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EXAMINING H.R. 3299, STRENGTHENING PUBLIC 

HEALTH EMERGENCY RESPONSE ACT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

MAY 19, 2016 

Serial No. 114–147 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California7 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

BRETT GUTHRIE, Kentucky 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

GENE GREEN, Texas 

Ranking Member 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

DORIS O. MATSUI, California 

BEN RAY LUJA ́ N, New Mexico 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 4 

Hon. Susan W. Brooks, a Representative in Congress from the State of 

Indiana, opening statement ................................................................................. 5 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 7 

Prepared statement .......................................................................................... 9 

WITNESSES

Richard J. Hatchett, M.D., Acting Deputy Assistant Secretary, Office of the 

Assistant Secretary for Preparedness and Response, Acting Director, Biomedical Advanced Research and Development Authority, Department of 

Health and Human Services ............................................................................... 11 

Prepared statement .......................................................................................... 13 

Answers to submitted questions 1 ................................................................... 104 

Michael Mair, Director of Strategic Operations, Office of Counterterrorism 

and Emerging Threats, Food and Drug Administration ................................... 28 

Prepared statement .......................................................................................... 30 

Colonel Russell E. Coleman, Ph.D., Joint Project Manager for Medical Countermeasures Systems, Joint Program Executive Office for Chemical and 

Biological Defense, Department of the Army, Department of Defense ........... 39 

Prepared statement .......................................................................................... 41 

SUBMITTED MATERIAL

H. R. 3299, the Strengthening Public Health Emergency Response Act of 

2015, submitted by Mr. Pitts .............................................................................. 56 

Letter of May 17, 2016, from Nancy Goodman, Executive Director, Kids 

v Cancer, to Mr. Upton and Mr. Pallone, submitted by Mr. Pallone ............... 63 

Letter of May 17, 2016, from David Ridley, Ph.D., Faculty Director, Health 

Sector Management, Duke University, to Mr. Pallone and Mr. Green, submitted by Mr. Pallone .......................................................................................... 65 

Statement of Richard Hamburg, Interim President and CEO, Trust for America’s Health, May 19, 2016, submitted by Mr. Pallone ..................................... 67 

Letter of February 11, 2016, from Joseph I. Lieberman and Thomas J. Ridge, 

Co-Chairs, Blue Ribbon Study Panel on Biodefense, to Mrs. Brooks and 

Ms. Eshoo, submitted by Mr. Pitts ..................................................................... 70 

Letter of May 19, 2016, from the American Thoracic Society, et al., to Mr. 

Pitts and Mr Green, submitted by Mr. Green ................................................... 71 

Letter of April 1, 2016, from Douglas W. Bryce, Joint Program Executive 

Officer for Chemical and Biological Defense, to Mrs. Brooks, submitted 

by Mrs. Brooks ..................................................................................................... 75 

Letter of July 29, 2015, from Elisabeth Posillico and Paul Chaplin, Co-Chairs, 

Alliance for Biosecurity, to Mrs. Brooks and Ms. Eshoo, submitted by Mrs. 

Brooks ................................................................................................................... 76 

1Dr. Hatchett did not answer submitted questions for the record by the time of printing. 

Page

IV 

Letter of September 16, 2015, from Todd Gillenwater, Executive Vice President, Advocacy & External Relations, California Life Sciences Association, 

to Mrs. Brooks and Ms. Eshoo, submitted by Mrs. Brooks .............................. 78 

Letter of September 14, 2015, from James C. Greenwood, President and 

CEO, Biotechnology Industry Organization, to Mrs. Brooks and Ms. Eshoo, 

submitted by Mrs. Brooks ................................................................................... 79 

Letter of October 14, 2015, from Bertrand C. Liang, et al., to Mrs. Brooks 

and Ms. Eshoo, submitted by Mrs. Brooks ........................................................ 80 

Article of June 2009, ‘‘Drug and Vaccine Development for Infectious Diseases: 

The Value of Priority Review Vouchers,’’ by J. Matheny, et al., Clinical 

Pharmacology & Therapeutics, submitted by Mrs. Brooks .............................. 82 

Article of 2007, ‘‘Incentives for Biodefense Countermeasure Development,’’ 

by Jason Matheny, et al., Biosecurity and Bioterrorism: Biodefense Strategy, Practice, and Science, submitted by Mrs. Brooks ...................................... 84 

Article of May 2016, ‘‘The Commercial Market for Priority Review Vouchers,’’ 

by David B. Ridley and Stephane A. Re ́gnier, Health Affairs, submitted 

by Mr. Green ........................................................................................................ 95 

(1) 

EXAMINING H.R. 3299, STRENGTHENING 

PUBLIC HEALTH EMERGENCY RESPONSE ACT 

THURSDAY, MAY 19, 2016 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

2123, Rayburn House Office Building, Hon. Joseph R. Pitts (chairman of the subcommittee) presiding. 

Members resent: Representatives Pitts, Guthrie, Shimkus, Murphy, Burgess, Lance, Bilirakis, Ellmers, Brooks, Collins, Green, 

Engel, Capps, Schakowsky, Butterfield, and Pallone (ex officio). 

Also present: Representative Eshoo. 

Staff present: Rebecca Card, Assistant Press Secretary; Carly 

McWilliams, Professional Staff Member, Health; Graham Pittman, 

Legislative Clerk; Chris Sarley, Policy Coordinator, Environment 

and Economy; Heidi Stirrup, Policy Coordinator, Health; John 

Stone, Counsel, Health; Sophie Trainor, Policy Advisor, Health; 

Waverly Gordon, Democratic Professional Staff Member; Tiffany 

Guarascio, Democratic Deputy Staff Director and Chief Health Advisor; Samantha Satchell, Democratic Policy Analyst; Andrew 

Souvall, Democratic Director of Communications, Outreach, and 

Member Services; and Kimberlee Trzeciak, Democratic Health Policy Advisor. 

Mr. PITTS. Ladies and gentlemen, if our guests will take their 

seats, the subcommittee will come to order. The Chair will recognize himself for an opening statement. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Today’s hearing will take a closer look at bipartisan legislation 

introduced by our Energy and Commerce Committee colleagues 

Representative Brooks and Eshoo, H.R. 3299. 

This bipartisan bill builds upon our previous work to modernize 

our biodefense systems, ensuring that we are well equipped to handle current and emerging biothreats. 

The biothreat is not new. Pandemics have occurred throughout 

history. There have been four flu pandemics in the United States 

since 1918, each with different characteristics such as the H1N1 flu 

most recently in 2010. Even more worrisome is the threat of biological weapons or infectious diseases employed as weapons of terVerDate Mar 15 2010 12:55 Sep 01, 2017 Jkt 037690 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X147PUBLICHEALTHEMERGPENDING WAYNE
2 

ror, such as the use of salmonella in Oregon in 1984 by the 

Rajneeshee cult or the anthrax scare in 2001. 

Science has made significant advances in genomics and genetics 

and biotechnology that hold tremendous promise for those affected 

by illness and disease. However, that same technology could theoretically be used to biologically engineer superbugs that are more 

virulent, more lethal, more difficult to treat than their naturally occurring counterparts. 

Imagine a weaponized and bioengineered version of the Ebola 

virus or polio or smallpox, and the devastating effect that would 

have on an American city. 

Since the terror attacks on September 11, 2001, Congress took 

steps to build our Nation’s health infrastructure and foster a development of medical countermeasures, MCM, in the event of a future 

chemical, biological, radioactive, or nuclear, CBRN, attack. 

In 2004, Congress enacted the Project BioShield Act, and later, 

in 2006, enacted the Pandemic and All Hazards Preparedness Act, 

PAHPA, which was authorized through 2011. In addition to establishing a strategic plan to direct research, development, procurement of MCMs, PAHPA also established the Biodefense Advanced 

Research and Development Authority, BARDA, within the Department of Health and Human Services. 

BARDA was charged with coordinating and accelerating the development of MCMs. BARDA was created from the understanding 

that most MCMs needed by the Nation did not yet exist, and their 

development is a risky, expensive, and lengthy process. There is little to no demand in the private market for vaccines and therapeutics that protect against bioterror agents. 

BARDA bridges the funding gap between early stage research 

and the ultimate procurement of products for the National Stockpile under Project BioShield. By partnering with private industry, 

using money from the Biodefense Advanced Research and Development Fund, BARDA, can reduce the development risk entailed in 

MCM research, thereby helping to mitigate the disincentives associated with countermeasure development and ultimately improving 

our national readiness with regard to a CBRN attack. 

The bill before us today reforms our Nation’s medical countermeasure acquisition process, incentivizes research to combat the 

next generation of deadly diseases, and increases accountability of 

preparedness spending. Such improvements will go a long way toward helping our preparedness for future public health emergencies, such as Ebola, by creating new incentives for developing 

necessary medicines and vaccines and streamlining the contracting 

process for medical countermeasures. 

Incentives are necessary to attract private investment in product 

development, and so too must the contracting processes be efficient. 

We must get this right. The stakes are too high, the cost of failure 

too dire. And I look forward to our discussion today about how to 

best protect our country from biological threats. 

[H.R. 3299 appears at the conclusion of the hearing.] 

[The prepared statement of Mr. Pitts follows:] 

3 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

Today’s hearing will take a closer look at bipartisan legislation introduced by our 

Energy and Commerce Committee colleagues, Reps. Brooks and Eshoo, H.R. 3299. 

This bipartisan bill builds upon our previous work to modernize our biodefense systems, ensuring that we are well-equipped to handle current and emerging biothreats. 

The biothreat is not new. Pandemics have occurred throughout history. There 

have been four flu pandemics in the United States since 1918, each with different 

characteristics, such as the H1N1 Flu most recently in 2010. Even more worrisome 

is the threat of biological weapons or infectious diseases employed as weapons of 

terror, such as the use of salmonella in Oregon in 1984 by the Rajneeshee cult or 

the anthrax scare in 2001. 

Science has made significant advancements in genomics, genetics, and biotechnology that hold tremendous promise for those afflicted by illness and disease. 

However, that same technology could theoretically be used to biologically engineer 

‘‘superbugs’’ that are more virulent, more lethal and more difficult to treat than 

their naturally occurring counterparts. Imagine a weaponized and bioengineered 

version of the Ebola virus, or polio, or smallpox and the devastating effect that 

would have on an American city. 

Since the terror attacks on September 11, 2001, Congress took steps to build our 

Nation’s health infrastructure and foster development of medical countermeasures 

(MCM) in the event of a future chemical, biological, radioactive, or nuclear (CBRN) 

attack. 

In 2004, Congress enacted the Project Bioshield Act and later in 2006, enacted 

the Pandemic and All-Hazards Preparedness Act (PAHPA) which was authorized 

through 2011. In addition to establishing a strategic plan to direct research, development and procurement of MCMs, PAHPA also established the Biodefense Advanced Research and Development Authority (BARDA) within the Department of 

Health and Human Services. BARDA was charged with coordinating and accelerating the development of MCMs. 

BARDA was created from the understanding that most MCMs needed by the Nation did not yet exist and their development is a risky, expensive and lengthy process. There is little to no demand in the private market for vaccines and therapeutics 

that protect against bioterror agents. 

BARDA bridges the funding gap between early-stage research and the ultimate 

procurement of products for the national stockpile under Project BioShield. By 

partnering with private industry using money from the Advanced Research and Development Fund, BARDA can reduce the development risk entailed in MCM research, thereby helping to mitigate the disincentives associated with countermeasure development, and ultimately improving our national readiness with regard 

to a CBRN attack. 

The bill before us today reforms our Nation’s medical countermeasure acquisition 

process, incentivizes research to combat the next generation of deadly diseases, and 

increases accountability of preparedness spending. 

Such improvements will go a long way toward helping our preparedness for future 

public health emergencies, such as Ebola, by creating new incentives for developing 

necessary medicines and vaccines and streamlining the contracting process for medical countermeasures. Incentives are necessary to attract private investment in 

product development. And so too must the contracting processes be efficient. 

We must get this right. The stakes are too high and the cost of failure too dire. 

I look forward to our discussion today about how best to protect our country from 

biological threats. 

Mr. PITTS. Mrs. Brooks, do you seek time? 

Mrs. BROOKS. Yes, Mr. Chairman. 

Mr. PITTS. The Chair will recognize Mrs. Brooks for her time. 

Mrs. BROOKS. Thank you, Mr. Chairman. 

I want to thank you and the leadership of the Energy and Commerce Committee so much for holding this important hearing today 

on our bill. Congresswoman Eshoo and I and our staffs have 

worked very hard over the course of this Congress to craft this 

piece of legislation that now enjoys significant support from both 

sides of the aisle. And I commend the chairman for understanding 

the urgency of this matter. 

4 

Last Congress, I served as chairman of the Homeland Security 

Committee’s Subcommittee on Emergency Preparedness and Response, where I was amazed to learn of truly what I thought was 

the dire straits our biodefense capabilities are in as a result of 

more than a decade of neglect. I wish I could sit here today and 

tell you that I think things have improved dramatically over the 

last couple of years. And I appreciate from your written testimony 

that some of you believe they have. 

Mr. PITTS. If you will suspend, I will recognize you for the chairman when he comes in. You will have more time. 

Mrs. BROOKS. Oh, I am sorry. 

Mr. PITTS. The Chair now will recognize the ranking member of 

the subcommittee, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman, and to our witnesses for 

joining us this morning. 

The Federal Government has undertaken many initiatives, especially since the anthrax attacks of 2001, to fortify our biodefense 

capabilities to address the threat of a biological outbreak or attack. 

With stockpiling medical countermeasures, MCMs, to build public 

health capacity, we are better prepared today than we were a decade ago. 

But the fact is we still are dramatically underprepared to respond to biological event of disaster proportions. The current Zika 

virus epidemic underscores our need for a robust pipeline of vaccines and treatments effective against current and emerging 

threats. Over the last decade, the amount of cooperation between 

Government and the private sector has improved and our level of 

preparedness has increased, but we must do more in order to meet 

the new challenges we face. 

Currently, the Federal Government’s biodefense initiatives span 

across a number of agencies and vary in scope and approach. Department of Homeland Security, Department of Health and Human 

Services, and Department of Defense each play a role. 

For example, HHS operates the Biomedical Research and Development Authority, or BARDA, which was created to advance capability to develop, manufacture, and distribute medical countermeasures, like vaccines, during public health emergencies. BARDA 

is housed within the Assistant Secretary for Preparedness, or 

ASPR, the agency responsible for leading prevention, preparations, 

and response to the adverse health effects of public health emergency disasters. 

H.R. 3299, Strengthening the Public Health Emergency Response 

Act, offers a range of ideas to move our biodefense and medical 

countermeasures development and procurement capacities forward. 

I want to thank the bill’s sponsors for their leadership. Medical 

countermeasures are essential to our Nation’s health and security. 

There is a clear and vital role for the Federal Government to play 

in order to contribute to a greater public health security and ensure preparedness against biological threats. 

We need meaningful countermeasures, research incentives, 

transparency, and predictability, and flexible contracting mechaVerDate Mar 15 2010 12:55 Sep 01, 2017 Jkt 037690 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X147PUBLICHEALTHEMERGPENDING WAYNE
5 

nism in order to shore up our ability to respond to biological 

threats and infectious disease outbreaks. Without strong commitment from the Federal Government, public-private partnerships, 

predictable processes and incentives, this market arguably could 

not exist. 

The Government is the only market for most of the medical countermeasures. Unlike other drugs and vaccines, these products are 

not sold or distributed within the healthcare system. To incentivize 

companies to develop and produce these critical products, Congress 

created the Project BioShield Special Reserve Fund in 2004. The 

Special Reserve Fund was a market for medical countermeasures 

and was originally funded through the advanced appropriations at 

$5.6 billion over 10 years to procure successful product candidates. 

The availability and certainty this 10-year fund offered had a 

positive impact on the Government’s ability to attract innovative 

companies into this space. Twelve MCMs against several national 

security threats were delivered to the National Stockpile under this 

program. Unfortunately, in fiscal year 2014, we shifted to annual 

appropriations for the Special Reserve Fund, which created an uncertainty where there was once confidence that there would be a 

markup for urgently needed new vaccines and treatments. 

The market guarantee for successful MCM candidates is much 

weaker, and funding has dropped significantly. While Congress has 

many levers and options to incentivize development, many of these 

simply nibble around the edges and fall short of making up with 

the lack of long-term sustained funding. This Congress, I cofounded 

the Public Health Caucus to evaluate the conversation around public health and emergency preparedness. 

We need to break the cycle of lurching from crisis to crisis, outbreak to outbreak, and invest in public health infrastructure and 

medical product development that protects us against current future threats. H.R. 3299 puts forth a range of reforms to improve 

MCM development and procurement response to emerging infectious diseases and hospital preparedness. 

While I have some concerns about the aspect of the legislation, 

I believe we can find common ground and strike the right balance 

to protect the health and welfare of our Nation. And I want to 

thank the stakeholders for their willingness to work with us and 

look forward to learning more about their proposals in today’s hearing. 

And I want to thank, again, our panel and the chairman for calling this. I think sometimes we are not topical, but with Zika and 

2 years ago Ebola and no telling what is coming next, this is a very 

important hearing. 

And, Mr. Chairman, I will yield back my time. 

Mr. PITTS. The Chair thanks the gentleman. 

I now recognize the gentlelady, Mrs. Brooks, for 5 minutes for 

opening statement. 

OPENING STATEMENT OF HON. SUSAN W. BROOKS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF INDIANA 

Mrs. BROOKS. Thank you, Mr. Chairman. 

I want to thank you so very much and the leadership of Energy 

and Commerce for holding this hearing today. 

6 

This legislation now enjoys significant bipartisan support from 

both sides of the aisle, including 21 members of Energy and Commerce, and I commend the chairman for understanding the urgency 

of this matter. 

Imagine for a second if the weapons used in San Bernardino, 

Paris, or Brussels were not guns and bombs, but instead aerosolized smallpox. And this isn’t farfetched. In fact, I learned last 

week at a simulation at the McCain Institute in Washington that 

this easily weaponized, highly contagious disease could result in 

the death of upwards of 1 million people if dispersed in Madison 

Square Garden alone. 

That number is not just for New York City. But in reality, those 

expose individuals would have returned home infecting every person with whom they came into contact along the way. And for a 

disease with a 30-percent kill rate, responsible for the deaths of 

300 million people in the 20th century alone, the fallout would be 

global and catastrophic. 

So I have been working with my good friend from California, 

Congresswoman Eshoo, one of the original architects of Project BioShield, to develop a set of policy changes that could make a difference in the next outbreak or, God forbid, a terrorist attack. H.R. 

3299 was developed in collaboration with leading experts in biodefense, academia, first responders, and the private sector. 

Among other things, this bill would reform contracting procedures at BARDA to ensure faster development of critical medical 

countermeasures and create a limited priority review voucher for 

diseases on DHS’ material threat list. Returning this negotiating 

authority to BARDA will alleviate the bureaucratic red tape, make 

an immediate impact on the development of vaccines and treatments, and the new PRV program will spur development in an effective vaccine to stockpile against threats like Ebola, anthrax, or 

smallpox, which often take more than a decade and cost hundreds 

of millions of dollars. 

So when you think about how we can improve our system, we 

could have possibly saved lives if we had an Ebola vaccine—thousands of lives—had it been deployed to West Africa. Or the Zika 

vaccine could have possibly already last spring have been in process and saved pregnant women in Brazil. The impact can be immeasurable if we make improvements and acknowledge that the 

system can be improved. 

And so these are commonsense reforms. But they are not just 

coming from Congress. This Blue Ribbon Study Panel, the National 

Blueprint for Biodefense, listed 33 recommendations to improve our 

biodefense. It was authored by experts, some of whom have testified before our committee. It includes leaders such as former Senators Tom Daschle and Joe Lieberman; former Governor Ridge; 

Donna Shalala, the former HHS Secretary under President Clinton. 

Now, a similar version of our bill has been authored by Senators 

Burr and Casey, and it has already passed out of the Senate 

Health Committee by a wide bipartisan margin. Preparedness is 

not a partisan issue. It has never been, and it shouldn’t be treated 

as such again. And so I assure my colleagues that any concerns we 

might have with this legislation can be addressed in a bipartisan 

7 

manner because it is our duty to really support and protect the 

American people. I think that is Federal Government’s top priority 

and must be our first priority. 

I look forward to hearing from our witnesses, working with my 

colleagues to pass H.R. 3299. 

And at this point, I would yield the remainder of my time to Dr. 

Burgess. 

Mr. BURGESS. I thank you for yielding. 

I thank the chairman for holding this hearing. 

And recognizing the topic of this hearing is strengthening public 

health response, I hope we will spend some time visiting the recent 

past and expanding upon whether or not we have learned any lessons from what has happened to us in the past few years. 

Almost in a twist of cruel irony, President Obama went to the 

CDC in Georgia and gave a talk that Ebola has not come—this was 

in September of 2014. He made the statement that Ebola has not 

come to this country, but if it does, we will be ready. Well, less 

than 2 weeks later, Ebola did come to our country. It came at the 

back door of a hospital in the middle of the night, wasn’t recognized, the patient was sent home, eventually came back, eventually 

died, infected two other people in the hospital. So the second part 

of his statement was not operative. We were not ready. 

And then I saw, with this problem literally in my backyard for 

the section several months, just how that not being ready, how that 

was manifest. We didn’t have the type of direction for people. And 

the first responders in our emergency rooms, they didn’t have the 

type of protective equipment. What was posted on the CDC Web 

site was woefully inadequate, as we unfortunately learned later, 

when two nurses were infected at the hospital. 

When people were looking for the type of protective clothing that 

they would need, if someone showed up in the middle of the night 

of their emergency room, how can they get an additional moon suit 

or two? Do they call a hospital across town? Are they going to be 

willing to give up their moon suit because they could have a patient coming in within the hour with the same set of symptoms? 

I hope we have explored these situations. I hope we have learned 

from them. One of, I think, the biggest weaknesses from 2 years 

ago was the lack of a single repository, a single place that a hospital administrator or manager or doctor could call to be able to access the equipment from the National Stockpile. 

So, Mr. Chairman, thank you for calling the hearing. I look forward to the testimony of our witnesses, and I think this is a timely 

topic. I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

I now recognize the ranking member of the full committee, Mr. 

Pallone, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Mr. Chairman. 

Since the attacks of September 11, Congress has worked in a bipartisan manner to increase our efforts to combat and respond to 

8 

biological threats. However, experts have repeatedly warned that 

our ability to respond to biological threats must be improved. 

Earlier this year, the Subcommittee on Oversight and Investigations heard from another member of the Blue Ribbon Panel on Biodefense and other experts about the U.S.’ biodefense preparedness. 

According to this report, the Unites States, quote, ‘‘does not afford 

the biological threat the same level of attention as it does other 

threats,’’ unquote. The report notes that we lack a centralized leader for biodefense, a comprehensive national strategic plan, and a 

dedicated budget for biodefense. And this review also offered 33 

recommendations about how Congress and the administration can 

improve our preparedness. 

H.R. 3299, the Strengthening Public Health Emergency Response 

Act, includes a number of provisions that would make progress in 

improving our readiness. While I support the intent of this legislation, I do have some concerns that I am interested in discussing 

with our panel today. 

One area is related to the hospital preparedness program. This 

legislation would limit the amount of funding that the Assistant 

Secretary for Preparedness and Response can use to operate this 

program to 3 percent of the program’s total funding. And I am concerned that this limitation, while well-intended, could limit the 

ability of ASPR to effectively oversee and evaluate the hospital preparedness program. And this limitation also would eliminate funding for other efforts that support our healthcare preparedness, response, and recovery ecosystem. So this is one thing we need to 

look at. 

I am also concerned about the delegation of contract authority to 

the Biomedical Advanced Research and Development Authority, or 

BARDA. Like other HHS divisions, ASPR operates the contracting 

office for all divisions and programs under its authority. This structure ensures that Federal investments are made through a fair and 

open process that is free of any conflicts. Removing ASPR oversight 

could lead to some influence on the contracting process by the 

BARDA Director, another program officer and outside source. 

Then, finally, I want to express some concern about further expanding the Tropical Disease Priority Review Voucher Program. 

This program, created in 2007, was intended to incentivize research and development of drugs to treat tropical diseases that disproportionately affect poor and marginalized populations. Once a 

qualifying drug is approved, the sponsor receives a priority review 

voucher that entitles the sponsor to a second 6-month review of any 

other human drug application, and the sponsor is also able to sell 

this voucher. 

Recently, a priority review voucher sold for $350 million. Since 

creation of the Tropical Disease PRV Program, three PRVs have 

been awarded, and there has been a significant interest from industry and others in expanding the program as a way to encourage 

development of medical countermeasures. 

While I believe we should explore additional ways to incentivize 

medical countermeasure development, I do not believe expanding 

the Tropical Disease PRV Program is necessarily the answer. Not 

only could expansion decrease the value of a PRV and the incentive 

to develop drugs under such programs, but it also increases the 

9 

burden on FDA to expedite review of additional applications that 

may not otherwise qualify for expedited review. 

I am concerned that expansion would only exacerbate known 

flaws in the current program. For example, current law requires 

FDA to award vouchers to sponsors even if a drug was previously 

approved in other countries. Additionally, there is no requirement 

that a sponsor market a product approved under the program; 

therefore, there is no guarantee that these drugs are actually helping. 

So I look forward to hearing from our Government witnesses on 

these issues. And as the committee moves forward, I hope there 

will be an opportunity for members to hear from additional stakeholders. 

I would like to yield the minute I have left to Mr. Butterfield. 

Oh, he left, OK. 

Then I yield back. 

[The prepared statement of Mr. Pallone follows:] 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

Thank you, Mr. Chairman. Since the attacks of September 11th, Congress has 

worked in a bipartisan manner to increase our efforts to combat and respond to biological threats. However, experts have repeatedly warned that our ability to respond 

to biological threats must be improved. 

Earlier this year, the Subcommittee on Oversight and Investigations heard from 

members of the Blue Ribbon Panel on Biodefense and other experts about the U.S.’s 

biodefense preparedness. According to this report, the United States ‘‘does not afford 

the biological threat the same level of attention as it does other threats.’’ The report 

notes that we lack a centralized leader for biodefense, a comprehensive national 

strategic plan, and a dedicated budget for biodefense. This comprehensive review 

also offered 33 recommendations about how Congress and the administration can 

improve our preparedness. 

H.R. 3299, the Strengthening Public Health Emergency Response Act, includes a 

number of provisions that would make progress in improving our readiness. 

While I support the intent of this legislation, I do have some concerns that I am 

interested in discussing with our panel of witnesses today. One such area is related 

to the Hospital Preparedness Program. This legislation would limit the amount of 

funding that the Assistant Secretary for Preparedness and Response can use to operate this program to three percent of the program’s total funding. I am concerned 

that this limitation, while well-intended, would limit the ability of ASPR to effectively oversee and evaluate the Hospital Preparedness Program. This limitation also 

would eliminate funding for other efforts that support our health care preparedness, 

response, and recovery ecosystem. This change may harm rather than strengthen 

our health system preparedness. 

I am also concerned about the delegation of contract authority to the 

BiomedicalAdvanced Research and Development Authority or BARDA. Like other 

HHS divisions,ASPR operates the contracting office for all divisions and programs 

under itsauthority. This structure ensures that Federal investments are made 

through a fair andopen process that is free of any conflicts. Removing ASPR oversight could lead toundue influence on the contracting process by the BARDA Director, another programofficer, or an outside source. 

Finally, I want to express serious concerns about further expanding the tropical 

diseasepriority review voucher program. This program, created in 2007, was intended toincentivize research and development of drugs to treat tropical diseases 

thatdisproportionately affect poor and marginalized populations. Once a qualifying 

drug isapproved, the sponsor receives a priority review voucher that entitles the 

sponsor to asecond six-month review of any other human drug application. The 

sponsor is also ableto sell this voucher. Recently, a priority review voucher sold for 

$350 million. Sincecreation of the tropical disease PRV program, three PRVs have 

been awarded. 

There has been significant interest from industry and others in expanding this 

programas a way to encourage development of medical countermeasures. While I believe weshould explore additional ways to incentivize medical countermeasure develVerDate Mar 15 2010 12:55 Sep 01, 2017 Jkt 037690 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X147PUBLICHEALTHEMERGPENDING WAYNE
10 

opment, Ido not believe expanding the tropical disease PRV program is the answer. 

Not only could expansion decrease the value of a PRV and the incentive to develop 

drugs undersuch programs, but it also increases the burden on FDA to expedite review of additionalapplications that may not otherwise qualify for expedited review. 

This undermines theagency’s public health mission. 

I’m concerned that expansion would only exacerbate known flaws in the 

currentprogram. For example, current law requires FDA to award vouchers to sponsors even ifa drug was previously approved in other countries. Additionally, there 

is no requirementthat a sponsor market a product approved under the program. 

Therefore, there is noguarantee that these drugs are actually helping the people 

Congress intended to help. 

I look forward to hearing from our Government witnesses on these issues. And, 

as the committee moves forward with this legislation, I hope there will be an opportunity forMembers to hear from additional stakeholders about these concerns and 

how they can best be addressed. 

Thank you. 

Mr. PITTS. The Chair thanks the gentleman. 

Mr. PALLONE. Mr. Chairman, could I ask, I had three letters I 

would like to, unanimous consent, to enter into the record, one 

from Kids v Cancer, regarding added medical countermeasures to 

the Tropical Disease PRV Program; a letter from David Ridley, the 

architect of the Tropical Disease PRV Program and his Health Affairs article regarding the impact of expanding the program; and 

a third from Trust for America’s Health. 

Mr. PITTS. And I would like to add to that one letter from the 

Blue Ribbon Study Panel on Defense. 

So, without objection, these are put into the record. 

[The letters appear at the conclusion of the hearing.] 

Mr. PITTS. As usual, all members’ opening statements will be 

made a part of the record. And we will now introduce the panel. 

We have one panel today, and I will introduce them in the order 

of their presentation. 

First, we have Dr. Richard Hatchett, Acting Director, Biomedical 

Advanced Research and Development Authority, BARDA, and Acting Deputy Assistant Secretary in the Office of the Assistant Secretary for Preparedness and Response, ASPR, U.S. Department of 

Health and Human Services. Secondly, we have Mr. Michael Mair, 

Director of Strategic Operations, Office of Counterterrorism and 

Emerging Threats in the Food and Drug Administration; finally, 

Colonel Russ Coleman, Ph.D., Joint Project Manager, Medical 

Countermeasures Systems, Department of Defense. 

Thank you for coming today. Your written testimony will be 

made part of the record. You will each have 5 minutes to summarize your written testimony. 

So, Dr. Hatchett, you are recognized for 5 minutes for your summary. 

11 

STATEMENTS OF RICHARD J. HATCHETT, M.D., ACTING DEPUTY ASSISTANT SECRETARY, OFFICE OF THE ASSISTANT 

SECRETARY FOR PREPAREDNESS AND RESPONSE, ACTING 

DIRECTOR, BIOMEDICAL ADVANCED RESEARCH AND DEVELOPMENT AUTHORITY, DEPARTMENT OF HEALTH AND 

HUMAN SERVICES; MICHAEL MAIR, DIRECTOR OF STRATEGIC OPERATIONS, OFFICE OF COUNTERTERRORISM AND 

EMERGING THREATS, FOOD AND DRUG ADMINISTRATION; 

AND COLONEL RUSSELL E. COLEMAN, PH.D., JOINT 

PROJECT MANAGER FOR MEDICAL COUNTERMEASURES 

SYSTEMS, JOINT PROGRAM EXECUTIVE OFFICE FOR CHEMICAL AND BIOLOGICAL DEFENSE, DEPARTMENT OF THE 

ARMY, DEPARTMENT OF DEFENSE 

STATEMENT OF RICHARD J. HATCHETT 

Dr. HATCHETT. Chairman Pitts, Ranking Member Green, Mrs. 

Brooks, Ms. Eshoo, distinguished members of the House Energy 

and Commerce Committee, thank you for the opportunity to testify 

today regarding biosecurity issues and H.R. 3299, the Strengthening Public Health Emergency Response Act. 

I am Dr. Richard Hatchett, the Acting Director of BARDA, and 

I will focus on steps taken by ASPR to strengthen our Nation’s 

health security and the contributions of my own office toward that 

end. 

We have made substantial progress in the past 10 years to advance the state of our national biodefense. Thanks to the support 

of this committee and others in Congress, we have established 

ASPR and BARDA and made critical investments in biodefense and 

our healthcare system. However, as highlighted by recent challenges, such as Ebola and Zika, there remain gaps in our preparedness. 

Where the civilian public health and medical response to such 

events is concerned, the ASPR is charged by statute to play a 

strong leadership role. The ASPR serves as a principal adviser to 

the Secretary of HHS on all matters related to Federal medical preparedness and response for public health emergencies. 

The ASPR is the author and custodian of the National Health Security Strategy, which focuses on protecting public health during 

an emergency. The ASPR chairs the Public Health Emergency 

Medical Countermeasures Enterprise, or PHEMCE, which coordinates medical countermeasure development efforts across the interagency. And the ASPR oversees the Hospital Preparedness Program, or HPP, which enhances medical preparedness and resiliency 

at the community level through its support of healthcare coalitions, 

which incentivize diverse and often competitive healthcare organizations to work together. 

The health of communities is deeply intertwined with the abilities of its institutions to provide care to all populations. And investments in HPP are critical to limiting the cascade of negative health 

effects caused by disasters. The PHEMCE promotes the development and acquisition of medical countermeasures for chemical, biological, radiological, and nuclear threats, pandemic influenza, and 

emerging infectious diseases. And it has achieved a record of success that is now being studied as a model for global preparedness. 

12 

The strong and direct incentives we have put in place to support 

the development of medical countermeasures work. The PHEMCE 

has achieved technical success. BARDA has achieved technical success. Twenty three products that BARDA has supported have received FDA approval, licensure, or clearance. And the pace of success is accelerating. Fourteen of these approvals have occurred 

since 2011, and five have occurred in the last 14 months. 

Seventeen products, ranging from anthrax antitoxins to an array 

of products for the management of thermal burns, have been procured for the Strategic National Stockpile under Project BioShield, 

with another seven anticipated between now and the end of fiscal 

year 2018. Over the last decade, we have honed a model of publicprivate partnership that works. It depends on combining push-andpull incentives in the form of nondiluted funding and guaranteed 

market commitments with access to subject-matter expertise and 

product development services. We thank you for your continued 

support and sustained commitment to these programs. 

To support BARDA’s activities, ASPR has established a separate 

Office of Acquisitions, Management, Contracts, and Grants, or 

AMCG. AMCG is an award-winning and innovative contracting office that has led the Department in meeting contracting timelines, 

and its independent line of reporting mitigates potential conflicts 

of interest and ensures the highest standards of program integrity. 

AMCG can work fast. While the departmental benchmark for 

contract actions is 180 days, 70 percent of our Ebola contract actions were awarded within 60 days. And the median time for recent 

Project BioShield and other major acquisition awards was 90 days 

from the publication of the RFP. And AMCG is fair. Last year, over 

95 percent of ASPR’s contract actions were competed, ensuring a 

level playing field for businesses capable of meeting HHS requirements. Fifty-one percent of eligible contract dollars were awarded 

to small businesses. 

These investments in preparedness have already paid dividends. 

Because of the workforce in capabilities ASPR has developed over 

the last 9 years, we and our Nation’s communities are much better 

prepared to respond quickly to disasters and emerging threats. 

Thank you again for the invitation to speak with you, and I look 

forward to addressing your questions. 

[The prepared statement of Dr. Hatchett follows:] 

13 


r'ctq(JJ 

.. !- Written Testimony r House Committee on Energy and 

~, E. Commerce, Subcommittee on Health 

"Public Health Emergency Response" 

Statement of 

Richard J. Hatchett, MD 

Acting Deputy Assistant Secretary and Acting BARDA Director 

Office of the Assistant Secretary for Preparedness and Response 

U.S. Department of Health and Human Services 

ASPR 

,\SSISTANT SECRETARY FOR - . --- -···,-·- ... --···--· ·-- .. 

For Release on Delivery 

Expected at 10:00 a.m. 

May 19, 2016 
14 


Chairman Pitts, Ranking Member Green, and distinguished Members of the House Energy and 

Commerce Committee, thank you for the opportunity to testify today regarding bioseeurity 

issues and H.R.3299, the Strengthening Public llealth Response Act. I am Dr. Richard Hatchett 

and I serve as the Acting Director of the Biomedical Advanced Research & Development 

Authority (BARDA) and as an Acting Deputy Assistant Secretary for Preparedness and 

Response. BARD A is a component of the Office of the Assistant Secretary for Preparedness and 

Response (ASPR). The ASPR, Dr. Nicole Lurie, serves as the principal advisor to the Secretary 

of Health and Human Services (HHS) on all matters related to federal medical preparedness and 

response for public health emergencies. 

Securing our nation against biological threats is a challenging endeavor. The array of threats for 

which we must be prepared is vast. Such threats include biotcrrorist agents such as anthrax, 

smallpox, and botulism; evolving and emerging threats causing substantial regional disruption 

such as Ebola and Zika; and highly communicable diseases with pandemic potential such as 

influenza. In the last tifteen years, the world has experienced the first innuenza pandemic in 40 

years, devastating outbreaks of foot-and-mouth disease, anthrax attacks, the re-emergence of 

cholera in the Western Hemisphere, the largest Ebola epidemic ever recorded, and the global 

dissemination of vector-borne viral diseases such as chikungunya and Zika. 

Thanks to lessons learned from previous responses, biomedical breakthroughs, and sound 

strategic investments, we have improved our preparedness for and capability to respond to a 

wide-range of threats regardless of their origin and properties. We have read with interest the 

report and recommendations of the Blue Ribbon Study Panel on Biodefense, which I know to be 
15 


of interest to this Committee. With that in mind, l would like to update you on some ofthe areas 

in which ASPR and BARDA have progressed in recent years. 

ASPR has made numerous improvements to ensure national health security and to protect the 

American people. One such improvement is the development and continued refinement of the 

National Health Security Strategy (NHSS), which unified a patchwork of public health and 

medical preparedness, response, and recovery strategies. The Nl-lSS works to ensure that the 

nation is prepared for, protected H·om, and resilient in the face of public health threats. The 

NHSS is the first strategy specifically focused on protecting public health during an emergency. 

It envisions resilient and strong communities with sustainable health and emergency response 

systems. The NHSS, with its accompanying implementation plan, lays out actionable goals and 

objectives to achieve these ends. 

Among her many responsibilities, the ASPR serves as the chair of the Public Health Emergency 

Medical Countermeasures Enterprise (PI-IEMCE). The PHEMCE is a standing virtual enterprise 

that coordinates the entire life cycle associated with the development and procurement of 

medical countermeasures. It was created explicitly to improve coordination and collaboration 

within the Department and with our external stakeholders, including nonprolits, other federal 

departments. the private sector, and the international community. 

The PHEMCE is comprised ofASPR, the National Institutes ofllealth (NIH), the Centers for 

Disease Control and Prevention (CDC), and the Food and Drug Administration (FDA), as well as 

the Departments ofllomeland Security (DIIS), Defense (DoD), Veterans Affairs, and 
16 


Agriculture. It has been uniquely successful in promoting the development and acquisition of 

medical countermeasures for chemical, biological, radiological and nuclear (CBRN) threats, 

pandemic influenza, and emerging infectious disease threats. PHEMCE activities are governed 

by the PHEMCE Strategy and Implementation Plan (SIP). The PHEMCE SIP is updated 

annually and describes the PHEMCE's governance and decision-making structure. One of the 

most important functions of the SIP is to provide clarity and guidance about PHE'v!CE objectives 

to our external partners and stakeholders. 

PHEMCE coordination and decision-making encompass all stages of the medical 

countermeasure life cycle from identifying requirements and developing target product profiles 

through product development to distribution and dispensing. Agencies take responsibility and 

are held accountable for activities within their mission space and Pl-IEMCE coordination 

establishes common priorities, facilitates joint decision making and information sharing, and 

ensures the smooth transition of products through development. The PHEMCE has an 

outstanding record of success and is now being studied as a model for global preparedness 

against emerging infectious diseases. It was established in 2007 and its processes have been 

iteratively refined and improved over the last 9 years. 

Operationally, the PHEMCE establishes product-specific requirements for CBRN medical 

countermeasures based on Material Threat Assessments developed by Of-IS. NIH and DoD 

support discovery and early stage development of product candidates. often in collaboration with 

academic and industry partners, and prepare them for the transition to BARDA. In turn, 

BARD A supports and assists product candidates through advanced research and development, 

4 
17 


including preparation for FDA review, until they are ready for acquisition under Project 

BioShield. After procurement, medical countermeasures are maintained at CDC's Strategic 

National Stockpile (SNS) locations or within virtual stockpiles maintained by commercial 

vendors (in so-called vendor-managed inventory). If advanced development data lead to FDA 

approval of a marketing application, the financial responsibility of purchasing medical 

countermeasures for stockpile and delivery transfers from BARDA under Project BioShield to 

SNS. Items that have not yet received FDA licensure can also be procured for the stockpile if 

they are eligible for usc during an emergency under an Emergency Use Authorization. 

During evolving public health emergencies, NIH, BARD A. and DoD may shift into response 

mode. interfacing with other federal agencies and manufacturers to develop. produce, and test 

products for fDA review and approval and (where necessary) distribution by CDC to state and 

local health departments. Our investments in preparedness have already paid dividends in this 

regard. Because of the workforce and capabilities we have developed over the last nine years, 

we arc much better prepared to respond quickly to emerging threats. The PHEMCE, for 

example, advanced multiple vaccines and therapeutics and an innovative lateral flow diagnostic 

into clinical trials during the response to the Ebola epidemic and more recently has mobilized to 

support the development of vaccines, diagnostics, blood donor screening tests, and pathogen 

reduction technologies for Zika virus. 

Within the overarching framework provided by the PHEMCE, BARD A supports the advanced 

research. development and procurement of medical countermeasures-vaccines, therapeutics, 
18 


antiviral and antimicrobial drugs. diagnostics, and medical devices. Advanced development 

includes critical steps needed to transform a candidate to a product that is ready to usc. These 

steps include optimizing and validating commercial scale manufacturing processes; optimizing 

product formulations, storage, product longevity, and effectiveness; creating, optimizing, and 

validating assays to assure product integrity; conducting late-stage clinical safety and eftlcacy 

studies; and carrying out pivotal animal efficacy studies. 

BARDA's considerable success with making available CBRN medical countermeasures derives 

from a business model that depends on a set of supporting incentives that can be likened to a 

three-legged stooL Each leg of the stool has proved critical to BARDA 's success. and it was 

only after all three legs were firmly established that BARDA truly began to deliver on its 

promise. 

The first leg is provided by Project BioShield funding, which serves as a market guarantee (or 

advanced market commitment) for products that otherwise might have no or very limited 

commercial prospects. Maintaining the integrity of this market guarantee has been critical to 

maintaining the confidence of our private sector partners as they undertake high-risk 

development programs. Project BioShield funding represents the government's bipartisan 

commitment to support private sector innovators who are willing to address unmet public health 

preparedness needs. With our private sector partners, we are building capacities to maximize a 

flexible, nimble response. We arc also working across the government to ensure threats are 

identified, requirements are established, and the medical counter measures are in place to protect 

the nation's health. The need for medical countermeasures against threats is regularly assessed 
19 


and informed by DHS's Material Threat Determinations, to which threat information provided 

by the Intelligence Community contributes. 

The second leg is provided by the classic push incentive ofBARDA's advanced research and 

development contracts, grants, cooperative agreements. and other transactions. These funding 

vehicles provide firms with access to the substantial amounts of funding required to navigate the 

·•valley of death" represented by late-stage clinical development. Small to mid-size 

biotechnology firms have found it virtually impossible to obtain funding from traditional capital 

markets for inherently non-commercial biodefcnse projects. Absent the push incentives that 

BARD A provides, these firms would not be able to advance their products to regulatory end 

points; they would simply die on the vine, victims of the market failure that underlies biodcfcnse. 

The third leg of the stool is the direct product development support that BARD A provides. Since 

most ofBARDA's partners have been small to mid-size biotechnology firms that have gaps in 

their product development expertise and capabilities, BARD A has established an array of core 

services that it can bring to bear in support of its partners' product development efforts. These 

core services facilitate access to subject matter experts in a variety of disciplines germane to 

product development (such as clinical trial design, regulatory affairs, process engineering, etc.) 

as well as access to animal models and preclinical laboratories. a clinical studies network, a fillfinish manufacturing network, and BARDA's Centers tor Innovation in Advanced Development 

and Manufacturing. These latter assets, which support BARDA's core mission of promoting 

biodefensc product development, also enhance BARDA's response capability and collectively 

constitute BARD A's National Medical Countermeasures Response Infrastructure, which was 
20 


mobilized for the first time during the Ebola epidemic to accelerate the development ofEbola 

vaccines and therapeutics and is being engaged now to expedite the development of vaccines 

against Zika. 

Since its creation, BARD A has built a comprehensive and formidable advanced development 

product pipeline that has supported close to 200 medical countermeasure development projects. 

To date, at least 23 medical countermeasures that BARDA has supported have been approved, 

licensed or cleared by FDA. Of these, 15 have been approved since 2011 and five have been 

approved in the last 14 months. Seventeen products, ranging fi·om anthrax antitoxins and 

smallpox vaccines to anti-neutropenia cytokine therapeutics for radiation illness and an array of 

products for the management of thermal burns, have been procured under Project BioShield with 

another seven anticipated between now and the end ofFY 2018. To better serve the needs of 

special populations, BARD A has funded the development of a smallpox vaccine (Modified 

Vaccinia Ankara) suitable for usc in immunocompromised individuals as well as pediatric 

formulations of drugs like Pruss ian Blue (a treatment for internal radiation contamination) and 

solithromycin (an antibiotic candidate under investigation). BARDA has also supported the 

development and manufacturing of 18 influenza vaccines, antiviral drugs, and diagnostics that 

were either used in the 2009 H!NI pandemic or stockpiled to enhance preparedness for H5NI 

and 1!7N9 influenza viruses with pandemic potential. 

To provide contracting support to BARDA's activities, ASPR has established a separate and 

specialized Office of Acquisitions Management, Contracts and Grants (AMCG) whose 

contracting authority is delegated from the l-IHS Senior Procurement Executive (SPE). This 
21 


independent line of reporting to the ASPR and the SPE mitigates potential conflicts of interest 

and maintains the highest standards of program integrity. AMCG is an award winning and 

innovative contracting office, having received the I !HS Secretary's 2015 Hubert H. Humphrey 

Award for Service to America, the 2012 HI-IS Small Business Award. and the 2010 HilS Project 

Team Award for is contribution to the HINI Influenza Virus response. It introduced 

competitive solicitation procedures known as Broad Agency Announcements which streamline 

the acquisition process for basic and applied research, and initiated the use of Other Transaction 

Agreements to further engage industry. 

AMCG has led the department in meeting contracting time lines. While the federal government 

and Department standard time line for awarding contracts is 180 days, AMCG awarded the 

majority of its Ebola contract actions within 60 days. In the same time frame (FY20 l4-FY2015). 

Project BioShicld contracts were awarded within an average of 128 days from the publication of 

a Request for Proposals. In summary, ASPR awarded 91 grants totaling $212,649,385.67 in FY 

2015. During that tlscal year. 90 percent of ASPR 's contract actions were competed, thereby 

ensuring that there is opportunity for businesses capable of meeting the needs of IIHS to 

compete on a level playing field. Exceeding targets under the President's Small Business 

Initiative. ASPR awarded 51 percent of eligible contract dollars to small businesses. This also 

exceeded our own 35 percent small business goal. 

The Federal Acquisition Regulation (FAR) provides flexibility in the event of an emergency to 

expedite contract award by the contracting oftlcer. This emergency authority was recently put to 

use by AMCG in what U.S. News and World Report on March 18,2016 called "an 
22 


unprecedented reliefeiTort, [by! the federal government and blood banks in the United States ... 

to provide the entire territory of Puerto Rico with safe blood to protect recipients from the Zika 

virus." AMCG was notified on February 24,2016 that FDA guidance recommended thatamong other things-whole blood and blood components for transfusion be obtained from areas 

of the United States without active transmission and that blood collection in aiTccted areas such 

as Puerto Rico would have to stop no later than March I until donor screening measures could be 

put in place to prevent transfusion transmission of Zika virus. Working closely with BARD A to 

define the actual requirement, conduct market research, obtain legal advice, and draft the 

contract document, the contracting ofticer awarded a $4.6 million contract on March 3, 2016 to 

transport blood products from the U.S. mainland to Puerto Rico, six business days after being 

notified of the impending shortage. On March 5, 2016, Chris llrouda, Executive Vice President 

of Biomedical Services for the American Red Cross, announced that nearly 5,000 units of blood 

and other products per week had commenced, enough to meet the whole territory's needs. These 

efforts by AMCG and BARD A prevented a public health crisis from becoming a medical crisis 

by demonstrating the flexibility, speed, and coordination with which the two offices can operate. 

As a result, a solution was eventually reached with the Roche blood screening. 

ASPR strives to preserve health, mitigate suffering due to illness and injury, and expedite 

recovery through the development of resilient communities before, during, and after events 

ranging from bioterrorism attacks to natural disasters that impact public health and well-being. 

To achieve this goal, ASPR supports building preparedness capabilities and resiliency at the 

community level before disasters or public health incidents occur. ASPR's flagship program in 

this regard, the Hospital Preparedness Program (HPP). has provided approximately $5.6 billion 

10 
23 


to state, local. and territorial health departments since 2002 to better prepare the nation's health 

care systems and hospitals for man-made or natural disasters. 

While hospitals remain at the center of a prepared health care system, events of the last decade, 

including the 2009 pandemic. the Joplin, Missouri tornado, and Superstorm Sandy, have 

highlighted how important it is for hospitals to work with one another and with other community 

health care entities, such as EMS and skilled nursing facilities, to prepare and execute a health 

care system response. Consequently, since 2012, HPP has emphasized the importance of 

regional health care coalitions to save lives during emergencies that exceed the day-to-day 

capacity of the health and emergency response systems. llcalth care coalitions (HCCs) 

incentivizc diverse and often competitive health care organizations with differing priorities and 

objectives to work together. They ensure that each HCC member has the necessary medical 

equipment and supplies, real-time information. communication systems. and trained health care 

personnel to respond to an emergency, so that each patient impacted by a disaster receives the 

right care at the right place at the right time. The health of communities is deeply intertwined 

with the ability of its institutions to provide care to all populations and investments in IIPP are 

critical to limiting the cascade of negative health effects that disasters can have on a community. 

HCCs have already proven beneficial. For example, even as emergency crews were still onsite 

searching for survivors and victims of the 2015 Amtrak train derailment in Philadelphia, local 

health care facilities, emergency medical services. and emergency management agencies, all 

members ofHPP-supported HCCs, were already in action, working together to facilitate a swift, 

coordinated response. Systems funded by HPP were able to send out notifications of emergency 

II 
24 


room capacity to I ICC members a full 30 minutes prior to the official city alerts. This enhanced 

communication provided responders real-time information on resources and capacity throughout 

the region. !ICC members immediately activated another HPP-funded response platform to 

track and triage patients, facilitate the proper distribution of patients, and prevent any single 

hospital from being overburdened. The operational response of HCC members. along with their 

systems and training. allowed for an effective response within an organized incident command 

structure, thus saving lives, improving care, and increasing accountability. 

ASPR has supported a number of recent initiatives to enhance the IIPP program. In 2010. ASPR 

led an effort to ensure that HPP funding and its health care preparedness mission was better 

aligned with CDC's Public Health Emergency Preparedness (PHEP) cooperative agreement and 

its public health preparedness focus. This alignment reduced bureaucracy and administrative 

workload for both programs' awardces, and ensured the programs could leverage one another's 

work and avoid duplication. Alignment of the exercise requirements for both cooperative 

agreements and the integration of annual awardee meetings are just two examples of efficiencies 

that have been achieved through this process. Further, ASPR 'sand CDC's alignment efforts for 

HPP and Pl!EP also serve to ensure the programs arc complementary. 

Over the last several years, HPP has evolved from an individual health care facility capacitybuilding program to a health care system capability-development program. In 2012, ASPR 

identified eight national health care preparedness capabilities that awardees, health care 

coalitions, and health care facilities and organizations strive to achieve. These capabilities arc 

sufficiently flexible to enable all-hazard planning for natural disasters, terrorist events, infectious 

12 
25 


disease outbreaks, and industrial accidents. The capabilities arc designed to facilitate and guide 

preparedness planning and to serve the needs of communities in every-day local emergencies as 

well as disasters eliciting state and federal disaster declarations. HPP awardees use the health 

care preparedness capabilities to identify gaps in their preparedness efforts and target 

investments to ensure that their communities are safer, more resilient, and better prepared. In a 

recent survey, HPP awardces indicated overwhelmingly that the Program's support-including 

funding, guidance, and technical assistance-is critical to developing, implementing. and 

maintaining health care preparedness capabilitks. For example, l 00 percent of awardecs agreed 

or strongly agreed that HPP was critical to health care system preparedness, and 92 percent 

agreed or strongly agreed that l!PP was critical to health care worker safety. 

The HPP appropriation funds a health care preparedness, response, and recovery ecosystem that 

extends from day-to-day emergency department improvements to recovery from major disasters. 

Funding supports HPP cooperative agreements as well as a set of suppot1ing federal effm1s that 

help HPP awardces, coalitions, and health care facilities and providers prepare for and respond to 

emergencies. These include: 

o The Technical Resources, Assistance Center, and Information Exchange (TRACIE), 

which ASPR launched in September 2015 to serve as a one-stop interchange for 1-IPP 

awardees, health care coalitions, and other health system partners to gain access to best 

practices, guidance documents, and technical assistance as well as to share ideas and to 

collaborate with stakeholders on matters pertaining to healthcare emergency 

preparedness, response, recovery, and mitigation. TRACIE has responded to nearly 500 

training and technical assistance requests in the eight months since the program launched: 

!3 
26 


the vast majority of those requests came lrom HPP awardees and coalition members. 

TRACIE has received more than 35,000 visitors to the website, its listserv has nearly 

5000 recipients, and more than 1300 individuals have registered as members of the 

program's Information Exchange. 

o The Emergency Care Coordination Center within ASPR strengthens the day-to-day 

emergency care system so that the nation· s emergency departments are better prepared in 

times of crisis. 

o ASPR's Critical Infrastructure Protection for the Health Care and Public Health Sectors 

leads a public-private sector partnership focused on protecting the essential goods, 

services, and functions of health care and public health that, if destroyed or compromised, 

would negatively affect the nation. This program served a coordinating function during 

the Ebola outbreak to ensure that hospitals that served as Ebola Treatment Centers had 

the personal protective equipment they needed despite a national shortage. The program 

also leads the Department's health care cybersecurity work. 

o ASPR"s Division of Recovery advances the nation's ability to recover fi·om the health 

and social services impacts of emergencies and disasters. ASPR's Recovery experts not 

only assist HPP awardees during and after emergencies, but they also promote predisaster health and social services recovery planning. Currently, ASPR 's Recovery team 

is leading eflorts to respond to the health and human services crisis in Flint, Michigan. 

Infectious disease threats manifest in myriad forms and present unique challenges for 

preparedness and response. Fortunately, many of the lessons learned in responding to emerging 

infectious disease threats can inform our preparedness for acts ofbioterrorism, while many of the 

14 
27 


capabilities we have developed to promote preparedness for bioterrorism simultaneously enhance 

our preparedness tor and ability to respond to natural threats. 

What is required to respond efTcctively may differ substantially from agent to agent and over 

time within a given event. as recent crises demonstrate. To meet such threats, our nation requires 

an array of response capabilities, the ability to adapt in real time to changing circumstances, and 

robust mechanisms for coordination and communication. In the less than ten years that it has 

existed, ASPR and its component programs have made signal contributions in each of these areas 

and today play a critical role in preparing for public health and medical emergencies, whether 

natural or deliberate in origin. Through concerted effort over many years, ASPR has brought 

closer to realization the aspiration articulated in the NHSS of"National health security [asj a 

state in which the nation and its people are prepared for, protected from, and resilient in the face 

of incidents with health consequences." 

15 
28 

Mr. PITTS. The Chair thanks the gentleman. 

I will recognize Mr. Mair, 5 minutes for your summary. 

STATEMENT OF MICHAEL MAIR 

Mr. MAIR. Good morning, Chairman Pitts, Ranking Member 

Green, and members of the subcommittee. Thank you for the opportunity to discuss FDA’s perspective on H.R. 3299, the Strengthening Public Health Emergency Response Act, which contains provisions intended to help improve preparedness for a response to 

chemical, biological, radiological, and nuclear, or CBRN, threats. 

FDA plays a critical role in protecting the United States from deliberate CBRN threats and naturally incurring infectious diseases, 

such as Zika virus and pandemic influenza. FDA is responsible for 

ensuring that medical countermeasures, including drugs, vaccines, 

and diagnostic tests, to counter these threats are safe and effective. 

We work closely with our interagency partners, including our 

partners seated here with me today, as well as with product developers to facilitate to the development and availability of medical 

countermeasures. This collaboration has been extremely successful. 

For example, since 2000, FDA has approved 89 medical countermeasures for CBRN threats and pandemic influenza, as well as 17 

supplemental changes to already approved applications and 71 

modifications to diagnostic devices. This success is in part due to 

the continuing support provided by Congress in establishing the 

programs and authorities necessary as well as providing the funding needed to create and sustain a robust Medical Countermeasures Enterprise. 

As you know, H.R. 3299 contains a provision intended to help 

incentivize medical countermeasure development by enabling product developers to receive a priority review voucher, or PRV, under 

FDA’s Tropical Disease PRV Program provided certain criteria are 

met. The PRV may be used by the product developer who receives 

it or sold to another product developer who may then use it to obtain priority review for a product application that otherwise would 

not receive priority review. 

When a marketing application receives a priority review designation, FDA’s goal is to take action on that application within 6 

months, as compared to 10 months under standard review. Thus, 

the PRV enables the product developer to potentially bring a product to market sooner than it would under standard review time, 

which is valuable to product developers. 

While FDA fully supports the intent in H.R. 3299 to further 

incentivize the medical countermeasure development, we do not believe that adding CBRN threats to the Tropical Disease PRV Program is likely to achieve that goal. Only three PRVs have been 

awarded to date under the Tropical Disease PRV Program since its 

inception in 2007, and these were for products that had been in development prior to the creation of the PRV program. Thus, it remains unclear at this time how effective this program is in spurring product development, particularly for new product development. 

And even if PRV has ultimately proved successful in 

incentivizing product development, expanding the Tropical Disease 

PRV Program to CBRN threats has the potential to increase the 

29 

number of PRVs that are issued over time, which could negatively 

affect the sales value of PRVs and thus the ability of the PRV program to do what it is intended to do: incentivize product development. 

As Dr. Hatchett noted, the U.S. Government already provides 

significant incentives to help facilitate medical countermeasure development, including funding for research and development, clinical 

trial costs, and procurement contracts, and extensive technical assistance throughout the development process. These incentives 

have been highly successful in facilitating the development of medical countermeasures required for emergency preparedness and response. Therefore, it is unclear that extending PRVs to CBRN 

threats is sufficient or even necessary to incentivize additional 

medical countermeasure development. 

FDA is also very concerned that adding CBRN threats to the 

Tropical Disease PRV Program will have a negative impact on 

FDA’s ability to support product development. PRVs are redeemed 

for products that would not otherwise qualify for priority review, 

such as drugs to treat conditions for which safe and effective therapies often already exist: for example, elevated cholesterol or diabetes. 

The clinical trials for these applications are typically more numerous, involving thousands more patients, and more complex than 

for the types of products that would normally qualify for priority 

review. Reviewing such applications within the target 6-month priority review timeframe is very challenging and requires many more 

person-hours and a larger review team. Thus, managers and reviewers must refocus time and resources away from other important public health work. 

If there are more PRVs being issued and redeemed as a result 

of the proposed expansion of the Tropical Disease PRV Program, 

FDA will have fewer resources available to review other marketing 

applications, including for serious diseases for which no available 

therapies exist. 

These resource constraints will also undermine FDA’s ability to 

conduct its portfolio of public health work from providing advice 

and guidance in the early stages to help facilitate product development, including for medical countermeasures, as well as to monitoring safety and approval. Given the uncertainty related to the 

utility of extending PRVs to CBRN threats and the potential negative unintended consequences associated with doing so, FDA believes Congress should approach the expansion of the PRV program 

to CBRN threats with caution. 

We suggest that it would be advantageous to conduct a full assessment of U.S. Government medical countermeasure programs to 

determine if additional incentives are needed, and if so, bring together key experts and stakeholders to explore the most appropriate incentives to add. 

Thank you, and I will be happy to answer any questions you may 

have. 

[The prepared statement of Mr. Mair follows:] 

30 


rood anJ 

Sllvc! Spnng. ~0993 

STATEMENT OF 

MICHAEL MAIR, M.P.H. 

DIRECTOR OF STRATEGIC OPERATIONS 

OFFICE OF COUNTERTERRORISM AND EMERGING THREATS 

FOOD AND DRUG ADMINISTRATION 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

BEFORE THE 

SUBCOMMITTEE ON HEALTH 

COMMITTEE ON ENERGY AND COMMERCE 

U.S. HOUSE OF REPRESENTATIVES 

STRE:\'GTHENING PUBLIC HEALTH EMERGENCY RESPONSE ACT OF 2015 

MAY19,2016 

RELEASE ONLY UPON DELIVERY 
31 


INTRODtJCTION 

Good morning Chairman Pitts, Ranking Member Green, and members of the Subcommittee. 

am Michael Mair. Director of Strategic Operations in the Office of Counterterrorism and 

Emerging Threats (OCET) at the Food and Drug Administration (FDA). Thank you for the 

opportunity to appear today to discuss H.R. 3299, the Strengthening Public Health Emergency 

Response Act of2015, which contains provisions intended to help improve preparedness for and 

response to chemical, biological, radiological, and nuclear (CBRN) threats. 

FDA Role in the CBRN Mission 

FDA plays a critical role in protecting the United States from deliberate CBRN threats and 

naturally occurring infectious diseases, such as Zika virus and pandemic influenza. FDA is 

responsible for ensuring that medical countermeasures-including drugs, vaccines, and 

diagnostic tests-against these threats are safe, effective, and secure. It is the mission of OCET 

to facilitate the development and availability of these life-saving products. 

FDA works closely with interagency partners-including the 011ice of the Assistant Secretary 

for Preparedness and Response (ASPR) and its Biomedical Advanced Research and 

Development Authority (BARDA), the National institutes of Health (NIH), the Centers for 

Disease Control and Prevention (CDC), and Department of Defense (DoD)-as well as with 

medical countermeasure developers and international pattners to facilitate the development and 

availability of the medical countermeasures necessary to respond effectively to public health 

emergencies and to support the unique needs of the warfighter. FDA supports medical 

countermeasure development and availability by providing subject matter expertise and technical 

assistance in medical countermeasure development, as well as by providing scientific and 

regulatory input to inform medical countermeasure stockpiling and deployment decisions. In 
32 


addition, FDA employs its authorities, such as Emergency Usc Authorization (EUA). to facilitate 

access to available medical countermeasures to respond to public health and military 

emergencies, even when products are investigational or not yet approved for that particular use 

provided certain criteria are met. 

In 2010, FDA launched its :V1edical Countermeasures initiative (MCMi), focusing increased 

resources on identifying and resolving regulatory challenges to medical countermeasure 

development and availability. The MCMi mission is to promote the development of medical 

countermeasures by establishing clear regulatory pathways for the development of medical 

countermeasures. instituting effective regulatory policies and mechanisms to facilitate timely 

access to available medical countermeasures, and advancing medical countermeasure regulatory 

science to create the tools that support regulatory decision making. 

This interagency collaboration has been extremely successful in facilitating the development and 

availability of medical countermeasures to respond to CBRN and emerging infectious disease 

threats. For example, since 2000, FDA has approved 89 medical countermeasures for CBRN 

threats and pandemic influenza, as well as 17 supplemental changes to already approved 

applications and 71 modifications to diagnostic devices. This success is in part due to the 

continuing support provided by Congress in establishing the programs and authorities 

neccssary··~as well as providing the funding needed-to create and sustain a robust medical 

countermeasure enterprise. 

The Tropical Disease Priority Review Voucher Program 

In 2007, in an effort to incentivizc the development of new drug and biological products for the 

prevention and treatment of tropical diseases that affect millions of people throughout the world, 
33 


Congress created the Tropical Disease Priority Review Voucher (PRY) Program at FDA. Under 

the Tropical Disease PRY program, FDA awards PRVs to the sponsors of approved tropical 

disease product marketing applications for speci tied tropical diseases provided cettain criteria 

are met. The PRY may in turn be used by the sponsor who receives it, or sold to another sponsor 

who may then use it, to obtain priority review for a product application that would otherwise not 

receive priority review. When a marketing application receives a priority review designation, 

FDA ·s goal is to take action on that application within 6 months as compared to 10 months under 

standard review. Thus, a PRY enables a product developer to potentially bring a product to 

market sooner than it would under the standard review time, which is valuable to product 

developers. 

The legislation that created the Tropical Disease PRY Program listed sixteen tropical diseasesincluding tuberculosis, malaria. and Dengue-that would qualify the developer of an approved 

product to prevent or treat the listed tropical disease to receive a PRY under the Tropical Disease 

PRY Program. 

The legislation also authorized the Secretary of the Department of Health and Human Services to 

add an infectious disease to the list of tropical diseases that would qualify the developer of an 

approved product to prevent or treat an identified tropical disease to receive a PRY if: (I) there is 

no significant market in developed nations for that disease; and (2) the disease disproportionately 

affects poor and marginalized populations. This authority is delegated to FDA, and in 2015, FDA 

added Chagas disease and neurocysticercosis to the PRY -eligible tropical disease list. 

4 
34 


In 2014, Congress passed S. 2917, which added filoviruses, which includes Ebola virus and 

Marburg virus. to the PRY -eligible tropical disease list; and in 2016. Congress passed S. 2512 

which added Zika virus disease to the PRY -eligible tropical disease list. 1 

Section 8 ofH.R. 3299 would add any disease or other agent that is determined to be a material 

threat (under section 319F-2(c)(2)(A)(ii) of the Public Health Service Act) to the PRY-eligible 

tropical disease list. There are currently material threat determinations (MTDs) for eleven 

biological agents. two classes of chemical agents, radiological materials, and nuclear detonation 

effects. 

FDA is concerned that extending the Tropical Disease PRY program to CBRN threats may not 

effectively incentivize medical countermeasure development and may have negative unintended 

consequences. 

Medical Countermeasure Development 

Many of the sponsors that arc developing medical countermeasures for CBRN threats already 

receive significant incentives from the U.S. Government, such as funding for research and 

development and clinical trial costs, procurement contracts for government stockpiling, as well 

as extensive technical assistance throughout the development process. For example, in Fiscal 

Year 2015, FDA's medical product review centers held 84 formal meetings with medical 

countermeasure sponsors or applicants to provide technical assistance and clarify regulatory 

requirements (in addition to having significant interactions with medical countermeasure 

sponsor to notify FDA of its 

enabled the Secretary ofHHS to add diseases to the 

and clarified that disease PRYs can be resold an 

tropical disease list (S, 2512: PL · 

disease 
35 


sponsors and applicants outside of the formal meeting process to address issues and provide 

assistance). 2 As noted above, these incentives have been highly successful in facilitating the 

development of medical countermeasures. Therefore, it is uncertain whether extending the 

Tropical PRY Program to CBRN threats is necessary to incentivize additional medical 

countermeasure development. 

Moreover. there has been no analysis of the Tropical Disease PRY program to assess whether the 

program is effective in incentivizing product development for the listed neglected tropical 

diseases. Only three PRYs have been issued to date under the Tropical Disease PRY Program 

since its inception in 2007 (for products that had been in development prior to the 

implementation ofthe Tropical Disease PRY Program) and thus it is not clear at this time how 

effective this program is in spurring product dcvelopment. 3 Given this uncertainty. FDA 

believes Congress should approach additional expansion of the PRY program with caution. 

Potential Consequences to the Tropical Disease PRY Program 

In addition to awarding PRYs under the Tropical Disease Program, FDA also awards PRYs 

under the Rare Pediatric Disease PRY Program that was established by Congress in 20!2 to 

incentivize the development of products to prevent or treat rare pediatric diseases. Adding all of 

the CBRN threat agents with MTDs to the list of qualified tropical diseases under the Tropical 

Disease PRY Program has the potential to increase the number of PRYs that are issued over 

time, which could negatively affect the sales value ofPRYs. and thus, the ability of the PRY 
36 


program to incentivize product development. David Ridley, one of the architects of the PRY 

concept recently published an analysis of the commercial market for PRYs that included an 

examination of how the PRY price is affected by the availability of additional PRYs 4 He found 

that the expected value of a PRY could be as high as $234 million if only one PRY is available in 

one year, but that if four PRYs are available in one year the value could fall to as low as 

$39 million. Thus, Dr. Ridley found that continuing to add more diseases and conditions to the 

list of qualified tropical diseases runs the risk of reducing the sales price ofPRYs, which 

ultimately will undermine the ability of the PRY program to achieve what Congress intended it 

to do: inccntivize the development of medical products to treat or prevent the diseases or 

conditions on the tropical disease PRY list. 

Potential to Impact FDA's Capacity to Support Product Development 

PRYs are redeemed for products that otherwise would not qualify for priority review, such as 

drugs to treat conditions for which safe and effective available therapies often already exist (e.g., 

elevated cholesterol, diabetes). The clinical trials for these applications arc typically more 

numerous involving thousands more patients making the reviews more complex than for 

products that would normally qualify for priority review. Reviewing such applications within the 

target six month priority review time fl-ame is very challenging and requires many more personhours and a larger review team. Thus, managers and reviewers must refocus time and resources 

away from other important public health work. 

While FDA receives additional fees for the review of products that redeem a PRY, these funds 

arc unpredictable and one-time, and thus do not translate into additional staff or resources for the 

Review Vouchers. 1/eaith l({j'(.t!ilhvood). 2016 May 
37 


division that ultimately is called upon to review the product linked to the PRY. FDA cannot 

predict which review divisions will need additional staff to support PRY-related reviews. and the 

notification that product applicants must provide FDA of their intent to usc a PRY prior to the 

submission of a marketing application is insufficient to enable FDA to staff up as needed. 

Product reviewers are highly specialized scientists and doctors who typically cannot be hired this 

quickly or on an as-needed basis. Additionally. trained product reviewers are not interchangeable 

and cannot be moved from one review division to another. Thus, FDA must review an 

application linked to a PRY with existing resources within the affected review division. 

Extending the Tropical Disease PRY Program to CBRN threats will signilicantly increase the 

number of PRY-eligible diseases, which will eventually result in more PRYs being issued and 

redeemed. This will ultimately result in FDA having fewer resources available to review other 

marketing applications for serious diseases. including for CBRN threats. These resource 

constraints also have the potential to undermine FDA"s ability to conduct its entire portfolio of 

public health work, from providing advice and guidance in the earliest stages to help facilitate 

drug development (including for medical countermeasures) to monitoring safety after approval. 

CONCLUSION 

FDA is fully committed to sustaining our deep engagement in facilitating the development and 

availability of medical countermeasures to prepare tor and respond to CBRN and emerging 

infectious disease threats. While we support the intent in H.R. 3299 to further incentivize the 

development of medical countermeasures for CBRN threats, we are concerned that adding the 

MTD threats to the PRY-eligible tropical disease list may not achieve that goal. We suggest that 

it would be advantageous to conduct a full assessment of U.S. Government medical 

countermeasure programs to determine if additional incentives are needed to improve medical 
38 


countermeasure development and, if so, bring together key expe11s and stakeholders to explore 

what are the most appropriate incentives to add. 

Thank you. I am happy to answer your questions. 
39 

Mr. PITTS. The Chair thanks the gentleman. 

I recognize Colonel Coleman, 5 minutes for your summary. 

STATEMENT OF RUSSELL E. COLEMAN 

Colonel COLEMAN. Good morning. Chairman Pitts, Ranking 

Member Green, and distinguished members of the subcommittee, 

thank you for the opportunity to testify on Department of Defense 

efforts to partner with industry on the development of medical 

countermeasures that threaten our deployed military forces. I am 

talking about chemical, biological, radiological, and nuclear agents, 

CBRN. 

As the DOD Joint Project Manager for Medical Countermeasures 

Systems, my mission is the advanced development, procurement, 

and sustainment of FDA-approved diagnostics, vaccines, and therapeutics needed to protect the warfighters from these deadly hazards. 

I am one of five Joint Project Managers within the DOD’s Joint 

Program Executive Office for Chemical and Biological Defense, 

which is the material developer for the Department of Defense 

Chemical and Biological Defense Program, providing full-spectrum 

capabilities against CBRN attacks. Today, available economic and 

regulatory incentives have not succeeded in encouraging the industry to partner with the Department of Defense on the development 

of medical countermeasures against CBRN hazards. 

In general, medical countermeasures against these threats for 

the military would be used in rare emergency situations. And the 

military market is small. We are talking, you know, a couple hundred thousand forces, not tens of millions or hundreds of millions. 

This market is small so that it is unlikely to yield an acceptable 

return on investment for our industry partners. And industry performers, in my talks with them, have indicated that return on investment is their top priority, and there is simply little or no benefit in targeting these low-likelihood, high-impact threats. 

I personally believe that incentives are needed to inspire additional innovation in this market. There are a variety of potential 

incentives that could be used to encourage this investment, and the 

Department of Defense recognizes that the development of incentives will require a careful assessment of the risks and benefits 

that extend well beyond just the Department of Defense. 

Please recognize that we are not idle in the face of the challenges 

we have. My organization is taking steps to increase the Department of Defense’s ability to more rapidly develop and field medical 

countermeasures for the Joint Forces. 

We have recently announced the award of an other transaction 

authority consortium specific for the development of medical countermeasures in order to make it easier for nontraditional defense 

contractors, such as pharmaceutical industry, to partner with the 

Department of Defense. The OTA is a special contracting vehicle 

that has flexibility that is appealing to the pharmaceutical companies. 

Additionally, my office is standing up the DOD Medical Countermeasures, Advanced Development, and Manufacturing Capability, 

a dedicated and enduring capability to conduct advanced development and manufacturing of products for the warfighter. This facilVerDate Mar 15 2010 12:55 Sep 01, 2017 Jkt 037690 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X147PUBLICHEALTHEMERGPENDING WAYNE
40 

ity will make it easier and more likely that small biopharmaceutical companies, with which the DOD already engages but who 

lack the necessary experience with the FDA and with manufacture 

and production, to actually succeed at filling our DOD role. 

The bottom line is that the DOD is determined to field and fully 

fulfill those validated warfighter requirements that will provide 

those urgently required capabilities against CBRN threats. I applaud the conversation now ongoing as to which incentives can best 

meet those requirements and generate innovation in this area. 

Thank you again for the opportunity to provide my perspective. 

I look forward to continued congressional efforts to achieve results 

for the warfighter and the taxpayer. 

[The prepared statement of Colonel Coleman follows:] 

41 


RECORD VERSION 

STATEMENT BY 

COLONEL RUSSELL E. COLEMAN, U.S. ARMY 

JOINT PROJECT MANAGER FOR MEDICAL COUNTERMEASURE 

SYSTEMS, JOINT PROGRAM EXECUTIVE OFFICE FOR CHEMICAL AND 

BIOLOGICAL DEFENSE 

BEFORE THE 

HOUSE ENERGY AND COMMERCE COMMITTEE 

SUBCOMMITTEE ON HEALTH 

SECOND SESSION, 114TH CONGRESS 

EXAMINING H.R. 3299, STRENGTHENING PUBLIC HEALTH RESPONSE 

ACT 

MAY 19, 2016 

NOT FOR PUBLICATION UNTIL RELEASED BY THE 

COMMITTEE ON ENERGY AND COMMERCE 
42 


Chairman Pitts, Ranking Member Green, and distinguished members of the 

Subcommittee, thank you for the opportunity to testify on Department of Defense 

(DoD) efforts to partner with industry to develop medical countermeasures to 

prevent or mitigate the health effects of chemical, biological, radiological, and 

nuclear (CBRN) threats to the Armed Forces. For the last three years, I have led the 

Joint Project Management Office for Medical Countermeasure Systems (JPM 

MCS), the organization within DoD's Chemical and Biological Defense Program that 

is ultimately responsible for the advanced development, procurement, and 

sustainment of Food and Drug Administration (FDA) approved diagnostics, 

vaccines, and therapeutics needed to protect warfighters against CBRN threats on 

the battlefield. JPM MCS is one of five joint project managers within DoD's Joint 

Program Executive Office for Chemical and Biological Defense (JPEO-CBD). 

During my tenure at JPM MCS, we have instituted a range of improvements 

intended to enhance our ability to deliver capabilities to the force; however, there 

are some fundamental challenges that require assistance which the DoD cannot 

provide. I therefore greatly appreciate the opportunity to discuss incentives that will 

improve the ability of the DoD to deliver medical countermeasures against CBRN 

hazards. 

Available economic and regulatory incentives have not succeeded in 

encouraging industry to partner with DoD on the development of medical 

countermeasures against CBRN threats. In general, medical countermeasures 

against CBRN hazards will be used in rare, emergency situations. The market for 

these medical countermeasures is small and is unlikely to yield an acceptable 

return-on-investment (ROI) for our industry partners. Industry performers have 

indicated that ROI is their top priority and there is simply little or no benefit to 

targeting these low-likelihood, high-impact CBRN threats. Further narrowing the 

potential ROI for industry is the limited size of the military population versus the 

entire U.S. population. Accordingly, I believe incentives are needed to inspire 

additional innovation in this market There are a variety of potential incentives that 

could be used to encourage this investment, and DoD recognizes that the 

Page 1 
43 


development of incentives will require a careful assessment of risks and benefits 

that extend beyond DoD. 

Make no mistake, however, we are not idle in the face of this challenge. JPM 

MCS is taking steps to increase DoD's ability to more rapidly develop and field 

medical countermeasures against CBRN hazards. For instance, in order to make it 

easier for non-traditional defense contractors such as pharmaceutical companies to 

partner with DoD, we recently announced the award of an Other Transaction 

Authority (OTA) consortium for the development of medical countermeasures 

against CBRN threats. An OTA is a special contracting vehicle with flexibility 

regarding certain procurement regulations and statutes and is available to federal 

agencies for the purpose of obtaining or advancing their research and development 

priorities. On behalf of JPM MCS, the U.S. Army Contracting Command has 

entered into an OT A with the National Chemical and Biological Defense Consortium 

for a period of 20 years. 

Additionally, JPM MCS is establishing the DoD Medical Countermeasures 

Advanced Development & Manufacturing Capability (MCM ADMC), a dedicated and 

enduring capability to conduct advanced development and manufacturing of 

medical countermeasures for distribution to meet warfighter needs. In coordination 

with the Department of Health and Human Services Centers for Innovation in 

Advanced Development and Manufacturing, the DoD MCM ADMC will promote 

competition and incentivize businesses to compete by making it more likely small 

innovator biopharmaceutical companies that lack the FDA regulatory and 

production experience can and will succeed at fulfilling DoD requirements. This 

broadens the community of potentially capable and potentially interested 

performers. 

DoD depends on small contractors to address our requirements for medical 

countermeasures, because, as noted, large pharmaceutical companies have been 

unwilling to join in ventures with the Government to address the DoD requirement 

Page 2 
44 


given the limited market potential for the resulting end products. DoD's MCM ADMC 

effort will be a place where small innovators can access expertise and technology to 

navigate the complex processes and challenges of medical countermeasure 

development and production. This $205 million project was undertaken in response 

to a directed requirement from the White House in 201 0.' 

DoD is determined to fulfill validated warfighter requirements for medical 

countermeasures against CBRN threats. I applaud the conversation now ongoing 

as to which incentives are best to generate innovation and results. DoD is an 

essential participant in the discussion and is well positioned to take advantage of 

improvements in this challenging market. The National Chemical and Biological 

Defense Consortium OT A and the Medical Countermeasures Advanced 

Development & Manufacturing Capability are just two examples of actions we are 

taking now to remain as ready as possible in an uncertain world. Thank you again 

for the opportunity to provide my perspective. I look forward to continued 

Congressional efforts to achieve results for the warfighter and taxpayer. 

'Brennan, John 0. (2010, December 29) Medical Countermeasures Against Biological and Other Public 

Health Threats [Memorandum]. Washington, DC: The White House. 

Page 3 
45 

Mr. PITTS. The Chair thanks the gentleman. 

We are voting on the floor. We still have time to begin questioning, so I will begin the questioning. I recognize myself 5 minutes for that purpose. 

Colonel Coleman, the Department of Homeland Security has 

identified 13 material threats to U.S. national security. Would a 

PRV for threats on the material threat list help develop new MCMs 

for DOD? And why is it so important that we make sure these 

products are developed? 

Colonel COLEMAN. Thank you, sir. There is a Department of 

Homeland Security threat list, the material threat list, and a DOD 

threat list. They have many commonalities. So I believe that the 

availability of PRVs for agents on that material threat list would 

be of value to the Department of Defense. 

As to the second part of your question, why is this necessary for 

the Department of Defense? We face a myriad of threats on the 

battlefield. Our environment is fundamentally different from that 

face defending the homeland. We deploy our military forces to remote areas of the world where we have an austere environment, 

limited resources, difficult situations. And so the situation for the 

military is not the same as for the homeland. 

There are a myriad of threats that we face, and we don’t have 

capabilities against many of them. We recognize the need, and we 

have ongoing problems and programs. The best example I can highlight is Ebola virus in the recent outbreak that is so fresh in our 

minds. I deployed to Zaire in 1995 as part of a small team dealing 

with an Ebola outbreak. At that time, I was given a thermometer. 

This was the medical countermeasure available. Take your temperature, and we will throw you in the isolation ward. 

Flash forward 20 years, and while the Government has been actively involved in developing countermeasures for Ebola virus, 

what did we have? We did not have FDA-approved products. Yes, 

we had experimental compounds that all of us worked to make 

available to help save lives, but we had not been able to get them 

over the finish line. From my personal perspective, again, for the 

military, it is the lack of industry interest just because of the lack 

of return on investment. 

We wish that, for our military needs, we would have a large 

enough guarantee that we would buy enough product to make it 

worthwhile. That is just not the case for the military. So alternative incentives, in my mind, could replace the return on investment. Now, I have to caveat, these are my personal perspectives 

and not a Department of Defense position. There is no real position 

from the Department of Defense on the value of priority review 

programs, but there is great interest in better understanding the 

incentives that could be made available. 

Thank you, sir. 

Mr. PITTS. Thank you. 

Mr. Mair, you said, in 2009, in an article that you authored, 

quote: ‘‘Priority review vouchers are an innovative, high-impact, 

low-cost mechanism for encouraging the development of new medicines and vaccines for infectious diseases,’’ end quote. 

In your testimony, you say that concern that extending the Tropical Disease PRV Program to CBRN threats may not effectively 

46 

incentivize medical countermeasure development. Have you 

changed your position? Explain, you know, the change there. 

Mr. MAIR. Thank you. So back when I wrote about the value— 

potential value of PRVs for CBRN threats, I initially got—it was 

initially not even a program that was anything but an idea back 

in 2007 when I initially published on that. And at that time, PRVs 

were only an idea, and then since that time, Congress created the 

Tropical Disease PRV Program, and then we also have now a pediatric rare disease PRV program. 

So both of those programs now exist, and they have a lot of products that you could get through under that. So my concern at this 

point is twofold: One is that to continue to increase the program 

will reduce the value of the vouchers. And so it is unclear that to 

keep growing the program is going to undermine the program. And 

so there is that problem and also the issue of the effect on FDA’s 

ability to conduct its work. At the time, I didn’t appreciate that because I was not in Government. And it sounded at the time like 

it was reasonable that FDA could charge an extra user fee and 

they would be able to bring on extra staff to do the extra work associated with those PRV reviews. But it turns out that it doesn’t 

work that way because we can’t just staff up quickly because those 

fees are one time and unpredictable. 

And so the effect on FDA’s ability to do its other work is sort of 

balanced against the value of the PRV. And also, at this time, it 

is not even clear that these PRVs are really valuable to the developers who might get them, especially if we continue to grow the 

program and they become less valuable. 

Mr. PITTS. Thank you. 

I have a question for you, Dr. Hatchett, but my time is expired 

for now, so I will recognize the ranking member. 

Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

Dr. Hatchett, thank you for joining us today. I think it is important to understand each element of H.R. 3299. I would like to focus 

on the provision which would give BARDA its contracting authority. When BARDA was created in 2006, Congress gave the agency 

sole authority to negotiate and execute medical countermeasure 

contracts to ensure that it would react quickly to the development 

of vaccines and appropriate solutions. 

My understanding is that the contracting was moved from 

BARDA to AMCG in 2009 in order to streamline ASPR’s internal 

process. However, I heard from stakeholders that this transition 

has several unintended consequences which serve to slow down the 

procurement process for medical countermeasures. For example, 

companies often respond to BARDA requests to submit proposals 

with a 24 to 48-hour turnaround only to have these proposals language in the AMCG’s review process for multiple weeks or months. 

Countermeasure and development is critical to our national security and requires a more urgent and efficient contracting process 

than traditional grants at HHS. Though I am sure AMCG is well 

intended, they do not appear best suited to deal with the complexities of vaccine or medical countermeasures development the way 

BARDA does. 

47 

Dr. Hatchett, I know you have only been on a job for a couple 

of months, but do you believe that we could achieve more efficiencies in the contracting process? If so, what recommendations 

would you have for this committee? 

Dr. HATCHETT. Thank you, Mr. Green. Thank you for the question. 

Let me address the major part of the question first, which is 

whether I think that we should move the contracting activity within ASPR back into BARDA. And I actually do not think that we 

should do that. There were good reasons of policy, as opposed to 

just streamlining ASPR’s contracting activity, that underlay the decision to move that contracting activity out of BARDA and to have 

it provide a separate line of reporting directly to the Assistant Secretary for Preparedness and Response. 

Having the independent contracting authority provides checks 

and balances, obviously. It helps ASPR conduct its business with 

autonomy, without either the perception or potentially the reality 

of undue influence by the BARDA Director. And it allows the Assistant Secretary, which is a Senate-approved Presidential appointment, to provide direct oversight of the contracting activity within 

ASPR. 

Mr. GREEN. I have got some other questions. And I understand 

the separation of powers and the checkpoints, but I also know that, 

if it is an emergency, you know, for the companies to submit the 

contract within 48 hours, why would it take months to do it if we 

actually had an emergency that we needed? And a good example 

is Zika, which we are experiencing right now. 

Dr. HATCHETT. So Zika is a good example. Thank you for that 

question. When it is an emergency, our AMCG, our contracting office can act very, very rapidly. In fact, during the Zika crisis, there 

was an incident that was potentially going to turn into a medical 

crisis where FDA issued guidance about the collection of blood in 

areas where ongoing Zika transmission was occurring, and it was 

going to require blood collection in areas with active Zika transmission to be stopped. 

We learned about the impact that this was going to have on 

Puerto Rico, which could potentially produce a medical crisis there, 

on February 24, and within 6 business days, our contracting office 

had issued contracts to support the emergency delivery of blood to 

Puerto Rico. And 1 day after the contract was issued, blood supplies began to be moved to Puerto Rico. That was in Zika. 

During—— 

Mr. GREEN. And I appreciate that, you know, but, again, we all 

have to be on our toes. Two years ago, it was Ebola, and now it 

is Zika. And, you know, where I come from in Texas, we have a 

lot of other challenges that—but I appreciate it. 

What other serious infectious disease threats is ASPR and 

BARDA monitoring and is concerned about the potential impact on 

public health? And what sustained approaches and questions and 

steps can be taken to prepare for emerging threats before they 

reach the level of being immediate and urgent public health concerns? 

Dr. HATCHETT. So we are constantly scanning to act proactively 

if we detect emerging threats. We are, for example, paying very 

48 

close attention to the yellow fever outbreak in Angola at present 

and monitoring the manufacturing capacity in status of yellow 

fever vaccine stockpiles. We certainly are continuing to monitor 

Ebola. We are working very closely with the international community. There is an ongoing effort right now to prioritize known 

emerging pathogens in terms of the potential threat they face. 

Mr. GREEN. OK. Mr. Chairman, thank you. I would like to ask 

unanimous consent to place in the record a letter from the Doctors 

Without Borders. 

Mr. PITTS. Without objection, so ordered. 

[The letter appears at the conclusion of the hearing.] 

Mr. PITTS. We are voting on the floor. We still have a couple of 

minutes left to vote. There are 11 votes, so we are going to stand 

in recess until the conclusion of those votes. It should be around 

11:30. 

So, without objection, the committee stands in recess. 

[Recess.] 

Mr. PITTS. All right. Thank you for your patience. The time of recess having expired, we will reconvene the hearing. 

And the Chair now recognizes the gentlelady from Indiana, Mrs. 

Brooks, for 5 minutes of questions. 

Mrs. BROOKS. Thank you, Mr. Chairman. 

And I would ask unanimous consent to provide to the record five 

letters of support for a bill, H.R. 3299: one from Douglas Bryce, 

Joint Program Executive Officer for Chemical and Biological Defense from the Department of the Army; one from the Alliance for 

Biosecurity; one from the California Life Sciences Association; one 

from the Biotechnology Innovation Organization; and one that is 

categorized from a number of venture capital firms. 

Mr. PITTS. Without objection, so ordered. 

[The letters appear at the conclusion of the hearing.] 

Mrs. BROOKS. Thank you. 

Dr. Hatchett, I realize that you have only taken over very recently as the BARDA Director, as recently as last month, but I am 

curious, and I would like to share with you some statements that 

your predecessor, Dr. Robin Robinson, told this committee under 

oath last year in November of 2015. 

He was asked the question if he believed that additional incentives were needed to get the private sector involved in the medical 

countermeasures development, and he answered yes. 

He also, when asked if he believed that creation of a priority review voucher limited to the material threats identified by DHS 

would be a useful incentive for the private sector, he answered yes 

to that as well. 

And when asked if he believed Congress gave BARDA the unique 

contracting authority based on its unique national security mission, 

he answered originally yes. 

When asked if it would be helpful to further expedite the medical 

countermeasures contracting process, he answered yes. 

And, finally, he asked if it would be helpful, most directly, for 

BARDA to have direct control over its advance development and 

procurement contracts as it has in the past. And he indicated, 

whatever would be helpful, whatever we could do, yes. 

49 

And so could you please explain the agency’s and the leader of 

the agency’s dramatic shift in thinking? And I appreciate your 

praise of, you know, ASPR’s contracting authority and so forth, but 

how is it that the leader of BARDA previously has a 180-degree different view than you do? 

Dr. HATCHETT. Thank you for giving me the opportunity to address that. Would you like me to address the question about incentives in the priority review voucher first, or would you like me to 

tackle the contracting? 

Mrs. BROOKS. Whichever you prefer. 

Dr. HATCHETT. OK. Let me start with the incentives question. 

We are very concerned about ensuring that we have appropriate 

incentives in place to support medical countermeasure development. As you and the members of the committee know, most of the 

medical countermeasures do not have viable commercial markets 

that can justify their existence. And in the absence of an appropriate set of incentives—and I do think it is important that we 

have a set of incentives—that development just will not take place. 

And it has taken us over a decade to get a set of incentives in place 

that have begun to show results, as I mentioned in my original testimony. 

I believe, with respect to the priority review vouchers, that—I 

certainly also hear from our partners in industry about their interest in seeing the priority review voucher being extended into this 

space. My perception is that the reason they are interested in seeing a priority review voucher extended into this space—a priority 

review voucher is what we call a pull incentive. It is a prize for delivering, you know, the goods. It is not to help them perform research, but it is something that we give them when they succeed. 

We—— 

Mrs. BROOKS. But just, if I could clarify—— 

Dr. HATCHETT. Yes, ma’am. 

Mrs. BROOKS [continuing]. This involves no taxpayer dollars. Is 

that correct? 

Dr. HATCHETT. The priority review voucher does have costs. They 

are distributed differently. It is not a direct taxpayer-dollar-funded 

incentive. 

But it is a pull incentive, because if a company can receive a priority review voucher, then they have this prize which they can 

trade on the open market, and it provides potentially a great deal 

of value to the company. 

My perception is that the companies that have expressed support 

for this are expressing support for a new pull incentive because of 

their concern about our collective commitment to the biodefense enterprise. Without a sustained, substantial commitment to supporting medical countermeasure development, they, I believe, view 

the addition of a new incentive as potentially valuable. 

I believe that the incentives that we have in place, if they are 

sustained and fully supported, are demonstrating that they can 

work. And that is why I differ with my predecessor about the value 

of a priority review voucher. I understand the interest in the priority review voucher. I am not denying that it serves as a pull incentive. But I believe there are more direct and less deleterious 

ways that we can achieve success. 

50 

Mrs. BROOKS. But would you agree with me, though, it is certainly not just the private-sector companies who engage in this 

space. It also was endorsed in a significant way by the National 

Blueprint for Biodefense by the blue-ribbon panel. And so a number of experts for a long period of time believed that this would be 

the way forward. In fact, it is a number of their recommendations. 

Dr. HATCHETT. We are very interested in looking at all potential 

incentives that can be brought to the table. 

And the one other thing that I would say is that, in the various 

spaces that we work in, for CBRN threats, for pan flu, for antimicrobial resistance, and now for emerging diseases, the market 

failures for each of those areas differ, and I believe that they will 

require potentially different sets of incentives to achieve success 

against each of those threats. 

Mrs. BROOKS. Thank you. 

Mr. Chairman, I failed to also ask if we could submit for the 

record—I know that you, I believe, in your questioning, mentioned 

prior articles written by Dr. Mair. And I have two articles with respect to the priority review vouchers and the value that I would 

like to submit for the record written, in part, by Dr. Mair. 

Mr. PITTS. Without objection, so ordered. 

[The articles appear at the conclusion of the hearing.] 

Mrs. BROOKS. Thank you. My time has expired. I yield back. 

Mr. PITTS. The Chair thanks the gentlelady. 

I now recognize the vice chairman of the subcommittee, Mr. 

Guthrie, for 5 minutes. 

Mr. GUTHRIE. Thank you. 

Thank you all for being here and your patience. We appreciate 

it. 

Mr. Mair, I know that you have claimed that when a priority review voucher is redeemed, FDA has a harder time reviewing other 

priority review applications on time. However, in its most recent 

PDUFA performance report to Congress, the FDA stated that it 

met review goals for 100 percent of the 29 priority review applications it received. And it appears, from FDA’s own data, the use of 

priority review vouchers has not had any impact on review times 

for other priority applications. 

If the FDA doesn’t support the priority review voucher incentive, 

then what other kind of incentives could be appropriate for developing countermeasures? I know you are not going to endorse any 

or ask for any, but what are other incentives that we could look 

at? 

Mr. MAIR. Thank you for the question. 

So, with respect to the effect, I think—with respect to the effect 

of the vouchers, potential effect on our ability to do other reviews, 

I think our concern we are raising here is expanding the program. 

Well, there will be more vouchers out there that will eventually 

come in. And so this has the potential to affect our ability to do 

more of our other work down the road, especially if we continue to 

expand the program. 

So while, you know, one or two might by doable, if we end up 

getting, you know, 5, 10, 15 vouchers out there, it, you know, has 

the potential to grow to a point where it is—— 

51 

Mr. GUTHRIE. Are there other incentives that might be workable 

if we need priorities to move forward? 

Mr. MAIR. You know, it is a difficult question and something we 

should look at, but there are—you know, it is a question of, you 

know, the incentives we currently have, can we treat them, can we 

hone them in some way, can we improve what is currently available, or can we add new incentives to the mix, and what is most 

valuable, and what can get us there in the best possible way with 

the most value to the taxpayer in terms of getting us there most 

efficiently. So it—— 

Mr. GUTHRIE. OK. Thanks. I am going to try to get through a 

couple more questions. I appreciate that. Thanks a lot. I wasn’t cutting you off to be rude, just to get to a couple more questions in 

my 5 minutes. 

Colonel Coleman, do you believe the Department of Defense has 

the requisite number of medical countermeasures developed, licensed, and available to protect our warfighters from biological 

agents? And, in your opinion, should Congress be doing more to encourage the development of medical countermeasures against these 

threats, like creating priority review vouchers for the medical countermeasures? 

Colonel COLEMAN. Yes, sir. Thank you for that question. 

So I can unequivocally say that we don’t have the full array of 

medical countermeasures needed to combat weapons of mass destruction. Ergo, we have a robust program with funds provided by 

Congress for this express purpose. So, clearly, the needs continue, 

and we are a long way from where we ultimately need to be. 

In terms of any Department of Defense position, there is no position, as I stated earlier—I mean, there is a clear belief that we 

need an array of incentives. Personal opinion, which I think you 

asked, regarding priority review vouchers, I believe they could potentially be of great value. 

I will refer back to the Ebola virus outbreak. Post-outbreak, I 

have engaged with conversations with many of the pharmaceutical 

companies that chose to engage at the time of the outbreak, and 

their interest is waning. And some of the companies have indicated 

that, when they choose to stay in, it is really for the priority review 

voucher, which was added to that neglected tropical disease threat 

list. So I am getting the feedback from commercial enterprises that 

they see the value to this. 

Mr. GUTHRIE. OK. Thank you. 

And, Dr. Hatchett, some claim that it is important that BARDA 

does not have contracting authority because of potential conflicts of 

interest or undue influence of the BARDA Director. Why was your 

contracting authority taken away? And did the BARDA office lack 

program integrity? 

Dr. HATCHETT. Thank you for asking about the contracting authority again because I didn’t get to answer Mrs. Brooks’ question—— 

Mr. GUTHRIE. OK. 

Dr. HATCHETT [continuing]. And would like to address her question as well. 

The contracting authority was removed from BARDA, I believe, 

in 2009, which was prior to—I joined BARDA in 2011. 

52 

Mr. GUTHRIE. Yes. There was no implication on you in there. 

Dr. HATCHETT. Yes. And I believe the concern was legitimately 

that contracting is such an important activity, it manages the taxpayers’ dollar, that it was extremely important that it be independent and that it represent the business function of Government 

independently in terms of negotiations with companies. 

Our contracting office is right down the hall from my office. The 

head of our contracting authority, retired Brigadier General Jeff 

Scarborough, is—you know, his office is less than 100 yards from 

mine. We talk every single day. Our staff interact with the contracting officer staff every single day. So, you know, there are no 

barriers to our working together. We work together on all contracting actions. 

And in point of fact, to answer Ms. Brooks’ question about why 

I have a different opinion than my predecessor, I have looked at 

the data. I have looked at the data as to the timelines for individual contracting actions as well as aggregate timelines. And it is 

quite impressive that we are well below Federal and departmental 

benchmarks in terms of our performance. There are outliers, some 

that are large outliers that result in, you know, the average times 

being actually being lower than the median times. That happens. 

But, overall, I think our contracting office is providing a service 

to the American citizen by ensuring the integrity of our procurement process. And I am very comfortable with the system as it currently exists. I just have a different opinion than my predecessor. 

Mr. GUTHRIE. Thank you, Mr. Chairman. My time has expired, 

so I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

Without objection, we have a member of the Energy and Commerce Committee, not a member of the subcommittee, here, one of 

prime sponsors of legislation. I would like to yield to Ms. Eshoo 5 

minutes for questioning. 

Ms. ESHOO. Thank you very much, Mr. Chairman, for your legislative courtesy. 

And I would like to thank the witnesses for their testimony 

today. 

I am very proud of the legislation that former Congressman Mike 

Rogers and myself shaped and shepherded to create the law that 

led to BARDA. We are both members of the Energy and Commerce 

Committee, but, very importantly, both members of the House Intelligence Committee. And we viewed this issue in many ways as 

the tip of the spear, that our national security is a portfolio that 

contains many items that must be addressed. 

And so it is a pleasure to work with Congresswoman Brooks to 

update BARDA, but the principles, the underlying principles still 

remain, and that is that we be effective, that we be limber, that 

we be timely, that we be able to identify, that we be able to attract 

those who are actually going to produce the stockpiles for our country so that we are indeed prepared. 

And I hear some back and forth here, the innards and some of 

the weeds and the whatever. I think we have to raise our vision 

and keep in front of us exactly what I just said. 

So, Mr. Mair, the FDA claims that allowing biodefense medical 

countermeasures to qualify for a priority review voucher would draVerDate Mar 15 2010 12:55 Sep 01, 2017 Jkt 037690 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X147PUBLICHEALTHEMERGPENDING WAYNE
53 

matically increase the number of PRVs awarded. Now, DHS has 

identified only 13 material threats to U.S. national security, and 

since the creation of BARDA in 2006, 12 years ago, there have been 

3 medical countermeasures. 

Now, it has been stated before, it is worth stating again, that 

this program is privately funded. There are no taxpayer dollars in 

it. 

How many medical countermeasures are you aware of in the 

pipeline that would qualify for a PRV under this bill? 

Mr. MAIR. Thank you for the question. I might defer that to Richard to speak to—— 

Ms. ESHOO. Yes, let’s go quickly, because I only have 5 minutes. 

Mr. MAIR. Sorry—to Richard, what is in the BARDA pipeline. 

Ms. ESHOO. How many countermeasures are you aware of in the 

pipeline that would qualify? 

Dr. HATCHETT. Ma’am, I don’t have a specific number available 

to me. I would be happy to provide that information—— 

Ms. ESHOO. That would be great. 

Dr. HATCHETT [continuing]. To you and will do so. 

Ms. ESHOO. And would you please provide the committee with a 

list of those medical countermeasures, the candidates that you believe would qualify? All right? 

Dr. HATCHETT. Uh-huh. 

Ms. ESHOO. Dr. Hatchett, how long does your average vaccine 

procurement take from solicitation to award? 

Dr. HATCHETT. The most recent numbers that I have looked at 

are actually aggregate numbers of major acquisition programs. And 

so those include Project Bioshield procurement actions, the most recent four procurement actions, as well as three additional major acquisition—— 

Ms. ESHOO. Yes, I just want to know how long does your average 

vaccine procurement take from solicitation to award. 

Dr. HATCHETT. Sure. 

Ms. ESHOO. Because timeliness is of the essence in all of this. If 

we can’t be timely—identify, target, be timely, bring it up, have 

these measures in place, then this is just a piece of paper with good 

ideas on it. 

Dr. HATCHETT. So the four actions that I have data for immediately available, three of them took 90 days from solicitation to 

award. 

Ms. ESHOO. I am asking about vaccine procurement. 

Dr. HATCHETT. OK. I will have to get back to you with definitive 

data. 

Ms. ESHOO. OK. I would appreciate that. 

Dr. HATCHETT. OK. 

Ms. ESHOO. I really don’t get your reason, your thinking, and 

what you have testified today, Dr. Hatchett, about contracting authority under BARDA. It is the way the legislation was written 

originally. The Commission—I mean, if there was ever a bipartisan 

commission of some of the most highlyregarded individuals in public service—they don’t agree with you. 

How did you arrive at your thinking? I mean, does it make it 

faster? More effective? What is it that you don’t like about it? 

54 

Dr. HATCHETT. First, in terms of how the Department of Health 

and Human Services handles contracting throughout the operating 

divisions—— 

Ms. ESHOO. No, I am asking you. I am asking you. 

Dr. HATCHETT. So I am trying to address your question, ma’am. 

The contracting activity at NIH, at FDA, at CDC report directly 

to the director of those agencies and provide services to the components of those agencies. The contracting activity within ASPR reports directly to the ASPR and provides—— 

Ms. ESHOO. I think you are talking about an organization chart. 

I want to know, in terms of our national security and the import 

of what this law is about, why do you take the position that you 

do? 

Dr. HATCHETT. I take the position that I do because I understand 

the complaints that have been articulated by our private-sector 

partners, and they have gone on to propose a solution, which is to 

move the contracting authority back into BARDA. 

Their complaints relate to concerns about the length of time it 

takes, about their interactions with the contracting authority. I believe there are other ways to address the complaints that they have 

articulated that preserve the integrity of our procurement process 

in a way that would be more effective than moving the contracting 

authority back into BARDA. 

Ms. ESHOO. Thank you. 

Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentlelady. 

Dr. Hatchett, I didn’t get to ask my question of you, so I would 

like to do that and let the ranking member or anyone else ask a 

followup if they would like. 

I would like to read from a letter sent to Congress by a group 

of venture capital investors who have experience with MCMs. And 

they say, quote, ‘‘We have watched the biodefense enterprise struggle to attract and sustain investment and participation from companies and financial partners. The lack of sustainable and predictable incentives for companies who have promising technologies for 

biodefense applications is the primary driver of this struggle. Quite 

simply, the decision to invest in the biodefense sector is infinitely 

more risky than any other portion of the biotech sector,’’ end quote. 

So, Dr. Hatchett, I would like—and I will enter into the record 

this letter, without objection. 

Mr. GREEN. No objection. 

Mr. PITTS. With no objection, so ordered. 

[The letter appears at the conclusion of the hearing.] 

Mr. PITTS. Multiple developers have indicated that investors actually devalue the biodefense work they do with the U.S. Government because it is so risky and unpredictable. So my question is, 

if this is the case, why would anyone oppose this limited incentive 

for MCMs? What are your thoughts on this issue? 

Dr. HATCHETT. Well, thank you, Mr. Chairman, for the question. 

I think you are actually making the same point that I was making earlier, which is that, in the absence of predictable and sustained incentives, it does become an extremely risky business to be 

in because of the absence of the commercial markets for the products at the end of the day. 

55 

I believe if the administration, whatever that flavor is, and Congress agree to provide the sustained incentives and strong support, 

that we have demonstrated that the system can work technically. 

We can bring countermeasures forward; we can address the technical challenges. 

In terms of it being a risky and unpredictable business to be in, 

in 2010 we undertook an interagency review of the entire medical 

countermeasures enterprise specifically to address areas of risk 

that the Government had some control over that could reduce that 

risk and make the Government better partners with our privatesector partners. 

And I think the results of the last 6 years since that review was 

performed have demonstrated an acceleration in the delivery of 

countermeasures. And so many of the steps that we have undertaken have addressed the different risks—the financial risk, the 

technical risk, the regulatory risk, the risk of working with Government as a partner because of the way the political winds blow. 

We are extremely mindful of the risks that our partners face. We 

are working to address those risks, reduce those risks. And we certainly thank you for the support that you have provided so far. We 

ask for continued strong support for this effort because, without 

that support, the enterprise is jeopardized. 

Mr. PITTS. Thank you. 

The Ebola and Zika outbreaks have been lessons in the seriousness of the challenges we face in this space, and H.R. 3299 was 

written to increase the efficiency of this program administratively 

and incentivize the product development. And I think you agree 

every minute is critical. It is important that we continue to work 

in a bipartisan manner to improve our emergency preparedness, 

incentivize medical countermeasures development. 

I will yield to the ranking member for any closing questions or 

thoughts. 

Mr. GREEN. Thank you, Mr. Chairman. 

I would like to ask unanimous consent to place an article from 

Health Affairs—— 

Mr. PITTS. Without objection—— 

Mr. GREEN [continuing]. Into the record. 

Mr. PITTS [continuing]. So ordered. 

Mr. GREEN. Thank you. 

[The article appears at the conclusion of the hearing.] 

Mr. PITTS. All right. We will have followup questions. We have 

been interrupted. We apologize for that. Thank you for your patience. But members do have followup questions, and other members have written questions. We will submit those to you in writing 

and ask that you would please respond. 

And I would remind members that they have 10 business days 

to submit questions for the record. Members should submit their 

questions by the close of business on Thursday, June the 2nd. 

Very, very important issue, very important hearing. Thank you. 

We look forward to continuing to work with you on this issue. 

Without objection, the hearing is adjourned. 

[Whereupon, at 12:31 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

56 


111TII co:\mmss 

1ST SESSIO:'\ H.R.3299 

To Hlll<'!Hl the Pulllil' Uenltl! 8Pt'Vi<'<' "\d to Pllo\ll'l' Jli'<']>Hl'<'dl!ess for cl!emi<·nl, 

l'Hdiologi(•nl, hiologienl, and nu<'l('UI' tllrents. nud fm· n1ht'l' purpos<'S< 

I~ TilE HOUm OF HEPRESE~TATI\'ES 

.Jny ~n. ~01" 

~[rs. BHOOE:-i of lndimw (fnr hl't'sl'if Hlld :\fs. F:>'IIOO) intmdne<•d thp folJm,·ing 

bill; \rl1id1 \HIS l'<>f't'lTPd to tlte (\Jmmith~P Oll Eneq . .!,)-- nnd ('omml'l'ee 

A BILL 

To amend the Pnblie Health Seniee ~\.et to emmre preparedness for dwrnieal, rndiologieal, biological, H!l(l nuelear 

threats, nml for other p11rposes. 

Be if c1wctcd by the 8enute uwl Jlouse r!{' Rcprcscntu2 tires r~j'tlle Cndcd 8t1dcs <~j'Amcricu in Coll.'}l'ess ossembled, 

3 SECTION 1. SHORT TITLE. 

4 This Aet llm~· be eited as the "8tre11gtheuing· Public: 

5 Health Emug<'m·~· Hesponse Aet of ~015''. 

6 SEC. 2. HOSPITAL PREPAREDNESS PROGRAM. 

7 Rnhsectiou (j) of sPetion ::n DC-:2 of' the Puhlie Health 

8 Rl~tTie(' Aet (4~ t:.S.C. ~-J.7d-:ih) is amended b? adding 

9 at the end the folluwing: 
57 


"(3) LE\'EL F'OH 

2 .\ W.\HDS.-Of the amounts appropriated to enrT~' out 

3 this seetiou for n fis(·al ~·pnr, not less thnn 97 JWl'-

4 eent shall hr awarded to eligible Pntities as (leserihed 

5 iu subseetion (a).". 

6 SEC. 3. GAO REPORT ON STATE, LOCAL, AND HOSPITAL 

7 PREPAREDNESS PROGRAMS. 

8 (a) I:\ GE.'\EH"\L.-1\ot later than 1 ~-ear after the 

9 date of enaetuwnt of this Aet, the Com.ptroller Oenernl 

10 of the Cuited States shall submit a report to the Congress 

11 on th(• programs for awnnling eooperatiYe agn•ements and 

12 grants mHler sedion 8 19C-l of the Pnblie Health Se1Tiee 

13 "\et (-t~ l'.S.C. :24/d-:in; imwm·ing State and ](wal publie 

14 health seemity) and sediou :l19C-:2 of snell .\et (-1:2 

15 U.S.C. :2-t/d-:ill: pm·tJH'rships for State and regional hos16 pitnl preparedness to imwow surge enpneity). 

17 (h) CO:\TE.'\TS.-The report under snbseetiou (a) 

18 shall addn•ss paeh of tht> follmYing: 

19 (1) The goals o!' 1lw programs speeit'ied in snb20 sPetion (a). 

21 (~) The extent to \Yhieh snell goals are being 

22 met, inelndiug performnnee nwtries thnt conl<l help 

23 assess whether S\l('h progmms are su<·eccdiug. 

24 p3) How sneh programs eonld he improwd. 

•HR 3299 IH 
58 


:.l 

( 4) How sueh prognuns eomplement other pre2 pHrl'dness programs of tlw Dt'partmeut of Health 

3 and Human St'tTiecs. 

4 ( 5) limY fnwls awnrded through sneh programs 

5 should be alloeated and wlwth<•r that alloeation 

6 should he bused on risk. 

7 ( 6) Progress malle toward State and loeal pre8 paredness entities being self-snst aiuing. 

9 (7) Whether the lew] of fnnding for snell pro1 0 gnuns is snffi<:ient. 

II SEC. 4. STRATEGIC NATIONAL STOCKPILE. 

12 Sediou :31~H<'-:2(a)(2) of the I'nhlie Health SerYiee 

13 Ad. (42 C.S.C. 2!7d-Gh(n)(2)) is anwmled14 ( 1) in subparagraph (G), b~· striking "ami" at 

15 the end; 

16 (2) in snhparngraph (H), by strikiug the perio<l 

17 at the end and insl'rting ";awl'': and 

18 (:l) h~· addiug at the ewl the f'ollmYing: 

19 "(I) ensnre proredures are in p]a('e to eo20 ordinat<> the ongoiug- sto('kpiling b~· the Bio21 nwdieal A<h·aneed Resean•h <Uld DeYelopmPJJt 

22 "\.nthorit~· ami Centers for Disease Control nnd 

23 Prewntiou of qualified eountern1ensnr·ps (as (h;-

24 fined in sed.iou 319F-l), security emmtt>r25 measures (as definer! in this seetion), and quali-

•HR :!299 IH 
59 


2 

3 

4 

fied pnlHlemie or epidemi(• prodnets (as defined 

in section :H9Ii1-:3) for whieh funds haw been 

mnde ;wnilable mHh•r section :nm, in onler to 

aYoid an~· gaps in preparedness.". 

5 SEC. 5. PROJECT BIOSHIELD PROCUREMENT PROCESS. 

6 Seetion ;j EW-2(e) of the Pnblie Health Seniee Aet 

7 (42 U.S.C. 2-17d-Gb(e)) is amended8 (1) in paragraph ("1)(-'-\)(ii), by striking "make 

9 a reeonmH'IHintion u!Hler paragraph (G) that the SJW1 0 (:ial reserw fnnd as defined in snbseetion (h) he 

11 made aYailable for the Jli'OenrPnwnt of snell eonnter12 measure" and inserting "rnake aYaiJahle the speeinl 

13 reserw fnnd as defined in subsection (h) for pro14 em·emPut of stwh emnltcrme<lsnre''; 

15 (2) in paragraph (li)-

16 (A) h~· striking subparagraphs (A), (B), 

17 (C), awl (E); and 

18 (B) by striking· "((i) REC'o:\L\IE:\IUTIO:\S 

19 FOH PHESIDE:\T'S ,\l'l'HO\'AL" and all that fo]-

20 luws t hrongh "(D) Sn;sr:ql'E:\T Sl'ECH'IC 

21 COC\TEIDIK\Snm;-;.-" and inserting "(6) 

22 Sl~llSE(~l~E:\'T SPECIFW ('(W::\TEIDIE.\Sl'Hl~S.-

23 Pm<'lll'ement nnder"; and 

24 (:3) iu parngrnph (7)-

25 (A) IJ~· striking· snhpnrngraph (A); 

•HR 3299 IH 
60 


2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

5 

(B) b~· redesignating snbpnragTaph (B) as 

subpmagraph (A) and cunetHling sneh subpanlgTaph (A), as re(lesigmtted, to read m; follows: 

"(A) PXY:\IE:'\'1'8 l''H0:\1 SPECL\L HES!mn:: 

Fl':'\D.-The spe(·inl r·cseiTe fund as defined in 

snbscetion (h) shall lw aYailahle for payments 

made b~, the SeerPhn·~, to a vendor· for Jli'O<'Urenwut of a seeurit~- eonntenneasnre in aeeonlHJH•e with tilt• Jn·m·isions of this JHH'agraph.''; 

awl 

(C) hy redesignating snbparngrnph (C) as 

12 subpmagn1ph (B). 

13 SEC. 6. BARDA TRANSACTION AUTHORITIES. 

14 Section :n9L(e)(5) of the Publie Henlth SenieP Aet 

15 (4~ CS.C. ~47d-7e(e)(5)) is anwrHled b~, adding at the 

16 end the following: 

17 

18 

19 

20 

21 

"(II) CO:'\TIL\CTI:'\U ,\t:TTIOHITY.-The 

SP<:retary slwll ddegate authority for negotinting· and eitttriHg into aU)' eoutruets, grants, 

m· eooperatiw agt'<'<'nwnts nnder this seetion to 

tlw Dit·eetor.". 

•HR 3299 IH 
61 


() 

SEC. 7. PUBUC HEALTH EMERGENCY MEDICAL COUNTER· 

2 

3 

MEASURES ENTERPRISE STRATEGY AND IMPLEMENTATION PLAN. 

4 Seetion 2H11 (d)(:Z) of the Public Health Service Aet 

5 (4:2 FS.C. :3()0hh-10(d)(2)) is amPtHied6 ( 1) in snbp::trngraph (A), b~· insertiug after "df•-

7 serilw the ehemieal, biologieal, radiolog-ieal, all(] nu8 ekar ng-eut ot· agents that may present a threat to 

9 the Nation" tlw following-: "(whieh shall iuelncle pan-

! 0 demie inf1uenz<t)"; 

11 (2) by striking "and'' at the PIHl of subpnrn12 graph (,J); 

13 (:3) b~· redPsig-nating· snhparagntph (K) as snh14 JHU'itgTaplt (L); and 

15 (±) b~· inserting after subp<mtgrnph (,T) the fol16 lowing: 

17 "(K) report on tlte mnonnt of tinw lwtii'Pen 

18 tlw issumwe of eaeh request for proposal OJ' 

19 tnsk onler from the Biomedic·nl AdYnneed Re20 seareh and Dewlopnwnt 1\nthorit:· and the 

21 award of <t eontrad pnrsnnnt to such request 

22 for proposal or task order: and". 

23 SEC. 8. PRIORITY REVIEW TO ENCOURAGE TREATMENTS 

24 FOR NATIONAL SECURITY THREATS. 

25 Sel'tion ;)24(n)(:l) of the l<'edPral Food, Drug, and 

26 Cosmetie Aet (21 F.S.C. :360n(a)(~1)) is amended-

•HR 3299 III 
62 


7 

( 1) by redesignating subparagraph (I{) as snb2 pm·ngrnph (8); and 

3 (2) h~' inserting after subpamgraph ((~) the fol4 lowiug: 

5 "(H) Au)' rliS('tlSP m· other agent that is de6 termined to be a material thrent under sedion 

7 :31 ~W-2(C')(2)(A)(ii) of the Pnblie Health Serv8 i<'e Aet .. ". 

0 

•HR 3299 IH 
63 


May 17, 2016 

The Honorable Fred Upton 

Chairman 

Energy and Commerce Committee 

U.S. House of Representatives Washington, 

DC 20515 

The Honorable Frank Pallone 

Ranking Member 

Energy and Commerce Committee 

U.S. House of Representatives Washington, 

DC 20515 

Dear Chairman Upton and Ranking Member Pallone: 

1 am writing to express my concern about Strengthening Public Health Emergency Response Act of 

2015, H.R.3299. 1 request that you not support Section 8 of this bill, to establish a new priority 

review voucher program. 

Section 8 of this bill would directly harm American children with cancer and life threatening 

illnesses. It would break what is now a very effective drug development incentives program for 

seriously ill children: the Rare Pediatric Disease Priority Review Voucher Program, also known as 

the Creating Hope Act, 21 U.S.C. 360ft (Pediatric PRV). Protecting Americans from a possible 

risk of bioterrorism is also an important goal, but please do not pursue it at the expense of ill 

children. 

Although the United States has a robust pharmaceutical industry, very few drugs have been 

developed for children with cancer. In the 20 years leading up to the passage of the Pediatric 

PRV, there had been only one initial FDA approval for a drug expressly for pediatric cancer, the 

leading cause of death by disease for children. Children's cancers are different from adult cancers 

and children are treated with drugs that are decades old, even as cancer research has undergone 

transformative leaps forward. 

In 2012, Congress responded to this crisis in pediatric cancer by including in the U.S. Food and 

Drug Administration Safety and Innovation Act the Pediatric PRV, which was based on the 

Neglected Tropic Disease Priority Review Voucher program. With the passage of the Pediatric 

PRV, companies are now, for the first time, actively developing drugs expressly for children with 

cancer and in the next 10 years we will finally see newly approved life saving cancer drugs for our 

kids. 

Of course the sweeping success of the PRV program has attracted attention and as a result you 

are considering a new bioterrorism PRV. However, as Dr. David Ridley of Duke University explains, 

expansion of PRV program will break the Pediatric PRV because the value of the voucher will 

plummet quickly. 1 Current pricing for vouchers can only be supported if the number of vouchers 

is not increased by the creation of new PRV programs. Even a small increase in the number of 

1 David B. Ridley and Stephane A. Regnier, The Commercial Market For Priority Review Vouchers, 

3401 NWI 20016: 646 3590 1 www.kidsvcancar,org! Kids v Cancer is a 50l{c)(3) nonprofit organizatlon 
64 


vouchers will dramatically depress the value of the Pediatric PRV --and of every other PRV and 

undermine the incentive to which companies are now responding. 

A new PRV program would be directly at the expense of children's health. It also would not be an 

effective incentive because the value of all PRVs would be depressed. The Strengthening Public 

Health Emergency Response Act includes other important provisions to increase development of 

new bioterrorism drugs. These provisions are uniquely suited for bioterrorism because they take 

into consideration the importance of military leadership in identifying and directing the 

prioritization of bioterrorism drug development. If these provisions are insufficient, they should 

be fixed or new incentives should be developed. 

The problem is simple: if everything is a priority, then nothing is a priority. 

Thank you again for protecting the Pediatric PRV and protecting American children by not 

supporting a new bioterrorism PRV. 

Nancy Goodman 

Executive Director 

Kids v Cancer 

DC ?00151 6Ml v Cancer a 501\c)(J) nonproflt organization 
65 


David Ridley, PhD Duke University 

F acuity Director 

Health Sector Management 

The Fuqua School of Business 

Durham, NC 27708-0120 

Te! +1.919.660.3784 

david.ridley@duke.edu 

http ://faculty. fuqua. duke. ed u/-d br1 

May 17, 2016 

The Honorable Frank Pallone, Jr. 

House Committee on Energy & Commerce 

United States House of Representatives 

Washington, D.C. 20515 

Dear Mr. Pallone and Mr. Green, 

The Honorable Gene Green 

House Committee on Energy & Commerce 

United States House of Representatives 

Washington, D.C. 201515 

I am writing regarding the Strengthening Public Health Emergency Response Act of 2015 (H.R. 

3299) which would extend the priority review voucher program to medical countermeasures. 

I was one of the authors of the 2006 Health Affairs paper that proposed the priority review 

voucher program (Ridley, Grabowski, and Moe 2006). Our aim was to encourage development 

of new drugs for neglected diseases. In 2012, Congress extended the voucher program to rare 

pediatric diseases. I am writing to highlight the trade-offs associated with extending the voucher 

program to more diseases. 

Like neglected diseases, there is little private financial incentive to develop medical 

countermeasures. Furthermore, there is potentially enormous need. Hence, it is important to 

create incentives to develop new treatments as medica! countermeasures. 

Viewed in isolation, it makes perfect sense to add medical countermeasures to the diseases 

eligible for priority review vouchers. However, members of Congress should be aware that 

adding voucher-eligible diseases will drive down the price of vouchers and thus drive down the 

incentive to develop treatments for diseases already on the list. In the current issue of Health 

Affairs, my coauthor and I estimated that if one voucher is available in a year, it will be worth 

more than $200 million, but if four vouchers are available, then the price could fall below $100 

million (Ridley and Regnier 2006). If voucher prices fall below $100 million, then the expected 

net present value of the voucher would fall below the typical cost of a Phase Ill clinical trial and 

FDA submission. Hence, the voucher would not provide sufficient incentive for drug 

development and additional incentives would be needed, such as a profitable commercial 

market or the promise of government purchase. 

To limit the supply of vouchers and thus maintain high voucher prices, members of Congress 

have two levers: limiting the eligible diseases and limiting the characteristics of the drugs. For 

example, Congress could restrict voucher eligibility to only truly novel drugs or only drugs for 

which the drug developer conducted new trials. Furthermore, Congress could require the 

voucher recipients have filed a report describing their access plan prior to drug submission. In 

the case of medical countermeasures, the access plan would be providing the drug to the 

government. 

If Congress does not make medical countermeasures eligible for vouchers, then a prize should 

be considered. The US government could create a prize of $350 million per approved new drug 

for medical countermeasures. A prize of this size would replicate the highest sales price of a 
66 


voucher. Perhaps the funds could be found in the existing budgets of the Department of 

Defense or Health and Human Services. A $350 million prize will likely be too small to excite 

large pharmaceutical manufacturers, because of their high cost structure (unless they choose to 

participate as a source of pride for their employees). However, even if large manufacturers are 

not interested, many small drug developers would likely be interested. There are many small 

developers, and surely some developers have drugs for infectious diseases that would be easy 

to test at relatively cost. An advantage of a prize (pull) mechanism is that government officials 

need not know about these small companies in advance, they need only know about the 

companies if they succeed. My experience with the priority review voucher has been that there 

are many small companies that few have heard of, but are willing and able to develop drugs for 

infectious diseases at relatively low cost. 

One way in which Congress could strengthen the voucher program and drug review more 

broadly would be to loosen the limits on pay for scientific reviewers at the Food and Drug 

Administration. The priority review voucher puts an extra strain on the FDA because it requires 

faster review. However, every priority review voucher redeemed comes with $5 million in user 

fees ($2.4 million for the standard fee and $2.7 million for the voucher) from the developer. So 

FDA has extra money to hire staff, but if FDA cannot attract new staff given pay restrictions, 

then the extra fees are not particularly helpful, and the voucher program creates a heavy 

burden for the FDA. 

I am grateful to the members of Congress for their enthusiasm for the voucher program and for 

looking for ways to strengthen it. As I've worked with Congressional staff on the voucher 

program, I have been thoroughly impressed with those I have met on both sides of the aisle. 

They seem genuinely interested in getting things right. 

Sincerely, 

David Ridley, PhD 

Duke University 

c: Chairman Fred Upton 
67 


/~~ 

~ ~fi<;:.'A'"- l-T P'A ltn 

House Energy & Commerce Subcommittee on Health Hearing on 

"Examining H.R. 3299, Strengthening Public Health Emergency & Response 

Act" 

May 19,2016 

Testimony for the Record of Richard Hamburg, Interim President & CEO 

Trust for America's Health 

Chairman Pitts, Ranking Member Green and members of the Committee: thank you for the 

opportunity to submit testimony for the record on today's important topic, the Strengthening 

Public Health Emergency Preparedness and Response Act (HR 3299). Trust for America's 

Health (TFAH) is a nonprofit, nonpartisan organization dedicated to saving lives by making 

disease prevention a national priority. We are an independent organization and accept no federal 

or private sector funds At TFAII, we have long advocated for strengthening the ability of our 

public health and healthcarc systems to prevent and respond to disasters. Our organization is 

grateful to Representative Brooks and Representative Eshoo for shining a light on the need for 

continuous improvement in the nation's health security. 

The ongoing Zika virus outbreak, the impact of natural disasters on our healthcare system, and 

the threat of bioterrorism are constant reminders that the nation must remain vigilant in 

protecting the health of all Americans. TF AH publishes an annual report, Outbrerdss: Protecth1g 

.:li7Jericans (rom !n(ect~9~1§'))f~fases, which looks at steps the nation should take to prevent and 

mitigate the impacts of infectious disease threats ranging from measles to Zika. This year, the 

report included several recommendations related to issues before the committee today: 

\Vc must support the entire medical countermeasure enterprise, from initial research 

through stockpiling and community-level distribution and dispensing; 

\Vc must create new incentives to encourage private sector partners to continue investing 

in medical countermeasures development; and 

We must continue to rebuild and modernize the Hospital Preparedness Program. 

This testimony will focus on this last issue, modernizing the Hospital Preparedness Program 

(HPP), which is addressed in sections 2 and 3 of the legislation. We are pleased that the bill 

includes a focus on this program, and the sponsors share our goal of making HPP as strong as 

possible. J.JPP, administered by the Assistant Secretary for Preparedness and Response (ASPR), 

is the main federal program that provides leadership and grants to improve medical surge 

capacity and enhance coordinated health system preparedness for public health emergencies. 

IIPP supports regional coalitions ofhealthcare facilities and public and private partners to better 

coordinate planning and response efforts. There arc nearly 24,000 healthcare coalition (HCC) 

members nationwide organized in about 500 HCCs, including hospitals, outpatient facilities, 

long-term care, emergency medical services (EMS) and public health departments. The program 
68 


has transitioned from its initial focus on individual hospitals purchasing equipment and supplies 

to developing IICCs and hcalthcare capabilities such as health system preparedness and 

recovery, emergency operations coordination, and information sharing. 

Funding for the program has been cut from a high point of S515 million in FY2004 to currently 

about $255 million annually to support the entire nation's health system preparedness, including 

a 30 percent drop from FY20 13. As a result, we are asking our nation's healthcare system to 

prepare fOr pandemics and disasters with insufficient funding to inccntivize meaningful 

participation, although we do want to ensure HPP is as effective as possible with available 

resources. We believe there needs to be better oversight and evaluation ofHCCs. ASPR should 

be able to define and evaluate the minimum capabilities that a coalition must meet in order to be 

considered a successful coalition, better delineate the funding level that can be retained at the 

state level and for what purposes, and require better evaluation of coalition performance, \Ve 

hope the upcoming funding opportunity announcement (FOA), which begins in FY2017, will 

address those concerns. 

While we support the goal of section 2 ofHR 3299 -ensuring more money is reaching 

healthcarc coalitions and their members- we arc concerned that the language as written would 

have a counterproductive impact on the effectiveness of those coalitions. As written, only three 

percent of the HPP funding line would remain for intramural usc at the federal level for all 

healthcare preparedness activities, including grant administration and evaluation. Under current 

allotments, there are only II regional Health and Human Services (IIHS) staff members to 

oversee approximately 50 coalitions in each region and ensure an appropriate level of funding is 

being disbursed from states to coalitions. Further, this level of staffing makes it challenging to 

provide adequate technical assistance regarding preparedness and response operations to achieve 

the cooperative agreement's requirements and goals. We believe the language proposed in the bill 

would greatly reduce the staff that arc needed to provide technical assistance, evaluation, and 

management of the program. 

In addition, the HPP appropriations line supports more than just the grant program. HPP is the 

only funding line within the HI-IS budget focused upon health system emergency preparedness. 

Therefore, the Critical Infrastructure Program, the Emergency System for Advance Registration 

of Volunteer lleatth Professionals (ESAR-YHP), the Science Ilcalthcarc Preparedness 

Evaluation and Research branch, the Emergency Care Coordination Center, Division of 

Recovery, and the Technical Resources Assistance Center and Infom1ation Exchange (TRACIE) 

arc all funded out of HPP. As the legislation is written, these programs would likely all be 

eliminated. The funds that remain at the federal level are not simply overhead and administration 

of the cooperative agreement, but support substantive work that contributes to health system 

preparedness. 

As an altcmative, we suggest adjusting the language to state that eligible entities should ensure a 

greater proportion of their grant goes directly to coalition activities and substantively supports 

coalition capabilities. This would allow more money to reach the end user but ensure effective 

grant management and evaluation. To that end, we also support the language in Section 3 to 
69 


request a Government Accountability Office (GAO) study addressing key questions about I!PP 

operations and outcomes. 

Many healthcarc coalitions are achieving impressive results. In recent years, we saw healthcarc 

coalitions react to a massive train derailment in Pennsylvania, tornados in Mississippi and 

Missouri, and the West~ Texas cxplosion. 1 The coordination and systems put in place under HPP 

likely saved lives. We want to see these results replicated in coalitions across the country. To do 

so, we need to build effective coalitions and ensure we arc measuring their capabilities. We are 

grateful that this committee is committed to ensuring we are achieving the best possible 

outcomes from the Hospital Preparedness Program. We look forward to working with you to 

ensure HPP is as effective as it could be in protecting the health security of our nation. 

1 US Department of Health and Human Services, HPP fn Action; Stories from the Field. 

http:l/www.phe.g_Qd__!:r~fl~!~Q.Q.E;Ss/olanning/hp.QL~y£:_~_t_~{F:a~_~f.d.~:@!:!l~2~ (accessed May 11, 2016). 
70 


Blue Ribbon Study Panel on Biodefense . . 

Representative Susan Brooks 

1505 Longworth House Office Building 

Washington, DC 20515 

February 11,2016 

Dear Representatives Brooks and Eshoo, 

Representative Anna Eshoo 

241 Cannon House Office Bnilding 

Washington, DC 20515 

As co-chairs of the bipartisan Blue Ribbon Study Panel on Biodefense, we write to offer our support for H.R. 

3299, the Strengthening Public Health Emergency Response Act of 2015. 

Last October, our Panel released its comprehensive report, A National Blueprint for Biodefense: Leadership 

and Major Reform Needed to Optimize Efforts. For a year, we worked to examine the state of U.S. 

biodefense. We found significant effort and progress hampered by insufficient high-level leadership and 

strategic focus. We believe that this deficit has led to challenges in three areas of our domestic biodefense 

policy: interagency coordination, stakeholder collaboration, and technological innovation. Shortfalls have 

resulted in challenges at the department and agency level that compromise America's public health security. 

The House Committee on Energy and Commerce has been responsible for the passage of critically important 

legislation, including the Pandemic and Ali-Hazards Preparedness Act and its reauthorization. Your bill, H.R. 

3299, would further strengthen the statutory underpinnings of biological preparedness by addressing certain 

unresolved issues. For example, the Ebola events of 2015 revealed specific weaknesses in hospital readiness 

and medical countermeasure (MCM) availability. H.R. 3299 would: ensure that the Hospital Preparedness 

Program operates optimally; assure that the funding Congress allocates to this program reaches its intended 

recipients; eliminate bureaucratic delays in contracting and providing incentives for MCM development; and 

emplace a plan for the stockpiling of needed MCM. 

As Ebola, Zika, and avian influenza prominently emphasize, the fight against infectious disease has been and 

will continue to be long and sustained. In A National Blueprint for Biodefense, we identify specific 

opportunities for Congress and the Administration to improve our preparedness for such biological events. 

Many of these actions, like those in your bill, can be implemented in the near term. Passage ofH.R. 3299 

would meet at least four of our recommendations l9a, 19b, 29a, and 29c while adding value in additional 

areas. We strongly believe that Congress can facilitate measureable progress in our nation's readiness by 

pursuing the provisions of H.R. 3299. We, therefore, encourage your committee to deliberate on this 

legislation as soon as possible. 

We look forward to working with you in the coming year to implement these and other recommendations of 

the Study Panel. Please do not hesitate to contact us with any questions. You may reach us through the 

Panel's co-directors, Ellen Carlin (ellen.earlin@biodefensestudy.org, 202-669-7830) and Asha George 

(asha.george@biodefensestudy.org, 30 l-351-5723). 

Joseph I. Lieberman 

Chair 

Thomas J. Ridge 

Chair 
71 


Drugs for Neglected Diseases initiative 

TB ALLIANCE GLOBAL ALLIANCE FOR T8 DRUG DEVELOPMENT Treatm&nt Action Group 

Submission Regarding Bill H. R. 3299: 

Sup-gestions to Fix the FDA PRY for Nep-lcctcd Diseases 

CC: 

Chairman, Committee on Energy and Commerce 

Ranking Member, Conunittee on Energy and Commerce 

~lay 19,2016 

Dear Chairman Pitts and Ranking Member Green: 

As several of the most recent and 

for R&D for 

Administration (FDA) 

inoenti;-izing new research 

brought to market through the 

health emergencies have reminded the \Vorld, the need for wellis today more than ever. Yet:, 

of new dru~ and approved across 

In March 2016, the American Thoracic Doctors \V'ithout Borders/IviCdccins Sans 

Diseases initiative, the IDS1\ Center Global Health 

the Treatment Action Croup sent a letter to the Committee on and Commerce leadership raising several 

concern;.; with the design of the FDA PRV program for neglected diseases and proposed legisl-ative amendments, 2 

value of PR\"s has been established through sales, with the tnost recent voucher being sold for $350 

2015, 1 However, the value of these vouchers as an incentive to innovation for new 

for populations affec1ed by diseases depends on the being awarded only to truly 

are accessible to those who 

a systematiC assessment. Lancet 20!3, 1(6) 
72 


Nevertheless, the lack of requirements for a product to be novel or to be made available to and affordable for those 

whom the product is are two critical fla'\VS in the design of the neglected disease PRV 

un,;ddrcg,;ed Now, as is examining the PRV program, we hope that the Committee will 

disease FDA PRV to ensure that no"·el disease medical 

and are accessible to and health 

There art' two key amendments to the PRV program for neglected diseases that '\VC strongly recommend: 

1. The PRV program should have a novelty requirement. L'nder current law, a PRV for diseases 

can be awarded even when new R&D investments have not been made by the entity rccch·ing a'\\·ard or if 

the mcchcal product awarded a PRV for neglected diseases is not ne'\v. 

of dmgs for select neglected diseases 1hat have not been registered 

been in use 1n other countries for years. 1\vo of the three FDr\ PRVs f()t 

reg1strat1on 

2. The PRV program should require an access strategy. The PRV for neglected diseases docs not 

include any mechanism to ensure governments and care providers '\vill have affordable and 

appropriate access to products a PRV has been awarded. 

'\vill be accessible 

tn arc not even a product that earns a PRV. 

that arc marketed not need !O be f'or example, in the case of 

miltefosine, care providers like :'viSF, R&D organizations like DNDi, gmrernments and others arc still 

strugghng to access this product at an affordable some cases to access it at all. A PRV should 

awarded to companies who commit to serious to make 

and accessible to patients in disease-endemic countries, '\vhom the 

Str,ti"htfm~vatd statutory changes, based on 

for PRV could help to 

these many Committee '\VC hope you "\Vill advance these solutions. 

In addit1on to the Committee will also request a US Government 

study and report to evaluate effccttYcncss of the PRV as an incentive for 

promoting innovation, and and to unmet needs for mnovation have been met 

by the PRV prograrn .. As organizations \Vorking to and prov1de access to neglected disease treatments and 

vaccines, we sec cvcrv day the need to incentivize needs-dl".iven R&D 

' re\~'ards for invcstments.61mprovt'mcnts to the PRV 

that are needed to ensure the R&D system appropriate and 

those who need \\:-'e th('teforc hope that will consider not only leading the Committee m 

for neglected diseases, but also considering the potential creat1on of additional 

mechanisms to ensure R&D for neglected diseases is successfully and appropriately inccntivized, and that all 

patients in need can benefit from the fruits of biomedical innontion 
73 


Sincerely, 

American Thoracic Society 

Drugs for Neglected Diseases initiative 

Drugs for Neglected Diseases itJitiatiw 

hiV mediCine OSSOCIOIIOn 

I-!IV 1-fedicine Association 

Infectious Diseases Society of America 

~SANS FRONTIERES 

- "WiTiiOUT BORDERS 

tviCdecins Sans r:rontiCrcs/Doctors \'(lithout Borders lJSA 

Sabin Vaccine Institute 

Treatment Action Group 

Treatment Action Group 

OJ TB ALLIANCE GLOBAL AlliANCE FOR TB ORUG DEVELOPMENT 

TB Alliance 
74 


The Drugs 

collaborative 

development (R&D) 

for neglected diseases afflicting 

'ccomplishes its work through innovative, 

1n disease-endemic countries, 

non-governmental organizations, and governments 

The I I1V I\kclicine Association is an organizaTion of medical professionals who practice HlV medicine. \'\?c 

represent the mtcn:st of our by promotmg 9uality in I IIV care and by advocating: for pohcies that ensur(' a 

comprehensive and humane response to the AIDS pandetnlc tnformed by science and sonal justice. For more 

mformatlon please v1s1t \V\nV.hi\rma.org 

organization that delivers medical care to 

from hcalthcare in neatly 70 countncs. Tn 

a range of medical conditions, including neglected diseases, for which new treatments are urgently needed. For more 

information please Yisit \VW\v.doctots"\vithoutborders.org. 

dechcated 

to provide solutions for some of the 

founding in 1993 in honor of the oral polio vaccine developer, Dr. 

the Institute has been at the forefront of efforts to control, treat and eliminate these diseases by 

usc of existing vaccines and promoting increased access to affordable medical 

visit \Vww.sab.in.org. 

Treatment Action Group 

a vaccine, and a cun~ for to ensure that all peopk 

information. \Ve are sctence-based treatment acriv:isrs 

community w1th research and policy institutions. 

and policy makers to end AIDS. 

for better treatment, 

recen-T trcattnent, care, and 

and accelerate vital research and effectiYe 

open collective action by all affected 

more information please v1sir 

and Legal Policy Adviser of the MSF Access 

are interested in 

judit.riusG:i)n<:wyor)c.m:;f.org I Phone: + 1 112 

moH' about 
75 


DEPARTMENT OF THE ARMY JOINT PROGRAM EXECUTIVE OFFICE 

FOR CHEMICAL AND BIOLOGICAL DEFENSE 

5101 HOADLEY ROAD 

ABERDEEN PROVING GROUND, MO 21010~5424 

The Honorable Susan W. Brooks 

U.S. House of Representatives 

Washington, D.C. 20515 

Dear Congresswoman Brooks, 

APR 0 l 2016 

Thank you for your letter requesting my perspective as the Joint Program Executive 

Officer for Chemical and Biological Defense regarding Food and Drug Administration 

(FDA) priority review vouchers. I appreciate hearing from you on this important aspect of 

facilitating and expediting development of medical countenneasures. 

I support establishing a new priority review voucher (PRV) program for medical 

countenneasures for items on the Department of Homeland Security (DHS) Material 

Threat List. I believe such a program will incentivize investment and partnership, thereby 

benefiting the Department of Defense (DoD) in the advanced development of products 

that are essential to the Warfighter. Today there are few economic or regulatory 

incentives to encourage industry to innovate in the chemical and biological defense 

medical countenneasure market space. In general, chemical and biological defense 

medical countenneasures will be utilized in rare, emergency situations and, accordingly, 

the market for product sales is unlikely to yield a high return-on-investment. A new PRV 

program can inspire additional innovation in this market and greatly enhance the DoD's 

ability to rapidly deliver certain medical treatments and prophylaxis to the warfighter. 

Because this issue is so important to my mission space, I have " been in discussions, 

along with my DoD leadership, with House Anned Services Committee staff to detennine 

the best approach to getting a PRV program specifically for DoD's validated chemical 

and biological threat list. Although the DHS' materiel threat list overlaps to a large degree 

with DoD's validated chemical and biological threat list, there are some differences 

based on the distinct missions of DoD. lastly, the only additional recommendation I 

would make is to consider adding 'prophylaxis' or 'vaccines' to 'treatments' in the title of 

Section 8 ("Priority Review to Encourage Treatments for National Security Threats") to 

affinn the point that both pre-exposure and post-exposure capabilities are required to 

address this tremendous threat to the Nation. 

Thank you again for your letter and for your efforts to incentivize innovation. 
76 


Alliance for Biosecurity 

Office of the Secretary and Legal Counsel 

1500 K Street, NW, Suite 11 00 

Washington, DC 20005 

Telephone 1.202.230.5133 • Facsimile: 1.202.842.8465 

WW>N.allianceforbiosecurity.org 

The Honorable Susan Brooks 

U.S. House of Representatives 

1505 Longworth House Office Building 

Washington, DC 20515 

July 29, 2015 

Dear Congresswomen Brooks and Eshoo: 

The Honorable Anna Eshoo 

U.S. House of Representatives 

241 Cannon House Office Building 

Washington, DC 20515 

Dn behalf of the Alliance for Biosecurity, we write today in strong support of your bill, the Strengthening 

Public Health Emergency Response Act af 2015. This bill would support preparedness for potential public 

health emergencies by increasing accountability and streamlining the contracting process for medical 

countermeasures (MCMs), Ensuring that these essential programs are sufficiently funded and effectively 

managed is critical to sustaining our national security. 

Biosecurity companies tackle some very complex scientific puzzles, which are no less challenging than 

those faced by the biopharmaceutical sector as a whole but face a much more limited market. The 

medical countermeasures enterprise represents the government's commitment to develop and procure 

the products necessary to protect our national interests and encourage further innovation by the private 

sector, A combined and concerted effort among government agencies has greatly improved our 

preparedness capabilities over the last decade, but as these programs must evolve to ensure that they 

continue to function efficiently, 

Given that MCMs are essential to our national security and that private sector partners play a critical 

role in their development, the contracting process must be expeditious. Government funded projects 

progress at a slower pace than privately funded ones due to unpredictable funding and a lengthy 

contracting process. This bill addresses this concern by taking steps to make the contracting process 

more transparent, predictable, and flexible and by removing the requirement that OMB review all 

contracts already approved and funded by HHS. These reforms will speed up the procurement process 

and facilitate the public private partnerships necessary for countermeasure development. 

This bill also encourages private sector development of MCMs by including the 13 material threats 

identified by the Department of Homeland Security in the tropical disease Priority Review Voucher 

program. This model has proved successful in encouraging the development of vaccines and 

therapeutics for neglected tropical diseases and rare pediatric diseases and its application to MCMs for 

material threats is an important step toward ensuring necessary products are developed, approved, and 

stockpiled for use in a potential disease outbreak or chemical, biological, radiological and nuclear (CBRN) 

attack. 

Bavarian-Nordic • CUBRC, Inc. • Elusys Therapeutics • Emergent BioSolutions • GlaxoSmithKiine• Meridian 

Medical Technologies, Inc., a Pfizer Company • Nanotherapeutics, Inc. • Neumedicines, Inc. • Novartis 

Vaccines • Rom ark Laboratories, Inc. • Siga Technologies • Soligenix, Inc. ! Lovelace Respiratory Research 

Institute • Texas A&M University System • University ofTexas Medical Branch 
77 


The Honorable Susan Brooks 

July 29, 2015 

Page 2 

Again, we thank you for your support of the programs that contribute to greater public health security 

and ensure preparedness against biological threats and appreciate your efforts to improve the 

effectiveness of these critical programs. The Alliance for Biosecurity stands ready to help you and your 

staff in any way possible. If you should have any questions please contact Maureen Hardwick (202-230-

5133, Maureen.Hardwick@dbr.com) or Rebecca McGrath (202-230-5679, Rebecca.McGrath@dbr.com). 

Elisabeth Posillico, President & CEO, Elusys Therapeutics, Inc. 

Paul Chaplin, President & CEO, Bavarian Nordic, A/5 

Co-Chairs, Alliance for Biosecurity 
78 


The Honorable Susan Brooks 

1505 Longworth House Office Building 

Washington, DC 20515 

Dear Representatives Brooks and Eshoo: 

September 16, 2015 

The Honorable Anna G. Eshoo 

241 Cannon House Office Building 

Washington, DC 20515 

On behalf of California Life Sciences Association (CLSA}- the statewide public policy organization 

representing California's leading hfe science innovators, in-cluding over 750 medica! device, diagnostic, 

biotechnology and pharmaceutical companies, research universities and private, non-profit institutes, and 

venture capital flrms-! am writing to express our support for your legislation, H.R. 3299, the Strengthening 

Public Health Emergency Response Act of 2015. CLSA is pleased to endorse this legislation that wHI improve 

our nation's biodefense preparedness. 

As you know, the recent Ebola outbreak exposed our nation's continued vulnerability to bloterror and 

pandemic threats, demonstrating the need for robust biodefense preparedness. Strengthening existing 

public-private partnerships, such as the Biomedical Advanced Research and Development Authority (BARDA), 

as we!! as creating new incentives for the research and development of medica! countermeasures are critical 

for the United States to appropriately prepare against chemical, biological, radiological and nuclear threats as 

wei! as dangers like pandemic influenza. 

The Strengthening Public Health Emergency Response Act is an important step forward in ensuring our 

nation's biodefense infrastructure is adequately prepared in the event of a bloterrorism event or pandemic 

outbreak. The bill creates a priority review voucher program to incentivize the research, development and 

licensure of medica! countermeasures in a space where there is no commercial application for the product, 

bridging a serious gap in the nation's readiness against national security threats. !n addition, the legislation 

will streamline the BARDA procurement process, improving this essential public-private partnership by 

creating a more efficient, predictable and seamless approval process for these vital products. 

CLSA applauds your leadership on this important legislation and we are pleased to join a broad group of 

stakeholders in offering our strong support for H,R. 3299, the Strengthening Public Health Emergency 

Response Act of 2015. Please let me know if CLSA can be of assistance to you -I can be reached at 

tg!Henwater@califesdences,org or (202) 743-7562. 

Sincerely, 

Todd Gillenwater 

Executive Vice President- Advocacy & External Relations 
79 


September 14, 2015 

The Honorable Susan Brooks 

1505 House Office Building 

United States House of Representatives 

Washington, D.C. 20515 

Dear Representatives Brooks and Eshoo: 

The Honorable Anna Eshoo 

241 Cannon House Office Building 

United States House of Representatives 

Washington, D.C. 20515 

On behalf of the Biotechnology Industry Organization (BIO), I am writing with our support 

for H.R. 3299, the Strengthening Public Health Emergency Response Act of 2015. I wish to 

commend you for introducing this legislation, and look forward to continuing to work with 

you this year on this important measure. 

BIO represents more than 1,100 biotechnology companies, academic institutions, state 

biotechnology centers and related organizations across the United States. BIO members 

are involved in the research and development of healthcare, agricultural, industrial and 

environmental biotechnology products. Our member companies play a central role in 

ensuring the development and manufacture of medical countermeasures (MCMs) to protect 

our nation's citizens against chemical, biological, radiological, and nuclear (CBRN) attacks as 

well as naturally-occurring infectious disease threats, such as pandemic influenza. 

Your legislation recognizes that more must be done to incentivize MCM research and 

development, improve the public-private partnership by streamlining the contracting 

process, and increase transparency around future MCM funding needs across all types of 

threats. This is particularly important since most products do not have a commercial market 

to help spur investment. Significant barriers to countermeasure development still exist and 

your legislation takes critical steps towards addressing these so that we as a nation are 

more fully prepared to effectively respond to health security threats. 

Again, BIO supports H.R. 3299, and looks forward to working with you both, as well as 

Chairman Fred Upton (R-MI) and Ranking Member Frank Pallone (D-NJ) and all the 

Members of the Energy and Commerce Committee to further this important bill. 

James C. Greenwood 

President & CEO 
80 


October 14,2015 

The Honorable Susan Brooks 

1505 Longworth House Office Building 

Washington, D.C. 20515 

The Honorable Anna Eshoo 

241 Cannon House Office Building 

Washington, D.C. 20515 

Dear Representative Brooks and Representative Eshoo: 

We write to thank you for your leadership in the area ofbiodefense. We strongly support your 

efforts in the House (H.R. 3299, the Strengthening Public Health Emergency Response Act) to 

provide certainty and new incentives for the development of medical countermeasures (MCMs). 

As members of the investment community who have invested in the life sciences space for years, 

we have watched the biodefense enterprise struggle to attract and sustain investment and 

participation from companies and financial partners. The lack of sustainable and predictable 

incentives for companies who have promising technologies for biodefense applications is the 

primary driver of this struggle. 

As you know, the decision for investors to fund MCM candidates is incredibly risky relative to 

other areas where investment firms can invest. Given there is no private market for MCMs, the 

government's commitment to a robust biodefense enterprise is the key factor we look for when 

deciding whether or not to invest in MCMs. Quite simply, the decision to invest in the 

biodefense sector is infinitely more risky than any other portion of the biotech sector. 

This lack of a dependable market for biodefense also makes it difficult for investors to gauge the 

value ofMCM products upon their successful development. The federal biodefense enterprise is 

immature relative to other government partners, such as the Department of Defense. And the 

recent conversion ofProjcct BioShield's advanced appropriations has subjected MCM funding to 

the unpredictable whims of the annual appropriations process. 

While there is no substitute for sustained federal funding for MCMs, the incentive you have 

proposed in H.R. 3299 to create a biodefense Priority Review Voucher (PRV) at the Food and 

Drug Administration (FDA) would be a game-changer for investment in this space. The PRV is a 

proven and valuable incentive that has worked to spur investment in other neglected areas of 

research and development, such as rare pediatric diseases and neglected tropical diseases. The 

creation of a biodefense PRV would revitalize interest in MCM development and provide much 

needed certainly that MCM products can have value in the marketplace. 

In addition, H.R. 3299 would create transparency in the long-terms plans for development and 

procurement ofMCMs by the U.S. government. Establishing predictability and accountability in 

MCM contracting would be incredibly valuable to us as investors in this space. 

Existing contracting procedures at the Department of Health and Human Services (HHS) are 

cumbersome at best and obfuscate the path to approval and procurement for most MCM 

products. 
81 


We look forward to supporting your efforts to move these critical policies through Congress. 

Thank you again for your continued leadership in this critical space. 

Sincerely, 

Bertrand C. Liang 

Pfenex Inc. 

Forward Medical Science Partners 

Steven Kornfeld, CF A 

Franklin Templeton Investments Inc. 

Forward Ventures 

Managing Member 

Evan McCulloch 

Franklin Templeton Investments Inc. 
82 


nature publishing group PERSPECTIVES 

POl NT /COUNTERPOINT 

Drug and Vaccine Development for Infectious 

Diseases: The Value of Priority Review Vouchers 

J Matheny,' B Smith,2 B Courtney' andM Mair2 

Priority review vouchers (PRVs) are 

an innovative, high-impact, tow·cosl 

mechanism 

reported to be under development are anti infcctives (i.e., vaccines 

infectious 

in large 

reSJJOnSJI'lilty to shareholders to 

profits. Ahsent other incentives, 

foundation 

the Orphan Drug Act 

purchase agreements such as advance 

market commitments. 'fhe PRV, a costfirms will invest in research anJ devd 110-85). 

the global burden of infectious diseases 

flrm. The PRV entitles its holder to HJA 

because of their positive externalities: 

CLINICAL PHARMACOLOGY & THERAPEUTICS VOlUMt 85 NUMBER 6 JUNE 2009 

lio that othenvise would receive stand· 

product does not produce more revenue 

as a reSl!lt, but because the revenues are 

received sooner-and firms, like indilion when applied to a blockbuster 

produCL that has annual global rev 

enues of l.JS$1 billion or more (in the 

1990s, 29 blockbusters were launched). 4 

Because a PRV is transferable, an innoon the number awarded, the 

S71 
83 


PERSPE!:TIVES 

to more than $500 million. No PRY s 

have yet been awarded, so their value 

cnt evidence that shorter review times at 

the FDA are associated with safetyproblems.11 A challenge in ilmJJe<,c<otic<g 

the new PRV 

public input 

most ellicicnl. 13 PRV s alone , ... ill not be 

sufftdent to generate all the pharmaceuticals the world needs. There is still an 

and highly cost-dfective addition. 

ACKNOWLEDGMENTS 

The authors are grateful to luc1ana Boric and 

CONFLICT OF INTEREST 

The authors declared no conflict of interest 

©2009ASCPT 

diseases that could qualify 1. WorldHealthOrgamzation.Oiseaseandln;ury 

for in addition to the 16 tropi 

cal diseases named in the law. As noted 

is no stgnificunt market in developed 

nations and that disprc,portic>natclv 

effect. 'Cnder the llatch~Waxman Act, affects poor and mamuvauzeo 

the duration of FDA revie\v i:. added tries. Products 

back to a effective lifethe maximum restoration allowed. As 

review 

patent li!e: 

tlme is lost under standard review is 

added back, and whatever lime 

Around 

cal trial and review periods 

out" the J-Iatch- \Vaxrnan provision, 7 

and for these drugs prionty review can 

Kesse!heim 11 •

9 expressed concern 

that products receiving priority review 

572 

lie Health Emergency Medical Co\mtcr11 

12 

13 

VOLUME 85 NUN!BfR 6 JUN[ 7009: www.natur~.(omkpt 
84 


and Biotcrrorism: BlOdcfcnsc 

Number 3, 2007 © Mary Ann 

DOl: I O.IOB9/bsp.2007.0030 

Practice, and Science 

Inc. 

INCENTIVES FOR BIODEFENSE COUNTERMEASURE DEVELOPMENT 

Jason Matheny, Michael Mair, Andrew Mulcahy, and Bradley T. Smith 

Therapeutics and vaccines are available for only a fraction of biological threats, leaving populations vulncrabl~ ro attacks 

involving biological weapons. Existing U.S. policies to accelerate commercial devdopmem of biodefense products have 

rhus far induced insufficient investment by the biopharmaceurical industry. In this article, we examine the technical, reg~ 

ularory, and market risks associated with countermeasure development and review existing and proposed federal incentives 

to increase industrial investmenr. We conclude wirh several recommendations. To increase industry's engagement in 

biodefensc countermeasure dcvdopment, Congress should expand BioShield funding, giving HHS the Ocxibility to fund 

a portfolio of biodefense countermeasures whose revenues are comparable to those of commercial drugs. Congress should 

establish tradable priority review vouchers for developers of new countermeasures. A National Academy of Sciences or Na~ 

tiona! Biodcfense Science Board should formally evaluate incentive programs and a government-managed "Virtual 

Pharma," in which HHS contracts separate srages of research, development, and production to individual firms. 

BJODEFEJ\'SE PLANN!t\'G BY THE U.S. government emphasizes the use of medical countermt:asures, including 

drugs and vaccines, to prepare for and respond to attacks 

involving biological weapons.'·-4 Currently, medical countermeasures are available for only a fraction of biological 

threats, including those representing the highest risk, as determined by the Department of } lomdand Security's 

(DHS) threat assessments.~ It is generally acknowledged 

that incenciv\:s of the scale and ~tructurc needed to motivate 

the biopharmaceutica! industry suH'iciently ro invest in 

countermeaSltre research and development (R&D) have 

been lacking.'!-~ Although federal investment in coumcrmeasure R&D has increased since 2001 ,;; fCw privare phar~ 

maceutical and biotechnology companies are engaged in 

coumermeasure development, fewer have advanced candidates through clinical trials, and fe\ver still are likely to 

market products.~ Out of' 11 requesrs for proposals issued 

by the Department of Health and Human Services (llHS) 

for biodefense countermeasures, only six products have 

been procured-none from a large pharmaceutical firm. 10 

In this article, we discuss the challenges ro industrial investment in countermeasure development, review existing 

and proposed federal incentives for countermeasure R&D, 

and recommend measures to increase industry's engagement in the medical countermeasure enterprise. 

COMMERCIAL P!IARJ .. 1ACEUTICAL R&D: 

LENGTHY, COSTLY, RISKY 

Pharmaceutical R&D is a lengthy, costly, and risky process 

(Table 1). The transformation of a promising drug candidate into a marketable product rypically rakes 10 to 15 

years from basic research to Food and Drug Administration 

(FDA) apptoval. 13 The cost of R&D rot a single product, 

including the cost of capital and the cost of failures, is in the 

MPH, MBA, is a Consultant; l'v1ichad Mair, MPH, is an Associate; and T. Smith, PhD, is a S(·nior Associate; 

At the time this anide was 

doctoral ~rudent, Health Care 

of Pimburgh Medical Ccnt(~r, Baltimore, 

Center for ofUPY!.C; he i~ 

Schoo!, U n.ivcrsity of Penn,'iylvama, 

228 
85 


hundreds of millions of dollars. One commonly cited estimate of the mean R&D cost per new drug {including the 

cost of failures and the cost of capital) was $800 miHion in 

1997; current costs are likely to exceed $1 billion per 

drug. 11 ·u Between five 12 and nine 14 drug candidates enrer 

clinical trials for every one approved by the FDA. Even 

drugs that reach market may not generate enough revenues 

w cover costs. ~ Thus, the profttabiliry of a pharmaceutical 

company depends on a small number of blockbus(er drugs. 

Jn markers for traditional drugs (e.g., those that address 

cholesterol. diabetes, or cancer), drug developers can estimate demand, price, and expected return on R&D investments from data on disease prevalence, 

and marker competition. A developer decide~ to move 

ward with when its expected are higher 

than those other possible Absent other incentives, developers will invest in R&D for mainstream 

products v,rith which they have prior experience and that 

possess a broad, well-defined market, clear clinical research 

and an established path to regulatory approval. These 

are scarce in rhe anti-infectives market and 

virtually abs~nt in the biodefense countermeasures market. 

WrrY ANTHNFECTfVES ARE UNATTRACTIVE 

TO THF PHARMACEL:TfCAL INDUSTRY 

Anti-infecrivcs include all therapeutics and vaccines dut 

treat or prevent inlt'ctious diseases. In 2004, among the 

world's 1 ') brgcst pharmaceutical companies, only 10% of 

Tab!c 1. R&D Process for a Typ~c1l New Drug 

MATHENY ET AL 

publicly disclosed New Molecular Entities were classified as 

anti-inft:crives. 17 Ami-infcctives are generally a low 

in pharmaceutical R&D because of technical, 

and market risks. Developers see high flnancial returns in 

targeting chronic diseases that offer repeated sales, while infectious diseases are typically acute in developed countries 

(HIV being a notable exception). 

From 1998 to 20()2, FDA approval of new antibacterial 

agents decreased by 56%, compared with the period 1983 

to 1987. 17 Between 1998 and 2004, only rw-o antibacterials 

were approved that had novel mechanisms. 17 Most major 

pharmaceutical companies have left the antibacterial marker because of increased regulatory risk, shrinking 

and a short drug life cycle due to bacterial 

By one estimate, a fourfold increase in antibacterial R&D 

eHOrt would be needed ro generate just one novel-mechanism antibacterial by 2012. 21 

The number of pharmaceutical companies producing 

vaccines has decreased from 26 in 1967 to 17 in 1980, to 5 

in 2004. 22 Among these five companies, vaccines generate 

less than 10% of their total revenue>~ 2 Investments in vaccine R&D are generally unattracrive ro industry for several 

reasons: 

Vaccines are generally used only a few times in a lifetime 

and rhus generate low expected revenues; 

By reducing disease transmission in a population, vaccines provide broad benefits for which vaccine producers 

are not fully compensared;n 

Large government purchases lead ro low m;ugins; 

Clinical trials 

Stage testing Phase I Phase II Phase III FDA Phase IV 

------+--· ---+--------f - ------~----~-----

Year~ 1.5 3.5 

Test population 20-100 healthy 100-500 patient 1,000-5,000 patient 

Purpose 

CapiralizeJ 

cosrs 335-38\ 

volunteers 

Determine 

safety and 

dosage 

volunteers 

Evaluate 

dTf'ctiveness, 

look !Or side 

dTccrs 

467 487 

($M, r.mge) 

-~-----~-----

Success Rare 5,000 

5 enrer trials 

volunteers 

Soun e. Ad.1p:ed hom Adam~ ' and Ph,Hrn;Kt:utical Rc:.carch and !\Limlfa(turer~ of Amcrio IPhRMA). 

Volume 5, Nnmbcr 3, 2007 

1.5 

Review 

229 
86 


INCENTIVES FOR BIODEFENSE COUNTERMEASURE DEVELOPMENT 

Since vaccines are given to healthy people, 

higher regulatory requirements and li1igarion 

For vaccines and other biologics, the FDA requires that 

companies begin building manufacturing capacity prior to product 

The probabilities of success at each R&D stage arc lower 

for vaccines than for many other pharmaceuticals; 2

·', 28 

and 

The basic research pipeline fOr vaccines is small: between 

2000 and 2005, 3% of NIH grants included "vaccine" as a 

WilY BIODEFENSE COUNTERMFASURE 

DEVFLOP~!FNT Is Ul\:ATTRACTIVE TO THE 

PHAR\1ACEUTICAL INDUSTRY 

Virtually a!l bioddCnsc countermeasures arc anti-infectives 

and, as such, face rhe general challenges described above, as 

we!! as risks peculiar to biodefensc. 

Clinical trials cannot be used w assess rhe efficacy of 

most bioddCnse countermeasures against rare and leThal 

There are few, if any, naturally occurring cases 

most of these diseas~s in humans, and it is unethical to 

infect a person with a potentially lethal pathogen. 

\"X'hilc satCty must be shown in humans, the FDA's Animal Efficacy Rule establishes a 

sures to be proven effective animal modds.JO However, for many 

animal models have yet to be 

Moreover, animal models represent, at a rough approximation of efficacy in humans, and, as such, countermeasures developed animal models will be untested 

unci! their use in humans an emergency:~ 1 

The FD/\. has yet to release comprehensive guidance on 

the Animal Efficacy Rule, and no novel products have been 

approved using the Rule; the Rule has thus far been used to 

extend lhe indicated usc of previously licensed products.* 

Emergency use of a coumerme~1sure that is in lare"stage de~ 

velopmenr but has not yet been approved by the FDA is 

possible through the Emergency Use Authorizadon (EUA) 

provision under the BioShicld k:gislation. 32 Currently, the 

fDA is expected to require extensive safety and ciTicacy 

"'Two products have b~cn approved using the Animal Eflic,tcy 

Rule; both we-re products approved for usc in the U.S. 

and used the 

grav1s. received an in~ 

dication for cyanide poisoning as wdi as smoke inhalation, but it 

230 

in France since 1996. It remains w be seen how 

new product wil! fare under the Animal EHlcacy Rule. 

data prior to granting a product EUA status. However, it is 

unclear what standards for safety and efficacy will qualify 

some products and disqualify others~and the detcrmina~ 

tion is made during, not befOre, an emergency. 

The scope, magnitude, and type of a future biological attack is uncertain, as is the demand for countermeasures. 33 

Because the response to a major biological incident will be 

coordinated by governments, government purchases will be 

the major (if not the only) sale fOr most countermeasures, 

(At present, the U,S. government is by far the largest purchaser of biodefense countermeasures.) Countermeasure 

developers must thus rely on governments to determine 

and communicate the market for biodcfcnse countermeasures. But government purchasing is subject to evolving 

threat assessments and shifting political priorities, which 

create market uncertainties. 

Developers' dependence on government purchases presems additional problems. A government has every incen~ 

rive to negotiate prices for countermeasures just above 

Lheir marginal cost of production, thus severely limiting 

profits. If companies resist low prices, governments can, in 

extreme cases, threaten compulsory licensing or purchase 

generics. In 2001, following the first anU.S. threatened such actions 

during negotiations Bayer over its antibiotic, Cipro. 

The threat was credible, and Bayer lowered its (already 

wholesale) price for the When a developer's R&D 

costs are already spent, the a developer can do in such 

cases is accept the government price. The prospect of a 

hard bargain causes drug developers to be wary of develop~ 

ing products whose prices arc not guaranteed to cover 

R&D cosrs. 

The rcchnical. regtllatory, and market risks associattd 

with biodcfensc countermeasures lead to weak commercial 

investment and thus few products. Given companies' fiduciary responsibility to investors, even countermeasures that 

are profitable at the margin will be ignored as long as com~ 

panics can focus their invesnnents on more profltah!e products. 

EXISTING INCENTIVES fOR BIODF.FENSE 

COUNTERMEASURE R&D 

Given the importance of biodefense to national security, 

the U.S. government has employed a broad menu of financial incentives to commercial investment in countermeasure R&D 2). Thi.\ menu can be separated into 

"push" incentives, which reduce industry's cost of R&D 

and are typically used to motivate early-srage research, and 

"pull" incentives, which increase 

R&D and arc typically used to motivate development and production. To dare there has been little analysis 

of the effectiveness of these incentives in accelerating counBio>ccuriry and Biorcrwri;m: BioJd"t-nse Strategy, Practice. and Science 
87 


MATHENY ET AL. 

Table Inc,·mivcs for Biodefense Countermeasure R&D 

lncnltil/e AiechaniSm Exmnplrs Strengths ------------- ---- ----- Push Incentives 

Covcrnmcnr R&D and 

technology tram.fer 

NIH/DoD intramural 

research 

Control over research path 

Open results 

\'Vea.k financial incentives for 

performance 

Government research 

grants and connacts 

(~ovcrn m(·nt-industry 

R&D col!abor:nions 

Liability prorenion 

Tax credits 

Pull Int'entives 

Regulatory rewards 

NIH/DoD extramural 

grants 

C:RADA 

Saftf}' i\ct 

PREP Act 

Standard R&D tax credit 

Orphan drug tax credit 

Priority Review designation 

Self-selenion of quality 

researchers 

Open rcsuits 

Avoids duplication of 

infrastructure 

Reduces developers' risks 

R&D may be more efllcicnt 

rhan average tax spending 

Reduces time to market 

Dillicult w judge value of 

applications 

Compllcated IP environment 

Potential to reduce safety 

Less aruactive m companies 

with low profl(s 

Increased FDA costs 

Exclusivity reward Patent protection 

Orphan drug market 

exdusiviry 

Valuable Industry Limited value tOr products \Vith 

small markets 

Pediatric exclusivity provision 

Procurement o:omracts cost 

Reduces competition on price 

and qua!iry 

Difficult to success of 

winning 

DoD procurement 

I-IHS procurement 

(e.g., BioShidd) Familiar to government 

No duplicate costs 

Contract must he adequardy 

specified 

termcasure development. A range of existing and possible 

incemives are discussed below. 

Push Incentives Used for Biodefense 

Countermeasure R&D 

Government R&D and technology transfer 

HHS and the Department of Defense (DoD) conduct inhouse (intmmural) basic R&D focused on biodefense countermeasure development. Discoveries produced by fCderal 

scientists conducting basic R&D arc often made available to 

the private sector through publication in scientific literarure, 

or they may be pat\""nted by the federal government and 

made available to the sector through technology 

transfers, Examples of technology transfers include the AVA and rPA vaccines fOr anthrax, which 

were initially developed by DoD and licensed co BioPort 

(nmv Emergent) and Va.xGen, respecrively. Government 

R&D allows government managers to retain control over 

the direction of research, bm it does not provide them with 

the financial incentives common in private firms to motivate 

performance. Iris not clear, however, that the lack of tlnancial incentives leads to a lower rate of success or to reduced 

efficicnc.y; the cost-effectiveness of government-managed 

drug development projects, such as that at the United States 

Volume), 1'\umiwr .~. 2007 

Army .Medical Research Institute for Infectious Diseases 

(USAMRIID), appears not to have been evaluated. 

Government research grants and contracts 

HHS, DoD, and, to a lesser extent, DHS :nvard research 

grants to institutions for countermeasure development. 

Most grants for research in biodcfensc arc awarded by H1 IS 

through the National Institute of Allergy and Infectious 

Diseases (NIAID).l5 In FY2006, NIAID awarded $1.7 billion in funding for biodcfense-related research." 

On December 19, 2006, President Bush signed the Pandemic and All-Hazards Preparedness Act imo law (P.L 109-

417), which created the Biomedical Advanced Research and 

Development Authority (BARDA) within HHS. One of the 

purposes of BARD A is to fund rhc development of products 

across the so-called "valley of death" between ~lAIDfunded basic research and end-stage procurement by the 

BioShield program (described below). Recipients of government grams and contracts are motivated to use funds judiciously, as evaluations of their results are typically used in future grant and contract reviews. But it can be difficult f()r 

reviewers to accurately judge the value of a project based 

solely on an application or bid, and the application process 

is slow: The NIH ROl grant review process, fOr instance, 

takes 9 months, on average, from application to award, 36 

231 
88 


INCENTIVES FOR BIODEFENSE COUNTERMEASURE DEVELOPMENT 

Government R&D collaborations 

Collaborations allow government, academia, and industry 

to share scientists, materials, !aci!ities, and other resources. 

Over the past 3 years, NIH has entered inro about 250 Cooperative Research and Development Agreements 

(CRADAs) 37 A 2005 CRADA teamed Medlmmune researchers with government scientists In NTH laboratories 

to develop vaccines against pandemic influenza strains. 

USAMRIID has emcred into CRADAs to develop anthrax 

rherap·eutJCS. NIAID makes several of irs resources available 

to including a to screen drug candidates 

against biological By sharing resources, CRADAs 

reduce rhe duplication of equipment and space, thus reducing R&D costs. The ofCRADAs is that 

Liability protection 

Liability protection reduces rhe financial risks to developers 

by lowering the costs of possible litigation. The first use of a 

medical countermeasure may be during an emergency, 

when the product is given to a large number of people. The 

pOtential fOr unforeseen s1de effects is signif-kam. Liability 

protection can be made available to countermeasure developers under the SAFETY Act (parr of the 2002 Homeland 

Security Act, P.L. 107-296) and under the Public Readi~ 

ness and Emergency Preparedness (PREP) Act (parr of the 

2006 DoD Appropriations Acr. P.L 109-148). 

R&D tax credits 

R&D tax credits allow developers to write off R&D expenditures against their taxable profits in the year the expenditures were made, Government pays the costs of tax credits 

through reduced tax revenues. /<rom studies in other industries, a doilar in tax credit stimulates a dollar of additional 

R&D.-'~';,4o This is efficiem when a dollar in tax revenues 

would not be used as cost-effectively, on average, as a dollar 

in R&D. Arguably, cou!w.:rmeasure R&D represents such 

a cast. Most receive an R&D rax credit equal to 

around 20% qualified resean._-h t~xpenses. Companies 

with drugs in development that prevent or treat diseases 

with a natural prevalence less than 0.05% can be Orphan Drug Designation (ODD) by the FDA recc!ve a 

SWVo tax credit on clinical trial expenses. Most if not all 

b!odefense countermeasures should be eligible fOr ODD. 

Pull Incentives Used for Biodefense 

Countermeasure R&D 

Regulatory rewards 

Regularory rewards increase revenues by shonening a product's time-to-market. The average FDA review process for a 

standard new drug takes 18 monthsY New drugs thought 

to offer a significant improvement over existing products 

qualify for review" status, which shortens the average review to 6 monrhsY This review, however, 

comes at some cost to the FDA. The additional FDA labor 

review has been estimated at $1 

Exclusivity rewards 

Exclusivity rewards allow developers to increase their revenues by reducing competition. The most common exclu~ 

sivity reward is patent protection. Patents allow developers 

to hold a time-limited monopoly on, and thus charge a 

high price for, a novel technology. Patents generally last 20 

years, bur much of this time is consumed by R&D. Companies with drugs that have been given ODD receive a 7-

year market exclusivity period for the orphan indication, 

which prevents competition from even chemically distinct 

products fOr the same indication, as as the latter are 

not therapeutically superior. The value and market exclusivity rewards is limiLed for products that have 

small markets: Extending a monopoly on an unprofitable 

product is still unprofirable. 4 ) These rewards arc thus unlikely to be a strong incentive fOr most biodefense countermeasures, which \Viii be sold only to government(s). However, exclusivity rewards could be valuable for some 

eases. 

anti-infcctives th.:tt are dTective against 

weapons and more common infectious disProcurement contracts 

Procurement contracts allow developers to earn revenues 

from developing and manufacturing countermeasures. 

HHS purchases countermeasures using the 

Fund created under the 2004 Project 

authorized $'5.6 billion over 10 years for procurement, 

thereby avoiding the uncertainty of the annual appropriations process. lJndcr BioShidd, the federal government can 

sign purchase agreements with companies whose products 

are expected to be eligible for approval or licensing within 8 

years. The federal government pays only upon delivery of 

the product. The 2006 Pandemic and All~ Ha:t.ards Preparedness Act allows HHS to make multiple milestonebased advanced payments (up to 50% of the total contract) 

under BloShield awards, rhus allmving manufacturers to 

earn revenues ffom devdoping and manufacturing countermeasures prior to delivery of the product. The Act also 

gives HHS the aU[hority to contract with a developer toestablish "warm base" manubcruring capacity ror a countermeasure. To date, six products have been procured under 

BioShicld at a total cost of $1.45 billion. 

Procuremem contracts are commonly used in government purchases. Competitively bid contracts increase efficiency when the government can accurately assess a firm's 

prospects for successfully delivering a high-quality product. 

These assessments are likely to be more accurate in tradiRio\ccuriry ~md Hioterrori;m: Biodrfcn"' Strategy. Pra<.:ti(:e, and Science 
89 


tiona! defense contracting, where developers have a long 

history of government contracts, than in biodefense con~ 

tracting, where developers are often new companies dcvel~ 

oping pharmaceutical products with a low probability of 

success. 

POTENTIAL INCENTIVES FOR BIODEFENSE 

COUNTE!t'v!EASURE R&D 

Given the threat ofbiorerrorism and natural epidemics, and 

the relatively limited commercial investment in countermeasure development, I l.HS should explore additional 

R&D incemives that have been used in, or proposed for, 

other technology Initiatives (Table 3). 

New Grant Incentives 

The immediate threat posed by biological weapons and rhe 

long developmtnt times required to produce a useable 

product warrant a fJ.srer NIH gram review process. The 

BioShield Act of2004 granted NIAID expedited review authority for grants rhat are dearly bioddense-related. w But 

because biodcfl'nse depends on advances made in many 

biomedical disciplines, the entire NIH grant review process 

should be accelerated. Alternatives to traditional reviews exist and others have been proposed. allocating a 

portion of the NIH funding ro be emrepreneurial program managers who seek out opportunities, 

rapidly fund promising research, then work dosdy with the 

scientists to moniror progress.'14 This process has been used 

with great success by the Defense Advanced Research Projects Agency (DARPA), Others have suggested creating 

NIH "prediction markers," in which a large community of 

Table 3. Proposed Incentiv~.:s f()r BiodefC'nse Countermeasure R&D 

l11antive A1eclvmism Examples 

MATHENY ET AL. 

reviewers can quickly place bets on which research projecis 

wilt be most productive. ii-4s 

Reward Vouchers 

Developers have expressed interest in making regulatory or 

exclusivity rewards transtCrable across products, in the form 

of vouchers (also called "wild cards")/' A developer that 

successfully produced a countermeasure could be rewarded 

by being granted a patent extension, market exclusivity, or 

priority review for any other product in its portfolio, increasing that product's revenues. Vouchers could also be 

made tradable, allowing one developer to sell its voucher to 

another developer. 

Patent extension and market exclusivity vouchers would 

revenues by delaying the introduction 

These would be highly valuable to developers with blockbuster drugs but could be costly to society 

by delaying the introduction of generics, thus boosting 

drug prices. Concerns over the costs of these incentives 

made them unpopular during Congressional debates on 

BioShidd and BARDA.49 

In contrast, priority review vouchers could be highly 

valuable w developers without imposing social costs. As explained above, priority review reduces a product's time to 

marker hy a year. At the same time, priority review does nor 

delay the introduction of generics, and consumers have access to new medicines a year sooner. A priority revie\v 

voucher that is tradable between d~velopers would allow a 

biotech Grm that successfully develops a countermeasure to 

sell its voucher to a pharmaceutical firm that has a potential 

blockbuster entering FDA review. There is risk to a flrm in 

buying a priority review voucher: There is no 

that the produC£ to which a voucher is applied 

Strl'llgths Weaknem·s 

-------------- ~-~--

l~xdusivity reward Roaming parent exttnsions Valuable to industry Parent extensions and market 

exdu~iviry have high social costs 

Regulatory rC'ward 

Prizes 

Advance markC't 

commitment 

Volume 5. Number.), 2007 

Priority review vouchers 

InnoCentivc Challenges 

Pilot AMC for pneumococcal 

vaccine 

No direct payment for failure 

Defers costs ro future 

No direct payment for failure 

Defers costs w future 

Market induces competition 

on qua!ity and price 

Voucher could be appliC'd to 

produce that does not become 

commercialiy successful 

Need to speci(v rules and product 

characteristics in derail 

Sponsor may default 

Duplicate research 

Optima[ AMC size unknown 

Need to rules and product 

characrerisrics in detail 

may defauk 

2.31 
90 


INCENTIVES FOR BIODEFENSE COUNTERMEASURE DEVELOPMENT 

proved by the FDA or become a commercial success. But 

most products that successfully navigate the cllnical trials 

process and are submitted to FDA for final review are 

proved, and the risk of failure is likely to be ourweighed 

the voucher's value: One study estimated a value greater 

than $300 million when transferred to a blockbuster 

(most of which do not already receive priority 

To prevent delayed reviews of medically important products. FDA would need to hire additional staff to review 

voucher recipients' products. The cost of this additional labor has been estimated at $1 million product and could 

be billed to the voucher 

Tax credits also could be made tradable. Tax credits are 

little incentive for the many biopharma firms that are not 

profitable. However, credits could be made tradable across 

dcYclopl'rs: Unprofitable firms could sell their credits ro 

profitable companies. Alternatively, tax credits could be 

made deferrable to a future time when a firm is profitable. 

Prizes 

"First-past-the-post" prizes offer rewards to the first researcher to a given research task. "Best entry" 

prizes reward produces the most promising 

result within a fixed period. Historically, have motivated inventions such as the Harrimn stearn locomotion, and phorography."'0 They became less common in 

rhe 20'h century but have enjoyed a in the past 

few year:.. (Patents are, in effect, a 

prize, where [he award is a time-limited monopoly.) 

Modern prizes include the DARPA Challenge, the National Academy of Engineering's Grainger Challenge, NASA's 

Centennial Challenges, rhe Ansari X-Prize, and lnnoCentive's 

prizes for inventions in chemistry and the life sciences. These 

prizes offer cash rewards ro inventors who develop technologies meeting pre-established specifications, The FY2006 Science, Stare, Justice, Commerce and Related Agencies Appropriations Act (P.L. 109-108) directed the National Science 

foundation to establish a prize program. And in 2007, aNational Academy of Sciences of 

experimental prizes and evaluations would cash reyvards for inventions of public value, under an Offlce ofinnovation Prize:. \Vithin the National Science Foundation."0 

One study concluded that a prize is theoretically the bt>st 

"if the size of the prize c.an 

value" of the innovation.~' Setting the 

prize's size is critical, as one can underpay and not motivate 

any R&D effort, or overpay and waste funds that could have 

been spent on other priorities. Other weaknesses of prizes arc: 

competing developers will duplicate costs, and sponsors must 

pay Jevdopers a premium to compensate fOr the risks or default, f3.i!ure, and competition. The strengths of prizes are: rhe 

sponsor pays nothing until a product is successfully de\'eloped, 

the sponsor ne-ed not audit or otherwise manage research, and 

developers will be motivated by competition. 

Advance Market Commitments 

An advance market commitment (AMC) is a guarantee by a 

government or other sponsor to pay developers a minimum 

price per dose of a medical product purchased in the market 

up to a specified volume. "

2 The government issues a detailed set of technical specifications. Products meeting those 

specifications and purchased in rhe commercial market are 

guaranteed a co-payment from the sponsor up to a specified 

volume of sales. AMCs are distinguished from conventional 

purchase contracts, as there is a minimum price open [0 

multiple competing and no guarantee on the 

number of doses 

AMCs are untested bur have been proposed fOr tropical 

diseases, such as malaria, tuberculosis, and HIV; one $1.5 

billion AMC has been secured for a (late-development) 

pneumococcal vaccine. 53 The necessary size of an AMC for 

a malaria vaccine with one entrant has been estimated at$) 

billion-the revenues from developing one com~ 

mercia! If a developer expected to split the marker 

with a competitor, the AMC would have to bt~ almost twice 

as large ro spur R&D. 

A theoretical model found that combining both an advanced market commitment and a payment of a fixed fraction of the developer's R&D cosrs is more cost-effective 

than either incentive independcndy. 43 Others have similarly recommended that AMCs be combined with milestone payments that provide financial support to companies while they ar(' a product.;,~ 

The strengths and of AMCs are like those of 

prizes.~ 5 One advantage of AJ\.1Cs over prizes is that in markets with multiple purchasers, !leveral products can be introduced that compete for market share. However, it is unlikely that the market fOr biodefense countermeasures will 

have many purchasers. 

RECOMMENDATIONS 

following: 

of biological threats and the need to 

and small biopharmaceutical companies 

countermeasures, we recommend the 

I. Congress should expand BioShield funding, giving 

HHS the flexibility to fund a portfolio of biodefense 

countermeasures whose revenues are comparable to 

those of commercial drugs. 

To date, the incentives used ro promote countermeasure 

development have succeeded in motivating significant 

biodcfensc R&D effort by only a modest number of 

biotech companies and no large pharmaceutical companies. 

Project BioShield has been successful in awarding a small 

Hio:.ccurity and Bimerrorism: Bioclcfensc Strategy, Practiu:, and Sci(·nn: 
91 


number of contracts for relatively mature products. 10 Tht~ 

first and largest BioShicld contracr~$877 million for anthrax vaccint--\vas cancelled in Dcwrnber 2006 because of 

technical problems with the product and subsequent delays 

in the development of the vaccine candidate. 

BioShield contracts do not resemble the scale and 

structure of the private drug marker. BioShidd's effectiveness will always be limited by its fnnding, which has 

been insufficient to attract large, profitable pharmaceutical companies. \X/ith $5.6 billion to be allocated over I 0 

years available to purchase countermeasures for at least 

14 top priority CBRN threat agenrs,2 the expected revenues from developing a countermeasure are significantly 

lower than the $3 billion or more expected, on average, 

from developing a single commercial drug. 1 It is nN surthat pharmaceutical companies prefer ro chase 

DlocKtJusrers over BioShldd contracts. BioShicld has so 

far attracted only small biotechnology companies with 

lower rcvem1c expectations than large pharmacemical 

companies~and limited resources to carry through 

clinical trials. Perhaps most important, the scale 

of the BioShield fund has prevented HHS from developing a broad portfolio and taking risks with individual 

contracts. Most products fail in clinical trials; HHS rhus 

needs a budget sufficiently large to fund, in parallel, multiple countermeasure candidates targeting the same 

threat. 

Regardless of how its costs are distributed across society 

and across time, biopharmaceutical research is expensive, 

\vith the average cost of developing one drug around $1 billion. u Debatt: about which incentives are more or tess cost-

~,ffective than others may be academic when total public 

investment has to significantly increase-perhaps tenfoldto address existing and foreseeable biological threats. No 

''funny mirror" incentive exisrs that can make a $900 million BioShield contract app-.·ar as attractive to industry as a 

$3 billion commercial drug. 

Congress has not yet indicated whether additional 

tnonies will be aclJ~d to the BioShield purchase fund 

once the initial funds are exhausted. This uncertaimy 

complicates management of the fund by HHS and may 

r<.•<.iuce pharmaceutical companies' investments in R&D 

for products rhat will reach maturity aft~r BioShield's expiration. 

2. HHS should replicate features of the pharmaceutical 

market that have succeeded in generating drugs and 

vaccines of commercial value. 

More money is necessary but not sufficient ro create a 

strong biodcfcnse. Success also depends on HI IS's ability to 

create a predictable and \vdl-managed market for countermeasures. The private market has offered sufficient incentives to generate many drugs for chronic diseases 5uch as 

Volume), Numbn 3, 2007 

MATHENY ET AL. 

high cholesterol or acid reflux. For commercial products, 

developers estimate potential market volume from epidemi~ 

o\ogic data and competitive intelligence, and market price 

from marketing surveys; they anticipate a predictable regulatory and they receive push funding from 

markets and pull funding from repeated in 

consumer markets. HHS can replicate rhesc features of the 

private market by: 

increasing the detail of price, voiume, and product specifications in requests for proposals; 

improving its Tech Watch to identify and fund promising new technologies at early stages; 

clarifying the path for licensure under the Animal Rule 

and Emergency Use Authorization; 

increasing transparency in procurement decisions; 

providing a mix of push and pull funding, with push 

funding directed toward early-stage research, and pull 

funding directed toward late-stage development and production; 

making large volume purchases; and 

shortening the period from when a pathogen is deemed a 

threat to when a BioShield contract is signed (currently 

more than 2 years on average).:o.'iG 

Perhaps most important, HHS can hire managers to lead 

the government's countermeasure effort who have a history 

of success in rhe biopharma industry. 56 

3. Congress should establish tradable priority review 

vouchers for developers of new countermeasures. 

Of the proposed incentives reviewed here, only tradable 

priority review vouchers have theoretical merits clear 

enough to warrant immediate implementation. With a po~ 

tential benefit to industry of $300 million and a public cost 

of $1 million or less, tradable priority review vou<.:hers 

would be highly cost-cffecrive. 

4. An NAS or NBSB committee should evaluate 

existing and potential incentives for commercial 

development of biodefense countermeasuresparticularly "flexible" technologies effective against a 

range of threats. 

Despite the billions of federal dollars invested annually in 

incentives for industrial R&D, fe\v data exist on their costeffectiveness. HHS should commission a pane! of experts 

from the economic and pharmaceutical devdopmcnt sectors to evaluate incentives for countermeasure R&D. Incentives for other important pharmaceuticals, such as drugs 

for orphan and neglected diseases, could also be evaluated. 

This task could be charged to a National Academy of Sci235 
92 


INCENTIVES fOR BIODEfENSE COCNTERMFASURE DEVELOPMENT 

enccs (NAS) committee or to a working group of the Na~ 

tiona! Biodefcnsc Science Board (NBSB, established by the 

Pandemic and All-Hazards Preparedness Act in 2006, bur 

not yet constituted). 

As biotechnologies become more powerful and more accessible, the range and severity of biological (hreats will increase.'i~ Eventually it \vill be too slow and costly to stockpile countermeasures for every threat. Two recent U.S. 

government documents-the White House's Homeland 

Security Presidential Directive 18 and HHS's Public 

Health Emergency Medical Countermeasure Enterprise 

(PHEMCE) Strategy-recommend addressing this problem by developing broad-spectrum countermeasures and 

platform technologies effective a range of threats. 

Given this new strategic shift by 

should be evaluated rhat can 

in the development of these new 

nologies.'i 8 As many of these technologies are early-stage, 

improvements to existing push incentives should be ex~ 

plored. 

5. An NAS or NBSB committee should evaluate 

Virtual Pharma models of government-managed 

countermeasure development, in which separate stages 

of research, development, and production are 

contracted to individual firms. 

In principle, government could adopt the "Virtual 

Pharma" mode! used by some pharmaceutical companies, 

in which discrete stages of the R&D process are contracted ro separate de\'elopers."'J Under this model, 

BARDA or a I3ARDA-likc organization could manage a 

portfolio of products from basic research to production, 

inviting developers to bid for each step in the R&D procc!>s, and tailor the size and structure of incentives accordingly. This model could decrease the costs and risks for 

both government and developers. 

The success of Virtual Phanna depends on the ability 

of a team w eff-lcienrly contract projects 

and cancel The experience o[ Virtual Pharma 

Public-Private Partnerships (PPPs) in developing drugs 

for tropical diseases such as malaria, HIV, and tuberthat effective management is possible. 

The costs of PPP projects are sigBificandy lower 

than pharma's, their clinical success rates remain to be It is possible thar PPPs 

gain efficiency by R&D to the lowest-cost 

developers, without regard potential intellectual 

property violations or rrade secret piracy. Secrecy reduces commercial developers' wlcrance for outsourcing, 

but government-managed programs would not be so 

constrained. 

There is a historical precedent for government successfully managing countermeasure R&D. The greatest period 

236 

of vaccine discovery was during World War II, when industrial vaccine developers partnered with the tcad users of vaccines-· the military. Industry scientisrs reported directly to 

military managers, who set dear and ambitious 

schedules for and a combination of push 

and pull The experience of government-managed countermeasure development should be evaluated 

and, where appropriate, replicated. 

ACKNOWLEDGME1'TS 

The authors arc grateful to Tom Inglesby, Gigi Kwik 

Gronvall, Luciana Borio, Stephen Maurer, and three 

anonymous reviewers for their comments on an earlier 

draft. 

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56. Gronva!l GK, Smith BT, Matheny J, et aL Meeting 

Biomedical Advanced Research and Development 

thoriry (BARDA) roundrab!e. Biosewr Bwterror 2007; 

j(n1n 179. 62. 

'57. Pccro JB, Plas~c TR, 

18. Cronv.1ll CK, !vLuhcny J, Smith BT, ct aL Flexible defenses 

roundtable meeting: promoting the strategic innovation of 

medical countermeasures. Bioserur Bioterror 200/;5(3):271-

277. 

59. Maurer SM. Choosing the right incentive 

diseases. 

60. 

for re-

\¥1orld 

Address requests to: 

Mair, MPH 

Associau 

E-mt1il: mmair@upmc-biosecurity.org 

2.18 Biosecurity ;wd Biorerrorism: Hiodd'en~e Strateey, Pr<~cticc, and Science 
95 


Health Affairs 

At the Intersection of Health, Health Care and Policy 

Cite this article as: 

David B. Ridley and Stephane A. Regnier 

The Commercial Market For Priority Review Vouchers 

Health Affairs 35, no.5 (2016):776-783 

doi: 10.1377/hlthaff.2015.1314 

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Not for commercial use or unauthorized distribution 
96 


Basel, Switzerlarld 

776 

By David B. Ridley and Stephana A. Regnier 

The Commercial Market For 

Priority Review Vouchers 

ABSTRACT In 2007 the US Con~Vess created the prioritr review vou~:her 

program to encourage the develof'ment of drngs for neglected diseases. 

Under the program, the develof'er of a drug that treats a neglected 

disease receives both a faster review 0€ the drng by .the .food and. Drng 

Admjnistratlon.and a voucher for a, faster review of a different drug. The 

developer ~n sell the voucher.We esj:intj!ted the: ~ommer<;ial value c:if the 

voucher Using US. sales of new treatments approved ill. the period 2007-

09. A third of the commerCial value of.a .vouehe~ come.s from capt~ 

market share from competitors, nearly half from the value of earl~er sales 

because ofthe•expedited review, an<l le.ss than a quarter from lengthening 

the tttne between approval and the launch of a g~eric competitor: :we 

estimate that if only one. prioriey reView voucher is avldlable in a year; it. 

will be worth more tlta:p. $2()0 million, l,>ut if.four VOl.lchers are available, 

the valUe could fall below $100 miliion. Congress sliuuid be cautious 

about expanding the voucher J:lfu~Vam, l>ecause mcre<~sing.the number of 

vouchers sh~ly decreases the expecte<l prie<:. LoWer voucher. prices could 

undermine the Incentive to develop new medicines for neglected diseases. 

T hestandardreviewofanewdrugby 

the US Food and Drug Administra· 

tion (FDA) takes about ten months. 

However, the FDA offers priority 

review-which takes about six 

months-to drugs that provide significant im· 

provements in safecy or effectiveness over exist· 

ing drugs. The difference of four months in review times could be highly valuable to a dntg 

developer with a potential blockbuster drug, 1 

In 2007 Congress leveraged the value of an 

earlier FDA approval by creating the priority review voucher program to encourage the development of new drugs for neglected diseases, And in 

2012 Congress expanded eligibility for priority 

review vouchers to include rare pediatric diseases. Under the voucher program, the developer of a drug for a neglected or rare pediatric 

disease receives priority review for that drug, 

as well as a bonus priority review voucher for 

MAY 2016 35:5 

another drug treating any disease. 'Thus, the following two drugs are involved: the dn1g that 

earns its manufacturer a bonus priority review, 

and the drugthatuses that bonus priority review. 

The drugs need not be from the same company, 

because the voucher may be sold. The ability to 

sell a voucher increases its value, especially for 

smaller firms with fewer drugs." 

The objectives of this article are to estimate the 

commercial value to the potential buyer of a pri· 

ority review voucher, based on current regulatory and market conditions, and to show how the 

voucher price falls as the quantity of available 

vouchers increases. The price of a priority review 

voucher is critical to the success of the program 

in encouraging new drug development.3 

As of the end of 2015 nine vouchers had been 

awarded, and four of them had been sold. Vouch¥ 

ers were avvarded for drugs for neglected diseases, including malaria and leishmaniasis, as 

0 

~ 0 

ru 

0. 

2. 
97 


PRESCRIPTION ORUG POLICY 

cally net of rebates. In instances where net sales 

were not available in annual reports, we used 

analysts' reports or sales reported by IMS Health. 

We converted net sales to 2014 dollars using 

the prescription drug index of the Consumer 

Price Index-All Urban Consumers. As Ernst 

Berndt and colleagues did, 17 we projected future 

sales for recently launched drugs. We predicted 

future sales using the prescription uptake curve 

of twenty-six standard-review products, fifthyear sales, and an annual price increase of 

3.2 percent (the compounded average growth 

rate for the period 2009-14 of the prescription 

drug index of the Consumer Price Index-All 

Urban Consumers). We estimated sales for twenty years after submission to the FDA. 

ESTIMATING THE COMPETITIVE EPPECT First, 

we estimated the competitive effect, in which 

value comes from earlier market entry relative 

to the entry of competitors within the same therapeutic area. A drug with earlier market entry is 

adopted by more providers and patients than a 

drug with a later entry, and if the first drug is 

effective for those patients, they are reluctant to 

switch to a later market entrant. Hence, earlier 

market entry yields higher sales. 

To estimate the competitive effect, we used the 

same approach that we did previously, 12 when we 

estimated peak share (that is, the highest monthly market share within the first four years after 

launch) as a function of speed to market, promotional spending, order of market entry (for example, whether the drug entered second or third 

in its therapeutic class), and number of com pet· 

itors. We then used the increase in peak share 

from launching four months earlier to estimate 

the increase in annual sales that would result 

from having a priority voucher. More information about our estimation of the competitive effect is available elsewhere12 and in the online 

Appendix. 18 

ESTIMATING THE TIME VALUE AND EXCLUSIVITY 

EPPECTS Second, we estimated the time value 

effect, meaning the value of generating earlier 

sales. Earlier sales are more valuable than later 

sales in part because, as noted above, the money 

from sales can be invested. We assumed a cost of 

capital ofiO.S percent. 19 As discussed above, we 

estimated sales for the twenty years following 

submission to the FDA, including zero sales during review. In a sensitivity analysis, we used a 

different cost of capital and a time horizon beyond twenty years. 

Third, we estimated the exclusivity effect. 

Compared to a drug that receives a standard review, a drug with a priority review voucher is 

approved earlier, but its patent does not necessarily expire earlier. This means that it can have a 

longer period of time between drug launch and 

778 HEALTH A>'FAIRS MAY 2016 35:5 

The changing 

regulatory and 

commercial 

environment 

necessitates a new 

analysis of the value 

of a voucher. 

patent expiration, which we refer to as the effective patent life. Under the Drug Price Competition and Patent Tenn Restoration Act of 1984 

(commonly known as the Hatch-Waxman Act), 

the patent expiration date depends on the length 

of clinical testing and review (for more on the 

patent term and how it affects voucher value, see 

the Appendix).18 

In addition to the assumptions described 

above, to calculate the time value and exclusivity 

effects, we made the following assumptions, 

which are summarized in Exhibit 1: that the 

probability of approval of a drug for which a 

voucher would be used was 90 percent; 19 that 

the marginal corporate tax rate was 28 percent;~ 0 

that the marginal cost of making a drug was 

20 percent, based on the ratio of the price of 

generic drugs to brand-name drugs when there 

are many generic competitors;~ 1 that the time 

between the purchase of a voucher and submission for FDA approval was six months (which 

means that approval would come twelve months 

after the purchase of a voucher, as was the case 

when Regeneron/Sanofi purchased a voucher 

for ahrocumab, its cholesterol drug) ;n that the 

drug would have market exclusivityofl2.9years, 

with a standard deviation of3.2 years; 23 and that 

after patent expiration, brand-name sales would 

erode, falling to 11 percent of the molecule market share as of one year after the entry of a generic competitor (with 9 percent as the standard 

deviation). 23 In a sensitivity analysis, we modified the erosion rate to examine how the value of 

a voucher would increase with limited generic 

competition, as could happen with biologics. 

voucHER PRICE To estimate the voucher price, 

we estimated the value of a voucher for each drug 

approved in a given year after a standard review. 

We ordered the values of these vouchers from 

highest to lowest in a given year and then estimated the range of possible voucher prices: For 

0 

~ g 

"-m 

"-

a 

3 
98 


PRESCRIPTION ORUG POLICY 

cally net of rebates. In instances where net sales 

were not available in annual reports, we used 

analysts' reports or sales reported by IMS Health. 

We converted net sales to 2014 dollars using 

the prescription drug index of the Consumer 

Price Index-All Urban Consumers. As Ernst 

Berndt and colleagues did/' we projected future 

sales for recently launched drugs. We predicted 

future sales using the prescription uptake cunre 

of twenty-six standard-review products, fifthyear sales, and an annual price increase of 

3.2 percent (the compounded average growth 

rate for the period 2009-14 of the prescription 

drug index of the Consumer Price Index-AU 

Urban Consumers). We estimated sales for twenty years after submission to the FDA. 

ESTIMATING THE COMPETITIVE EFFECT first, 

we estimated the competitive effect, in which 

value comes from earlier market entry relative 

to the entry of competitors within the same ther· 

apeutic area. A drug with earlier market entry is 

adopted by more providers and patients than a 

drug with a later entry, and if the first drug is 

effective for those patients, they are reluctant to 

switch to a later market entrant. Hence, earlier 

market entry yields higher sales. 

To estimate the competitive effect, we used the 

same approach that we did previously, 11 when we 

estimated peak share (that is, the highest monthly market share within the first four years after 

launch) as a function of speed to market, promotional spending, order of market entry (for example, whether the drug entered second or third 

in its therapeutic class), and number of competitors. We then used the increase in peak share 

from launching four months earlier to estimate 

the increase in annual sales that would result 

from having a priority voucher. More informiltion about our estimation of the competitive effect is available elsewhere11 and in the online 

Appendix.w 

ESTIMATING THE TIME VALUE AND EXCLUSIVITY 

EFFECTS Second, we estimated the time value 

effect, meaning the value of generating earlier 

sales. Earlier sales are more valuable than later 

sales in part because, as noted above, the money 

from sales can be invested. We assumed a cost of 

capital of 10.5 percent. ~ As discussed above, we 

estimated sales for the twenty years following 

submission to the FDA, including zero sales during review. In a sensitivity analysis, we used a 

different cost of capital and a time horizon beyond twenty years. 

Third, we estimated the exclusivity effect. 

Compared to a drug that receives a standard re· 

view, a drug with a priority review voucher is 

approved earlier, but its patent does not necessarily expire earlier. This means that it can have a 

longer period of time between drug launch and 

778 HEALTY A'-"'AIRS "'lAY 2016 35:5 

The changing 

regulatory and 

commercial 

environment 

necessitates a new 

analysis of the value 

of a voucher. 

patent expiration, which we refer to as the effective patent life. Under the Drug Price Competition and Patent Term Restoration Act of 1984 

(commonly known as the Hatch-Waxman Act), 

the patent expiration date depends on the length 

of clinical testing and review (for more on the 

patent term and how it affects voucher value, see 

the Appendix). 18 

In addition to the assumptions described 

above, to calculate the time value and exclusivity 

effects, we made the following assumptions, 

which are summarized in Exhibit 1: that the 

probability of approval of a drug for which a 

voucher would be used was 90 percent;19 that 

the marginal corporate tax rate was 28 percent; .. '' 

that the marginal cost of making a drug was 

20 percent, based on the ratio of the price of 

generic drugs to brand-name drugs when there 

are many generic competitors; 22 that the time 

betvveen the purchase of a voucher and submission for FDA approval was six months (which 

means that approval would come twelve months 

after the purchase of a voucher, as was the case 

when Regeneron/Sanofi purchased a voucher 

for alirocumab, its cholesterol drug);u that the 

drug would have market exclusivity of12.9 years, 

with a standard deviation of 3.2 years;n and that 

after patent expiration, brand-name sales would 

erode, falling to 11 percent of the molecule market share as of one year after the entry of a ge· 

neric competitor (with 9 percent as the standard 

deviation). H In a sensitivity analysis, we modi· 

fied the erosion rate to examine how the value of 

a voucher would increase with limited generic 

competition, as could happen with biologics. 

voucHER PRICE To estimate the voucher price, 

we estimated the value of a voucher for each drug 

approved in a given year after a standard review. 

We ordered the values of these vouchers from 

highest to lowest in a given year and then csti· 

mated the range of possible voucher prices: For 

~ 0 

ru 

a. 

ro 

a. 

a 

3 
99 


Assumptions used to estimate the value of a priority revlew voucher 

Descrlption Value Source 

Voucher acceleration of 4 months FDA 10 months for 

regulatory rev1ew '" sales for a top- S914 million Authors' analysis of data on average sales of !isdexamfetamlne. 

drug regadenoson, usteklnumab from company annual reports 

Otscountratf' 10.5% DiMasi eta!., 2016 (see Note 19 in text} 

Market exclusivity with 12.9 years Grabowski et aL. 2014 (see Note 23 in text) 

voucher 

90% DiMasi et at. 2016 (see Note 19 in text) 

Marginal cost 

Tax rate 

Brartd share of Molecule 12 

20% 

28% 

11% 

Grabowski et al., 2007 (see Note 21 in text) 

Mintz and Chen, 2014 (see Note 20 ln text} 

Grabowski et al.. 2014 {see Note 23 ln text} 

months after gf'neric entry 

T1rne between voucher 

purchase and FDA decision 

12months a voucher in 2014; the FDA decision 

4 in text) 

Time horizon 20 years Authors' assumption 

Annual price increase 3.2% of data from the 

lnd€'x-AIIUrban 

drug index of the 

sou!fu Authors' analys:s of d.;~ta from the sources in the exh:b:t. NOTE FDA is Food afld Drug Adm'fliSiratmn 

each voucher, the price could be as high as the 

voucher value and as low as the value to the 

alternative buyer (alternative buyers are dis~ 

cussed below). We assumed that the relevant time 

period was one year (that is, we estimated the 

potential voucher value and prices per calendar year). 

EXHIBIT 2 

Estimated vatue of a priority review voucher by its three 

effects 

•• 

For example, consider three drugs for which 

the value of priority review would be $300 mil· 

lion, $200 million, and $100 million, respective· 

Jy. If there were just one voucher for sale, the 

bidder that values the voucher at $300 million 

would buy the voucher, and the bidder that val· 

ues the voucher at $200 million would be the 

alternative buyer. We expect the price to be between $200 million and $300 million, because at 

prices below $200 million, two bidders (the manufacturers of the drugs for which the voucher 

would have a value of $200 million or $300 million) would bid up the price to $200 million, and 

at prices above $300 million no one would be 

willing to purchase the voucher. Likewise, if 

there were two vouchers for sale, then we would 

expect the price to be at least $100 million. 

Additional details about the theoretical model, 

estimation methods, and sensitivity analyses are 

available in the Appendix. 18 

Study Results COMPETITIVE EFFECT For the first or SeCOnd drug 

in the same therapeutic area to enter the market, 

accelerating drug launch by four months is associated with an increase in peak share of 1.2 percentage points (for example, from 50 percent to 

51.2 percent)Y If two drugs launch at the same 

time, each drug is expected to achieve 50 percent 

peak share in the first four years, so 1.2 percent· 

age points would be a 2.5 percent increase in 

sales. Similarly, for the third drug to enter the 

MAY 2016 35:5 HEALTH AFFAIRS 779 
100 


PRESCRIPTION DRUG POLICY 

·-~-~~!'('~ 

Priority review voucher value based on fifth·year sates and approvat acceleration 

Millions of dollars 

Fifth-year sales 

$250 s 28 

500 56 

750 85 

914 103 

1.000 113 

1.250 141 

1,500 169 

1,750 197 

4 

$40 '52 ; 64 ; 76 $87 $99 

81 lOS 128 151 175 197 

121 157 192 227 262 296 

147 191 234 277 319 361 

161 209 256 303 349 395 

202 261 320 379 436 493 

242 314 384 454 524 592 

282 366 448 530 611 691 

market, accelerating drug launch by four months 

is associated with an increase in sales ofless than 

1 percent (or 0.30 percentage point). 

EXPECTED VOUCHER VALUE FOR TOP•SELLING 

DRUGS The value of the voucher depends on 

many factors, including entry order and effective 

patent life, denoted in Exhibit 2 as the exclusivity 

effect, and approval acceleration (Exhibit 3). For 

a drug that has fifth-year sales of$1 billion and is 

an early mover to the market (which means no 

competing drug has locked in many providers 

and patients), the voucher value is $256 million 

if the drug extends effective patent life and 

$196 million if it does not (Exhibit 2). 

For a drug that has fifth-year sales of $914 million (the average for the top-selling drugs of 

EXHIBIT 4 

Value of priority review vouchers, by number of vouchers 

issued per year 

780 HEALTH AFFA!RS MAY 2016 35:5 

2007, 2008, and 2009), the voucher value is 

$234 million if the voucher extends the effective 

patent life by four months (Exhibit 3). Of that 

value, almost half ($106 million) is attributable 

to the time value effect, roughly a third to the 

competitive effect ($73 million), and less than a 

quarter to the exclusivity effect ($55 million). 

The voucher value decreases to $179 million if 

the voucher does not extend the drug's effective 

patent life (data not shown). 

Ifthe drug that benefits from priority review is 

the third to enter the market instead of the first 

or second, the voucher value decreases from 

$234 million to $189 million (assuming that po· 

tential fifthHyear sales remain at $914 million). 

This is because of the reduced competitive effect 

of an earlier approval of a drug on third entrants 

into the market, compared to second entrants 

($27 million versus $73 million). 

If a drug has potential fifth-year sales of 

$250 million and the voucher extends the effec· 

tive patent life by the four months provided by 

the priority review, the voucher value for a first 

or second entrant into the market decreases to 

$64 million (Exhibit 3). If a product reaches 

blockbuster status at that time instead (sales 

of $1 billion), the voucher value is $256 million. 

We assumed that generic competition eroded 

fourteenth-year and later sales. However, the assumption has little effect on the present value of 

a voucher, because sales in the distant future are 

heavily discounted. Without generic competition, the voucher value increases from $234 million to $263 million (data not shown). Likewise, 

the voucher value increases from $234 million to 

$267 million if the discount rate is 8 percent 

instead of 10.5 percent. Extending the analysis 

from twenty years to twenty-five years after FDA 

submission increases the voucher value by less 

than $2 million. 

VOUCHER VALUE AND PRICE Jf there were only 

one voucher to be sold per year, the value of the 

voucher would be between $234 million (the 

value to the buyer willing to pay the highest 

price) and $129 million (the value to the buyer, 

known as the alternative buyer, willing to pay the 

second-highest price) (Exhibit 4). The steep de· 

dine in value as the number of vouchers increases is a result of a skewed sales distribution. 

The highest-grossing drug has sales that are 

nearly double those of the second-highest-gross· 

ing drug ($900 million compared to $500 mil· 

lion, as shown in the Appendix). 18 

In Exhibit 4 we assumed that the patent expi¥ 

ration date was unchanged, so that a voucher 

gave a drug an extra four months of effective 

patent life. However, if the voucher moved the 

expiration date forward, the voucher value and 

price would both fall by about 25 percent. 
101 


The estimates 

presented here apply 

to the economic value 

of earlier drug launch 

in general. 

BUSINESS IMPLICATIONS OF THE VOUCHER 

VALUE We showed that the expected value of a 

voucher for a drug with $914 million in fifth-year 

sales is $234 million (assuming an exclusivity 

effect). If four vouchers are available in one year, 

our estimates predict prices as low as $39 million 

(the value to the would-be fifth buyer). If there is 

one price for all four vouchers, the price will be 

benvecn $39 million and $79 million. If there is 

not a single price for all four vouchers, perhaps 

because the voucher sellers and buyers are not all 

in the market at the same time, the price could be 

as high as $234 million. 

How do the estimates compare to actual selling 

prices? Ret'all that vouchers have been sold for 

prices ranging from $67.5 million in 2014 to 

$350 million in 2015.' Regeneron paid $67.5 mil· 

lion for a voucher to speed the review of a1irocumab, which suggests that Regeneron expected 

sales of the drug to exceed $250 million. Indeed, 

before alirocumab's launch, analysts projected 

fifth-year sales of more than $1 blllion in the 

United States."" Thus, the value of the voucher 

would be more than $256 million (Exhibit 3)-

well in excess of the price of$67.5 million paid by 

Regeneron. 

AbbVie paid $350 million for a voucher to be 

used in the future on an unspecified drug. A 

$320 million voucher price is associated with 

fifth-year US drug sales of $1.25 billion (Exhibit 3), so clearly AbbVie expected the voucher to be 

used for a blockbuster drug. Moreover, because 

only one voucher was available at the time, the 

price suggests that the voucher had a high value 

to both AbbVie and another bidder. 

Whether the voucher will provide a positive 

return for the developer depends on whether 

the expected net present value of a voucher exceeds the cost of conducting a Phase III clinical 

trial. The expected net present value of a voucher 

sold for $234 million is approximately $99 million at the beginning of such a triaL This estimate 

assumes that only a Phase HI trial is required, the 

probability of submission is 70 percent, the probability of approval is 90 percent, the discount 

rate is 10.5 percent, and four years elapse betvveen the beginning of the trial and FDA approval.1v> 

A net present value of $99 million will typically 

cover the cost of a Phase III trial plus FDA submission for a drug for a parasitic or infectious 

disease. While the average out-of-pocket cost for 

such a trial and submission is $190 million, ~ the 

cost of a trial for an anti-parasitic or anti-infective drug tends to be about half of the average, 26 

and orphan drug tax credits cut those costs in 

half again. 1berefore, a voucher price of 

$234 million should cover the cost of a Phase 

III trial plus FDA submission. 

If voucher prices fall below $100 million, as we 

would expect with four or more vouchers per 

year (Exhibit 4), then the expected net present 

value of the voucher would fall below the cost of a 

Phase HI clinical triaL Hence, the voucher (even 

with orphan drug tax credits) would not provide 

sufficient incentive for drug development, and 

additional incentives would be needed-such as 

an advance market commitment5 or a profitable 

commercial market. 

Finally, while the focus of this article is on the 

priority review voucher program, the estimates 

presented here apply to the economic value of 

earlier drug launch in general. Thus, they are 

relevant for estimating the economic gains from 

faster completion of clinical trials and faster FDA 

review. 

LIMITATIONS 

.. LIMITATfONS OF THE MODEt: There are SeVeral reasons why the potential voucher value 

could be higher than the value in our modeL 

First, the competitive effect value would double 

if two companies were racing to have the first 

drug approved in a class and only one voucher 

were available. In such a race, the competitive 

effect of a voucher would include not only the 

impact on its buyer's drug, but also the impact of 

preventing the competitor from increasing its 

drug's market share through earlier market entry. The competitive effect would double from 

$80 million to $160 million and the voucher val* 

ue would rise from $256 million to $336 million 

for an early entrant with fifth-year sales of $1 billion (Exhibit 2). 

Second, the voucher value would be higher 

than our estimates if drug sales were higher than 

the sales of the drugs in our data sample. Our 

three-year sample period (2007-09) did not include mega blockbuster drugs such as atorvastatin and esomeprazole magnesium that achieved 

multiple billions of dollars in annual sales while 

under patent protection. 

Third, if one company controlled the market 

for vouchers, eitherthrough its own drug development or through buying vouchers from 

MAY 2016 35:5 HEALT>-1 AFFAIRS 781 
102 


CI>RESCRIPTION Ol!UG PO~ICY ' 

782 

others, then it could charge higher prices than 

we estimated. Similarly, while many vouchers 

might be sold in a given year, if a company 

had only a small window of time during which 

to purchase a voucher (that is, betweenreceiptof 

the results from a Phase III clinical trial and 

submission to the FDA), and only one voucher 

were available during that window of time, then 

the seller would have market power and the price 

might be dose to the buyer's value, 

Conversely, recall that the voucher value 

would be lower if there were no exclusivity effect 

(Exhibit 2). Also, the voucher value would be 

lower if earlier market entry did not translate 

to earlier sales because of delays by payers wait· 

ing to grant reimbursement until a competitor 

drug entered the market. 

Jlo LIMITATIONS OF THE VOUCHER PROGRAM: 

This article has focused on the commercial value 

of the priority review voucher program. Howev· 

er, there are several concerns about the social 

value of the program. First, vouchers have been 

awarded for drugs that would have been developed without the incentive. n This is analogous to 

giving tax breaks for charitable donations that 

would have been made even without the tax incentive. However, unlike tax breaks, the costs of 

the voucher program are not necessarily borne 

by the government. In some cases, the costs of 

the program are borne by competing drug companies that lose market share to the company 

that uses the voucher for its drug. Regardless 

of who bears the costs, it appears that some 

voucher recipients received a windfall. One possible regulatory mechanism for reducing such 

lNindfalls would be to require a minimum investment in research and development by voucher 

recipients. However, such cost-based rewards 

might encourage inefficient investment. 

Second, while the voucher program encourages innovation, it does not ensure 

access to drugs developed as a result of the program. w-N Drug developers should be required 

to submit to FDA their plans for how to make 

their drugs accessible. Also, funding from governments or foundations might be needed to 

purchase treatments for people with neglected 

diseases who live in low-income countries. Other 

mechanisms for encouraging drug development 

for neglected diseases include direct government 

or foundation subsidies of clinical trials and ad+ 

vance commitments to purchase the drogs."·s'1 

Policy Implications As more diseases are included in the priority 

review voucher program, the number of vouchMI\Y 2016 35:5 

Congress and the FDA 

should carefully 

consider the 

conditions for eligible 

diseases and drugs. 

ers will increase. However, we have demonstrated how eligibility expansion could decrease the 

expected vouchers' price and reduce the incentives to invest in neglected or rare pediatric 

diseases. 

If four vouchers were granted per year for 

products that would otherwise receive standard 

review, the price of a voucher could fall as low as 

$39 million (Exhibit 4). The net present value 

would be even lower and might not cover the cost 

of a Phase III clinical trial. Because a lower price 

for vouchers would reduce the incentive for developing drugs for these diseases, policy makers 

should think carefully about making additional 

diseases eligible for vouchers. 

To avoid the substantial decline in the price 

and value of priority review vouchers that would 

be caused by having a large number of vouchers 

in the marketplace, Congress and the FDA 

should carefully consider the conditions for eligible diseases and drugs. Additional diseases 

should be evaluated for inclusion in the program 

based on need-which might include factors 

such as the burden of the disease, current drugs 

in use or in late-stage development, and alternative incentive mechanisms. Furthermore, Congress could reduce the supply of vouchers by 

excluding from eligibility those drugs that were 

already widely available outside the United 

States {for example, drugs that had been available for a given indication for more than five 

years before FDA submission)< Finally, Congress 

should require that manufacturers have a plan 

for ensuring drug access. 

Conclusion 

Congress and the FDA might find it easier to say 

"no" to expansions of the priority review voucher 

program if they used the evidence in this study 

about the impact of additional vouchers on the 

price of all vouchers. • 
103 


NOTES 

12 R<!gnier SA, Ridley DR Market 

watch: forecasting mJrket share in 

pre<oented.n t'1eart" eclte thoseoft'w 

Juti>ors 

the US phannaceuncal market, Nat 21 

13 

t5 

17 

18 

'v\AY 2016 35:5 HCALTi-1 Al"FAIRS 783 
104 


UP:--ON, MOCHH1AN 

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ONE HUNOHtD FOURTEENTH CONGRESS 

Fr\ANK PALLONE:, JH , NEVI/ 

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l!ongref\% of tbe Wniteb .~Mates 

J!)onse of ii\tpnscntntilnz 

COMMITIEE ON ENEHGY AND COMMEHCE 

21?5 Rlwr..uRN House On=;cr- ButLD!!\IG 

WMHIN(ifOei, DC 205'15-6115 

Dr. Richard Hatchett MD 

Acting Director 

Biomedical Advanced Research and 

Development Authority 

June 17,2016 

U.S. Department of Health and Human Services 

200 Independence A venue, S. W. 

Washington, DC 2020 I 

Dear Dr. Hatchett: 

Thank you for appearing before the Subcommittee on Health on May 19,2016 to testily at the 

hearing entitled "Examining H.R. 3299, Strengthening Public Health Emergency Response Act." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for ten business days to permit Members to submit additional questions for the record, which are 

attached. The format of your responses to these questions should be as follows: (I) the name of the 

Member whose question you are addressing, (2) the complete text of the question you are addressing in 

bold, and (3) your answer to that question in plain text. 

To facilitate the printing of the hearing record, please respond to these questions with a 

transmittal letter by the close of business on July I, 2016. Your responses should be mailed to Graham 

Pittman, Legislative Clerk, Committee on Energy and Commerce, 2!25 Rayburn House Office Building, 

Washington, DC 20515 and e-mailed in Word format to graham.pittman@mail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Sincerely, I{ A-ft 

i~ Chairman 

Subcommittee on Health 

cc: The Honorable Gene Green, Ranking Member, Subcommittee on Health 

Attachment 
105 


Attachment- Additional Questions for the Record 

The Honorable Marsha Blackburn 

One of the mechanisms proposed by the Federal Government to offset development costs for 

essential medical countermeasures is the support of so-called "Dual Use Compounds." These 

medical interventions are designed to address a specific bioterror threat, but are simultaneously 

being developed for the treatment of specific patient populations. In the setting of 

these parallel development programs, safety concerns may emerge which are specific to a limited 

patient population or are related to an extended duration of treatment. 

l. Are there mechanisms in place to prevent a safety concern which is relevant to a specific 

patient population from negatively impacting the development or procurement of a medical 

counlenneasure, particularly when the safety concern is not applicable to the general 

population in the event of a bioweapon attack? 

The Honorable :VIichael C. Burgess 

l. The Ebola crisis exposed weaknesses in our healthcare system's ability lo identify and 

respond to biological public health threats. In what specific ways does H.R. 3299 address 

gaps in our national biological preparedness? Additionally, how will the bill improve HHS's 

ability to both proactively identify biological pathogens, such as Ebola or Zika, and make 

available medical countermeasures in a timely and effective manner? 

2. When BARDA was created in2006, Congress.provided the agency with authority to 

negotiate its own contracts. In 2009, ASPR moved all of BARDAs authority to negotiate 

contracts to ASPR's Office of Acquisitions Management, Contracts, and Grants. While this 

move was intended to simplify the contracting process it created confusion and unnecessary 

delays. There is a consensus among industry that sole contracting authority should return to 

BARD A. H.R. 3299 would direct the Secretary ofHHS to delegate contracting authority for 

negotiating and entering into any eontracts, grants, or cooperative agreements back to 

BARD A. Please describe the specific ways this authority would improve BARD A's ability 

to execute its mission. 

The Honorable Billy Long 

On January 20, 2004, the Secretary of Homeland Security deterntined that anthrax is a material 

threat to the U.S. population sutlicient to affect national security. Since that time, the U.S. 

Department of Health and Human Services (HHS) has been pursuing a comprehensive strategy 

to address this threat. This approach has included acquisition of vaccines, antibiotics, and 

therapeutics to meet immediate public health needs in the event of an anthrax attack. While 

progress has been made in preparing against anthrax, I would like to learn more about BARD A's 

plans for the future of its anthrax vaccine program. 

I. Can you please provide an update on the next-generation anthrax vaccine candidates 

currently being supported by BARDA? 
106 

Æ 


I also understand that BARDA continues to pursue multiple next-generation Recombinant 

Protective Antigen (rPA) anthrax vaccines. The president's FYI7 budget reinforced the support 

and need for an rPA anthrax vaccine, and indicated that in the next three years BARDA 

anticipates new procurements of an rP A anthrax vaccine for the U.S. Strategic National 

Stockpile. Additionally, in the PHEMCE Multi-Year Budget submitted to Congress, BARDA 

says it intends to procure $300 million of an rPA anthrax vaccine in FY18. The budget includes 

timclines indicating BARD A's plans to transition from development to procurement of an rPA 

anthrax vaccine in FY2017-FY20 18. 

2. Can you please describe the potential benefits associated with an rP A anthrax vaccine, as 

compared to traditional anthrax vaccines? 

3. Can you please provide a detailed summary ofthe developmental status and projected 

time lines for each of the rP A anthrax vaccine programs'? 

2