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96–812 PDF 2005

S. HRG. 108–826

BIOSHIELD II: RESPONDING TO AN EVER–

CHANGING THREAT

JOINT HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY

AND

COMMITTEE ON HEALTH, EDUCATION, 

LABOR, AND PENSIONS 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

OCTOBER 6, 2004

Serial No. J–108–99

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY 

ORRIN G. HATCH, Utah, Chairman 

CHARLES E. GRASSLEY, Iowa 

ARLEN SPECTER, Pennsylvania 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

LARRY E. CRAIG, Idaho 

SAXBY CHAMBLISS, Georgia 

JOHN CORNYN, Texas 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

JOHN EDWARDS, North Carolina 

BRUCE ARTIM, Chief Counsel and Staff Director 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS 

JUDD GREGG, New Hampshire, Chairman 

BILL FRIST, Tennessee 

MICHAEL B. ENZI, Wyoming 

LAMAR ALEXANDER, Tennessee 

CHRISTOPHER S. BOND, Missouri 

MIKE DEWINE, Ohio 

PAT ROBERTS, Kansas 

JEFF SESSIONS, Alabama 

JOHN ENSIGN, Nevada 

LINDSEY O. GRAHAM, South Carolina 

JOHN W. WARNER, Virginia 

EDWARD M. KENNEDY, Massachusetts 

CHRISTOPHER J. DODD, Connecticut 

TOM HARKIN, Iowa 

BARBARA A. MIKULSKI, Maryland 

JAMES M. JEFFORDS (I), Vermont 

JEFF BINGAMAN, New Mexico 

PATTY MURRAY, Washington 

JACK REED, Rhode Island 

JOHN EDWARDS, North Carolina 

HILLARY RODHAM CLINTON, New York 

SHARON R. SODERSTROM, Staff Director 

J. MICHAEL MYERS, Minority Staff Director and Chief Counsel 

(III)

C O N T E N T S 

STATEMENTS OF MEMBERS OF THE COMMITTEES 

Page

Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming .................... 6

prepared statement .......................................................................................... 114

Gregg, Hon. Judd, a U.S. Senator from the State of New Hampshire ................ 1

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 2

Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts, 

prepared statement .............................................................................................. 138

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 21

prepared statement .......................................................................................... 157

Reed, Hon. Jack, a U.S. Senator from the State of Rhode Island ....................... 9

Schumer, Hon. Charles E., a U.S. Senator from the State of New York ............ 22

WITNESSES 

Angulo, Carlos, Partner, Zuckerman Spaeder LLP, on behalf of the Coalition 

for a Competitive Pharmaceutical Market ......................................................... 14

Bartlett, John G., M.D., Chief, Division of Infectious Diseases, Johns Hopkins 

University School of Medicine, on behalf of the Infectious Disease Society 

of America ............................................................................................................. 17

Clerici, John M., Partner, McKenna, Long & Aldridge, LLP, Washington, 

D.C. ........................................................................................................................ 28

Grant, Christine, Vice President, Public Policy and Government Relations, 

Aventis Pasteur .................................................................................................... 7

Greenberg, Patricia B., R.N., on behalf of the Service Employees International 

Union, AFL–CIO .................................................................................................. 30

Jaeger, Kathleen D., President and Chief Executive Officer, Generic Pharmaceutical Association, Arlington, Virginia ............................................................ 12

Kushan, Jeffrey P., Partner, Sidley, Austin, Brown and Wood, LLP, Washington, D.C. ........................................................................................................... 26

Timmins, Alan P., President and Chief Operating Officer, AVI BioPharma, 

Inc., Portland, Oregon .......................................................................................... 10

QUESTIONS AND ANSWERS 

Responses of Carlos Angulo to questions submitted by Senators Kennedy 

and Schumer ......................................................................................................... 33

Responses of Kathleen Jaeger to questions submitted by Senators Kennedy 

and Schumer ......................................................................................................... 38

Responses of John Clerici to questions submitted by Senators Hatch and 

Kennedy ................................................................................................................ 48

Responses of Christine Grant to questions submitted by Senators Kennedy 

and Schumer ......................................................................................................... 56

Responses of Jeffrey Kushan to questions submitted by Senator Kennedy ....... 62

Responses of Alan Timmins to questions submitted by Senators Kennedy 

and Schumer ......................................................................................................... 67

SUBMISSIONS FOR THE RECORD 

Aetna, Inc., Mark Rubino, RPh., MHA, Chief Pharmacy Officer, Hartford, 

Connecticut, statement ........................................................................................ 68

Angulo, Carlos, Partner, Zuckerman Spaeder LLP, on behalf of the Coalition 

for a Competitive Pharmaceutical Market, prepared statement ...................... 69

Page

IV

Bartlett, John G., M.D., Chief, Division of Infectious Diseases, Johns Hopkins 

University School of Medicine, on behalf of the Infectious Disease Society 

of America, prepared statement and attachments ............................................ 73

Biotechnology Industry Organization, Washington, D.C., prepared statement . 86

Clerici, John M., Partner, McKenna, Long & Aldridge, LLP, Washington, 

D.C., prepared statement .................................................................................... 90

Grant, Christine, Vice President, Public Policy and Government Relations, 

Aventis Pasteur, prepared statement ................................................................. 115

Greenberg, Patricia B., R.N., on behalf of the Service Employees International 

Union, AFL–CIO, prepared statement ............................................................... 122

Jaeger, Kathleen D., President and Chief Executive Officer, Generic Pharmaceutical Association, Arlington, Virginia, prepared statement ......................... 127

Kushan, Jeffrey P., Partner, Sidley, Austin, Brown and Wood, LLP, Washington, D.C., prepared statement and attachment ............................................ 143

Lieberman, Hon. Joseph, a U.S. Senator from the State of Connecticut, statement and attachments ......................................................................................... 160

Rafferty, James G., Harkins Cunningham LLP, Washington, D.C., statement . 221

Teva Pharmaceuticals USA, George S. Barrett, President and Chief Executive 

Officer, North Wales, Pennsylvania, letter ........................................................ 233

Timmins, Alan P., President and Chief Operating Officer, AVI BioPharma, 

Inc., Portland, Oregon, prepared statement ...................................................... 236

(1)

BIOSHIELD II: RESPONDING TO AN EVER–

CHANGING THREAT 

WEDNESDAY, OCTOBER 6, 2004

UNITED STATES SENATE, COMMITTEE ON THE JUDICIARY, COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS, Washington, D.C. 

The committees met jointly, pursuant to notice, at 10:00 a.m., in 

Room 216, Hart Senate Office Building, Hon. Judd Gregg, Chairman of the Committee on Health, Education, Labor, and Pensions, 

presiding. 

Present: Senators Gregg, Hatch, Enzi, Reed, Leahy, and Schumer. 

OPENING STATEMENT OF HON. JUDD GREGG, A U.S. SENATOR 

FROM THE STATE OF NEW HAMPSHIRE 

Chairman GREGG. I know we are going to be joined by a number 

of other colleagues. Unfortunately, at this time, there is a conference going on relatively to significant tax legislation which I suspect Senator Hatch is involved in. I am also involved in it relative 

to a number of issues, one of which is going to be taken up this 

morning, so I may have to leave to attend that conference, unfortunately. 

But we did want to have this hearing today, this joint hearing 

today with the Judiciary Committee and the HELP Committee to 

address the issue of BioShield and how we are proceeding relative 

to the issue of bioterrorism and protecting our nation and our people against a bioterrorist attack. 

Throughout the 1990s and the 1980s and certainly the 1970s and 

the 1950s and 1960s, when you discussed national defense and infrastructure for national defense, you always talked about whether 

or not we had the industrial complex to be able to maintain our capacity to defend ourselves as a nation. People talked about whether 

we could build planes or whether we could build tanks or whether 

we could build artillery and there was always a concern that our 

defense industrial complex might be eroding or was being shipped 

overseas. 

Today, the defense industrial complex is entirely different because we are fighting a different war. The defense industrial complex, in other words, the industries which are going to defend us 

as a nation, are our technology industries and especially biologic 

industries. Our concern is that those industries which produce the 

medicines which will allow us to defend ourselves from an attack, 

a biological or chemical attack, those industries be vibrant, strong, 

2

and robust in their ability to produce first the research, and then 

produce the anti-toxins and the vaccines necessary to protect our 

people. 

That is why we passed BioShield. The whole concept behind BioShield was to create within the research community and those 

folks who produced biological agents which fight biological agents, 

vaccines specifically, produce an atmosphere where those companies, those individuals would have an incentive to go out and create the vaccines necessary to protect our people from attacks by biological agents, whether they be smallpox, anthrax, plague, botulism. 

We recognize as a Congress that there isn’t a consumer group 

out there that is going to use these types of vaccines other than the 

government, and therefore the government had to set up a system 

to try to create an incentive to produce these types of cures and 

vaccines. 

The concern we have, I have, anyway, is that since BioShield has 

passed, we still have a very anemic response within the research 

communities and within the production communities to producing 

these types of vaccines and anti-toxins which would protect us in 

the case of an attack. Less than 100 companies have actually come 

forward and said that they have an interest in pursuing biologics. 

So that creates a question. What else do we need to do? 

What else do we need to do to make sure that there is an incentive out there amongst our creative and innovative people to 

produce the necessary vaccines to protect us as a nation from these 

types of biological attacks, because we recognize that in today’s 

world, it is a biological or chemical attack, along with a potential 

dirty bomb, that is the most significant threat to us as a nation. 

So that is what this hearing is about, to get an update on how 

people think BioShield I is working and to get some ideas as to 

what we should do should we pursue a BioShield II proposal. 

I certainly appreciate Senator Hatch taking the lead in this effort 

with the Judiciary Committee and the HELP Committee working 

together. That is the type of cooperation that I think reflects well 

on us as a Congress, and certainly Senator Hatch has been a leader 

in all sorts of areas dealing with pharmaceuticals especially, having written the Hatch–Waxman Act, and was chairman of this, or 

ranking member on this committee for a number of years, the 

HELP Committee, and now, of course, runs the Judiciary Committee. So his knowledge on this issue is instrumental to our capacity to be successful as a Congress. So I will yield to my fellow chairman, Senator Hatch. 

STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM 

THE STATE OF UTAH 

Chairman HATCH. Thank you, Mr. Chairman. I am grateful to be 

able to participate with you in this hearing because this is a very, 

very important hearing. We are both pulled all over Capitol Hill 

right now, so I am going to make my opening statement and then 

I am going to have to leave because I am in the middle of the conference on the Medicare, and you are also—on the FSC–ETI bill, 

excuse me, and that has been a very intense conference. But I understand Senator Enzi is going to be here, too. 

3

Chairman GREGG. Senator Enzi is going to be here. 

Chairman HATCH. That is great. You couldn’t have anybody better. Let me just make these comments. 

More than three years ago—now, I want to welcome our witnesses. They are great witnesses, great people to have here on both 

panels and I just want to tell you how impressed and how proud 

I am to have all of you here. 

But let me just say, more than three years ago, our nation suffered the most deadly attack on its soil. We woke up on the morning of September 11, 2001, to a new reality. A month later, we 

again realized the magnitude of the ever-changing threat that we 

were facing when this building, this very building, was contaminated with anthrax and ended up being shut down for about three 

months. Most Americans were shaken out of their sense of complacency in 2001. 

After the events of 9/11, Congress took action to secure our borders, our ports, and our airlines and bolster our public health infrastructure. However, the essential steps necessary to secure our nation against the ongoing threat of bioterrorism are still being carefully evaluated, and while these steps are being evaluated, time is 

running out. 

We took an important first step when the Project BioShield Act 

of 2004, better known as BioShield, was signed into law in July. 

However, there is so much more that needs to be done. That is why 

the Judiciary Committee and the Senate HELP Committee are 

holding this hearing today, to raise awareness on what else needs 

to be done in order to combat bioterrorism. 

I couldn’t be more happy to work with a fellow chairman than 

with Senator Gregg. He has done a terrific job on the HELP Committee. It is a committee I have always taken a great interest in. 

I just admire him greatly. He is a very, very intelligent man who 

has done an awful lot of good in this body. So it is a privilege to 

be here with him. 

It is common knowledge that terrorists are specifically interested 

in biological weapons. Many of these weapons were produced by Soviet scientists before the collapse of the Soviet Union and some experts believe that Soviet scientists concocted strains of smallpox 

that were 100 percent lethal. They developed a strain of yersenia 

pestis, the bacterium that causes the plague, which was resistant 

to ten types of antibiotics. 

Today, it is unclear where many of these former Soviet scientists 

are working, and even more disturbing, it is not clear if these bioterror agents are still being kept in the former Soviet Union. As 

new varieties of bioterror weapons are developed, the threat of another attack becomes very real. 

For this reason, I believe that the time for Congress to act on the 

Lieberman–Hatch–Gregg BioShield II legislation is now and I 

think it is important that we move ahead. 

Even if we continue investing resources to build up a prepared 

public health infrastructure, if we do not have the medicines to 

treat those who are exposed or infected, the only other option is 

quarantining these individuals, and my colleagues, quarantining 

individuals, hundreds, maybe even thousands of people, will be extremely difficult to manage. So this is important stuff. 

4

As I have said earlier, BioShield is only the first step to ensure 

readiness against this threat, and I am proud to say that the new 

law is based on legislation that my good friend and colleague, Senator Joe Lieberman, and I introduced this Congress, S. 666, the Biological, Chemical, and Radiological Weapons Countermeasures Research Act. 

Today’s hearing will focus on the next steps, essentially, what is 

needed in a BioShield II package and what we should do about it. 

BioShield II is the next step in the legislative process toward accomplishing this important and time-sensitive goal of bioterror 

readiness, and Senator Lieberman and I intend to reintroduce BioShield II legislation in the 109th Congress. 

We simply cannot wait. Considering the anthrax attacks of 2001 

and the ricin attack on our nation’s capitol in February of this 

year, we already have ample reason to believe that the July law, 

while an important first step, is not sufficient and we need to move 

or to enact a more comprehensive legislative strategy. 

Given the growing risk of further attacks on our nation and potentially devastating consequences of bioterrorism, we must abandon business as usual and take the vigorous steps that will be advocated through our BioShield II legislation. 

The purpose of today’s hearing is to expose and explore an array 

of intellectual property, liability, and other incentives to ensure the 

creation of a robust biodefense industry that needs to be included 

in the BioShield II legislation. Direct government funding for this 

research is not the most effective strategy. To be effective, we must 

also enact incentives so that potential investors will want to fund 

the research associated with building a defense against potential 

attacks. We must have the biopharma industry working with us on 

these solutions. 

BioShield II will encourage biopharma companies to take the 

lead in the development of vaccines, therapeutics, and diagnostics 

to combat terrorism. The goal of our legislation is to have a safer 

and better prepared America, but in order to be prepared, we need 

to provide researchers with the proper incentives. These companies 

are worried about partnering with our government, and I believe 

Congress needs to engage the industry so that we can reap the benefits of their research. But forming partnerships with these companies is the key. Otherwise, this partnership will never work. 

I look forward to hearing from our witnesses regarding this matter and what their thoughts are on what incentives should be offered to these researchers and companies. 

Another critical question that will be explored today is whether 

these same incentives will apply to infectious diseases generally. In 

my opinion, all research on infectious diseases is interrelated, so 

we might strengthen bioterror research if the research focus is 

broader than just bioterror pathogens. Furthermore, by conducting 

this research, we may also discover cures for diseases that afflict 

the world’s poorest nations. 

I would like to acknowledge the terrific work of the HELP Committee, especially Chairman Judd Gregg and Senator Ted Kennedy, 

the HELP Committee’s Ranking Minority Member, Senator Enzi, 

as well, but every member of that committee. I particularly appreciate you folks on that committee recognizing the importance of 

5

this issue by agreeing to hold this joint hearing at such a busy time 

in the legislative session. 

Majority Leader Frist has also been a leader in this area, and I 

want to thank the Judiciary Committee’s Ranking Minority Member, Senator Pat Leahy, for his cooperation on holding today’s hearing. Bioterrorism is an extremely personal issue for him. His office 

was one of the offices that received a letter containing anthrax. 

Finally, I would like to recognize the work of our good friend, 

Senator Joe Lieberman, whose leadership on this issue has made 

the legislation possible and he deserves a lot of credit. I might add, 

he deserves credit for bringing this matter before our committees 

and the full Senate. 

I also want to recognize the indefatigable efforts of Chuck 

Ludlam of Senator Lieberman’s staff for his considerable efforts in 

developing this legislation. 

Senator Lieberman is, of course, one of the managers of the intelligence reform bill which is pending on the floor this morning, and 

unfortunately, it is simply impossible for him to appear to present 

his testimony today. I ask unanimous consent that Senator 

Lieberman’s testimony be included in the hearing record, and without objection, it will. 

Senator Lieberman has asked me to send his apologizes to the 

committee and to all witnesses. We are all under a lot of pressure 

right now because it is the end of the session. I know Senator 

Gregg has a thousand things to do, and I am pulled all over Capitol 

Hill right now. I just have to say that, again, I appreciate all the 

witnesses that are going to be here today. 

This is very important stuff, and I promise you that I am going 

to know everything that you say and I am going to pay very strict 

attention to it. I know all of your schedules are busy, too, and to 

join us today for this very important discussion is very important. 

So I look forward to hearing your thoughts and reading your 

thoughts on what should be included in our BioShield II legislation. 

I ask unanimous consent that the following statements be submitted for the record. First, the statement of James Rafferty from 

Harkins Cunningham on tax incentives. 

Second is the statement of George Barrett, President and CEO 

of Teva Pharmaceuticals. 

And, of course, the statement of the Biotechnology Industry Organization. Without objection, we will put those in the record. 

With that, I know Senator Leahy when he comes will have a 

statement, so maybe we could interrupt for Senator Leahy, or whoever is talking, when they finish, we can turn to Senator Leahy. 

Chairman GREGG. You and I are probably going to have to leave 

in a few minutes to go to the FSC conference, and so I have asked 

Senator Enzi to chair the hearing and introduce the witnesses. 

Chairman HATCH. That would be great. 

Chairman GREGG. I will stay as long as I can. 

Senator ENZI. Thank you, Mr. Chairman 

Chairman Hatch. Thank you for doing this, Senator Enzi. 

6

STATEMENT OF HON. MIKE ENZI, A U.S. SENATOR FROM THE 

STATE OF WYOMING 

Senator ENZI. [Presiding.] I will also make some brief comments. 

I want to thank the chairmen, both chairmen, for this effort. This 

is very unusual for the United States Senate, to combine two committees, but it demonstrates the importance of this particular issue 

and the way that the two committees have worked together to handle the pieces of it that come under their jurisdiction. 

The purpose of the hearing, of course, is to build a record. I think 

we have particularly capable witnesses today who will be building 

that record that the Senate can look at. We are doing this right 

now, even though it is the busiest time of the year for the United 

States Senate, so that we can have the jump on things when we 

get here next year, because that is when the action will be taken 

and this bill will have an opportunity to be one of the first in line. 

Protecting America from bioterrorism will require the best efforts 

of both government and the private sector. This hearing today will 

demonstrate that. It will help us to see what more needs to be done 

to make America as safe as possible from this threat. 

The legislation to enact President Bush’s Project BioShield, 

which Congress passed into law in July, is an important first step 

towards securing our homeland and our citizens from a bioterror 

attack and its aftermath. I am proud to have cosponsored that legislation and I am committed to seeing the law improves our biodefense capabilities. My only regret is that it took more than a year 

for the full Senate to approve the bill after the HELP Committee 

reported it to the floor with unanimous support. 

Now, looking forward, it is critical for these two committees to 

work together to build upon Project BioShield. Project BioShield 

was never intended to address all of the obstacles to the development of bioterror countermeasures. It was intended simply to establish a stable and guaranteed source of Federal financing for the 

purchase of countermeasures developed by private industry, since 

most of these products don’t even have other significant commercial 

applications. 

Now that we have established this financing mechanism, it is 

time that we address the other roadblocks that impede our 

progress on bioterrorism countermeasures. Chairman Hatch and 

Senator Lieberman have developed a bill that aims to address a 

wide variety of outstanding concerns that must be addressed, from 

liability protections to intellectual property incentives. 

I was looking forward to hearing Senator Lieberman. I am very 

impressed with the testimony. I was anxious to see how he was 

going to condense that into just a few minutes. It is one of the most 

extensive testimonies that I have seen presented, and, of course, 

that becomes a part of the record today, as well. 

I wholeheartedly agree with Senator Lieberman that we will not 

be able to address fully this threat without tapping the ingenuity 

that resides in these innovative industries. We need their input 

and involvement as we take the next steps toward protecting 

America from bioterrorism. 

Again, I thank the chairmen and ranking members of both the 

committees, as well, for coming together to refocus these committees on our biodefense capabilities and I look forward to working 

7

with the HELP Committee and the Judiciary Committee as we 

build this national biodefense. 

[The prepared statement of Senator Enzi appears as a submission for the record.] 

Senator ENZI. The panel that is before us, we have Christine 

Grant, who is Vice President of Government Relations with 

Aventis. It is the third-largest pharmaceutical company and one of 

the largest manufacturers of vaccines in the world. Aventis will 

provide their perspective on the remaining barriers to biodefense 

research and development. 

We have Alan Timmins, who is the CEO of AVI BioPharma, 

which is developing treatments for a wide variety of infectious diseases and potential bioterror agents, including hepatitis C, West 

Nile, SARS, dengue fever, and ebola, to provide a smaller company’s perspective on BioShield. 

We have Kathleen Jaeger, the President and CEO of Generic 

Pharmaceutical Association. She will present the views of the generic pharmaceutical industry, and although generally supportive 

of including additional measures under BioShield, the Generic 

Pharmaceutical Association is concerned about some of the proposed patent and intellectual property provisions. 

We have Carlos Angulo, who is with Zuckerman Spaeder. He 

represents the Coalition for a Competitive Pharmaceutical Market. 

It is made up of large employers, such as General Motors, Caterpillar, and of health insurers, such as Blue Cross–Blue Shield. The 

Coalition seeks to ensure the timely availability of lower-cost generic drugs. 

We have Dr. John Bartlett, who is the Chief of the Division of 

Infectious Diseases at Johns Hopkins University School of Medicine. He is appearing on behalf of the Infectious Disease Society of 

America, IDSA. He will discuss why BioShield should be expanded 

to cover products intended to combat infectious disease generally. 

We thank you for being here. Ms. Grant? 

STATEMENT OF CHRISTINE GRANT, VICE PRESIDENT, PUBLIC 

POLICY AND GOVERNMENT RELATIONS, AVENTIS PASTEUR 

Ms. GRANT. Good morning. Mr. Chairman, members of the committee, it is an honor for me to testify before you today about 

Project BioShield. I am here to represent one company, Aventis 

Pasteur. We are the largest company in the world devoted entirely 

to vaccine research, development, and manufacture. We produce 

more than a billion and a half doses of vaccine each year, protecting more than a half-a-billion people against 20 different diseases. We manufacture influenza vaccine and several other vaccines at our Swiftwater, Pennsylvania, plant here in the United 

States. We have had a variety of successes throughout the years. 

And we have also been partnering with the Federal Government 

in times of peace as well as conflict. We provided support of tetanus and diphtheria vaccine after the attack on the World Trade 

Center. We donated 85 million doses of smallpox vaccine to the 

Federal Government. We have always supplied the U.S. military, 

including military needs today in the war in Iraq. And we have responded already to more than one Federal request for biodefense 

measures, and therefore, we have some current experience on the 

8

subject. We have worked on global polio eradication and are actively involved in trying to develop a SARS and avian influenza 

vaccines. 

We have testified in support of a number of the principles in BioShield I and we are pleased that you recognized in that bill that 

the development of medical and biological products requires a number of years under the most favorable circumstances to bring a 

product to market. That is why the multi-year contracting provisions were so important in BioShield I. We now ask and hope that 

HHS and the staff will implement those multi-year provisions enthusiastically as we now begin to see the fruits of BioShield I. 

We also want to talk about the issue of having what are known 

as other transaction authority. Other transaction authority allows 

the HHS Secretary to contract with our biodefense companies for 

research, development, and manufacturing under one contract, 

under one roof. While the reports in BioShield I seem to indicate 

that other transaction authority was being provided, we would certainly encourage that that become explicitly considered in BioShield II. The reason is that, realistically, an established company 

like Aventis Pasteur not only does research and development, but 

we also emphasize the ongoing reliable manufacture of millions of 

doses of vaccine, so that when we have a satisfactory result at the 

research and development phase, we are in this business to continue to manufacture with HHS for HHS and the United States. 

Similarly, Project BioShield I provided HHS the streamlined procurement authorities to ensure that contracting process is familiar, 

is consistent with commercial business practices, and that was a 

very important element. We now hope that HHS and its staff will 

have the energy, the enthusiasm, and the empowerment to ensure 

that it is not business as usual, but rather BioShield will be implemented in a way that is familiar to large established commercial 

companies. 

Now, what remains to be done? Well, first, the issue of potential 

liability protection for entities such as us and other companies to 

get involved in this area is very, very important. For example, in 

our case, the absence of liability protection frankly was a major obstacle in our response to recent procurement by NIH for development of a next generation of anthrax vaccine. The absence of such 

liability protection continues to be a major hurdle for our company. 

We always try to obtain commercial insurance, but the practical reality today is that it is very unlikely to be able to obtain commercial insurance for projects of the nature contemplated by Project 

BioShield, and BioShield I was silent with respect to addressing liability. 

Now, it is true that the passage of the Homeland Security Act 

of 2002 radically altered the way in which the U.S. can go about 

promoting the development of technologies. The Safety Act also 

provided some protections. But as you will hear in more detail from 

other witnesses, the Safety Act has not yet been applied essentially 

after the fact or for products such as vaccines, which are designed 

to protect against the eventuality of a terrorism attack, but rather 

it seems to be limited in practice to only actual terrorism attacks, 

and my written testimony suggests ways that we feel that one 

could argue that the Safety Act extends to vaccine. 

9

Now, it is also worth noting that both the Secretary of HHS and 

DHS have already the authority to provide Federal indemnity to 

private contractors under Public Law 85–804. However, in our experience, use of such authority remains very, very rare. In March 

of 2003, President Bush revised Executive Order 10,789 governing 

the use of this authority to provide indemnity under Public Law 

85–804 in the context of anti-terrorism technologies. 

However, while HHS is currently using its authority in very limited circumstances, our problem in talking with HHS has been that 

the best understanding is that the agency is not providing such indemnification or other liability protection until, at best, a contract 

is awarded, and even then has not to date guaranteed that such 

protection will be forthcoming, even after an award is made. This, 

we are advised, has not been the same practice in other agencies 

and we would encourage working with you on that. 

It puts us, as an established company, in the untenable position 

of having to perform a contract bare of liability protection and assume what are really very unusually high legal risks for these kind 

of projects. Once a contract is awarded, frankly, the leverage has 

changed. It is very difficult for us. We must rely on the agency to 

follow through and decide whether to provide liability protections. 

So in summary, we would like to suggest that certainly going forward in BioShield II, that the authority for other transactions be 

offered and that we work together on liability protections, and I 

will be happy to answer any questions. 

Senator ENZI. Thank you. 

[The prepared statement of Ms. Grant appears as a submission 

for the record.] 

Senator ENZI. My apologies to Senator Reed. I didn’t notice that 

he was here until I had already introduced the first witness. I will 

interrupt so that he can do an opening statement. Senator Reed? 

STATEMENT OF HON. JACK REED, A U.S. SENATOR FROM THE 

STATE OF RHODE ISLAND 

Senator REED. Thank you very much, Mr. Chairman. We have a 

simultaneous hearing in the Armed Services Committee, so I will 

have to depart after my statement, but thank you. 

Let me join my colleagues in commending the chairman and the 

ranking member of both the Judiciary Committee and the HELP 

Committee for holding this hearing and thank the panelists for 

their expert testimony. 

This is a vitally important topic and I commend Senator 

Lieberman and Senator Hatch for their initiative in proposing their 

BioShield legislation. Since 9/11, we have taken dramatic steps in 

many different arenas, creating the Department of Homeland Security, conducting operations across the globe, in Afghanistan and 

Iraq, but I think we all agree we have to do much more when it 

comes to the threat of bioterror, chemical, and radiological countermeasures. The proposed legislation, I believe, is a step forward, following on BioShield I. 

One of the concerns I have, however, with the proposed legislation is that it doesn’t recognize the critical role that the government can play in directing, encouraging and generating some of the 

research necessary for this approach. We are all familiar with comVerDate 0ct 09 2002 15:47 May 23, 2005 Jkt 096812 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\96812.TXT SJUD4 PsN: CMORC
10

mercial products that began through government research initiatives. The most famous is obviously the Internet, but satellites, explosive detection equipment, all these things started with government research and, frankly, government direction. 

The private sector has to play a critical role here, but I would 

like to work with the sponsors of the bill to ensure that we take 

full advantage of the capacities of the Federal Government in this 

process. 

One particular point that is critical when it comes to biotechnology and defenses against biological threats is that so much 

of this information is classified. So much of it is within the purview 

of the government because of its secrecy, because of the danger it 

poses if it gets out. So that, I think, is another element to consider. 

Certainly, we have to be able to incentivize the private sector to 

produce these materials in a manner that is appropriate and have 

them in supply in case of a threat. 

I look forward again to reading thoroughly all the testimony. 

Like Senator Enzi, I was hoping that Senator Lieberman would 

provide Cliff’s Notes today for his extensive testimony—

[Laughter.] 

Senator REED. —but I will read the testimony. I thank the panel 

and I thank the chairman for this time. 

Senator ENZI. Thank you. I will mention to the panel that if you 

can condense your remarks to keep them within five minutes, as 

Senator Reed did, that it would be extremely helpful. 

I will mention also that the record will be left open so that if you 

want to make some additions to your testimony, that will be possible, and also so that members of the committees can submit questions in writing, which we hope you will also answer to add to the 

record. 

We will be kind of pressed for time today, because at 11:30, we 

start doing stacked votes, which will continue until the intelligence 

reform bill is finished, which could be very late tonight without any 

break. Normally, we would recess for a vote and come back, but 

that is not going to be a possibility today. 

So with that, Mr. Timmins? 

STATEMENT OF ALAN P. TIMMINS, PRESIDENT AND CHIEF OPERATING OFFICER, AVI BIOPHARMA, INC., PORTLAND, OREGON 

Mr. TIMMINS. Thank you, Senator. Thank you for inviting me to 

testify today. I am Alan Timmins, the President and Chief Operating Officer of AVI BioPharma. AVI is an Oregon-based company 

that was founded in 1980 under the premise that the gene is the 

target for drug intervention. We have developed our own proprietary technology, distinct from that of other companies, and we 

have run 11 clinical trials serving over 300 patients without a single adverse event. 

We have also found, though, that our technology is particularly 

germane in the area of infectious disease and specifically to bioterror threats. Particularly, it is available in a rapid-response format, and that is perhaps best illustrated by an incident that took 

place last February at the U.S. Army Medical Research Institute 

of Infectious Disease, USAMRIID, at Fort Detrick, Maryland, 

11

where a post-doctorate researcher suffered a needle stick with a syringe that was filled with ebola. Now, Senator, as you know, ebola 

is a very lethal virus, and in fact, it is fatal in over 80 percent of 

the cases of people that contract it. 

The researchers at USAMRIID called my company and asked if 

we were able to offer some sort of help. We looked at publicly available databases, found a couple of relevant genes, put together, synthesized a drug, helped USAMRIID get an emergency IMD from 

the FDA, and delivered the drug to USAMRIID all within five days 

of receiving that request. That gives you an idea of the power of 

the technology. 

We also work in other infectious diseases, which we believe leads 

us to the ability to respond on a rapid response therapeutic basis 

to perhaps an engineered agent of bioterror, and that is important 

heading forward into the future. We also believe that we can address over 75 percent of the bioterror agents currently listed by the 

CDC. 

But the issue here isn’t the capability of my company or any 

other company, large or small. The issue here is whether or not we 

will be able to enact the principles laid down by Senators 

Lieberman and Hatch in BioShield II. I would like to comment very 

briefly on those particular premises. 

In the area of tax incentives, a company like mine, a small company, we rely in a great degree on favorable capital markets to provide the funding to support our product development and to support the clinical trials necessary to get those products into the marketplace. The tax incentives sketched out by Senator Hatch and 

Senator Lieberman would be considered favorable by the capital 

markets, including the R&D partnership, which would allow usage 

of tax credits and business deductions on a timely basis, and also 

the capital gains incentive, which would encourage investment in 

smaller companies that are focused on biodefense. 

Also important are the patent incentives, particularly the ‘‘wild 

card’’ patent incentive, which would allow for an extension of time 

for a relevant patent for a successful invention that is used in biodefense. That, along with a period of market exclusivity, is important also to investors in smaller companies that are developing biodefense mechanisms. 

More important, though, than these two incentives are the liability protection that is spelled out by Senator Lieberman and Senator 

Hatch. 

It is important that government gets back to being seen as a reliable, respectful, and responsible partner with industry and not in 

opposition to industry. The way that would happen is guarantees 

that intellectual property for companies, small companies, large 

companies, including patent protection, wouldn’t be marched on or 

threatened by the government in the event of emergency. Rather, 

the government would work together in concert with the pharmaceutical industry and the biotechnological industry to bring the 

best biodefense mechanisms forward. 

Without that sort of protection, I would submit to you, though, 

Senator, that you won’t find the best companies, the best and the 

brightest, working toward biodefense. You will find them staying 

away from that because they will perceive that the threat to their 

12

intellectual property is too great to take the risk to work with the 

government. That is unacceptable, in my opinion. 

In conclusion, to address the threat of bioterror, to take a major 

step forward, there are four things that need to be done. First, we 

need to effectively enact the provisions of BioShield I. 

Second, we need to provide appropriate tax incentives to foster 

investment in those companies that are going forward in biodefense. 

Third, we need to look for patent incentives that help companies 

such as ours that are developing mechanisms to fight bioterrorism. 

And fourth and most important, again, commit to liability protection. Commit to the government being a responsible and strong 

partner. 

Senator I believe that those measures taken together would pay 

for themselves over a number of years. But most importantly, they 

will foster the innovative spirit of both the pharmaceutical industry 

and the biotech industry, and I would submit to you that that innovative spirit, when all is said and done, is going to be our most potent weapon in the war against bioterror. 

I am willing to take your questions at any point. Thank you. 

Senator ENZI. Thank you very much. Excellent job. 

[The prepared statement of Mr. Timmins appears as a submission for the record.] 

Senator ENZI. Ms. Jaeger? 

STATEMENT OF KATHLEEN D. JAEGER, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, GENERIC PHARMACEUTICAL 

ASSOCIATION, ARLINGTON, VIRGINIA 

Ms. JAEGER. Thank you. Chairman Gregg, Chairman Hatch, and 

Senator Enzi, I am Kathleen Jaeger, President and CEO of Generic 

Pharmaceutical Association. On behalf of GPhA and its members, 

thank you for this opportunity to testify on the ways to strengthen 

BioShield I. 

GPhA and its member companies strongly support the stated policy goal of both BioShield I and S. 666, to ensure that America has 

the adequate supply of drugs and other products that would serve 

as countermeasures to bioterrorism attacks. Indeed, many of our 

members are already making substantial contributions to this end. 

However, new policies in this area must be balanced against the 

very real costs. 

Mr. Chairman Congress took a significant step toward national 

preparedness with the passage of BioShield I this summer. We believe that the new law represents a sound foundation from which 

to build. As you know, BioShield I provided many of the tools needed to stimulate research and development of countermeasures. In 

many ways, Project I exemplifies what can result when the Federal 

legislative process works best by producing bipartisan legislation 

that utilizes a private-public partnership and research procurement 

and contracting to meet as major challenge head on. And already, 

we are seeing representatives of the pharmaceutical industry, the 

Federal Government, academia responding to the new laws, incentives, and call for action. 

Nevertheless, even prior to enacting BioShield I, questions arose 

about the possible shortcomings, especially with respect to inadVerDate 0ct 09 2002 15:47 May 23, 2005 Jkt 096812 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\96812.TXT SJUD4 PsN: CMORC
13

equate product liability protections. S. 666 is designed to address 

these concerns. Four notable provisions look particularly promising 

in this regard. 

First, the limitation of product liability exposure to manufacturers of desired countermeasures. 

Two, the provision of additional tax incentives to encourage investment in novel counter-bioterrorism products. 

And third, the provision of FDA fast track review to expedite approval and availability of new countermeasures. 

And fourth, additional Federal financial support for these initiatives. 

However, we are alarmed that S. 666 includes provisions that 

reach into every medicine cabinet in America by effectively eliminating consumers’ access to affordable generic products of everyday 

medicines. More specifically, the definition of what drug products 

would be eligible to receive an array of excessive and expensive incentives is extraordinarily, and we hope inadvertently, broad. 

For example, the definitions could cover such ubiquitous pathogens as staph, E. coli, and other causes of common, everyday infections. While this may seem ridiculous, it could be shown that drugs 

widely used, such as Zoloft for depression, Plavix for heart attacks, 

Effexor XR for anxiety, Imitrex for migraines, could play a role in 

treating the symptoms of a bioterrorism attack and these would be 

eligible for additional protection under S. 666. 

In addition, four provisions of S. 666, if allowed to stand, would 

unnecessarily and excessively penalize consumers to the tune of 

tens of billions of dollars in lost pharmaceutical savings. They 

would institute new loopholes that would extend additional and expensive market exclusivity provisions for brand products already on 

the market. Mr. Chairman these financial benefits would be on top 

of the other generous incentives already available. 

As more fully detailed in our written testimony, these provisions, 

individually and collectively, will create devastating effects on the 

current health care system and undermine the balance of Hatch–

Waxman amendments by, one, penalizing generic drug applicants 

with an additional five years of market exclusivity for merely filing 

applications as required by Federal law, and another five years if 

an applicant fails to successfully challenge a patent even though 

another generic company has prevailed and can bring their product 

to market. 

Two, providing open-ended and unlimited patent extensions for 

all countermeasure drug products. 

And three, needlessly extending current market exclusivities to 

ten years for something as simple as a conversion from a tablet to 

an extended release dosage form. 

And four, granting a two-year wild card patent extension that 

can be applied to patents and products that are wholly unrelated 

to any countermeasure and which can be stacked one upon the 

other to indefinitely delay generic entry. 

For example, under S. 666, a company like Pfizer could merely 

perform a small animal study on one of their commercially available antibiotics and that company could receive a windfall to extend the exclusivity of one of their blockbuster products for two 

years. Suppose Pfizer used its wild card on America’s most recVerDate 0ct 09 2002 15:47 May 23, 2005 Jkt 096812 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\96812.TXT SJUD4 PsN: CMORC
14

ommended cholesterol-reducing drug, Lipitor. Pfizer’s return would 

be a minimum of a $14 billion windfall. 

Now, suppose that Pfizer performed a second animal study, either on the same antibiotic or on a different agent. They could 

claim that a $3 billion product, Zoloft, could get an additional two 

years of market exclusivity. And to that, again, there would be an 

additional $6 billion windfall, clearly to the detriment of patients 

and their families suffering from mental illness. 

Mr. Chairman, as you can see, these four provisions taken to 

their logical conclusion could affect consumer access to and the affordability of most everyday medicines. All four of these provisions 

would inflate drug prices, impose major obstacles to the entry of generic drugs into the market, and worsen the crisis faced by every 

American who must pay for all or a substantial portion of his or 

her prescription drugs, including the millions of uninsured and 

older Americans. They serve little sound purpose, and unlike the 

other four positive provisions I earlier outlined, certainly would not 

strengthen BioShield I and better achieve its goals. 

In conclusion, Mr. Chairman, the broad eligibility definitions and 

the excessive and unnecessary market protections of S. 666 give a 

blank check to PHRMA payable against the financial and health 

care interests of America, America’s workers, businesses, and taxpayers. We think these provisions would be extraordinarily expensive and would do little to accelerate research and production of 

truly innovative products. Congress was right to reject, at least not 

include, such counterproductive policies when you passed BioShield 

I earlier this summer. 

And lastly, GPhA and our members stand ready to provide whatever support we can to respond to your challenge to research, 

produce, and stock, and be ready to distribute new and effective 

bioterrorism countermeasures. 

Thank you for the opportunity to testify. I would be happy to answer any questions. 

Senator ENZI. Thank you. 

[The prepared statement of Ms. Jaeger appears as a submission 

for the record.] 

Senator ENZI. Mr. Angulo? 

STATEMENT OF CARLOS ANGULO, PARTNER, ZUCKERMAN 

SPAEDER LLP, ON BEHALF OF THE COALITION FOR A COMPETITIVE PHARMACEUTICAL MARKET 

Mr. ANGULO. Good morning, Senator Enzi. My name is Carlos 

Angulo and I am here to testify on behalf of CCPM, the Coalition 

for a Competitive Pharmaceutical Market, on S. 666, the BioShield 

II bill. Thank you for the opportunity to appear before you today. 

CCPM is an organization of employers, insurers, generic drug 

manufacturers, and others committed to improving consumer access to affordable pharmaceuticals and promoting a vigorous, competitive prescription drug market. CCPM supports public policies 

that facilitate timely access to affordable pharmaceuticals. The Coalition, of course, is also absolutely committed to assisting Federal, 

State, and local governments and the American people in their efforts to develop quick, effective, and accessible responses to bioterrorism. 

15

The Coalition’s membership is broad, including numerous prominent purchasers of pharmaceuticals, such as General Motors Corporation, Caterpillar, Inc., and Eastman Kodak Company. On behalf of the Coalition, I would like to share with the committees 

today our experience regarding prescription drug cost increases and 

to underscore our belief that in its current form, S. 666 would dramatically delay generic drugs from coming to market and cause a 

crippling increase in prescription costs for America’s employers, 

health plans, and consumers. 

By way of background, large and small businesses, consumers, 

unions, governors, the Federal Government, and health plans 

throughout the nation are aggressively attempting to manage soaring prescription drug costs. These expenditures are growing at annual rates of up to 20 percent and are unsustainable. Current 

pharmaceutical cost trends are increasing premiums, raising copayments, pressuring reductions in benefits, and undermining the ability of businesses to compete. CCPM members seeking to continue 

to provide prescription drug coverage to employees and subscribers 

face a tremendous challenge in light of these skyrocketing pharmaceutical costs. 

For example, General Motors, the largest private provider of 

health care coverage in the nation, insuring over 1.1 million workers, retirees, and their families, spent over $1.3 billion last year on 

prescription drugs. Despite GM’s use of state-of-the-art management techniques that assure the most appropriate and cost-effective use of prescription drugs, its pharmaceutical bill continues to 

grow at a rate of 12 percent to 16 percent a year, more than quadrupling the general inflation rate. 

Similarly, Eastman Kodak Company, which insures 150,000 covered lives, spends 31 percent of its health care dollars on prescription drugs. Kodak spent roughly $99 million on drugs in 2003 and 

its costs are growing each year. 

The experience of insurers is no different. The 41 Blue Cross and 

Blue Shield plans that collectively provide health care coverage for 

91 million Americans, represented in the Coalition by the Blue 

Cross and Blue Shield Association, are continuing to experience increases in prescription drug costs. The BCBS Federal Employee 

Program, for example, had drug increases over the last year of 9.67 

percent. BCBSA expects these costs to continue to impact the affordability of premiums. 

Such drug cost increases are driven by multiple factors, including 

higher utilization, direct-to-consumer advertisements, drug price 

increases, and especially delayed generic competition. If S. 666 

passes in its current form, these costs will escalate dramatically 

and America will have a health care bill it cannot afford to pay. 

The Coalition strongly supports legislation aimed at improving 

our ability to respond to terrorist uses of chemical or biological 

weapons. There can be no denying that the events of September 11 

forever changed the way in which we work and we live. Today, we 

recognize that in order to protect our families, our friends, and our 

employees, we must be prepared for every type of situation. 

For this reason, we wholly support the goals of the Project BioShield Act of 2004, or BioShield I, which went into effect just this 

summer. We also recognize that the effort to prepare our nation 

16

against terrorist threats should include incentives to stimulate the 

development and production of drugs and other countermeasures, 

and therefore we support certain provision of S. 666, such as the 

provisions for tax credits, fast track Food and Drug Administration 

review of applications for countermeasures, protection against 

product liability suits, and the creation of a terror weapon countermeasures purchase fund. 

It is also clear, however, that the goal of encouraging a response 

to bioterrorism must be balanced against the overall costs to American consumers and an already overburdened health care system. 

Unfortunately, as currently drafted, S. 666 has many unnecessary 

provisions that will increase costs without significantly benefitting 

the anti-terrorism effort. Specifically, there are four provisions in 

the legislation that would seriously hinder employers’ ability to 

provide affordable health care to their employees and that would, 

in fact, deny public access to affordable versions of the countermeasure products that the bill seeks to make available to the 

American public. 

First, S. 666’s wild card exclusivity provision would give brand 

pharmaceutical companies a broad mandate to extend a patent for 

two years on virtually any drug they choose, even if it is completely 

unrelated to terrorism. This extension of brand company monopolies would force consumers and employers to pay billions of dollars 

in prescription drug costs beyond what they would pay if generic 

drugs were permitted to enter the market as provided under current law without significantly advancing any anti-terrorism goals. 

Second, Section 5(f) of S. 666 expands by up to seven years the 

non-patent statutory exclusivity period for countermeasures. This 

change dramatically alters the careful policy balance struck by 

Congress under the 1984 Hatch–Waxman Act and last year’s 

amendments to that legislation. S. 666 alters this balance by extending broadly, in certain cases by over 200 percent, brand company monopolies at the expense of consumer access to generic 

drugs. 

Third, Section 5(c) of S. 666 would provide patent extensions for 

the full period taken to complete regulatory review for countermeasures. In certain cases, this provision would go so far as to reinstate patents on drugs that have been off-patent, forcing generic 

alternatives off the market. This bill would only exacerbate the 

problems of unsustainable health care costs and the growing number of uninsured Americans. 

Fourth, Section 5(f) of S. 666 penalizes the generic industry for 

merely following the law in submitting generic applications with 

required patent certifications by providing that a generic company 

that submits such an application for a generic version must wait 

an additional five years for FDA approval beyond what is required 

under current law. This again contradicts the very intent of the 

Hatch–Waxman Act. 

In short, and I will conclude, Senator, each of these four provisions of S. 666 standing alone could cost America’s employers, insurers, and consumers billions of dollars without substantially assisting in the anti-terrorism cost. Each of these provisions has been 

rejected before by the Senate and by Congress. As innovators, patent holders and competitors in the world market, the Coalition 

17

members respect the integrity and value of intellectual property 

protection, but not at the expense of consumer protections and 

lower drug prices for consumers and for our employees and retirees. 

Thank you. I will be happy to answer any questions. 

Senator ENZI. Thank you. 

[The prepared statement of Mr. Angulo appears as a submission 

for the record.] 

Senator ENZI. Dr. Bartlett? 

STATEMENT OF JOHN G. BARTLETT, M.D., CHIEF, DIVISION OF 

INFECTIOUS DISEASES, JOHNS HOPKINS UNIVERSITY 

SCHOOL OF MEDICINE, ON BEHALF OF THE INFECTIOUS 

DISEASE SOCIETY OF AMERICA 

Dr. BARTLETT. Thank you for the opportunity. I represent the Infectious Disease Society of America. It is an organization of about 

7,000 or 8,000 physicians, most of whom do what I do, which is 

take care of patients with infectious disease. 

I am here on behalf of the Society representing patients. We 

don’t really have a commercial interest in anything. We are mostly 

worried about the availability of drugs in the event of a crisis, and 

we see an evolving crisis and that is the reason that we are particularly pleased to be invited. 

The Institute of Medicine described the current era as a period 

in which there is a great probability of what they call a perfect microbial storm, and actually, there have been a bunch of them. 

SARS or avian flu or monkey pox or anthrax, any of these would 

be called potentially devastating infectious, especially if they hit 

the wrong place at the wrong time, and some already have. 

What we are particularly worried about at the moment is the escalating problem of increasing resistance of the bacteria that we 

deal with every day, which is pretty predictable and it is shown on 

this visual here. The increase in some of the most common bacteria 

that we deal with every day in the hospital, we know that is happening because that has been an act of nature that we have dealt 

with ever since penicillin was brought on board in 1950. 

But that is accompanied by a very distressing decrease in the 

number of antibiotics that we have available. So the number of 

antibiotics that we have is going down, down, down. In fact, in 

2003, we had no new antibacterial agents introduced into the marketplace, which is really extraordinary. 

Now, our Society has gone around and talked to ten of the major 

pharmaceutical manufacturers and we have done a lot of research 

in this area in terms of the pipeline and what we found is that 

many of the companies are either going out of business, and the 

rest of them that aren’t going out of the antibiotic business are 

downsizing that operation. So when we look at the pipeline, for example, there are something like 503 new molecular entities in the 

pipeline, new drugs, and out of those, five are new antibacterial 

agents. 

So when we look down the line, we see that miracles of the last 

50 years, which have increased longevity by 30 years, is simply 

going to go away. So we are very worried about that problem of the 

dearth of antibiotics, new antibiotics, to deal with emerging crisis. 

18

I did want to dispel a couple of what I think are common 

misperceptions. One misperception is that the NIH or other government agencies plays an important role in drug discovery. That is 

really not true. I expect everybody in this room has taken an antibiotic in the last ten years, took one that was discovered by a pharmaceutical company, developed by a pharmaceutical company, and 

brought to market by a pharmaceutical company. They have the 

history of having done it and certainly have the skill to do it. 

Another misconception that is common is that we are actually 

not so bad right now, because if I have sinusitis, I can get a drug 

for it and it will take care of it. The fact is, we deal in an environment where we deal with serious infections that are very resistant. 

We are pulling drugs off the shelves that we haven’t used in 20 

years. Some of them are for this methicillin-resistant staph aureus 

that we are encountering very much more frequently and some of 

it is for this bug called acinetobacter, which is common in Iraq and 

now very common in the United States hospitals. 

So we are worried about our ability to be able to keep up with 

the bugs at a time when the amount of available antibiotics is decreasing. And when you talk to the drug companies, it is very clear 

why they are going in this direction. You take an antibiotic for a 

week and you take Lipitor for the rest of your life. I mean, the economics are simple. It is not hard to figure out why they are doing 

what they are doing. 

So I think what I would like to urge is in the framework of BioShield II, there be the possibility of responding to a microbial 

storm with the understanding that we don’t know how that is going 

to appear. It might be a brand new bug, like SARS. It might be 

a really bad resistant bug, like acinetobacter. It might be a manufactured resistant organism, like anthrax. I am saying we don’t 

know where it is going to come from, but we are pretty sure it is 

going to happen. 

The other thing I would mention is that we now have to plan five 

to eight years down the line because that is the average time it 

takes to develop a new drug. So we are not talking about 2005, 

which is pretty bad in itself. We are talking about 2010. Thank 

you. 

Senator ENZI. Thank you very much. 

[The prepared statement of Dr. Bartlett appears as a submission 

for the record.] 

Senator ENZI. This is a very impressive panel. One of the great 

perks of being in the United States Senate is the opportunity to 

learn about all these things that we probably wouldn’t even have 

cared about before and some of the things that we never wanted 

to know about. It is a tremendous education. I think we probably 

pick up about a college course a month around here. 

Again, we are under a little bit of a time constraint, so I do have 

a few questions that I want to ask right now. Hopefully, you will 

give me rather brief answers and expand on them later as you get 

other questions from us, as well. I know that several members of 

the panel wanted to ask questions based on the testimony that 

they received already and some that was presented today, so I will 

start with a few questions here. 

19

Ms. Grant, BioShield provides no protection against the risk of 

litigation stemming from possible adverse events. How much of a 

risk does this present in the case of a biodefense product that is 

not required to undergo Phase 3 clinical trials, and in the event of 

emergency may not even be FDA approved? 

Ms. GRANT. This is a very, very big risk, and in a sense, it is almost a non-starter because the realities of the commercial markets 

today here and around the world are that we just can’t get commercial liability protection anywhere approaching reasonable 

prices. So it is a very, very serious problem. It has a chilling effect 

and our companies are watching very closely how liability protection will be addressed. 

Senator ENZI. Again, on all of these questions, any of you that 

want to answer them, we will accept answers in writing on them, 

due to our limited amount of time. 

Mr. Timmins, you run a small company based on the other side 

of the country. I am from Wyoming, and every business in Wyoming that is headquartered in Wyoming is a small business. I 

know that the Federal Government sometimes needs to be reminded that small companies don’t know how to navigate Washington in the same way that big companies do. From your perspective, what does HHS need to do to ensure that small companies 

like yours understand how to work with the government on Project 

BioShield? 

Mr. TIMMINS. Senator, that is a terrific question and probably 

one that should be the subject of a hearing in and of itself, because 

I can tell you, it is a hard running river and it is going in the 

wrong direction. You work your hardest. You try your best. But 

really, the key is to have terrific representation, as we are fortunate to in the State of Oregon and the people of the great State 

of Wyoming are, as well, great representation in the Senate offices 

so that the legislative assistants can help you navigate those waters. That has been our best help going forward. 

And then we find, like Senator Gregg’s staff, very helpful, just 

finding friends on, as we call it, a friendship tour, when we come 

back and talk to the various Senators and ask for their help, their 

assistance, what is the next step in the way as we are trying to 

get the message out. 

Senator ENZI. Thank you. It sounds like a good topic for the 

Small Business Committee that I am also on, so we will pursue 

that. 

Ms. Jaeger, you had that chart that was over there that I don’t 

think is part of the record here. It was almost too small for me to 

be able to read from here. So if you would provide us with copies 

of that, I would really appreciate it. 

For both you and Mr. Angulo, if you could provide us with some 

more detail on how those provisions might be revised that you 

mentioned that would place an extra constraint particularly on generic drugs, that would be helpful. 

Ms. JAEGER. We would be pleased to. 

Senator ENZI. Wording is always a difficulty around here, particularly if we don’t have expertise in the area that we are working 

in—which does not stop us from working on something, but—

[Laughter.] 

20

Mr. ANGULO. We would be glad to. 

Ms. JAEGER. We would be happy to, Senator. 

Senator ENZI. Again, we will have some additional questions for 

you, particularly concerning those specific points that you raised. 

Dr. Bartlett, you called for a BioShield-like set of incentives to 

spur the development of new antibiotics. You specifically suggest 

that we need a guaranteed pool of money. However, you note in 

your testimony that there is a major civilian market for antibiotics. 

We don’t have such a market for—although you made the distinction between Lipitor and antibiotics, as well, and then there is an 

even more limited market for bioterror countermeasures, which is 

why we created Project BioShield in the first place. Why would we 

need a guaranteed pool if we have a civilian market for antibiotics? 

Dr. BARTLETT. Well, first of all, I think there are a couple parts 

of that. One is that if we have a major problem with a microbe 

such as the one I mentioned, acinetobacter, there is a big problem 

for us trying to take care of patients in the hospital. There is not 

enough of a market for any pharmaceutical company to ever develop a drug for acinetobacter. It will never happen. 

The antibiotic market is between here and here. It is sinusitis 

and bronchitis and so forth. The other markets in medicine are 

much more profitable than the antibiotic market. So the civilian 

part of this is simply not going to go forward on the basis of what 

we perceive to be the biggest problems. 

Senator ENZI. Thank you. I want to thank the entire panel and 

again encourage you to answer the questions that you will be receiving. Those answers will be a part of the record and will be 

shared with all of our colleagues. 

While we are changing panels, the ranking member of the Judiciary Committee, Senator Leahy, can provide any statement that he 

wishes. 

Senator LEAHY. My questions will be submitted for the record. I 

thank that all the panelists who have come here. Of course, we are 

in major debates on the Senate floor. This is probably the last week 

we will be in session until the lame duck. As the leaders, both Republican and Democratic, pointed out to all committee chairmen, 

this will be not a good week to hold hearings because nobody could 

be here. We are all, as I said, on the floor. So I just wanted you 

to know that it is not that we are not interested in what you have 

to say. 

I also want to remark on how much has been left undone by the 

Senate. Some things, we don’t get done. However, by law, we are 

required to pass a budget by April 30 and now, in October, there 

is no sign of it. By law, we are supposed to pass the 13 appropriations bills by September 30. We passed one. I guess somebody just 

pulled out a calendar and suddenly realized where we were. 

So the empty chairs up here are not a sign of disrespect to you. 

I appreciate all of you being here, and I think you are going to have 

a lot of questions submitted. I am just going to give a short opening 

statement, Mr. Chairman. 

Senator ENZI. We will have them stay there for a moment while 

you do your statement. Senator Schumer may be on his way down, 

too. 

21

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR 

FROM THE STATE OF VERMONT 

Senator LEAHY. The focus of today’s joint hearing is an important 

one. That is why I wish it had been done during normal Senate 

time because it is an important one. I think in an increasingly uncertain world, the American people deserve assurance that government and industry are doing all they can to protect their health 

and well-being. 

But this morning, that question is far from clear. As we meet 

here to discuss how to prepare our nation for the dire possibility 

of a catastrophic bioterrorist attack, the likes of which I hope we 

will never see, we learn that we are really not prepared to meet 

the biological threat that is here every year since I was born, and 

long before that. Of course, that is flu season. 

I had hoped that the Bush administration would have learned 

their lesson from last year’s experience, when we saw a major flu 

vaccine shortage. Now, we see health officials across the country, 

including in my home State of Vermont, asking healthy people just 

to forego their flu shot. I think the American people are right to 

challenge this vaccine rationing. They deserve an answer from the 

administration, why it didn’t plan and prepare better. If they can’t 

be prepared for the seasonal flu, which happens every single year, 

what does that say about the ability to prepare for biological terrorist attacks? 

I will admit there is some interest in this. Like most people, I 

at one time or another in my life had a case of the flu. But unlike 

most people in this country, I have been the subject of a biological 

attack. There are two members of Congress, only two, that actually 

were threatened with a biological attack, Senator Daschle and myself. People who touched—touched—the envelope addressed to me, 

died. I think about the families of people who were crippled and 

stay crippled from that. I think of the people who died, simply because they were doing their job trying to deliver a letter to me. 

And, of course, my family and I think about what might have happened if I opened that letter. That was two of us up here. It could 

have been a whole lot more people. I am speaking, of course, of the 

anthrax attack. 

But back to the flu, one of the primary problems with the flu vaccine that is highlighted by the administration’s inability to deliver 

sufficient flu vaccines appears to be the concentration of producers. 

Market concentration is something the government can speak to. I 

believe the brand pharmaceutical industry is too concentrated. 

They fiercely lobby to extend their patents to prevent generic pharmaceuticals from giving consumers more affordable medicine. A 

huge amount of money is spent in this town for that. 

Our constituents and, I think, members on both sides of the aisle 

need to ask why this country is so dependent on just two suppliers 

for this important vaccine. With all the pharmaceutical suppliers 

in this country, why is our government relying on a foreign supplier, which has now just been put out of business by the British 

government? 

And so I would hope the big brand pharmaceutical companies 

would demonstrate their capability to respond to this crisis by answering the call of this flu vaccine problem rather than pushing for 

22

patent extensions and windfall profits. It is probably too late this 

year, but they ought to be thinking about next year. I hope we can 

guarantee that neither I nor any other person in the government 

or in private industry will receive an anthrax attack like the deadly 

one I had, but we have to assume that 280 million Americans will 

be subject to getting the flu next year. 

So I would hope we could address the potential crisis, make 

agreements to license and produce the vaccine the world needs. I 

would hope we would not find ourselves in this position again. 

I will put into the record the rest of my statement. I am, among 

other things, pleased that the Congress took action to enact the 

Project BioShield Act of 2004. I applaud appropriately Senators on 

both sides of the aisle on that, and I will put that statement in the 

record. I know they will be eager to read it, Mr. Chairman as always, and I thank you for being here. 

Senator ENZI. Thank you very much, and thank you for making 

your statement a part of the record since we are under the voting 

time constraint today where we have to start the series of votes at 

11:30 and we have one more panel to go. 

[The prepared statement of Senator Leahy appears as a submission for the record.] 

Senator ENZI. With that, I will turn it over to Senator Schumer 

for a statement or questions. 

STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR 

FROM THE STATE OF NEW YORK 

Senator SCHUMER. Thank you, Mr. Chairman. I first want to 

thank both Senators Hatch and Gregg for calling this joint hearing 

about a very important homeland security issue. 

There is no doubt that Project BioShield is an important piece of 

legislation and it provided a reasonable and needed incentive to encourage research and development of life-saving countermeasures 

to be used in the event of or to protect us from biological, chemical, 

nuclear attack, God forbid them all. We may need, though, to look 

at a few tweaks to make those incentives work like they were 

meant to work. 

I understand that some of my colleagues may be drafting new 

bills. I look forward to seeing them. But I am deeply disturbed by 

the approach taken in a bill that is already out there which is identified as BioShield II. That is S. 666, and I am going to focus on 

that here today. 

The bill contains patent provisions which undo almost every one 

of the important pro-consumer Hatch–Waxman reforms that my 

colleague, Chairman Gregg, and I fought so hard to have included 

in the Medicare bill. Its approach could indefinitely delay access to 

generic versions of all major blockbuster drugs and cost consumers 

billions—not millions, not hundreds of millions, billions of dollars. 

To me, this amendment is, and I will restrain my language 

uncharacteristically, but it is awful, and it is taking a noble purpose and then sneaking in the wishes of the pharmaceutical industry that have nothing to do with protecting us from biological, 

chemical, or nuclear, and I will do everything to stop the entire bill 

if this provision stays in. 

23

Let me describe it. The most egregious part of these patent windfalls is the so-called wild card patent extension. This provision says 

that if a company does research on a potential countermeasure, 

they would be rewarded with a two-year patent extension that they 

could slap on any drug they wanted. Do $20 million of research on 

one thing and get a $3 billion benefit on another. Who are we kidding? This is not intended to help biological research, which we 

desperately need. It is intended to give the drug companies even 

more. 

I would hope that the people who put this in have learned their 

lesson. They tried to come up with a pharmaceutical bill, adding 

it into Medicare to help people. Do you hear President Bush talking 

about that bill in his election? Nope. Do you hear my Republican 

colleagues talking about that bill in their election? Nope. Why? Because they gave everything away to the big pharmaceutical industry. The idea that Medicare couldn’t negotiate with the drug companies ruined the bill and it became a political albatross, and yet 

nobody seems to learn and we are doing the same thing right here. 

Now, the bill says, you will say, the reward should only go to 

smaller drug companies, but it is the Secretary of Homeland Security’s authority to waive this requirement, at least at the moment—

maybe it will change—from the same administration that won’t do 

anything—anything—that the pharmaceutical industry doesn’t 

want. 

One might think that in order for a company to get this reward, 

they would actually have to discover and produce a new life-saving, 

epidemic-stopping countermeasure, but that is far from the case. 

The company doesn’t have to discover a new drug. They can do a 

test on one they are already marketing. They don’t have to produce 

the drug for the government’s stockpile. They don’t even have to 

get the drug approved as a countermeasure and they can still get 

the multi-billion-dollar reward. 

So the incentives in this bill make the American public pay billions of dollars to drug companies for no guaranteed return. No 

businessman would make that investment. Why are we? 

Let me give you a sense of what this could mean for blockbuster 

drugs. Two extra years on Zocor, the popular cholesterol medicine, 

would mean a $9 billion windfall for Merck. Two extra years on 

Zyprexa, a drug used for schizophrenia, $6 billion for Lilly. Two 

extra years on Prevacid, blockbuster ulcer medicine, $8 billion for 

TAP Pharmaceuticals. 

If we add up the value of just a one-year patent extension on the 

nine top drugs, just one year, nine top drugs, $31.5 billion, all to 

the pharmaceutical industry. That is more than the entire NIH 

budget, all of it completely allowed in S. 666, all of it with no return, no guaranteed return for the consumer. 

The way I understand this provision, at least as it is drafted 

now, a company could get multiple wild card extensions and put 

them all on the same blockbuster drug, one after the other after 

the other. You could have these drugs or others, Lipitor or whatever, extended for years. This is Washington at its worst. 

That is all I can say. I am infuriated by this. Let me ask the 

American people, do you think the only way that we can secure our 

24

homeland is to pay tens of billions of dollars to the pharmaceutical 

industry? It is like ransom. We are not going to do it. 

I would urge the people of this noble bill, and I certainly understand the need to give people incentives to invest in these things. 

I felt the same way when it comes to vaccinations and other things, 

you know, all the lawsuits and everything else that go too far, but 

this is not the way to do it. 

With that, I would like to ask Mr. Angulo a question. Now, your 

Coalition represents some of the largest payers for health care in 

America, major employers, Kodak in my State, General Motors, 

which has a lot of employees in my State. What would be the impact of enacting the type of patent extensions described here today 

on the ability of these companies to provide quality health care for 

their employees at an affordable price? 

Mr. ANGULO. The impact would be enormous and it would be 

enormously negative. Already, it is difficult enough under the current situation, the current landscape, to provide affordable health 

care to our employees, the Coalition’s employees, the retirees, all 

the individuals that they are responsible for. To add this on top of 

it would, I think, create, as I said in my testimony, an 

unsustainable situation. 

Senator SCHUMER. Thank you. My next question is for Ms. Jaeger. All of us agree that it is vital to enhance our medical defenses 

against deadly weapons of mass destruction, but we have to be 

careful to use our efforts wisely, our resources wisely. Aren’t there 

more cost-effective ways to enhance the production of new vaccines 

and medication than providing wild card patent extensions that 

could cost billions of dollars every year? Isn’t driving up the cost 

of prescriptions the last thing we should be doing right now? 

Ms. JAEGER. Yes, Senator. We would agree that putting the burden on Americans who need medicine the most is not the right way 

of going and that really what should happen is that taxpayers 

should actually have to bear this burden equally among all. 

And so, therefore, we would suggest that people consider full 

funding of these programs, perhaps providing more funding over to 

NIH and also doing very aggressive partnerships with private entities. We also think, again, another piece that would actually accelerate some development in this area is a product liability exemption for manufacturers. 

So we think that the current environment, all the wonderful incentives that we provide to the pharmaceutical industry today, 

which include tax credits, market exclusivity, patent extensions, 

along with BioShield I and along with perhaps some other added 

concepts like product liability and additional tax credits, really 

would be the best way of going, and so that we can make sure that 

this nation is actually very secure and at the same time, we don’t 

destroy our current health care environment, which is also in a crisis right now. 

Senator SCHUMER. Thank you. Now, I have spoken strong language. If anybody would like, any of the other panelists would like 

to put in a counterword, I would like to hear what they have to 

say in defense of this specific provision. Does anyone want to defend it? No? Then my time has expired, Mr. Chairman. Thank you. 

25

Let the record show no one wanted to defend it, at least on this 

panel. 

Senator ENZI. Before the record shows that, while this panel is 

moving, I will make a comment on that. 

Senator SCHUMER. Go ahead. 

Senator ENZI. I do want the Senator from New York to realize 

that this is a bipartisan bill, and while all of the accusations went 

toward the Republicans on it, that one of the two drafters of this 

is from your side of the aisle. I think that there was a good bipartisan effort in coming up with this. Nobody said that it was a perfect bill at this point and there is a chance to work on it. I would 

provide a lot more rebuttal if we had more time, but we have another panel that we need to have and we are going to start voting 

at 11:30. Three people at five minutes doesn’t get us done by 11:30. 

Senator SCHUMER. I would just say, Mr. Chairman, my goal is 

to get this provision out of the bill, and whatever side of the aisle 

that comes from and whoever’s side of the aisle put it in, it ought 

to be taken out right away. As I understand it, my colleague, Senator Kennedy, agrees with my thoughts on these issues. 

Senator ENZI. And I did ask Ms. Jaeger and Mr. Angulo to provide us with some wording that would make that a more fair provision, but to keep in mind that we are trying to come up with some 

incentives for them to do these very short-term products. Dr. Bartlett gave an excellent explanation of the difference between Lipitor, 

which is for life, and antibiotics, which are for a week—

Senator SCHUMER. Mr. Chairman? 

Senator ENZI. —and could have added this as being for the moment. 

Senator SCHUMER. Right. Let me make the record clear. I am all 

for incentives to do this and I think you need them. I think no one 

in their right mind would want to give an incentive of $2 billion 

for a $10 million or $20 million—for an incentive that warranted 

a $10 or $20 million investment. 

Senator ENZI. I understand that. I would also like to mention 

that the flu vaccine was mentioned, and I want to mention that 

Chiron was shut down by British regulators. I will be interested to 

see what that was. But the shortage does point out the need for 

new incentives and liability reform so that we aren’t surprised by 

companies and so that we can have more companies in the United 

States who are involved in this process. 

Our next panel is Mr. Jeff Kushan, who is a partner with the 

firm of Sidley, Austin, Brown and Wood, representing clients on a 

wide range of intellectual property matters, licensing, policy, and 

litigation. 

Mr. John Clerici, who is a partner with the firm of McKenna, 

Long and Aldridge, with a focus on homeland security, particularly 

in the policy and legislative areas of how the government procures 

anti-terrorism technology from the private sector. 

And Ms. Patricia Greenberg, a registered nurse who is the coordinator of the Nurse Alliance of New York State, which was established in September 2002. Ms. Greenberg has been a nurse since 

1991 and has been a Service Employees International Union activist for over ten years. 

Mr. Kushan? 

26

STATEMENT OF JEFFREY P. KUSHAN, PARTNER, SIDLEY, 

AUSTIN, BROWN AND WOOD, LLP 

Mr. KUSHAN. Thank you, Mr. Chairman, and thank you to all the 

other members of the committee for giving me this opportunity to 

testify before you today on the issue of market incentives to encourage development of countermeasures to respond to bioterrorism 

pathogens and threats. I am appearing today in response to an invitation to share my views on certain market exclusivity proposals 

contained in the Lieberman–Hatch bill. More importantly, I am 

testifying today in my personal capacity and the testimony that I 

am offering is my own. 

During the deliberations that led to BioShield I, Congress appreciated the significant challenges in inducing the private sector to 

invent and bring to market new countermeasures to treat 

counterterror pathogens. The most significant of these challenges is 

there is no assured or consistent market for new products that 

might be developed. A company could thus spend millions of dollars, assume huge risks, only to find there is no market for its 

product or that that market is extremely limited. 

Congress has partially addressed this challenge or this problem 

through its assured procurement opportunities and also by expediting the approval procedure for new products, but these measures 

are only going to go so far. Government procurement of products 

is both limited in its scale and subject to a number of risks that 

make this type of market opportunity less attractive than many 

other market opportunities that the biotech and pharmaceutical industry faces. 

The true challenge of any legislative package is to convince the 

capital markets that the market opportunities associated with developing countermeasures are comparable to those for other types 

of drug development. A truly viable biodefense industry is one that 

will engage in new product discovery and development that is motivated by the opportunity for market success rather than by only 

through government subsidies. 

As I note in my written testimony, the biotech and pharmaceutical industry markets are extremely market savvy. The industries are very market savvy, and more importantly, the markets 

are very savvy about the biotech industry. I tend to focus on the 

biotech industry because there is where you see most of the capacity for really high-risk innovative activity. Everybody is contributing to the environment, but those are the companies you really 

have to focus on inducing to shift their resources. 

The formula that the market sees as necessary for success for a 

new venture is not only that a company has come up with a new 

product, but that it is going to have assured market exclusivity and 

meaningful market exclusivity once it finally reaches a market 

with that product. Meaningful market exclusivity in these industries means that the innovator will only face technology competition and not price competition for a reasonable period after it 

launches its product. 

By technology competition, I mean you will see other products 

entering the market to treat that type of disease or disorder, but 

that you won’t have intense intermediate price competition in other 

parties selling the same product. The inducement to technology 

27

competition is what we are aiming for with incentive. We want 

more products, more approaches, more interventions, and that is 

what we have to figure out how to create. 

Investors that participate in the biotech industry accept higher 

risks of failure because of the higher possible return on their investment, and that risk that they all tolerate is the risk of product 

failure. But they can’t tolerate—and I deal with venture capital 

companies who evaluate opportunities and I deal with companies 

who have intellectual property that they are trying to get venture 

capital folks to give them money to support—they all focus on market exclusivity. They all want certainty. And they all want to have 

a finite number of risks that they face. What they can’t face as a 

risk is the political uncertainty and other types of uncertainty that 

might destroy a market once they finally reach it with a new product. 

The Lieberman–Hatch proposals that have been discussed before 

have some innovative approaches to tackling the challenge and creating significant and effective new incentives for developing countermeasures. I am going to talk about three of these briefly. 

The first is the question of patent term restoration. There is currently an authority in the Hatch–Waxman Act for companies to obtain credit for the time they spend developing and getting their 

drugs through the FDA process. Under that equation, there is a 

partial credit system. You don’t get the entire credit. This is something which should be solved or addressed in the system. Small 

companies that develop these products should be able to get the 

full period of exclusivity corresponding to the regulatory period. 

The second issue is this patent bonus that has already been the 

subject of some discussion today, and I think this is a creative approach that Congress is grappling with. Certainly, there are a lot 

of variables in how you express it and pin it down, but fundamentally, it is an interesting concept that is similar to the pediatric exclusivity concept. Pediatric exclusivity is an option that if a company does pediatric clinical investigations, it can get six months of 

additional exclusivity. That mechanism has addressed a problem 

that the market hasn’t been able to solve. The market is not going 

to encourage people to do clinical investigations in pediatric populations, so they had to come up with a broader incentive that addressed that market shortfall. The patent incentive that is being 

discussed here might do that by giving an alternate funding opportunity or an opportunity for return investment that is not there by 

the potential of the drug itself. 

And finally, in the Lieberman–Hatch bill, there are a number of 

ideas for market exclusivity, data exclusivity, following approval of 

a new countermeasure. That would extend those periods out. 

One point, and I will end on this. The one challenge for this entire class of products is that these products may never be used and 

the window of time following approval is fairly short, as was mentioned earlier, in some cases only three years after a product is approved for marketing. We might not have a need for using that 

product three years after a product is approved. And so some measure that will encompass out into the future and assure market exclusivity is warranted and I invite the members of Congress to 

28

come up with the best type of package to induce this type of innovation. Thank you, Mr. Chairman. 

Senator ENZI. Thank you. 

[The prepared statement of Mr. Kushan appears as a submission 

for the record.] 

Senator ENZI. Mr. Clerici? 

STATEMENT OF JOHN M. CLERICI, PARTNER, McKENNA, LONG 

& ALDRIDGE, LLP, WASHINGTON, D.C. 

Mr. CLERICI. Yes. Thank you, Senator Enzi. I want to thank 

Chairman Gregg, Chairman Hatch, Senator Kennedy, and Senator 

Leahy for taking on this issue, and most significantly, Senator 

Lieberman with Senator Hatch, who had the foresight to address 

this issue soon after the attacks of 2001 and bring the legislation 

to the forefront. 

I also want to thank Secretary Thompson and Secretary Ridge. 

They have been on the forefront of implementing this legislation. 

Their offices have been open. Assistant Secretary Stu Simonson 

has been willing to work with industry to understand how this 

process should be implemented and he deserves credit for that 

openness. 

Finally, I would like to applaud the passage of BioShield in this 

regard as a positive step in the right direction. The country is significantly safer because of the passage of BioShield and Congress 

and the administration deserve the credit for that. 

The goal now is to build upon that success and address the major 

issues that are preventing biomedical countermeasures from coming to market. 

Make no mistake, liability concerns are preventing biomedical 

countermeasures from entering the government’s stockpile. We 

have worked in my capacity at the law firm with clients on the 

issue of product liability related to sales to the Federal Government. I helped with my firm and others on the passage of the 

SAFETY Act and its implementation, so I understand the provisions of that Act and how they apply to this market. 

We also recognize that working on contracts for our clients, for 

SARS vaccine, for avian flu vaccine, for smallpox vaccine, for nextgeneration anthrax vaccine, for anthrax therapeutics, smallpox 

antivirals, botulism vaccines, and antidotes for ricin and cyanide, 

that these companies that are undertaking these efforts will get to 

a point where they will not sell to the Federal Government unless 

their shareholders are adequately protected on the liability issue. 

We have to recognize that this environment is in the post–Sarbanes–Oxley world and there are obligations that public companies 

have to mitigate these risks. 

Currently, the threat derived from products in the countermeasures produced under BioShield are fundamentally different 

than the risks encountered by a typical drug company. They are 

meant to stop, to interdict, to prevent an unknowable criminal act 

of terrorism. The terrorists could engineer the toxin around the 

vaccine or around the countermeasure. The terrorist could use it in 

an entirely different way than we ever imagined. We have seen 

their creativity obviously three years ago to take no steps in that 

way. 

29

We recognize that these products, by their very nature, can only 

be implemented and tested using an animal role. We can’t expose 

healthy humans to these toxins. We have to rely on a lot of predictive models, on Phase 3 clinical trials, and a great deal of luck, 

and that is important to recognize that that threat is different. 

As my co-panelist has already pointed out, these pharmaceutical 

drugs and biomedical countermeasures will be likely stockpiled for 

years. We are not sure where they are going to be deployed, or 

when they are going to be deployed, and we pray to God that they 

never are deployed. But they are sitting on the shelf to be administered by someone other than the pharmaceutical, other than the 

public health system maybe in the event of an emergency, and that 

risk is too great for companies to bear. 

Currently, there are only two options to deal with this liability 

protection for the broad scope of biodefense countermeasures, Public Law 85–804, which was already touched upon by a prior witness, and the SAFETY Act. Public Law 85–804 has been used in 

the donation of smallpox vaccine by a couple of companies, and 

HHS has been willing to reach out and use that authority when it 

is necessary. But recognize that that authority still creates a litigation model. The government, if you will, acts as a super-insurer. It 

could be years before judgments are rendered and payments are 

made to compensated unintended victims of this act of terrorism. 

And most importantly, as already has been pointed out, HHS will 

not negotiate these provisions in advance of award. Companies are 

faced to allocate scarce resources and use shareholder money for a 

contract that, if they win, they might not be able to accept because 

of the liability concerns, and that has happened, absolutely, since 

the year 2001. 

The SAFETY Act, which again is a very powerful piece of legislation, is not a compensation act. It removes the liability as a matter 

of law and creates a presumption of dismissal from a lawsuit. It 

does apply to countermeasures that stop or prevent a terrorist attack, but it doesn’t apply to the liability in its current form in the 

way it has been implemented for those dangers prior to the terrorist attack, such as those created by a vaccine with animal model 

testing and limited research and development. 

And most importantly, HHS has not linked the SAFETY Act effectively to procurement. It is a two-step process. You get the 

award, you apply for the SAFETY Act. The uncertainty that these 

companies face cannot be passed to their shareholders as responsible corporate citizens. 

The way to address this issue is to clarify the SAFETY Act to 

make clear that it does and can apply to liability that occurs prior 

to an act of terrorism, and I would urge you to also consider coupling the SAFETY Act with a compensation scheme. There is an 

effective compensation scheme already in law for smallpox vaccine 

under the Homeland Security Act of 2002 and the Smallpox Act of 

2003 that Senator Gregg and Congressman Burr worked on. That 

measure could be easily extended to biomedical countermeasures 

and coupled with the SAFETY Act, the questions involving the concerns of the liability and whether or not that is adequate protection, coupled with the SAFETY Act, would certainly be an improvement over the status quo. 

30

Finally, Mr. Chairman, I do comment in my testimony on antitrust provisions, as well. There are provisions in existing law that 

do not require Congressional action that Congress should urge the 

administration to use to discuss how this market can be better developed in the incentives that industry needs without fear of antitrust violations. 

I am open to your questions. Thank you. 

Senator ENZI. Thank you. 

[The prepared statement of Mr. Clerici appears as a submission 

for the record.] 

Senator ENZI. Ms. Greenberg? 

STATEMENT OF PATRICIA B. GREENBERG, R.N., ON BEHALF 

OF THE SERVICE EMPLOYEES INTERNATIONAL UNION, AFL–

CIO 

Ms. GREENBERG. Good morning, Senator Enzi. My name is Patricia Greenberg and I have been a registered nurse since 1980, 

though I thank you for taking ten years off my age. 

[Laughter.] 

Ms. GREENBERG. I have worked in critical care, coronary care, intensive care, operating room, and neonatal intensive care. Currently, I am the Executive Director of the New York State Nurse 

Alliance of 1199 SEIU. On behalf of the Service Employees International Union, I thank you for this opportunity to testify. 

I also want to thank the sponsors of S. 666 for honoring Kathy 

Nguyen. Kathy was a member of my local union who died from her 

exposure to anthrax. 

SEIU is the nation’s largest organization representing health 

care workers, with over half of our 1.7 million members made up 

of nurses, doctors, EMTs, and other occupations within the health 

care sector. Many of these employees work in occupations that 

would be defined as first responders in the event of a terrorist attack. 

As nurses, we want to do everything in our power to respond to, 

treat, and care for any patient who may be a victim of a terrorist 

event. We have reviewed S. 666 and are supportive of the broad 

principles of the legislation, to encourage the development of new 

countermeasures to protect all of us from such threats. 

In particular, we have noticed how S. 666 is quite comprehensive 

in protecting the drug and other biotech companies who produce 

countermeasures from liability. In sharp contrast, we are alarmed 

that there is no mention of providing protections for the front-line 

volunteers working to protect our national security if they suffer as 

a direct result of the implementation of any of these countermeasures. 

Frankly, we have been down this road before. The Homeland Security Act of 2002 provided blanket liability protections for smallpox vaccine manufacturers, but no protections for front-line health 

care workers, their patients, or the public. S. 666 sadly mimics 

many of the same serious flaws contained in the Bush administration’s failed smallpox vaccine program. 

This bill is of even more concern when you consider that it is premised on the expectation that there will not be adequate time to 

do full safety testing on these newly developed measures. As a reVerDate 0ct 09 2002 15:47 May 23, 2005 Jkt 096812 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\96812.TXT SJUD4 PsN: CMORC
31

sult, we fear that, once again, nurses and other first responders 

will be quite hesitant to roll up their sleeves to volunteer when 

they learn of the bill’s deficiencies. 

It is not right or even logical to go to great lengths to protect the 

manufacturers that create the countermeasures from liability and 

then ignore the safety needs of the first responders and their patients in the event of adverse reactions. I can assure you that the 

best countermeasures in the world will not be effective if health 

care workers and their patients do not have confidence in the safety of these countermeasures and if those injured can expect no 

more than a ‘‘get well’’ card from their elected leaders. 

You may recall that in December of 2002, President Bush unveiled a smallpox vaccination plan to inoculate 500,000 health care 

workers within 30 days and ten million more public safety workers 

in six months. Six months prior to this announcement, a wide 

range of organizations told the CDC that the program would likely 

fail if serious gaps in patient and worker production were not addressed. We all know the result of that initiative. Today, less than 

one-half of one percent of the ultimate goal of ten million workers 

have been vaccinated in the program later called a fiasco in a 

Washington Post editorial. 

I now that we can and must do better with S. 666. The example 

of the recent past points the way. Specifically, SEIU believes that 

the following nine elements must be included. 

A requirement that first responders be educated about the risks 

and benefits of any new countermeasure before implementation. 

A requirement that workers are free to decline newly produced 

vaccines or other countermeasures not sufficiently tested without 

fear of workplace discrimination. 

Free and confidential medical screening for volunteering will be 

provided in any vaccine or drug trial to screen out those with preexisting medical conditions. 

That patients be informed of the risks of any countermeasures 

that could impact their safety. 

That the Federal Government will oversee the monitoring of any 

adverse effects in volunteers who receive countermeasures. 

That any first responder volunteer who becomes ill due to any 

countermeasure does not face loss of income. 

That free medical care be provided to those who volunteer if they 

become ill from any countermeasure. 

That first responders be provided with an explanation of any new 

job duties resulting from the implementation of the countermeasures. 

And, finally, contrary to how smallpox vaccine was administered, 

require that any new vaccines or other medications that utilize 

needles be administered with safe needles as required under the 

Needlestick Safety and Prevention Act of 2000. 

I want to recognize and thank you, Senator Enzi, for sponsoring 

the Needlestick Safety Act. Thanks to this visionary action, there 

is no need for any tainted needlestick to ever threaten any health 

care worker again. 

Thank you, and I would be glad to respond to any questions. 

[The prepared statement of Ms. Greenberg appears as a submission for the record.] 

32

Senator ENZI. Again, I want to thank this panel for some very 

detailed and useful information and critique of the bill. I wish we 

had some time for some extensive questions on it. We will be submitting questions to you in writing to get your response to make 

a part of the record, although the detailed comments that you gave 

are extremely useful. 

I want to thank in their absence Senator Hatch and Senator 

Gregg and Senator Leahy and Senator Kennedy for holding this 

hearing. There was a lot of misgiving about what would happen 

with it when it was just prior to an election, particularly a Presidential election. I think, for the most part, we have avoided that 

kind of thing, because this is to get information for something that 

will begin after the first of the year but give our staff now something to really dig their teeth into and to get additional answers 

in response to your concerns and the concerns of the panelists. 

One of the things that I have discovered around here is that we 

pretty much agree on about 80 percent of any bill. Unfortunately 

for America, it is the 20 percent that we don’t agree on that we go 

to the floor and fight about, and that is one of the things that I 

have learned from working with Senator Kennedy on some of the 

things like the Needlestick bill, that when we work together, we 

can get some amazing things done. We will be watching out for the 

safety. That is why it is a joint committee on this. 

We will be looking to see what incentives will work while best 

preserving competitiveness. I think that the testimony today shows 

the immense need for liability protection and worker protection. 

With that, I will leave the record open and we will be getting 

questions to you to complete the record. 

I would also like to include in the record the prepared statement 

of Senator Kennedy. 

I thank everybody for their participation today. The hearing is 

adjourned. 

[Whereupon, at 11:40 a.m., the committees were adjourned.] 

[Questions and answers and submissions for the record follow.]

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