ußd~r this contract uml.$s did aggie**ts amoUnt thereof is or may reisosuibly be expected to beover $100. (d) As used in paragraph (b) abbve, the term "cod- tract dUte" mea& the date set for she bid opeiiliug, or if this is a negotiated contract, the date of this con- tract. As to additional suppliesoc services procured by modification cc this contract, the term "contract date" means the date of such modification. (e) Unless there does not exist any reasonable basis to sustain an exemption, the Government, upon request of the Contractor, without further liability, agrees, except as otherwise provided in this contract, to furnish evidence appropriate to establish exemptlcra from any tax which the Contractorwansnts in writipg was excluded from the coflcr*št price. In addition, the Contracting Off icdr may furnish evidence to es- tablish exemption (rote any tax that may, pursuant to this clause, give rice to either an increase as de. crease in the contract price. Excppt as otherwise provided in this contract, evideflee appeopriste to establish exemption from duties will be fuunished only at the direction of she Ceowactlng Officer. (f) The Contractor shall promptly notify then. sracting Officer of matters which pill iessk us either an increase or decrease in due eornsdct price, and shall take action wish respect diteeso as dliscdid by she Contracting Officer. PAGENO="0336" 330 ALTERATION TO SF-32, GENERAL PROVISIONS EMPLOYMENT OF THE HANDICAPPED (a) The contractor will not discriminate against any employee or applicant for employment because of physical or mental handicap in regard to any posi- tion for which the employee or applicant for employment is qualified. The contractor agrees to take affirmative action to employ, advance in employ- me4t and otherwise treat qualified handicapped individuals without discrim- ination based upon their physicial or mental handicap in all employment practices such as the following: employment, upgrading, demotion or trans- fer, recruitment, advertising, layoff or termination, rates of pay or other forms of compensation, and select~on fpr training, including apprenticeship. (b) The contractor agrees to comply with the rules, regulations, and rele- vant orders of the Secretary of Labor issued pursuant to the Mt. (c) In the event of the contractor's noncompliance with the requirements of this clause, actions for noncompliance may be taken in accordance with the rules, regulations and relevant orders of the Secretary of Labor issued pursuant to the Act. (d) The contractor agrees to post in conspicuous places, available to em- ployeee and applicants for employment, notices in a form to be prescribed by the Director, provided by or through the Contracting Officer. Such notices shall state the contractor's obligation under the law to take af fir- native action to employ and advance in employment qualified handicapped em- ployees and applicants for employment, and the rights of applicants and em- ployees. (e) The contractor will notify each labor union or representative of workers with which it has a cbllective bargaining agreement or other contract under- standing, that the contractor is bound by the terms of section 503 of the Rehabilitation Act of 1973, and is committed to take affirmative action to employ and advance in employment physically and mentally handicapped indivi- duals. (f) The contractor will include the provisions of this clause in every sub- contract or purchase order of $2,500 or more unless exempted by rules, regu- lations, or orders of the Secretary issued pursuant to section 503 of the Act, so that such provisions will be binding upon each subcontractor or vendor. The c.ontr~actor will take such action with respect to any subcontract or pur- chase order as the Director of the Office of Federal Contract Compliance Programs nay direct to enforce such provisions, including setion for noncom- pliance. Revised 6/8/76 PAGENO="0337" 331 TERMINATION FOR CONVENIENCE OF THE GOVERNMENT (a) The perfor~nance of work tinder this contract may be terniinated,by the Government in accordance with this clause in whoic,. at from time to time in part, whenever the Contracting Officer shall determine that such termination is in the beat interest of the Government. Any such termin- ation shall be effected by delivery to the Contracto~of a Notice of Termination specifying the extent to which performance of woth under the contract is terminated, and the dates ~zpon which such termination b~comea effective. (b) After receipt of a Notice of Termination, and except as otherwise directed by the Contracting Officer, the Contractor shall: (1) Stop work under the contract on the date and to the extent specified in the Notice of Termination; (2) Place no further orders or aubcontracts for materials, services, or facilities, except as may be necessary for corn- pletion of such portion of the work under the contract as is not terminated; (3) Terminate all orders and subcontracta to the extent that they relate to the performance of work terminated by the Notice of Termination; (4) Assign to the Government, in themanner, at the times, and to the extent directed by the Contracting Officer, all of the right, title, and interest of the Contractor under the orders and subcontracts so terminated, in which case the Government shall have the right, in its-discretion, to settle or pay any or all claims arising out of the termination of such orders and subcontracts; (5) Settle all outstanding liabilities and all claims arising out of such termination of orders and aubeontracts, with the approval or ratification of the Contracting Officer, to the extent he may require, which approval or ratification shall be final for all the purposes of. this clause; (6) Transfer title to the Government and deliver in the manner, at the times, and to the extent, if any, directed by the Con-' tracting Officer, (i) the fabr~eated or unfabriaate4 parts, work in process, completed work, supplies, and other material produced as a part of, or acquired in connection with the per~ formance of, the work terminated by the.Notice of Termination, and (ii) the completed or partially completed plans, drawings, information and other property which, if the contract had been completed., would have been required to be fu*niahed to the Gov- ernment; 98-930 0 - 78 -- 22 PAGENO="0338" 332 (7) Use his best efforts to sell, in the manner, at the times, to the extent, and at the price or prices directed or authorized by the Contracting Officer, any property of the types referred to in (6) above: Provided, however, that the Contractor (i) ahall not be required to extend credit to any purchaser, and (ii) stay acquire any such property under the conditions pro- scribed by and at a price or prices approved by the Contracting Officer: ~nd provided further, that the proceeds of any such transfer or disposition shall be applied in reduction of any payments to be made by the Government to the Contractor under this contract or shall otherwise be credited to the price or cOst of the work covered by this contract or paid in such other manner as the Contracting Officer may direct; (8) Complete performance of such part of the work as shall not have been terminated by the Notice of Termination; and (9) Take such action as may be necessary, or as the Contract- ing Officer may direct, for the protection and preservation of the property related to this contract which is in the pos- session of the Contractor and in which the Government has or may acquire aninterest. At any time after expiration of the plant clearance period, as defined in Subpart 1-8.1 of the Federal Procurement Regulations (41 CFR 1-8.1), as the de~inltion may be amended from time to time, the Contractor stay submit to the Contracting Officer a list, certified as to quantity and quality, of any or all items of termination inventory not previously disposed of, exclusive of items the disposition of which has beendirected or authorized by the Contracting Officer, and may request the Government to remove such items or enter into a storage agreement covering them. Not later than fifteen (15) days thereafter, the Government will, accept title to suCh items and remove then or enter into a storage agreement covering the same: Provided, that the list submitted shall be subject to verification by the Contracting Officer upon removal of the items or, if the items are stored, within forty-five (45) days from the date of submission of the list, and any necessary adjustment to correct the list as submitted shall be made prior to final settlement. (c) After receipt of a Notice of TerminAtion, the Contractor shall sub-' mit to the Contracting Officer his termination claim, in the form and with certification prescribed by the Contracting Officer. Such claim shall be submitted promptly but in no event later than one year from the effective date of termination, unless one or more extensions in writing are granted by the Contracting Officer upon request of the Contractor made inwriting withtn such one-year period or authorized extensitom thereof. However, if the contracting Officer determines that the facts justify such action, he may receive and act upon any such termination claim at any time after such one-year period or any extension thereof. Upon failure of~the Contractor to submit his termination claim within the time allowed, the Contracting Officer may, subject to any review PAGENO="0339" 333 required by the~ contracUng agency's procedures in effect as of the date of execution of this contract, determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall thereupon~pay to the contractor the amount so determined. (d) Subject to the ~provisions of paragraph (c), and sub~Ject to any re~ view required by the contracting agency's procedures in effect as~of the date o1~ execution of this contract, the Contractor and the contracting Officer may agree upon the whole or any part of the amount or amount to be paid to the Contractor by reason of the total or partial termination of work pursuant to this clause, which amount or amounts may include a reasonable allowance for profit on work done: Provided, that such agreed amount or amounts, exclusive of aettlement coats, shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the ~contract price of work not terminated. The contract shall be amended accordingly, and the Contractor shall be paid the agreed amount, Nothing in paragraph. (e) of this clause, pro- scribing the amount to be paid to the Contractor in the event of failur~ of the Contractor ar~d the Contracting Officer to agree upon the whole amount to be paid to the Cohtractor by rea8on of the termination of work pursuant to this clause, shall be deemed to limit, restrict, or otherwise determine or affect the amount or amounts which may be agreed upon to be paid to the Contractor pursuant to this paragraph (d). (e) In the event of the failure of the Contractor and the Contracting Officer to agree as provided in paragraph (d) upon the whole amount to be paid to the Contractor by reason of the termination of work pursuant to thisclause, the Contracting Officer shall, subject to any revi~v re- quired by the contracting agency's procedures in effect as of the date of executIon of this contract, determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall pay to the Contractor the amounts determined as follows: (1) For completed supplies accepted by the Government (or sold or acquired as provided in paragraph (b)(7) above) and not theretofore paid for, a sum equivalent to the aggregate price for such supplies computed in accordance with the price or prices specified in the contract, appropriately adjusted for any saving of fteight or~other charges; (2) The total of (1) The costs incurred in the performance of the work terminated, including initial costs and pre- paratory expense allocable thereto, but exclusive ~f any costs attrjbutable to supplies paid or to bepaid for under paragraph (e)(1) hereof; PAGENO="0340" 334 (ii) The cost of settling and paying claims arising out of the termination of work under subcontracts or orders, as provided in paragraph (b)(5) above, which are properly chargeable to the terminated portion of the contract (exclusive of amounts paid or payable on account of supplies or materials delivered or ser- vices furnished by subcontractors or vendors prior to the effective date of the Notice of Termination, which amounts shall be included in the costs payable under (i) above); and (iii) A sum, as a profit, equal to 2 percent of that part of the amout determined under (i) above which represents the cost of articles and materials not processed by the Contractor, plus a sum equal to 8 percent of the remainder of such amount, but the ag- gregate of such sums shall not exceed 6 percent of the whole of the amount determined under (i).above: Provided, however, that if it appears that the Con- tractor would have sustained a loss on the entire contract had it been completed, no profit shall be included or allowed under this subdivision (iii) and an appropriate adjustment shall be made reducing the amount of the settlement to reflect the indicated rate of loss; and (3) The reasonable costs of settlement, including accounting, legal, clerical, and other expenses reasonably necessary for the preparation of settlement claims and supporting data with respect to the terminated portion of the contract and for the termination and settlement of subeontracts thereunder, together with reasonable storage, transportation, and other costs in- curred in connection with the protection or disposition of property allocable to this contract. The total sum to be paid to the Contractor under (1) and (2) of this para- graph (e) shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. Except for normal spoilage, and except to the extent that the Government shall have otherwise expressly assumed the risk of loss, there shall be excluded from the amounts payable to the Contractor as provided in (e)(1) and (2)(i) above, the lair value, as determined by the Contracting Officer, of property which is destroyed, lost, stolen, or damaged so as to become undeliverable to the Government, or to a buyer pursuant to paragraph (h)(7). (f) Costs claimed, agreed to, or determined pursuant to paragraphs (c), (d), and (e) of this clause shall be in accordance with the contract cost principles and procedures in Part 1-15 of the Federal Procurement *aiula- tions (41 CFR 1-15) in effect on the date of this contract. PAGENO="0341" 335 (g) The Contractor shall have the right to appeal, under the clause of this contract. entItled "Disputes," from any detarmination made by the Contracting Officer under paragraph (c) or (e) above, except that, if the Contractor has failed to submit his claim within the time provided in paragraph (c) above and has failed to request extension of such time, he shall have no such right of appeal. In any case where the Contracting Officer has made a determination of the amount due under paragraph (c) or Ce) above, the Government shall pay to the Contractor the following: (1) if there is no right of appeal hereunder or if no timely appeal has been taken, the amount so determined by the Contracting Officer; or (2) if an appeal has been taken, the amount finally determined on such appeal. (h) In arriving at the amount due the Contractor under this clause there shall be deducted (1) all unliquidated advance or other payments on ac~ count theretofore made to the Contractor, applicable to the terminated portion of this contract; (2) any claim which the Government may have against the Contractor in connection with this contract; and (3) the agreed price for, or the proceeds of sale of, any materials, supplies, or other things acquired by the Contractor or sold, pursuant to the pro~ visions of this clause, and not otherwise recovered by or credited to the Government. (i) If the termination hereunder be partial, prior to the gettlement of the terminated portion of this contract, the Contractor may file with the Contracting Officer a request in writing for an equitable adjustment of the price or prices specified in the contract relating to the continued portion of the contract (the portion not terminated by the Notice of 1~er~ inination), and such equitable adjustment as may be agreed upon shall be made in such price or prices. (j) The Government may from time to time, under such terms and condi~ tions as it may prescribe, make partial payments and payments on account against costs incurred by the Contractor in connection with the terminated portion of this contract whenever in the opinion of the Contracting Officer the aggregate of such payments shall be within the amount to which the Contractor will be entitled hereunder. If the total of such payments is in excess of the amount finally agreed or determined to be due under this clause, such excess shall be payable by the Contractor to the Government upon demand, together with interest computed at the rate of 6 percent per annum for the period from the date such excess pay- merit is received by the Contractor to the date on which such excess is repaid to the Government: Provided, however, that no interest shall be charged with respect to any such excess payment attributable to a reduc-~ tion in the Contractor's claim by reason of retention or other disposi- tion of termination inventory until ten days afte'r the date of such re- tention or disposition, or such later date as determined by the Contrsct~ ing Officer by reason of the circumstances. (k) Unless otherwise provided for tn this contract, or by applicable statute, the Contractor, from the effective date of termination and for a period of three years after final settlement under this contract, shall PAGENO="0342" 336 preserve and make available to the Government at all reasonable times at the office of the Contractor but without direct charge to the Gov~- ernment, all his booKs, records, documents, and other evidence bearing on tYie cost8 and expenses of the Contractor under this contract and relating to the work terminated hereunder, or, to the extent approved by the Contracting Officer, photographs, microphotographs, or other, authe~itic reproductions thereof. PPR 1~8.7O1 PAGENO="0343" 337 \ ALTERATIONS (Continued) January 1975 PRICE EEDVCTION FOR DEPECTIVE~ COST OR PRICING DATA (PPR l~3. 814-1(a)) If any price, including profit or fee., negotiated in connection with this con" tract or any cost reimbursable under this contract was incteased by any signifi- cant sums because: (a) The Contractor furnished cost or pricing data which was pot accurate, complete and current as certified in the Contractor's certifiCate of Current Cost or Pricing Data; (b) A subcontractor, pursuant to the clause of this contract entitled "Sob- contractor Cost or Pricing Data" or "Subcontractor Cost or Pricing Data -Price Adjustments" or any subcontract clause therein required, furnished cost of pricing data which was not accurate, complete and current as csrtfltad La the subcontractor's Certificate of Currant Coat or Pricing Data; (c) A subcontractor or ptoapective $ubcontractOr~ furnished cost of pricing data which was required to be accurate, complete and current gad to be submitted to support a subcontract cost estimate furnished by the Conttactor bet which *a not accurate, complete and current as of the date certified in th* Comtractor'e Certificate of Current Cost or Pricing Data; or (d) The Contractor or a subcontractor or prospective subcontractor futntshsd any deta, not within (a), (b), or (c) above, which mae not accurate as submitted; the price or cost shall be reduced accordingly and the contract shall be ~ifted in writing as may be necessary to reflect such reduction, Movsver,~*ny reductim inthe contract price dueto defective subcontract data of a prospective subcsu- tractor when the subcontract was not subsequently awarded to such subcontractor, will be limited to the amount (plus applicable overhead and profit markup) by which the actual subcontract, or actual cpat to ttie Contractor if there mas no subcontract, was less than the prospective subcontract cost estimate submitted by the Contrectot: ~ The actual subconttact price Was not affected' by defective coat or pricing data. - (NOTE: Since the contract is subject to redugtio~ under this clause by reason of defective cost or pricing data submitted in connection with certain subcOntracts, it is expected that the Contractor may wish to include a clause in each luch sub- contract requiring the .subconttsctorto appropriately -ind~tfy th* Contractor. It is also expected that any subcontractor subject to such ind~ification will gener- ally require substantially similar indemnification for defective cost or pricing data required to be submitted by htS lower tier aubeontrictors.) PAGENO="0344" 338 ALTERATIONS (Continued) January l~1S SUBCONTRACTOR COST OR PRICING DATA (p~ 1-3814-3) (a) The Contractor shall require subcontractors hereunder to submit, actually or by specific indentificatfon in writing, coat or pricing data under the follow- ing circumstances: (1) Prior to the award of any subcontract the amount of which is expected to exceed $100,000 when entered into; (2) Prfor to the pricing of any subcontract modification which involves aggregate increases and/or decreases in costs plus applicable profits expected to eXceed $100,000; except where the price is based on adequate price competition, established catalog or market prices of coesnercial items sold in substantial quan- tities to the general public, or prices set by law or regulation. (b) The Contractor shall require subcontractors to certify, in substantially the Sane form as that used in the certificate by th~ Prima Contractor to the Government, that to the best of their knowledge and belief, the cost and pricing data aubmited under (a) above is accurate, complete, and current as of the date of agreement on the negotiated price of the subcontract or subcontract change or ~ modification. Cc) The Contractor shall insert the substance of this clause including this paragraph (c) in each subcontract hereunder which exceeds $100,000 when entered into except where the price thereof is based on adequate price competition, esta- blished catalog or market prices of conseercial items sold in substantial quantities to the general public, or prices set by law os regulation. In each such excepted subcontract hereunder in excess of $100,000, the Contractor shall insert the sub- stances of the following clause: SUBCONTRACTOR COST OR PRICING DATA PRICE ADJUSTMENTS (a) Paragraphs (b) and (c) of this clause shall become operative only with respect to any modification made pursuant to one or more provisions of this con- tract which involves aggrec~ate increases and/or decreases in costs plus applicable proffts expected to exceed $100,000. The requirements of this clause shall be limited to such contract modifications. (b) The Contractor shall require subcontractors hereunder to submit, actually or by specific identification in writing, cost or pricing data under the following circumstances. (1) Prior to award of any subcontract, the amount of which is expected to exceed $100,000 when entered into; (2) Prior to the pricing of any subcontract uuo4ification which involves aggregate increases and/or decreases in costa plus applicable profits expected to exceed $100,000; except where the price is based on adequate price competition, established catalog or market prices of coomercial. items sold in aebstanttal. quantities to the general public, or prices set by law et regul*ttom. PAGENO="0345" 339 (c) The Contractor shall require subcontractors to certify, in substen. tially the same form as that used in the ctrtificate by the Prime Contractor to the Govertunent, that to the beat of their knowledge and belief the cost and pricing data subi!iicted under (b) above is accurate, coeplete, and current as of the date of agreenen~.~on the negotiated price of the subcontract or sqb contract change or modification. (d) The Contractor shall insert the substance of this clause including this paragraph (d) in ech subcontract hereutder which exceeds $100,000 when entered into.. PAGENO="0346" 340 ~LThRAf ICISS (Continued) (FPR 1-3.814-2) (a) GENERAL. The Contracting Officer or his representatives shell bees the sedit and inspection rights described in the applicable ,aragraphe (b), (c), sed (4) bslmw. (b) EXAMII8&TTON OF COSTS: If this is a cost-reiabursemant type, *nesse*ue, *8th end materials, labor hour, or price redstersiesble contract, at y e~f~ktIth ~, :he Contractor shell maintain, and the Centracting Of fleer at b4 se~**ISthI**5SI ~il. ~ave the right to easmine books, records, duewnsnta, and o*ar evHthee sth~ asce~1LI~ rocedures and practices, sufficient to reflect prapsrly all direst ~*sest satan of whatever nsture claimed to have been inserted end eeticipsa*d et be ~*ma8 fir ~I* performance of this contract. Such right of enaei~iom shall inside teiipsiitii* * -easoosbie times of the Contractor's plants, at such parts thaseef. as sap is ~ 1* the psrforssnce of this contract. (a) COST OR PRICINE DATA. If the Contractor subeitted cOst St prisi~ dete is th. cection with the pricing of this contract or ~ey ebsege or esdifteatiss thenCe, sMsse auch pricing was based on adequate prtcd c.s~stition, established catting or :riees of cos.ssrcial items sold in substantial quantities to the gsesrat public, at prices set by law or regulation, the Contracting Officer or his rspresentativee tho era pt.pmas of the United States Goveremient shell have the right to examine .11 hooks, records, dses- ments and other data of the Contractor related to the negotiation, pricing or perfesueneap of such contract, change or modification, for the purpose of evaluating the accuracy, completeness and currency of the cost or pricing data subnitted,. Addttioaslly, in the ease of pricing any change or msdification exceeding $100,000 to formally sdvertised ,tracts, the Comptroller General of the United States or his representatives who are u.nployeea of the United States Coverrmisnt shell have such rights. The right of smashes- ation shall extend to all docew,snts necessary to permit adequate eveluatioe of the cost or pricing data submitted, along with the cenpvtstions and projections used thereia. (4) AVATLetELIT!. The materials described in (b) i 4 (c) shoes, a ~ds availsble at the office of the Contrecte - - - 5 audit or raproductiose, Until the r~ under this contract at iuch les~~ sent Regulations (41 OPR Pitt I by applicable statute, or by ether ci CL) If this contract is con to the work tsrninitsd shall be nede any resulting final sottlsmsst. (2) Records x.. tract, or litigation or t contract, shsll be made avail iispoaed of. (e) The Contractor shell insert a d~0 cirtoining a clause, including this paragraph (I), in *11 sibeontracts h necessary for proper identification of the costrictiag parties a Officer under the Oovereussnt prime contract. PAGENO="0347" 341 July 1974 ACCOUNTS, AUDITS, AND RECORDS (a) The Contractor shall maintain bookg, records, documents, and other evidence, accounting procedures and practices sufficient to~ reflect properly all direct and indirect tosts of whatever nature claimed to have been incurred for the performance of this~ contract. The foregoing constitutes "records" for the purpose of this clause. (b) The Contradtor'i facility(ies) or such part thereof as~may b~ dngaged in the performance of this contract, and his records shall be subject at ci]. reasonable time to inspection and audit by the Secretary or his authorized re' presentatives. (c) The Contractor shall preserve and make available his records (1) until the expiration of 3 years'from the date of final payment under this con- tract, or the time periods for particular records specified in 41 Cfl Part 1-20, whichever expires earlier, and (2) for such longer period, if any, as is required by applicable statute, or by other clauses of this contract, or by (1) or (ii) below: (1) If this contract is completely or partially terminated, the records relating to the work terminated shall be preserved and made available for a period of 3 years from the date of any result- ing final payment. (ii) Records which relate to (A) appeals under the "Dispute&' clause of this contract, (B) litigation or the settlement of claims arising out of the performance of this contract, or (C) costs end expenses of this contract to which exception has been taken by the Contracting Officer or any of his duly authorized representatives, shall be retained until such appeals, litigation, claims, or excep- tions hav~e been disposed of. (d) The Contractor shall insert the substance of this clause, including this paragraph (d) in each subcontract hereunder with the exceptions of (1) purchase orders not exceeding $2,500 and (2) subcontracts or purchase orders for public utility services at rates established for uniform applicability to the general public. When so inserted, changes shall be made to designate the higher-tier subcontractor at this level involved in place of the Contractor; to add "of the Government prime contract," in place of "this contract" in (B) of subparagraph (e)(ii) above. PAGENO="0348" 342 PREAWARD EQUAL OPP(*TUNITY COMPLIANCE REVIEWS Where the bid of the apparent low responsible bidder is in the amount of $1 million or more, the bIdder and his known first~'Uer subcontractors which will be awarded subcontracta of $1 `million or more will be subject to full, preaward equal opportunity coa~ pliance reviews before the award of the contract for the purpose of determining whether the bidder and his subcontractors are ale to comply with the provisions o~ the Equal Opportunity clause. PAGENO="0349" 343 ALTERA?ION TO SF-32, General Provisions CLEAN AIR AND WATER CLAUSE (Applicable only if the contract exceeds $100,000, or the contracting officer has determined that the orders under an indefinite quantity contract in any one year will exceed $100,000, or a facility to be used has been the subject of a conviction u~nder the Clean Air Act (42 U.S.C. 1857C-8(C)(1)) or the. Federal Water Pollution Contro]~.Act (33 U.S.C.. 1319 (C)) and is listed by EPA, or the contract is not otherwise exempt.) (A) The contractor agrees as follows: (I) To comply with all the requirements of Section 114 of the Clean Air Act, as amended (42 U.S.C. 1857, et seq., as amended by Public Law 91-604 and Section 308 of the Federal Water Pollution Control Act (33 U.S.C. 1251, as amended by Public Law 92-500), respectively, relating to inspection, monitoring., entry, reports, and information, as well as other requirements specified in Section 114 and Section 308 of the Air Act and the Water Act, respectively, and all regulation and guidelines issued thereunder before the award of this contract. (Ii) That no portion of the work required by this prime contract will be performed in a facility listed on the Environmental Protection Agency list of violating facilities on the date when this contract was awarded unless and until the EPA eliminates the name of such facility or facilities from listing. (III) To use his best efforts to comply with Clean Air Standards and Clean Water Standards at the facilities in which the contract is being performed. (IV) To insert the substance of the provisions of this clauSe in any nonexempt subcontract, including this paragraph (IV). (B) The terms used in this clause have the following meanings: (I) The term "Air Act" means the Clean Air Act,*as amended (42 U.S.C. 1857 et seq., as amended by Public Law 91-604). (II) The term "Water Act" means Federal Water Pollution Control Act, as amended (33 U.S.C. 1251 et seq., as amended by Public Law 92-500). (III) The term "Clean Air Standards" means any enforceable rules, regu- lations, guidelines, standards, limitations, orders, controls, prohibi- tions, or other requirements which are contained in, issued under, or otherwise adopted pursuant to the Air Act or Executive Order 11738, an applicable implementation plan as described in Section 110(D) of the Clean Air Act (42 u.s.c. 1857C-5(fl)), an approved implementation procedure or plan under Secth.n 111(C) or Section 111(D), respectively, of the Air Act (42 U.S.C. 1857C-6(C) or (D)), or an approved implementation procedure under Section 112(D) of the Air Act (42 U.S.C. 1857C-1(D)). PAGENO="0350" 344 ALTIRATION TO S?'32, Gen.raJ. Provisions Clean Air and Water Clause (Continued) (IV) The term "Clean Water Standards" means any enforceable limitation, control, condition, prohibition, standard, or other requirement which is promulgated pursuant to the Water Act or contained in a permit issued to a discharger by the Environmental !rotection Agency or by a State under an approved program, as authorized by Section 402 of the Water Act (33 U.S~C. 1342), or by a local government to ensure compliance with pre~ treatment regulations as required by Section 307 of the Water Act (33 U.S.C. 1317). (V) The tern "compliance" means compliance with Clean Air or Water Stan dards. Compliance shall also mean compliance with a schedule or plan ordered or approved by a court of competent jurisdiction, The Environmen~ tel Protection Agency or an Air or Water Pollution control Agency in accordance with the requirement of the Air Act or Water Act and regula~' tions issued pursuant thereto. (VI) The term "Facility" means any building, plant, installation, struc~- ture, mine, vessel or other floating craft, location, or sit. of operations, owned, leased, or supervised by a contractor, subcontractor, to be utilized in the performance of a contract or subcontract. Where a location or site of operations contains or includes more than one building, plant, instal- lation, or atruc~ure, the entire location shall be deed to be a facility except where the Director, Office of Federal Activities, Environmental Pro tection Agency, determines that independent facilities are colocated in one geographical area. PAGENO="0351" 345 EQUAL OPPoltTIJNttY (JulY 1976) (The following clause is applicable unless this contract is exempt mider the rules, regulations, and rel~vans ordetn of tire Secretary of Labor (41 CER ch.. 60).) During the perforasa~tce of this con)iac~;~thc Contractor agrees as follows: * (a) The Contractor will (fof discrimiritte against any ~jrpf&yee orapplis'ant ide employment' bec~use of eace,' e~lor~, religion, sex, ~r nationaiorigin: ~Fhe~ Contractor Will take affl sting actiOn to ehtttrg ihat ap~lifants are * employed, agd that ensp$sryeeu `are treated during employment wltli~ut regard t~tJseir raeg,~folot~ religion, sex, Or national origin. Such action shall )nclude, bst not be limited (0, the following: Employment, u~grad(ng, de~ption, or `teassler;' recruitment or recruitment a~dverlising; layoff or tertnipa(Ion; rate~ of pay or `o(Eter forms of compOnsation~ and selection for training, Including apprentl~shup. The Contr~tor ~agrees to post in~ cons(alOuous places, `available let employees and dpplicanss foe employment, notices `be prosiciptl by ~he ,Cortteac(it~g Officer selling forth Use provisions of this Equal Opportunity clause. (b) The Contractor will, in all solicitations or advertisearsen~s fQr employees place~ by or on behalf of tire Contractor, state tlas all qualified appi1~inta w(I1 receive consideratio~i for employnrent without regard to race, Color, reltgion, tot, or'naliotsal origin. (c) Tire Contractor will isend to earls labor itnion or representative of: wetterS `witls whirls he has a eoilcc'tive bargaining agreests~nt or otlsct' contract or unders,tandirtg, a, sotlte, to `be heovided 1y tli~ ayency Contractidg Officer, advising tire labor union Os Workert' representative of tire Contractor's colunsitments under thin Equal Opportunity clause, assd strait post copies of tlse notice in conspicuotrsplaees avgiiabie to empioyees,and applicants for empioynrerss. (d) The Contractor will comply with all provisions of Executive Order No. 11246 ofSeptember 24, 1965, and~of site rules, regulations, and relevant orders of the Secretary of Labor. (e~ The Contractor wi(1 furnisls all itsformat~on ~nd reports required by Executive Order No. 11246 of Septetnbpr 24, 1965, an4 by the rules, rrmstiations, and ordees of the Secretary of Lat,or, or pursuant thereto, and will" pernsit access to lain books, r~cords, attd~ accounts by the contracting agency and the Secretary of Labor for purposes 01 investigation so ascertain compliance with such ruler, regultrsionn, and orders. (1) In the event of lire Contractor'S nonconrplia~ce Wills tire EqualOpportunity clause of thiS contract or with any of tire said rules, regulations, or orders, thin contract may be canceted, terminated, or suspended, in Whole or in part, apd the Contractor trsay be declared ineligible for furtlee~ Government contracts in ac~ordance ~ with procedures duthorized in E~sCcutive Order No, 11246 of September 24, 196$, an&suelr ol(tcr sanctigns may be i(llposed and e6ttcdies jnvoked as provided In Executive Order No. (1246 of September 24, ~ or' by rule, regulasiosr~ or order of the Secretary of Labor, or as otherwise provided by law. (g) The Contra~tor will include tire provisions of paragraphs (a) througir (g) `in every subcontract or purchare order unless cxenrpted by rules, regulations, or orders of the Secretary of Latstsr'ivsued pursuant to section 204 of Executive Order No. 11246 01' September 24, 1965, so that such provisions wilt be binding upon each subcontractor or vendot, The contractor will take such action with respect to any subcontract `or purchase order an the contracting agency may ditect as a means of enforcing such provisions, including ~nctionu for- noncompliance: Provided, however, That its the event the Contractor becottsea istiolved in, or is llsreatened with, litigation with a subcontractor or vendor an a result of such dirCctiofl' by the contracting agency, the Contractor may request the U'smilcd'$tateu to enter into such litigation to prOtect the interests of the Usrited States. PAGENO="0352" 846 Mr. WAXMAN. Was it the intention of HEW and the vaccine manufacturers to, at some point, enter intQ written contracts, which they did do in August of this year, with at least three of the four companies. Is that correct? Dr. MIu.AR. That is true. Mr. WAXMAN. Why was it such a long delay between the letter contracts and reducing it into a written contract? I~r. MiuAR. As the GAO people mentioned `earlier, one of the major issues involved was whether or not the Federal Government would waive the usual requirement for cost accounting standards. This `strikes me as a very serious matter, which was pondered for a rather considerable period of time, largely because of its implica- tions. I would venture that this consideration of whether or not to waive the cost accounting standards is, in fact, the reason for most of the delay. Mr.' WAXMAN. Tell us what the serious implications are. Dr.' MILLAR. I think that we referred to them earlier, and I am not competent to comment on the special ramifications of waiving those procedures. I would presume that any time a company asks the Government to waive a standing set of standards that this should require some significant pondering. But I do not feel that I perso~ialiy have the competence to respond as to what the implica- tions of those waivers really are. Mr. WAXMAN. GAO said that it was inappropriate to contract with the vaccine manufacturers, and to have that kind of language in it. This generally applies to Defense people. You seem to indi- cate that there would be some serious consequencies in having waived that provision, which caused HEW to ponder on it for over 1 year. Dz~. MILLAR. It took a rather considerable period to deal with that. I "wonder if I might ask Mr. Bradford to offer some help on this point. Mr. BRADFORD. I think it took an awful long time, clearly, to decide the issue of whether this should be waived `or not. Obviously, the Department has come down on the position that this will not jeopardize the Government's interest in signing the contract. But, yes, it took a long time. Mr. WAXMAN. Tell me more about it. What did the Government decide to give up? Mr. B~ADFORD. Again, I apologize, Mr. Waxman, because I am not a contractual expert. As I understand the issue, the manufac- turers' normal accounting systems were not set up to directly relate each item of cost to a specific, or to one ~specific product. What was done, in fact, initially when the letter contracts were signed in September 1976, was to establish cost criteria which both the Government and the contractors could agree upon. This was the basis for the contracts which were signed in September. The issue of whether the normal standards would apply in allo- cating costs in the audit could not be agreed upon by the parties, and so this was a major reason why the final contracts went unsigned. Mr. WAXMAN. You are talking about allocating costs. In other words, the'party contracted with by the Government would have to PAGENO="0353" 347 allocate the ~costs to~show. where each dollar went. Is~that what the accounting system requires? Mr BRADFORD That is the general idea, but I cannot speak to the specifics. Mr WAXMAN Would it be fair for one to conclude that it would have been a way for the U S Government to know what the costs were for the manufacturers of the vaccine by way of a clear.cut audit, as opposed to just taking their word for what the costs wculd Mr. BRADFORD. This does not take the place of an audit. Again, the Department determined, after reviewing the issue, that these accounting standards could be waived, and the final determination of what it cost the manufacturers to produce the vaccine could still be obtained through audit So the audit process still takes place Mr WAXMAN Tell me about the audit Would the audit go into every part of the cost incurred by the vaccine manufacturers, to know what their costs were, or would it be taking certain assump- tions to furnish the Government by the vaccine manufacturers? Mr BRADFORD Agreements have been reached with the manu- facturers that the records of cost, and other records, will be open to the N~W auditors for this purpose Mr WAXMAN I want to know what we gave away that took such a long time, and that HEW pondered over so greatly before decid~ mg to give the signed contracts After all, we gave up the normal liability that is placed on the vaccine manufacturers because we were threatened with adverse effects. So HEW came to Congress, and said "You have to pass a new law" HEW made an administrative decision that they were going to waive some provision that is in the law, and I imagine that it is in the law for some purpose Could HEW give us some information on that. Mr BRADFORD I think that we could provide the detailed infor- ination about each of the standards included, what was the difficul ty with them, and why the decision was made There are proce- dures, as you indicated, for the granting of waivers of these types of clauses in contracts, when there is deemed to be good reason Mr WAXMAN I am not questioning whether you have the right to make a waiver I am not sure that~you have the right to make the waiver, but it is a decision that HEW made to give the waiver to the vaccine manufacturers after a year of negotiations as to the cost. Evidently, this was something important enough for the vaccine manufacturers to want that out, and which finally the Government felt the~y could not press any longer What did we give up9 Mr BRADFORD I cannot answer that question The audits will turn that up, and, of course, GAO~ will continue to look at this process. Mr. WAXMAN. GAO only talks to you. It does not talk to anybody else. I would like, Mr Chairman, that the record be held open for a detailed account I wonder why we do not have a person from HEW who negotiated this This is a very important part of the negotia tions with the manufacturers. I find it inexcusable that we do not 98-930 0 - 78 .- 23 PAGENO="0354" 348 have somebody here to give us this detailed information of what we gse up. I would like to have the record held open for that information to be~provided to us. Mr. ROGERS. Without objection, it is so ordered. [A detailed description of the waiver of cost accounting standards grar ted by the Department is included in the information provided on~p~ge 110 of the Hearings.] Do. you have anyone here who negotiated the contracts, or is a con~act person from~HEW? D*. MIUAR. No. S MrS. WAXMAN. How many people were involved in the negotia- tion~? S ~Mr. BRADFORD~ The contracting officer at CDC in Atlanta. Some of these determinations, I might add, had to be made elsewhere in the ]Mpartment, particularly the waiver question. Mr. ;WAXMAN. Did HEW object to the item for $8 million that the vaccine manufacturers~ asked for their insurance coverage in light of the liability? Mr~BRAD~'oRD. I believe HEW would have been happy to sign the contract that would have assured the delivery, of vaccine at the lowest~ possible price. The ~agreement was reached as ~a result of Public. Law 94-380. While no profit would be allowed, the manufacturers were also interested in seeing that no losses would be incurred. I think that this is the basis for that a?reement. Mr. WAXMAN. HEW failed to monitor the use of informed con- sent forms, Use of the forms was haphazard. Those who contracted Guiilain~Barre had difficulty making a case because they never signed a form, or cannot~ prove that they did or did not. That is a conclusion of the GAO. Do you have any comment to make about that? S Dr. Mtu~R. That has to be viewed in the context of the national use of informed consent procedures. In fact, surveys that have been done with recipients of the vaccine have indicated that approxi- mately 89 to 90 percent of the people who got the swine flu vaccine did, in fact, receive informed consent forms, and did, in fact, ex- ecute those. Almost universally, they claimed that they understood what they were signing. This means that there were approximately 10 percent who re- ceived the shot who did not receive the informed consent proce- dure. Constructed in the very narrow sense, one would have to say that the system was imperfect because these people did not receive the informed consent materials. However, when looked at in the broader sense of doing such an activity for the first time on a national basis, there is considerable reason for thinking that 90- percent performance is pretty good performance. Mr. WAXMAN. How many forms of the warning did you have? How many different forms of the warning did you have? Dr. Miu.AR. We had two basic forms. One form for the monova- lent vaccine, and one form for the bivalent vaccine. Both forms consisted of two pages, the front page of which was an introduction which was identical in each instance, and the second page provided PAGENO="0355" 349 ~ spe~ific i~fo˝i:ßtion about;the specific vaccine, whether It was mon- Ovalent or bivalent Mr WAXMAN Did each form advise the person that there was a possibility of Guillain-Barre syndroine'~ Dr Mxu~R The form d4 not contain any reference to the Guil.- larn-Barre syndrome ~t the time the forms were co~nstruoted, and iiideed up until December of 1~st year the experietice with Guil larn-Barre an4 vaccine was as follp*s there was a report published of some 1,100 cases of Guillam~Barre syndrome, essentially com- prising the published experience with that syndrome Among those 1,100 cases, there was one person who had been vaccinated with influenza vaccine prior to Onset of'Guillain Barre I hasten to add that there were 150 or so other such conditions that were also listed, including some fairly bizarre ones, four people in that group had even been struck by lightning We did not feel that the available information at the beginning of the pro- gram, in fact, warranted any conclusion that there ~as an associ- ation between flu vaccuie ai~fd the Guillain-Barre syndrome Mr WAXMAN. Were patients informed on either form that there was a potential danger fOr pregnanš Women to have the vaccine? Dr MILLAR The section on pregnanOy was obviously one that produced a certain amount of contro+ersy The matter was taken to the National commission for the Protection of Human Subjects in Biomedical and Behavioral Research Afterward, there was never an adequate resolution to the issue because of the fact that there is a substantial historical amount of information on the use of flu vaccines which does not indicate specific problems between the vaccine and pregnancy On the other hand, the sort of well-controlled studies that we are coming to expect nowadays, evaluating women who have been vaccinated and then having children, with women who hava not been vaccinated who have children, these studies simply has'e not been done So the data do not exist to say, with 100 percent clarity, that there is absolutely no risk Trying to balance these risks and benefits for pregnant women was a real problem But the pregnancy section that eventually became a part of the form was drawn from the recommendations of the Advisory Committee on Immunization Practices and did, in fa˘t, note that there was some ambiguity Mr WAXMAN It later became part of the form, but it was not part of the farm initially Dr MILLAR The first forms that *crere sent out, dated Jul~r 15, 1976, and the introduction to the vaccine forms, said Many people ask questions about flu vaccination during pregnancy. An advisory committee of the Public Health Service examined this question and reported that `there are no data specifically to contraindicate vaccination with the available killed virus ~accifle In pregnancy Women who are peegnant should be considered as having essentially the same balance of benefits and risks regarding influenza vacci nation and influenza as the general population~" That was m the forms that were in use when the program began Mr WAXMAN Later you cha4lge4 that Dr MILLAR After the Guillam Barre episode, forms were pro- duced that changed the language of that to the following: PAGENO="0356" 350 Many people ask about the risks of flu vaccination during pregnancy. There is not now any specific data on whether the risks are the same or different from what they are for the general population. For this reason, a pregnant woman should be advised by a doctor~ on the benefits and risks for her or her offspring. It does not say how the doctors should be advised about the b4nefits and riSks, and that illustrates the ambiguity. Mr. WAXMAN. If you were a pregnant woman, would you feel that you got any information from that form? Dr. MIUAR. I would say that from the form that we were using in July, as far as I am concerned, the statement, "the same balance of benefits and risks regarding influenza vaccination and influenza as The general population," is a significant message. Mr. WAXMAN. That was changed. I want to ask about some contradiction in your testimony. As I understood your testimony earlier, you talked about 36 cents per dose for monovalent as the cost, and 42 cents per dose if there was some self-insurance. I did not understand what that meant. Then later you came back and testified that It was a range of 15 to 30 cents per dose~ Could you explain that difference? Dr. MIUAR. The discrepancy arose in our scrambling to get the information that we did not have in front of us., It was confused, and I ~would appreciate it if you would ignore what I said on costs just ~before the' break, because we developed that as quickly as we coul4 from the information at hand. Mi~. WAXMAN. Are you sure that I should ignore what was said befoi~e the' break? Dr~~ MIu~R. On that point. Mr~ WAXMAN. You are willing to give us figures. Are you satis- fied ti~iat that represents cost and not profit? Dr. MIILAE. For the two companies, there is no profit even sought for the bivalent vaccine. For the other two companies, I would~ presume their figures' do include some profit for the A- Victo˝a vaccine. Mr. WAxMAN. Are you accepting the fact that they `are not asking for profit, and that they are not getting profit? `Dr. MILLAR. I am accepting the fact that to date we have three contrac~ts concluded and audits are or soon will be underway. At this point in time, I am not prepared to say specifically, without having seen the audits, one way or the other. I don't `think that I have the information at hand to really respond. Mr i~OGERS Would you have those audit reports presented to the committee at the conclusion of those audits? Dr. MftLAR. We will. [The following information `was received for the record:] AUDIT REPORTS Audits by the HEW Audit Agency could not commence until the manufacturers accumulated the final costs and closed their accounting periods. Currently, HEW audits of Merck Sharp and Dohme and Wyeth are in progress. An audit of Merrell- National is scheduled to begin in the near future. The audit of Parke-Davis will be delayed pending final determination of the Shope influenza virus vaccine production cost issue. Copies of these audits will be provided to the subcommittee as they become available. Mr. RoGERS.' Mr. Maguire? ` Mr. MAGUIRE. Thank you, Mr. Chairman. PAGENO="0357" 351 In the J~iiy 1976 hearing that was conducted by this committee, there was an exchange between Dr Cooper and myself, just prior to the meetings that were to take place between HEW, the manu facturers and the insurers, to try to hammer out the details. This is~the frame of reference: If we are going to become involved, that is the Government, in the sharing of the risk in some fashion above a certain level I Would hope that those doing the negotiat~g might also keep in mmd that it would be nice for the Governntent, to the extent that we find we do nOt end up with a problem-I meant by that a situation where there would not be an Incredible number of clauns and the costs associated with those claims-that we also be able to share in whatever reduotion of cost might result from that fact, just as we would equally share the risk. Dr. Cooper answered, "Yes, sir. We would adhere tO those `princi- ples." Now it is my understanding that among other alternatives that were considered, or proposed, there were some that were proposed. by the insurance companies, which involved a retrospective adjust- ment of premium' payments. What became of those proposals? Dr. MIu~R. .1 don't have any information on that. Mr BRADFORD I am not sure of the specific question, but the contracts do not now r~quire retrospective reimbursement Mr. MAGUIRE. I ath aware Of that, sir. `But what I am trying to find out is, what happened to that idea which was discussed in the hearings. it seemed to me at the time and it seems to me now, if that had been properly negotiated, surely there could be ways to negotiate it that would be satisfactory, sa that in a situation where there are very few claims compared to the projections we would not have had to pay enormous amounts of money. If we had a retrospective arrangement, it would seem to me that we would not be in a better position Alternatively, if the costs had exceeded those that were anticipated, and it had been necessary to consider how to cover that, the agreement would have concerned itself with that. Some assumption of Government responsibility beyond the ceil- ing might have made some sense We discussed that at great length at the hearings as well. Mr. Chairman, it appears to me as though once again the rÚpre- sentatrves of HEW are not prepared to answer the questions of the committee. I think that it is very surprising that HEW's delegation to these hearings does not contain someonÚ'who participated in the Regotiations a year ago. Apparently, we will have to ieave the record open at this point for a written response to the committee, or the committee will have to call further HEW witnesses to find what, in fact, occurred during those negotiations Mr ROGERS I think that it may be that the committee will want to hear from the people who actually participated in those negotia tions, and we will leave the record open and make that )udgment Mr MAGUIRE Thank you, Mr Chairman Mr Ro~Rs Dr Carter? Mr CARTER Thank you, Mr Chairman Is the risk of a swine flu epidemic ~any greater, or less, or about the same this~year? Dr Miu*.i~ Dr Carter, I wish I could answer that question with some precision. The experts are very quiet on that particular point. PAGENO="0358" 352 B~zt I cannot escape my own common sense as an epidemiologist that since there have not been many cases, or any outbreaks of swine flu in the interim, I cannot beUeve that the risks of swine flu in the future are as great as they were when we dealt with this problem in February and March of 1976. But this is based on epidemiologic intuition. We still don't know influenza viruses well enough to know whether we have seen the last of the swine flu virus. We do know that we are still due for a major pand~mic change within the next fe~years. Dr. Jordan is perhaps more expert in these matters. Would you care to comment on that, Dr. Jordan? Dr~ JORDAN. I would agree with Dr. Millar's comment. The un- predictability of influenza is one of the greatest plagues to the epidemiologists and physicians, as you know. There is a cyclical behavior that recurs and produces pandemics, and that is why it is expected, and was expected when this new variant arose, that we are due for a new pandemic within the next few years. Mr., CARTER. If a new virus were to be located and is~1ated, this year in a similar experience to Fort Dix, what steps wouldyou take to assess the risk of the `outbreak? How would you go about evalu- ating such a situation? WOuld you do it differently than was done with the swine flu threat? Dr. JORDAN. We are beginning now to discuss this question. We have been thinking about it for some time, since last year. The Secretary's Office has created within the agency a working group that ins~oives the Bureau of Biologics, National Institutes of allergy and, Infectious Diseas~s and CDC, to discuss what preparations should b~. made to control future pandemics. Hopeftilly, we will learn from the swine flu experience something about the decisionmaking process and how to improve our perfor- mance. If a new variant arises, we will face the same questions that we faced in February when the swine flu arose. We will have to address the same issues: how different is the new strain from previous strains, how different is it from strains currently in today's vaccine, and how susceptible is the population. Mr. CAItTER. GAO has stated that before another mass immuni- zation prOgram is conducted, that total Federal assumption of the liability coverage of vaccine production should be considered. Would you comment on these recommendations? Dr. MIUAR. I think, Dr. Carter, that the Department is, at this point, giving very careful. consideration to issues .relating to liabil- ity and to compensation. As I indicated in my statement, the two are, in fact, inter-digitated in the sense that until there is some means found to compensate the rare, but finite victims of an immu- nization procedure, one will have chronically to deal with problems of liability. A preliminary draft of the departmental position on this has been sent to the Congress. We are promising that in October, a final report, hopefully incorporating very specific recommenda- tions, will be forwarded to you. So rather than commenting on the GAO recommendation, I would prefer to say that the Department's position on this, I think, is spelled out in the draft, and also PAGENO="0359" 853 hopefully will come to you with some recommendations for a pro- gram i October. Mr. OARTER. ]~o you think there is relation between the Guillain- Barre syndrome and the swine flu virus vaccine, or the Victoria-A strain, or any other particular influenza virus? Dr MILLAR We saw cass of GuiUam Barre syndrome in recipi ents not only of the 2-A vaccine, the swine vaccine and A-Victoria, but also in recipients of the B-virus vaccine. Because we do not have a clear fix on exactly how many doses of B vaccine were administered to people, that nOt being part of the national pro- gram, we cannot come up with a rate for Guillain-Barre in recipi- ents of only B influenza vaccine. My own personal opinion is that the association such as it is applies to all the flu vaccines, but that is based on a presumption, because we do not have the necessary data on the distribution OIB- influenza vaccine to make a firm conclusion about those rates. Mr CARTER Have you read that the Guillain Barre syndrome may be related to, or precipitated by the type of injection, and not just influenza? Dr. MIUAR. I realize that that opinion exists, but at this point I do not agree with it. I don't think that there are data to suggest that Guillain-Barre syndrome is associated with other vaccines. Mr. ~cARTER. How do you account for the approximately equal number of Guillain-Barre cases that did occur without being inject- ed with the virus? Dr MILLAR We know that there is a background occurrence of the Guillain~Barre syndrome that has been going on for as long as the syndrome has been described, which is a century now But we did not have a good fIx on the prevalence before this past winter It is quite obvious that there are cases occurring all the time from a variety of causative factors, which are not clear. Mr. ROGERS. May I ask you to answer, for the record, number of additional questions. I want additional information about the number of people who may have been injured as a result of the swine flu immunization program What methods the Department are employing to review actual costs of the program, and to predict other future program costs. I think the committee is also interested in how the Bureau of Biologics plans to go into a future program, and what would be the possibility, if we find, as the General Accounting Office has stated we might, that a manufacturer does not want to produce a vaccine What steps should we take? 1 think that we should have the recommendations of the Depart- ment, as to whether or not we should get into the business our- selves. These and other additional questions will be submitted to the Department; their responsewill be a part of the record. Thank you for your presence today. [Testimony resumes on p. 378.] [The following correspondence was received for the record:]. PAGENO="0360" 354 NINETY.rIFTh COI~ 5095 ROOM 2415 - RAYBURN HOU900FFICE BUILDING PAW. A. 50055$, PLO., CR0151409 PHONE (*02) 225-4902 ~ ~ 0 w 21 P'o~~~ 3~)ou%c o~ 3L~epvc~entnt(be~ NY úlubcommittee on 3*ealtb mob ibeenb(r0001cot VA, oCtbe CommLttee on Snter%(ote 20* Io(e(*o t000mUCE ~1a~bin~ton, ~B.C. 2O3~5 October 4, 1977 Honorable Joseph A. Califano, Jr. Secretary Department of Health, Education, and Welfare Washington, D.C. 20201 Dear Mr. Secretary: At the conclusion of HEW's testimony on September 16, 1977, before the Subcommittee's oversight hearing on swine flu, I indic*ted that additional written questions would be submitted to the Department for your response. The Subcommittee has been polled, and Congressman Henry Waxman, Congressman Andrew Maguire and I now pose the accompanying questions with the request that the Department's response be submitted for the heariw~ record nO later than October 21, 1977. Your attention to this request is most appreciated. K~,nd regards. ely yours AUL G. RO ERS, .C. Chairman, Subcc(rnjoittee on Health and the `~nvironment PGR:rd EnclosuZ~es PAGENO="0361" *35.5 ADDITIONAJ. QUES!E'IONS WINE ~LP 1. Why has one vaccine ma~uifacturer still not signed a contract with the federal government in the Swine Plu Program? 2. Why did the o'~her vaccine md~ufacturers finally sign contracts about a month a~o with the federal government? Was there a quid pro quo for their signing the contracts? 3. Exactly why was there a waiver granted from standard government accounting standards? 4. Why have HEW's audits of the manufacturers' cost beenso delaye~ and what )iave the findings of these audits been? 5. What is the status of negotiations between HEW and `Parke-Davis with respect to who will bear the costs of producing' the wrong flu vaccine? 6. What steps have been taken to assure smooth organizational management (i.e. a defined `chair~ of command') for futur&~ immunization programs? 7. What new research and testing procedures, specifically related to vaqcine development and assessment qf effectiveness:and' safety1 are being deve1~pped b'y the ~epartment? 8. What methods: is the Department employing to~~eYie~ actual costs of the program and better predict future program cOsts? 9. Why was the decision made to, accept -t~e fixed liability inslwapce premium rather than opting for a retrospective rate adjustment? What options were prOposed, and why were the various other options rejected? 10. What effort, if any, has the Department made to locate individuals who nay have been injured as a result of the swine flu immunization program? ll.~ please respond to each6f the twenty specifiC recommendationS made by the Association of State and Territo~ia1 ~ealth Officials' Spokesmen, Dr. Lloyd, in ~is testimQny, ( a copy of that testimony is enclosed for your use). 12. What new national liability policies has HEW developed to prevent the government from bearing the Oost of indemnifying the phar~ maceutical manufacturers? 13. What initiatives has HEW taken to develop a patient compensation scheme? PAGENO="0362" 356 DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE OFFICE OF THE SECRETARY WASHINGTON. D.C. ~O2OI October 27, 1977 The *onorable Paul C. Rogers Chaf~tman, Subcommittee on }Iealtb and the Environment Committee on Interstate and Foreign Commerce Rouse of Representatives Washington, D. C. 20315 Dear Mr. Chairman: Secretary Calif ano has asked that I respond to your letter concerning questions which arose du▒ing the Subcommittee's oversight hearings on September 16 regarding the swine flu famunization program. The en4losure responds to the questions raised by the Subcommittee, with the exc~eption of question number ii requesting comments on the 20 recommendations of the Association of State and Territorial Health Officers. Because of delay in our receipt of these recommendations, adequate responses have not yet been developed. They will be forwarded to you as expediously as possible. We hope that the enclosed information will assist in your efforts to utilize the lessons from the swine flu experience in the construction of a workable Immunization policy. Sincerely yours, Dick. Warden Assistant Secretary for Legislation Enclosure PAGENO="0363" * 357 Sub~omrnittes `QuestIon 1 Why has one vaccine manufaettirer still not signed a contract with the Federal Government in the Swine Flu Progtain? Department ~esporise A finalized contract with Parke-Davis is being delayed pending resolution of the issue on the allowability of production costs of approximately 6 million doses of vaccine produced from a laboratory strain of the influenza virus (Shope) which was not approved for use in the 1976-1977 program. These cos~s have been disallowed by HEW and Parke-Davis has appealed the HEW decision to the Armed Services Board of Coji~ract Appeals (ASBCA) which has been designated by the Secretary to hear eppeals of this natt~t~. The ASBCA will ~review the facts and citc*inihtances surrˇi.inding the Parke-Davis claim for payment *i~ the `NEW decisidn and will ~render a finhl opinion ~f the allÓwability of thd~production cost.~ `Once the final judgment has been rendered, a "definit~zed cot~ract'~an be' signed with Parke-Davis replacing the existing "letter contract" presently binding the Government and this vaccine manefacturer. PAGENO="0364" 358 Subcommittee Question 2. Why did the other vaccine manufacturers finally sign contracts about a month ago with the federal government? Was there a quid pro quo for their signing the contracts? Department Response Three issues prevented the signing of definitized contracts in September 1976: (1) The need for a ruling on the tax status of the self insurance retention fund; (2) a ruling on whether the cost of producing approximately six million doses of the wrong vaccine by one manufacturer would be paid; and (3) the need for a decision on waiving the normal cost accounting standards which are applied to contracts of this type. The second issue, affecting only Parke-Davis, is discussed in the answer to question number one. It has not been resolved. The resolution of the first and third issues permitted the signing of final contracts with three of the manufacturers in August 1977. The issue related to the waiver of normal cost accounting standards is discussed in response to question number three. With reference to the tax status of the self insurance retention fund, the manufacturers were concerned that if this payment of $2.5 million was taxable in the year it was received (1976), most of it would be required to meet the tax imposed. HEW agreed to seek a ruling on this from the Internal Revenue Service. This ruling was requested on November 17, 1976, and a deciSion was received on April 8, 1977. In essence, IRS ruled that the fund was taxable in the year it was used and not the year it was received. Since this fund could only be used to meet certain legal expenses as specified by Public Law 94-380 and the provisions of each contract, the effect of this ruling was that the fund would always be offset by expenses resulting in a "tax wash-out." A copy of this ruling will be supplied to the Committee with the transcript for inclusion in the record. There was no "quid pro quo." PAGENO="0365" 359 SubcomitteeQt~e sUo~ 3. Exactly why was there., a waiver granted from standard goverpment cost acdounti4 standards'? Department Response The normal procedure for procuring vae~ine is to negotiate a price based on established catalogue or market prices. A supply contract is then awarded `on a firm, fixed price basis. The cost acŔounting standards are not applicable when this procedure is used. Enactment of Public Law 94~38Orequired the cost of sw~.ne'flu vaccine to be determined on a retrospective basis through audit to preclude (or in the case of A/Victoria/75 antigens,.,to limit) payment of profit. Because of this requirement, the contracts could not be awarded on a firm, fixed price basis, but rather a cost~reimbursenent contract was called for. In this type df contract, the price is not established based upon catalogue or market price, and the cost accounting standards become applicable. For reasons discussed below, application of the cost accounting standards was ultilately considered inappropriate. Significant standards normally included in cost type contracts are: consistency in estimating, accumulating, and reporting costs. Consistency in allocating costs incurred for the same purpose. - Allocation of home office expenses to segments. Capitalizatioxi of tangible assets. Accounting for unallowable costs. - Cost accounting period. - Use of standard costs for direct material and direct labor. PAGENO="0366" 360 The use of many of those standards is generally predicated on accumulat~. ing and reporting costs consistent with the manufacturers' normal cost accounting practices. The vaccine manufacturers, prior to the swine flu program, did not accumulate or report costs on a product-by-product basis. Therefore, their normal accounting practices did not lend themselves to the kind of cost accounting generally associated with these unusual cost type contracts. Although the manufacturers did take steps to establish accounting systems to be able to isolate and report costs of producing swine flu vaccine, in order to use the actual cost accounting standards, they would have had to reestablish their entire accounting system. In addition, it is Important to understand that those standards are only ~ to calculate costs, not the only way. The Dep~ttment, therefore, elected to permit the manufacturers to establish special cost accounting procedures for the swine flu program without modifying their cost accounting system on a company-wide basis. Such a step would have been excessively costly to the manufacturers and the Government, and was not justified for this one-time special procurement. In conducting the audits referred to in the answer to question number 4, the Department will, of course, verify that costs have been accounted for in accordance with generally accepted accounting principles and practices. PAGENO="0367" 3~i * Subconunittee ueSti~ 4. Why~have HEW'~saudits of ~he mauufacttir~DS' coat beez~so de~.ayed and what ha~te the dinding8~of these au4its been?, Department Response The HEW audits of cost could not coumence until the manufacturers accumulated the final costs and closed their accounting periods. Currently, HEW au&LtS of Merek Shatp and Dobxne amd Wyeth are in progress. An audit of Merrei~l-National is scheduled to begin in the near future. The audit of Parke-Davis~wiU 1?e delayed pending final determination of the "Shope" virus vaccine productioiv cost issue. Gopies of these audits will be provided to the Subconm~ttee as they become avai~.able. ~ubcounnittee Question 5. What is the statGs.* of negotiations between HEW and Parke-Davis with respect to who will bear the costs of producing the wrong flu vaccine? D~partrnent Response As indicated ir~ the response to question number one, appealing HEW's decision not to permit reimbursement associated with the production of this vaccine. The the Armed Services Board of Contract ~ppÚals wil2 be adverse to the Government. rf:the~Governmettt should Parke~-Davis could appeal the Board' $ decision to, the Parke~Davis is of the costs determination of final ~f it is prevail, however, Court of Claims. PAGENO="0368" 362 Subcommittee Question 6. What steps have been taken to assure smooth organizational management (i.e., a defIned `chain of command') for future innŘunization programs? Dep4tment Response The Department has taken a number of steps toward improving its organiza- tional. structure relative to future immunization programs: 1. The Assistant Secretary for Health has established a special group within the Department (designated the Pandemic Influenza Planning CÓmmittee) comprised of representatives from the Bureau of Biologics (FDA), the Cent~r for Disease Control, and the National Institute of.Alergy and Infectious Diseases (NIH). Among the. issues being addressed by the group are: (a) Time-tables regarding decision making and program ~implementation. (b). Immediate needs in the areas of surveillance, vaccine production, administration, and research. (c) The decision making process, including organizational structures. Theit~ report, which is due November 1, will summarize past and present activities, include options for the future, and make specific reconimendations. 2. The Secretary has appointed a project manager for the Secretary's Immunjza~ion Initiative who is reporting directly to the Secretary and the Assistant Secretary for Health. 3. The Secretary obtained the services of Professor Richard Neustadt to carty out a study of the decision making process in the swine flu program. It is anticipated that the study will be helpful in developing the best organizational scheme possible. PAGENO="0369" 363 \ Subco~ittee. Question 7. What new research and testing procedures for flu vaccines have been initiated relating to dewelopmŰnts in the 8afety and efficacy area? Deyartment Response As you know, the Department has an ongoing program for the development. and improvemetit of controlled test procedures to ascertain the safety and efficacy of influenza vaccines. Of particular significance are the recently developed procedures employing iinrnunoelectrophoresis for direct quantitation of viral content of vaccines which appear to provide a more reliable index for determining influenza vaccine potency than the currently used agglutination tests. These newer immunolog~cai. techniques currently ~re being evaluated in an inCernational collabbrative test sponsored by the Bureau of Biologics of' the Pood and Drug Adniniotration, the National Institute of Biological Standardization and Control in England, and the ~Zorld Health Organization. In addition, the extensive clinical trials carried out as a result of the swine flu campaign provided us with a unique opportunity to study the effect that vaccines have on man, both in terms of potency and adverse effects. Por example, it was determined that there was a corre- lation between whole virus vaccines and the incidence of short-term reactions, e~g., aches and fever. It was also noted that in older populations, which may have been exposed to influenza earlier, split virus vaccines produced good antibody responses without the systemic reactions produced by the whole virus vaccine. 98-930 0 - 78 -- 24 PAGENO="0370" 364 Subqommittee Question 8. What ~methods are the Department employing to review actual costs of the program and better predict future program costs? Department Response As indicated in the answers to questions 3 and 4, the Department is in the process of auditing actual production costs of the manufacturers. As you are aware, costs for the swine flu program were originally estimated to be $135 million, based upon estimates of the per unit cost and the cost of distributing and administering the vaccine. No estimate was included for the cose of liability since there was no experience upon which such an estimate could be made. To date, the program has cost $102 million, approximately $33 million less thafl estimated, primarily because unit costs were less than estimated (43~ versus 50c) and the number of units produced was fewer. In addition, a survey of State and locAl projects revealed that considerable resources were devoted to the program over and above Federal funds. A summary of these datais enclosed. Findings from the present audit and the actual experience of State and local governments should contribute to our capacity to estimate the costs of future programs. PAGENO="0371" NATIONAL INFLUENZA IMMUNIZATION PROGRAM ESTIMATE OF TOTAL RESOURCES USED, BY TIME PERIOD, FOR 61 OF 63 GRANTEES TOTAL APRIL 1976 - SOURCES OF RESOURCES USED TO NAY 1977 APRIL SEPT. 1976 OCT. - DEC. 1976~ JAN. - MAY 1977 TOTAL 43,983,653 12,364,640 ~27;392,2O4 4,226,809 TOTAL~ FEDERAL FUNDS 20,044,865 6,327,015 11,081,590 2,636,200 SWINE. FLU GRANT 17,420,150 5,302,989 9,803,321 2,313,840 OTHER FEDERAL FUNDS ~: 2,624,715 1,024,086 1,278,269 322,360 VALUE OF HEALTH . AGENCY (GRANTEE) RESOURCES 12,011,318 . ▒,994,O54 8,111,323 905,941 VALUE OF RESOURCES . PROVIDED BY OThER OFFICIAL AGENCIES STATE AGENCIES .. ~ 11,927,470 1,568,402 ` 3,043,511 746,035 8,199,291 659,567 . 684,668. 162,800 LOCAL AGENCIES 10,359,068 2,297,416 7,539,724 521,868~ SOURCE: NATIONAL PUBLIC HEALTH PROGRAM REPORTING SYSTEM, ASSOCIATION OF STATE AND TERRITORIAL ~1EAL~▒H OFFICIALS PAGENO="0372" 366 Sub~uunittee Question 9. Why was the decision made to accept the fixed liability insurance premium rather than opting for a retrospective rate adjustment? What options were proposed, and why were the various other options rejected? Deparpnent Response As you know, pursuant to P.L. 94-380, the Federal government was authorized throu3h subrogation to sue program participants, including manufacturers, for their negligent acts in the manufacture of the swine flu vaccine. This provision made it necessary for the manufacturers to obtain insurance against the possibility that they might produce a faulty batch of vaccine. Although the legislation did provide "... that any itisurance premium amount which is included in the price of such procurement contract and which is, refunded to the manufacturer under amy retrospective, experience- rating ptan or similar rating plan shall in turn be refunded to the United States...", it did not mandate that the insurance premium be subjected to a retrospective adjustment. It is our understanding that in the negotiations between the mamufacturers and the insurance compatiies various options were not discussed because the insurers refused to offer any retrospective adjustmemt. The possibility of significant profits to insurance companies was recognized (see in particular the comments of Congressmatt' Eckhardt, Con~ressional Record, August 10, 1977, R8653). Under less extreme circumstances, the Department might have entered the negotiations between the manufacturers and the insurers. However, with the flu season imminent and negotiations otherwise faltering, it did not do so. PAGENO="0373" 367 Subcommittee uesbion 10. What effort, if any, has the Department made to locate individuals who may have been injured as a result of ~the swine flu immunization program? Department Resp9ns~ The standard consent documents, which were provided to each waccinee, summarized the types of side effects which might be expe~rienced after vaccinatioh .~ Each.federally assisted State or ~ocal project developed procedures (generally a note attached to the consent documents) which informed vaccine recipients about the mild side effects which might be expetted and listed a place to call if anything more serious occurred. Reports of illnesses which occurred following vaccination were reviewed by State or local project personnel and sent to CX for analysis if the illness required a visit or call to a physician or clinic, or resulted in the need for bed cave. Over 4,500 reports have been received, by ~DC. The standard consent documents also provided specific information on how to file a claim if a person felt that their injury or illness was related to the vaccination. `In addition, on a retrospective basis, the Depar~aent, `in an attempt to identify victims of Guillain-Barre Slndrome, requested all States to conduct su~eys ~hi'ch ine1~ded dir~ctly contacting al1~ neurologists within the State. PAGENO="0374" 368 Subcommittee Question 12. What new national liability policies has HEW developed to prevent the Covernn~ent from bearing the cost of indemnifying the pharmaceu- tical manufacturers? De~partnent Response The liability issue has been under study since prior to the swine flu program. As required by Public Law 94-380, the Department has developed a preliminary draft document outlining 9ptions for a national liability policy~and strategy. The initial draft was submitted to the House Subcommittee on Health and the Environment on September 15, 1977. To review more carefully all available options and to obtain better estimates of the costs of the various options, the Department requested a delay in the submission of the final report. Subcommit~tee Question 13. What initiatives has HEW taken to develop a patient compensation scheme? ~artment Response In November 1976, HEW convened a National Immunization Conference which addressed six different problems associated with immunization. One of these was the question~of liability, including the issue of compensation of persons injured in the course of `immunization programs. A work group was appointed to develop recommendations for addressing each problem. The final report and recommendations regarding liability options were reviewed in a public forum on April 5, 1977. Since the compensation issue is so closely related to the liability issue, it will be dealt with comprehensively in the report discussed in the answer to question number 12. PAGENO="0375" 369 I*PAR~rMENT OF~ HEALTH, EDUCATIOr4, AND WELFARE-~~ ~` ~ OFFICE OF TH~ SECRE1'ARY S S WASHINC1TO~D.C. a02.oI December 13, 1977 The Honorable ~au1 G. Rogers S~ S Chairman, Sub~omtnittee on Heatth S S and the Environment S C~iflsnittee ~m~Interstate and Foreign Connner~e S House Of Representatives Washington, D. C. 2O~15 Dear Mr. Chaiflnan: S As noted in my ~e~;Úr~~f Octhber 27, delayed transmitta~Lof the 20 recominendajious o~5 the Association o~ S~at~ and Territorial J~ea1th O~ficer~s regarding the swine fJ~u prog~am necess~nat~4a4dition~1 time to prepare adeqt~ate ~e~po~ises. X hop~ that the enctqsedxesponseswiu be he1p~ul in your continuir~g reviM~ o~' the swine fiu experience. S Sincerely yS ~ S S ~S S S S D ~k Warden Assistant Secre1~ary for Legislation Enclosure PAGENO="0376" 370 Su1bcomxnit'tee Question 1. Please respond to each of the twenty specific recommen- dations made by the Association of State and Terrjtorial Health Officers' spokesxnan,Dr. Lloyd, in his testimony (a copy of that testimony is enclosed for your use). Dep~r'tment Response The conclusions and recommendations of .the Association pf State and Territorial Health Officers (ASTHO) touch on several aspects of the swine flu program which must be addressed carefully before another nationwide, mass imrnuni- * zat.ion program is undertaken. As such, they will receive * careful attention during the next, few months as the Depart- ment completes its own evaluation of the decision-making, organizational, and operational aspects of the swine flu prog~am in order to better manage similar programs in the future. Professor Richard Neustadt of Harvard University has been asked by the Secretary to prepare an independent analysis of the program, focusing especially on the decision- making process. His analysis is due in March 1978. In addit~ion, a work group made up of a number of agencies within the Public Health Servic~, established by the Assistant Secretary for Healths will develop options for preparing for the next influenza pandemic. The Department will therefore be carefully assessing' the weaknesses and the successes of the l976~77 experience in order to estab- lish an improved approach for meeting future threats. Commet~ts on each of the specific recommendations of the ASThO `follow: `ASTHO' Recotm~end'ation 1. State health departments should have input a~ two levels, i.e., policy decisions and implementation decisions, in any future program. D'epa'r'ttnertt' Comment The Department concurs. While there was representation from State health departments in all formal and almost all informal policy' meetings and discussions throughout the duration of * the swine flu program, the perception of many State health * officers that their involvement was minimal must be recog- nized and addressed in future programs. In the final analy- sis it is these officials who are charged with carrying .out such programs. The matter of consultation with State offi- cials is receiving attention as the process of decision- * making during the swine flu program is evaluated and as plane are made for future Departmental responses to similar health threats. PAGENO="0377" 371 ASTHO Recommendation 2. There should be `a rational, detailed discusaion ~f the medical facts bearing on the `decisions in the medical press. 20. More publIcation of clinical trials data is ne~ded ix~ medical journals. * De~arthtent' Comment The Department' concurs. During the swine flu program, the results of the first phase of the field trials were pub- lished in the ~š~nal of Infect~ous Diseases within 20 days after the data were accumulated and anaiyze~l in an open meeting at the Bureau of Biologics (BoB) Publication of the second phase of the field trials in this journal occured * 60 days after their collection and analysis. Additional articles on the swine flu prqgram also appeared in the medical press. while the Department agrees that more could be done to disseminate information to the medical press including information regarding the medical deoision-mak~ng process, it must be noted that the Department cannot control *~hat independent medical journals publish. The `Department ,belieyes that means other than the, dissemina- tion of information to the medical press must also be used to provice technical information to the medical community including distribution thr°ugh State and local medical societies and through health department and Public Health Service `publications. ` `All' possible avenues must be utilized in order to provide the medical community with better infor- mation about pandemic influenza and the options' available for prevertting illness and death prior to the time when major national decisions must be made, * A~THO Recommer~dati~n * * 3. There `shoul4 be a clearly delIneated focal point within HEW for such a program., rather than a variety of *le~ders. ~partment* Co,txmie * The Department concurs. During the swi~te flu program thefl Assistant Secretary for Health functioned as the focal point for directing the entire Public Health Service's influenza immunization activity The Center for Disease Control (CDC) was designated as the lead agency for carrying out the program Clarificat~.on of the chain of command is receiv~.ng attetttion as plans are developed for future immunization * programs. Recently, to facilitate the coordination and * management of the new Childhood Immunization Initiative, Secretary Califano has established a special wor1~ group in * his `immediate office. ` , PAGENO="0378" 372 ASTRO' 1~e'cotimiendatiOn * 4. Immunization programs should be aimed at high ris'k groups, riot at the total population of the country. Dep~tment `Cbtm~ent The response to this question depends on the circumstances. * `If the nation is. faced with the threat of pandemic influ- enza, in which excess mortality has been observed in young, apparently healthy individuals, and the vaccine supply is adequate to immunize the entire population, it would be iinpro~er to exclude persons not at high risk from an in- fluenza `immunization program. If the influenza threat is of such ~ nature that it is expected to cause excess mortality * primarily in high risk groups, or if. vaccine supplies a~e inadeluate to immu'iaize the entire population,, then aiming an influÚttza immunization program at high risk groups may be appropriate. During inter-pandemic periods', the Depart- ment's only recommendation is that high risk individuals be * given influenza vaccinations. No recommendations are cur- rently' made for other. groups. * ASTHO' RecOmmendatiOn `5. All. State health departments should have teletype or re~"ctive computer terminal capability in order to' receive `rapid communication, from C1~C. 6. More .teletype `and postal communj.cations should emanate from `CDC; all telephonic communications should be followed by written confirmation. * D'e~artxrieri't C'oa''ent One `of the `most persistent problems encountered during thern swine flu program was that of communication. At the' present time a nuuther of measures' are under consideration, including improved telecommunication systems. The `cost of. various alternatives remains a major concern, however. The Center for Disease Control (CDC) is presently conducting a formal, structural evaluation of methods to improve communications with each State. Similar systems are needed within States * to complete the network of communication to local areas. The CDC haS discussed these alternative approaches with the ASTHO at its meeting on November 3, 1977 and is taking their suggestion~ under consideration. The determination of which systems wi'l~l be most cost effective in improving rapi'd, two- way communications is exp'e~ted in the near future. PAGENO="0379" 373 ASTI Recommendation 7. CDC should develgp a rnechanism to obtai~i input from State and local health departments. Department Comment The Department concurs. The CDC carries out much of its overall mission through State and local health departments~. and is commit ted to remedying any remaining weakues s es in obtaining advice from-~hese groups. The CDC maintains an informal line of communication with State health officers and collaborates with State and local health departments through the day..to:~day. implementation of disease c~ntrol grant programs, the epidemIc assistance provided by the CD~ to State and local agencies, and the diagnostic~refÚrence and other laboratory improvement services offered by ~he CDC. In addition, there are more formal means by which the CDC receives advice from State and local health depirtments, in- cluding: (1) membership on the Advisory Committee on Immu- nization Practices; (2) meetings with the ASTHO as a whole and with its Executive Committee (3) annual meetings with the Association of State and Territorial ~pidemologi~ts-- particularly with respect to determining which diseases shall be notifiable on a weekly basis;. and (4) annual meet- ings with the Association of State and Territorial. Public Health taboratory Directors.. ASTHO ReconŘnendation 8. If Ct~C is goiug to use its regional offices to transmit or handle requests for information, si,ich offices need to be better informed. Department Comment me Department concurs in the need to assure good two-way conmnuicaUon with the States~ One of the earliest problems encountered in the swine flu program was the need to improve the exchange of information between the CDC and the State and local health officials through the Regional Offices ~ecause of this problem in June, 1976 CDC designated 5 staff members to serve as liaison to eachRegional Office which resulted in improvements in the exchange of informa- tion Future programs would, of course, be conducted with this experience in rind In addition the Department has recently reorganized the Regional Offices t~ enhance the;i.t ability to serve as an effective first line of communication PAGENO="0380" 374 ASTI~O Recommendation 9. When considerable amounts of State and local resources will be required for a program, the program should not be hailed as a "federal program." Depa~tment Comment The ~epartment concurs. The swine flu program was appro pria~ely designated as a "national" program, but unfortu- nately this was sometimes translated by the media and the public as being a "Federal government" program. In most States, however, the role of the State and local governments was properly, perceived. Naturally, in programs such as these~ the Department is anxious that the cooperative aspects be recognized. ASTHO Recommendation 10. An estimate of State and local costs should be con- sidered in the initial decision-making process. Department Comments State and local costs were considered in the initial swine flu decision-making process. The original estimates of State and local costs were based on previous experience in carrying out immunization programs, although there was no completely adequate prototype since no program comparable in scope had ever been carried out. Several key assumptions were made. First, it was thought that significant numbers of volunteers would be available to assist State and local agencies in doing many needed jobs. This assumption was apparently valid until delays in vaccine availability forced State and local health officers to continually reschedule their programs. Many volunteers were lost in that process. Second, jt was assumed that existing State and local person- nel resources would be available for use in the program. Even if Federal funds had been made available to support all paid personnel needed for the program, State and local officials would not have been able to hire new personnel to do many of the tasks. Personnel loaned from existing pro- grams were required because special expertise, found only in existing health department staffs, was necessary. The Federal budget estimates did not include reimbursement for such personnel if they were already budgeted for ongoing health department programs. While the provision of funds for this purpose might have eased some of the financial pressure on State and local health agencies, it would not have prevented the temporary diversion of health department personnel to the swine flu program. The Department is aware of these problems and anticipates that the seine flu experience will be valuable in anticipa- ting personnel dislocations and in estimating costs of similar programs in the future. PAGENO="0381" 375 ASTHO Recon~iendations 11. Fun4s should be made available for~ State and local public information efforts since these were generally more effective than the Federal efforts. Department Conmient The Department concurs Funds were in fact provided for State and local public inimuni~ation efforts during the swine flu program and should be provided in any future effort. ASTHO ~omdati 12. The public should be provided at the start of a program with information on potential side effects. Dep~r'tmen't1 Cotut~ebt The Department concurs. Known' side effects from infi~uenza immunization were widely publicized from the beginning of the program as were the results of the field trials on the particular vaccines which were used in the swine flu pro- `gram.. Furthermore, the Department made continuing eff~rts~ to apprise individuals of risks as they became known to the ~epartnient. A related problem which has been raised by State and local health p.fficers is that the public was not prepared for the expected coincidental illnesses which were bound to occur but which had no relationship to the swine flu vaccine~ While it was common knowledge `among Federal and State health officials that there would be coincidental deaths and ill- nesses, the expected inci4ence of those events was not thoroughly quantified nor were adequate efforts undertaken to make the public aware of such expected coincidental occurences The need for greater public education is not confined to th~e swine flu program, but should be extended to all immunization programs While it will be very difficult to counter the impact of "crisis" me4ia cov&rage of events where vaccine associated illness or death is alleged, an active effort must be made to provide a balanced picture of the true risks and bene~hts o~ vaccination in order to help the ,p~i~lic place suchreports in proper perspective. PAGENO="0382" 376 * AST1~O Recozendation 13. More realistic dates for vaccine delivery should be given.with recognition that delays will occur. * Department Comment The Department agrees that the changing vaccine availability schedules during the period July-September 1976, were a major source of frustration and lost opportunity during the early~ stages of the swine flu program. In establishing schedules, the Department tended to focus on production and distribution capacities and might not have sufficiently emphasized the disruptive effect that ancillary events might have. In the swine flu program, the liability issue significantly disrupted distribution schedules when the manufacturers delayed release of produced vaccine until adequate protec- tion against liability was in place. While it is often difficu~t to foresee that kind of eventuality, the swine flu experieflce has taught the ~Department to be more wary of the many complicating factors that can impede the delivery of vaccine.~ Present review of that experience by the Depart- ment and Congress should produce more reliable production and delivery schedules. ASTHO Reo~ommendati˘n 14. Norn~l distribution channels should be used for vaccine with availability through commercial channels. * Department Cothment The Department will give consideration to this recornmenda- tion, altMtigh past experience with reliance oti normal dis- tribution ~hannels in national programs has not been favora~~ ble. When production of vaccine was left to voluntary action by ~he manufacturers during the 1957 influenza pan- demic,supplies were inadequate and maldistributed. During the swine flu program the four vaccine manufacturers honored the Department `s request that the Federal govern- ment's needs be met before the vaccine was provided through normal commercial channels. This request was made in an effort to achieve an equitable distribution of vaccine throughout the country. In any future mass immunization program, so long as timely and adequate supplies of vaccine are assured to the Federal government for its distribution, the manufactt~rers would be encouraged to provide supplies through whatever commercial channels are available to them. While overall delays in the distribution of the swine flu vaccine were a major problem in 1976, the Department feels that the ability of CDC to direct early supplies of vaccine to areas of the country with confirmed clinic schedules facilitated the best use of the supplies which were avail- able. This was particularly true during the month of October, the critical first month of the vaccination phase of the program. PAGENO="0383" 377 ASTHO Recommendation i5~ I~iunization schedules. .sho~ld be k~t simple. Department Co~ment The~epartment concurs with this recommendation i~ p$nci- pie However,~ the type of antibody response produced by a given vaccine previous experieriOe with the target virus, and the fact that reaction rates vary according to age, are factors which must be considered in making vaccine recomme~n~ dations. To the extent that there are ttniform~.r~action and antibody responses to a single vaccine formulation through~~ out the population, influenza inlmunizatiQn s~hedules will be kept ~imp1e. ASTHO Recommend~ti~n 16. should 4eveLop~a x~tional ~poiicy on~ informed sent with substantial planning around the Lssua of ~n- formed consent before ~the next prcigrÓm requires i.inmedi- ate ~ction 17 Input on form prep~aration should be obtained from public health profeSsionals and~ Lay ~ersons. Department Comment The Department co˝curs.~ During the swine flu prbgram, informed consent procedures and forms were developed and implemented under very stringent time c~onstraints While the response from State and local pro3 act directors to the ori~ina1 drafts of the swine flu consent~ forms was very useful, subsequent developments, including delays in vac- cination rec~tntnÚndatiotis f~r young people and the special requirements for consent forms authorized b~ Pub L 94-380 such as review b~ the National COtnmissibm for the Protection of Human Subjects, required revisions of forms and procedures with minimal advice or recommendations from State and local health authorities. The Department is currently attempting to improve its pro- cedures for developing informed consent forms to provide an easily comprehended and balanced statement of the risks and benefits of vaccination. The recent development of new forms to be used in immunization programs for the vaccine preventable diseases of childhood included: (1) review by State and local health authorities, and (2) a field trial of their effectiveness in adequately informing the potential vaccinee's parent or guardian about the risks and benefits of vaccination. Naturally, we are aware of the need to review consent forms on a continuing basis not only to reflect developments in the medical and scientific areas but also to improve them as a means of communication. PAGENO="0384" 378 ASTH'O' RecOmmendatiOn 18. HEW should develop a mechanism for involving national, State, and local medical societies in medical policy- making at an earlier stage. 19.~ The role of private medicine in such a program should be enhanced and encouraged. Dep~rtm'ent'Cothrnent The Department ~oncurs.~ No national immunization program cansucceed without the active participation of private medicine. Unfortunately, the cooperation and participation of private medicine in the swine flu program of 1976 was generally less than expected. With.respect to the decisions made during the swine flu prog*am, national medical groups were represented on~the Advisory Committee on, Immunization Practices and through parti~cipation in national meetings held at the White House on March 24, 1976, and at the CDC on April 2, 1976. On a conti~uing basis the CDC attempts to involve medical societies throu~gh the Advisory committee on Immunization Practices and other Departmental advisory.committees. In addition, the general issue of the involvement of all elements of the health care delivery system in the decision-making process is being studied both retrospectively, with respect to the swine `flu program, and prospectively, with `respect to future immuni~ation programs. Mr. ROGERS. The committee will have to stand in recess for 10 minuteS. I know that there are some of you who have to catch planes, and I apologize, but we are running behind schedule. We will try to get to yqu as soon as possible. The committee stands in `recess for 10 minutes. [Brief recess.] Mr. ROGERS. The subcommittee will come to order, please. PAGENO="0385" . . 379 We will noW have t1xe~ testimony from the . official health agen- cies, br Douglas S Lloyd, Connecticut Department of Health on behalf of the Association of State and Territorial Health Officials, Dr Williath Elsea, Health Officer and Director of the Fulton County~ Ga, Department of Health, on behalf of the National Association of County Health Officials, and Dr Richard M Biery, Director of Health, Kansas City, Mo, Director of Health, Kansas Cit~ Mo, Depoitment of Health, on behalf of the U S Conference of City Health Officers All of yoti are welcome Your statements will be made part of the reeˇrd, and~at this potht, we will hŔÔr from Dr. Lloyd. STATEMENT OF DOUGLAS S LLOTh, M D, ON BEHALF OF THE ASSOCIATION OF STATE AND TERRITO1~IAL HEALTH OFFI- CIALS (ASTHO) Dr Lloyd Thank you, Mr Chairman My name is Dr Douglas Seward Lloyd I am Commissioner of Health for the State of Connecticut, I appear before you today representing the Association of State and Territorial Health Offi cers (AST}IQ) to give testimony concerning the 1976-77 A/New Jersey A/Victoria national influenza immunization program- Public Law 94-380, The information contained herein re~presents the combined re- sponse of the State and Territorial Health Officers who participat- Ŕd in a nationwide survey conducted by ASTHO at the conclusion of the swine influenza program AST}XO members were asked to characterize the way in which the decision to immunize the nation's population against the A/ New Jersey/76 virus was made The vast majority felt that the decision was c~orrect, given the facts available at the tune, and not politically motivated It was a mistake, however, to have the pro- gram announced by the President, as such endorsement prevented any later attempt to modify the program, and it cast a political overtone on the decision A major weakness of the decisionmaknig process was the lack of input from State and local health departments Opposition to the decision to launch the program should have been presented forth rightly at the time the decision was announced The apparent HEW philosophy to "move forward at all costs," rather than to modify the program as problems developed, was another major weakness. Of communication between the Center for Disease Control (CDC) and the States, the State and territorial health officials felt that all too often the press received information before the health officials I can relate a personal example of this particular situation, Mr Chairman When the conference call to halt the program was to come from CDC, local television camera crews had already been alerted through their news wires and were in my office filmmg me answering the phone Their abilities with communications far e~- ceeded the Federal capability to relay information concerning health expeditiously. It was quickly found that conference calls cannot be used as a forum for discussion It was often difficult, if not impossible, to find an appropriate person at CDC to answer questions when the pres- 98-930 0 - 78 -- 25 PAGENO="0386" 380 sure for those answer were upon State and local officials and the data on which~to base the answer were in Federal hands. COmmu- niCation did improve as the program progressed, but never reached satisfactory levels. On the issue of funding of the program, the answers were almost unanimous. There was a definite drain on State and local resources to administer and implement the program, so that other~ public health programs suffered from diversion of staff to the influenza program In some States, there was no possibility to obtain addi~ tional State or local funds, since appropriating legislative bodies were not in session. ~A ~cost analysis of Connecticut's program clearly demonstrated that ~municipal governments, had to bear the brunt of the costs of the program. At 50 cents per dose for the vaccine and 13 cents per dose for its delivery, the Federal expenditure per inoculation was 63 cents. The Connecticut State Health Department added another 11 cents per dose. This brought the total expenditure by the Feder- al an~ State Governments to 74 cents per dose. On the average, a town i~˝ Connecticut which immunized 30,000 people spent an addi tional "73 cents per vaccination~' There were no extra State or Federel moneys available to offset these costs to the towns. Public information and public awareness efforts can be charac- terized!as too little, too late and reactive after the fact rather than anticipatory. The national public information effort through the mass media was inadequate and did not really educate the public. Materials provided by CDC for local use were received too late to be Of much value. Although the quality of materials was generally good, some were too technical for the general public. Professional education was almost totally lacking, but an interesting finding was thatr the public~ can appreciate basic data on relative risks. When ASTHO members were asked to comment on vaccines and supplies, the following answers were recorded The Vaccine supply was adequate, only because the program was curtailed. The great- est problem encountered `in implementation of the program was the late, delayed and fluctuating delivery of vaccines, which result- ed in cancellation of clinics and strained credibility with the public and volunteers. National campaigns should be as simple as possible; the complex- ity of immunization schedules and the use of four vaccines' unnec- essarily complicated the program. Jet injector guns were of inferior quality; the breakdown rate exceeded previous experience. Perhaps the most controversial issue of the program centered about the informed consent procedures. The most typical problems voiced by reSpondents were as follows: Frequent changes in the form added to the confusion surround- ing the progi~am and wasted large amounts of paper and money. No provisions were made for handling informed consent forms from those who do not have a written language, such as Indians, or speak a less common foreign language, the foreign translation of the form was generally poor. Problems in form distribution were similar to those with vaccine distribution. Forms were designed by lawyers to fulfill liability problems and, accordingly, did not serve as a tool to inform or educate the vaCcine recipients. PAGENO="0387" 381 The ~rm was too long and was not read or understood. A major oversight in the planning and fuiiding of this immuzu~a tion program was the failure to provide for orderly recordkeeping systems If we are to carry out pubhc health service programs on a mass scale we must keep retrievable individual records of those served just as would be expected in routine medical delivery Because of CDC's inability to fund computerized data systems, Connecticut now has 1,700 lineal feet of 3 by 5 catalog cards which are yet to be alphabetized by hand The result is difficulty in tracing consent records on individuals who have sued the Federal Government for vaccine reactions, and inability to conduct evalua tions of these data which could expand our knowledge of ~ vac- cine. Opinions of ASTHO members varied considerable when the ques- tion of relationships with private medicine was posed, but several points were universal. The program fared better: in those locations where the relationship with private medicine was good Like State and local health departments, private medicine in general was not included in the decisionmaking process Private ~rne&cine never really understood the program or the rationale behind it There was little discussion of the medical issues in the~medical journals Lack of a position on the program by the American Medical Association, we felt, also detracted from the support of the program by private medicine. Problems with vaccine distribution and the lack of availability of vaccine through normal commercial channels particularly irritated the private medical community; All but one respondent felt that Federal public health advisers and Epidemic Intelligence Service Officers employed by CDC and assigned to the States were invaluable in the plan~ning, coordina- tion, and implementation of the program Medical complications were the issue that led to the final demise of theprogram Health professionals were extremely critical in this area The general feeling was that more advance warning on the possibility of coincidental mortality was needed. The media were at times overly negative in reporting deaths~ and complications be- cause th~y had not been previously desensitized~ CDC handled the Quillian-Barre Syndrome issue well. ~owec~er, unfortunately, knowledge that this syndrome may follow other immunizations may detract from future immunization programs CDC could have provided more~ information to the States regarding~ the eomplica- tions and deaths. Finally, on the question of the clinical trails of the vaccine, the information was thought by ~some to be misleading ~and overly optimistic. Data provided to the States did not entirely support the recommendations Most, however, felt the data were adequate but were not shared sufficiently early The recommendations were One State health departments should have input at two~ levels, that is, policy decisions and implementation decisions, in any future program. Two: There. should be a ratiolal, detailed discussion of the medi- cal facts bearing on the decisions in the medical press Three There should be a clearly delineated focal point within HEW for such a program, rather than a variety ~f leaders. PAGENO="0388" 382 Four: Immunization programs should be aimed at high-risk groups, not at the total population of the country. Five: All State health departments should have teletype or reac- ti*re computer terminal capability in order to receive rapid commu- nication from CDC. Six: More teletype and postal communications should emanate frOm CDC; all telephonic communications should be followed by wzjtten confirmation. Seven: CDC should develop a mechanism to obtain input from State and local health departments. Eight: If .CDC is going to use its regional offices to transmit or handle requests for information, such offices need to be better informed. Nine: When considerable amounts of State and local resources will be required for such a program, the program should not be hailed as a Federal program. Ten: An estimate of State and local costs should be considered in the i~itial decisionmak.ing process. Eleven: Funds should be made available for State and local publ~ information efforts, since these were generally more effec- tive than the Federal efforts. Twelve: The public should be provided at the start of a program with information on potential side effects. Thirteen: More realistic dates for vaccine delivery should be given with recognition that delays will occur. Fourteen: Normal distribution channels should. be used for vac- cine, with availability through commercial outlets, where possible. Fifteen: Immunization schedules should be kept simple. Sixteen: HEW should develop a national policy on informed con- sent with substantial planning around the issue of informed con- sent before the next program requires immediate action. Seventeen: Input on form preparation should be obtained from public health professionals and lay persons. Eighteen: HEW should develop a mechanism for involving na- tional, State, and local medical societies in medical policymaking at an earlier stage. Nineteen: The role of private medicine in such a program should be enhanced and encouraged. TwentV: More publication of clinical trials data is needed in medical ~3ournals. Almost all of these criticisms and recommendations bear on CDC's handling of this program. This is inevitable, given CDC's key role in coordinating the program and communicating with the States. The State health officers do not mean to impugn CDC. On the contrary, the Center is held in high regard as an indispensable source of aid and expertise in preventive medicine, especially in communicable disease control. It is, in fact, the Federal agency most adept at providing public health services, working through State and local health departments. Our hope is that through CDC the Federal capability to pursue all sorts of preventive medical programs on a mass scale may be refined and expanded. If one were asked to make an overall assessment or draw conclu- sions from' the multitude of responses from the health department heads throUghout the country, the following would be the product: PAGENO="0389" 888 First: The' swine influenza immunization program of 197647 indicated that State health departments are not slow-moving bu reaucracies State and local health departments can rapidly launch a massive effort in response to demonstrated need. Second The swine influenza immunization program has enabled health departments to refine their skills in community organiza- tion, to improve relationships with the media, and to develop a cadre of health-oriented volunteers. Our fear is that the* program may have harmed the credibility of health departments in some areas due to the many problems which appeared to develop unex- pectedly.' If I may, I would like to add a personal note Connect~icut achieved one of the highest levels of immunization of its population in the country, almost 58 percent of the target population and more than 95 percent,~of the high-risk population was immunized in less than 2~/2 months; These achievements werethe direct result of the extraoz'dinary hard work and dedication of the health profes- sionals of the State It was those individual efforts and the out- standing cooperation from the news media which were the corner stone of the Connecticut's successful program I would like to thank you for your kind attention and will be most happy to answer any questions either at this time, or at any future date of your choosing.. Mr ROGERS Do you feel that we will have this type of liability problem in future immunization programs? ~ Dr LLOYD It was a major headache for us in the State of Con- necticut. We constantly had to deal with problems of liability. We found, for instance, that many of the private doctors did avoid the program because of the liability There was a lot of unnecessary expense I would think that the Congress needs to look very sen ously at some sort of no4ault situation in the future for untoward effects. Mr ROGERS You mean a better system of keeping records on the persons receiving immunization What could have been done to improve this? ` Dr LLOYD We spend roughly 13 cents per dose for delivery We think as much should be spent for records The reason is that if we are going to learn from massive health programs like this, we have to have better data. We need access in the event of reaction, death, or legal complications. Many of the points that were brought in the testimony before the committee this morning show that we need better records Absolutely, it is going to be necessary to evaluate effectiveness in the future, so that we can do the job better. Mr ROGERS What about communications being improved I think you have a good point there Dr LLOYD We would agree that communication, and CDC also agrees, is extremely important It was somewhat embaii!~assmg that the press very often had answers to questions that were being asked before we did We feel that some sort of almost instanta neous communication' between the ODC and the State health de- partments is going to be extremely important, some sort of interac tive computer or teletype system. We feel that it is going to be very important. ` PAGENO="0390" 384 Since the swine flu program, other problems that we have had, whether it be with measles, and other issues that we have had to respond to, have required some sort of better communication. Mr. ROGERS. I thought that you might like to know that the American Medical Association did endorse the program, the entire program. Dr. Lloyd, thank you for your presence. We appreciate your helpful testimony, and we will ask HEW to comment on your su~estions. Dr. LLOYD. Thank you, sir. Mr. ROGERS. Dr. Elsea, you may proceed. STATEMENT OF WILLIAM R. ELSEA, M.D., VICE PRESIDENT, NATIONAL ASSOCIATION BY COUNTY HEALTH OFFICIALS (NACHO); ACCOMPANIED BY MIKE GEMMELL, LEGISLATIVE REPRESENTATIVE Dr. E1SEA. Mr. Chairman, and members of the committee: I am Dr. William Elsea, health officer~and director of the Fulton County, Ga., Health Department in Atlanta, and vice president of the Na- tional Association of County Health Officials-NACHO--.on whose behalf I am appearing today. NACHO is the public health affiliate of the National Association of Counties. I am also a member of the U.S. Public Health Service Advisory Committee on Immunization Practice which advised HEW on im- plementation of the national influenza immunization program. With me today is Mike Gemmell, legislative representative for both NACHO and NACO. The purpose of my statement is to point out some of the success- es and problems local government health officers faced during the implementation of the national immunization program last year. In the interest of time, I will summarize my testimony. With your permission, I would like to have the attached survey of county agencies~ made a part of the record. The survey demonstrates the high level of county involvement of the national swine flu program. Mr. ROGERS. Without objection, it will be made part of the record [see p. .392]~ Dr. ELSEA. I would like to point out for the record that the National Association of County Health Officials and the National Association of Counties strongly supported the initial decision to launch the vaccination program against swine influenza. Both asso- ciations pledged their support and cooperation in carrying out the immunization program; We did warn our~county health officers about the potential prob- lems they might face, such as problems in storage of the vaccine, lack of manpower, confusion over implied consent, public apathy, and most importantly, the lack of financial resources to get the job done. On the last point, for example, Jefferson County, Ky., spent $140,000 of local money that was not reimbursed; Arlington County, Vat, spent $16,000; Jefferson County, Ala.,' spent $54,000; Palm Beach County, Fla., spent $30,000, and large amounts of funds were spent in Lo~ Angeles County, and that will be submit- ted on Monday.~ PAGENO="0391" . . 385 ~Mr. ~ Ch~irrn~n~ these do not sound I~ke large amouAts, perhaps, compared to the Federal budget, but these represent marnly local property taxes that are especially keenly felt by the local people In retrospect, ai~d this does not. include in general local re sources, and we will go to that point in a moment, in restrospect we remain convinced that those Federal officials responsible for initiating the program acted in good faith They made the hard decisions that circumstances required What concerns us now is the long range negative impact the swine flu program will have on other unmunization programs con- ducted by county health agencies Of the 52 million American children under 15 years of age, 20 million are not properly immu- nized against polio, measules, rubella, tetanus, diphtheria and whooping cough~ We have the vaccine, the public and private health care re sources and the know how to immuhize these children, yet the experience with the swine flu program and the current immuniza tion rates suggest a real danger of outbareaks of these preventable diseases. The county health officers have strongly endorsed Secretary Cali fano's child disease immunization initiative We want to be consult ed during initial~ stages of the program. The feedback from the swine flu episode highlights the essential need to involve local health officers in program implementation. During the swine flu program there was a definite drain on local resouces We estimate that th~y probably nearly match the amounts spent on vaccine by the Federal Government As a result, basic public health imniunization prograips suffered from the di version of money, time and manpower to the national influenza program. However, our failure to maintain proper immunization levels cannot be solely blamed on the swine flu episode. It is a result of inadequate knowledge on the part of the lay population, msuffi- cient coneern and vigilance on the part of the professional commu mty, the fact that disease prevention has traditionally been the neglected part of Federal health care policy and, finally, the lack of Federal, State and local funds to improve the capacity of local health agencies to carry out their primary mission, that of protect- ing the public's health through disease prevention activities. We concur with the Association of State and Territorial Health Officials' conclusions and recommendations just presented concern mg the national influenza immunization program Our own re- search found that the very nature of the emergency immunization program, including the preparation and administration of a new vaccine against a poorly understood virus, created problems that were to be expected and constituted a great majority of the com- plaints from the counties. These included Insufficient supplies of vaccine, time consuming informed consent forms; constantly changing guidelines creating numerous administrative problems, among others But, many basic organizational problems could and should be avoided in any future mass immunization program. More money allocated toward administration of the program, including personnel costs at the local level, better communication PAGENO="0392" 386 and direct local agency involvement in the policymaking and im- plementation process were the most often cited suggestions for improvement of the national immunization program. In summary, Mr. Chairman, the national swine flu program dethonstrated that State and local health agencies have the capa- bility to rapidly gear-up to carry out a national immunization program. One final point needs to be made. Let it go on record, Mr. Chairman, that when the call went out to prepare for a possible influenza epidemic in the spring of 1976, county, State and city public health officials, at the expense of other public health en- deavˇrs, performed with distinction. They shouldered the burden. They faced the critical public and their local governments support- ed their immunization activities. We thank you for giving us the opportunity to share our observa- tions concerning county health agency involvement in the national influenza immunization program. TheNational Association of County Health Officials' survey is attached to this testimony. This documentation will no doubt be of importance since HEW is launching a mass immunization pro- gram. On a closing note, we wish to commend the chairman for his leadership under conditions that have been extremely volatile and mostly politically charged. Thank you, Mr. Chairman. We will be happy to answer any questions. [Testimony resumes on p. 397.] [Dr. Eisea's prepared statement and attachment follows:] PAGENO="0393" 387 STATEMENT ON WILLIAM ELSEA,. M.D., HEALTH OFFICER, FULTON ~OUNTT, GEORGIA, ON BEHALF OF THE NATIONAL ASSOCIAFION OF COUNTY HEALTH OFFICIALS (MACHO) BEFORE THE COMMITTEE QE INTERSTATE AND FOREIGN COMMEECE~, SUBCOMMITTEE ON HEALTH AND ENVIRON-~ MEET, ON TILE NATIONAL INFLUEN~A NIEATYONPROGRAM,~ SEPTEMBER 16, 1971. MR CHAIRMAN MEMBERS OF THE SUBCOMMITTEE I Alt DOCTOR WILLIAM ELSEA HEALTH OFFICER AND URECTOR OP THE FULTON COUNTY, GEORGIA HEALTH DEPARTMENT AND. VICE PRESIDENT OP THE EATIONAL ASSOCIATION OP COUNTY HEALTH OTFICIALS (NACHO) ON WHOSE * BEHALF I AN APPEARING TODAY. NACHO IS THE FUB~ZC HEALTH AFFILIATE OP THE NATIONAL ASSOCIATION OP COUNTIES (NAC0)1. I ~SN ALSO A MESBER OP THE U.S. PUBLIC HEALTH SERVICE ADVISORT COMMITTEE ON IMMUNIZATION PR~CTICE ~HICH ADVISEb HEW ON IMPLEMENTATION OF THE NATIONAL t1flLUENZA~INMUNIZAT~ON PROGRAM. WITH ME TOD4Y IS MIKE GEMMELL, LEGISLATIVE HEPRESENTATIVE FOR BOTH MACHO AND NAC0. THE PUR~()SE OP MY STATEMENT IS TO POINT OUT SOME OF TEE SUCCESSES AND PROBLEMS. LOCAL GOVERNMENT HEALTH AGENCIES FAQED DURING THE IMPLEMENTATION OF TEE NATIONAL INFLUENZA IMMUNIZATION PROQR.AN LAST YEAR. . THE NATIONAL ASSOCIATION OF COUNTIES REPRESENTS OVER 1600 COUNTS GOVERNMENTS WHICH TOGETHER MAKE~UP OVER 90 PER CENT OP THE U.S. FOPULATION. THE ~ MAJORITY OP THESE COUNTIES PROVIDE PUBLIc HEALTH AND MEDICAL CARE TO THOSE cITIZENS2. 1N*Co is1 the only national organization representing county gQverflment in America. Its membÓrship includes urban, suburban, and rural counties joined together for the common purpose of strengthening County government to meet the needs of all Americans. By virtue of a county's membership, all its elected and appointed off i- cials become participants in an organizatiOn dedicated to the following goals: improving county government serving as the national spokesman for county gOvernmett acting as a liaison b~tween the nation's counties and other levels of government; and, achieving public understanding of the role of counties in the federal system. 2Over 75% of the 3000 counties are administratively responsible for providing * community health services. Over 68% provide medical assistance, 60% provide mental health services, 30% operate hospitals (nearly half of pullic hospitals are county operated), 38% provide emergency medical services, and 26% operate long term care facii~Les. Counties also provide traditional public health servicÓ: immunization programs, sanitation, home health, school health, V,D. clinics, well-~baby clinics, alcoholism and drug abuse prevention and treatment, family planning, etc. To a large extent, these servides are financed by local funds. CenSus data shows that countIes spent $3 billion for hospitals and $1 billion for community health services in 1915. In 1966, countieS spent $1.3 billion and $311 million, respectively. PAGENO="0394" 388 IN THE INTEREST OF TINE, I WILL SUMMARIZE MY STATEMENT. WITH YOUR PERMISSION, `I WOULD LIKE TO HAVE THE ATTACHED $UR~E~. OF SELECTED COUNT!' HEALTH AGENCIES `BE MADE PART OF THE HEARING RECORD. THE SURVEY WAS CONDUCTED TO DEMONSTRATE THE HIGH LEVEL OF COUNT! INVOLVEMENT IN THE NATIONAL SWINE~'PLU PROGRAM. I WOULD ALSO LIKE TO POINT OUT FOR THE `RECORD TEAT'~ZEE NAtIONAZ~ ASSOCIATION OF COUNT! BEALTH OFrICIALS ANt) "THE NATIONAL ASSOCIATION OF COUtC1~IES STRONGLY SUPPORTED THE INITIAL DECISION TO LAUNCH THE VACCINATION PRO÷RAM' AGAINST SWINE INFLUENZA. BOTH MACHO AND NACo PLEDGED THEIR SUPPONT AND COOPERATION `IN CARRYING oi~R THE IMMUNIZATION PROGRAM. WE DID WARN OUR COUNT! EEALTH~OPFtCERS ABOUT THE POTENTIAL PROBLEMS THEY MIGHT ~ACE BASIC PROBLEMS LIKE STORAOE OF THE~ VACCINE,' LA~K OF MANPOWER, CONFUSION OVER IMPLIED CONSENT, PUBLIC APATHY, AND MOST IMPORTANT-' LY; THE LACK OF PINANCIAL RESOURCES TO GET THE JOB DONE. FOR EXAMPLE, JEFFERSON COUNTY, KENTUCKY SPENT $140,000 OF LOCAL MONEY THAT WAS NOT REIMBURSED; ARLINGTON C0UWrY, VIRGINIA SPENT $16,000; JEFFERSON COUNTY, ALABAMA SPENT `$54,000; `?ALM BEAON COUNTY, FLORIDA SPENT $30, OOO; GUItR'bRD COUNT!, NOkTH CAROLINA `SPENT $20,000. MOST COUNTIES REPORTED THAT NON-'RETMBURSABLE LOCAL FUNDS WERE SPENT ON PERSONNEL, OVER!~IME, PUBLIC RELATIONS, OUTREACH AND OTHER A1)MINISTRATIVE COSTS. THESE FUNDS WERE LARGELY DIVERTED FROM OTHER BUDGETED PUBLIC HEALTH PROGRAMS. `~tN RETROSPECT, WE STILL BELIEVE THOSE FEDERAL OFFICIALS RESPONSIBLE FOR INITIATING THE. PROGRAM ACTED IN GOOD FAITH. WHAT CONCERNS US NOW IS' THE LONG RANGE NEGATIVE IMPACT THE SWINE FLU EPISODE WILL HAVE ON OTHER IMMUNIZATION PROGRAMS CONDUCTED B~ COUNTY HEALTH AGENCIES * OF THE 52 MILLION AMERICAN CHILDREN UNDER 15 YEARS OF AGE, 20 MILLION ARE NOT PROPERLY IMMUNIZED AGAINST POLIO, MEASLES, RUBELLA, TETANUS, DIPHTHERIA AND WHOOPING COUGH. WE HAVE THE VACCINES, THE PUBLIC AND PRIVATE HEALTH CARE RESOURCES AND THE KNOW HOW TO IMMUNIZE THESE CHILDREN, YET THE EXPERIENCE WITH THE SWINE FLU PROGRAM AND THE CURRENT IMMUNIZATION RATES PAGENO="0395" 389 REPRESENT A REAL DANGER OF OUTBkEAKS OP tHESE PIEVENTABLE 1)ISE~SES. THE ~)UNTY HEALTH OFF1CE~S NAVE STRONGfft ENDORSED SECRETART CALfrANO'~S ~CH~L~ DISEAS* INMUNIHA'- TION INITIATITE.. WE WANT To BE~ CONSULTED DI3EING INI~1AL STAGES OP TEE PROGEAN. THE ED~BAGR PRONTHE SWIHE #T2IY EPISODE HIGHLIGHTS TEE ESSENTIAL EE~Eb TO INVOLVE LOCAL HEALTH OFFICERS IN PROGRAM II4PLEMENTATtON, DURING THE SWINE FLU~PRbORAM~ THEßE Wd A ~EftNITE DRAtN~0N LOCAL RESOURCES. AS A RESULT, BASIC PUBLIC ~HEAITH ti~MUNIZATION PROORAM~ SUFFERED PROM~TEE DIVERSION OP MONET, TIME AND MANPOWER TO THE NATIONAL INFLUENZA PROGRAM. EOWEVU, OUR FAILURE TO MAINTAIN PROPER IMMUNIZATION LEVELS CANNOT BE SOLELY BLAMED O)~ THE SWINE FLU EPISODE. IT IS A RESULT OP INADEAQUATE ENOWLEDGE ON THE PART OF~THE LAY POPULATION, INSUFFICIENT CONCEEN ANb ~IGILANCR ON THE PART OP THE PROFESSIONAL COMMUNITY, THE FACT THAT DISEASE PREVENTION HAS TEADITION4~LY BEEN THE NEGLECTED PART OF FEDERAL HEALTH CARE POLICY AND, FINALLY, THE LACK OP FEDERAL, STATE AND LOCAL FUNDS TO Ii~PROVE THE CA~ACITY OP LOCAL HEALTH AGENCIES TO CARRT OUT THEIR PRIMARY MISSION -- TO PROTECT THE PUBLIC' S HEALTH THROUGH~ DISEASE PEZVEWtION ACTIVITIES. WE~ (~ONCUR WITH THE ASSOCIATION OF STATE ANT) TERRITORIAL* HEALTH OFFIC~tALS' (ASTHO) c~ONCLUBIOHS AND RECOMMENDATIONS CONCERNING THENATIONAL INFLUENZA INMUNIZA- lION PROGRAM. OUR OWN RESEAAC~ ~OUND~1AT THE VZRT~NATURE O~ THE EMERGENCT IMMUNIZATION PROGRAM CREATED PROBLEMS THAT WERE TO BE EXPECTED ANT) CONSTITUTED A GREAT MAJORITY OP THE COMPLAINTS FROM THE COUNTIES. ~THESE INCW~)ED INSUFFICIENT SUPPLIES OP VACCINE, TIME CONSUNIN1~ ~INFORMED CONSENT PORNS, CONSTANTLY CHANGING GUIDELINES CREATING NUMEROUS ADMINISTRATIVE PROBLEI4S,ANONG. OTHERS. BUT, MANY BASIC ORGANIZATIONAL PROBLEMS COULD AND SHOULD BE AVOIDED IN ANY FUTURE MASS IMMUNIZATION PROGRAM. MORE MONEY ALLOCATED TOWARDS ADMINISTRATIVE ASPECTS OF THE PROGRAM, PERSONNEL COSTS, FOR EXAMPLE, MORE COMMUNICATION (SOME COUNTY HEALTH PAGENO="0396" 390 QPFICIALS FOUND OUT FRON THEIR LOCAL 1~EEWSPAPERS WHEN THE PROGRAM WAS TO BEGIN), AND DIRECT LOCAL HEAJ~FH AGENCY INVOLVEMENT IN THE POLICYMAKING AND IMPLEMENTATION PROCESS, WERE THE MOST OFTEN CITED SUGGESTIONS FOR IMPROVEMENT OP A NATIONAL IMMUNIZATION PROGRAM. OTHER SUGGESTIONS FROM OUR COUNTY HEALTH OFFICERS INCLUDE: INCREASED MEDIA SUPPORT FOR THE PROGRAM. HIGH PRIORITY PROJECTS SHOULD BE THE ONLY ONES CONSIDERED. , USE OF A TARGET POPULATION WOULD Ct~T DOWN ON CONFUSION AND INCREASE EFFECTIVENESS. * INVOLVEMENT OF. PRIVATE PHYSICIANS IN TEE PROGRAM, AND INCLUDE THEM UNDER THE LIABILITY COVERAGE. * LEAVE THE NORMAL DISTRIBUTION SYSTEM IN EFFECT IN ORDER TO AVOID TENSION BETWEEN PUBLIC AND PRIVATE PROVIDERS. BETTER ORGANIZATION AT THE FEDERAL LEVEL WOULD EASE IMPLEMENTATION AT THE COUNTY LEVEL. * TIMELY DISTRIBUTION OF FUNDS AND VACCINES. ~ IDENTIFICATION OF PRIORITY GROUPS AMONG THE POPULATION AT RISK AND MORE TECHNICAL ASSISTANCE TO DEVELOP EFFECTIVE STRATEGIES TO REACH INDIVIDUALS. ~ EFFECTIVE AND EXPEDITIOUS IMPLEMENTATION OF CONSENT FORMS AND PROCEDURES. * COORDINATION OF INFORMATION DISSEMINATION ACTIVITIES WITH OUTREACH AND DELIVERY SERVICES. * INVOLVEMENT OP ALL SEGMENTS OF THE COMMUNITY. IN~ SUMMARY, MR. CHAIRMAN, THE NATIONAL SWINE FLU PROGRAM DEMONSTRATED THAT STATE AND LOCAL HEALTH AGENCIES HAVE TUE CAPABILITY TO RAPIDLY GEAR-UP TO CARRY OUT A NATIONAL IMMUNIZATION PROGRAM. ONE FINAL POINT NEEDS TO BE MADE * LET IT GO ON RECORD, MR. CHAIRMAN, THAT WHEN THE CALL WENT OUT TO PREPARE FOR A POSSIBLE INFLUENZ4 EPIDEMIC IN THE SPRING OF 1976, COUNTY, STATE AND CITY PUBLIC HEALTH PAGENO="0397" 391 OFFICIALS, AT THE~EXPENSE OP OTHER~ PUBLIC HEAZ~TH ENDEAVORS, PERFORMED WITH DISTINC- TION. THE! SEOU EkED THE BURDEN, THEY PACED THE CEITICAL PUBLIC AND THEIk LOCAL GOVERNMENTS SUP~ORTED THEIR IMMUNIZATION. ACTIVITIES. WE THANK YOU FOR QIVZN~*~JS THE OPPORTUNITY TO SHARE OUR OBS~EVAFIONS C0NCZBN~- ING COUN▒Y HEALTH AGENCY INVOLVEMENT IN THE NATIONAL INFLUENZA IMMUNIZATION PROGRAM. THE MACHO SURVEY OF SELECTED COUNTY HEALTH DEPARTMENTS IS ATTACHED TO THIS TESTIMONY. THE DOCUMENTATION WILL NO DOUBT BE OF IMPORTANCE SINCE HEW IS LAUNCHING A MASS IMMUNIZATION PI~OGRAM. THANK YOU, ~. CHAIRMAN, PAGENO="0398" 392 NACHO SURVEY OF SELECTED COUNTIES' EXPERIENCE WITH THE NATIONAL INFLUENZA IMMUNIZATION PR0GR.AN* GUILFOR.D COUNTY, NORTH CAROLINA vaccinated &2,75O people (22% of its population). Local money was spent mainly on overtime salaries ($20,000), but this has all been reimbursed. The special clinics and non-routine op~rating hours created problems in the beginning, but on the whole the program was viewed as "running smoothly." The informed consent form was too time ~onsuming, very bulky, and required addi- tional staff. There was a necessity to stockpile the informed consent forms as trot enough were delivered at any one time. One suit was filed and turned over to the county attorney, which was subsequently handled by the U.S. Public Health sCrvice. A major fault with the swine flu program was the way publicity was handled. This particular county noted that very few blacks were vaccinated, and attributed this fact to the poor publicity. Although AUGUSTA COUNTY, VIRGINIA, like most other counties, learned quickly how to adapt to mass immunization procedures, there lingers deep resentment against federal interference in what should have been. a local program. The federal goYernment publicized certain aspects of the program that never materialized at the local level (leading to certain embarrassment for county health officials as implementers of the program). Edicts were sent out to local health officials whiab complicated procedures rather than simplifying them. The county health stafl' was completely tied up with administering the swine flu vaccine, which set back many on going local prograsm (these constitute non-reimbursable costs to the county). Administrative problems occurred with site location of immuni- zation centers (traffic tie-ups at schools). The county still has a large quantity of the vaccine and storing it is creating problems. The delay in receiving the vaccine also created problems., More publicity and' support from the media was also suggested as a way to improve mass immunizations in the future. This county vaccinated 25% of its population. JEFFERSON COUNTY, ALABAMA (which includes the city of Birmingham) vaccinated 199,614 persons (47% of its total population). Approximately $54,000 of local money was spent for supplies and wages that was not reimbursed by the state. Delays in receiving the vaccine creeted administrative problems. The informed consent form created mechancial and logistical problems (major back ups in lines). Jefferson County health officials feel not enough information about the program was disseminated. Any future program should take more precautions and be of a higher ptiority (unlike swine flu immunization turned out to be ) in order to restore credibility in such programs. Using target populations was also suggested as a means of averting many of the problems that occurred under swine flu program. PALM BEACH COUNTY, FLORIDA vaccinated 114,000 people (32%) and spent approximately $30,000 of local money that was not reimbursed. The program, as viewed from one county health off icial,was cumbersome,but with much effort they made it a workable program. A major problem was the inadequate funding for administration (this is where almost all of the non-reimbursable local money was spent). Suggestions for any future immunization project include more concrete planning,and involvement of private and public physicians. *5u1.~,ey conducted in June 1977 by the National Association of County Health Officials, 1735 New York Avenue, N.W., Washington, D. C. 20006 (202) 785-9577 PAGENO="0399" 393': ARLINGTON COUNTY, VI~GINTA dis trtbuted 20,900 doses of swine flu vaccine and waS able to immunize 60% of the hi-gb risk population (elderly, and chronically i~l) Approximately $l6)000 was spent ~y the county for ~Mtsonttel coStS ßn4~was not reimbursable. Delays in reteiving the vaccine, delays i~ settling the question of f~deral liability a!td the revised informed Consent forms created administrative problems. Major mistakes made under the swine flu immunization program were the lack~of~'a' target population cc a gational~le'fel (Ar~~ngton itself chdee tdtarget vaccinations for. high risk groups), and the inadequate dissemination of knowledge exacerbated by. the media coverage of the Guillain.~Rarre~epiSodea County health of ficiÔls herS also pointed out the danger that might occur- in the future ~due to a diminished public acceptance of and response to all immunization programs. H~M!LTON C0UNT~, TENNESSEE vaccinated 43,000 (17%) people and was reimbursed for all personnel costs from the state. The main problem that arose in hatdling the swine 21u ~vactination program was the distribution systm- imposed on county health officials. All vaccine was delivered to the county health department, whose duty was to distribute the vaccine to private physicians andlocal industrr upon request. Due to the i~edictable .delivery schedule Of vaccine to' the county, quantities r~qneSted by: private physicianeand iitdustry were not readily available * This led to' friction and tension between public and pt&yate providers, and embarrassment for the cbunty health department (the county was accused of holding out). The informed consent forms required the hiring of extta clerks to e~šplain the form to people who were already aw*re of the information. Eamilton County also received a surplus of supplies which were never requested by them, and are still creating storage problems. yAY~TTE COUNTY, ~NTUCK~ vaccinated 150 ,000 (33%) people. The program was said `to have gone well until the a~dverse pŘb-ltcity appeared. Major problems were `caused by the' uncertain arrival of vaccine `(rescheduling clinics, ~taff,' etc.). Th~ inforn~d c~nsent farms created aprob'lem during the program (sL~eedline,and many did not understemd what they were reading) and are still creating storage problems (the informed consent form for measles must be stored 20 years, rather than the 2 or 3 years for swine flu). Bettetorganizat-Lon at the federal and industry level (drug companies- specifically) ,tioui.d make implementation of such programs at the. county level much easier. MECKLENBUEG, NOETH CAItOUNA vaccinatBd45-30% of its population. - ~op..reimbursable money was, spent on newspaper adverl:isefflents and-~stńff, Adminittrativ~. problems were creatad by- diversion of time and effort of'~etaff front their-regular duties and projects. -The-informed consent foxes were inadequate. The new forms -~ including the provision for `Guil'lain .-Barre took time to process and review, and are still creating Storage problems. - County health officials here believe a major mistake made ttider swine flu was the announcement by the federal government that this was to be a coOPe~ratiVa program. In reality, it was neither a cooperative program nor a wholly federally run program. Enforceability of an immunization program shoul4 be under authority at the state and local level. Concern was also expressed for what the spin off effect fyom the outcome of the swine flu immunization will be onto other worthwhile' immunization programs. PAGENO="0400" 394 L0~ISVILLE AND JEFFERSON COUNT!, KENTUCKY vaccibated 260,910 (32%) people. This county spent $140,000 of local money and has not been teimbursed for this cost for staff time. The problems with the program were all due to the changing guidelings it made the program extremely difficult to administer and to justify. 0RLE~NS COUNTY, LOUISIANA immunized 30,000 people (5%) and had large administrative cos~ that were not reimbursed by the State. This county also seemed to have in indirect problems with liability insurance the private physicians did not readily vol*rnteer their services due to fear of malpractice suits against them. The mass immunization program could work better if the vaccine was given directly to local health officials to administer. ANNE ARUNDEL, MARYLAND vaccinated 67,573 (23%) people and spent local money for staff salary. Although this county received good local cooperation, the numerous unknowns (unreliability of receipt of vaccine, variabiliby. of "walk-ins" at different centers which caused difficulty in scheduling volunteers) made it a night~narish program to administer. The informed consent form was considered to be too long (the three page form was described as incomprehensible), too time consuming and ambiguous. The different dosages and different procedures created confusion. The problems with lack of adequate supply led to a lack of credibUity and ill feelings from the public. Suggestions for any future program included more funding, a stronger mandate to physicians and public health officials, and more lead time for such a massive project. WESTCHES'IER COUNTY, NEW YORK vaccinated 100 ,000 people (10%). Political problems arose when each village wanted its own clinic (65 clinics were in operation; 6 of them were open 12 hours a day). The logiŔtical problems in setting up these clinics and operating them were enormous. Future federaI~immunization programs should be better plapned and apply better orientation and comm~inication techniques for local health administrators. More notice would also alleviate many logistical problems. ERIE COUN~Y, NEW YORK immunized 84,000.people (8%) and spent a considerable amount for overtime salaries which has not been reimbursed. There was a problem in getting enough people to handle the program. Planning a budget for this program was difficult due to. the reimbursement schedule of 5 cents for every shot. Since the number of shots given depended on the unknown factor of how many people would decide to be immunized, costs were minimized by skimping on staff. Many internal problems occurred with liability incidents (property damage, explosions, carelessness with syringes) all oE,which would not reocctir if another mass program were implemented. More money and more support would be required for any future immunization program to be more successful than the swine flu program. PAGENO="0401" 395 BERGEN COUNT!, NEW .JEESEY. This state administered its swine flu program b~ regions within the state rather than through county health departm'enta A county ~official believed any future immunization on a massive scale must use direct input from the counties, who are the ones that actually know mhat the problems are. Communication froin~the federal government should be much better organized and Lines of responsibility should be clearly delineated. HAcObIB cOUNTY,'MIcHIGAN vaccinated 170,000 people (27%) and all costs to the county were reimbursed by the state. The overall program ran smoothly, however, the unavailability o~f a vaccine supply created some probiesm. Health offieials here feel the federal government should not undertake another such program unless more time is allowed for planning,testing, and dissemination' of information. WAYNE COUNTY, MICHIGAN immunized ~00,0O0 people (18%) and the staff costs were not reimbursed. All problems stemmed from the reliability and credibility of information at the national level. The vaccine delivery schedule created logistical problems as did the informed consent form (too difficult and too long). Any future program would need better cooperation by the news,media, an informed public, and documented risks to be ~ucessful. The~federal goeet'nment.'s credibility1 as fCr as another mass immunization program, was under qumstion. Thus, any federal involvement must be done with Ipw profile and administered directly through local government. SACRAMENTO `COUNTY, CALIr0RN~A immunized 70,000 people (11%). Major problems arose due to the delay of arrival of the vaccine; scheduled cAinids had to be cancelled and rescheduled' numerous times~ The informed consent form was too complicated to administer smoothly~ ~The different kinds of vaccine and split populations also made administration difficult. The problem of liability insuranCe *as common to all from this time forth any time a county wants to administer a mass immunization effort on its own, it wil1~be virtually impossible to get insurance due to the past experience with ~swine flu liability claims. This county suggests adoption of federal legislation to secure a permanent solution to this liability problem. SAN DIEGO COUNTY, CALIYORN~tA vaccinate4 220,000 people (15%). While the state reimbursed counties for overtime personnel, many programs had to be dropped and these operational costs were considered as direct lasSes for the county. The informed consent forms created problems due to their late arrival, slowing down lines, and necessity of storage. A county health official believes that the federal approach is not the way to handle masS ilmunizations. The whole community should be involved if a program of this type is to be at all effective, CLARK COUNTY, NEVADA vaccinated 38,000 (13%). Informed coOsent forms were never delivered in great enough supply and this created problems. The biggest mistake made under the swine flu immunization program was lack of communication with county health officials, During the swine flu program, the. newspapers printed information before the county `health Officials knew anything about it. Any fast moving program, such as a mass immunization, must include the local administrators. 98.930 0 - `TB 26 PAGENO="0402" 396 WICHITA - SEDGEWICK COUNTY, KANSAS vaccinated 74,000 (21%) people and was reimbursed for overtime salaries for personnel. Administrative problems were created and exacerbated by the lack of uncertainty of vaccine arrival, This county had to scrap three plans due to delays and shortages of vaccine (this involve4 cancelling clinics, rearranging volunteer schedules). In order to avoid future embarrassment for local officials programs must render assurance that scheduled events will materialize and adequate supplies will be available when needed. GALVESTON COUNTY, TEXAS vaccinated 18,000 people (10%) . Administrative problems arose sin~ce no information was received about the arrival of vaccine. The informed consent forms required bilingual interpreters which created confusion. Suggestions for any future programs stress more flexibility achieved through more direct coinmunicatiou and iziformation. ALAMEDA COUNTY, CALIFOHNIA immunized 100 ,000 (9%). Local money, which was spent on staff wages was not reimbursed, Administtative problems were created by the starting and restarting of programs every time a new vaccing was delivered. The informed ce!lsent forms were legnthy but manageable. One problem under swine flu immunizatio~ (due to the nature of the program) was the lack of any early long range planning. ALLEGHENY COUNTY, PENNSYLVANIA vaccinated 498,900 people (31%). The cost of the program to the county is immeasurable. It was considered the number one priority program for four months, and as such demanded full staff attetttion. Administratively, programs had to be scrapped due to non.-ar~ival of vaccine and changing guidelines created more problems. The informed consent form was not really considered to have served its purpose - senior citizens and others were not really informed. Better organization from the central authority (federal government) and a better documented program (adequate field research) would have alleviated many of the major problems. PAGENO="0403" 397 . ~ Mr. Roc~ERs. Thank you, Dr. Elsea, for avery helpful statement. Here again, we will ask HEW to comment :i think the participation of local government and local health authorities was outstanding Do you have any other suggestions in order to make future national programs more effective? Dr ELSEA I would like to add perh~ps two or three suggestions to the ones that were presented by ASTHO One is a quick analogy to the military situation We were asked to gear up for a battle that was fairly unlikely, but nevertheless required preparation. There was a cry of "wolf,". which went through~ our cou˝try~ and the wolf,. although threatening, never appear~ed. The longer the wolf never appeared, the more people became apathetic and, in fa~ct, distrustful, so that gradually we lost their trust We could see this happening each month as the program went forward We know that we were right to begin preparation, several stud- ies have shown that But we believe that we should have communi- cated better to the people, especially, and also to p~'ofessionals, the kinds of risks that we were talking about For example, what the guesstimate was of the probability of an epidemic We believe our communication was not good We did not use the media too well, and we dOn't ~believe we had their understanding. We overkilled and oversold at some points, and I think especially the Federal Government got caught in the situation where jt was not flexible enough to change in the middle of the stream. We believe that local agencies were more flexible We, in fact, did change several times In fact, the people, of course, changed their respOnse as the data came in, showm~ that the epidemic was less~ likely I'wo other specific suggestions, if I thay One is, I beliei~e we will be better off if we can get a broader representation by particularly professional organizations, like the Advisory on Immunization Practices in the program. I was on this committeee. But we did not have important organizations like the AMA, and other important organizations, that should have been involved, learned from our deliberations, and supported the program more Finally, I believe that we need a well planned national liability policy with plans for payments of the ~vaccine caused disease, such as we have seen in this last endeavor This is the summary of my suggestions, Mr Chairman Mr ROGERS Thank you so much, and your suggestions will be most helpful to the committee. Dr.~ Biery, you may~proceed. STATEMENT OF RICHARD M. BIERY, M.D., O~ BEHALF OF TUE UNITED STATES CONFERENC1~ OF CITY HEALTh OFFICERS Dr BIERY Mr~ Chairman, I have curtailed my spoken remarks If you wish, I can read them, but you have them Mr ROGERS Your complete statement will be made part of the recordjsee p 400] Dr BIERY Mr Chairman, and members of the $ubcommittee on Health and the Environment I am Dr Richard M Biery, Director of Health, Kansas City, Mq, Department of Health, representing the United States Conference of City Health Officers, and I am an officer of that conference. PAGENO="0404" 398 I am here to testify about my city's experience with the swine flu program, and provide some general observations. The swine flu vaccination program, generally, ran well in Kansas City. We vacci- nated approximately 50 percent of the eligible population, approxi- mately 70 percent of the significantly at risk population. The city was basically receptive and supporting of the program. A large voluntary effort developed. Medical societies were support- ive and cooperative. The local press was generally positive and noncynical. I personally was on talk shows, and call-in shows, and discovered a retharkable degree of public trust and confidence, even in the face of adverse national publicity. For example, after one ~particu- lar bad series of national events relating to the program, I was to be on a call show. So I braced myself for an anticipated storm of challenging calls from skeptics, or at least worried citizens, and we received not one such call, but instead calls from people who wanted to know whether they should take the' shot because they had this or that ailment. We also were impressed by the resiliency of people's basic posi- tive attitudes against repeated publicity concerning the problems of the program; the public's `ability to weigh the odds in their own mind, and decide where they were, personally, on the risk contin- uum. Now, some words about the problems. From the local perspective, the technical foulups and the conflicts over resolving the liability question were unfortunate, and could only adversely affect the credibility of the `program. But as I stated, in our part of the Nation, `I was struck by the lack of cynicism, and the rather resil- ient and~forgiving attitude toward these' issues. Furthermore, I feel philosophical about these problems. I hope that they are at least chalked up to experience, and I will return to them in a minute. I think that this committee is a reflection of that effort. Locally, it created for us an on-again, off-again situation which certainly challenged our people in terms of planning. Again, the public was remarkably forgiving, and we pulled the program up. The informed consent mechanism, or the warning system,' also kept us guessing until late. But fortunately, developing that was not our responsibility. Part of the delay, which was not mentioned here today, was the fact that the State Attorneys General had to have input and/or approval, and this certainly added to the com- plexity of the decisionmaking process. To assure ourselves of the maximum public information, we, and the Kansai City newspapers, published the entire consent form at the initiation of the program. Furthermore, our clinics were orga- nized in such' a way that people would have plenty of time to read the form prior to being vaccinated. To my kii~wledge, the consent form changed no one's mind, once they had come to the clinic. I believed that in voluntary programs, either people come because they believe it to be in their interest, or they don't come. Informed consent is obviously signed by believers at the time, who are willing to take the risk of the known adverse `effects against the risks of the disease. PAGENO="0405" 899 The public willingness of the assumption O~ that risk, I believe, rests as much of the credibility of public health officials and epide- miologists as any other item of information~ the public may have concerning it, consent forms, or not. It was our impression that the national press and media searched for and amplified conflict, differing opinions, whether or not informed, and the adversities mentioned earlier Grc~en that kind of national press coverage, I was surprised by the amount of local trust and support I think that our ability to stay informed, answer the questions of the news agency was critical, and that gets to the issue of information transmissions and communication I have a more positive view, perhaps, toward that than has been expressed. Basically, we had no argument with the policy decisions nation- ally, based on what we found to be was well supplied information. In fact, we sent someone from our medical society to review the information personally, and concluded before our medical society took a position that they were founded on sound epideiniological principles, which not everyone understood Two decision analyses, including one at Chapel Hill, which I reviewed personally, done by the Management Systems people there, and one at Harvard, which I think has been published,and *the retrospect of the discusSions in the medical literature have borne those conclusions out. Another benefit was that Kansas City had a B-strain outbreak this past winter, but while other cities were having A-Victoria outbreaks, because we had immunized 70 percent of our elderly population, we could feel fairly confident that we would not have an A-Victoria outbreak with mortality, and we did not In terms of dealing with Guillain-BarrÚ sequel, we had one or two possible postimmuinzatiOn cases Our experience with this in Kansas City was well below the national average That has not been aproblem in terms of adverse publicity locally. Our recordkeeping system was such that we have been able to pull informed consent and records when needed. Turning to the indemnification device developed for the swine flu influenza program, it simply moved the liability back to Uncle Sam, but left the means of settling that liability in the same system I am speaking now to the problem of liability It seemed to us that if Congress felt strongly enough about the swine flu, Congress should, at least, aggressively consider a similar device at minimum or, at most, total removal from the tort settle- ment mechanism in order to keep the established social process of protecting against exceedingly expensive disease in tact Finally, without a cooler and statesmanlike, I predict that we, as a Nation, will have serious difficulty in developing further the frontiers of preventive strategies for the benefit of all The cost ratios are well documented, including immunizations However, less threatening environment, public boldness, statesmanship, and mutual willingness to conquer these roadblocks are absolute neces- sities. Thank you, Mr. Chairman. [Dr. Biery's prepared statement follosvs:] PAGENO="0406" 400 STATEMENT OF RICHARD M. BIERY, ~M.D., DIRECTOR OF HEALTH OF KANSAS CITY, MISSOURI, ON BEHALF OF THE UNITED STATES CONFERENCE OF CITY HEALTH OFFICERS Mr. Chairman and members of the Subcommittee on Health and the Environment, I am br. Richard Biery, Directhr of Health of Kar~sas City, Missouri and representing the United States ConferenCe of City Health Officers. I am here to testify about my City's experience with the Swine Flu Program and provide some general observations and note some growing serious threats to immunization programs. The Swine Vaccination Program generally ran well in kansas City. We succeeded in vaccinating approx- imately 50% of the eligible (adult) population and approx- imately 70% of the significantly at risk population. The City was basically accepting and supportive toward the program. A large volunteer effort developed, medical societies were supportive and cooperative and the local press was generally positive and non-cynical. I personally was on talk and call-in shows and discovered a remarkable degree of public trust and confidence even in the face of adverse national publicity and difficulties. For example, after one particular bad series of national events relating to the Program, I was to be on a call-in show and so I braced myself, anticipating a storm of challenging calls from skeptics and cynics or at least worried citizens. We received not one such call, but instead calls from people who wanted to know whether they should take the shot because they had this or that ailment~ We also were impressed by the resiliency of PAGENO="0407" 401 people's basic positive attitudes against' repeated national publicity concerning the problems of the program and the public~'s ability to weigh the pdds in their o~n mind and~ decide wh~re. they were~ personally ~n the risk contir~uum. Now some words about the problems: FrOm the local perspective, the technical foul~ups and the conflict over resolving the `~iabiUty question was unfortunate and could only a~ersely effect the credthility o~ the Program but, a~ ~. stated, in our pArt~of the nation I was struck by the la of public cynicism and rather a resiliency and fQrgiving attitude. * *~ Furthermore, I am sanguine enough personally to be fairly philosophical about those problems and tend to hope*hat they are, at least, chalked up to experience. I will return to them in a minute. * Locally, they created an oU-again, on-again situation which certainly challenged our people in terms, of planning - sort of a game of "keep-them--guessing" or "dodge-em"~ with target dates, facilities, manpower and equipment. Again, the public was remarkably forgiving. The informed consent mechanism also kept us guessing until late, but fortunately developing that was not our'responsibility. To assure ourselves of n~aximum public information we (and the Kansas City newspapers) published the entire consent form at th~ initiatiQ~ of the program. Furthermore, our clinics were organized in such a way that people would ha~...time to read the PAGENO="0408" 402 f~rm prior to being vaccinated. To my knowledge, the informed consent changed no one's mind once they had come to a clinic. It is my impression that, in a voluntary program, people believe or not and come or don't come. An informed consent is obviously signed by believers (at the time) who are willing to take the risk of the known adverse effects against the risk of the disease. The public willingness of the assumption of ~hat risk, I believe,' hangs as much on the credibility of public health officials and epidemiologists, as any other item of information the public may have, consent forms or not. One more comment on the national scene. It was our impression that the national press and media searched for and amplified conflict, differing opinions, whether informed `or not, and the adversity mentioned earlier. If Dr. Salk disagreed with Dr. Sabin so much the better for the evening news. Given that kind of national coverage, I was surprised by the amount of our local trust and support. I think our ability to stay informed and answer the questions of the local news agencies was critical. !olicy:. Basically, we had no argument with the policy decisions nationally, and based on well supplied information, concluded they were founded on sound epidemiological principles (that not everyone necessarily understood). At least two decision-analyses and retrospective discussions (even in spite of Guillian Barre' sequellae) PAGENO="0409" 403 in. the medical literature bear that out. Although Kansas City had a B-strain outbreak this past winter, and while some other cities were having A-Victoria outbreaks, because~we had immunized 70% of our elderly population to both A-~New Jersey and A.4ictoria, X could feel fairly confident we would not have an . A-Victorian outbreak with mortality, and we did not.. In terms of Guillian ~arre' sequellae, we had one possibly post-immunization case. This incidence was below the national average. Substantial Issues Concerning Zmmt~rtization Programs in General Waxing p1~ilosOphical for a moment, we~zould like to point out the obvious, that those efforts of society to implement preventive strategies take corporate social action for significant public bÚnef it to be achieved and also for the protection of those indivith~als handicapped in such away that they cannot avail themselves of a particular strategy, e.g. the vaccination. In programs where individual responsibility is required to~ achieve such effects, a mutual responsibility as fellow human beings must be recognized and we as i~dividu~ls must accept a corporate decision and its mechanism of implementation. Parenthetically, we are no longer men to g~od will. The increasing litigenous spirit, skepticism, and adversarial mood of our society, coupled with the climate that as one health officer said, "you have to tell everyone everything. .." but protect privacy, threatens the fabric of our public health and preventive capa~city to ~olvC problems under ~I~e old rules PAGENO="0410" 404 of mutual good will. Nowhere is that clearer than in the area of immuflizations. To benefit as a society to this technology we need to maintain substantial immunization levels (in the race of an apathetic public) but we also maintain in our Society a system that provides a means ~for indivi.duals allegedly agrieved by a program to use society' s tort system to hit us in the solar plexus. This is having a rapid and seriously threatening effect on immunizations as an important and critical part of our disease defense system. Probably, the most obvious and dramatic examples are the polio vaccine cases against 1.) Wyeth in Texas resulting in a substantial jury settlement (where the facts, I believe, are far from convincing) but more important Wyeth's withdrawal from the polio vaccine market ahd now, 2.) the recent two million dollar suit against Seattle and Lederle, the last remaining manufacturer. In that case, the plaintiff is suing. in spite of having signed an up-to-date informed consent. No matter the outcome, which in these cases (in jury settings) is by no means benign, the effects on Seattle, its health department, dedicated community health workers and, I suspect, on Lederle is serious, demoralizing and damagin~. The same would have been true, perhaps even more so, had this been a private medical sector incident. Solution: It. seems to me that there may be public responsibility toward thoserare situations in public health where an PAGENO="0411" 405 untoward adver~e `effect occurs due to publid ~o1icy (and state law in many cases) but such pompensation needs to - be removed, I believe, fromÓ systeth where even one ease can result in a disabling kick in the gut. :Evei~ governments are no longer immune; so exposure is. esa~iti~lly total., Kansas City has just been sued for 10 million dolla~~ by. a law ~tudent ~zho maintains that Kansas City should have built its creeks and storm sewer systems to anticipate a 13" rain. I suspect that had he liyed in Noah's day, he would have sued a skeptical mankind for not building more boats.' ` The indemnific~ation device developed for the Swine Influenza Prog~ram simply moved the liability back to Uncle Sa!a but left the mo~ns Qif settling, that li~bility in the same system. It seems to ~s at if Congress- felt strongly enough about the Swir~e Ir~fluenZ a Program, a decision I am not critizing, but~nevÚrthe.1e~s a speculative but bold program aqains an.. `~if-corne~' enemy, Congress should certainly agressr~re1y consider a similar devi'ce, ~t minim~xn, or ~a~t most; total removal froxnthe tort (lay jury) settlement ~techanism in order to keep the established social fab~ic o~ protective strÓtdgies againet Jcnown and exceedtngly expensi~re aisease' enemies intact. Fi4aliy, without. a cooler and statesman-like environment, I predict~that we, as a nation, will have serious difficulty dev~eloping further the fro1ttiers of preve,ntive strategies-~'-h~re the benefit to~ cost r~t-ios are substantial (removing-entire disease categories-:rom death certificates) However, a less threatening environ- ~ public bo1dne~s, statesntenship and mutual will.in~ness to conquer these roadblocks are absolute necessities. Thank you. PAGENO="0412" 406 Mr. ROGERS. Thank you very much. I might say that we will have to look at the liability issue more closely. I think that the Federal Tort Claim Act, which was on the books, was used by the Congress in view of the fact that we had tort claims costing up to $23 billion. So we felt that there should be some no-fault. Dr. BIERY. I commend Congress for that move. I think the rest of the immunization system is exposed to that same liability. Mr. ROGERS. Thank you so much. Are there any questions? Mr. WAXMAN. Don't be too quick to congratulate Congress for taking on the liability. I don't think that it is a good move on our part. I appreciate your suggestion that we do have to address those questions in any future program. Mr. ROGERs. I presume you would agree, that when the manufac- turers said that they would not produce vaccine, or that they would not market vaccine without insurance, someone had to assume their liability. Dr. BIERY. My reply would be that there would not have been a program, and polio is in the same situation right now. Mr. ROGERS. Thank you so much for your presence. Dr. .J. Anthony Morris will be the next witness. Dr. Morris, we welcome you before the committee. STATEMENT OF J. ANTHONY MORRIS, Ph. D., GREENBELT, MD. Dr. MoRRIs. My name is Dr. J. A. Morris. I have been engaged in reseaith on viral and rickettsial diseases and in study of vaccines to prevent these diseases since 1940 or for approximately 37 years. My wOrk was done at Walter Reed Army Institute of Research, at the National Institutes of Health, and the Food and Drug Adminis- tration. In the period 1966-72 I brought to the attention of the Director of the Division of Biologics Standards of the National Institutes of Health serious deficiencies in the regulation of vaccines for use in this country. The response to the receipt of this information on the part of the Director of the Division of Biologics Standards was first an attempt to fire me, and second to ignore the existence of serious deficiencies. In 19'1~2, these same deficiencies were brought to the attention of Senator Ribicoff including those deficiencies concerned with the potency and efficacy of influenza virus vaccine, one of the most widely used vaccines in this country. Senator Ribicoff requested a GAO investigation of the Division of Biologics Standards; and during the course of the investigation, found serious shortcomings concerned with vaccine regulation. As a result, hearings were held before the Subcommittee on Executive Reorganization and Govern- ment Research in 1972: following the hearings the vaccine regula- tory agency was transferred from NIH to the FDA. During ~the 1972 hearings it was noted that it was not possible to measure with accuracy the potency of influenza virus vaccine, yet the user and the recipient of this vaccine had no. way of knowing this because the label indicated a precise measurement of potency. PAGENO="0413" 407 What is the situation now? This is indicated by aquote from the GAO report of June 27, 1977, dealing with~tbe .. swine flu program. .~ FDA AND MANUFACTURERS Dima IN Po~E~cyT~sr R~suLm Three of the four swine flu vaccine manufacturers consistently reported potency test results which were higher than F1)A test results for the same lOts of vaccine submitted to FDA under the swine flu program For example one manufacturer's test results on 49 vaccine lots submitted during 1976 showed that 47 had a higher potency value than that shown by Ft)A s tests 1 had the same test results, and the remaining lot scored lower. GAO repOrt, June 27, 1977, page 84. In addition, the tabular data provided it~ the GAO report show that one lot of swine flu vaccine with a designated CCA value of 800, when examined in the FDA's laboratory had a value of 696 This example and other examples given in tabular data m the GAO report clearly show that potency of swine flu vaccines wa~ not indicated by the information on the label In other words, the swine flu vaccine was mislabeled In 1972, it was brought to the attention o1~ the Director of ~Divi sian of Biologics Standards that there wete no reliable data to measure the degree of protection afforded civilian populations by use of commercially available mfluenza vaccine This is indicated in by a quotation taken from the 1977 GAO report. The Director of the Division of Biologics Standards questioned.whether the use of flu vaccine had any detectable effect on the 1957. or 19~8 pandeinicL Ue stressed that priority be given to research into the problem of making sufficient vaccine available `in time to countet a threatened flu~epidemic. A group of Government virologists who reviewed experience with flu between 1967 and 1972 concluded: It is generally agreed that inactrvnted vaccme containing the appropriate anti genic concentration in suitable j~otency will provide a reasonable degree of immuni ty for a limited period of time This statement simply means that on some occasions the vaccine has worked and on others it has not * * * There is no doubt that properly constituted aqueous inactivated vaccines can provide some measure of protection How much protection they afford is open to question Protection rates are clearly influenced by many features peciliar to the vaccine the virus and the host-and by methods used by the investigators GAO report, June 27 1977 page In assessing the value obtained `fro~* use of the swine flu `vaccine the GAO report concluded: Previous efforts to combat pandemic flu have not been successful The swine flu program differed from past i~accination e~'forts because the swme virus was isolated earlier and because the high-priority Federal mass vaccine delivery program was the first of its kind Consequently the potential protection provided by the swine flu vaccine is difficult to estimate based solely on previous experience. GAO report, June 27, 1977, page 38. So, the situation now is as it was 5 years earlier: an assessment of the benefit derived from the use of influenza virus vaccine is not determined I would like to mention here the practice of administering influ- enza virus vaccine to pregnant women In 1972 we wrote a memo- randum tO. the director of'the National Institutes of Health. Not only has there been little ~r no benefit from the use of influen~a va˘cin~ in man but harm has resulted The vaccine contains a considerable concentration of virus material which although inactivated possesses toxic properties and if given in sufficient quantity, may cause illness in an appreciable percentage of pSople, PAGENO="0414" 408 especially in children. Moreover, until recently, influenza vaccine contained (and still does in some instances) extraneous bacteria which could have been removed during ~the manufacturing process, but was not, because this was not required by the Division of Biologics Standards. These, too, when injected into man, cause ilnei. Further, the vaccine contains antigens of chicken-egg origin which may lead to sensitization, or, rarely, to marked reactions in persons already hypersensitive to such material. In addition, the egg protein contain blood group antigens which, when injected into man, induces the formation of specific antibody directed against that antigen. In pregnant women, this can be a dangerous event and result in fetal damage. It is for this reason that pregnant women were removed from the "high risk group" (CDC Report 1962 and compare with CDC Report 1969). It will never be known with certainty whether the recommended injection of influenza vaccine into pregnant women induced fetal damage, and if it did occur the degree and extent of the da~nage. What is inexcusable is that pregnant women were placed on, and removed from, the "high risk group" without first making these determinations. The risk might have been justifiable if the vaccinated women had been protected from contracting influenza during pregnancy, but the chances are that they were not. In addition, every, inactivated myxovirus vaccine-measles, parainfluenza, and mumps-that has been studied prospectively has been shown to hypersensitive a certain percentage of vaccinated people to subsequent exposure to natural disease induced~by a virus of the same type. See 83419 April 20 and 21 and May 3 and 4, 1912, page 526. What is the situation now? We., learn, now that after injecting swine flu vaccine into pregnant women who were told that: "Flu vaccine can be taken safely during pregnancy,"-GAO report, June 27, 1977, Appendix I, page 87-that * * * the center for disease control is supporting two studies on women who received the swine flu ~vaccine to identify unfavorable preg- nancy outcomes, such as spontaneous abortions, stillbirths, and congenital malfor- mations~, These studies will follow reactions in children up to 6 weeks beyond birth, born to women in the studies. Letter GAO to Congressman Waxman, June 27, 1977,' page 7. I might note here that if they stop `the study at 6 weeks, I think'~' that it would be very difficult to determine what definite results there are from these injections~ This series of events would, in my judgment, be serious endict- ments of'vaccine regulation and of the Government's vaccine regu-, latory agency. In fact, Mr. Joseph Califano, Jr., Secretary of HEW on March 2, 1977, on Meet the Press, said: The greatest damage the swine flu program has done, aside from the human tragedy of the individual paralyzed and killed, has been the impact on immuniza- tion programs, and a large part of that is attributable to the people's fear about immunization programs. Mr. Cal~,fano said further: "We have got to restore confidence in immunization programs." I doubt that under the current managers of vaccines regulation in this country, this confidence is restorable and it is my judgment that the widespread skepticism that followed the swine flu fiasco is fully justified. I thank you for your attention. Mr. ROGERS. Thank you, Dr. Morris. Mr. MAttJIRE. Mr. Chairman, the' GAO witness this morning gave testimony that the vaccine which was released for the swine flu progran~ met the Food and Drug Administration safety stan- *dards. The~ said that almost 30 percent of the vaccine was consid- ered subpotent initially, and the agency did not permit its release to the public until the minimum potency requirement was met. Now you are saying, I take it, that initially there was a problem. I think that. it would be interesting to. know why 30 percent of'the PAGENO="0415" 409 but presumably not meet ~it was CCA when mention Lts made to measure the potency completely unhelpful with is used to measure the aggluti- nation of chicken red blood cells. There is no positi~e relationship whatsoever between that measurement and the ability of this vac- cine to protect a person against influenza. Therefore, I was interested in the comments made by Dr. Millar this morning, when he continuously stated that swine flu vaccine immunized its recipients. This vaccine induced the formation of swine antibodies, but Dr. Millar has yet to demonstrate that swine flu vaccine immunized anyone against anything. Mr. MAGUIRE. Surely you recognize that there are other people in the field who disagree with you? Dr. MORRIS. Let us take one, Dr. Sabin, before a congressional committee in June 1976, said, and I paraphrase: I am giving you a battery of reasons as to why I am withdrawing my support from this program. One of these reasons is the inability of anyone to measure with accuracy the potency of the influenza virus vaccine. Mr. MAGUIRE. I think everyone has recognized that we are not as far along in developing the immunization potential and capacity of our inoculations with respect to influenza as well as some other things. Everybody has recognized that. To move from that to the statement that it does not have any utility at all, does surprise me a bit. Are you saying, in effect, then, that all of the influenza immunization programs that we have had, whether it be the Hong Kong, the A-Victoria, or whatever, in recent years have been of no utility? Dr. MORRIS. In my estimation, there is no substantial informa- tion in the medical literature which demonstrate satisfactorily that influenza virus vaccine has protected man against influenza. Now this was brought to the attention of the speakers this morn- ing. I think that it was Dr. Millar who said, in I paraphrase: Despite the use of 20 million doses of influenza virus vaccine, in 1957 the course of the 1957 epidemic was not altered. The same situation was true in 1968 despite the use of approximately 20 million doses or more of influenza virus vaccine, the course of the epidemic was not altered. The reasons given by the Government in those two instances are that the vaccine was too little and too late. vaccb~e did ~Ot meet that is a question we can The GAO said~ ~ the potency sta~ used in the program. Dr. MORRIS. Yes. value, whieh - in fact PAGENO="0416" 410 Mr. MAGUIRE. There are examples, one can go over the data and say that the course of the epidemic was altered by timely applica- ti~on? Dr. MORRIS. There is no record in the medical literature that indicates that the course of an influenza epidemic has ever been altered by the use of influenza virus vaccine. Mr. MAGUIRE. Aside from your more general point, what would be the reason why tests by manufacturers~ and by the FDA would vary substantially with respect to the CCA factor, whatever that value may be? 1)r MoRRIs There is a standard procedure, a set of measures that when applied by a manufacturer, or the FDA, or any other intrested party, should result, in a series of measurements that approach similarity. If you measure with an inch; an inch is an inch, but when you measure the potency of influenza virus vaccine by the CCA test procedure, you get results which are shown, for exa~nple, in the GAO report, that in the test procedure the mea- surement unit-the C~A unit-may vary by approximately 100 percent. You have figures given in my statement where the test results for a particular lot of swine vaccine was 690 in one laboratory and 1,008 in another laboratory by applying the same test procedure to the same lot of vaccine. These results should indicate the unreliabi- lity ~f the test procedure. Mr. MAGUIRE. So we have in your mind a question about the value of the C~A value itself. You have questions about the test procedures and their accuracy. Let~ me ask you whether you agree that the vaccines that were administered to the American public under the swine flu program met the minimum CCA standards `as the GAO said they did, or whether you also doubt whether that was the fact or not? Dr. MORRIS. That depends. The GAO has reporte4, if I remember correctly, that when certain lots of vaccine in rare instances did not meet the minimum requirement, in order to facilitate the passage of the vaccine lot, the requirement was lowered. It depends on what you mean by the requirement. If yOu lower the requirement, then it is not that difficult to meet the requirement. Mr. MAGUIRE. What about the ones that went out to the Ameri- can public, did they meet whatever the requirements were that were in force `at that time? Dr. MORRIS. Each of these lots did meet the requirements which were standard at that particular time. Mr. `MAGUIRE. The implications in the witness's testimony go rather i~ar, and I find myself unable at this point to pursue those various~avenues. I `yield back the balance of my time. Mr. ROGERS. Mr. Waxman? Mr. WAxMAN. Dr. Morris, if there were a rapidly growing epi- demic and a clear national emergency, would you, then, favor mass immunization as long as any risk from the vaccine were disclosed? Dr. MORRIS. There is no evidence in the medical literature which would s~.iggest that an inactive influenza virus vaccine will alter the course of an epidemic of influenza. That fact is established. PAGENO="0417" 411 There is evidence that a live influenza virus vaccine is capable of controlling influenza infections. You asked the question as to why a live influenza virus vaccine is not available. It is not available because of great shortcomings on the part of NIH in developing this vaccine. When the NIH came before the Congress in 1972, if I remember correctly before Mr. Rogers, and said that there are serious short- comings which characterized the activity of the virus vaccine. We would like to ask for an appropriation to develop a live influenza virus vaccine. If I remember correctly, several million dollars were appropriat- ed for that purpose to develop a lab to work on that virus. The reason for that development was the inadequate nature of the dead vaccine. There were serious problems encountered in the develop- ment of that vaccine, but there is no doubt that this vaccine does, in fact, protect you against influenza. That is the path that has to be followed in the future. One has to abandon the hope that an inactive vaccine will ever protect man in an appreciable way against influenza. The avenue must be changed, and it should be changed toward the live influen- za virus vaccine. Mr. WAXMAN. Do you have any information as to the cost of the vaccine for swine flu, which would be helpful to us in developing that question? Dr. MORRIS. The information I have, and I would rather not give it because it is not solid. Mr. ROGERS. We very much appreciate your testimony. Thank you. The next witnesses are a panel of vaccine manufacturers. I would appreciate it if the witnesses would keep their testimony limited to 5 minutes. The statements will be included in their entirety in the record. STATEMENTS OF ROBERT F. HENDRICKSON, VICE PRESIDENT, OPERATIONS, MERCK SHARP & DOEME DIVISION, MERCK & CO., INC.; ACCOMPANIED BY CLARENCE A. ABRAMSON, SENIOR COUNSEL, CHARLES F HAGAN, GENERAL COUNSEL, AMERICAN HOME PRODUCTS CORP.; FRANK MARKOE, JR., VICE CHAIRMAN, BOARD OF DIRECTORS, WARNER-LAMBERT CO. (PARKE-DAVIS); AND FREDERIC D. LAMB, VICE PRESI- DENT AND LEGAL COUNSEL, MERRELL-NATIONAL LABORA- TORIES Mr. HENDRICKSON. My name is Robert F. Hendrickson, and I am Vice President for Operations of Merck Sharp & Dohme. I would like to make two brief points, and then we will be pleased to answer any questions. I would like first to reaffirm that the vaccine manufacturers continue to be an important national resource for public health programs, able to tailor production rapidly to meet emerging needs when given a reasonable amount of advance warning and a reason- able degree of cooperation. Second, I want to reemphasize that we could not be expected to participate effectively in public health programs if we were unable to obtain insurance, or otherwise be protected against liability from 98-930 0 - 78 - 27 PAGENO="0418" 412 factors in the use of the vaccine that cannot realistically be consid- ered our responsibility. We are perfectly willing, and we believe able to accept that part of the liability burden that derives from factors over which we have control. Contract arrangements between the Center for Disease Control and manufacturers are now including provisions stipulating the responsibility the Government assumes in carrying out public im- munization programs, with specific attention to the duty to handle any necessary warnings to, or obtain any necessary informed con- sent from, recipients of vaccine in these programs. These arrangements have helped to assure the continuation of the insurance coverage now in place. However, ill-defined liability risks continue to loom in the field of immunization, and we believe it is important to take a first legislative step now, in a non-crisis atmosphere, to help lessen the possibility of any jeopardy to immu- nization programs in the future. This might be in the form of legislative authority for HEW to indemnify manufacturers from costs resulting from HEW's breach of its duty to warn recipients of the vaccine of its risks. The liability problem should not be permitted to distract us all from the principal job of assuring maximum protection of the health of American citizens. So we urge that interim action be taken now and future solutions of broad social significance be developed as rapidly as possible. I will be happy to try and answer any questions that the commit- tee may have, and I hope that my complete statement will be submitted as part of the record. [Mr. Hendrickson's prepared statement follows:] PAGENO="0419" 413 STATEMENT OF ROBERT F. HENDRICKSON VICE PRESIDENT, OPERATIONS NERCI( SHARP & DOBME DIVISION MERCK & CO., INC. Subcommittee on Health and the Environment Committee on Interstate and Foreign Commerce Friday, September 16, 1977 Mr. Chairman: My name is Robert F. Hendrickson, and I am Vice Preaident for Operations of Merck Sharp & Dohme. We were pleased to respond to your invitation and will be happy to be of any help we can in your review of immunization policy and procedure. I would first like to reaffirm that the vaccine manufacturers continue to be an important national resource for public health programs and second to urge that a modest but important legislative action be taken now to help lessen the likelihood that liability issues will complicate immunization programs in the months and years ahead, When Secretary Califano announced the new initiative against pediatric diseases last April, Merck wrote to him to pledge our full support. We also expressed full confidence that private sector suppliers could meet the national need, We urged that this program, as with those in the past, recognize and encourage full participation by private sector health care resources in complementing the public health activity. Given a reasonable amount of advance warning and a reasonable degree of cooperation, vaccine manufacturers are well equipped to make needed quantities of vaccine that reflect public interest. This ability was illustrated once again this past winter and spring, as outbreaks of measles occurred on the West Coast and in other areas of the country. We at Merck Sharp & Dohme were in a position to PAGENO="0420" 414 scale up our production very rapidly because we maintain a substantial inventory of vaccine in a frozen-filled state. Thus we were able to escalate our deliveries by some 500% compared with the same period the previous year. To California alone, in the period of January through May we shipped a total of 800,000 doses of measles-containing vaccines to both the public and private sectors on what we believe was a very expeditious basis. It ~ a difficult situation for public health authorities when there is an outcry for tens of thousands of doses of vaccine and it does not materialize overnight, but it is generally impractical to maintain large inventories of dated vaccine ready for immediate shipment and a certain time-lag is required to scale up production. However,, the capacity is there, and once again the ability to accelerate production to meet a need has been demonstrated. The second point I want to reemphasize is that we could not be expected to participate if we were unable to obtain insurance or otherwise be protected against liability from factors in the use of the vaccine that cannot be realistically considered our responsibility. We are perfectly willing and we believe able to accept that part of the liability burden that derives from factors over which we have control. We therefore urge that some interim measures on liability be adopted while a long-term solution is sought. It is admittedly difficult to focus attention on potential policy problems in the absence of a crisis. Yet, preventive measures now would save much difficulty when the crisis does arrive. LaSt year this Committee and other members of the Congress found it necessary under crisis conditions to pass legislation radically altering the methods of handling liability problems for swine flu vaccine. We believe that action to have been very sound under the circumstances. We recognize the PAGENO="0421" 415 reluctance of Congress to adopt a similar pattern for vaccines other than swine flu, and we are not at~this point pressing'for such a legislative move. However, we do believe it important to take a first legislative step now in a non-crisis atmosphere to help lessen the possibility of any jeopardy to further immunization programs. That step, simply, is to empower HEW to contractually indemnify manufacturers if courts make adverse judgments based on failure of the government to discharge responsibilities it bears in public health immunization programs. As Dr. Foege of the CDC and others have noted, the Center for Disease Control and HEW have been working out specific arrangements with manufacturers in contracts for vaccine purchase. These stipulate the responsibility the government assumes in carrying out public immunization programs. A key element is the important duty to handle any necessary warnings to, or obtain any necessary informed consent from, recipients of vaccine in these programs. These provisions are healthy. First, they clarify what appears to have been a confused picture in earlier years, whereby courts placed duties on manufacturers that would necessitate our intrusion deeply into the conduct of public health programs. Second, they help define and reaffirm the remaining areas of responsi- bility borne by us as manufacturers. These clarifications, we believe, materially aid in assessing potential risks, and have helped assure the continuation of the insurance coverage now in place. Unfortunately, such provisions are not adequate to reduce the enormous amount of self-insurance built into our coverage nor to protect against the radical escalation in risk assessment that would follow any major new adverse judgment in this field. We and our carriers would bear the burden of handling any new avalanche of suits, regardless of merit. As you know, government estimates of its own costs for such handling of swine flu suits are huge. And, in the event PAGENO="0422" 416 a court were to determine that the fault lay with the government, as defined in the contract, we then would face the possibility of relitigating this same issue against the government in order to recover. Fortunately the picture I paint is hypothetical at the moment but it would become immediately real in the event of litigation of any magnitude The swine flu episode is instructive. Last year we heard much debate over potential liability risks in the swine flu program. Yet today many hundreds of citizens are seeking over a billion dollars in connection with the national program. Ill-defined liability risks continue to loom in the field of immunization. A history of relative safety does not protect against an epidemic of litigation A reasonable first step in our opinion is legislation empowering HEW simply to fulfill its contract commitments in the event of adverse court ~pudgnients against a manufacturer on matters within the government's accepted responsibility. This. might be in the form of legislative authority for HEW to indemnify manufacturers from costs resulting from HEW's breach of its duty to warn recipients of the vaccine of its risks. It would be gratifying to offer to the committee a definitive plan for some new form of compensation for those citizens unavoidably injured as a consequence of public health immunization programs. We have been intrigued as have been others by the concepts of a system that might parallel principles of workman's compensation. In face of the complexity of such a revolutionary plan, however, we have placed most of our hopes in the process that began last fall and winter with the National Immunization Conference, and the study report that I believe was then submitted to Congress. We recommend that this process be continued, so that consensus positions can be developed to underpin a specific legislativeprogram for this committee to consider PAGENO="0423" 417 One final point: With the early termination of the swine flu program, there are millions of doses of both the bivalent and monovalent vaccines remaining on hand between the manufacturers' warehouses and the state and local distribution centers. We understand the CDC plins to stockpile the remaining vaccine until its final disposition has been decided. This vaccine had been dated to expire on August 1, 1977 (the date that the authority for the program expired under PL 94-380). Our concern is that sometime in the future it may be decided to use this vaccine, assuming the safety, purity and potency remain at their present levels. Since the government's responsibility for claims expired on August 1, 1977, we feel that it is important that no future use be made of this vaccine unless Congress has first authorized its use and has resolved the responsibility for liabilities arising out of the use of this vaccine after August 1, 1977. To conclude: Despite the difficulties encountered last year, we remain optimistic that public health and private medical immunization efforts will be successful in reducing to a minimum the toll of communicable diseases. We are confident that national policies and practices will permit vaccine manufacturers to participate effectively and efficiently. The liability problem should not be permitted to distract us all from the principal job of assuring maximum protection of the health of American citizens. So we urge that interim action be taken now and future solutions of broad social significance be developed as rapidly as possible. I will be happy to try to answer any questions you may have. PAGENO="0424" 418 Mr. WAXMAN. [presiding]. Thank you very much for your abbre- viated statement. Your complete statement will be made part of the record. We will now hear from Mr. Charles Hagan. STATEMENT OF CHARLES F. HAGAN Mr. HAGAN. My name is Charles F. Hagan and I am general counsel of American Homes Products Corp., of which Wyeth Labo- ratories is a division. We have been asked to comment on problems encountered in the swine influenza virus vaccine program. As other witnesses will undoubtedly affirm, by far the major problem in this program was the working out of satisfactory solution to the anticipated liability situation, especially because of the loss of the vast majority of insurance coverage for this vaccine in July of last year. The Department of HEW and the manufacturers attempted to negotiate contractual provisions to deal with this problem, but adequate protection could not be worked out because of the Anti- Deficiencies Act. With the passage of Public Law 94-380, and the cooperation of the insurance industry in providing coverage for any claim against the manufacturers by the Government in the event the Government is held liable because of the manufacturer's negli- gence, it appears that the liability problem has been adequately handled. However, the constitutionality of this law is being chal- lenged in a number of suits. To date, two district courts have upheld the constitutionality of this law, and these decisions are being appealed. The concerns expressed about liability before this subcommittee in the last session proved to be valid. As of August 5, we are told there were 743 administrative claims, totaling $1,334,463,319 pend- ing against the Federal Government for injuries allegedly resulting from this vaccine. These suits were filed against the manufactur- ers, and are being handled by Government counsel under Public Law 94-380. In any program of this magnitude, there are bound to be some technical and administrative problems, and that was so in this case. However, these problems were minor in comparison with the liability problem. We appreciate the opportunity to appear before you today, and I will be pleased to try to answer any questions you may have. Mr. ROGERS. Mr. Markoe. STATEMENT OF FRANK MARKOE, JR. Mr. MARKOE. My name is Frank Markoe, Jr., vice chairman of the board of directors of Warner-Lambert Co. I am appearing on behalf of Parke, Davis & Co., a subsidiary of Warner-Lambert and one of the four vaccine manufacturers that participated in the Government's national influenza immunization program last year and provided the swine flu vaccine at cost. In the interest of time I will briefly summarize the longer state- ment which I have submitted for the record. Parke-Davis wholeheartedly committed its total biological re- sources-including scientists, manufacturing facilities, and cap- PAGENO="0425" 419 ital-to the swine flu program to provide the maximum possible number of doses within the time specified by the HEW for delivery. The company proceeded on a 7-day, around-the-clock program with- out a contract, without insurance and without knowledge of the final cost of the vaccine to try to meet an unrealistic timetable. Prior to the announcement of the program there had been mini- mal consultation with the manufacturers on production scheduling, formulation, capacities, and administration of the vaccine. In our view any future Government mass immunization program must resolve these problems as well as deal with informed patient con- sent and the matter of liability except, of course, any issue of liability arising from a manufacturer's negligence. These problems, unless resolved, could be a serious limitation to future participa- tion in the program. On the matter of some of the vaccine produced by Parke-Davis at the beginning of the national program, which was prematurely and unscientifically highlighted in a press release by HEW, I think it is sufficient to say that this vaccine was produced from virus seed supplied by the Government and that the production, packaging, and quality control techniques used by Parke-Davis met every known scientific and manufacturing requirement. It is most important to note that the investigation by outside, independent experts and by Government scientists immediately following identification of the problem indicated no evidence of negligence on the part of Parke-Davis in the manufacture of this vaccine. It is further important to note that it has been determined by clinical studies that this particular vaccine met the criteria for the program and produced effective antibodies in the high risk group against the New Jersey strain and could have been used in the program. Despite the difficulties of last year's program and negative impact on our company, Parke-Davis would again work with the Government in a national effort, assuming we would be part of the decisionmaking process from the beginning and work together as a team. Thank you, Mr. Chairman. If you have any specific questions, I should be happy to answer them. [Mr. Markoe's prepared statement follows:] PAGENO="0426" 420 Statement by Frank Markoe, Jr. Vice Chairman of the Board of Directors Warner - Lambert Company (Parke -Davis) Before the Subcommittee on Health and Environment House Interstate and Foreign Commerce Committee Government Program on Swine Flu Immunization. September 16, 1977 Mr. Chairman: I am Frank Markoe, Jr., Vice Chairman of the Board of Directors of Warner-Lambert Company. I am testifying on behalf uf Parke, Davis & Company, a subsidiary of Warner-Lambert, which was one of the four vaccine manufacturers that participated in the Government's National Influenza Immunization Program last year. On three previous occasions we have appeared before your Subcom- mittee detailing Parke-Davis' contributions to the immunization program. However, permit me to review briefly that participation. Parke~Davis has been producing influenza vaccines for about 30 years, and has developed outstanding expertise in this field. Its experience in biological products dates back to the turn of the century, when the company was issued U.S. Biological License Number One. In March of last year, Parke-Davis had nearly completed its normal influenza vaccine production requirements when swine flu virus was isolated at Fort Dix, New Jersey. At the request of the Government, the company immediately began the production of A/Swine influenza vaccine. Manufacturing PAGENO="0427" 421 started on March 26, 1976, and continued on a seven-day-a..week, around- the-clock crash program until last fall. The company unreservedly committed its scientific and manufacturing resources to the project, even though it had no contract with the government, and with such matters as potency, dosage, packaging, consumer information, insurance and delivery of the vaccine still unresolved. The manufacture by Parke-Davis and the other three companies of nearly 156 million doses of influenza vaccine was an unprecedented production achievement, especially when one considers that historically the industry produces only about 20 million doses in a normal year. Even though we exerted almost superhuman efforts in providing the requested vaccine for the American public, the results for our company were disastrous. We say this not in a spirit of animosity, but simply that the facts can. be studied and sound plans can be made for closer, more effective cooperation between government and manufacturers so that the American people~ can best be served in any similar future public health undertaking. As you know, the manufacturers provided the swine flu vaccine at cost -- as a social response to an anticipated national health emergency. Speaking only for Parke - Davis, the imposition of the swine flu program substantially reduced anticipated profit from our regular vaccine program. On balance, it appears we will lose money on the swine flu program, even though we were permitted by law to earn a small net profit, ultimately less than one cent per dose, on only the A/Victoria component of the bivalent vaccine. PAGENO="0428" 422 Unfortunately, this hastily conceived program was launched in a turbulent political atmosphere, which, needless to say, did not add to its orderly accomplishment. We are here today in the spirit of cooperation believing that our views will be helpful to your deliberative process. We have extreme concern for the maintenance of public health, and our company has strong recom- mendations that we believe should be considered prior to initiation of another major government-operated immunization program. There is an absolute need for the manufacturers to be consulted in advance of any program, and to work as a team with the government, rather than just as a supplier receiving vague, often contradictory, orders. Our concerns cover five areas - - timing, formulation, regulatory approvals, insurance and inve stment commitment. Timing is essential in the production of vaccine, which is entirely dependent on the availability of fertile eggs. Crash programs during off production seasons increase the costs. As part of the formulation, it is crucial that the potency requirement -- the stipulation of the CCA content -- be established at the earliest possible time. Knowledge of the potency requirement is critical, since it dictates the number of eggs that will be required, as well as the overall production time necessary to produce a given number of doses. Any delays in this orderly decision-making process greatly complicate production. In last year's program, there was a crucial delay of one month in confirming the potency requirements with the manufacturers. PAGENO="0429" 423 The third area of concern is the regulatory approvals required. These include, among others, such elements as a license amendment, labeling guidelines, and production and lot releases. Not until the license amendment has been approved, can finished supplies of influenza vaccine be cleared for distribution. Last minute changes can delay the program. As you are aware, each vial of vaccine is individually labeled, and a package insert giving detailed product information must accompany the vaccine. I might add, however, that we have traditionally received excellent cooperation in these regulatory areas from the scientific professionals within the Bureau of Biologics. A commitment of scientific resources and production facilities -- people and capital - - must be made at an absolute minimum of six months, and preferably nine months, before distribution of the vaccine to ailow for orderly management of the program. We believe that Parke-Davis fully complied with every government request in respect to the implementation of the national program.-- including providing the number of doses committed for delivery at specified times,. despite time consuming changes by the federal agency in package sizes, consumer information inserts and timing of distribution. Much has been spoken and written about the vaccine produced by Parke-Davis at the beginning of the national program. `I think it is sufficient to say at this point that the vaccine was produced from virus seed supplied by the government and that the production, packaging and quality control techniques used by Parke-Davis met -- as they always have - - every stipulated scientific and manufacturing requirement . PAGENO="0430" 424 The exact reason why the vaccine lots in question exhibited some properties more closely associated with the Shops virus than the New Jersey virus is still not known, and in all probability will never be fully and scientifically understood. Unfortunately, HEW seized upon this to announce prematurely and unscientifically that the program timetable would be delayed because of a "mistake" by Parke-Davis. In fact, the timetable was totally unrealistic to begin with. However, it is of the utmost importance to recognize that, despite the most intensive scientific investigation analysis and review by Parke- Davis, independent experts and rsp'i~esentatives of the Bureau of Biologics, no evidence of negligence on the part of Parke-Davis has been identified. In fact, a report by the Bureau of Biologics, following their thorough inves- tigations, stated, and I quote, ". . . we were Hot able to establish evidence of a break in techniq~ that would have allowed mixing of the two viruses" end quote. It is also important to note that this vaccine has been determined by clinical evidence, to have met the criteria for the program. It was an effective vaccine for the production of specific antibodies against the New Jersey strain and could have been u~ed in the program for the high risk group The legal ramifications involving this particular. vaccine are being reviewed by the attorneys for the government and Parke-Davis. Turning now to the question of product liability When we raised the issue six months before the mass program got underway we were branded by some as arrogant and our attitude was termed by other5 to be "unconscionable." Subsequently, the Congress recognized the validity PAGENO="0431" 425 of our position and enacted the essential legislation. The nearly 800 claims, totaling more than $1 billion, attest to the validity and the necessity of such action. In fact, yesterday's Wall Street Journal estimates 2500 eventual claims, totaling $2 billion. ~ny future govern- ment mass inoculation program must resolve this question and its corollary of informed consent by the recipients of the vaccine who fully understand the benefit-to-risk of an immunization program. In retrospect, Parke-Davis committed for and did provide 30 million doses of swine flu vaccine which it volunteered to provide at cost, but still was accused of seeking windfall profits, though exactly the opposite was true. One thing is clear -- our company's vaccine programs could simply not survive should the circumstances that prevailed during the swine flu program be repeated. We appreciate that last year's program was conducted under very unusual circumstances. However, we believe that with sound planning, full cooperation between government and manufacturers and explicit and accurate information to the public on benefits and risks, the major problems that plagued the swine flu program can be sharply reduced, if not eliminated, in any future endeavors. PAGENO="0432" 426 STATEMENT OF FREDERIC D. LAMB Mr. LAMB. Mr. Chairman, in the interest of time, I would submit my full statement and read only four short paragraphs from the statement. My name is Frederic Lamb, vice president and legal counsel of Merrell-National Laboratories. While there were a number of problems understandably encoun- tered in a program of this magnitude, I believe the main difficulty and time-consuming problem we all faced was dealing with the product liability situation, not only in terms of obtaining appropri- ate legislation but in terms of obtaining adequate specification and contractual language. Had the product liability issue been worked out in advance, I believe the swine flu program could have proceeded more promptly and efficiently. The issue is not one of the manufacturer's attempt- ing to avoid liability for its negligence in the production of vaccine; it is our belief that Federal legislation is required to resolve the product liability crisis since it seems virtually impossible, as per- haps suggested by others earlier in the day, to solve the matter on a State-by-State basis. The method by which liability protection is accomplished is somewhat secondary in my judgment. More importantly, action of some type must be taken quickly to resolve the matter. It appears to our company that, unless the overall policy of the Federal Gov- ernment is to resolve the product liability issue forthrightly and promptly, there is significant possibility of inadequate supplies of vaccine bein~ available to the people of the United States. [Mr. Lamb s prepared statement follows:] PAGENO="0433" 427 STATEMENT ON BEHALF OF I4ERRELL-NATIONAL LABOflATORIES I am Frederic D. Lamb, Vice President and Legal Counsel of I4errell-National Laboratories. My appearance today is through the invitation of the Committee's staff to review our experience with the Swine Flu Program and provide suggestions which may help strengthen future mass immunization programs. Mr. Chaim?ian, Merrell can point with pflde to its record of cooperation in the Nationwide Immunization Program despite the critical problems that faced us and the Government: 1. Before the letter contract was signed, we took a sub- stantial financial risk and proceeded at great expense to pro- duce approximately 40 million doses of bulk vaccine even though, at the time, Congress had not passed legislation needed to pro- vide adequate insurance protection. 2. Following passage of the necessary legislation we moved forward to pool, vial and package on a full capacity 7-day a week basis to provide the vaccine at the earliest possible time. 3. In September, when asked by the CDC to do so, we went back into production of additional quantities of bulk vaccine to help meet the then anticipated increased vaccine requirements. In fact, Merrell ultimately produced about 40% of the total vac- cine supplied to the Government. `ihile there were a number of problems understandably en- countered in a program of this magnitude, I believe the main difficulty and time-consuming problem we all faced was dealing with the product liability situation, not only in terms of ob- taining the legislation but in terms of getting adequate speci- fications and contractual language. Had the product liability issue been worked out in advance, I believe that the Swine Flu Program could have proceeded more promptly and efficiently. 98-930 0 - 78 -- 28 PAGENO="0434" 428 As far as the future is concerned, we read with interest the "Reports and Recommendations of the National Immunization Work Groups" submitted to the office of the Assistant Secretary for flealth, and presented at a public meeting in Washington, D C on April 4~-6, 1977 The work groups recognized that a failure to solve the product liability issue could seriously affect the future of government immunization programs The product liability exposure created by the ~yes case the high cost of defe'~ding spurious lawsuits the notoriety of the swine flu program the unpredictable nature of juries and the lack of adequate insurance protection is an unbearable risk to the vaccine manufacturer who might participate in a mass immunization program The recent Swine Flu Program points up the serious nature of the product liability issue In the Reyes and subsequent cases the mcinufacturer was held to be responsible for assuring that the ultimate vaccinee in a mass immunization program is properly warned In point of fact, it is impossible for the manufacturer to sustain this duty. Furthermore, it has been the experience that a number of groundless lawsuits have been brought alleging injury from the vaccine Even if the law- suits are spurious there is a high cost to their dezense In some cases the unpredictable nature of the jury's sympathy for the injured party and the consequent passion and prejudice leads to a money verdict for the plaintiff when one is not legally deserving In most cases the vaccine manufacturer has a substantial deductible before its product lianility in- surance becomes effective These factors, together appear to be economically unjustified and could lead to the bankruptcy of the producer PAGENO="0435" 429 The issue is not-one of the manufacturer attempting to avoid liability for its negligence in the production of the vaccine. It is our belief that federal legislation is required to resolve the product liability crieis, since it seems virtually impossible to solve it on a state-by-state basis. The exact means by which the liability protection is accomplished is, perhaps, secondary. More importantly, action of some type must be taken quickly to resolve the matter. It appears to our Company that unless the overall policy of the federal government is to resolve the product liability issue forthrightly and promptly, there is a significant possi- bility of inadequate supplies of vaccine being available for the people of the United States. PAGENO="0436" 430 Mr. ROGERS. Thank you very much. Mr. WAXMAN. Were any of you gentlemen present or do you have any knowledge of what took place 1 month ago, when the manufacturers finally agreed to sign contracts with HEW? Were any of you involved in those negotiations? Mr. ABRAMSON. Mr. Waxman, nothing happened 1 month ago. There was a series of communications for several months between the manufacturers and HEW, basically CDC. Last September we had a letter contract. It basically authorized CDC to purchase the vaccine and to be obligated to pay for it at some price that would be determined at a later date after certain audits were conducted. The definitive contract was prepared about that time but we were waiting on several issues. One was determining the cost crite- ria that would apply to the contract as was mandated by the legislation last year. The second issue was over the tax treatment of the self-insurance retention funds. That would be the $2'/2 mil- lion that each manufacturer would have to maintain an escrow account. The resolution of this problem took, as I recall, until April of this year. Then, after April of this year, the draft definitive contract was finalized. The various manufacturers, as I understand it, signed the contracts and submitted them to CDC. The contracts were not executed by CDC until after the question of the waiver of the cost accounting standards was satisfied; and then the next thing we knew, about 1 month ago the contracts were actually signed by CDC. So that was really the sequence of events. Mr. WAXMAN. Could you tell us why your clients wanted to change the terms of the cost accounting standards which otherwise have been part of the contract? Mr. ABRAMSON. We did not want to change the terms. It was our financial adviser's view that the nature of the program was such, including nonprofit element, that having to crank up on short notice for the program, the cost accounting standards would not be applicable in this type of situation where so many unknowns exist- ed for so long. We discussed this with CDC and, under current Federal procure- ment regulations, there are provisions authorizing a waiver. We submitted a request for the waiver, I guess back in the spring of 1977. That never became a sticking issue. We requested it but we never took the position we would not execute the contract. It was a bargaining position. We were audited both at a preaward stage by HEW and after the delivery of the vaccine and they were satisfied by examination of our records we met the generally accepted accounting principles. Thus they were satisfied, before they would grant the waiver, that there would be no variance between what would have been done under the cost accounting standards and how our books were actu- ally kept. Mr. WAXMAN. Could you tell us why you thought the cost ac- counting standards were not applicable in your case? Mr. ABRAMSON. I am quoting what our financial people told me. It is a matter of restructuring the way we accounted for certain indirect costs. I can't explain it in detail; maybe one of these other PAGENO="0437" 431 gentlemen can. But our costs were allocated under generally ac' cepted accounting principles. I can't tell you under what cost ac- counting standards they might vary. There is no difference in how we came out as far as numbers go. It is how we accounted for it on the books. Mr. WAXMAN. Why, do you think, did it take so long before the definitive contracts were actually entered into and signed? Mr. ABRAMSON. As I mentioned, the first thinj was to determine what cost criteria would apply to the vaccine. This was something HEW, under Secretary Mathews, had to determine. They discussed it with the manufacturers and there were specific criteria deter- mined which would govern what costs would be allocated. That had a bearing on the cost accounting standards and took several weeks to resolve. The next thing was the IRS ruling on the tax treatment of the self-insurance retention funds. Until we knew what that tax treat- ment would be, we could not agree on final terms of that part of the contract. That took from November to April of 1977. After that was resolved, we signed the definitive contract, which did not contain the cost accounting standards clause, and submit- ted it to the CDC. From April until August the contract was not signed by CDC until both we and they resolved the exclusion of cost accounting standards clause. Mr. LAMB. Mr. Waxman, my wife asked me the same question and I tried to explain it this way: We had a letter contract the last time that this panel appeared before you. There is not much differ- ence in the terms that are in the definitized contract and the terms that were in the letter contract-at least in our case-and I have reviewed the other contracts since I have received them under the Freedom of Information Act and I find that that is essentially true for the others. So even though these questions have been raised, we have been operating essentially under the final contracts since September, when we testified, approximately 1 year ago. Mr. WAXMAN. Even though there might be little difference in the terms of the contract, it was the desire on the part of the manufac- turers to have that specific cost accounting requirement waived, isn't that correct? Mr. LAMB. That, sir, is the only substantial difference in our contract between the one previously and that which was defini- tized-the waiver was decided by the new Secretary of HEW, since Mr. Califano is required by statute to make the waiver. Second, we explained-I guess you understand Public Law 94-380 does contain the requirement that the Secretary of HEW must establish the cost data, the cost criteria. Those then became part of the contract and were established prior to the consideration of the fact that they were in conflict, in several instances, with the CASB. Mr. WAXMAN. The Secretary established the criteria for the costs that the manufacturers would incur? Mr. LAMB. According to Public Law 94-380 he was required to do So. Mr. WAXMAN. And then he established that criteria which was at variance-I didn't understand what you said. PAGENO="0438" 432 Mr. LAMB. With the Cost Accounting Standards Board. Mr. WAXMAN. What is the Cost Accounting Standards Board? Mr. LAMB. The Cost Accounting Standards Board, CASB, is the Board that establishes the CAS. These are the cost accounting standards that were waived by the Secretary, by Secretary Cali- fano. Mr. WAXMAN. But Secretary Califano still insisted on the criteria of the cost that his office had established being fulfilled. Mr. LAMB. That is my understanding. Mr. WAXMAN. What kinds of criteria? Mr. LAMB. I am in the same spot as Mr. Abramson, I am a lawyer not an accounting man. I do know that most of the costs that were incurred in the performance of the swine flu program were incurred prior to the time we entered into the letter contract in September of last year. Those costs-and in our case they were quite substantial costs from producing 40 million doses of bulk vaccine-were done without regard to the cost accounting stan- dards requirements. Consequently, the accounting records and the accounting procedures had to be changed at the time the contract was signed. The cost criteria that were established by the Secretary took into account the fact that there was a period of time when costs were being incurred and there was no contract, when there was no requirement that we proceed, and we later proceeded under a specified standard when they established the cost criteria that became part of the contract. Mr. WAXMAN. The GAO study indicates that manufacturers' claims of potency in their vaccines were consistently at variance with the findings of the Government. I would like to know from you gentlemen were you deliberately trying to distribute vaccine that was ineffective, hoping to recoup your production costs or do you not test vaccine for potency before distribution? Mr. HENDRICKSON. I will attempt to answer and start by saying that I am not a scientist. The CCA test is recognized as less than desirable by both the manufacturers and the BOB. It is not the best test we could have. Unfortunately it is the only one we have. It does have inherent in it a variance of test accuracy, and I think this is where the problem comes in. If we look at our own case, I think we submitted some 70-odd lots to the Bureau. There were a number of these lots where our results were higher than the Bu- reau's. there were a number where our results were lower. So it is not unusual that you would get differences between laboratories. What we went through was a process of trying to establish what the relative gradation of this test was in the two laboratories so that we could achieve consistency of test results between the two laboratories. Now with regard to the potency, the only thing the CCA test really does for us is assure consistency between lots. What we determined through the clinical tests was what antibody levels would be achieved through a vaccine that contained 200 CCA units. Then our job as manufacturers was to assure that we had at least 200 CCA units in our vaccine so that the same antibody level results would occur in human beings. We all recognize and you have heard other testimony to the effect that there are questions concerning whether this is really a measure of potency or not. The PAGENO="0439" 433 only thing I can say is it is the best thing we have. It does assure consistency from batch to batch and that is really our concern. Mr. WAxMAN. Nevertheless, GAO studies and the program indi- cates that 15.5 million doses were subpotent. Mr. HENDRICKSON. The end result was that none of that vaccine was used by the public before it had been fortified with additional units. So what you have here is a normal process that goes on between the manufacturers and the Bureau to establish what is in fact the CCA level of the vaccine and this is firmly established and agreed to by both laboratories before anything is released to the public at large We are only dealing with the bulk test This is not a finished test so any variance at that stage can be corrected by adding or subtracting viral units. It is really an in-process test and it is a test that is trying to establish what should be put into the final container. Mr. WAXMAN. Let me ask a question about the relationship between the manufacturers, those of you before us, and your insur- ance carriers. Is there an ongoing relationship with one particular carrier that each of you does business with or do you have various carriers insurance for various kinds of vaccines and drugs? Mr. MARKOE. In our case we do business with I would estimate at least 20 to 30 carriers. However, they are all involved essentially in the same product liability program. Certain carriers carry more of the burden than others. But there are a multitude of companies that are involved. Mr. WAXMAN. How much of a negotiation do you have on the setting of rates by the insurance companies for the various drugs and vaccines? Mr. MARKOE. I don't personally do that, Mr. Waxman. I know there are extended discussions but I am not familiar with the precise nature of the discussions. It becomes more difficult every year subject to product liability. As the product becomes more difficult it takes longer to work out the negotiations. Mr. WAXMAN. Are any of you other gentlemen familiar with the negotiations? Mr. HAGAN. I can say this much. When this program began we had dollar one coverage. In other words, we were insured from the first dollar of exposure. The carrier who carried that risk no longer carries our risk and I don't believe is involved in this program at all. Mr. WAXMAN. Which program? Mr. HAGAN. The carriers that are backing up any claim by the Government against us. I don't believe it is one of the carriers that is involved. Mr. WAXMAN. The carriers that have represented you for any liability as a result of the swine flu program have no other con- tracts with you for insurance coverage for other drugs and vac- cines? Mr. L~B. They do not. That is essentially true, Mr. Waxman. In the case of our company we have a substantial deductible and there are a number of insurers and reinsurers. PAGENO="0440" 434 Mr. ABRAMSON. That is also true with the primary carrier with which we do business and there are other insurance companies on top of the primary layer. Mr. WAXMAN. How can you account for the fact that the cost of the bivalent vaccine was so much greater than the cost of the monovalent vaccine? Mr. HENDRICKSON. The obvious answer is that there are two components to it so you would expect it to be higher. In our own case I can give you our prices if you lack them. For the monovalent we have it in two forms, 10 and 50 dose so on monovalent prices in 10 dose, 28 cents a dose. In 50 dose, 24 cents a dose. The bivalent in 10 dose was 45 cents a dose and in 50 dose it was 40 cents a dose. Mr. WAXMAN. Almost twice as much. Mr. HENDRICKSON. Slightly less than twice; yes. Mr. WAXMAN. Why would it be so much more? Mr. HENDRICKSON. Again you have two components in it. Mr. WAXMAN. Don't you incur costs in developing bivalent that you would have with a monovalent that would change as additional doses are added? Mr. HENDRICKSON. No, you are dealing with two different virus components. You have the same problems with the second compo- nent that you might with the first, variability of the yield, question of the amount per egg, the yield that you get as you go through your process. So each one is really a separate product and then combined at the end and as a separate product would, could carry entirely different costs throughout. I should say both of these com- ponents bear no profit margin in our case. Mr. WAXMAN. Both bivalent and monovalent? Mr. HENDRICKSON. Yes. Mr. LAMB. In the case of Merrell we also agreed, for both the bivalent and the monovalent, to supply at cost. Our figures were 39 cents per dose on bivalent and 18 cents per dose on monovalent vaccine. Mr. MARKOE. For Parke-Davis we believe our cost for monovalent will be about 20 cents and about 35 cents for the bivalent. Below some of the others. For an average of around 30 cents a dose. Mr. WAXMAN. None of you gentlemen have the profit for your companies by virtue of the monovalent vaccine manufacture; is that correct? Mr. MARKOE. Parke-Davis had no profit. We will suffer signifi- cant loss. Mr. WAXMAN. Do any of you receive any benefit whatsoever from the $8 million that was paid for insurance coverage of what some people testified was only a remote possibility of liability? Mr. HENDRICKSON. No benefit to Merck. Mr. HAGAN. No benefit other than the insurance coverage that it bought. Mr. MARKOE. Same for Parke-Davis. Mr. LAMB. Same for Merrell. Mr. WAXMAN. I thank you for your answers. Mr. ROGERS. Do you have any arrangements with any insurance company for retroactive settlement if they don't have to pay out any of the premium you paid to them? Mr. HENDRICKSON. Merck Sharp and Dohme does not. PAGENO="0441" 435 Mr. ROGERS. How about the other companies? Mr. HAGAN. No, sir. Mr. ROGERS. No agreement to that. Mr. HAGAN. No, sir. Mr. ROGERS. So the payments made are made from the cost of the product. How much did each of the companies---- Mr. LAMB. Excuse me, Mr. Rogers, may I add one thing. No portion of the premium is refundable under our contract of insur- ance. I think they are identical to the others, nonrefundable to the companies; but the definitized contract that we entered into, as well as the letter contract, provided that if we receive, or any benefits are returned to us, they should be returned to the Govern- ment within 80 days after our receipt. So that if for some reason there were refundable or retroactivity in any way applied, it would be refunded to the Government under the contract terms. Mr. ROGERS. What about in any other insurance programs that would in any way be related to this? Would there be a refund at all? Mr. LAMB. I know of no related insurance program. Mr. ROGERS. In other words, in other vaccine programs there would be no relationship to what you are paying here with the adjustment? Mr. LAMB. These are separate policies. This was a special policy. Mr. ROGERS. No connection at all. Mr. MARKOE. There is no connection. Mr. ROGERS. What about your other vaccine programs? If you would just briefly give me an idea of the other vaccines you are currently producing? Mr. HENDRICKSON. We are currently producing measles, mumps, and rubella vaccine and also have a meningococcal vaccine. Mr. HAGAN. We produce a broad line of vaccines including the flu vaccine and tetanus vaccine and a great many others. Mr. LAMB. Mr. Rogers, I did not come prepared to know exactly what vaccines we do produce. I know yellow fever vaccine is a vaccine we do produce and we are the only producer of that vac- cine. Our other vaccines such as diphtheria, tetanus, meningococ- cus and diphtheria-tetanus vaccines are also produced by other manufacturers. We are not a single source of those, only yellow fever. Mr. MARKOE. Parke-Davis produces DPT-diphtheria pertussis and tetanus. Mr. ROGERS. Now what about your liability for these vaccines? Have you had any problem getting insurance for these biologicals? Mr. MARKOE. In our case as you know it is handled through the private sector, the private distribution sector, administered in most cases by physicians so you have the physicians-patient relationship. So because of that reason, as I understand it, we have not had difficulty to date. Mr. LAMB. In Merrell-National's case we have insurance cover- age for biologicals this year but I think that is somewhat mislead- ing unless I add that as most companies we have a substantial self deductible before the insurance protion applies. Mr. ROGERS. I presume that is true with all the companies. PAGENO="0442" 436 Mr. LAMB. I think it is true in most companies so that when you talk of insurance, the insurance starts after almost the catastrope level. Mr. HAGAN. Above our self-insured level we have been able to maintain coverage. We perhaps could have gotten insurance from dollar one but the costs would have been prohibitive. Mr. ROGERS. So you have self-insurance but you had no problem obtaining that coverage? Mr. HAGAN. Well, it takes a good deal of effort but we have it for this current year. Mr. ROGERS. What do you mean it takes a good deal of effort? Mr. HAGAN. We have to look for it assiduously. We have been able to maintain an adequate layer of coverage for this current year. I can't predict next year yet. Mr. HENDRICKSON. We have insurance coverage at the present time, but it is subject to a large deductible and that is a risk to which we are exposed. Mr. ROGERS. How many suits or claims have you had filed against the company for these other vaccines that you manufac- ture? Mr. MARKOE. I don't have the precise numbers but there have not been large numbers today in the case of Parke-Davis, but we have some. Mr. ROGERS. As I recall it was generally less than 10. Mr. MARKOE. I think that would be applicable to our company. Mr. LAMB. It may be a few more than that for our company. Mr. ROGERS. About how many more? Mr. LAMB. A dozen, dozen and a half but it is not significantly more. Mr. HAGAN. The last major attempt by the country to immunize on a national basis was in the polio campaign. In that instance the two companies I am familiar with had certainly better than 50 very serious product liability suits arising out of that program. In recent years, we have not had-apart from this swine flu effort-a national immunization program and our suits have been less. Cer- tainly, within the past year, we have not had any more than 10 suits involving a vaccine. Mr. HENDRICKSON. I don't have exact figures but I would esti- mate in the range of 10 to 20. Mr. ROGERS. Have there been any recoveries in suits this year? Mr. HENDRICKSON. Not for us. Mr. HAGAN. None for us but that is because we have not proceed- ed to trial in any this year. Mr. ROGERS. You must not have many suits if you have not even gotten to trial. Mr. HAGAN. It takes an average from 2 to 7 years between the time a case is filed and the time that it is tried. Mr. ROGERS. I understand, but I would think that if there were lots of suits you would constantly be in trial. Have any been dismissed? Mr. HAGAN. Not this year in a vaccine case. We have been successful in some other cases. Mr. ROGERS. How many are you in trial on now? PAGENO="0443" 437 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 this year. Mr. ROGERS. So the other vaccine products are not a very signifi- can'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 propri- etary. 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. PAGENO="0444" 438 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 0. 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 Ameri- can 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. In 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, Edu- cation, 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 com- pleted the commitments necessary to fill out that coverage when the Department advised us that they were changing their ap- proach, 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, commit- ments 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.