Eight days after receiving Dr. Jonas Salk's miraculous vaccine, 5-year-old Anne Gottsdanker came down with polio.

It was spring 1955, and the California girl wasn't alone. About 40,000 children developed headaches, neck stiffness, muscle weakness and fever within weeks of being vaccinated. More than 50 were paralyzed, and five died.

A handful of pharmaceutical companies manufactured Salk's new vaccine, but the tragic polio outbreak was initially traced to shots made by Cutter Laboratories of Berkeley, Calif. Federal officials found the company had failed to properly inactivate the vaccine, meaning more than 100,000 children were inadvertently inoculated with live, fully virulent polio virus.

The Cutter Incident was a wake-up call to federal regulators of vaccine safety, and it helped move the pharmaceutical industry down a path of dramatically increased safety standards, said Dr. Paul Offit, an immunization expert at Children's Hospital of Philadelphia. His book on the subject will be published in September.

But experts looking at the vaccine business 50 years after Salk point out that the costs of safety -- in terms of regulation and litigation -- are among the factors that make vaccines a difficult business proposition today.

"It's hard to understand why anyone would compete in that industry," Offit said. "We complain bitterly that there were only two vaccine manufacturers for flu shots last year. But when you look at those two vaccines, they sell for roughly $8 per dose.

"That's a very low profit margin for a very unstable market, because demand is so unclear."

Anne Gottsdanker still remembers receiving the vaccine during a doctor's house call in 1955, then getting ill, and eventually suffering paralysis of her right leg.

"I was never scared by it," Gottsdanker said of polio. "You get upset because you can't do the things you want to do -- you can't stand, you can't walk, you can't go places. But it's not like a fear."

If Gottsdanker's parents ever considered how their family's struggle because of the vaccine contrasted with the triumph it represented for so many others, they never talked to her about it. The only inkling Gottsdanker has of her parents' feelings was the fact that they brought a lawsuit against Cutter Laboratories in 1957.

Offit says the case changed the history of vaccine manufacturing.

All the companies that made Salk's vaccine had trouble doing so safely, Offit said, pointing out that Wyeth Laboratories also made a vaccine that paralyzed several children. Within three months of the Cutter Incident, the National Institutes of Health created a division of biologics standards to improve vaccine safety by increasing the number of government regulators from 10 to 150.

When jurors learned of the manufacturing problems during the trial, they ruled that Cutter was not negligent in the production of its polio vaccine. But the jury still held the company financially responsible.

Tough liability standard

Offit claims this was the beginning of a new standard that eventually crippled the pharmaceutical companies: Liability without negligence. The Gottsdanker verdict made it easier for juries to hold companies responsible for any harmful effects of a vaccine, he said.

By the mid-1980s, lawsuits had put vaccines on the verge of elimination. Congress stepped in and created the National Vaccine Injury Compensation Program. The program is funded by a federal excise tax on every dose of vaccine and compensates people harmed by vaccines. An expert panel helps courts determine which problems are caused by vaccines.

Offit credits the program with saving vaccine manufacturers. Even so, problems persist today because of loopholes in the program.

For example, vaccines that aren't routinely recommended are not covered by the program, Offit said. A case in point was a vaccine for Lyme disease that came to market in 1998, and whose company was sued by plaintiffs who claimed the vaccine caused chronic arthritis. The arthritis claim has never been substantiated, Offit said, but the manufacturer pulled the product from the market anyway, in part because of media attention to the lawsuits.

"At the time of the Cutter Incident, 26 companies made vaccines," he said. "Today, it's four big companies."

The problem with having only a few vaccine manufacturers was on display last fall, when regulatory action against one company meant that half the U.S. supply of flu shots was lost.

But there are deeper problems, said Randy Juhl, a pharmaceutical industry expert at the University of Pittsburgh.

There's a lack of vaccines for some conditions, Juhl said, while other established vaccines carry side effects that could be eliminated if companies had incentives to improve them. But drug companies see more opportunity for profit in other areas.

Dr. Anthony Fauci, chief of the National Institute of Allergy and Infectious Diseases, put it this way: "Our vaccine production and development enterprise is very fragile and, in fact, is broken."

The situation has inspired leaders at the University of Pittsburgh Medical Center to begin talking about creating a vaccine manufacturing plant in Pittsburgh.

But the negative critique isn't shared by everyone.

Offit's count of the number of vaccine manufacturers in the United States, for example, doesn't include smaller players such as Chiron Corp. -- the California company whose flu vaccine was blocked last year -- or MedImmune, a Maryland company that makes an inhalable flu vaccine. New entrants to the business profess great enthusiasm about its future, while established vaccine companies say there have been benefits to consolidation.

The FluMist story

MedImmune, founded in 1988 to develop new vaccines, raised $25 million in 1991 with an initial public offering. The company's highest-profile product has been FluMist, an inhaled vaccine whose fortunes have illustrated the unpredictable demand for flu vaccine.

When FluMist first went on the market in 2003, MedImmune and its marketing partner, Wyeth, believed that they could sell it at $46 per dose. But this was roughly three times the price of a flu shot, and consumers weren't buying. Thousands of doses were thrown away.

In the midst of last fall's flu shot shortage, MedImmune agreed to ramp up vaccine production. But demand languished by January. At one point, providers such as the University of Pittsburgh Medical Center resorted to giving away doses of FluMist.

Despite all this, MedImmune is continuing costly studies to demonstrate the safety and effectiveness of FluMist in small children and the elderly, two groups for whom it's not currently recommended. MedImmune has four other products on the market and is developing more vaccines.

"FluMist contributes about 5 percent of our total revenues right now," Young said. "We believe that with a more useful formulation, expansion of the label and greater experience in the marketplace, that this can ultimately be over a half-billion-dollar-per-year product."

Large players acknowledge challenges with the vaccine business, including the time it takes to clear regulatory hurdles and the expense of massive studies required to show that a vaccine is safe. But they also say the gloom and doom isn't entirely warranted.

Just last month, the vaccine maker Sanofi Pasteur -- the world's largest manufacturer, in terms of doses administered -- received a license for the first new polio vaccine to be developed in decades. The new vaccine will be used starting next month in Egypt as part of the World Health Organization's strategy to end polio transmission by the end of this year.

This month, the company won a $97 million contract from the U.S. Department of Health and Human Services for new technology that could cut the time it takes to make influenza vaccine.

"We see the vaccine market as being a profitable piece of our business, and we see it as continuing to grow," said Philip Hosbach, vice president for new products and immunization policy at Sanofi Pasteur, which is the vaccines division of pharmaceutical giant Sanofi-Aventis.

Companies are willing to manufacture vaccines as long as they can get a fair price on the market, Hosbach said. That wasn't the case with flu vaccine in the United States during the 1990s, when manufacturers were getting about $2 per dose, he said. But purchasers of flu vaccine in the United States are now paying more, Hosbach said, so companies are responding.

At Merck & Co. Inc., the seven vaccines currently manufactured by the company account for just 5 percent of the company's overall revenue. Nonetheless, the company is trying to bring to market another four vaccines, including one that works against the virus that causes cervical cancer, said Alan Shaw, executive director of external scientific affairs at Merck Vaccines.

A 13-year process

If the company brings the cervical cancer vaccine to market next year, it will culminate a 13-year effort -- a typical length of time for new vaccines, Shaw said. The company spent four years determining the process it would use to chemically assemble the vaccine, then started building a pilot plant for making vaccine to use in human trials.

When those trials proved successful, the company built a full-scale plant to produce vaccine in the mass quantities needed for full safety testing. These studies typically involve tens of thousands of patients, Shaw said.

Among all pharmaceutical company products, the safety standards for vaccines are especially high and time-consuming because they are given to healthy people. So developing a vaccine often involves building a manufacturing plant before a company knows whether it has a product that will be cleared for sale.

"Vaccines are a relatively small part of the money side of the business," Shaw said. "But it's a large public-impact part of the business. Although people think of us as money-grubbing bandits, we're really not."

Companies are trying to use new statistical methods to shorten the cost and duration of trials by quickly determining the doses at which vaccines won't be effective, said William Gruber, vice president of clinical research at Wyeth. Manufacturers also are hoping to do more vaccine trials in countries outside the United States and Europe, where it's more expensive to conduct studies, Gruber said.

Vaccine technology has advanced to a point that Jonas Salk couldn't even have dreamed of, Gruber said, and those advances create tremendous opportunities for new vaccines.

Wyeth's vaccine Prevnar, which protects against pneumococcal diseases, is the first $1 billion vaccine to hit the market, the company says. Approved in 2000, the vaccine sells for about $65 per dose.

But despite all the bright points, there's an undeniable problem for the industry as a whole, Gruber said. Vaccine manufacturers are victims of their own success.

As immunizations eliminate common diseases, people become less tolerant of the risks that come from the vaccines themselves, Gruber said.

"What we accept today is clearly many times more stringent than what would have been accepted even 10 years ago as far as criteria for safety," Gruber said. "Safety is a premier concern for us -- we want to make sure the vaccines we develop are safe. The question is: Have we had enough discourse about the benefits vs. risk, and what they need to be for the vaccine to move forward?"