Thursday, May 1, 2014

Who Pays for VICP?

There is a lot of misinformation out there about vaccines and, well, pretty much anything related to them. People like myself that take a science-based approach to vaccines to counter myths are "pharma shills" (we're not). Manufacturers have absolutely no liability (they can be sued for some liability claims). If vaccines work, it doesn't matter whether my kid is vaccinated or not (it does matter), or the variation, why do so many outbreaks include the vaccinated (it's a numbers game; see previous link). The government is scared to do a randomized, double-blind, placebo-controlled trial of the vaccine schedule (such a study would be unethical and possible illegal). VAERS is a reliable source for drawing conclusions (it's unreliable for conclusions, but can be a springboard for research ideas).

And then there's something that came up yesterday in a CDC twitter chat about vaccines. The chat (#CDCvax) was crashed by a bunch of anti-vaccine activists spouting all kinds of nonsense, including all of the myths mentioned above. One other claim popped up that I have not written about before. It involves the funding of the Vaccine Injury Compensation Program (VICP). Basically, one anti-vaccine proponent made the oft-repeated, but never correct, claim that taxpayers fund the VICP compensation fund. Here's one example of this claim:

Here's a clue, they aren't.

The short response is: Taxpayers do not pay for vaccine court payouts. But I'll go into a bit more detail.

I can understand why some people may think this. If you go to the VICP web site, on the main page you will find this description of the trust fund from which compensation is dispensed:
The Vaccine Injury Compensation Trust Fund provides funding for the National Vaccine Injury Compensation Program to compensate vaccine-related injury or death claims for covered vaccines administered on or after October 1, 1988.

Funded by a $0.75 excise tax on vaccines recommended by the Centers for Disease Control and Prevention for routine administration to children. The excise tax is imposed on each dose (disease that is prevented) of a vaccine. Trivalent influenza vaccine for example, is taxed $0.75 because it prevents one disease;  measles-mumps-rubella vaccine, which prevents three diseases, is taxed $2.25.
It's not clear from this description who is responsible for paying the excise tax. The FAQ about the program does not clarify the question, either. Without a clear description of who this tax applies to, it's easy to think that everyday citizens, whether they get a vaccine or not, are paying for the fund with their tax dollars. In its more general form, the claim implies that your income tax or property tax or some other personal tax goes to fund the VICP. It doesn't help that people like Ginger Taylor promote this misunderstanding:
Patients pay a 75 cent excise tax for each vaccine and that adds $200 million to the compensation fund each year. The pharmaceutical companies do not have to pay for the vaccine injuries they cause. Tax payers do.
But the claim is simply wrong. The History of Vaccines web site has a good overview of VICP, including a statement about who pays the tax:
NVICP is funded by a tax of $0.75 per vaccine dose, collected from vaccine manufacturers by the U.S. Department of the Treasury.
IRS Publication 510 makes this clear, with vaccine taxes listed under Section 5: Manufacturer Taxes. The manufacturer is responsible for paying taxes on every dose of vaccine they sell, if the vaccine is on the recommended childhood immunization schedule. The manufacturer, not your average citizen, is responsible for paying to the IRS that $0.75 per vaccine dose.

[Edited to Add (Dec. 10, 2014): Apparently, publication 510 was too confusing for the folks at the Vermont Coalition for Vaccine Choice to understand:

Amusingly, they asked me if I had updated this post yet to say that taxpayers, not manufacturers, pay the tax. Well, thanks to them, I'm adding this update. In case IRS Publication 510 is just as confusing for any other anti-vaccine folks who might read this, another IRS resource makes the matter even clearer. At the IRS page Excise Taxes - Manufacturing Tax Tips, it states (emphasis mine):
Manufacturers are responsible for manufacturers taxes on the following items (for more information on each item listed, see Publication 510, Excise Taxes for 2009 (Including Fuel Tax Credits and Refunds)
  • Sport fishing equipment - tax based on the sale price of the item
  • Bows - tax based on the sale price of the item
  • Arrow components - tax based on the sale price of the item
  • Coal - tax based on either sale price of the item or weight of the item
  • Tires - tax based on the weight of the item
  • Gas guzzler automobiles - tax is based on the fuel economy rating of the automobile
  • Vaccine - tax is based per dose
I hope that settles the matter. The government has imposed the vaccine excise tax which funds VICP on the manufacturer, not on taxpayers like you or me.]

We could stop there, but folks like Taylor will try to redefine things, by saying that the manufacturers charge patients for the tax, so it's really the patient who pays into the fund. That's not exactly true. Yes, the manufacturer can pass the cost of the tax along to whomever buys the vaccine. That may be a patient, if they buy it directly from the manufacturer, but that's hardly likely, especially considering you need a medical license to buy prescription products like vaccines. The ones buying the vaccines are more likely health care providers, like pediatricians in private practice, clinics, hospitals and so on. But regardless of who they may pass the cost along to, the manufacturer is still ultimately responsible for paying the tax to the government. And even if you use some convoluted logic to try to claim the patient pays the tax, the recommended vaccines are considered preventive medicine, so most insurance companies do not require (and are even prohibited by law in some states from requiring) a copay for them. Unless the patient is uninsured and paying out of their own pocket, they still would not be paying the tax at all.

Anti-vaccine activists try to claim that VICP is funded by your tax dollars, but that just is not the case. Like most of what they say, it is a distortion meant to mislead and sow anger. Vaccine manufacturers pay into the fund. So when a VICP award is paid out, that money is coming out of the wallets of the vaccine manufacturers. If you're worried about your taxes being wasted on things that should not be happening, then you might want to support vaccination as a means of preventing outbreaks, which end up costing you, via your tax dollars, tens to hundreds of thousands of dollars. With most outbreaks now driven by vaccine refusal, anti-vaccine activists are the ones wasting your tax dollars.


  1. Actually, your post is not correct as well. The $0.75 levy on each vaccine is not correct. If you read on about the IRS statute, the federal government levies a 25% premium for all trust funds that they administer. So the real number that is deposited into the Vaccine Injury Trust Fund is $0.75 - 25% = $0.56. And the post claiming that tax dollars are funding the Trust Fund is partially correct. According to the US Treasury, 53% of all purchases of vaccines in the US are from the Federal Government in the form of Medicaid/Medicare, VA, and DoD programs. Your statements about insurance is entirely accurate as well. For vaccines such as Gardasil, influenza, meningitis, and pneumonia. And most of us are for safer vaccines, not the dogma of anti-vax that you describe. Nation needs to have a civil discussion of vaccine safety.

    1. Just a quick note on the premium bit. Whether or not there is a premium does not change the fact that the manufacturer pays the full $0.75 tax on each dose. The premium just changes how much of that ends up in the compensation fund and how much goes to overhead to pay for administration of the fund (and other, non-compensation uses).

      As for the bit about taxpayers paying because the government buys lots of vaccines, that is just a variation on the claim I discussed. Ultimately, it is the manufacturer paying into the fund. Again, although the government may use funds derived from taxes to pay for the vaccines they purchase, the taxpayer is not paying into the fund anymore than they are paying the salaries of Merck employees (also part of the cost of the vaccine).

    2. Todd. The manufacturer pays the levy to the US Government after receiving payment from hospitals, clinics, doctors, and our own government purchases. They do not pay this levy/tax when they sell the vaccine to other countries. Only US.

      You imply that this levy is born upon the vaccine manufacturer. It is not. The taxpayer is funding the purchase of the vaccine via Medicaid/Medicare, VA, DoD. Of course they are. Over 50% of the net revenue into the fund comes from gov't purchased vaccines. Manufacturer is just the pass through.

  2. All this parsing about who "pays" the 75 cents per dose into the fund is ridiculous. It's a cost of producing the vaccine, same as building a plant, buying raw materials, running the equipment, shipping the product and paying employees and taxes. It all gets built into the final price.
    And this would be no different if there were not a VICP fund. The cost of defending or settling individual lawsuits would have to be built into the final cost as well. The difficulty here is in predicting what that (future) cost will be. Get it wrong and the business will go bankrupt and no-one will get vaccinated.
    The VICP fund solves problems for both consumers and manufacturers. The cost is known up front, and access to compensation is (relatively) simple and direct not to mention even-handed, compared to resorting to individual cases through the court system where the outcome is not the same for everyone.
    Does this mean individuals can't sue at all? No, that is an often repeated lie. If your VICP claim is denied, you are free to proceed with a lawsuit. This doesn't seem to happen because claims that don't get compensated by the fund tend to be without merit. And a manufacturer can be sued at any time for malfeasance. The VICP fund does not "shield" them from that.
    As for Wayne's comment that we need ". . . a civil discussion of vaccine safety." - that sounds like code to me. The fact that there are extremely rare adverse outcomes from receiving a vaccination does not mean that they are not being produced to be as safe as we know how to. Nor does it mean that there is no effort or desire on the part of those involved to eliminate all risk if possible.

    1. Actually, design defect claims must go through the VICP. If they fail, the case can be appealed on administrative grounds, but the claimant can't actually take the manufacturer to court in the tort system. If Narad is reading this, he can give a better description of what options are available.

      Manufacturing or labeling defect claims, however, can go through the tort system.

    2. Argus. You are incorrect on your statement that if a petitioner is not satisfied with the outcome of their claim, they can exist the program and file suit against the manufacturer. The Supreme Court in Bruesewicz v Wyeth Labs in Feb 2011 shut the door on that option. The NVICP is the exclusive remedy for all vaccine-related injuries or death. And your conclusion that vaccine safety is code for something else, that is your problem. But we as a nation cannot have a civil discussion about vaccine safety, vaccine efficacy without the demonization by media or other types. Vaccine adverse events or injury is rare. But that number is still a large number of people. And what we do about it, to learn from it or help those who have been injured needs to improve.

  3. Thanks for the clarification.

  4. Todd W: I do not understand the payouts under VICP. Anti-vaxxers use these payouts to substantiate their claim that the "government concedes autism link." Since there is no such link, or to the other claims anti-vaxxers make, what are the payouts based on? I realize a tiny handful of people may have reactions to vaccinations, but that does not seem to be what these cases are about.

    1. Beverley,

      None of the VICP awards have been for autism. The payouts, which represent a very, very small percentage of all people who have received vaccinations, have been for rare, but known, risks associated with vaccines. These are known as "Table Injuries". If a petitioner shows that they suffered one of these injuries within the specified time frame following immunization, the court won't even bother with trying to establish causation. For example, if a child goes into anaphylactic shock within 4 hours of receiving a DTaP, barring any other possible causes, the court will assume that it was caused by the vaccine and award compensation.

      If the injury is not on the table, or if it is suffered outside of the listed time frames, then the petitioner must prove that, more likely than not, the vaccine was the cause of the injury.

      As for supposed autism awards, as I said, none have been made. Compensation has been paid out for injuries, such as encephalitis, that eventually led to autism-like symptoms. This has led anti-vaccine activists to define autism as "brain injury" or to say that encephalitis is autism, when that is not the case.

      Hope that helps.

  5. Thank you Todd,
    for putting all this information together. I knew that the vaccine manufacturers paid for the vaccine trust, I just didn't know the details of it. I also learned recently how the vaccine court works- with its table form and so on. Very smart solution to address both the manufacturers and the consumers.

  6. Should a university that spends millions be paying this "excise tax?" According to your publication reference we should be refusing to pay this and the manufacturer should be paying and passing along to their customers. Any advise would be greatly appreciated!


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