H5N1, Part II
Brian Trumbore
President/Editor, StocksandNews.com

In his essay for the March/April edition of Foreign Affairs, infectious disease expert Michael Osterholm addresses the issue of preparedness against the avian flu, H5N1. While President George W. Bush and other government officials finally banged the drum in 2005 and got Congress to appropriate some funds, by 2006 the discussion was largely over and in the '06 congressional campaign, for example, there were no debates or position papers. In fact, Osterholm did a LexisNexis search of general news articles on H5N1 in 50 major international newspapers and found more than 850 articles for October 2005 but fewer than 75 for November 2006. And while there has been a surge in documented cases of the virus in early 2007, it doesn't appear the coverage has picked up any.

Osterholm:

"Some public health experts had anticipated that planning fatigue would quickly set in if a pandemic did not materialize shortly after the first warnings. Lassitude is a normal reaction to the perception that public health experts have been crying wolf and to the challenge of staying on high alert over a sustained period of time. But the price of such apathy will be very high, because avoiding the consideration of key issues will compound the devastating effects of the next pandemic. For one thing, not enough attention is being paid to developing an effective vaccine and an effective way to produce it and deliver it to both developed and developing countries. For another, little thought is being given to what effects the structure of the world economy will have on the spread of a pandemic - and, in turn, what effects a pandemic will have on the basic functioning of the world economy. Meanwhile, the private sector has been largely left to its own devices as it prepares for a calamity, even though its collaboration with the public sector will be critical to any prevention campaign or emergency response."

Unfortunately, an effective vaccine is years away. More than a dozen drug companies are researching new ones, but Osterholm claims they will result in "antiquated first-generation vaccines used over the last 50 years."

I know some of you are dabbling in companies that may be working on these vaccines, so perhaps you want to keep the following technical analysis from Osterholm in mind.

"Cell-culture vaccines, like egg-culture vaccines, provide maximum protection against a pandemic when they are produced using the virus strain causing it. This means that although cell- culture vaccines can supplement egg-culture vaccines during the first three or four months of a pandemic, no production can start until after the pandemic itself has begun. And it will take years of research and clinical trials before cell-culture vaccines are approved and years after than before they can be widely produced."

Plus, since the H5N1 strain is rapidly changing, chances are the vaccines now in research will be based on those strains already circulating in Vietnam and Indonesia, for example, and thus may not provide protection against any new strains.

Michael Osterholm notes that in the United States and elsewhere, not only is the government failing to fund production capacity for the day it's needed, "they are treating vaccine research and development as though it were about business as usual, not a pending catastrophe." [Total spending on developing new vaccines, worldwide, is just $2.5 billion.]

There is some good news. Pharmaceutical giant Roche announced it will be able to produce up to 400 million doses per year of Tamiflu beginning in 2007. Tamiflu has shown effectiveness in preventing H5N1 infections in animal subjects when taken before exposure; but it's effectiveness on humans during an outbreak isn't known.

But even if the right kind of vaccines were available, there is another dire issue. Many healthcare systems, including in the United States, are ailing. More than 30% of hospitals in the U.S., for example, are losing money. Emergency rooms are increasingly over capacity. "100,000 additional registered nurses are needed." In other words, a mild pandemic would overwhelm the system.

Then there's this:

"The interconnectedness of the global economy today could make the next influenza pandemic more devastating than the ones before it. Even the slightest disruption in the availability of workers, electricity, water, petroleum-based products, and other products or parts could bring many aspects of contemporary life to a halt. The global economy has required wringing excess costs out of the production, transport, and sale of products. Inventories are kept to a minimum. Virtually no production surge capacity exists. As a consequence, most of the developed world depends on the last-minute delivery of many critical products (such as pharmaceuticals, medical supplies, food and equipment parts) and services (such as communications support). In the United States, approximately 80% of all prescription drugs come from offshore and are delivered to pharmacies just hours before they are dispensed?.With such long supply chains, a pandemic that closed borders, caused worker attrition, and suspended travel or the transport of commercial goods would seriously disrupt the delivery of everyday essentials."

How do you plan for it all? One expert told Osterholm off-the- record at Harvard University, "Planning for a pandemic is so different from anything we've done in business before that we're writing the book as we go - and it won't be finished until the virus is finished."

Some of the questions that businesses face include:

"Would consumers willingly pay a higher price for products sold by a company that invested substantially in pandemic preparedness, or would competitors gain market share by taking advantage of its increased costs? How should the stockpiling of critical emergency products be promoted in this global just-in- time economy? If solutions to these problems cannot be developed, expectations about how much can be done should be revised." [Osterholm]

Michael Osterholm's conclusion is that each community will be largely on its own. It's up to us to make sure our elected officials have some sort of plan in place. Of course they don't, one must assume.

I live in New Jersey, in a community about 20 miles from Manhattan as the crow flies, and I'm amazed that each and every resident in the tri-state area does not have a little card in their possession telling them where to go in the event of a nuclear or chemical explosion. Literally, something reading 'if the wind is blowing one way, do this'; 'if it's blowing another, do this.' I've written this for years in my "Week in Review" commentary. I'm not saying you can prevent panic, but at least it would be orderly panic, wrote the editor with a wry grin.

It all comes down to the words of Winston Churchill, who Osterholm quotes.

"It is no use saying, 'We are doing our best.' You have got to succeed in doing what is necessary."

And when it comes to vaccines, Osterholm adds we must come up with an initiative as bold as John F. Kennedy's man-on-the- moon agenda back in 1961.

Wall Street History returns next week.

Brian Trumbore