Blood Safety Transcripts

DEPARTMENT OF HEALTH AND HUMAN SERVICES
ADVISORY COMMITTEE ON BLOOD SAFETY AND AVAILABILITY

Nineteenth Meeting

"The Economics of Blood and Where Blood Fits in the Overall Cost of Health Care"

9:03 a.m.
Friday, May 2, 2003

Hyatt Regency Hotel on Capitol Hill
400 New Jersey Avenue, N.W.
Washington, D.C. 20001

P A R T I C I P A N T S

Committee Members

• Mark Brecher, M.D., Chairman
• Celso Bianco, M.D.
• Rajen K. Dalal, MBA
• Richard Davey, M.D.
• Ronald Gilcher, M.D.
• Edward D. Gomperts, M.D.
• Paul F. Haas, Ph.D.
• W. Keith Hoots, M.D.
• Dana Kuhn, Ph.D.
• Jeanne Linden, M.D.
• Karen Shoos Lipton, J.D.
• Lola Lopes, Ph.D.
• John Penner, M.D.
• Mark Skinner, J.D.

Non-Voting Government Representatives

• Mary E. Chamberland, M.D.
• Jay Epstein, M.D.
• Colonel G. Michael Fitzpatrick
• Harvey Klein, M.D.

Consultants to the Committee

• Captain Lawrence McMurtry, Acting Assistant Secretary

C O N T E N T S

AGENDA ITEM PAGE

• Call to Order 4
• Roll Call 4
• Can the Blood Centers Just Charge More?
• Melissa Fisher 6
• Mike Fuller 49
• Break
• FDA Update on HCV - Paul Mied 97
• CDC Update on SARS - Matthew Kuehnert 121
• Lunch 148
• Public Comments 149
• Committee Discussion 159
• Adjournment 255

P R O C E E D I N G S

DR. BRECHER: We're going to begin. I'd like to welcome everybody to the second day of the Advisory Committee on Blood Safety and Availability for the economics of rounding dust.

[Laughter.]

DR. BRECHER: We have to do a roll call again today, and Mac is going to start with the roll call. He's getting his jog in for the morning.

CAPT. McMURTRY: Mark Brecher is here. Larry Allen?

[No response.]

CAPT. McMURTRY: Celso Bianco?

DR. BIANCO: Here.

CAPT. McMURTRY: Rajen Dalal?

MR. DALAL: Here.

CAPT. McMURTRY: Richard Davey?

DR. DAVEY: Here.

CAPT. McMURTRY: Ronald Gilcher?

DR. GILCHER: Here.

CAPT. McMURTRY: Paul Haas?

DR. HAAS: Here.

CAPT. McMURTRY: Keith Hoots?

DR. HOOTS: Here.

CAPT. McMURTRY: Dana Kuhn?

DR. KUHN: Here.

CAPT. McMURTRY: I'm sorry. I skipped Edward Gomperts.

DR. GOMPERTS: Here.

CAPT. McMURTRY: Jean Linden?

DR. LINDEN: Here.

CAPT. McMURTRY: Karen Lipton.

MS. LIPTON: Here.

CAPT. McMURTRY: Lola Lopes?

DR. LOPES: Here.

CAPT. McMURTRY: Gargi Pahuja is still not here. John Penner?

DR. PENNER: Here.

CAPT. McMURTRY: Mark Skinner?

MR. SKINNER: Here.

CAPT. McMURTRY: John Walsh is absent today. Jerry Winklestein is absent today.

One last thing before we start, I only have two of those affidavits that the lady talked to us about yesterday. I need you all to sign those, the Affidavit of Appointment, and get it in to me. Celso, I have yours.

DR. BRECHER: Caroline has it.

CAPT. McMURTRY: Never mind.

DR. BRECHER: We're going to begin by discussing "Can the blood centers just charge more?" We actually only have two speakers, as opposed to the three that were on the original agenda.

Why don't we begin.

MS. FISHER: Good morning. My name is Melissa Fisher, and I'm the chief financial officer for the Gulf Coast Regional Blood Center. I've been with the blood center for about the last eight years and have had the opportunity to see a lot of changes in the industry, some of which have come very quickly these days. I think yesterday's discussions were very enlightening, and I'll be able to reflect on some of those as we move through today.

First off, I'd like to give you a perspective about who we are because in this topic of "Can we charge more?" I think it's important to understand who the blood center is. We're a regional blood center based in Houston, Texas. We cover about 24 counties in the Gulf Coast and East Texas region of our state. We've been in operation since 1975.

We're trying to collect 240 units of blood this year to serve over 200 health care institutions. That covers about 5 million people in the 24 counties. Our per capita usage is .13, which is just above the national average of .10.

Now, we serve one of the largest medical centers, if not the largest medical center in the world. We have level trauma Trauma 1 centers, heart transplant facilities, major heart institutes and cancer treatment facilities. And unlike yesterday, when Mr. Penny talked about the RBC usage in England, where it has been decreasing for the last couple of years, we have seen a 10-percent increase in the usage of red blood cells in our area. Now, the question might be for this group, why does the blood center even charge for blood? And we have some fairly significant costs, and the largest is related to our people and the related costs. Forty-eight percent of our expenses go to those costs.

The second-largest expense that we have is related to collection, and testing and our laboratory supplies, and that comprises about 30 percent. Those things are all necessary for us to do our jobs so it's very difficult when we have to try and cut costs trying to make decisions about where we cut those costs.

Our recruitment costs of our donors, which without them we don't operate and neither do our hospitals, are about 5 percent of our budget. So, again, that's a very important area for us.

Now, the types of costs that we have, to be sure, many of which you are very familiar with, relate particularly to new testing, and I've got a list here of items that certainly have been around for a while and some of which are in the future, but have a very significant impact on our organization.

NAT testing for HCV and HIV added a cost of $4.3 million to what we have to do every year, and this includes both the costs from 1999, when we first started NAT testing, as well as the new licensure costs that have just gone into effect.

The difference with I think to test today--and, again, I've only been in the business for about the last eight years, so that's my window of real-life experience--of today and of yesteryear, I compare that to the p24 antigen test that came in, in 1996, and the disparity in cost between the NAT, HIV and the p24 is significant; versus a few dollars versus the $15- to $20-range tests. So I wish to say there wasn't an even swap when we got rid of one--and we're very thankful to get rid of one--but the cost went up significantly.

West Nile, it was certainly very interesting to hear DR. EPSTEIN's comments yesterday. This is a very significant issue for us in the Gulf Coast Region.

One year ago, from my recollection, I don't even recall talking about mosquitoes and West Nile Virus, and maybe this group was doing that, but we weren't even thinking about maybe there was West Nile, but was there a test that was necessary.

Six months ago, we underwent a major withdrawal of our frozen products, and for the Gulf Coast Region, that was significant. That was five months of our inventory, comprised of approximately 53,000 products that were in the overall set, and we discarded about 14,000 units that hadn't already been transfused. The cost to our organization was about $800,000, and as far as I know, that may have been one of the most significant impacts related to West Nile Virus in our nation.

Today, we are on the cusp of implementation of our new test. We are fully expecting to be up and running on July 1st, God willing that there is a test available on that day, and sooner, if at all possible, because we know in the Gulf Coast Region we are already experiencing West Nile Virus in our birds, quite a few in Louisiana. I'm not aware of any in the State of Texas at this point, but since we are so close to Louisiana, it is very much a concern for us. The added cost of that is estimated to be about $2 million. So that's something that we have to consider in passing that cost along.

Bacterial contamination is a new standard that I'm sure each of you are very familiar with, and we expect to implement that by March 2004, as required. Our estimated costs for that is it to be about $3.6 million. Now, all of these things, so far as I know and understand, and again my background is a certified public accountant, and I do the best that I can to understand all of the technical aspects of the business, but it is my understanding that these are all nonoptional expenses that we must incur.

One that's on the forefront and also was mentioned yesterday is pathogen reduction. This new technology frankly is one that concerns me as a chief financial officer for the cost of $150 per unit. Dr. Snyder talked about it yesterday when he talked about the costs that his hospital experiences and the fact of how do we manage that cost and how do we really assess the benefit of the cost to incur that type of cost for a unit of blood, and I think it's very critical, as this committee moves forward in evaluating those types of procedures in the future, can the system, can the hospitals, can the blood centers, can the reimbursement system actually pay for that process.

Now, oftentimes, when I'm dealing with our hospitals, if they're not actually getting a new test out of the deal, they say, "Hey, we're not affected. You shouldn't be charging us anything else."

Well, that's not necessarily the case because many times, when questions are added, there might not be a test available, but when questions are added, we have the ability to lose a lot of our donors, and CJD is one of those examples.

Now, my mad cow on this slide is a picture of what I would say some of our donors looked like the day that we told them. You've been a full-time, regular donor. You've given us six times a year, but today you can no longer give blood. We went through that experience way too many times. We lost 6 percent of our donations, and it was a significant impact to our donor base.

The challenges with the increased questions, and this is not only for mad cow disease, but also for the others that we have added questions, is that it increased the time for the donor to give, questions that already a donor deems are invasive to their privacy and their personal life, but they're willing to put that on the line for they know the need for blood is out there, and they want to make sure it's available, and they may be the one who needs it.

However, it does have an impact because they say, "Well, I don't want to spend more time doing this. I want to be over here. It takes too long." So we're working to try to make sure that we can have a process that's efficient and effective for the donor as well, but as we add more questions, it is a challenge.

It's also a challenge for our staff, for we have to educate them, make sure that they understand the ramifications of the new questions, and then it takes time for them so that we are decreasing the amount of donors that can be seen by each staff person. We have to recruit new donors, and I'm going to talk more about our recruiting costs, but more money is necessary to do that to educate our donors, to increase our donations, not just today, but on a long-term basis.

Other questions that affect us are malaria, not necessarily a new question, but however periodically we have new places that people can't go, and that adds some education. Last year, we had smallpox. Now, we have SARS. And from what I understand, we're about to put that on our donor questionnaire as well.

Quality and compliance are also an area of concern, and it is preeminent that we make sure that our staff are quality and compliant, and we want to make sure that they have the tools in order to be able to do that. That's a cost that we have to incur.

As I indicated, recruitment is a big expense, and for years we said, well, we'll just cut costs there, and you can see where we made some dips, and we went up, but this is a picture of what our recruitment costs are doing today. And we've recognized that in the years that we did not increase our cost in this area that we were at a point where we were losing donors. So at the time that we lost that donor who gave six times a year, we didn't have anybody to replace him with. So it's critical that we don't cut that cost.

Salaries are another area because it's critical that we make sure that we have a staff that is adequately trained and has the experience, and certainly one of the greatest burdens to bear today for not only us, but the entire health care industry, is insurance costs. In some cases, can we even get insurance to cover the things that are going on. Utilities, inflation, those are all things that are out there, but we have to take things into consideration.

So I ask the question, why do blood centers just not choose to implement a test or regulation? I'd say that we have no choice. I have never seen a document from DR. EPSTEIN that said, "Hey, just you choose and decide whether or not you want to do this NAT test. You know, you don't have to ask this question." I have never seen that document. Usually, it says you need to do this, and you need to do it right now. So it's the law. We have to comply with the law, and we will comply with the law.

Quality is preeminent for us. We will follow the regulations and the standards that are given to us to make sure that we have a safe blood supply.

We have public perception. Everybody wants the safest unit of blood that they can get, and so if there is a test to be done, we want to do that. It doesn't matter what the cost is.

I think we're also faced with creeping precautionism, and this is a phrase I keep seeing bantered about, that zero-risk blood supply that we've got to get to. And, again, being an accountant, I'm not a clinician, I would probably say that the human body is a living being, and it changes.

And as we've learned recently, we have new viruses that come up that we didn't know about before, and things are going to continue to happen. so the answer or the question might be can we get to a zero risk and how do we manage the cost of getting to a zero risk because the more procedures we put in place the more costs that will have to be incurred by the blood centers, the hospital and the system.

Now, the challenge we face is with our hospitals, and you might say, "Well, the hospital just wants everything that we can give them." My experience has been that's not necessarily the case. There is a push-back that is created by our hospitals in many cases, and I'll give you two examples.

Bacterial contamination was recently a debate, and there was a group of our hospitals in our area that basically said this is not something that we need. This is not a problem that we have, and we don't need that. They expressed those comments to the groups or powers that be, and still we had the regulations.

So, when the time comes, and I have to implement this new test, this cost associated with this, the value to my hospitals is that there is no value. There's no perceived value to them. So I run the risk of them trying to explain to them you need to do this and making a decision for them.

Another example is leukoreduction. We had a resounding, yes, we want to have 100-percent leukoreduction from our hospitals. But interestingly enough, within the few days of us going to 100-percent leukoreduction, we had a giant push-back, and you know why? It was because of the cost. It was at that moment that they realized, "Oh, my, this is going to cost us an awful lot of money."

So, from the clinical side, it was determined, although I know that there are very competing ideas on that topic of whether or not 100-percent leukoreduction makes a difference, but there was that challenge that, yes, we want to do this, it is good, but then, wait a minute, it's going to cost a lot of money. So that's a challenge that we face in working with our hospitals and our customers.

So can blood centers just pass the costs along? I have an answer of yes and no. I think it just depends. I feel like I'm in Ken Blanchard's leadership training, it just depends. It depends on the situation. And I'm going to talk to you about the cycle that we go through.

Now, this is what I call the "yes cycle," and up here at the top I have, in the beginning, if we pass along our costs, the blood center feels good because we have maintained our financial stability, and I'm going to talk more about financial stability a little bit later.

The hospital is not happy because their price went up, and they feel like, well, their reimbursement didn't go up, they can't get anything else. So their expenses are higher--perceived--and as we heard from Dr. Snyder yesterday, they reallocate, and reallocate, and reallocate. My question is how long can they reallocate? And also that goes for the blood center; if we don't pass it along, how long can we reallocate?

So the hospital begins to seek out their best price because they have limited dollars that they have to be able to spend, and that creates competition.

Now, competition comes from a variety of different places. Competition comes from other blood centers who have the ability to collect excess, particularly in Group O's,which is the driving factor in our medical center. We already collect 56 percent of our RBCs as O's, and I consider that to be a pretty high number, but our usage is in the 70-percent range. So we can't get there with what we have, and we're continuing to force our way and trying to encourage more O donations.

We also face competition from the local hospital blood banks because they say, Well--and we heard this yesterday--I can do it cheaper, so I'm just going to do it myself.

Well, the one problem there, and I've talked with the hospitals about this issue, is they don't consider all of their costs because it's already embedded into the hospital. So it is a perceived less cost.

The challenge with the hospital blood bank is that we start to compete for donors and, in some cases, the resources of the hospital are not such that they can collect those donors multiple times during the year. They may be able to go once or twice. Whereas, we might be able to go to those donors four times a year. So then we face a situation of underutilization of a donor. And the goal here, obviously, is to max out that donor to the best of our ability, and I know we continue to try to get two donations per donor a year, and we're steadily holding at 1.5 right now.

So we move on from competition. The blood center starts to lose their customer because they're seeking out that best price. The support for other regional programs starts to diminish, and the blood center begins to lose its financial stability. So while we started at financial stability because we went this route, we end at the other end of the spectrum that maybe we're not really there. So there is a challenge that we face.

The "no cycle" is a little bit shorter. The hospital is happy. The blood center has to basically do everything the hospital did and try to reallocate and absorb those costs. We do our cutting costs, and we still, in my opinion, face competition because getting that lowest price is the best way to go.

Now, in cutting costs, I think there are a couple of things that happen, and I would say this is probably similar in our hospitals. We cut costs, we put quality at risk. We have to be very careful where we cut costs and how we do that. We cut salaries, which then means our people are going to try to find places to find better employment, which means we have to face, and challenges an adequate workforce with experience and knowledge to do the job.

And believe me this, I think, being a blood donor phlebotomist and sticking everybody in the arm every day and having to do that perfectly is a real challenge, so it's not a job you can just pull somebody off the street to do.

We cut recruiting costs, which we've done in the past, but there's a challenge with that, and that's the shrinking donor base that we face with deferrals. And if we're not adding new donors, then we face the biggest problem, and that's the increased shortages I think that we continue to see today that are much larger and more intense.

And, finally, the challenge that we face, and this is going to be no different from our hospital so that we don't replace infrastructure, so our flexibility to react to new tests and having the resources available are challenging enough, but to do that without the proper infrastructure is hard.

So one of the things that we've tried to do, and that is to be a partner with our hospitals. To do that, we've designed some programs, some of which we've copied from others and some we've created on our own, to try to work with them to decrease the cost impact that they feel when we have to increase the cost of blood.

The first is a 1-percent, on-time payment rebate. Now, this is not your normal payment rebate because normally you'd go to a, you know, you don't pay, you have a late charge. From our perspective, we said, well, that doesn't really work because people don't like to pay late charges. So we said, well, why don't we do it to where we incentive the hospitals to pay us consistently.

So if a hospital will pay us three months a row in a quarter, they'll get a 1-percent rebate on their total sales for that quarter. This does two things. It helps us because it improves our cash flow, which is very important, and it also helps the hospital because they get the rebate. And really it's pretty, I would say it's not like we pay by the 10th of the month. We have, say, by the 25th of the month. So it's not like it's real tight.

The next thing is a hospital drive blood rebate program. Again, this has a twofold: We want to be partners with our hospitals, and that's critical in our community. Obviously, as I said, we face blood shortage, and we need more blood. Ironically, it is our hospitals that we don't have a lot of blood drives with. We rely on our churches, and our schools, and large corporate donor groups, but our hospitals we really want to get involved with the blood program.

So this summer we'll be starting a hospital blood drive rebate program so that if a hospital has blood drives with our organization, that we will give them a rebate for every tenth unit that they collect, and that way, again, they're increasing the supply to the region, and it allows all of our hospitals to be able to work better, and it will again allow a financial incentive to the hospitals to participate there.

Lastly, as a reimbursement seminar, we heard a lot about coding yesterday and how our hospitals may not be coding blood, and we want to try to help that. And through AdvaMed and the AABB we will be putting on a reimbursement seminar early this summer, and, again, hoping that education for that two-year lag and hoping to build that database so that blood pricing and reimbursement will be appropriate for the future.

So what happens to a blood center when costs are not passed along? Here, I want to give you a short case study of what happened to the blood center in the 1990s, when competitive market forces increased substantially?

This is a picture from 1990 to 2002 of our expenses and our revenues, as well as our red cell fee. The red cell fee is this bottom line down here, and you can see in these years where it stayed very stable. Now, in the front end, it really wasn't bad. We didn't have increasing costs that bad.

It was about 1992 to 1998 we had a 56-percent increase in our costs, and we only had a 9-percent fee increase. So what did that do? That started to precipitate losses. We incurred losses, and after those years of losses, we made some decisions that we had to continue to pass the cost along to the hospital.

Now, when I looked back at the graphs and the information we talked about yesterday, one thing that is very interesting is the fact that between 1995--and I think that's right there--and 2003, we saw RBC prices increase 135 percent, but from 1999 to 2003, they increased 110 percent.

So that answers the question of where that cost increase has happened. It's happened in the last few years, and that's because of NAT, leukoreduction. As I indicated, the challenges we faced with recruiting and trying to decrease the shortages that we're feeling, CJD and now with the West Nile Virus and the NAT licensure. So the cost increases are substantial.

Now, as a comparison to show you--that's our center--a graph from the America's Blood Center shows virtually the same thing. This is the red cell, and it has that increasing trend going for the same period. So this is an average of the America's Blood Centers' membership over that period of time.

We, also, I don't know, I'm sure you all read it, was Toby Simon's article in Transfusion, in February of this year, talked a lot about this. And when I read that article, I said, "My goodness. I feel like I'm reading about my blood center." And he talked about reserves dropping, and this is what happens when you don't increase your prices. Your reserves drop away and go to nothing.

I will tell you that our low point, right here, we had 13 days of reserves, and there were days that I seriously questioned whether or not I would be paying payroll that day. It's very unnerving to know that you don't have that flexibility.

And what makes this really relevant is when you think about the West Nile Virus. In one day, in a decision that we made, we lost $800,000. Now, was it the right decision? I'm not here to place judgment on that, but I know the impact that we felt.

Had this happened in 1997, that would have decimated my reserves. I would have had virtually nothing left. So to have financial flexibility for a blood center is very important because we have to react to those things that occur.

Now, I've been talking about margin quite a lot, and I want to be able to show you the impact that that has because a low margin doesn't help the organization. What I'm showing you here is the blood center, more in red. This is our annual margin. These are our years of losses for the last 13 years, and this is the average hospital profitability, and this is pulled from the Modern Health Care magazine that annually publishes by the numbers.

As you can see, our bottom line continues to be below that. And the margin is very slim. Knowing that I haven't had a 4-percent margin in 13 years, and I look at that, that would be nice just to be able to try to cover my capital expenditures. But that really shows you the lack of flexibility as an organization for generating cash.

Why I think this is so important is because we are here to make sure that we can provide a resource that can't be created, at least not today, for the patients that come into our hospitals. We provide a critical, as all blood centers do in this nation, a critical service to the patients of this country, and if we can't do our jobs, it's going to be dependent on somebody else to have to do that, but we know that shortage challenges exist. We want to be able to be flexible and have the ability to do that.

So basically we weren't able to replace our infrastructure. We decreased capital expenditures significantly, and what that does is it just delays it. Eventually, we're going to have to catch up, which we're doing today. Salaries were not increased for a couple of years. We didn't have increases. We lost experienced staff. We reduced expending in vital areas such as donor recruitment, and again that really was a significant impact on us.

So financial stability with a question mark. It's a balancing act. It's a balancing act between us, and our hospitals, and the system. It is a challenge, but it is necessary to talk about financial stability because we need the care of our institutions to be able to serve the patients in our nation. And as we talked about yesterday, the two-year lag in reimbursement is just too long. Somebody's got to take the heat during that time period while that's happening.

So I think really everybody pays. Everybody feels the impact. It starts with us, depending on how we approach this, and we work very hard to make sure that our costs are at a level that are reasonable, but when we don't recreate years of losses, we maintain a low margin no matter what we do, it creates a lack of flexibility for us to respond.

We do have the challenge of decreasing purchases of our blood components, and ultimately what that creates is a situation that we have to spread our fixed costs over a smaller area, which is in the highest-demand products, which is our red cells.

The hospitals are impacted because they can pay, but they don't get reimbursed, which then affects their expenses. They seek the lowest price that they can because that is what they need to do. That's what their administrators are telling them to do. They feel increases in other areas that may or may not be appropriate, and like we talked about, the decimal dust of the 1 percent of the hospital, it's not decimal dust to the laboratory because that's the budget that it's sitting in, and they're feeling the pain when their administrators are telling them to get the costs down.

But, ultimately, again, I come back to the patient. I really feel like this ultimately affects them, and Dr. Snyder said it yesterday, and, DR. KLEIN, you appropriately addressed that issue. Is the patient getting the quality of service that they need, and that's very important to consider.

And, finally, DR. BIANCO had a comment that we're in a trap, and I agree. I think this cycle never ends, and until we can break it, it will continue to be a challenge.

So, from our perspective, service maybe matters today, quality maybe matters today, which concerns me. Supply of O red cells, no question, certainly for us that is the greatest level of demand, as I am sure it is for most of the blood centers in our nation. And price, price and price is continually what I hear, as a chief financial officer, is that you cannot continue to raise the price of blood.

But I'm stuck in that wedge because I can't make a choice over here, but I have to make sure that my business, and I will say it is a business, I have 600 people that we employ, and I am responsible, as far as I'm concerned, to make sure that we have financial stability so that we maintain those jobs.

So then blood may become no different than orange juice or wheat or coffee or pork bellies, a commodity. I can't imagine that blood is a commodity, but I really think today we feel that it is--get what you can for the best price--and we hope that that doesn't continue.

So, in summary, increase costs must be considered when looking at safety. We really need to determine the additions and the risk benefit for that.

Reimbursement changes, again, we heard it all day yesterday. We've really got to try to make those match the safety regulations. If the safety is mandated, we need to have the reimbursement changes at the same time.

The loss of eligible donors needs to be considered. Again, as we heard yesterday when DR. EPSTEIN talked about the West Nile, that we have the potential of losing 1 percent, less than 1 percent I believe is what you said. And for me, again, living in the hotbed of Houston, as we were called last year, that's a big concern. I hope the number is 1 percent or less, but I don't know.

So can blood centers just charge more? Again, I say yes and no. It just depends. It depends on the impact that the blood center wants and can survive, and only time will tell.

But as I close, I'd like to just reflect on one important reason, and I've mentioned it an awful lot through my presentation. I want to remember why we're here and show you some of the things, one of the people that we work for every day.

This little girl's name is Victoria, and she is a patient, leukemia patient, in our Texas medical center. She was a vibrant 5-year-old one day and feeling just fine. She started to develop a fever, and she started to easily bruise, and her parents became very concerned by that. So they rushed her to the Texas Children's Hospital and our medical center, and within a day they had diagnosed her with leukemia.

She obviously was impacted by the therapy that she had to go through, and she needed weekly platelet and blood cell transfusions. Her parents fortunately were a match for her so they gave as often as they could, but they had to rely on the gifts of other people, and I want to read to you a quote from her mom.

"When you have your kids and your family, you take pride in how you support them every day, but to sustain my daughter, I have to depend on other people. It's a scary thing because you don't know how long people's good will is going to last." Once afraid of needles, her mom has a new appreciation for giving blood, and I am happy to report that Victoria has gotten a clean bill of health and that she will finish school with her friends and that she will spend the summer having fun like any normal kid because the gifts of so many donors were there, and I hope that they can continue to be there.

So she is dependent on so many of the things that we do. She is just one of the patients, obviously, and certainly, as physicians, you probably see many more of these than I ever have the opportunity to, but these are the reasons why I come to work every day, to make sure that we can provide the services to our hospital so that they can do the fabulous job that they do. Thank you very much.

DR. BRECHER: Thank you, Melissa.

Do we want to open for questions?

John?

DR. PENNER: Just a quick question. I can see that if we assume that we have lean production costs, which most of our centers are attempting to do in peeling this down, we continue to add on new laboratory assessment for quality and for safety, we're still left with the fact that we're operating, as we've already heard, with a DRG program. So what would you propose? Would you consider having a line item for blood separate from the DRG or would you have some folding in of product costs into DRG that can be recognized so that at least the hospitals would not look at this as a cost center problem that they can just attack, that they would consider it a necessity which they have to respond to?

So what of those things do you think might be plausible here? Otherwise we're in the box, and you can't wiggle out.

MS. FISHER: Right. That's a very good question, and certainly the challenge I think that we all face. I think it can work either way. I think somehow blood has to be recognized by itself as a line item and somehow has to be recognized so that when these measures are demanded, they have to be done.

There is not an option that those costs are recognized and placed against that. So the hospital doesn't feel like they're just getting hit, and I think that's got to be part of the deal.

DR. PENNER: So Jay has to work on getting this as a line item separate from the DRGs, right?

DR. EPSTEIN: If I could just comment that the FDA is not responsible for the financial side of this. [Laughter.]

DR. BRECHER: Dana?

DR. KUHN: MS. FISHER, thanks for that financial perspective of what goes into impacting the cost of blood. As a chief financial officer, I know that you're probably pretty frustrated when you see the costs going up, and I guess the quality and also the service going down.

But in order to incorporate the cost of testing and also some of the losses that you shared with us, what is your perspective of what the percentage of the increase in the cost per unit would need to be in order to incorporate the testing, as well as the losses that are incurred?

MS. FISHER: Well, again, I think it depends. When we have a new test come up, and I'll use the West Nile as a perfect example, we spend a lot of time to strictly evaluate what our cost is associated, and we really look at it what's our cost? We look at people, the reagent costs, which frankly are generally the most expensive part at this point because we do have a high-quality lab that does an awful lot of testing right now. So that adding labor to that is not extensive.

In some cases, however, we do have to construct new space because we don't have space to put it in there. So we're looking at the direct cost of that. It's going to depend on every situation. The cost for NAT was different than West Nile, and as I indicated, it's different for p24. So is this going to vary by the situation the impact that we feel? So I can't recommend a percentage to you, but I do think that it needs to be considered, and it certainly can't be considered by blood center because blood centers are going to vary in that cost, but I know that we worked with America's Blood Centers when we went through the clinical trial of NAT testing to where we created an average of everybody's cost of what the NAT cost us as the clinical trial, and that was reported to the FDA.

So I think, from that point of view, the data could be picked up from the blood centers and provided to the agencies.

DR. KUHN: I think the reason why I asked that, I may be looking at this too simplistically, but if you had a NAT that added cost to $4.3 million, and then West Nile, $2.2 million, and then $3.6 million, I would think you'd be able to figure out mathematically what kind of percentage increase that would be over a unit of blood, at least based on those numbers.

MS. FISHER: I could. I'm sorry, I don't have that information.

DR. KUHN: I think that would be helpful information, I know for me, to be able to say what is the percentage increase that is going to be necessary for us in order to continue to offer units of blood uninterrupted and without having these losses, but also do it in a fair and equitable way? I think that's very important information whether you get it aggregately from all blood centers, but I think that is an important piece because you're asking for, in some ways, how do we increase the costs to cover everything? Well, unless you know really what that cost is and how you're going to add that onto a unit of blood, you're kind of like swatting flies in the air. You need to have some real numbers.

MS. FISHER: Well, and again, I would say that, as I indicated to you in the last four years, 110 percent I think is what the figure was that our costs have gone up. I can certainly say that from 1995, when I joined the blood center and blood was mid 70s, that a unit of red cells today is in the high 170s. So that's a huge increase that you can see right there. That was, I said, 110/135 percent.

DR. KUHN: Thank you.

DR. HOOTS: You were talking about your $800K write-off, single, for having to discard for potential West Nile contamination of your frozen reserves. There are precedents in society because obviously that reserve is critical in a number of ways, and Dr. Snyder alluded yesterday, in terms of even reserve, in terms of potential terrorism having redundancy in case something happens, and certainly FEMA provides for structural reserve for our society, in terms of if you were to be blown away by one of our hurricanes or something, then FEMA would come through and help you with your physical infrastructure.

But I don't know that there is any way to indemnify yet, at least, for this kind of one-time hit, and perhaps that's one way we could explore, from the federal level, to help indemnify blood centers because obviously Houston is in a critical West Nile thing. The next pathogen may strategically hit the Northeast and the Northwest, and those kind of one-time things are, it won't solve the big problem, but certainly if you didn't have to take an $800K hit, it would probably have helped you, at least in terms of reestablishing that critical reserve.

MS. FISHER: Very true, and one of the things we did do, DR. HOOTS, when that happened, was we evaluated whether or not there was federal funding that might be available to us from either a disaster perspective or related to West Nile. We found none at that time.

DR. BRECHER: Mike?

COLONEL FITZPATRICK: I just have two questions.

One, given your reserves, other than making capital improvements to incorporate a new test or buy new equipment to do testing or meet a regulatory requirement, have you been able to look at other capital investments in the way of modernizing your procedures and your equipment or are you restricted because of this in doing that?

MS. FISHER: In 1999, when we made the decision that we could not absorb costs going forward after we had done it for the years in the past, we have started to build our reserves again. We have a goal that's 90 days, and we're still at less than half of that at this point, but we are steadily building it in small increments.

We find the ways to do it. We will figure out ways within operations. I'll give you an example. For the West Nile lab we're constructing, it's about a $350,000 expenses. We had to evaluate other things we already had planned for this year and make a decision that we're not going to do those. So we really have to do the reallocation game that Dr. Snyder talked about and make certain decisions, what are we going to give up to make sure that we can do this?

Somehow, interestingly enough, we always figure out the way to do it. I applaud our team at the blood center because we always figure out the way to make it happen. Sometimes it's very difficult, but we make it happen.

COLONEL FITZPATRICK: My other question was could you explain a little bit more about the donor rebate program.

MS. FISHER: The hospital program or the on-time--

COLONEL FITZPATRICK: The hospital.

MS. FISHER: We are looking at our hospitals that we have or don't have blood drives, particularly the ones we don't have blood drives with, and we will establish a goal with the hospital, and they will meet or exceed, we hope, the goals that are set with them.

When we do that, for every unit of blood that we collect, we will return to them the value of an RBC for every tenth unit that they collect. And if they exceed the goal for I think it's every five--and, again, this is a very new program, Colonel, so I'm not positive this is exactly what it ends up being--but for every five they'll get half of the value of an RBC returned to them in that rebate.

DR. BRECHER: Last question, Ron?

DR. GILCHER: Mine is just a comment, Melissa. We've been doing this for about three years, using the rebate program. For us, with many rural hospitals, it's been very, very successful in bringing in significant numbers of donors because the CEO of the hospital gets behind the community blood drive. We've had a dramatic increase, at least with the rural hospitals.

We've also done it with the large hospitals, and it's not had as great an impact, but we actually have now some hospitals that collect so much blood that they have virtually no blood bill, and that has become very important to some of the rural hospitals, in terms of how we are helping them stay afloat because the rural hospitals are in crisis with respect to funding, but I want to point out that this mechanism works extremely well. We are now going into our fourth year with it, and it has worked extremely well for us.

MS. FISHER: That is great news. I hope it works the same in the City of Houston.

DR. BRECHER: Sorry, Karen. You can have the last word.

MS. LIPTON: I just wanted to ask, and actually, Mike, if you could think of this, too, do you know what it costs you to recruit a new donor when you lose somebody, for example, who is a six-time a year donor? I mean, I think it would be very important for us to know what does it cost you to bring in a new donor and bring that donor up to that same place? Because it seems to me we keep saying, well, we're only going to lose 1 percent of donors over this, but there is a real cost to that. And I think if we understand in dollars what that means to go out and get a new donor when you have to replace them, I think that would be a very important thing for the committee to know.

MS. FISHER: That's a tough answer to give you, Karen. I can tell you that our cost overall per donor is like $10 to $14 for recruitment, but your question was directed at how do I get that donor to be a six-time-a-year donor.

I can probably get them back one time, but to have them have that much commitment is questionable to that donor, what can I do? Because I think a lot about the donor is the donor has to feel the commitment themselves. And one of the things that we're working on right now, which we'll probably roll out later this year, possibly early in 2004, is a program called Commit for Life. And what we're trying to do there is instead of getting people to focus in on an annual, you know, give four times, five times a year, we want to commit them for life. So, instead, give every quarter, so then it's a continual cycle that goes round and round. We hope that with that type of a program, people who may just give once a year will consider I'll give once a quarter and automatically we get them to that point.

So I think it's difficult to say how do I get them to be that six-time regular donor.

DR. BRECHER: Thank you, Melissa.

MS. FISHER: Thank you.

DR. BRECHER: We'll now move to our next speaker on the same topic, Mike Fuller.

MR. FULLER: Good morning. I noticed yesterday that the church was arranged with the pulpit in the direction so that we can preach to the choir a lot easier, and I appreciate that.

My name is Mike Fuller, and I'm the chief operating officer at the Blood Source in Sacramento. I've been in blood banking almost 30 years now. And just as a point of reference, I do remember when blood was $30 a unit, so it has gone up dramatically, but I would indicate that I don't think it's the same unit of blood that we were supplying back in 1974 as we're supplying today. A lot has changed.

I think Melissa did a wonderful job. I just wanted to say that Sacramento is just slightly smaller than Houston. The medical community is obviously a little bit different. We only serve about 40 or 50 hospitals, but a lot of the operations and the issues that we deal with are exactly the same.

It was really surprising to see her presentation because it was exactly what I had thought we ought to do to present, and I had to figure out where we're going to go from here based on what Melissa had started with.

The one thing that is different in Sacramento our financial picture is not as rosy as Houston's. We've only had one year in the past six where we have made money, so our reserves are nonexistent. As is the case or was the case, at least before the last couple of years, with a lot of our local hospitals.

You've probably seen that commercial on TV, where the baseball manager goes to the mound, and he tells the pitcher he has good news and bad news. The bad news is that he's relieving him; the good news is that he saved money on his car insurance--the manager did.

Well, I do that with the board kind of periodically. You go to the board and you have good news/bad news. We're losing five point something million dollars/six million dollars over the last six years, but the good news is I don't have to hire any accountants to take care of our reserves.

[Laughter.]

MR. FULLER: So there's always a positive way to look at this, and I think our hospitals are pretty much in that same situation, at least in California and certainly in Northern California. It's been an interesting managed care experiment, and I think the experiment is over with, and I think that most of the hospitals, and certainly the blood centers, in California would agree that it's not been particularly successful.

I don't believe that the system can be repaired. I believe that the box that DR. BIANCO mentioned yesterday has to be completely blown apart, and we have to start all over, and I'm going to try today to kind of walk through why I feel this way and the reasons why that I don't think that we can take a line item or do any of these things and really fix this system because I don't think it is fixable.

Up to this point, the agenda, the questions have been fairly easy to answer, but I think really what you are asking is the "should" questions rather than the "can" questions. The "can" questions are obviously yes. The "should" questions are should we pass on this cost without adequate reimbursement? That's the real question. And for most of us, just by virtue of being who we are, we agree that we should not, that there should be some reimbursement down the road or we see a lot of bad things, like Melissa said, are going to happen to our blood centers or to our hospitals.

And not withstanding the current competitive environment that we find ourselves in, I think that our collegial past really had set a stage for some phenomenal things to happen in the blood banking community.

I think that for 50 years we did a remarkable job taking transfusion medicine to new heights, and it's really only recently with this imposed competitive, and I think it started out with friendly competition or whatever the Clinton-era word was, but competition is never friendly, and Deming even talked about that, and it's always destructive. It's destructive in the real world, too. Honda and Isuzu made a lot more money by building cars and trucks together than they ever did competing end on end.

I think we're kind of in that same situation. I think we did a remarkable job addressing the AIDS crisis, regardless of what the media said. I have never been put in a position, since I have been in blood banking, and I have been with several organizations, large, national organizations, where I was ever asked or ever intimated that I should put the patient at less than the top of our list, that safety and adequacy were always the most important, and that's all the time in the last 30 years. I think it was unfortunate that we got the rap that we did, but I think we were kind of novices at the media game at the time.

I think the short answer is, yes, we should charge more if there is reimbursement downstream for the hospitals so that they can get the money for these new safety initiatives.

We heard yesterday about allocating costs, and there were some questions about allocating costs. I think it's pretty easy in the cost allocation, and I think we suffer from that $10 aspirin example of years past.

When we started this, and actually I think I'm going to go back in just a minute and talk a little bit about history, but there was a sense that blood had a lot of costs in it that really didn't need to be there, that somewhere in this product that we were providing that we had, like the aspirin, put in about $9.90 worth of costs that really didn't belong because that's really what the DRGs are all about. There was a lot of money in that aspirin, and what it was was just bad cost accounting. They just threw a lot of costs in there because I don't think there were any really hospitals that were getting rich back in the '60s and '70s.

So what happened is we took this perception that there is cost in blood, and then we worked through that, and that's kind of where we find ourselves today. There really isn't any extra cost, and I think most of us, we're all kind of in the same group purchasing organizations. We all pay about the same thing for our raw material direct cost, and I think if you ask us would we accept just the vendor charge for the test, we would be ecstatic, and I think that's fairly easy to target; again, because we all pretty much pay the same, and the blood centers will work out the people side.

As Melissa indicated, that's usually the less-expensive side. Now, we may negotiate with the hospitals, but in a lot of cases, as she mentioned, we already have the overhead of the infrastructure to accommodate a new test. It's just that extra $5 that we have to pass along that is such a nuisance to us and to our hospitals.

If you looked at her charts, and I think most community blood centers, and the Red Cross included, are like this, you'll find that our revenue picture looks exactly the same. We've tried, over the years, to be partners with our hospitals and not put these burdens on them that somehow they can't resolve, too, realizing that it's a continuum, it's a system that we have to protect.

Yesterday, we also heard, and I apologize, I didn't get the program down that Mr. Green noted yesterday. It talked about a $100-million program, and I can't remember if it was instituted or cut, but I do remember that he said that it's a little more than our take-home salary, and I think we also suffer from a perception.

Now, that's probably true in this room, at least I would imagine to the people that I'm looking at, but about I guess it's been almost four weeks ago now, there was an article in USA Today that they noted the highest-paid CEO in the country. His take-home pay is $116 million, and he just happens to run a chain of for-profit hospitals.

So it's really hard to come to Washington and say we're losing money, we're having these problems, when you see in USA Today that CEOs, and we know every CEO gets this $116 million, and that's before stock, by the way. It was closer to $200 million if you add in the stock options. Two hundred million is taken out of health care.

I was watching my wife a few weeks ago, and it became very apparent that you can say just about anything about anybody if you say, "Bless their heart," after. You know, you can basically, you know, "That ugly baby, bless his heart."

[Laughter.]

MR. FULLER: And I'm thinking about this CEO, and, well, you get the picture, and I'm thinking "bless his heart." He's causing us an awful lot of problems, and people don't understand the difference between the nonprofit and the for-profit, and I'm not sure that it wouldn't happen in for-profit, but I think the motives are a little bit different. In certainly the hospitals I deal with they are.

I think one of the alternatives, looking for solutions, is to maybe back up Medicare reimbursement and back it up to maybe our suppliers, the blood bank suppliers, the people who provide us bags, and tests, and bacterial detection devices, and let them go to Medicare and get reimbursement before they ever give us the product for free, and we pass it on for free.

They have more ability to work with Medicare to kind of generate that reimbursement right up front, and then we can just pass it on free, and there wouldn't be any charge to the hospitals, and the hospitals and blood banks would be much better off. I got a sense they're not going to deal with 62 percent of the cost of doing business, though.

I don't think that any real-world company is going to do that, and somehow we have been plagued with that. Again, I think it's perception and because we are individuals in this game. I think we do have some collateral, and we'll talk about that in a minute.

I mentioned earlier we're dealing with some issues from the past. I think we have leftover Reaganomics, bless his heart.

[Laughter.]

MR. FULLER: And this is from 1978, when we really looked at things and the powers that be said there are too many physicians making too much money off of Medicare. This was really the way the conversations were going, and so they said we're going to implement DRGs.

And actually it was a physician who was on Reagan's staff who had this idea of injecting a little market mentality into health care. For what it's worth, years later he had the opportunity to be a victim of managed care, and I understand, legitimately, he planned on changing his mind. He left a day surgery center, oozing blood and vomiting from a procedure that used to be an in-hospital procedure. So I guess everything kind of comes around.

But I think at the time we were looking to try to penalize some physicians that had learned how to work the system, and what we've done, it seems, is taken the money that the physicians were making and actually give it to the administrators. So I guess that's why Dr. Snyder yesterday was talking about physicians getting MBAs.

In my opinion, the market model just doesn't work by definition. I think a lot of the business terminology just does not fit health care. I'll try to give you some of the reasons why I believe this.

First, we provide funding on a macro level, and it's real easy to do. You take the young lady that we just saw on Melissa's slide, you take her out of the picture, and you deal with a vast majority of data, and you make some decisions, and certain decisions can have phenomenal cost savings.

But then when you hear about two-year-old data that you use, I'm not sure that there's very many companies in a real-world market that are using two-year-old data to make decisions. If you think about the airlines, they change pricing daily on specific flights, and many times a day on specific flights, and they have software that they'll sell you to do the same in your business, and we don't have the opportunity to do that. So we actually pull that ability away. So we're limited there.

Second, we provide service on a micro level. It's the individual that gets the service. It's not humanity that gets the service. Too many times efficient health care is for somebody else. That's for your family, that's not for my family. When Aunt Bessie needs help, she needs the best there is. Even though she's brain dead and hasn't spoken to us in a month, we want the best for her, bless her heart, and by the way, her heart hasn't beaten in a week, but we're going to do everything we can to keep her here with us as long as possible.

Third, I think we treat health care as an entitlement or a right, and we have never had that vote in the United States. I'm not sure that's not the right thing to do, but we've never, as a country, said it is the right of everybody to enjoy a level of health care, but we fund it as a market commodity.

Now, I think these definitions I think are bad. I don't health care, because of who you all are, I don't think it can ever be a commodity. You cannot, because of your profession, treat it as a commodity. It's just not possible. You can't say no to somebody that you know you can help with it, and without the ability to do that, it's not a real-market model.

So this schizophrenic modeling, finally, is further complicated by the lack of substitution. Time and place utility doesn't work real well. I mean, you can't substitute a heart surgery for an appendectomy. If you're bleeding out a couple units an hour, you can't wait around for the artificial stuff. I mean, there's certain things that just don't work in a classic market model, and I don't think these are going to change.

I think we heard the economic models and the market examples yesterday. I think another problem is kind of what I just mentioned is exclusion. If you're working at Starbucks, and you're one of their, is it baristas, and I come in, and I don't have the $5 for a latte, you're probably not going to serve me.

And it's not the same in a hospital. We treat people, regardless of whether they have insurance. We kind of say that we don't, and we pretend that we are better business people than that, but in fact people do not die from a loss of blood because there isn't enough blood in the community or because they can't pay for that blood. And I think it's been a long time, at least since I've been in blood banking, this has really never happened.

I go back to the ABC, before it was America's Blood Centers, when we were talking about regionalization and some other things, the last true national crisis, it seemed, was in the '60s, especially during the Vietnam War, and not being in blood banking at that time, I'm not even sure how much of a crisis that is today.

Our concern with having enough and the perceived crisis if we don't get enough I think is what drives us today, and I think that's appropriate, but the real crisis or people dying really hasn't happened.

We also heard that before 1984, there was really little incentive for hospitals to become efficient. I have a real problem with the word "efficient." I think health care, by definition, is inefficient. It's the alternative that's efficient. So it's difficult to come to grips with just being able to say you can be efficient in something that is inherently inefficient. It just doesn't work.

Now, I think what we're really talking about is driving the waste out. We want to make sure we use our resources properly. But then when you look at waste, there are plenty of times in science where you're not really sure it's waste at the time that the experiment didn't work right.

I think, even in the real world, you can look at 3M and the adhesive that didn't work right when it was generated, and as they kept it around and worked with it a little bit longer, it turned out, obviously, not to be waste. And so post-it notes are the rest of the story.

So I think we have to be careful with some of these classic business definitions and models. I even believe, and I don't have data for this, and I apologize for that, I've had personal experience in two hospitals in the last six weeks. One hospital, in a very high managed-care area, and in fact I think this particular hospital was 95-percent managed care, 95-percent under contract, obviously, in this hospital, health care was marginalized.

These nurses did not need MBAs to understand the business. They had been beaten up with business for the last 15 years, and they understood exactly what they were doing, from a business standpoint. In fact, it really was unsettling many times because you knew they were thinking about what they were spending on the patient more than they were thinking about what the patient needed to do to get going.

The other hospital, they were very focused on the patient. That was in an area of the country that had a lot less managed care. In fact, I'm not even sure it was more than 20 percent, but the focus was on the patient. And the interesting thing is that the nursing ratios, patient ratios, were 8 to 1 in both hospitals.

And in one hospital it was different than in that other hospital; you had a sense that you were being taken care of, and in the business hospital, you were a customer, and they were going to try to get as much margin as they could because they needed to, to survive the day or to survive the quarter or whatever.

We know, to a certain extent, that our health care is basically you pay now or you pay later, and I think it's probably like that in a lot of other markets too. If we postpone again, like Melissa's charts, we try to hold on to costs. Ultimately, we're going to go broke if we don't pass them on, and if the hospitals don't get reimbursed, ultimately they're going to go broke.

Competition, I think, creates a very short-term mentality. Even though we don't have quarterly stockholders meetings or dividends or things we have to create on a quarterly basis, you still think in terms of the next financial. We actually were required by our board to get our financial reporting down to eight to ten days. I'm not sure what difference that made. Still, we didn't make any money, but they knew it quicker. I guess they were happy about that.

So the short term is I think really a problem, and it's a problem for the long-term savings in health care.

I don't know how many of you saw this USA Today article the other day, but Sacramento is sixth in the most polluted areas in the country. California, they said, hit four out of the top five, but they would have had five out of the top six if they'd have gone down one more.

We actually looked at changing our fleet of 60 vehicles over to clean air vehicles. The cost was too much, even with the subsidies that you got from the agencies. Now, that's the right thing to do. You know that this is going to have a positive impact on community health in the future, but if we added that cost to our unit cost now, even though you could see the future benefit, we stand to lose customers, and if we lose customers, we lose revenue, we lose revenue. You get the picture.

We are competing with a low-cost provider in our area, and it is on price only. We have not had a shortage in over 20 years. We actually resource share about 30 percent of our red cells. So we have more than enough, and it's important to have more than enough. Obviously, again, this is the choir sermon. You have to have more than you need so that everything is available when you need it, and we've kind of gone by that, invested in recruitment and tried to be able to have that.

I'm sorry that I'm like Melissa's answer, it's just too difficult to really come down with what it costs to get that repeat donor. And just going through in my mind, it probably is not a lot different because you spend different kinds of money and recognition on them to keep them repeating as you do for the first time. So there's probably a fairly consistent price that you're paying to continually try and keep those people to repeat.

Our 10-gallon program this year had about 1,100 people attend, and these are all people that have donated more than 10 gallons, some of them up in the 65 and 70 range now, with ability to do frequent plasma. And that event cost us about $90,000. So that's just specifically those repeats. So I don't know, it's really difficult to cut out those costs.

I think competition can definitely have a very negative impact on our organizations and on our hospitals.

The one thing we do, and I think probably all blood centers do this, is we try with our new employees to make sure they understand that safety and adequacy go hand in hand. You can't have one without the other, and this is where I take exception to the FDA not responsible for the money part because the money part creates the adequacy part, and without the adequacy, you don't have safety. You may have the safest unit, but if you need two of them, and you don't have enough, there is no safety.

I was also thinking, as I was thinking to everybody else, I think if the FDA actually had a role in adequacy, I think we probably would not hear as much about shortages. So maybe there's a direction there that we could take it to. But it is very important, and Melissa spoke about this, too, to take care of the safety part because we have to comply with the safety regulations because of the federal mandate. We can be closed down very easily. Adequacy is on our own. So if we're going to divert resources, we're going to divert them from adequacy into the mandated safety part of our business.

I think a lot of future opportunities are also lost when we're diverting these resources. The repeat donor, if we don't start today, we're probably not going to have those donors as we go forward. And, again, as Melissa said, it's kind of getting to be very individual. We've picked the low-hanging fruit.

The easy blood drives we're all doing. It's now we're spending more per unit to get it in because it's harder, and harder, and harder, and you have to be more individual in the way that you go. Anybody can go out, if you can find them, and do a 100-unit blood drive, but now we're going to have to find people, with the way we do business, in much smaller areas.

Just briefly, we had on our pricing list a couple of years ago two types of apheresis platelets. One was a 3.0 times 10 to the 11th, and to the other was a 4.0 times 10 to the 11th, and our theory was that if we put more platelets in the bag, you could use less platelets, and we sold none of those. We only sold the 3.0 because they were cheaper.

As Melissa said, it's price, price, price. And I think that's mostly from the purchasing agents. I'm not even sure that's from the lab any more. Now, the CEOs can talk a good talk about utilization and everything, but somehow it doesn't trickle down.

Dr. Snyder talked about layoffs. All of the hospitals in Northern California have gone through several rounds of layoffs, and we heard that two of our major hospitals are going to do this again because of some of the cuts that are coming out of the California budget because of the financial crisis that California is in.

I've probably done enough whining. I think all of you know kind of the whys of all of this. It's kind of where do we go. I mentioned I don't think that the system really can get fixed.

It seems that when we talk about the GDP, in fact, we really are talking negatively when it's health care. Now, if GM increases their part of gross domestic product, we're really happy that somehow they've done something miraculous, but if health care does that, it's in a negative context. I was thinking, why does that have to be? I mean, we provide jobs. We provide very high-level paying jobs, and by the way, we save lives. I mean, we might make cars, but we save lives. So you think some of these things just are not in a business mode. They just don't meet those basic market models.

We have about one physician for every 30- to 40,000 units. Those physicians sit on the Transfusion Committees by contract with our hospitals. They are those people to say no that Dr. Snyder was talking about, only they're really not there to say no. They're there to ensure appropriate utilization. I think even with their efforts, there comes a threshold where you're going to use "X" amount of blood on "X" amount of patients regardless of how good you get if you're going to have a positive patient outcome.

We have saved a lot of money. It's interesting. I go back to the competition that I mentioned the other day with the low-cost provider. One of the systems has put together a formula, and I apologize, I don't know all of the aspects, but it's an adjusted case mix on missiles or something like that.

Basically, what the bottom line is, even though blood source is a high per-unit priced product, we actually come out as a middle-cost provider for the hospital systems because we work with utilization. Our utilization rates are less than the lower-cost provider. If you think about that, those incentives are the way they should be. All of us need pretty much the same amount of revenue to make it work. It's the same way in pretty much anybody's institution. It's just how you get there.

We charge a little more up front. We pay the professionals to do the work, and we evidently are seeing that on the outcomes. In a lower cost, you need to sell more to get your volume up because your margins are smaller, so the hospital pays more ultimately. We hope we can show this in more cases as we go forward.

So utilization is a real key at this point. A lot of our physicians in our area are going back to fee-for-service. It's a rather novel idea to get paid for what you do. It might be something that we need to look at.

I think we always need to look at the value that the dollars we spend provide for an enhanced patient outcome. The focus needs to be a little different than perhaps it has with just a general we'll pay this much for this kind of a thing.

I mentioned aligning incentives from the vendors all the way through the patients, so that we all have the same outcome at the end.

One thing I just wanted to comment before I wrap it up. Yesterday, if we could just provide the data--the data was good--if we could just provide the data that they would understand--it's kind of like if we build it.

We were at a legislative day about two years ago/three years ago, and a lobbyist, who is a retired Congressmen, said that all of the data in the world really didn't help HMOs. In fact, the data show that HMOs worked. It was a movie that actually caused more patient access or, in some states, Patients' Rights bills to be passed. That movie was "As Good As It Gets."

And if you remember, those of you who saw it, the scene, it's Helen Hunt's ranting, and raving, and bashing the HMOs as she's talking to the physician that's going to treat her son in a better way than the managed care or the HMOs had. And he actually said that this movie had more of an impact on getting people motivated in Washington and around the United States than any of the data because the data actually showed that more people were covered. What that meant, I'm not sure, but for those of you who belong to HMOs, you can kind of take it from here.

I think advocacy is our answer. I think we have about 8 million voters as our donors, and we need to turn--that's our political collateral--and we need to turn those donors into voters for what we see as the needs of health care and of transfusion medicine.

We have started that in Sacramento. We've purchased software that actually helps us do that, and we're going to try to push ahead so that when we go to the state legislature, which we seem to do more and more now, or when we have to interact with our national representatives, they will know that there are votes that come along with us. We don't have the dollars, and we're somewhat restricted on PACs, but we can turn our donors into our vehicle for change.

I think if we don't change, I think we're going to exclude those very people that Mr. Green said DRGs were intended to give better quality to. Those Medicare beneficiaries are going to be ones that are ultimately excluded because there's no money in it, and the providers are not going to take--they're going to be more like Starbucks. They're not going to take the people who can't pay. Thank you.

DR. BRECHER: Thank you, Mike.

Jay?

DR. EPSTEIN: I just want to make a few comments. A lot has been said about the FDA role, and a number of inaccuracies I think just need to be fixed.

First of all, the assertion that FDA ignores implications to supply. Our mandate under the statutes is to assure that biologics are safe, pure and potent, and biologics, when they're drugs, need to be safe and effective.

However, the Agency has, for a long time, recognized that adequacy is part of safety, and I think that the record would support me in the statement that we have repeatedly with emerging issues considered the supply implications of policy alternatives and have been very mindful both of that role in policymaking and also proactive in trying to monitor the supply impacts of decisions both before and after the fact. So it's simply not true that we don't recognize a responsibility to consider the supply implications.

Now, the issue of cost is a little bit more complicated. It is certainly true, as many people have stated, that FDA policies have a major impact both on cost and availability. However, it needs to be understood that the mandate of the Agency does not include considerations of cost except when they are part of rulemaking.

So when we are doing a product review, it's not within our purview or when we are establishing a policy outside of a rule, it is not within our purview to consider costs directly. Now, we do consider risk, and to a certain extent many elements of risk may be derivative of cost implications, and we certainly can be aware of and consider risk, but we do not directly control costs, we do not set prices. The only exception in that area is that we permit cost recovery and investigational studies. And there are certain limits to what are allowed under the law for cost recovery. Now, coming back to DR. PENNER's point. We are not the agency that establishes reimbursement. The Medicare system and Medicaid are managed by CMS, not FDA, and CMS then deals directly with the issue of reimbursement for products. This brings back to my mind a statement that was made by I believe DR. KLEIN at a symposium or a workshop that we had on NAT, at which he said, and correct me if I'm wrong, Harvey, "We don't have a cost problem here. We have a reimbursement problem."

And I think that it's important to make that distinction. Because many products that are safe and effective would not be approved if the only issue was whether they add cost. Of course, they add cost. So cost is part of the equation, and cost has its implications, but it should not be isolated from the larger issue of how do we pay for technology advancements.

So I would submit that much of the focus is misplaced saying FDA causes costs. The issue really is are these affordable and how are they reimbursed, and that gets you into many, many larger social questions that are outside of the FDA purview and, in fact, are one of the chief reasons that this Advisory Committee was created. Because unlike the FDA, this committee has within its charter the ability to consider directly issues of cost, issues of global public health impacts, issues of social choice and prioritization that may affect global health.

So I think FDA is an easy target in this domain, but it's not helpful because we're the wrong target. We have a role in this, but that role cannot and should not be isolated outside of the larger context of our social system and our economic system, which is I think what the real issue is in front of this committee today and yesterday.

And then lastly I want to comment on the issue of mandates. Certainly, the FDA is in the role of setting standards and, as everyone knows, we also have enforcement powers, which is not true of other public health service agencies.

However, there is a distinction to be made between requirements that are in existence as a result of statutes and regulations versus guidance. And we have a regulation regarding guidance, and it leads to the following concept. I'm just going to read you some standard, boilerplate language that's on every guidance document that we publish.

"This guidance represent statute Food and Drug Administration's current thinking on this topic. It does not create or confer any rights for or on any person and does not operate to bind FDA or the public. You--" that's the blood establishment "--can use an alternative approach if the approach satisfies the requirements of the applicable statutes and regulations."

And this is, in fact, true, and the Agency deals on a daily basis with requests for alternative procedures. So the bottom line is that it's the statutes and regulations which govern, that the regulations are established through a public process involving notice and comment. They're not created in a vacuum. And as issues emerge, the FDA does give the public advice. You know, we do promulgate recommendations to the regulated industry.

Of course, it's true that we expect compliance. Of course, it's true that we try to promulgate recommendations that we feel will be a basis for enforcement, but it's concurrently true that alternative approaches are acceptable when they satisfy statutes and regulations.

So I think that my main point here is that FDA has a major role to play and that we accept that and I'm not backing away from that. But demonizing the FDA as the cause of the problem simply won't be helpful because we're a player in a much larger field where there are many other forces operating. And one force that I would draw attention to coming from your own remarks is the issue of competition within the blood system. And I would ask you whether you think that it is, in fact, the price competition that went on for over a decade among the blood organizations. To what extent is that the underlying reason that hospitals have been able to essentially put the blood center under the squeeze? Because, after all, the hospitals have an obligate need to purchase blood. I mean, they cannot operate. There won't be surgeries, there won't be chemotherapies, there won't be trauma care, et cetera. So they must buy blood.

So how can it be that, whereas they must buy blood, they can keep telling you, well, we won't pay that? And I'm not an economist, but it seems to me that part of the answer, at least, is that they've been successful getting it from other sources. They can cause you to compete with each other, lower prices. I mean, we saw the graph from Melissa Fisher that showed that, despite more than a decade of rising costs, blood centers were not charging more for blood. This is not free market economics. And you have to wonder: Why did that happen and, you know, was that the fault of the increased cost of safety measures, which seems to be the contention? I don't think so. I think it shows other problems in the marketplace, and I tend to agree with you that it is evidence of the fact that the market model is not working in this sector of the society.

But, again--and I would appreciate your comments on the impact of competition among blood centers. But my point here is that I tend to agree with Harvey, we have a reimbursement problem much more than we have a cost problem, and I think it's simply not helpful to say, well, you know, FDA is the root cause.

MR. FULLER: First of all, I apologize if I indicated or in some way demonized the FDA. Actually, we teach in our new employee orientation that the FDA is a customer and we have to satisfy that customer like any other customer.

I think initially when we--as novices, when we were learning the legislative game, our only contact had been with FDA, and we obviously are people that wear white hats, and so doing God's work, if we do the right thing, then everything's going to be okay. We weren't quite exposed to Washington yet.

I think today I agree with you completely. It is a funding issue. I think that the DRGs and the whole market implications started the competition. It started hospitals thinking that they could get something different and that--I'm not sure that you can separate any of that. That certainly is part of it. But if you looked at that same time, we have a time line that shows the implementation of new tests. I'm not sure that's any different than General Motors when they're required to put in seat belts or air bags or anything, a new bumper that will withstand pressure.

The difference was on the end--and this has nothing to do with FDA, but the difference was on the end they're allowed to seek reimbursement for that. When I go to buy a car, I've got to pay for those things. But when we add them, the hospitals don't get any money. And that's not an FDA issue. That is a CMS issue, Medicare, MediCAL, those kinds of issues.

So, again, I apologize. It's not the demon. Sometimes I think if we named the demon, we can get power over it. But it's not the FDA that's the demon. It's the funding. So it is a cost issue. It's truly a business issue.

The problem is the focus is on those things that we need to do, and I would think any blood center--again, in my career, any blood center would not want to do everything that they possibly could do to make sure that it's the safest unit that goes on to comply with the regulations in the highest manner that they possibly can and go from there. It's just that it gets very frustrating when that funnel gets so narrow at the end. And you do have--you're absolutely right. There is a lot of playing one center against the other. They learned that very quickly, and actually I understand that it was some ex-blood bankers that were out consulting to tell them how to do it even better. And that's all free market.

The problem is that, again, there are things that other markets you can do that we can't, and it really isn't an issue with the FDA; it's an issue with how we run our business outside of that.

DR. BRECHER: We have to move along.

To Mike's defense, Jay, he never did say, FDA, bless their hearts.

[Laughter.]

DR. BRECHER: We're going to go Harvey, Celso--we have three comments and questions. That's it.

DR. KLEIN: Yes, Mike, I still say that this is a reimbursement issue, not a cost issue; and for the record, I believe that blood is an enormous bargain in terms of what the health care system gets.

Now I'd like to ask you a variant of the question that DR. PENNER asked MS. FISHER. This is the Secretary's committee, and we're going to be making recommendations. Obviously it's a given that we're not going to reform the whole reimbursement system, and we're probably not going to get out suppliers to give us their supplies free, as attractive as that seems, that concept seems.

Given that blood is a national resource, what should we recommend in terms of reimbursement? You must have thought about this at some length, and I'm sure MS. FISHER has as well. What would you recommend if you were the Secretary's committee?

MR. FULLER: I think the easiest and the cleanest thing to ask for at this point is, again, because we're all part of the same group purchasing organizations and pricing is virtually the same for our direct raw materials, that if you just ask for the cost that those safety initiatives are provided to the blood center; if it's $5 for a test, just the reagents, that we ask for that. And then we'll let the blood centers and the hospitals negotiate the people part of that or the production part. And in some cases, we can implement that with very little overhead and very little extra cost. Other times, like NAT, it's a whole new lab and there's things.

But to begin with, that cost is an easy one to determine. You can go to our vendors, and they basically--or to our associations, and they have that data right now. And we all, for the most part, are paying the same. So that's one amount that we can all agree on, I think. That's not everything and it would be nice to have more, but I think that's the simplest. There's nothing hidden in that. It's a cost before we get it and manipulate it or allocate it, whatever the appropriate word is.

DR. BRECHER: Celso?

DR. BIANCO: Mike, thanks for all the thought, but I want to get a little bit into the issue of competition because we are going to get to the same point of both DR. PENNER and DR. KLEIN.

You said competition is destructive. Well, it's the heart of this country, bless their heart.

[Laughter.]

DR. BIANCO: And so also, I can see destructive competition in other areas like airlines, that is, they're dying, every one of the big airlines is losing money, going bankrupt, and the prices of the tickets keep going down.

So what are the competitors trying to get? You don't have as much O's as you need. You have shortages. What happened to competition last January, December, where there wasn't blood? And how can these competitors--they are losing money--survive losing money? What feeds the competition?

MR. FULLER: To a certain degree, I think it's exactly what you said. It's motherhood and apple pie. It seems to be what we think we're made of, even though it's probably not true that we ever really had a free market economy because we've had government regulations almost from the beginning.

We actually did have competition during the time when nobody had any blood, but the one thing I think we move away from in this community--most of you have M.D. after your name--is you base everything on truth in data.

I'm an MBA, and I don't have those same restrictions. I can tell you certain things and lead you to believe certain things like I have enough O's and I can do these certain things, and as a hospital administrator, again, perhaps, not being a physician, you might believe me. And it's not until I can't perform that that price doesn't look so good.

But if you think about the same thing with the airlines, yes, I have a particular problem with Southwest, bless their hearts. I think that they are undermining all of the real airlines in the world. They don't provide the same service. They'll take you just about any place in the country, but you've got to stop 16 times. And they're not going to take you--I made a mistake yesterday and said Paris; I won't make that mistake again--to London. They don't go across the Pond.

So it's not the same product. And yet when you look at the television and you watch the people standing in line saying, well, you know, United and American have got to come down to the cost of running their airline like Southwest, it's a different product. And a low-cost provider may not provide the same product.

It's incumbent on us to be better marketing our services, and so far we have maintained all of our customers. We virtually have that monopoly that we're condemned for and that is not American, for the most part, but it works very well, that utility model. It works very well in--coming from California, it works very well in utilities, too. When the lights go off and you don't have enough energy, nobody really cares how efficient you are. And I think that it's these misapplications of the market model that really come to grips. You don't have some of those same advantages, and exclusion is one, being able to say no--and that is, again, I think by definition. As a physician, you have real trouble saying no to a patient.

DR. BIANCO: But they got money from the Federal Government to get out of the hole. Is that the model we want?

MR. FULLER: I think I'd go back to--I think the short answer is yes, but I think that I'd go back to most--it seems to me most of the third-party payers look at the Medicare model, the DRGs, the contracted care, and modeling after that, what we need is when there is something put on top of that that CMS says, yes, we're going to pay for this safety initiative because we know it is the right thing to do and it's going to save money down the road, rather than waiting for two or three years and doing the equations.

So, yes, I think there is a certain amount. I don't think it's a grant. Obviously Melissa said they worked their way out of that shortfall of $800,000. I think there are certain things in business and in health care that you have got to work your way out of. But it's the implication of that new test or that new device that you've gotten to a certain point, you are doing, you are fulfilling your mission, and then you have this added on and it's the right thing to do, and the patient wants it, and I think that's really where the issue comes.

We have conditioned health care consumers in our country to expect everything free. That's bad. Health care has a cost. I noticed today on television here in Washington, D.C., that physicians can't prescribe allergy medications until they send them to the drug store to try Claritin. But that's not medicine. That's business. And I think when you pull the professional out of that, I think you destroy the system.

I think what's going to happen is you're just going to have a lot of lawsuits. You know, somebody wants Allegra. You know, I pay my money, I want Allegra.

And so I think that--and my request would be that when we have a safety initiative that is appropriate, that maybe a letter goes from FDA to CMS and says you guys ought to give these people an extra five bucks because this is a good thing to do; and, by the way, they're all doing it.

DR. BRECHER: Paul?

DR. HAAS: I'm an economist so I'll assume, and we'll move from there. But there are a lot of things--and I won't go into a great bit of detail, but I wish--I would have Mike come to a class that I teach called Public Health Economics. And I think an awful lot of what I heard throughout is that in our society, as good and as messy as it is, that--and we talk medical terms and now we can talk economic terms. The language of economics, as it's typically discussed, does not fit the medical model that we're talking about, and I think that's very much the point that Mike is saying. And we allow ourselves to get excited about the benefits of competition, which are wonderful. Clearly you're not going to say a market model should be thrown out the window. Yet when we have the nature of health care, which again says exactly as Mike has said, that no one gets turned away, the concepts of efficiency, the concepts of revenue, the concepts of quality all have to be looked at from a different model than what we're used to in the market sense. And the general picture I think you painted is very accurate.

MR. FULLER: Thank you.

DR. BRECHER: Okay. We're going to take a break. We're going to be back at 11 o'clock starting promptly. Thank you.

[Recess.]

DR. BRECHER: Okay. Everyone take their seats. We're going to start in 60 seconds.

We're running a little behind schedule, and so we're going to try to get us somewhat back on schedule. We have two updates, one from the FDA and one by the CDC, and we're going to tow the line, 30 minutes for each presentation and discussion. So, Paul, you have, say, 25 minutes, plus 5 minutes for discussions. The clock is starting now.

DR. MIED: Thank you, DR. BRECHER.

I've been asked as part of this update on HCV lookback to review for the committee exactly what is meant by HCV lookback and what FDA guidance and rulemaking on lookback is meant to accomplish.

As you know, multiple layers of safety, including donor screening and testing, are used to reduce the risk of transmitting infection through blood transfusion. However, a person may donate blood early in infection during the period when the tests marker is not detectable by a screening test, but the infectious agent is present in the donor's blood. This is known as the window period.

If a donor donates blood on a number of occasions and each donation tests negative for markers for HCV, but the donor subsequently returns and tests repeatedly reactive for antibody to HCV or reactive on a nucleic acid test for HCV RNA at a later date, prior collections from such a donor may have been during the window period, and they would be at increased risk for transmitting HCV.

In addition, a recipient of a transfusion of blood or blood components collected from such a donor during the window period would not know that he or she may have become infected with HCV through the transfusion unless notified. Furthermore, prior collections that were never screened for anti-HCV from donors who later were found to be repeatedly reactive when screened for anti-HCV since 1990, when screening began, may have been at increased risk for transmitting HCV due to a prevalent chronic infection in the donor.

Now, chronic hepatitis due to HCV is a major health problem in the United States. The infection is usually clinically silent until serious damage has been caused to the liver. As a result, infected people usually are unaware of their disease until such damage has already occurred. Advances in medical diagnosis and therapy have created opportunities for disease prevention or treatment many years after recipient exposure to a unit from a donor later determined to be increased risk for HCV infection.

Now, although transfusion-transmitted infections account for only about 7 percent of all HCV infections in the U.S., it is possible to identify and look back at prior donations that might have been collected during the window period.

FDA has recommended through draft guidance for industry that blood establishments perform HCV lookback activity prospectively when a donor currently tests reactive on a screening test for a marker of HCV infection. This activity should include identification and quarantine of any prior collections from that donor that remain in inventory; notification of consignees that have received shipments of such blood or blood components so that they also may quarantine in-date units; further testing of the donor; destruction or labeling of potentially infectious prior collections; and notification of transfusion recipients, either through their physicians or directly, who may have received blood from a donor later determined to be infected with HCV so that those recipients can be tested for HCV and counseled if positive.

Now, these recommendations for HCV lookback are similar to the existing regulations for HIV lookback.

In addition, FDA has recommended through draft guidance for industry that blood establishments perform a historical or a retrospective records search to identify prior collections from donors who had tested repeatedly reactive for anti-HCV in the past and were deferred from further donations. This retrospective records search should be of historical testing records extending back to January 1, 1988, or back indefinitely for computerized electronic records.

HCV lookback is part of a broad public health strategy to prevent advanced liver disease in persons with a chronic HCV infection. The goal of HCV lookback is to enable persons who may have acquired their infection from transfusion to learn about their condition and to seek medical care. The mechanisms whereby HCV lookback has been initiated include a public information campaign that I'll say a little more about and traceback from donor test records.

The rationale for targeted lookback is that it specifically identifies potentially infected transfusion recipients based on donor records, and, therefore, unlike educational efforts directed toward transfusion recipients in general, so-called general lookback, targeted lookback does not depend on the transfusion recipient to self-identify risk. As a public health strategy, targeted lookback addresses both disease prevention, primary and secondary, and the recipient's perceived right to know.

FDA's initiative on HCV lookback is part of a broader departmental response to the HCV epidemic that includes research efforts by the NIH. The current status of HCV lookback is a result of two initiatives: a physician education program and the public information campaign conducted by CDC and the targeted lookback or recipient tracing program that was defined by FDA and CMS and is being implemented by blood establishments and hospitals under draft guidance issued by FDA.

In addition, CDC conducted and published an interim evaluation of the yield of targeted retrospective lookback for HCV, and CDC intends to perform additional outcome evaluations when the lookback effort is brought to completion nationwide.

So targeted lookback or recipient tracing is a joint initiative by FDA and CMS. It's being conducted by blood establishments in accordance with draft guidance issued by FDA to specifically identify potentially infected transfusion recipients based on a search of donor records, followed by notification of transfusion services and hospitals and then notification of physicians and their patients, the transfusion recipients.

Now, since the decision by the Secretary of DHHS in January 1998 to engage in HCV lookback, FDA has issued three draft guidance for industry documents and the proposed regulation. A draft guidance for implementation and comment was issued shortly after the Secretary's decision and later reissued for implementation and comment with technical corrections. This guidance contained recommendations for lookback based on donor screening with multi-antigen tests for antibodies to HCV that became available in March 1992.

Another draft guidance was subsequently issued by FDA for comment that contained recommendations for lookback based on donor screening with the single-antigen test for antibodies to HCV that was in use between May 1990 and July 1992.

FDA also issued a proposed rule that addressed lookback based on donor screening with both the multi-antigen and single-antigen test for antibodies to HCV. A companion proposed rule was issued concurrently by CMS to establish requirements for transfusion services and hospitals to notify physicians and/or patients in cases of a potentially infectious blood transfusion identified through lookback.

Now, FDA has reviewed comments on the draft guidance and the FDA proposed rule and has established consistency between these documents. FDA is currently preparing a final guidance for implementation. Final action in terms of rulemaking is currently under consideration within FDA, and this rulemaking initiative is being coordinated with CMS, who would issue a final rule concurrent with a final rule that would be issued by FDA.

As a result of comments received to the dockets of FDA's draft guidance for industry and proposed rule, FDA's current thinking is that the major changes that are called for to both documents include, first of all, limiting the scope of the search of records prior to January 1, 1988, to computerized electronic records rather than readily retrievable records.

Secondly, including a reactive nucleic acid test, or NAT, for HCV RNA as a trigger for initiating lookback both prospectively and retrospectively, and as an additional test that may be performed to help determine the HCV status of the donor.

And, thirdly, consideration of the results of unlicensed supplemental tests such as the Chiron RIBA I and the Abbott neutralization peptide assay when these tests were performed in helping to determine the HCV status of the donor.

Let's look at the current status of implementation of HCV lookback. This lookback has been implemented voluntarily by the blood industry in response to draft guidance issued by FDA. Prospective HCV lookback based on a repeatedly reactive test for HCV antibodies or a reactive NAT for HCV RNA is ongoing for all current donations.

According to nationwide estimates from the year 2000, the confirmed HCV antibody-positive rate for repeat blood donors was 0.007 percent, which corresponds to 736 donors. Additionally, there were an estimated 30 repeat donors who were identified as HCV RNA NAT positive.

Now, since on the average each donation of whole blood is separated into 1.6 components, it is estimated that approximately 1,200 blood products were identified from prospective lookback triggered by antibody-positive and NAT-positive donations in the year 2000. Conservative estimates are that approximately 1,000 HCV-tainted or potentially infectious blood products from prior collections are currently being identified each year by the prospective lookback.

Now, although FDA and CMS final action on HCV lookback has not yet been published, there has been significant progress toward completion of the retrospective records searches by the blood organizations. Recent informal surveys on the status of the retrospective lookback within the American Red Cross and America's Blood Centers, whose centers together perform over 95 percent of all blood collections, revealed that searches of donor records and notification of transfusion services and hospitals is about 89 percent complete for results from multi-antigen screening tests, that is, tests available since March 1992.

CDC estimates that lookback based on the multi-antigen screening tests will result in approximately 36 percent of all case findings from the retrospective lookback. The same surveys of the blood organizations indicate that searches of donor records and notification of transfusion services and hospitals is about 70 percent complete for results from single-antigen HCV screening tests, that is, for the test in use from May 1990 until March 1992.

However, a significant portion of the industry has not yet initiated lookback based on the single-antigen HCV screening test, which is expected to yield about 64 percent of case findings, of all case findings from the retrospective lookback. If we combine these figures, we're able to estimate that at the present time the overall effort to date by the blood organizations represents completion of an estimated 77 percent of all records searches and notifications of transfusion services and hospitals that would be indicated under FDA's current draft guidance.

And so while they have made substantial progress on HCV lookback, blood establishments are awaiting the issuance of a final guidance or final action by FDA to complete the HCV lookback activity.

The American Red Cross estimates that when the retrospective lookback has been completed, they will have performed approximately 66,000 lookbacks for repeat donors who are reactive by serology or NAT. The American Red Cross estimates that from these 66,000 cases, 106,000 implicated blood products will have been identified. Since the American Red Cross represents approximately 47 percent of the U.S. blood supply, we could project the total yield of the retrospective lookback, when completed, to be approximately 226,000 HCV-tainted or potentially infectious blood products identified.

Also, as part of the retrospective lookback that has been implemented, hospital transfusion services that are under the jurisdiction of FDA have begun the notification of transfusion recipients as recommended in the FDA draft guidance. However, the majority of U.S. transfusion services and hospitals which are under the jurisdiction of CMS rather than FDA are awaiting the issuance of final action on HCV lookback by CMS, which would be issued simultaneously with FDA final action on HCV lookback.

At this time we do not have an estimate for the state of completion of notifications of physicians and transfusion recipients by the transfusion services and hospitals.

In October 2000, CDC published an interim evaluation of the yield of targeted retrospective lookback for HCV. An estimated 1,500 persons will have been newly identified an anti-HCV positive when lookback related to multi-antigen screening of donors is completed. When retrospective lookback based on single-antigen screening has been completed, the additional yield is expected to be an estimated 3,500 individuals, for a combined total of all lookbacks of about 5,000 HCV-positive persons who did not previously know their HCV status.

In summary, targeted lookback is a joint initiative by FDA and CMS. FDA has issued three draft guidance for industry documents and a proposed rule. CMS has issued a companion proposed rule. FDA is preparing final guidance for implementation, and final action is also under consideration. CMS is preparing a final rule that would accompany any FDA final rule. Prospective HCV lookback is currently ongoing for all current donations that are repeatedly reactive on an HCV antibody test or reactive on an HCV RNA NAT test. And it is estimated that prospective HCV lookback is currently identifying approximately 1,000 potentially infectious blood products per year.

The retrospective lookback is about 77 percent complete in terms of total case findings, but the industry is waiting for final guidance and/or a final action from FDA as well as a final rule from CMS to complete the HCV lookback effort. When HCV lookback has been completed, it is estimated that 226,000 potentially infectious products will have been identified and approximately 5,000 infected recipients will have been identified, notified, tested, and counseled who did not previously know their HCV-positive status.

I think I'll stop there and take any questions you might have.

DR. BRECHER: Thank you, Paul. Thank you for being on time, too.

Jeanne?

DR. LINDEN: Just for clarification, these numbers that you're talking about of these, quote, tainted products, you're talking about ones that are actually infected with HCV.

DR. MIED: Potentially infectious.

DR. LINDEN: Well, what do you mean by potentially infectious? You mean potentially infected, meaning they're from somebody who later was positive, or they're actually carrying HCV?

DR. MIED: They're implicated prior collections that may have been in the window period.

DR. LINDEN: Okay, that may have been.

DR. MIED: Yes.

DR. LINDEN: But aren't--so, I mean, they're not actually then tainted.

DR. MIED: Well, tainted, as I say, rather than tainted, I'll refer to them as potentially infectious, because that's what they are. We can't say that they are absolutely infectious without doubt.

DR. LINDEN: That's a world of difference. And I assume also you're talking about only components.

DR. MIED: We're talking about whole blood, blood components, source plasma and source leukocytes.

DR. LINDEN: What about recovered plasma?

DR. MIED: In blood components, yes, as a blood--

DR. LINDEN: Yes, but I mean derivatives made from source plasma.

DR. MIED: From source plasma--

DR. LINDEN: Excuse me, from recovered plasma. I'm sorry. I misspoke.

DR. MIED: Only to the extent that they haven't been pooled for further manufacture.

DR. LINDEN: Okay.

DR. BRECHER: There was a summary of the first part of the lookback that CDC put together, and we'll make--there was an article in Transfusion that we'll circulate to members of the committee after lunch.

Keith?

DR. HOOTS: In terms of the CMS role in this, is this to make sure that individuals not only get in for testing and counseling but also therapy if they're not eligible for any other, like private insurance?

DR. MIED: Yes, their role is notification of recipients so that they can be tested, counseled if they're positive, and receive therapy if positive.

DR. HOOTS: I think that's fantastic, and I think, you know, since that's kind of where we started with this committee, if we can encourage--and I hope this is part of the plan, you know, in terms of longitudinal follow-up of these individuals in terms of the outcome of their therapy and we can do--you know, you can easily model it. If 40 percent of the people respond to therapy, then you could--you know, and you're adding 1,000 per year to the 5,000 you've already identified, then before long, the economic impact of doing this can be counterbalanced against the cost of actually doing it. And I think it will be a very important piece of data to give to society at large about the importance of not only doing what's right but that, in fact, the long-term cost savings may, in fact, more than account for the up-front costs.

DR. BRECHER: Jay?

DR. EPSTEIN: I think it's important to clarify that the FDA authority gets the information to the hospital. The CMS authority ensures that the hospital blood bank or physician will notify the patient. What happens from that point on is not under this regulatory scheme. You then enter the general public health domain. And a lot of people have pointed out that it would be nice to have ultimate outcome measures, but how feasible that will be to obtain is not clear at this moment, though there's no lack of interest within government in obtaining it.

DR. BRECHER: John?

DR. PENNER: It's impressive that it's only taken, what, six, seven years to get some guidelines, not yet out on this issue, so that one really can't worry a little bit about the fact that records really don't have to be kept more than ten years, I think, by our blood banks and hospitals, so that we've passed that issue of the '90-92 range of positives where we'll be able to extract all of that information and identify some of the patients who have been exposed. So I think we've kind of run into a deficit here on our approach to at least attacking the problem.

The controversy and the contentiousness was really related to the single-antigen assay, which was '90 to '92, recognizing that probably culled out a fairly large number of individuals who were positive at that point, and so from '92 on when we had the multi-antigen assay, which was much more efficient, we were dealing with a smaller population, which, as you pointed out, means that if we were able to go back and now finish off much of that '90 to '92 single-antigen testing, we would pick up another several thousand patients, much more than we've had now, who had been exposed.

DR. MIED: Quite so, yes.

DR. PENNER: And I must admit that I'm still seeing an occasional patient who comes in with cirrhosis at age 45 or 50 and not understanding the fact that his blood transfusion back in 1988 was responsible for it and now he's just kind of left with the need for a new liver.

DR. BRECHER: Jay?

DR. EPSTEIN: Just a comment that, in fact, the recordkeeping period is still five years, and it's in the proposed rule that we would extend it to ten. So we have that problem of whether records did or didn't exist when this all started.

Despite that, though, what we've found is that most of the records do exist and that many of them are electronic and that they go back even before 1998--1988, sorry. So, in actual fact, that has not proven to be the barrier to completion of lookback.

DR. BRECHER: Mike?

COLONEL FITZPATRICK: Paul, on the potential 5,000 cases--and I honestly don't remember the Transfusion article well enough whether it covered that or not. But when CDC did their survey, they asked how many individuals were deceased, how many individuals that you discovered did not know they had hepatitis C. And I know that DOD completed its retrospective survey and had gone clear back to single-antigen testing. Our yield from that was two individuals who did not know that they had previously had HCV. So is that 5,000 figure adjusted for deaths and for those individuals who already knew that they had HCV?

DR. MIED: Yes, it's adjusted for all of those things: recipients who have passed away; recipients who have moved and cannot be located, even after three attempts to locate them; recipients who get the word and refuse to see a doctor, or do see a doctor and then refuse to be tested; recipients who find out that they are, in fact, negative. All those are taken out of it so that the bottom line is the 5,000 people who did not know they were positive.

We know that the efficiency of targeted lookback is low. It's about 1 percent, and we always knew that to be the case right from the start. But in the end, that's the bottom line, that people find out for the first time they're positive.

DR. BRECHER: In the Transfusion article on the multi-antigen lookback, 69 percent of patients had already died prior to notification, and it was estimated that less than 1 percent of the estimated 300,000 HCV-positive persons in the U.S. would have been identified by the lookback.

Okay. Thank you, Paul. We're going to move on. We're now going to hear about the CDC update on SARS. Matt?

[Pause.]

DR. BRECHER: Is this time for--do we have time for a joke? I heard that if Bill Gates had a nickel for every time Windows crashed--oh, that's right. He does have that.

[Laughter.]

DR. BIANCO: While the computer is thinking, I didn't hear clearly, either from Paul or Jay, if there is a timeline for the issuance of this rule that is proposed, the joint or parallel rule by CMS and by FDA.

DR. EPSTEIN: Well, I can't provide a timeline at this point except to say that both the final guidance at FDA and the rulemakings that FDA and CDC are under active consideration within parts of the government and we're hopeful that they'll move. But I cannot put a timeline on them now. It depends how these deliberations go.

DR. BRECHER: I think the optimistic way to look at this is that most of the lookback has been completed, and that's a good thing.

DR. BIANCO: I agree, Mark. One concern that has been expressed is that the rule may contain--the draft guidance is where the basis for what has been done and is still being done is the concern that the rule may contain surprises and have people review a lot of the work that has been done.

DR. EPSTEIN: No. In fact, that's the reason that final guidance was not issued, was because of the recognition that if we were, in fact, going to engage in rulemaking, we had to avoid any scenario in which a final rule would create requirements that were different from final guidance. So, you know, we could have issued final guidance a long time ago except for the fact that we concurrently engaged in rulemaking. So the two need to correspond, and that's the point that Paul made, is that we determined that we needed to review concurrently comments to the draft guidance and comments to the proposed rule and ensure that the two would coincide fully. So, to a certain extent, we can't issue the final guidance until we have clarity on final rulemaking. But that's, you know, in your interest.

DR. KUEHNERT: Maybe this would be a good time to plug government employees having faster computers.

What I wanted to do today is give a quick overview on the SARS investigation to date. Thank you for inviting me to present this. As new information helps our understanding of the epidemic more every day, we still don't know all the answers and probably won't be able to answer all your questions, but I'll hope to provide a framework for thought about what we know and about implications for blood safety.

It seems like last century, but it was just early February that China first reported a disease cluster to the World Health Organization. The cluster was of more than 300 people with pneumonia of unknown etiology detected in Guangdong Province beginning in November of 2002. And a report from ProMed, which is an infectious disease list serve, described in addition that approximately one-third of patients were health care workers, and this was a real tip-off that this was something unusual going on that was not your garden variety typical pneumonia outbreak.

Later in February, Dr. Carlo Urbani, who was a WHO official working in Hanoi, noted an unusual disease syndrome in a patient that was similar to that described in China, and that turned out to be the index case in Vietnam.

At the same time or nearly the same time, an outbreak of similar illness was reported among health care workers in Hong Kong. That was associated with a patient who had also traveled to China.

Early in March, a cluster of ill health care workers in Hanoi was reported, including Dr. Urbani, who later died from SARS. The disease spread to a large number of health care workers in Hong Kong, and WHO issued a global alert about cases of several atypical pneumonia in Hong Kong and Hanoi, and CDC offered assistance to WHO for a global investigation.

Soon after that, Canada reported cases from a patient who had traveled from Asia, and CDC initiated domestic surveillance, and soon after that the United States started to report cases.

I wanted to go through the case definition here. The information we have about the clinical syndrome at the time was one of a prodrome of fever and respiratory symptoms which initially in many patients seems to be quite mild, followed by, after approximately a week, a progression of respiratory symptoms, often to pneumonia. And so the case definition is based on the sort of clinical syndrome and also epidemiologic factors. And, of course, it's been very difficult without a laboratory test.

The other aspect of this is that there are sort of two levels of case definition. There's suspect case and probable case based on clinical severity, and from the start, I think we at CDC have really emphasized the importance of detecting suspect cases, being that they may be as important in transmitting disease as those that are probable. And so initially we were reporting suspect cases to WHO while other countries wee asked to report probable cases. And now those have been aligned as far as the WHO reporting, but I think it led to a little bit of confusion early on.

So, anyway, a suspect case is defined as a respiratory disease of unknown etiology, fever and respiratory symptoms such as cough, shortness of breath, and an exposure history defined as recent travel to an area with SARS transmission, and this is the so-called affected areas, or close contact with a suspected SARS case. A probable case is all of the above, a suspect case