MIAMI - (KRT) - The loss last week of half the nation's supply of flu vaccine shocked the public, and public health experts say the news signals widespread vulnerability in the vaccine industry.

High production costs combined with low revenues have driven many drug companies out of the vaccine business, leading to frequent shortages of a variety of vaccines. Doctors ran out of flu shots last year. Since 2001, there have been shortages of vaccines against eight childhood diseases, including tetanus, measles and rubella.

"We are now in the position of kind of gritting our teeth, waiting for the next shortage,'' said Dr. William Schaffner, director of the department of preventive medicine at Vanderbilt University and a member of the National Vaccine Advisory Committee, which advises the federal government on vaccine policy.

In the past 30 years, the number of companies manufacturing vaccines for the United States has fallen from more than 25 to just five, according to a report by the federal Institute of Medicine.

More than 20 vaccines - including those for measles, tuberculosis and polio - are now made by a single manufacturer, said Dr. Greg Poland, director of the Mayo Clinic's vaccine research group.

In the past four years, the number of companies making significant numbers of flu shots has fallen from four to just two - California-based Chiron, and Aventis Pasteur, which is based in France. Nationwide, the flu kills about 36,000 annually.

When Chiron announced last Tuesday that regulators had closed the company's Liverpool, England, factory because of contamination, the nation in a single blow lost about 47 million flu shots - roughly half the supply for the year.

As the number of flu vaccine manufacturers has declined, demand has increased. Last year's supply of 86 million doses was not enough; 100 million doses were ordered for this year. The failure at Chiron means only about 55 million doses will be available, and public health officials have called for rationing.

The incident revealed the tenuous state of the nation's vaccine supply, said Dr. Julie Gerberding, director of the Centers for Disease Control and Prevention: ``Our entire vaccine production system is fragile in our country.''

Vaccines are often more costly to produce than drugs because they're made from live viruses, instead of chemicals. Making a vaccine can require hundreds of steps, each subject to stringent sterility guidelines.

Yet manufacturers are often unable to sell the vaccines at a price high enough to make a profit.

Pediatric vaccines are purchased primarily by the federal government, which has negotiated prices so low that many companies have been driven from the market, the Mayo Clinic's Poland said.

Adult vaccines are left to the free market, and many are not covered by insurance. When companies try to raise prices, consumers often balk.

"With most drugs you're treating sick people, and the willingness to ... pay for a drug when you're sick is different than for vaccines, which you're selling to healthy people,'' said Dr. Peter Paradiso, senior vice president for scientific affairs at the pharmaceutical company Wyeth, which stopped selling the flu vaccine last year. ``The willingness to pay for vaccines seems to be less.''

Manufacturers of flu vaccines face additional problems. The process for making a vaccine is decades old, requires millions of fertilized chicken eggs and takes several months. The vaccine must be re-engineered each year to match the strains of flu virus in circulation. Distribution is left to the free market, and a company that makes too much vaccine has to throw out its excess supply.

Wyeth, for example, quit making the vaccine after it failed to sell half of the doses it made in 2002, Paradiso said.

Last week, Gerberding called for an overhaul of the nation's vaccine system.

"We need a comprehensive national strategy with government and the private sector to develop manufacturing capabilities that simply don't exist right now.''

Two reports last year by federal advisory committees came to the same conclusion. They recommended:

_Creating a six-month stockpile of all recommended pediatric vaccines.

_Using federal tax breaks or subsidies to dramatically increase the number of flu shots manufactured each year.

_Easing the rules for importing vaccines made for use in other countries.

_Raising the prices the government pays.

"We should cut the messing around and the government ought to pay for them with tax funds and mandate that private insurers pay for them,'' said Mark Pauly, a health economist at the University of Pennsylvania and an author of one of the reports.

"If we really think it's all that important for public health, we ought to put our money where our mouth is and stop treating this as the poor relation in the pharma-biotech family, which is what we do now,'' he said.

Change has been slow in coming.

Last year the CDC began building an emergency stockpile of pediatric vaccines, but shortages have delayed the process. As of January, the agency had six-month stockpiles of measles, mumps, rubella, varicella, and inactivated polio vaccines.

The other recommendations have not been adopted, but they're likely to receive new scrutiny in light of the flu vaccine shortage - at least one congressional committee has scheduled a hearing on the vaccine shortage.

Dr. Lee Sanders, research director for community pediatrics at the University of Miami, said the reluctance of the government, insurance companies and patients to pay more for vaccines goes to the heart of the nation's healthcare system.

"We have a biomedical bias in the way our health care system runs,'' he said. ``That bias is toward treating existing conditions. You would never imagine that there would be a shortage of drugs for treating high cholesterol.''

Sanders said he has been frustrated by his inability to give his patients vaccines he knows prevent sickness and death.

"I take care of a population of mostly underserved children,'' he said. ``When they are able to make it to the doctor, they can't get what they need.''