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96–176 PDF 2004

HEARING ON BIOSHIELD: COUNTERING THE

BIOTERRORIST THREAT

HEARING

BEFORE THE

SELECT COMMITTEE ON 

HOMELAND SECURITY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

MAY 15, 2003

Serial No. 108–3

Printed for the use of the Select Committee on Homeland Security

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house
SELECT COMMITTEE ON HOMELAND SECURITY

Christopher Cox, California, Chairman 

Jennifer Dunn, Washington 

C.W. Bill Young, Florida 

Don Young, Alaska 

F. James Sensenbrenner, Jr., Wisconsin 

W.J. (Billy) Tauzin, Louisiana 

David Dreier, California 

Duncan Hunter, California 

Harold Rogers, Kentucky 

Sherwood Boehlert, New York 

Lamar S. Smith, Texas 

Curt Weldon, Pennsylvania 

Christopher Shays, Connecticut 

Porter J. Goss, Florida 

Dave Camp, Michigan 

Lincoln Diaz-Balart, Florida 

Bob Goodlatte, Virginia 

Ernest J. Istook, Jr., Oklahoma 

Peter T. King, New York 

John Linder, Georgia 

John B. Shadegg, Arizona 

Mark E. Souder, Indiana 

Mac Thornberry, Texas 

Jim Gibbons, Nevada 

Kay Granger, Texas 

Pete Sessions, Texas 

John E. Sweeney, New York 

Jim Turner, Texas, Ranking Member 

Bennie G. Thompson, Mississippi 

Loretta Sanchez, California 

Edward J. Markey, Massachusetts 

Norman D. Dicks, Washington 

Barney Frank, Massachusetts 

Jane Harman, California 

Benjamin L. Cardin, Maryland 

Louise McIntosh Slaughter, New York 

Peter A. DeFazio, Oregon 

Nita M. Lowey, New York 

Robert E. Andrews, New Jersey 

Eleanor Holmes Norton, District of Columbia 

Zoe Lofgren, California 

Karen McCarthy, Missouri 

Sheila Jackson-Lee, Texas 

Bill Pascrell, Jr., New Jersey 

Donna M. Christensen, U.S. Virgin Islands 

Bob Etheridge, North Carolina 

Charles Gonzalez, Texas 

Ken Lucas, Kentucky 

James R. Langevin, Rhode Island 

Kendrick B. Meek, Florida 

JOHN GANNON, Chief of Staff 

UTTAM DHILLON, Chief Counsel and Deputy Staff Director 

STEVEN CASH, Democrat Staff Director 

MICHAEL S. TWINCHEK, Chief Clerk

(II) 
(III)

CONTENTS 

MEMBER STATEMENTS 

The Honorable Robert E. Andrews, a Representative in Congress From 

the State of New Jersey ................................................................................... 91

The Honorable Diaz-Balart, a Representative in Congress, From the State 

of Florida, and Chairman of the Subcommittee on Rules ............................. 7 

TheHonorable Donna M. Christensen, a Representative in Congress From 

the U.S. Virgin Islands .................................................................................... 6

TheHonorable Christopher Cox, a Representative in Congress From the State 

of California, and Chairman 

Oral Statement ..................................................................................................... 1

Prepared Statement ............................................................................................. 6

TheHonorable Norman D. Dicks, a Representative in Congress From the 

State of Washington ......................................................................................... 7

The Honorable Jennifer Dunn, a Representative in Congress From the 

State of Washington ......................................................................................... 31

TheHonorable Barney Frank, a Representative in Congress From the State 

of Massachusetts .............................................................................................. 40

TheHonorable Jane Harman, a Representative in Congress From the State 

of California ...................................................................................................... 8

The Honorable James R. Langevin, a Representative in Congress From 

the State of Rhode Island ................................................................................ 57

TheHonorable Sheila Jackson-Lee, a Representative in Congress From the 

State of Texas 

Oral Statement ..................................................................................................... 5

Prepared Statement ............................................................................................. 9

TheHonorable Nita M. Lowey, a Representative in Congress From the 

State of New York ............................................................................................ 46

The Honorable Edward J. Markey, a Representative in Congress From 

the State of Massachusetts .............................................................................. 48

TheHonorable Kendrick B. Meek, a Representative in Congress From the 

State of Florida ................................................................................................. 58

TheHonorable Harold Rogers, a Representative in Congress From the State 

of Kentucky ....................................................................................................... 5 

TheHonorable Loretta Sanchez, a Representative in Congress From the 

State of California ............................................................................................ 33

TheHonorable Christopher Shays, a Representative in Congress From the 

State of Connecticut ......................................................................................... 44

TheHonorable W.J. Tauzin, a Representative in Congress From the State 

of Louisiana ....................................................................................................... 4

TheHonorable Jim Turner, a Representative in Congress From the State 

of Texas, and Ranking Member ....................................................................... 1 

WITNESSES 

Mr. L. Garry Adams, DVM, PhD, DACVP, Associate Dean for Research, 

Biodefense and Infectious Diseases College of Veterinary Medicine, Texas 

A&M University 

Oral Statement ..................................................................................................... 14

Prepared Statement ............................................................................................. 16

Dr. Ronald Crystal, Professor and Chairman, Department of Genetic Medicine, Weill Medical College of Cornell University 

Oral Statement ..................................................................................................... 23

Prepared Statement ............................................................................................. 24
Page

IV

Mr. Anthony S. Fauci, M.D., Director, National Institute of Allergy and Infectious Diseases National Institutes of Health 

Oral Statement ..................................................................................................... 10 

Prepared Statement ............................................................................................. 12

William A. Haseltine, PhD., Chairman and Chief Executive Officer of Human 

Genome Sciences, Inc. 

Oral Statement ..................................................................................................... 61

Prepared Statement ............................................................................................. 63

Mr. Alan Pemberton, Pharmaceutical Research and Manufactures of America 

Oral Statement ..................................................................................................... 67

Prepared Statement ............................................................................................. 68

Dr. Clarence James Peters, University of Texas Medical Branch, Galveston, 

Texas 

Oral Statement ..................................................................................................... 18

Prepared Statement ............................................................................................. 19

Mr. Frank Rapoport, Esquire Partner, McKenna Long & Aldridge LLP 

Oral Statement ..................................................................................................... 70

Prepared Statement ............................................................................................. 72

Mr. Robert J. Sutcliffe, Director, President and Chief Executive Officer, Digital Gene Technologies, Inc. 

Oral Statement ..................................................................................................... 76

Prepared Statement ............................................................................................. 77

APPENDIX 

ADDITIONAL MATERIAL SUBMITTED FOR THE HEARING RECORD 

Mr. P. Roy Vagelos, M.D., Retired Chairman and CEO Merck & Co., Inc., 

letter for the Record ......................................................................................... 28

Questions and Responses for the Record ........................................................... 103
(1)

HEARING ON BIOSHIELD: COUNTERING THE 

BIOTERRORIST THREAT 

Thursday, May 15, 2003

HOUSE OF REPRESENTATIVES, 

SELECT COMMITTEE ON HOMELAND SECURITY, 

WASHINGTON, DC. 

The committee met, pursuant to call, at 1:15 p.m., in room 345, 

Cannon House Office Building, Honorable Christopher Cox [Chairman of the Committee] presiding. 

Present: Representatives Cox, Dunn, Tauzin, Rogers, Shays, 

Camp, Linder Shaddegg, Thornberry, Gibbons, Sessions, Turner, 

Sanchez, Markey, Dicks, Frank, Slaughter, DeFazio, Lowey, Andrews, Lofgren, Jackson Lee, Pascrell, Christensen, Etheridge, 

Gonzalez, Lucas, Langevin, and Meek. 

Chairman COX. Good afternoon. A quorum being present, the Select Committee on Homeland Security will come to order. The committee is meeting today to hear testimony on the administration 

proposed Project BioShield. 

As members know, our rules permit any member to make a 3-

minute opening statement. Alternatively, members who arrive 

within 5 minutes of the fall of the gavel and who waive their opening statement will at their election have that 3 minutes added to 

their time for questioning of the witnesses. 

I will yield first for an opening statement to the ranking member 

of the full committee, Mr. Jim Turner of Texas. 

You are recognized for 3 minutes. 

Mr. TURNER. Mr. Chairman, if the chairman will indulge me for 

a minute, I want to speak to an issue unrelated to our hearing but 

very much related to our committee, a disturbing issue which has 

arisen concerning the Department of Homeland Security, which we 

have the responsibility of overseeing. Recent news reports have 

stated that an agency within the Department of Homeland Security, the Air and Marine Interdiction and Coordination Center 

based in Riverside, California, has used its domestic intelligence 

gathering capabilities for political purposes. It is reported by the 

media that the Center diverted Federal resources from homeland 

security purposes and used its intelligence gathering function to 

monitor and track down a private plane flown by the former Speaker of the Texas House of Representatives, Hon. Pete Laney. Former 

Speaker Laney was in public service for some 30 years. He is the 

gentleman who was asked by President Bush to introduce him to 

America for a prime time speech after the Supreme Court gave its 

verdict on the election of 2000. 
2

Mr. Chairman, that domestic intelligence capabilities would be 

used for partisan political purposes should be deeply disturbing to 

this committee and to all Americans. We created the Department 

of Homeland Security to track down terrorists, not law abiding citizens. This new Department has been entrusted with an important 

mission, to protect and defend the American people. The Department must carry out its mission, and maintaining the trust of the 

American people is essential in carrying out this important task. 

To those who suggest it is appropriate for Federal resources to 

be used to locate and arrest State legislators who have broken no 

law and have exercised a time-honored right to break a quorum, 

a practice used by a young Illinois State representative named 

Abraham Lincoln in 1840, reminds one of the days of Watergate 

when Federal resources were used for purely partisan political purposes, an act which brought a government down. 

I am formally requesting, by letter to the Secretary, that an inquiry be conducted into this matter and that information be produced as soon as possible regarding persons responsible for this unacceptable action and the misuse of Department resources. 

Thank you, Mr. Chairman. 

Mr. Chairman, today we gather to deal with a very critical issue 

to this country, the threat of biological terror. The Defense Science 

Board has identified 67 diagnostic vaccines and therapeutic products which are priorities for defending against a biological attack. 

Right now we have only two, vaccines for anthrax and smallpox. 

Experts estimate it can take 8 to 10 years at a cost of as much as 

$800 million or more to develop a new vaccine from scratch, to put 

it through clinical trials and to bring it to market. These estimates 

assume that industry is fully engaged in actively pursuing the 

products. 

Regrettably, that is not the case today. Last year the National 

Research Council reported that major pharmaceutical companies 

over the past 3 to 5 years have decreased their investment in drug 

discovery related to antibiotics, and few are exploring antiviral 

agents. Last year’s shortage of numerous childhood vaccines revealed that a number of major drug companies have simply gotten 

out of the vaccine business altogether. 

Against that troubling backdrop, today we are considering the 

administration’s proposal, Project BioShield. This legislation is designed to stimulate private sector production of vaccines and other 

countermeasures for biological, chemical, radiological and nuclear 

attack. BioShield’s purpose is to accomplish this protection by guaranteeing in advance that the government will purchase a large 

quantity of a drug or vaccine if the manufacturer produces an effective product that addresses a material national security threat. The 

administration has proposed $5.6 billion for this project over 10 

years. The key question that we must consider today is whether 

Project BioShield is sufficiently bold in its response to this 

daunting challenge which faces our Nation. 

The witnesses before us today will confirm what we all know to 

be true, and that is the threat to our Nation from bioterrorism, not 

to mention the natural development of new viruses like SARS and 

antibody resistant strains of disease, are deadly serious. We know 

there was a very active biological weapons program in the former 
3

Soviet Union where they developed at least 30 deadly agents, but 

we do not know if the stockpiles created are secure. We know that 

Saddam Hussein had a biological warfare program that produced 

massive amounts of biological agents. Thus far, we have not been 

able to find them. 

Moreover, we know that science may have progressed to such an 

advanced state that terrorists can engineer pathogens so that the 

drugs we develop will be ineffective. If that occurs, efforts to find 

vaccines and cures might not be able to be started until after we 

are attacked. 

To address this grave concern to our Nation, we need to take 

bold action. We need to cast off our old ways of thinking and be 

open to new ideas and new ways of doing business. And we need 

to harness all of the energy and brilliance of our scientific community in a sustained, focused and massive effort. 

I have some serious doubts as to whether Project BioShield 

meets this test. The most enthusiastic testimony provided by industry to date is that BioShield is a good first step. But many concerns 

have been expressed, both publicly and privately, as to whether the 

incentives in BioShield are strong enough to get the private sector 

to make the drugs we so badly need. 

The former chief executive officer of Merck, Dr. Roy Vagelos, 

wrote me today that although the BioShield legislation should be 

tried, the proposals, and I quote from his letter, ‘‘will not accomplish what is needed, a reliable stream of bioterror measures.’’ 

I ask, Mr. Chairman, that this letter and Dr. Vagelos’ biography 

be made a part of the record. 

(See page 27.) 

Mr. TURNER. To have a former CEO of one of the largest drug 

companies predict in essence that BioShield will not work is a 

frightening prospect, for if we pass BioShield with the expectation 

that drugs will be developed and they are not, we will lose valuable 

time in our race against the terrorists. I believe we will be making 

a mistake, and perhaps a tragic one, if our only approach is to 

incentivize the private sector. 

We should simultaneously be building a capacity through a public-private partnership to develop these vaccines ourselves. We 

need to put out an all-points bulletin to our scientific community, 

and we need the best and brightest focusing on the problem. We 

need to appeal to their spirit of duty and citizenship to contribute 

their considerable skills toward the endeavor, even if greater financial rewards lie elsewhere. And we need our government to demonstrate leadership by developing a plan to get us from our current 

state of vulnerability to a level of protection that the American people expect as soon as possible. 

While I look forward to the presentations of our witnesses today, 

I do not believe that Project BioShield is the complete solution we 

are seeking. It may be a positive first step, but I am confident that 

we will need to spend much more time and energy on this very 

compelling subject. 

Thank you, Mr. Chairman. 

Chairman COX. Thank you. I next recognize the gentlelady from 

Washington, the vice chairwoman of the full committee, Jennifer 

Dunn. 
4

Ms. DUNN. Mr. Chairman, I am going to pass on my opening 

statement with the hope that we can get to our wonderful panel 

quickly, and add on to my question time. 

Chairman COX. The gentleman from Louisiana, the chairman of 

the Committee on Energy and Commerce, Mr. Tauzin. 

Mr. TAUZIN. Thank you. First of all, to my friend from Texas, I 

want to say that while we might have a legitimate debate over 

whether or not lawmakers ought to be finding another State to 

hide in at a Holiday Inn rather than doing their duties in the State 

Capitol, and while we can argue about the choice of venue where 

they landed, and I think the Holiday Inn in New Orleans would 

have been much more interesting and entertaining shelter for your 

legislators, none of us should argue about the misuse of funds dedicated to homeland security. I am anxious to learn those facts just 

as you are. 

Let me just say that earlier today the Committee on Energy and 

Commerce reported out BioShield legislation. This hearing obviously is critical to further understand the issues as we move to the 

floor, but I want to make one simple point. To understand why this 

legislation is critical and why it does in fact advance us in the fight 

against the potential of a bioterrorism attack is a simple question 

of why would anybody in the country be interested in producing a 

vaccine against the black plague? Why would you invest money to 

do it unless you incentivize to do it when there is no market for 

a vaccine against the black plague, against diseases that we 

thought had been eradicated long ago, and no longer a threat to 

mankind? 

When you consider that some of the potential bioterrorism attacks our country is beginning to receive might be possible, are not 

just threats to Americans, they are threats to human life on the 

planet, that is how critical and how immensely serious this debate 

is all about and why it is critical that the government assist in 

making sure that the companies that are good at producing vaccines and good at discovering cures and treatments, they be 

incentivized to do that. 

The second question whether they ought to do it or government 

ought to do it ought to be a simple answer. We ought to incentivize 

and work with the companies that know how to do it and are good 

at it, and are the best in the world at producing health care treatments and vaccines and cures, and to incentivize them in a way 

that this bill attempts to do. 

No, this is not going to be a perfect solution. We have worked 

carefully with the appropriators to make sure there is 10-year forward funding in the bill, and there is some guarantee that this is 

more likely to happen than not. But is it perfect yet? I guess not. 

I think we will be visiting it from time to time as we see it implemented, but I suspect this is a step, not just the right first step, 

it is a critical and unfortunately a necessary step that we must 

take to follow up on the great work of the bioterrorism bill that we 

passed in the House and Senate. 

Senator Kennedy called me to talk about this and other matters. 

I complimented him once again on the extraordinary bipartisanship 

in which the Senate and the House worked on the bioterrorism bill 

last Congress. This is a complement to it, and a critical one. The 
5

Vice President said to me last week that this could mean life on 

the planet, life or death for the whole human race on the planet. 

Thinking through what these evil people might intend for us and 

what they might be willing to do in their demented causes is an 

awful process, but one we cannot escape. We have to be prepared 

for the worst. This is not a perfect solution, I agree, but it is an 

essential step. 

I commend the chairman and this committee for this hearing. I 

think it is going to advance the cause of understanding this process 

as we move forward. I thank the gentleman. 

Ms. DUNN. [Presiding.] Mr. Chairman, we are going to consider 

this a rolling vote, so if you wish to go and vote and them come 

back, please do. We will continue the committee’s business. 

Ms. Sanchez. 

Ms. SANCHEZ. Madam Chair, I reserve my time for questioning. 

Thank you. 

Ms. DUNN. Mr. Rogers. 

Mr. ROGERS. I will be brief, Madam Chair. The need for this kind 

of legislation is obvious and apparent, and we must deal with this 

forthwith. The question of how we incentivize the production of 

these antidotes while we also preserve the integrity of the congressional oversight of the expenditure of huge public sums is something we have to pay attention to. I think we can do that. We have 

had conversations with the select committee and the authorizing 

committee and myself on the appropriations subcommittee, and we 

think there is a way to do that and keep the integrity of the congressional oversight intact. 

That is a concern that I have especially. We think there is a way 

to do that, much the same as we fund mass transit, FAA construction of runways at airports and the like, where there is a guaranteed stream of money but annually appropriated. We think that we 

can do that, and give the proper incentives to make production of 

these antidotes available to us. That is something that we will be 

exploring as the weeks wear on. 

Thank you, Madam Chair. 

Ms. DUNN. Thank you, Mr. Rogers. 

Ms. Jackson Lee. 

Ms. JACKSON LEE. Madam Chair, out of respect for the panel, let 

me simply associate myself with the comments of Ranking Member 

Turner on the issue of the use of Federal resources. 

But I do want to say that I look forward to the hearing and presentation, and would simply suggest that there is an answer to the 

question of why the incentive process should not be the underlying 

and only basis of creating the necessary, if you will, bioprevention 

measures. It should be because it is the right thing to do. After 9/

11 we turned the page of history in terms of responding to the 

threat against the United States, whether it is bioterrorism, whether it is a threat to our borders. I hope as we proceed in this hearing 

we will begin to establish the kind of homeland security plan that 

just says we should do it and we should do it no matter what it 

takes to get it done. 

With that, I yield back the balance of my time. 

Ms. DUNN. Thank you, Ms. Jackson Lee. 

Mrs. Christensen. 
6

Mrs. CHRISTENSEN. Thank you. Let me say at the outset that today’s committee hearing is reassuring and I welcome the opportunity to get back to the many challenging issues that we have responsibility for on this select committee. I thank the chairman for 

calling us back to work to meet some of these challenges. 

This is our second hearing on Project BioShield, and although 

the bill has undergone some slight changes, I still have reservations and concerns about it. Recognizing the importance of our universities and the pharmaceutical industry to this process, let me 

say nevertheless that some of my concerns remain very basic and 

relate to the open-ended funding and what appears to be another 

attempt to bypass congressional oversight. I have strong objections 

to both of those things. 

The bill before us today is very important, not just because of 

what it seeks to accomplish, but also because how we deal with it 

will set the stage and be a precedent for everything else that follows in this important committee. I am going to listen very carefully to the testimony of all of our witnesses, but I am disappointed 

that there is not a public health expert on any of the panels. The 

burden as far as I am concerned is on the administration and the 

private industry to convince us that to be effective that competitive 

bidding has to be bypassed, that good science as the basis of decisions should be allowed to be compromised, the decision to obviate 

testing should be vested essentially in one person, and I am also 

concerned about how we are going to resolve the issues around indemnification and liability. An overriding concern is whether anyone can assure us if we pass this bill and Project BioShield, people 

of this country would be better protected in the case of bioterrrorist 

attacks, given all of the many, many possibilities, including the unknown. Of course, what good does all of this do if the public health 

infrastructure in so many of our communities remain in a state of 

severe disrepair? 

I look forward to the testimony. I thank the panelists for coming 

to share their expertise with us this afternoon. I thank you, 

Madam Chair, for convening the hearing.

PREPARED STATEMENT OF THE HONORABLE CHRISTOPHER COX 

I would like to welcome the Members in attendance this morning, and thank our 

witnesses for agreeing to appear before the Committee to testify on such short notice. This initiative has been moving very quickly. We have already had one hearing 

on BioShield; this is the second. A version of BioShield was marked up this morning 

by the Energy and Commerce Committee, and will be marked-up by this Committee 

in the immediate future. 

But I also want this hearing to take a step back, to examine the unique nature 

of the bioterror threat, and the scientific and economic challenges that will need to 

be overcome to defeat it. 

Each of us here has an understanding of the grave potential of bioterrorism. An 

attack on our population or our armed forces involving one ofthe numerous biological agents for which there is currently no effective treatment could be devastating. 

This country is blessed to have the most vital and innovative healthcare system 

in the world. Our free markets and strong patent protections have led the American 

pharmaceutical and bio-tech industries to spend more on research and development 

of new products and treatments than all of Europe and Japan combined. This investment has led to incredible advances in the treatment of a wide variety of ailments. 

At the same time, there have been few advances in the treatment of many of the 

diseases that pose the greatest bioterror threat. Diseases such as smallpox, Ebola, 
7

and plague currently affect few Americans, and the reality is that manufacturers 

cannot afford to devote resources when there is no natural market. 

The BioShield Act recognizes the great asset the American bio-tech and pharmaceutical industries represent. Rather than trying to create a parallel government 

bio-industry from scratch, BioShield seeks to draw on the expertise of the private 

sector by creating a ‘‘homeland security’’ market for bioterror countermeasures. It 

also recognizes the fact that we possess the strongest system of research unversities 

in the world, and gives us greater flexibility in working with them. 

The proposal has three main sections. First, it gives the Secretary of Health and 

Human Services increased flexibility to conduct and support basic bioterror research. Second, it provides a stable source of funding for the purchase and stockpiling of bioterror countermeasures. It also recognizes the fact that we have the 

strongest academic research centers in the world, and gives us greater flexibility in 

working with then. 

I look forward to hearing the witnesses thoughts on the provisions of BioShield. 

But more importantly, I look forward to hearing theft expert scientific opinions on 

the challenges we face in confronting the bioterror threat. We are privileged to live 

in a time that has been marked by remarkable progress in the biological sciences, 

particularly molecular biology and genetics. 

Unfortunately, many of the same techniques that have allowed us to eradicate infectious disease as a major cause of death can also be used to manipulate infectious 

pathogens to create a bioweapon. As our world shrinks due to increased and rapid 

travel, an epidemic caused by the intentional use of a bioterror agent poses a threat 

of spreading world-wide with unprecedented speed. 

The scientists that are with us today are world renowned for their work. They 

are experts in the treatment and diagnosis of infectious diseases, in how viruses 

spread in a population, and how to rapidly detect pathogenic organisms in the 

human population. They have been instrumental in developing new vaccines and 

treatments. And they have traveled the world, from the Ebola outbreak in Zaire to 

the sophisticated bioweapons labs secretly set up inthe former Soviet Union. 

I hope the dialogue that will be generated today will help us to answer some basic 

questions such as: What is the value of stockpiling vaccines against pathogens that 

may naturally mutate or, more troublingly, may be purposely altered by terrorists? 

How easy is it for would terrorists to keep one step ahead in the race, and engineer 

agents that can defeat any new countermeasures I hope the witnesses will speak 

to these questions, and to the difficulties researchers and businesses confront in developing bioterror countermeasures. 

PREPARED STATEMENT OF THE HONORABLE LINCOLN DIAZ-BALART 

Thank you Mr. Chairman. I would like to thank our distinguished panelists 

forjoining us today, and for your testimonies. 

As with any measure to protect our population if terrorist attack, the key is preparation I applaud the Bush Administration for the proposed Project BioShie1d

We have seen the impact of a biological attack on our open society—and we have 

an idea of the price that it can bring. We have already witnessed many steps taken 

by our Federal, State, and local officials to protect our citizens I would like to particularly applaud Governor Jeb Bush and the Florida Department of Health for its 

efforts in carrying out Operation Vaccinate Florida. 

I would also like to thank Director Fauci for his leadership at the NIH For years 

the National Institutes ofHealth has served as our Pentagon in the war against disease and Americans as well as people around the world have benefited, Now we 

must call upon the NIH to utilize the expertise and innovation of our scientists to 

guard against the horrors that a serious biological attack would mean. 

The threat of biological weapons is real. 

I look forward to working with my fellow committee members to ensure we take 

all steps possible to prepare for the possibility of such a threat. 

PREPARED STATEMENT OF THE HONORABLE NORM DICKS 

Thank You, Mr. Chairman. This is a very important hearing this afternoon, as 

this Committee considers the new and serious threats of hioterrorism and our nation’s ability to prevent and to respond to those threats. 

Clearly we are late in recognizing the need to protect our population from the 

deadly biological agents that we know have been developed by nation’s that support 

terrorism. In the past, we have worried about protecting our military personnel from 

the dangers of chemical and biological weapons that might be used in the battlefield, and thus the Defense Department has conducted its own research and development on various vaccines and antidotes. But today the threat is much more seri-
8

ous.. Since 9–11, and with the rise of terrorist actions directed at U.S.. citizens and 

facilities worldwide, we have more reason to believe that terrorists will attempt to 

use these new weapons of mass exposure on our citizens here inside the United 

States. There is no doubt there there is an urgency here.the urgent need to improve 

this nation’s protection and response mechanisms. The urgency of our situation demands a bold response, and clearly Project BioShield as proposed by the President 

was a bold response, Mr. Chairman. The version of the BioShield legislation that 

has just been approved by the House Energy and Commerce represents an improvement on this concept, particularly with regard to the financing mechanism. But I 

know that many serious questions remain, and today’s hearing will explore the implications of this particular bill as well as other concepts, including whether there 

are better harnessing the power and capabilities of the pharmaceutical industry to 

develop vaccines for the most serious of biological agents as well as for a broad 

array of other dangerous substances I have had some discussions with Mr. 

Rapoport, one of today’s witnesses, about another method of jump starting the vaccine development process: namely, providing immediate incentives to industry—

using private funds—to accomplish these objectives. I look forward to hearing from 

him today and from both of our panels of experts who are bringing their perspective 

and their insight to our committee Above all we must focus on actions that will be: 

•Timely—recognizing that the threat is here and now; 

• Complementary—avoiding unnecessary duplication of effort; and 

• Cost-effective—because even though we will spend a considerable amount of federal funding on this bio-defense effort, there are still many other serious homeland 

security priorities to be addressed this year and in coming years. 

Thank you Mr. Chairman and Mr. Turner for working to schedule this important 

hearing today and for keeping the Members of this Committee involved in the process. 

PREPARED STATEMENT OF THE HONORABLE JANE HARMAN 

Thank you Mr. Chairman and Ranking Member Turner. 

I’d like to put my remarks on Project BioShield in the context of the threat and 

the homeland security partnership between government and the private sector. 

Threat 

As the Ranking Member on the House Intelligence Committee, I am convinced 

that the United States faces a real bioterrorism threat TODAY. I made that statement at our subcommittee hearing on BioShield in March. Two significant events 

that have happened since then: 

• SARS has killed at least 588 people worldwide, with more than 7,500 infected. 

While there’s no particular reason to believe that this is a terrorist event, it shows 

the potential impact of an agent released into the global environment. 

•Thousands of liters of enormously dangerous biological weapons from Iraq are 

missing. 

So the threat is very real, immediate, and one for which we are not prepared. 

While BioShield may be an important part of building our bio defense, other parts 

are also important: 

• Identifying and safeguarding biological materials—from, for example, Iraq and 

Russia; 

• Improving our intelligence on BW possession by other countries or groups and 

their intentions for use or proliferation; and 

• Re-building the international taboo against use of biological weapons. 

Partnership 

BioShield depends on the partnership of the public and private sectors. There is 

a clear market failure to develop countermeasures for rare diseases, chemical weapons, and nuclear or radiological devices. At the same time, the government lacks the 

capacity and expertise to produce the countermeasures itself. 

The Administration is requesting new authorities to get the private sector to do 

a fundamentally public sector job. It is for Congress to decide whether new authorities are in fact needed, and to determine what flexibilities are appropriate and in 

our best security interests. 

I support, Mr. Chairman, doing what is necessary to produce the biodefenses to 

weapons we know are out there. But our action must take into account our dire 

budget situation, and the alternative possibility that we might be able to stimulate 

private investment for new breakthrough drugs without spending scarce federal dollars. 

The private-public partnership in general is one of the most difficult issues for the 

Department of Homeland Security. As the most visible example of this partnership, 

it is especially important that we do this right. 
9

PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON-LEE 

Mr. Chairman and Mr. Ranking Member, I thank you for convening this vital 

hearing to hear testimony on the Project BioShield initiative. 

The threat of bioterrorism must be one of our chief concerns as we continue our 

work of protecting our homelands from terrorist attacks. Biological weapons pose a 

particularly dangerous threat. Biological weapons are highly portable and difficult 

to detect. Positive strides have been made in securing our borders and preventing 

unwanted materials from entering our country, but it is unrealistic to expect no biological weapons to enter the United States. Last year alone 30 million tons of cocaine was smuggled into the United States. If we can’t stop 30 million tons of cocaine from crossing our borders, how can we expect to stop a vile filled with anthrax, botulism, or small pox? A vile that could kill hundreds or possibly thousands. 

Bioterrorism attacks not only pose a danger to human lives, they also have the 

ability to cripple the operation of our society and severly harm our economy. We all 

recall the primary and secondary impact of the anthrax attacks in 2001. The attacks 

involved a series of letters mailed in pre-stamped envelopes to media outlets in Florida and New York and to the offices of Senators Thomas Daschle and Patrick J. 

Leahy (D–Vt.). The anthrax attacks killed five Americans and left 13 others severely 

ill. The five people who died from inhalation anthrax included two postal workers 

at the Brentwood postal facility in Washington, a Florida photojournalist, a New 

York hospital worker and a 94-year-old woman in Connecticut. Thousands more 

were exposed to the lethal bacteria. The letters passed through various post offices 

and postal distribution centers along the East Coast leaving a trail of contamination. Buildings from the Brentwood mail facility, to the Congressional office buildings, to NBC headquarters had to cease operations. 

The threat of bioterrorism did not end in September of 2001. As recently as April 

22nd of this year in Tacoma, Washington we had a bioterrorism scare. a white powder was found in two envelopes, and 94 people had to be evacuated from a mail distribution facility. Initial tests of the powder tested positive for biotoxins that cause 

bubonic plague or botulism. Four people at the facility had to be decontaminated. 

The same day, a suspicious powder was found in a Federal Express cargo area at 

Southwest Florida International Airport, in Fort Myers, Florida. Six people were 

taken to a hospital for possible decontamination, including one who suffered burning 

eyes and nose. 

We are presently faced with the threat of a worldwide SARS outbreak. The inability of many foreign countries to adequately deal with that outbreak raises questions 

about our own preparedness. What about other infectious diseases like tuberculosis? 

There are many ailments that our medical professionals are struggling to control. 

We must do better in the area of biological weapons. 

The ease with which biological weapons can be manufactured is also a danger. 

The equipment and ingredients needed to manufacture many biological agents can 

be purchased over the Internet. Additionally, as our failure to apprehend those responsible for the 2001 anthrax attacks illustrates, biological terrorists can operate 

with more secrecy than traditional terrorists. 

These are but a few concerns we face as we consider Project BioShield. The provisions of Project BioShield provide a good start to protecting Americans from a bioterrorist attack but work remains. Presently Project BioShield’s provisions grant the 

National Institute of Health new powers, through grants and contract awards, to 

speed effective research and development efforts on bioterrorism countermeasures. 

Project BioShield also creates a long-term funding mechanism for the development 

of medical counter measures, and empowers the government to purchase safe and 

effective vaccines. Finally, Project BioShield authorizes the Food and Drug Administration to use promising, yet uncertified, biological treatments in the case of emergencies. 

Mr. Chairman and Ranking Member, I believe these are good first steps in protecting Americans from biological attacks. However, I feel that many questions remain. I look forward to the testimony of our witnesses today, and I hope that there 

guidance can help us make all Americans less vulnerable to bioterrorism.

Ms. DUNN. We are expecting members to vote and return to our 

committee, but I think it is important to begin testimony in the 

time we have available since the last vote is going to be around 

2:00 p.m., and we want to maintain as much membership here as 

possible. So we may interrupt you, depending on what the chairman wishes to do. 
10

There being currently no further opening statements, I want to 

recognize the first panel of witnesses. Our first panel is a distinguished group of scientists who should all be able to speak directly 

to the challenges of conducting bioterror research. 

We have Dr. Garry Adams, Associate Dean for Research from 

Texas A&M University; Dr. Ronald Crystal, Chairman of the Department of Genetic Medicine at Cornell University; Dr. C.J. Peters, Director for Biodefense and Emerging Infectious Diseases at 

the University of Texas Medical Branch. We also are very fortunate 

to have Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases. 

Normally as a senior administration official, Dr. fauci would appear on a separate panel. Due to time constraints and scheduling 

issues, we have asked him to testify as part of our first panel, and 

he has accepted our invitation to do so. We are very interested in 

hearing his own research and scientific experience with bioterrorism. 

In addition to being an administration official, Dr. Fauci is one 

of the world’s most eminent research scientists. In fact, a recent 

survey found that in the period 1981 to 1994, of the more than 1 

million scientists worldwide who published during that period, Dr. 

Fauci was the fifth most cited. So we are particularly appreciative 

for his willingness to provide his expert testimony alongside our 

other distinguished panelists. 

We have your written testimony, and we would ask that each of 

you simply summarize in the 5 minutes you have your testimony. 

Dr. Fauci, we will begin with your opening statement, and work 

our way down the line. 

STATEMENT OF DR. ANTHONY FAUCI, DIRECTOR, NATIONAL 

INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES 

Dr. FAUCI. Thank you, Madam Chairman, and members of the 

committee. I want to thank you for calling this hearing and express 

my gratitude to Chairman Cox and other members of the committee for taking such an intense interest in this important subject. 

September 11, 2001 changed forever the way we look upon the 

defense of our homeland, particularly followed soon thereafter with 

the anthrax attacks. Bioterrorism, be it microbes, chemicals, nuclear, or radiologic, are a clear and present danger, as articulated 

by Mr. Turner just a few minutes ago. So I need not spend more 

time on that. 

What we can do to protect our citizens is developing and making 

available effective countermeasures against these agents of bioterror that are truly essential to protect the homeland. It is critical 

that we expedite and accelerate the development of countermeasures, for what we have been doing over decades, particularly 

in the arena of emerging and reemerging diseases, has positioned 

us quite well to accept the challenges of HIV/AIDS, West Nile virus 

and what have you, but we are now in a wartime mode of operation 

and we must adjust accordingly if we are to properly protect our 

citizens. 

If you look here on this particular poster, that is the commonly 

used pathway of going from concept and basic research concerning 

a pathogen all of the way up to the development of a new product. 
11

This need not be a pathogen, it could be a concept for the development of any product that is for the health of individuals. It is a 

complicated process that involves basic research and then identification of targets, preclinical development and clinical evaluation. 

There is a heavy dependence on industry and academia when one 

needs to come up with a product. We need to accelerate this and 

we need to do it rapidly. The reason is the incentives, for example, 

of industry to get involved in getting us to these products, particularly under exigent circumstances, must be considered. 

If a product has great commercial value, it is easy. There are two 

parts to this. There is the push with the basic research and the 

pull or the incentive to industry. Let me give an example of that 

on this poster. If one looks at the situation with vaccines and why 

vaccines fail to compete with other agents because of the market 

appreciation of the need for it and the profit margin and incentives 

for industry to get involved, this particular poster shows the dollars 

in billions for all vaccines compared to a single drug like Lipitor, 

which is a lipid-lowering agent, and PRILOSEC, which is an acid 

blocker. 

As you can see, the incentive of the marketplace puts vaccines 

at a great disadvantage. Vaccines are just one category of countermeasures that we need to develop, and so the problem is compounded in the arena of bioterrorism and biodefense research. 

I would like to put these issues now into perspective in light of 

the President’s proposal for Project BioShield as he has articulated 

in his January 28 State of the Union Address. The purpose of BioShield in the context of what I have just told you is to accelerate 

the process of research, development, purchase and ultimately 

availability of effective countermeasures against agents of bioterror. 

It is a three-pronged program. It includes the push of research, 

and that includes making more flexible our capabilities to expedite 

the research and development process, which we do fundamentally 

at the NIH. When I say expedite, I mean very clearly not to compromise the tried-and-true mechanisms of peer review. I am talking about doing things on a much faster track while preserving the 

scientific integrity of what we do. 

The second and an important component is related to the incentives associated with industry’s involvement in the areas that I just 

mentioned, and that is to establish a secure funding source for the 

purchase of critical biomedical countermeasures and a funding 

source for deliverable products. It is very clear from our dealings 

with industry that they take risks when they get involved in developing any product. Most of them have no problem with taking the 

risk of failure when developing a product. 

When you have great commercial value, the risk is certainly 

worth it. When you have a situation where there is no guarantee 

or at least at the present time no guarantee that there will be a 

market for the product and it might only go, for example, into a 

stockpile, we need to create incentives that make them feel secure 

and that is the secure funding capability which according to the 

BioShield proposal is a mandatory authority to allow money to be 

available when the companies, be they biotech or pharmaceutical 
12

companies, deliver a product that is useful for the protection of the 

Nation. 

Finally, the establishment of an FDA emergency use authorization for critical biomedical countermeasures, which means when 

there is a product which is absolutely needed to protect the Nation 

and the benefit clearly outweighs that risk, when a product that is 

on its way to being licensed or might be on a track showing it to 

be safe and effective but isn’t licensed at this time, that under exigent circumstances the Secretary of the Department of Health and 

Human Services could allow the FDA to make that product available. 

So in closing, Mr. Chairman and members of the committee, 

these are extraordinary times and we have extraordinary responsibilities. These responsibilities in turn call for extraordinary 

means to meet the challenge of protecting our Nation from the 

threats of terrorism, either by biological, chemical, radiological or 

nuclear weapons, and we can do this by developing and procuring 

and ultimately making available countermeasures to the citizens of 

our Nation that would be effective against such threats. 

We believe that Project BioShield is a very important step in 

that direction. 

Thank you, Mr. Chairman.

PREPARED STATEMENT OF DR. ANTHONY S. FAUCI, M.D. 

Mr. Chairman and Members of the Committee, I appreciate the opportunity to 

discuss the Administration’s proposal, Project BioShield, with you today. The events 

of September 11, 2001, and the subsequent anthrax attacks, have changed forever 

how the biomedical research community responds to the emerging threat of terrorism. While the National Institutes of Health (NIH) and other Department of 

Health and Human Services (DHHS) agencies, including the Centers for Disease 

Control and Prevention (CDC) and the Food and Drug Administration (FDA), have 

been preparing to address the threat of bioterrorism for several years, we have been 

called to accelerate our efforts vastly since the attacks of 2001. 

Overview 

Today, we know that there is a real threat to our nation, and one of the most 

important ways that we can respond to this threat is through the development of 

medical countermeasures to address potential agents of terrorism. We are now in 

a ‘‘wartime’’ mode and must modify the way we do business, while protecting the 

elements of our system that have made us so successful. 

For decades, the NIH has led the biomedical research effort to improve the Nation’s public health. The NIH research enterprise, fortified by a rigorous system for 

ensuring that only the best science is supported by Federal dollars, has served our 

country extraordinarily well. Through the traditional funding mechanisms of grants, 

contracts, cooperative agreements, and other partnerships, as well as time-tested 

personnel practices, this system has resulted in numerous major scientific advances 

that have improved the health of people around the globe, such as the development 

of interventions for emerging and re-emerging infectious diseases, including HIV/

AIDS and Ebola. 

With the unprecedented budget increases provided by Congress for biodefense research, NIH has hit the ground running with a comprehensive research agenda to 

address bioterrorism. However, there is an important issue that must be addressed: 

we must expedite and greatly accelerate the research, development, purchase, and 

availability of effective medical countermeasures against biological, chemical, 

radiologic, and nuclear terrorism. There is no time to wait. 

When all Americans must confront the realities of terrorism directed at the 

United States, it is imperative that the Federal Government be prepared to protect 

its citizens from the scourge of terrorism. We are particularly challenged by the biological threats that are known to us or could be modified, as well as those that are 

unknown. To address these threats, we must build not only a strong biomedical research base, but we must create incentives for the companies upon whom we are 

reliant to produce the needed medical countermeasures to defend us. 
13

NIH stands ready to push forward its biodefense research agenda to support the 

development of ‘‘proof of concept’’ for diagnostics, therapeutics, and vaccines to address agents of potential bioterror. However, without the expertise, resources, and 

proven capabilities of the pharmaceutical companies who develop these products and 

bring them to the market so efficiently and safely, we will not be able to meet the 

challenges set forth to us. Project BioShield would provide this needed incentive to 

industry, by giving it the necessary assurances that we will be reliable partners 

with them in meeting the challenge to develop the critical medical countermeasures 

to protect our citizens from acts of terror. 

Project BioShield 

Project BioShield would use the resources of NIH, FDA, and the DHHS Secretary 

to work together to accelerate the research, development, purchase and availability 

of effective medical countermeasures against chemical, biological, radiologic and nuclear terrorism. It takes a three-pronged approach. First, Project BioShield would 

increase authorities and flexibility for NIH, particularly the National Institute of Allergy and Infectious Diseases, to expedite research towards the development of critical medical countermeasures for biodefense, such as vaccines and therapeutics. Second, it would establish a secure funding source, via a mandatory authority, for the 

purchase of such countermeasures. And third, it would establish an FDA Emergency 

Use Authorization for critical countermeasures. 

With regard to the first component of Project BioShield, the legislation would provide NIH with additional authorities to expedite the conduct of research and development in promising areas of medical countermeasures against potential agents of 

bioterrorism. This authority would provide NIH additional flexibility in awarding 

contracts, cooperative agreements, and grants for research and development of medical countermeasures including vaccines, drugs, biologics, and diagnostics. It also 

would streamline procurement authority, bolster authorities for acquisition and renovation of facilities, expedite personal services contracts and provide flexibility for 

certain personnel decisions to hire the necessary technical experts for biodefense research. Funding awards would remain subject to rigorous scientific peer review, but 

expedited peer review procedures could be used, when appropriate, without compromising scientific, technical, and programmatic standards. These new authorities 

would give NIH the tools it needs to expedite and push forward the pathway from 

basic research to effective biodefense countermeasures. 

With regard to the second component of Project BioShield, the secure funding authority for procurement of countermeasures, it is worth noting that, historically, 

pharmaceutical research and development has focused on the development of products likely to attract significant commercial interest and a long-run market. We 

have found with experience, particularly in our numerous efforts to develop vaccines 

against some of the world’s most devastating diseases, that uncertainties in the 

marketplace can create barriers to industry’s willingness to invest resources and 

make long-term commitments to manufacture the needed products to prevent and 

treat disease. The recent shortages of vaccines for common and naturally occurring 

diseases are evidence of this problem. This lack of industry incentive is compounded 

with regard to the development of medical countermeasures to address bioterrorism, 

where the probability of a bioterrorist attack and the actual threats themselves remain unknown. 

Our colleagues in the pharmaceutical industry—from small biotech firms to ‘‘Big 

Pharma,’’—particularly those in the vaccine industry, have stressed that, they are 

willing and eager to help in the development of biodefense countermeasures. However, these companies are businesses, not non-profit organizations, and they need 

a tangible incentive to get involved in the critical effort to ensure adequate defense 

against bioterrorism. 

When it is evident that a given pharmaceutical product has a potential to make 

a profit, no incentives are needed to engage industry. However, with the development of a product for which there is no guarantee of a return, or for which the market is uncertain, industry prefers some assurance that there would ultimately be a 

return on its investment. Without such assurances, companies likely will pursue the 

development of other products. 

When NIH meets with industry, we hear that, first, companies already may be 

involved in the early stages of development of biodefense countermeasures at their 

own initiative and are willing to assume a degree of risk of failure. However, they 

would like assurances that a market would exist for their product if indeed they are 

successful in its development. Also, many state quite frankly that they do not want 

to be vulnerable to the vicissitudes of the cyclical appropriations process. 

In the other case, when NIH tries to engage reluctant companies to get involved 

in biodefense research, we try to ‘‘push’’ them into action using discretionary research dollars. However, in many cases, this does not seem to be enough to convince 
14

them to become engaged. With Project BioShield, we would be able to tell these companies that if they partner with us, meet certain milestones, and devise a licensable 

countermeasure, they will have our assurances that there will be money available 

to them for the purchase of that product. These are examples of the ‘‘pull’’ in the 

process: to the extent that the Federal Government can define its requirements and 

assure up-front that funds will be available to purchase critical countermeasures, 

regardless of the level of appropriations for the year in question, then industry will 

have a real incentive to meet the biodefense research challenge. We feel that such 

assurances can only be given by a mandatory funding authority. 

With regard to the third component of Project BioShield, the FDA Emergency Use 

Authorization, it is worth noting that the FDA approval process for drugs, devices, 

and biological products is the gold standard for the world. The FDA’s policies and 

regulations help ensure that products that get to market are safe and effective. In 

addition to animal studies, sponsors of new drugs and vaccines typically conduct 

three phases of clinical trials in humans to demonstrate the safety and efficacy of 

a product. This process, however, can take years. 

In preparing for the challenges we face today, we may not always have a desirable 

amount of time to address the threat presented by agents of bioterrorism. While the 

FDA has several mechanisms in place to get products to market faster, these alone 

are not sufficient in an emergency. 

Project BioShield would permit the Federal Government to make new and promising treatments that are still under development available quickly, if needed, for 

use in emergency situations where no effective approved or licensed products are 

available, potentially saving many lives. Specifically, Project BioShield would authorize the DHHS Secretary to grant an emergency authorization for the use of unapproved products in the event that the Secretary determines that there is no adequate and approved alternative available. This authorization would require the Secretary to determine that the benefits associated with using the countermeasure 

would outweigh the potential risks. Project BioShield would provide authority to the 

Secretary to apply conditions on the authorization, including limitations on distribution of the product, requirements to convey specific information to health care providers and patients, and requirements for recordkeeping, records access, and adverse event reporting. This authorization could be revoked by the Secretary and 

would be be limited in duration to the period of the emergency or not later than 

1 year, unless renewed. It is important to note that the critical countermeasures 

would be tested for safety to the extent that the situation permits.

Conclusion 

In summary, the need for medical countermeasures for biodefense is exigent and 

real, and we have a responsibility to the American people to make these products 

available now. The accelerated development of effective countermeasures against 

terrorism requires a new biomedical research paradigm, new ways to engage our industrial partners, and an ability to make promising products available for use during an emergency more quickly. Project BioShield would help us meet the challenges 

of terrorism effectively and expeditiously, improving our Nation’s preparedness for 

and capability to respond to the threat of bioterrorism. 

Thank you again for the opportunity to testify today about this important initiative to improve our homeland security. I would be pleased to answer your questions.

Chairman COX. [Presiding.] Thank you, Dr. Fauci. Since I was 

voting when you began, I didn’t have the opportunity to welcome 

you personally and thank you for the outstanding leadership that 

you provide at NIH and the assistance you have provided to this 

committee in developing this legislative initiative. 

Next is Dr. Garry Adams. We have copies of your testimony, and 

invite you to summarize your testimony in 5 minutes. I welcome 

you as well. 

STATMENT OF DR. L. GARRY ADAMS, ASSOCIATE DEAN FOR 

RESEARCH, BIODEFENSE AND INFECTIOUS DISEASES, COLLEGE OF VETERINARY MEDICINE, COLLEGE OF VETERINARY MEDICINE, TEXAS A&M UNIVERSITY 

Dr. Adams. Thank you, Chairman Cox, and members of the committee. Thank you for an opportunity to give perhaps a different 

perspective from the veterinary profession and, as a member of the 
15

public health community, to present what I hope is an informed 

and experienced perspective for the enthusiastic support for Project 

BioShield. 

My name is Garry Adams. I am a veterinarian. I am a veterinary 

pathologist. I am also the Associate Dean for Research and Graduate Studies and I have my own research laboratory. 

I have been actively engaged in these diseases, including category A, B and C diseases, for about 30 years. I have lived in foreign countries on four continents for 7 of those years and have 

worked with several of those pathogens. What is important on 

these pathogens is about 70 percent of them are transmitted from 

animals to man and vice versa, so the veterinary profession plays 

an important role in working with the entire medical community 

and a one medicine approach from a public health point of view to 

control these diseases, whether it is in man or animals. 

Much of the work that I have done has been involved with several countries in South America, Africa, Europe, and Canada. I 

have also had personal experience in inspecting and now collaborating with former Soviet weapons bioscientists, particularly on the 

development and production of a vaccine against brucellosis, a 

pathogen that had been weaponized not just in the Soviet Union 

but also here in former years. 

Thank goodness the U.S. government has invested in transforming former bioweapons laboratories into laboratories where 

they can now manufacture and produce vaccines and products for 

domestic and international consumption, but the point here is that 

I was able to see the mass scale production of manufacturing, distributing and arming missiles for deployment and what could be 

done and what was being done by some 60,000 scientists in some 

14 laboratories. But that is hopefully now changing, and many of 

us are involved in that transformation. 

So the other point that I would like to make is the relative ease 

of obtaining several of these pathogens, and for some of them the 

relative ease of transforming them into bioweapons. Right now in 

Texas we are probably having anthrax outbreaks in wildlife, or we 

will have in the very immediate future. The same can be said for 

a whole spectrum of pathogens on a worldwide basis. Or they are 

obtainable. While we close the cupboard here on much, and in fact 

all of the laboratories through the PATRIOT Act, those organisms 

are still available to those who would make them into weapons and 

use them against us. 

I am convinced that they do pose a profound and real threat to 

the health of not just the U.S. human population but to livestock 

populations. In fact, I have heard it stated from a scientist, a political scientist from Lawrence Livermore, saying that should we be 

attacked by multiple pathogens of both man and animals, several 

different pathogens simultaneously in 100 different sites, some of 

those pathogens would cause disease, death, and loss of our economic viability as well as eroding the confidence of the people in 

the Federal Government, State government and local government 

to control these diseases to a point that we might not recover economically. 

Also, I base part of my testimony on working with the foot and 

mouth disease in Yorkshire, England in 2001. As a veterinarian, I 
16

worked there as a diagnostician under field conditions. And what 

I saw was a devastating impact, a psychologic epidemic among the 

people, much less the 11 million animals that were lost and the billions of English pounds that were lost. It was a psychological impact that I saw among the farmers, but not just the farmers, the 

postman, the person who delivered the milk, the person who ran 

the shop in the village, to the bed and breakfast where I stayed, 

a huge impact on the morale and on the future of that country. 

Plus the loss of breeding animals that have been bred for the last 

500 years. One farm that I visited where the animals were destroyed, they had been bred since 1526, and all animals were destroyed by that night. That is what occurred in the animal population. 

What could have been done was to have prevented this by preemptive diagnosis, preemptive vaccination, and preemptive therapeutics, perhaps not in the case of foot and mouth disease, but the 

concept embodied in Project BioShield is the sort of preemptive 

moves that this country needs to make for protection of human, 

animal and even plant viability because of our economy. 

So the threat is real. I have seen it personally. Perhaps one could 

say at the animal level that biological systems are biological systems, whether it is animal, plant or man. 

And as I have mentioned, many of those pathogens are transmitted. Up to 70 percent in category A, B and C pathogens, animals serve as a reservoir, so we need to think in terms of protecting the human and the animal population. 

One other point is the ability to manipulate the organisms genetically and transform them from an organism that might be susceptible to current therapy to one that is not. The Brusella bacterium is one that I am familiar with where some of that work has, 

unfortunately, been done. However, there are strategies, and strategies that are proposed in BioShield, and strategies that are being 

proposed by federally funded projects now in several agencies to 

move in an anticipatory thinking and strategy to avoid that. 

So the threats are real for inflicting loss on man and animals 

and eroding the national economy. I cannot overemphasize the 

economy and the impact it would have on our Nation, and the massive epidemiologic outbreak that we would see among the citizenry. 

What we saw in England in the foot and mouth was overwhelming 

the diagnostic capacity, the regulatory capacity. There were 25 diagnostic tests done in the first week, a thousand the second week, 

and the third week 10,000. 

In summary, I am highly supportive of the Project BioShield and 

welcome the opportunity to speak to you today.

PREPARED STATEMENT OF L. GARRY ADAMS, DVM, PHD, DACVP ASSOCIATE DEAN FOR RESEARCH, BIODEFENSE & INFECTIOUS DISEASES, 

COLLEGE OF VETERINARY MEDICINE, TEXAS A&M UNIVERSITY 

Chairman Cox and Members of the Committee, thank you for inviting me as a 

representative of the veterinary profession and as a member of the public health 

community to present an experienced and informed perspective for enthusiastic support for the concept, principles and implementation of the ‘‘Project BioShield’’ initiative. I am Dr. Garry Adams, associate dean for research and graduate studies, professor of veterinary pathology and a member of the faculty of the College of Veterinary Medicine, Texas A&M University, College Station, TX. I am and have been actively engaged in biodefense and infectious disease research for over three decades, 
17

funded by the United States Department of Agriculture, National Institutes of 

Health, United States Agency for International Development and the Rockefeller 

Foundation. I am testifying based upon: 

My personal experience as a research scientist developing diagnostic tests, therapeutics and vaccines to detect and prevent important high priority (NIH Category 

A, B and C pathogens) infectious disease pathogens transmitted from animals to 

man and vice versa (so called zoonotic diseases) either insect-borne or not while 

working for a total of 7 years on four continents and several other countries (Mexico, 

Colombia, Argentina, Ecuador, Peru, Brazil, Kenya, Republic of South Africa, Israel, 

Egypt, Germany, Canada). 

On my personal inspection of former Soviet bio-weapons experimental production 

and aersol laboratories, and my current collaboration with former Soviet bio-weapons scientists that are now being transformed into civilian scientists and facilities 

for vaccine development and production for domestic and international markets, 

thanks to the US Government. 

On my recent experience working as a veterinary inspector in Yorkshire, England 

with the Ministry of Agriculture, Fisheries and Forestry under the auspices of the 

Royal College of Veterinary Surgeons during the deadly, economically and psychologically devastating Foot-and-Mouth Disease outbreaks in the United Kingdom 

where pre-emptive diagnostic surveillance and tactical use of effective vaccines may 

have saved the lives of millions of animals, billions of English pounds, and loss of 

some of the world’s best breeding livestock. 

On my personal knowledge of the ease of obtaining and relative ease of 

weaponizing NIH Category A, B and C pathogens as well as public information that 

several of these pathogens have already been weaponized by nation states, rogue 

groups and defiant individuals with the malicious intent to use them as weapons 

of mass destruction, thus representing profound real threats to the health of US 

human and livestock populations, food safety, food security, national economy, and 

psychological well-being of our nation. Knowledgeable sources have stated that frequent serial or multiple simultaneous bioterrorist events with multiple pathogens 

in both human and animal populations could be so deadly and so economically devastating that our nation might never recover to the state of health or economy that 

we currently enjoy. While our system of transportation facilitates the rapid development of markets and accumulation of wealth, it also greatly enhances the spread 

of diseases in human and animal populations. 

On the fact that approximately 70% of the NIH Category A, B and C pathogens 

are diseases transmitted from animals to man to contaminate our food supplies by 

entering our domestic livestock populations and food chains and even worse by 

spreading into our massive wildlife populations where eradication of certain of these 

diseases may be impossible. 

On the basis that should these pathogens be genetically manipulated by bioterrorists for enhanced for infection and mortality, the magnitude of the threat and impact on US human and animal populations and could amplified exponentially. 

Thus, as stated above from my personal experience and knowledge of these pathogens and their associated risks and threats to our nation, I am fully convinced of 

their real potential for use as Bioterroist Threat weapons of mass destruction for 

1) inflicting loss of life of man and animals, 2) eroding the national economy, 3) creating a massive psychological epidemic among US citizens, and 4) overwhelming 

regulatory and control capacities at local, state and national levels as well as 5) undermining the confidence of American citizens in government organizations whose 

responsibility to prevent, control, contain and eradicate these diseases. 

The old axiom of an (ounce of prevention is worth a pound of cure( does not apply 

in the case of intentional, well planned Bioterrorism, because the short and long 

term effects on the US society could well be hundreds or even thousands of times 

greater unless prevented, thus concerted, pre-emptive and fully functional programs, 

e.g. Project BioShield, are essential especially for prevention as well as for mitigation and recovery from small and large bioterrorist attacks. US scientists are especially well poised to address virtually all facets of malicious bioterrorism to produce 

1) high quality, mass scale diagnostics, 2) large quantities of protective vaccines that 

avoid confusing diagnostic tests, and 3) new rationales of chemotherapies for treatment of these pathogens. Investment in US health-related research has paid great 

dividends to the US citizens in the form of improved health and longevity, safer food 

and water supplies, and prevention of many diseases causing high morbidity and 

mortality in other nations. Development of safe, effective countermeasures is obligatory for the prevention and recovery from bioterrorist attacks, but this will require 

large infusions of major resources, such as requested by Project BioShield, coupled 

with effective, transparent collaborations between and within academia, the biomedical industries and Federal agencies, under rigorous scientific review and scru-
18

tiny to develop and produce the diagnostics, vaccines and treatments required to 

protect our citizenry and food resources. Importantly in the absence of bioterrorist 

attacks, the investment in Project BioShield will have the greatest benefit that will 

be realized every day in the physician’s and veterinarian’s offices as well as in our 

super markets with improved health, safer foods, and confidence in the security, 

public health and well-being of our nation. 

In summary, I sincerely thank the Chairman and all members of the Select Committee on Homeland Security for this opportunity to very enthusiastically encourage 

the appropriations essential for Project BioShield to protect the future of our nation’s citizenry, livestock, public health, and economic viability as well applying the 

benefits of the Project BioShield in global populations. I strongly support the concept, principles and implementation of the ‘‘Project BioShield’’ initiative and urge 

that the necessary resources be made available soon to protect against not only the 

potentiality of bioterrorist attacks but also against new emerging diseases occurring 

globally, such as SARS, and mad cow disease (bovine spongioform encephalopathy). 

My profession has decades of experience with many of these diseases, and we look 

forward to becoming a full scientific partner in the development of improved 

diagnostics, vaccines and treatments as countermeasures for these devastating 

pathogens.

Chairman COX. Thank you very much for your testimony. Out 

next witness is Dr. Clarence Peters. 

STATEMENT OF DR. CLARENCE JAMES PETERS, UNIVERSITY 

OF TEXAS MEDICAL BRANCH, GALVESTON, TEXAS 

Dr. PETERS. Thank you for the opportunity to share some of the 

observations that I have made over the past 30 years with you. 

That is about how long I have spent working in the field of biodiseases, including both public health and biodefense. I have worked 

in the U.S., Africa, Latin America and Asia. In fact, I started my 

career in Panama where I was a NIH research associate. Most germane to this discussion, I was at USAMRIID, the DOD lead laboratory for biodefense for 13 years, including the time of the first Gulf 

War. 

I then went to CDC, where I was head of the Special Pathogens 

Branch for 10 years. This is the branch which was charged with 

dealing with high hazard pathogens, and maintained the biosafety 

level for a laboratory there. During this time, we discovered the 

hantavirus pulmonary syndrome, we dealt with Ebola in Africa and 

Nipah virus in Asia. 

Every single year we found examples of a virus that was new, 

that is new to science, previously unsuspected and undiscovered, or 

a virus doing something it was not supposed to be able to do, or 

a virus in a place it had never been known to occupy before. 

I would like to leave the committee with one central idea about 

emerging infections and one about bioterrorism. First of all for bioterrorism, there are a limited number of different organisms that 

can truly cause mass casualties, but their threat is indeed quite 

real. During the Gulf War I had the occasion to examine the old 

classified data from our defensive program in depth and to consult 

with some of the experts who produced these weapons. This method of killing people can be successful, literally measured in the tens 

of thousands of casualties. The delivery is by an airborne aerosol, 

so it is stealthy and will go unnoticed initially, but later declares 

itself when humans sicken and die. 

Now let us talk for a second about emerging infections. Why 

would I bring them up with bioterrorism? First of all, the organisms are often exactly the same as with bioterrorism only they 
19

occur naturally. I would like to emphasize the central theme that 

I see in emerging infections. These microbes are on the move. The 

factors underlying emergence were put forth in an Institute of 

Medicine report 10 years ago. I had the privilege to be on an IOM 

committee and have a preliminary report from that committee that 

looked back over the revisited lessons. These conclusions set forth 

in Microbial Threats to Health were basically the news is not good. 

The factors in emergence are all working against us and these factors are interactive. 

I believe the only way we will be able to deal with the full spectrum of these encroaching microbes is through an active program 

of vaccines and anti-infectives, just as we need to protect ourselves 

against bioterrorism. We can develop vaccines and therapeutics 

against these agents. Indeed, there have been some successes in 

the past. Unfortunately, these successes have not been carried forward for policy and funding reasons, but they do give us a road 

map and they can be surpassed with the fine technical base which 

has been built by NIH in the intervening years. 

Let me share briefly an oversimplified model of how I think 

about dealing with diseases in the past. The physician recognizes 

the disease, the public health authorities count the disease, tell us 

how important it is, NIH research then builds a technical base and 

finally the private sector brings forth drugs and vaccines that we 

use to deal with these. 

Well, neither an emerging infectious disease when it is on the 

march or a bioterrorism event when it has already been perpetrated will lend themselves to that model. They will come swiftly, 

and each element has to be in an accelerated mode. NIH training 

for the physicians who will be our infectious disease specialists 

must not be ignored by purchase of these other remedies. The public health infrastructure still could use some strengthening. NIH’s 

current research agenda and their movement toward translational 

extension is going to be extremely important still, but Project BioShield may be what we need to give us the essential weapons that 

are going to be needed in this fight. 

The fight will not work just with public health or physicians. We 

have to have vaccines and anti-infectives. We have already heard 

multiple times that there is insufficient incentive in the commercial 

sector. 

I would just close by saying that I certainly support the goals of 

BioShield. I am not a sufficiently well-versed health economist to 

be able to help you with some of the other deliberations about the 

funding.

PREPARED STATEMENT OF DR. CLARENCE JAMES PETERS 

Chairman Cox and distinguished members of the Committee, thank you very 

much for the opportunity to express the lessons that I have drawn from my experience in this area as they relate to the issue of Project BioShield. I was educated 

as a physician at Johns Hopkins Medical School in Baltimore, trained in Internal 

Medicine at the University of Texas Southwestern Medical School in Dallas, and did 

additional work in immunology at Scripps Foundation in La Jolla. My first introduction to research in infectious diseases was in Panama where I lived and worked for 

5 years as a research scientist in an intramural NIH laboratory. Subsequently I 

spent 13 years at USAMRIID, the principal DoD laboratory in biodefense research; 

I began as a laboratory scientist and eventually became deputy commander, serving 

this role during Desert Storm. I then spent 10 years at CDC as head of their BSL–
20

4 laboratory, dealing with emerging infections including hantavirus pulmonary syndrome, Ebola, Marburg, Nipah, and other viruses. For the last two years I have 

been at the University of Texas Medical Branch at Galveston, TX where I am the 

John Sealy Distinguished University Chair in Tropical and Emerging Virology, the 

Director for Biodefense, Center for Biodefense and Emerging Infectious Diseases, 

and the director of the BSL–4 laboratory. This laboratory is the only such high containment laboratory in the US within an academic institution. 

I would like to share with you reasoned conclusions drawn from that experience. 

I further believe that my impressions reflect those of a large number of my colleagues who are working in public health, infectious diseases, and epidemiology. 

Bioterrorism is a real threat to our country and to our way of life. We have, of 

course seen the deep impact of 22 cases of inhalation anthrax with 5 deaths on our 

social and governmental fabric in 2001. During my work at USAMRIID I was deeply 

involved in biowarfare defense and as a part of our defensive posture had an opportunity to examine the offensive program that existed in the US prior to 1968. This 

convinced me beyond any shadow of a doubt of the practicality of biological attacks 

that could be small and focused with extreme disruptive effect or broad and lethal 

to tens to hundreds of thousands of citizens. The most dangerous of these attacks 

could be achieved with only a handful of agents, but defenses were woefully inadequate. The major route of dissemination for all except smallpox virus would be by 

small particle aerosols; smallpox virus could be spread initially by this route, but 

uniquely among the lethal agents of mass casualties would then be able to propagate itself by interhuman transmission. 

USAMRIID, DoD’s lead agency for biodefense, and related agencies worked intensively on medical countermeasures with considerable success given their resource 

limitations. When I became associated with the effort in 1977, a licensed anthrax 

vaccine existed but was not procured because of larger issues of DoD doctrine for 

its use and procurement; this is the same vaccine was used in the two Gulf wars. 

The licensed smallpox vaccine was given to troops explicitly for its importance as 

a deterrent for biological use of the smallpox virus; this was discontinued for a variety of reasons; incidentally, this coincides temporally with the increased efforts of 

the Soviet weaponization of smallpox described in Ken Alibek’s book ‘‘Biohazard’’. 

USAMRIID had developed a number of prototype vaccines against other agents and 

before I departed in 1990 developed several more, including those against NIH/CDC 

category A agents Argentine hemorrhagic fever and Rift Valley fever. All these vaccines remained in investigational status even though they were used to protect investigators working with the agents in the laboratory as well as persons involved 

in epidemic disease control. There was simply no doctrine to drive their licensure 

and deployment nor was there a budget to support this. The antiviral drug ribavirin 

was also shown to have preclinical efficacy against several category A agents; and 

through contract CDC tested the drug in humans naturally infected with Lassa 

fever in West Africa to confirm this efficacy. Other potential products came out of 

this program, including botulinum antitoxins, a humanized monoclonal antibody to 

the virus of Argentine hemorrhagic fever, and other prototype vaccines that only 

now are being tested in humans. I thought it was important to bring these products 

to the committee’s attention to show that these threats can be countered and to emphasize that the research base is not sufficient to actually bring products that have 

great promise to practical utility. I am not certain of the exact budget of USAMRIID 

during that period, but I would estimate $10–20 million annually as a reasonable 

figure; the results included the above-mentioned vaccines and drugs as well as a 

considerable knowledge base on expected behavior of agents and diagnostics. 

We are facing an ever-increasing threat from emerging infections, as well. This 

is not irrelevant to the present discussion. Emerging infections arrive unexpectedly 

and can be equally or more lethal than bioterrorist events. In fact, in some ways 

they are even harder to prepare for. I would be willing to predict that we will suffer 

both bioterrorist attacks and significant depredations from emerging infections in 

the next decade. I can further predict that anthrax is the highest threat for a significant bioterrorist attack, followed by other agents in the category A and B lists 

developed by NIH and CDC. However, I have no idea what the next emerging infection will be, a problem exemplified by the recent surprising appearance of the SARS 

coronavirus as a serious threat to global health. Parenthetically, I would emphasize 

that among the emerging disease unknowns there is one established threat: the recurrence of pandemic influenza is virtually certain and should be a part of our planning. 

Biothreats and emerging infections converge in two important ways: the agents 

are often the same and the remedies usually share significant elements, including 

the importance of vaccines and anti-infectives. I had the opportunity to observe 

emerging infections first-hand between 1991 and 2000 when I was head of the Spe-
21

cial Pathogens Branch at CDC. We were responsible for infectious diseases that required special containment for safe laboratory work and for field work. Our BSL–

4 laboratory was the focus of the global struggle against high-hazard pathogens 

around the world. In that decade we dealt with new (new to science) viruses, returning viruses that had been thought to no longer pose a threat, and known viruses 

exhibiting behaviors not previously thought to be a feature of their behavior. The 

assessment and control of these agents was due to the dedicated and very capable 

staff of the branch as well as others at CDC, the strong scientific base laid by NIH, 

the work from USAMRIID, and the contributions of persons in the endemic areas. 

It is important for the committee to understand that we were not out looking for 

these agents: they came to us in the form of destructive and challenging epidemics. 

Were these epidemics a phenomenon of the internet communications and the 24/

7 news atmosphere? Emphatically, no! The Institute of Medicine in 1992 published 

a thoughtful analysis of the importance of infectious disease in the U.S.: Emerging 

Infections. Microbial Threats to Health in the United States, National Academy 

Press. This volume showed the importance of emerging infectious disease and antimicrobial resistance in the increasing role of lethal infectious diseases in our country, as well as the threat from microbes outside the US to our population. I was 

privileged to participate in a 10 year review of this report published in 2003: Microbial Threats to Health: Emergence, Detection, and Response, National Academy 

Press. Unfortunately, the findings of the committee were pessimistic. The factors 

originally identified as driving the emergence of infectious disease threats were correct and continued to operate, but at an ever-increasing force. The belief of the committee was that these factors plus the intrinsic adaptability of the microbes were 

driving us toward some very unpleasant consequences. Our major defenses against 

the adverse outcomes were in disarray. The initial investment in woefully undersupported basic public health deriving from our bioterrorism response was somewhat helpful in a general sense, but the modest new capacity was largely (and appropriately) utilized in bioterrorism planning and response enhancement. A particular national vulnerability to emerging infections was the lack of new industrial 

developmental efforts toward anti-infectives, vaccines, and pesticides. 

Thus, the proposed BioShield initiative is particularly timely. It has the potential 

to improve our defensive posture toward bioterrorist threats utilizing weapons of 

mass destruction and to also enhance the ability to deal with major emerging infectious menaces. To explain this, I will use a greatly oversimplified model of how we 

have dealt with some past problems. This imaginary sequence goes something as 

follows: 

1. Medical practitioners recognize the disease and make diagnoses 

2. Public health authorities see the aggregate picture and analyze the importance 

of the infection in the community and the nation. 

3. 1NIH sponsors research to understand the underlying scientific issues 

4. 1Industry picks up on the above to produce a remedy, often a vaccine or perhaps an anti-infective 

A novel infection, whether from a bioterrorist attack or from an emerging infection, will likely follow a similar sequence: 

1. A medical practitioner recognized the 2001 anthrax attack and this has been 

the case for most of the emerging infections I have dealt with. I would urge the committee to recognize the needs for training of physicians and infectious disease practitioners as part of our front line defenses; this appears to be threatened by reduction 

of NIH infectious disease research grants to procure anthrax vaccine and initiatives 

such as BioShield would offset this cannibalism of resources. 

2.Public health will be the first responders. Public health capabilities have been 

strengthened, but the over-all vigor of the public health establishment remains in 

doubt. We must be sure our quotidian public health needs are well-met with trained 

professionals who have the depth of staffing, organization, and resilience to recognize and deal with bioterrorist and emerging infectious disease emergencies. 

3.We also have a great deficit in basic research on the important bioterrorist 

agents; NIH has recognized this and has launched excellent programs to remedy our 

gaps. These remedies inevitably are in the nature of ‘‘catch-up’’, but we are now on 

an accelerated track. Money for the research programs is not a sufficient response 

and NIH has recognized this. They have initiated programs for construction of the 

specialized laboratories that will be needed for the work in these diseases. I urge 

the committee to assure that these laboratories are constructed and supported. NIH 

has also recognized requirements for training in the diseases involved as well as in 

performing research in these highly specialized containment laboratories, and I 

would urge the continuing support of the committee for this aspect of biodefense. 

4.The actual development of anti-infectives and vaccines for prevention and treatment of biothreat and emerging infectious diseases. This is a complicated and im-
22

portant area. It does little good to achieve 1–3 without having these remedies available. 

Virtually every recent advance in drug and vaccine development has been due to 

the far-sighted and broadly supported research base evolving from NIH with its 

strong Congressional support. However, we also recognize that NIH has not usually 

been the actual product developer. The private sector has shouldered the initiative 

and responsibility of translating this research into a safe and effective armamentarium to protect our nation’s health. I am convinced that this traditional model will 

not work in the case of biodefense and emerging infections. The financial incentive 

is not sufficient to draw the large pharmaceutical houses into the fray. This is not, 

in my opinion, inappropriate; they have responsibilities to their shareholders. The 

basic facts are fairly simple: I have worked with DoD and in the area of emerging 

infections for more than 30 years and have seen no movement or interest of the 

international pharmaceutical industry in the available markets. We must, however, 

overcome this lack of vaccines and anti-infectives, which is a major obstacle to the 

security of the Nation and its citizens. 

Even more alarmingly, the DoD has suffered serious decrements in its capability 

to develop and produce vaccines. Although their programs were appropriately directed toward military problems, the severe cut-backs of in-house DoD vaccine development programs, the loss of the vaccine production capability at the Swiftwater 

facility, and the narrow approach taken by the Joint Vaccine Acquisitions Program 

documented in the ‘‘Top report’’ (Protecting Our Forces: Improving Vaccine Acquisition and Availability in the U.S. Military (2002), Medical Follow-Up Agency, Institute of Medicine) represent a significant national loss. This has changed our readiness landscape markedly. The ability to rapidly develop prototype vaccines, prepare 

modest-sized lots under suitable conditions for human use, and to test these in humans is vital to a flexible and forward looking biodefense and emerging infectious 

disease policy. 

BioShield seems to provide an incentive to bring new initiatives into the arena 

of developing protective measures. The availability of targeted monies for actual procurement of the drugs and vaccines we need should draw entrepreneurs into the 

field and encourage the flowering of those already involved. This would be expected 

to synergize with the research that NIH has already shifted into the direction of 

diagnostics, therapeutics, and vaccines to lead to actual practical solutions to the 

problems we face. I see this as an important departure from what Dr. Fauci has 

described as ‘‘business as usual’’ and potentially a boon to humanity. 

I believe that the significance of BioShield can only be realized if it is truly directed into the area intended. It must be used to insightfully develop the drugs we 

need in biodefense. There are some other considerations that I would list in closing: 

1. It must take into account the dividends accruing from testing these drugs in 

populations that are at-risk for the different diseases that are simultaneously biodefense and emerging disease threats. This can provide proof or at least an indication of efficacy and may result in extensive local use that can enlarge the safety 

data base. 

2. One of the areas that should be considered is the importance of anti-infectives 

over vaccines in the civilian population. Vaccines are supremely important for the 

military, but the difficulties of employing multiple vaccines in the face of uncertain 

threats are exemplified by the simple application of smallpox vaccine to hospital 

workers in the US. Thus, antiviral drugs for the category A threat agents become 

of particular interest. 

3.Some of the vaccines and drugs that are in an investigational status would be 

of tremendous advantage for the researchers involved in these important studies of 

national defense importance. These protective measures should be made readily 

available to researchers. Vaccines formerly available for use under ‘‘Investigational 

New Drug Exemption’’ are increasingly difficult to obtain. Their use would decrease 

the risks of laboratory scientists, in some cases decrease the needs for expensive 

containment, and accelerate the development of definitive countermeasures for the 

agents. 

4.The thrust of this effort must be protection of the civilian population from biothreats and from emerging infectious diseases. Military and civilian priorities will 

differ. However, the contributions of the military should not be forgotten and DoD 

biodefense work should be supported and the many complementary findings should 

be incorporated into the civilian effort. 

Thank you very much for the opportunity to make these comments.

Chairman COX. Thank you, Dr. Peters. 

Dr. Ronald Crystal. 
23

STATEMENT OF DR. RONALD CRYSTAL, PROFESSOR AND 

CHAIRMAN, DEPARTMENT OF GENETIC MEDICINE, WEILL 

MEDICAL COLLEGE OF CORNELL UNIVERSITY 

Dr. CRYSTAL. Thank you, Mr. Chairman. In addition to my role 

at Cornell Medical College as Chairman of the Department of Genetic Medicine, I am also a practicing physician and Chief of the 

Division of Pulmonary Critical Care Medicine, and I would like to 

give you the view of the academic/physician/scientist in regard to 

bioterrorism. 

First, there is no question that these organisms are available. 

We, all of us on this panel, have trained many people over the 

years. There are thousands of people who know how to deal with 

these kinds of organisms, and the amount of resources that one 

needs to grow them up and reproduce are trivial. You can do them 

in 100 square feet with equipment that is readily available and not 

very expensive. 

With regard to our care of patients who may be infected with 

these kinds of agents, despite the fact that my intensive care unit 

is as high tech as there is and our physicians are well-trained, we 

have a disaster plan and they know how to deal with these agents, 

if we had 10 to 100 individuals in New York City come to our hospital we would be overwhelmed, and so we have no choice as a Nation other than to protect ourselves, and clearly that is the goal of 

BioShield. 

But the academic world cannot do it by itself, if we are going to 

produce these new therapies and vaccines. The academic community is capable of moving very quickly. We are capable of doing 

basic research, of doing experimental animal studies, and to a limited extent to do human studies. In our institution I have a facility 

available to me to produce vaccines that we can try on humans, but 

we cannot scale up to be able to treat and protect the Nation. We 

need the pharmaceutical industry and the biotech industry to be 

able to be part of that. 

So there are several points I think that are critical. We as a Nation have to be very quick acting. We have to be able to move 

quickly in terms of response to these threats. Our defenses, our 

therapies in themselves have to be quick acting, particularly if we 

use a stockpile kind of strategy. 

Second, the methodology and the technology to genetically modify 

these organisms is not very difficult. Our scientists who are training graduate students are capable of that kind of work. It is not 

that high tech. So we have to develop therapies that are versatile 

that can meet that change so that if an organism such as anthrax 

which has been modified so that it is resistant to antibiotics, that 

we can provide vaccines and therapies to meet that challenge. 

In the context of the academic community not being able to do 

it itself, we need the industrial partnership, and clearly it has to 

be attractive as a commercial opportunity. Otherwise it seems to 

me that we are not going to be able to develop as a Nation these 

kinds of therapies. 

Finally, as you have heard, we have to be able to get approval 

of these kind of therapies. You may have seen in the paper today 

there are new recommendations for the treatment of hypertension. 

If I was developing an anti-hypertensive drug, I would take the 
24

group of people who had hypertension, treat them and another 

group, not treat them. You cannot do that with bioterrorism 

agents. You cannot try out your vaccine and then administer these 

organisms to human. We need other paradigms to be able to approve these drugs, and when we need them we have to do it quickly. 

Thank you. I would be happy to answer questions.

PREPARED STATEMENT OF DR. RONALD CRYSTAL 

Testimony of Dr. Ronald Crystal to the House Select Committee on Homeland Security 

Chairman Cox, Ranking Member Turner and Members of the Committee, thank 

you for inviting me to present to the Committee a scientific assessment relating to 

‘‘Project BioShield’’. I am Dr. Ronald Crystal, Professor of Medicine, Chairman of 

the Department of Genetic Medicine, and Chief of the Division of Pulmonary and 

Critical Care Medicine at Weill Medical College of Cornell University—New YorkPresbyterian Hospitals in New York City. I will focus my remarks on the scientific 

aspects posed by the threat of the use of infectious agents for bioterrorism, the feasibility of preventing the spread of disease caused by these agents, and how the academic community can contribute to this effort. 

We believe the threat is very real. While control of access to these agents will 

help, we cannot lower the risk to zero. If a group wanted to spread a bioterrorism 

agent in a populated area, it would not be difficult, particularly in the context where 

the perpetrators are willing to give up their lives to carry out an attack. As you 

know, there is a long list of bacteria, viruses, and other pathogens that, if introduced into a populated area, could quickly spread undetected through the population, with resulting morbidity and death and consequent social and economic disruption. These organisms are readily available and many are found in nature. Even 

most of the so-called class A select agents are not difficult to obtain. 

The 2002 Public Health Security and Bioterrorism Preparedness and Response Act requires Federal registration for possession and transfer of select agents. All laboratories possessing and working with these agents are required 

to resister these pathogens, to identify the individuals that have access to these organisms, and to have in place a Select Agent Safety Plan for handling and accounting for all select agents. This is a positive step and will reduce the risk of these 

agents being available to potential bioterrorists. Even so, keep in mind that biologic 

agents by their very nature reproduce themselves. It is relatively easy, in a laboratory as small as 100 sq. ft. with equipment and reagents that are readily available 

and technology that is known to thousands of individuals in our country and around 

the world, to reproduce sufficient amounts of bioterrorism agents that, if released 

into the environment of a populated area, could result in massive disruption to society. 

One of my responsibilities is to run the Medical Intensive Care Unit at the Weill 

Cornell Medical Center of New York-Presbyterian Hospitals. Our Intensive Care 

Unit is as modern and as high tech as any in the world, our physicians are trained 

to deal with the diseases that can be caused by the biologic agents of bioterror, and 

we have specific disaster plans in place to deal with a bioterrorist attack. Even so, 

the facilities of our hospital, and those of any of the medical facilities in our country, 

would be quickly overwhelmed if hundreds of patients with a highly infectious disease were to come to the hospital over a short period of time. 

In the context of these realities, we have no choice other than to invest our resources to protect ourselves from the potential of bioterrorism in our country. This 

Committee’s consideration of BioShield is central to that effort. 

How can the resources of our country be mobilized to meet the challenge of BioShield? Between the academic community, guided by the efforts of Tony Fauci and 

the National Institute of Allergy and Infectious Disease and the pharmaceutical and 

biotech industries, we can get it done. Collectively we have the expertise and the 

infrastructure to create new generations of vaccines, monoclonal antibodies, and 

small molecule drugs to prevent and treat diseases caused by bioterror pathogens. 

What should our strategy be? The list of potential bioterror agents is large, and 

it simply is not rational to believe that we could immunize everyone in our country 

against every possible agent. Not only is the list of possible agents too large, but 

inherent in any prophylactic therapy is the risk of adverse effects. While these risks 

may be small, when put in the context of the entire population, the risk-benefit 

analysis suggests the risk and cost for immunizing everyone against everything ar-
25

gues against this approach. I believe the strategy should be to leverage the exploding knowledge of the genetic revolution to develop new generations of vaccines and 

therapies against the most probable agents, and then stockpile the effective vaccines 

and therapies to be used in response to an attack. 

The biomedical academic community in the US is unequaled in the world in regard to expertise, depth and infrastructure. It can be rapidly mobilized to focus on 

this challenge, and should be able to develop strategies to protect against and treat 

these disorders. With the information provided by the genetic revolution, the academic community can move quickly to develop safe, effective, and versatile platform 

technologies in which to provide the BioShield relevant to protect our population. 

In addition to being safe and effective, there are several features of new generations 

of vaccines and therapies that are specific to the bioterror threat. 

First, if our defenses are going to be stockpiled and used in response to an attack, 

they must be rapidly acting. 

Second, we must be cognizant that the technology is widely available to genetically modify potential bioterror agents to circumvent existing vaccines and therapies. For some agents, this has already been done, such as the creation of strains 

of anthrax that are resistant to conventional antibiotics. Thus, we have to develop 

‘‘platform’’ vaccines and therapies that are sufficiently versatile to meet this potential threat. 

Third, while our universities, institutes, and hospitals can develop the strategies 

for these vaccines and therapies and carry out proof-of-principle studies in experimental animals and in small human trials, the academic community does not have 

the infrastructure, expertise, or resources to turn these new generations of vaccines 

and therapies into large amounts of final products that would meet the necessary 

safety criteria for large scale human use. This final step is critical to the overall 

effort and will require a partnership of the academic community and the pharmaceutical and biotech industries. In this context, it will be important that strategies 

be developed to make working in this area attractive as a commercial opportunity 

for the pharmaceutical and biotech community. 

Finally, because of the very nature of the threat, it is not possible to test the efficacy of these new bio-defenses in humans in terms of protecting against the actual 

bioterror pathogens. In this regard, the Food and Drug Administration will need to 

work with Congress to develop new paradigms for approval of BioShield products 

based on surrogate measures of efficacy, rather than the classic demonstration of 

efficacy in humans against the specific pathogen per se. 

In closing, I thank the Chairman and the Members of the Committee for the opportunity to help you in your deliberations regarding BioShield, a national strategy 

that I and my colleagues in the academic biomedical community strongly support.

Chairman COX. Dr. Crystal, I will advise members because we 

moved forward with this hearing during the vote, that for all members under the rule who were here within 5 minutes of the fall of 

the gavel, if you have second thoughts about an opening statement 

you will have an opportunity to make one for 3 minutes at the beginning of the time during which you are recognized. Alternatively, 

you may take the full 8 minutes for questioning. 

I will now recognize myself for 8 minutes. 

I want to emphasize as I did a moment ago how grateful we are, 

first, Dr. Fauci, to you for the continuing work you have been doing 

on Project BioShield with the President for some months beginning 

when you and I and the President, Secretary Ridge and Secretary 

Thompson kicked it off on your campus; and next, to the other distinguished members of our panel, thank you so much for taking the 

time to be here with us and to help advise us. We have some scientific questions as well as economic questions that we cannot answer without your help. 

I would like to begin with a very straightforward question that 

Dr. Fauci might answer in one way because of the classified information that rests behind part of the answer, but the rest of the 

panel can also address, and that is we have heard that biological 

organisms exist or can be manufactured which will not only wipe 

out tens of thousands of people if administered as a weapon, but 
26

that conceivably could wipe out life on the planet. I want to know 

if that is an exaggeration or whether that is a real prospect, and 

I will begin with Dr. Fauci. 

Dr. FAUCI. Mr. Chairman, I would not characterize the capability 

of literally wiping out life on the planet through biologics as something that is feasible. But within the same breath as I say that, 

I say clearly that engineered microbes in a number of categories 

could wreak destruction on our civilization measured in the millions and millions of people if you have a microbe that spreads 

from one person to another, and we know there are multiple different categories. We know the prototype for one that can be easily 

disseminated but does not spread from person to person: anthrax 

spores. The other type would be one that could be spread from person to person like smallpox. 

When you have a situation where you can disseminate one or the 

other of those, I would have to say as a scientist it would be extraordinarily unlikely that you could wipe out civilization on the 

planet—but that is quite draconian,—but you could still do enough 

damage to make it a very, very horrible situation. 

Chairman COX. Thank you. I would put the question to each 

member of our panel in turn. 

Dr. ADAMS. Generally in challenge situations, there are always 

individuals who survive those challenges. I can use foot and mouth, 

anthrax, tuberculosis, and several others where there are natural 

resistance mechanisms which are yet unknown in engineering that 

pathogen to completely destroy all life on the face of the Earth. I 

have a lot of reservations about that statement. 

On the other hand, the lateral impact, maybe not the direct impact, would have a huge impact on life as we know it. And so while 

wiping out all populations on the face of the Earth is I think an 

untenable statement, the impact on everyone else would be tremendous. 

Dr. PETERS. I think we have one example of the movement of the 

Conquistadors to the New World. They brought measles, smallpox 

and a variety of other diseases with them. They did not wipe out 

the Indians, but they destroyed their civilization and were instrumental in the Spaniards being able to conquer the New World with 

relatively few people. 

I think we have something going on right now with SARS that 

we do not know exactly what the end of it is going to be, but we 

already know that Asian economies are suffering tremendously. My 

prediction is they will not be able to control it in China. If that is 

true, we will be dealing with repeated introductions in this country 

for the indefinite future, so we may see a change in our way of life 

where we are taking temperatures in airports, in addition to taking 

our shoes off and putting them through the x-ray machines. And 

we may see emergency rooms rebuilt so if you have a cough, you 

go into one entrance. You would go into a negative pressure cubicle 

until your SARS test comes back. 

So while I think wiping out human life is extremely unlikely, we 

have unengineered examples of bugs that have made great impacts 

on civilizations. 

Chairman COX. Dr. Crystal. 
27

Dr. CRYSTAL. The natural examples of what you suggest were, of 

course, hundreds of years ago with smallpox and the plague, which 

wiped out one-third of the population. We now have treatments for 

organisms like the plague, but if they were engineered to be resistant, but if they infected a number of people and had the capability 

of being spread rapidly from individual to individual, it would 

cause enormous havoc. I agree with the panel, I don’t think it 

would wipe out civilization, but the consequences to our society 

would be enormous. 

Chairman COX. Dr. Crystal, that leads to my next question. 

Given that engineered mutations represent a special threat, Project 

BioShield is designed to stockpile vaccines but obviously it can 

stockpile a vaccine only against something we already have in 

hand. What then of natural mutations that occur in organisms? 

The common cold changes from year to year, and what also of the 

fact that these stockpiled vaccines themselves will have a shelf-life? 

The prescription that I get has a date label on it which tells me 

it is good only for so long. There is a decomposition of any cure or 

antidote. Do we run the risk of investing billions of dollars in cures 

for the wrong thing because it is only what we now have in hand? 

Dr. CRYSTAL. I don’t think we have a choice because of the risk, 

but we have an example of that in influenza which changes from 

year to year and we effectively deal with that by developing new 

vaccines. What we have to do is a two-pronged approach. One is 

to develop the therapies and vaccines against what is out there, 

and then have versatile platforms, the development of these vaccines and therapies, so we can move very quickly, and the moving 

very quickly is a very important aspect of it, to develop the therapy 

if they are engineered to be different. 

Chairman COX. Before a biological weapon is used, ought we to 

stockpile a vaccine for it; and if so, how do we know when to stop 

with the different possible threats against diseases? 

Dr. CRYSTAL. You can prioritize the organisms, not only in terms 

of which ones are more deadly, but ones which can spread more. 

We can prioritize in terms of the vaccines and therapies that we 

already have, the ones that are getting close to development, and 

the ones further out. So I think one can make a rational plan about 

how to go about that problem without wasting resources. 

Chairman COX. Do others on the panel wish to address either of 

those questions? 

Dr. FAUCI. Mr. Chairman, just a brief comment about a word 

used by Dr. Crystal about what we call universal platforms, and by 

platform we mean if you can have a matrix vaccine to which you 

can insert the genes of whatever relevant microbe you are dealing 

with, even if it is a microbe that we do not have much experience 

with that we will ultimately identify. 

A good example of doing this outside of the context of biodefense 

is what we are working on in our emerging diseases program 

where you can make a West Nile virus vaccine by taking a vaccine 

that we already have developed against dengue or yellow fever, and 

since it is the same class of virus as the West Nile virus, to essentially create what we call a chimera or a mixing of the vaccines 

where we insert the genes of the West Nile into the yellow fever 

backbone so you can have vaccines that allow you to then inter-
28

change these cassettes of genes. That is one of the things that we 

very much want to provide industry with incentives to get involved 

in because they can do that better than anyone else. 

Chairman COX. My time for questioning is finished, but I would 

be happy to recognize Dr. Peters for further comment. 

Dr. PETERS. In addition to the other comments, there are some 

parts of the microbe that are essential for its functioning, and in 

some cases you can develop vaccines against the essential part of 

the microbe which can’t be circumvented. 

Chairman COX. That is encouraging. Thank you. 

I recognize Mr. Turner for 5 minutes of questioning. 

Mr. TURNER. Mr. Chairman, I have no doubt that everyone of us 

on this committee and I am sure all of our witnesses agree that we 

face a very serious threat and we need to be very aggressive about 

dealing with it. The only question that I think is really open and 

perhaps unresolved regarding our legislative approach is will this 

get the job done? 

I have been looking for someone with expertise who will tell me 

that if our goal is to find answers to five, 10, 12, whatever biological threats we want to address first, that within some period of 

time I can know that we will have addressed them. 

Now Project BioShield and the administration’s proposal attempted to accomplish that by basically providing a funding mechanism which says that the administration could just write a check 

to get some pharmaceutical company to proceed to try to develop 

a vaccine. Congress was very reluctant, and in the bill that was 

marked up today by the Committee on Energy and Commerce that 

blank check section of the proposal was eliminated. 

I have a letter here and I want to read it into the record because 

I want some comment from anybody who feels this is an area that 

you have an expertise in. I know it is a specialty to know the economics of the pharmaceutical industry, but this is a letter from retired chairman and CEO of Merck & Company. I had the opportunity to talk to him on the telephone. I asked him to be here today 

but he had a conflict and could not appear. I understand that Dr. 

Fauci knows Dr. Roy Vagelos well, who is currently a resident of 

Bedminster, New Jersey. Here is his letter:

Dear Congressman Turner: I have reviewed Project BioShield as you have 

requested. These are all good proposals and they should be tried. But I am 

afraid they will not accomplish what is needed: a reliable stream of bioterror countermeasures. The risk of failure with any R&D project aimed at 

a specific project is very high. That is true for products in the commercial 

marketplace as well as those that are aimed at the defined and limited 

market for a bioterror countermeasure. Although it would be useful to have 

many of the measures targeted by Project BioShield, these would help research organizations only if they succeed in discovering and developing a 

countermeasure. But most research aimed at specific product discovery and 

development fails. Long-term investments are required with great patience, 

waiting for the occasional success. 

Bioterrorism countermeasures will not be important targets for either large 

pharmaceutical companies or small biotech companies. Their priorities 

must be large commercial targets if they are to survive and prosper. For 

patriotic reasons some large pharmaceutical companies may take on a some 

of the bioterror targets. Small biotechs will rarely venture into this field unless they are motivated purely on patriotic grounds. 

In order to assure the Nation that significant bioterror countermeasure 

R&D aimed at product development will be undertaken, I believe an organization must be built that will dedicate its work to this field. The organiza-
29

tion must be contain top research and development people who know and 

practice state of the art research and development. To start such an organization, people experienced in drug vaccine research and development should 

be recruited from industry as well as inexperienced younger scientists who 

want to dedicate part of their careers to such work. 

A fully equipped facility should be built, preferably close to the National Institutes of Health, so as to share the intellectual climate. People who work 

in this bioterror countermeasure laboratory could do this as a career, or 

they could spend several years in this environment either to gain experience in drug/vaccine R&D or to satisfy patriotic ambitions. The most important thing for succeeding in such an unusual venture is the identification 

and recruitment of an outstanding leader who understands the science and 

is willing to dedicated his career to the cause. I see no reason that people 

of similar quality as those working at NIH, Department of Defense, or the 

Center for Disease Control could not be recruited to such an important 

cause. 

P. Roy Vagelos 

Retired Chairman of the Board and Chief Executive Officer 

Merck & Co., Inc.

Dr. Vagelos is Chairman of the Board of Trustees of the University of Pennsylvania, a post he accepted in October, 1994, having served as a trustee since 1988.

Dr. Vagelos served as Chief Executive Officer of Merck & Co., Inc., for nine years, 

from July 1985 to June 1994. He was first elected to the Board of Trustees in 1984 

and served as its Chairman from April 1986 to November 1994. He was previously 

Executive Vice President of the worldwide health products company and, before 

that, President of its Research Division, which he joined in 1975. 

Earlier, he served as Chairman of the Department of Biological Chemistry of the 

School of Medicine at Washington University in St. Louis and as Founding Director 

of the University’s Division of Biology and Biomedical Sciences. He had previously 

held senior positions in cellular physiology and biochemistry at the National Heart 

Institute, after internship and residency at Massachusetts General Hospital. 

The author of more than 100 scientific papers, Dr. Vagelos received the Enzyme 

Chemistry Award of the American Chemical Society in 1967. He is a member of the 

National Academy of Sciences, the American Academy of Arts and Sciences and the 

American Philosophical Society. He has received honorary Doctor of Science degrees 

from Washington University, Brown University, the University of Medicine and 

Dentistry of New Jersey, New York University, Columbia University, the New Jersey Institute of Technology, Mount Sinai Medical Center and the University of British Columbia; an honorary Doctor of Laws degree from Princeton University; and 

an honorary Doctor of Humane Letters from Rutgers University. He has received 

the Thomas Alva Edison from Thomas Kean, the Lawrence A. Wein Prize from Columbia University, the C. Walter Nichols Award from New York University’s Stern 

School of Business and the National Academy of Science Award for Chemistry in 

Service to Society. Dr. Vagelos was awarded the Prince Mahidol Award in January 

1998 by His Majesty the King in Bangkok, Thailand. 

Dr. Vagelos is a Director of The Prudential Insurance Company of America, 

PepsiCo, Inc., and The Estee Lauder Companies, Inc. He is Chairman of the Board 

of Regeneron Pharmaceuticals, Inc. He is Co-Chairman of the New Jersey Performing Arts Center, a Trustee of the Danforth Foundation and Director of the Donald Danforth Plant Science Center.

Mr. TURNER. I would like to invite any of you to comment on Dr. 

Vagelos’ recommendations who feel your expertise would allow you 

to make an assessment of whether or not we can be assured that 

the approach we are taking will get the job done. 

Dr. FAUCI. Thank you, Mr. Turner, for reading that letter. 

Certainly. Dr. Vagelos has put up an opposition that has been seriously discussed, not only with regard to biodefense but in the involvement of vaccines for things that are not related to biodefense. 

There are some good points that he makes. The problem I have 

with that is that I—what he is suggesting is essentially having a 

vaccine authority that is a megavaccine institute, where we, and I 

think he is talking about the Federal Government, fund an entity 
30

that would be responsible for the developing of all countermeasures. 

I don’t reject that out-of-hand at all. But, what it misses is the 

fact that it doesn’t allow us to call upon the extraordinary creativity and expertise of multiple, multiple biotech companies and 

‘‘big Pharma’’ that can be enticed into using their capabilities to address problems that are imminent, or problems that might actually 

arise. 

So it is not that it is a bad proposal at all, but the thing that 

BioShield does, and no program is perfect, Mr. Turner, but one of 

things that BioShield tries to do is embrace the extraordinary capabilities of something that this country has that is better than any 

country in the world, and that is a major, absolutely unparalleled 

pharmaceutical industry. 

Mr. DICKS. Will the gentleman yield for a quick point? 

Chairman COX. The gentleman’s time has expired, but with 

unanimous consent the gentleman can have an additional minute 

to yield. 

Mr. DICKS. You can take it out of my time. What if you had 

grants to the private sector and then grants to the universities like 

we do now, and you would have basically the kind of system that 

we operate today? Wouldn’t that work around the model that has 

just been suggested? 

Dr. FAUCI. Yes, Mr. Dicks. Actually, that is part of the underlying strategy of BioShield, as I mentioned. I don’t think you were 

here because the vote was on. But, there are two major components 

to the development of countermeasures. One is what we call the 

push, namely the development of the proof of concepts at the research level. This is what the NIH and other Federal agencies that 

have research responsibilities are doing. 

Trying to get the best of the minds to create the proof of concept, 

and to push the process through the early developmental stage. 

And then on the other side of the spectrum is what we call the pull, 

or the incentive to the industry which does this so well to get involved, to take risks, and perhaps even share risks with us, to the 

ultimate development of a product that they can do better than any 

other entity in the world. 

So the point that you make is entirely compatible with the entire 

spectrum from proof of concept in basic research, up through and 

including the product, which is what we tried to do when we put 

BioShield together. 

Mr. DICKS. Thank you. 

Chairman COX. Mr. Turner. 

Mr. TURNER. Dr. Fauci, I know you are well acquainted with Dr. 

Vagelos. I want to be sure the record is clear. I noticed in your response, in disagreeing with some of what he said, you left the implication that he did not approve of the things that were in the legislation. And the letter, and I am going to ask the chairman to 

make it part of our record. In the opening paragraph that I read, 

he said that these are good proposals, and they should be tried. But 

I am afraid they will not accomplish what is needed. 

So it is not that he didn’t approve of trying to utilize the private 

sector, after all he was Chairman/CEO of Merck, and I am sure 
31

that he’s more than willing to suggest that the private sector can 

be involved, it should. 

The issue that he raises, and the one that I have concern about, 

is whether or not the goal is going to be accomplished. And I would 

suggest that perhaps utilizing what we have proposed, and also utilizing the establishment of a bioterrorism research laboratory along 

the lines suggested by Dr. Vagelos, may be our best insurance to 

be sure that this country is protected against biological attack. 

Dr. FAUCI. Yes, sir. There are many good points that Dr. Vagelos 

has made. I hope I made it clear that I don’t reject, at all, what 

he is saying. And I do recognize that he is saying that there are 

parts of BioShield that he feels are very important. 

So I think it is just a question of the emphasis upon which you 

place your major thrust. I might also bring to your attention that 

Dr. Vagelos was also a colleague at the NIH before he went in to 

academia and became the Chair of Merck. 

Mr. TURNER. Thank you. Mr. Chairman, I would like to offer the 

letter as part of the record from Dr. Vagelos. 

Chairman COX. Without objection. 

The gentlelady from Washington, Ms. Dunn, the vice-chair of the 

full committee is recognized for 8 minutes. 

Ms. DUNN. Thank you. Welcome, gentlemen. This week Homeland Security Department is performing exercises in my hometown 

of Seattle, and also in Chicago, to evaluate our response to radiological or biological attacks. 

We have learned certainly from the briefings we received in the 

Seattle exercise, and from your comments today also, about the 

rapid ability of these agents to spread throughout communities and 

throughout potentially nations and the world. 

Assuming the existence of a national stockpile, do you believe 

that we have the rapid response team in place that we need to address such threats, any one of you? 

Dr. FAUCI. We are getting better at it. TOPOFF II is an example 

of trying to get us on the road to being better than we are. We certainly are not at the peak of where we need to be. 

But, considerable resources have been put in, are being put in, 

and will continue to be put in to revitalize a public health, local 

and State infrastructure that because of the successes of what we 

have been able to do with commonly occurring diseases, that infrastructure has, in fact, been neglected. And what Secretary Thompson is trying to do in the Department, and which last year he put 

$1.1 billion, this year $1.4 billion and we plan to put more in, is 

to try and revitalize what is somewhat decaying, but hopefully—

being able to counter that and get it back to where it should be, 

a State and local health capability that would meet the needs of 

what we see as a threat to the health of the Nation. 

Ms. DUNN. What I experienced in Seattle was very educational. 

And I think one of the points of this exercise, although it has been 

criticized for being expensive, is that what you practice, is what 

you produce in an emergency. And the ability to figure out the coordination and the decisionmaking ladders, I think, certainly made 

it apparent to me that this is an important sort of exercise. 

You have indicated, all of you, in your testimony that there is a 

long list of bacteria, viruses, and other pathogens that, if intro-
32

duced into a populated area, could quickly spread undetected 

through our population. 

Considering the large number of potential diseases that could be 

inflicted, and we talked earlier, other folks have asked the question 

about prioritizing dollars, do you think that Project BioShield at $6 

billion is an effective use of our resources? Do you believe that this 

is going to help to prepare for the prevention, or at least the response if it does happen, of this problem, or is it your general, perhaps intuitive, sense that we ought to be using these dollars in 

some other way, focusing on prevention a little bit more, for example? 

Dr. CRYSTAL. If I may. Keep in mind that we have there, for the 

bioterrorism agents, we have other than the antibiotics, we have 

very limited vaccines. We have basically smallpox that we can vaccinate against, and the others we can’t do anything about. 

Even the anthrax vaccine, which is used for our military, takes 

18 months to reach full immunity and protection. And so essentially we are starting from almost scratch in terms of our response. 

And so I would suggest that any resource that is put into this is 

a start. It is something that we critically have to do. 

Ms. DUNN. Dr. Peters. 

Dr. PETERS. You know, I would agree wholeheartedly with Dr. 

Crystal. I would also point out that we can prioritize the agents. 

We do have some like anthrax and smallpox where anthrax will be 

back again and again. It is going to be like the nuclear threat in 

the Cold War. We will have to deal with anthrax for the foreseeable future. The next time it could be antibiotic-resistant to multiple antibiotics. 

That is just a simple fact of life. The other issue about engineered organisms is that, certainly, there will come problems in the 

future. But, my guess is, for the next decade or perhaps longer, we 

will be dealing primarily with engineered antibiotic resistance in 

bacteria and not with super bugs. 

So that we would be well-served, I think, to take care of the antipasto before we move on to the more complicated main dishes. 

Dr. FAUCI. Could I make a brief comment on that? 

Coming to the $5.6 to $6 billion number was based on the best 

estimate that we had of countermeasures that we could identify 

would either be imminent, in the process, or at least within reach. 

That is a number, when the President put that forth in the State 

of the Union Address, was a number that was based on material 

that was given vis-a-vis the background that I just mentioned to 

you of what kind of countermeasures could we project over a 10-

year period. It was always felt that that number could be less than 

that, depending on the success, or more than that, which is one of 

the bases for the concept of a mandatory approach as opposed to 

a discretionary, so that you could have the flexibility of moving. 

And I understand, as mentioned by Mr. Rogers, that this was 

marked up, and we respect and appreciate that. But, that was one 

of the reasons why the original proposal was brought forth as being 

a mandatory proposal to be able to have the flexibility of knowing 

that if indeed something came up, that the industry would know 

that there would be the secure funding source for something that 

we may not have accounted for in the original estimate. 
33

Ms. DUNN. Thank you very much. The real goal of—

Yes. Go ahead. 

Dr. ADAMS. Can I respond just a little bit to the TOPOFF II Exercise? Having been in three exercises now for Foot-and-Mouth and 

Rinderpest occurring in our State of Texas exercises, I want to emphasize that, what I think the real benefit there is the interaction 

of agencies, and who is in charge of the mission. 

In the exercises that we have had, we have had up to 34 agencies 

working together. And the first one didn’t go so well. But, as the 

agencies began to understand an incident command structure, and 

I think that is what they are testing. Resources, yes, you must 

have resources. And that is what I saw in UK, but it was the command structure that makes it work at the local level because all 

control starts locally and then goes nationally. 

And so I think that these exercises are absolutely essential. 

Without those you won’t know your deficiencies, and they have to 

be graded to find out where those deficiencies are. 

And as far as supporting—BioShield supporting vaccine development, the limited numbers of vaccines available as tools is so few 

that this step must be taken to generate a spectrum of vaccines 

prioritized by risk assessment, which should be done first, second 

and third. Without that investment, I would say we would be derelict in our duties not to tell you that that needs to be done to protect the human population. 

Ms. DUNN. Thank you very much, gentlemen. Thank you, Mr. 

Chairman. 

Chairman COX. The gentlelady’s timing is impeccable. You ran 

your time to precisely zero seconds. 

The gentlelady from California, my colleague from Orange County, Ms. Sanchez. 

Ms. SANCHEZ. Thank you, Mr. Chairman. It is nice to sit on a 

committee where the chairman is from Orange County. 

Chairman COX. They should all be that way. 

Ms. SANCHEZ. Well, if we turn to Congress around, I would get 

a chance. But, gentlemen, first of all, thank you for coming before 

us. And, you know, I am not—I will tell you—I’m am not an expert 

on this. Thank God you are scientists and I am not, but that is why 

we have you here. I guess I have a couple of directions of question 

that I have for you. And please feel free, any of you, to answer once 

I get through it. 

You know, sitting on this committee our job, I think, is really to 

take a look at all of the threats to the American people here on our 

homeland, let’s say, to try to figure out what is the tactical approach, what is it we need to take care of first? What is the longterm approach? What is it that will make us safer in the long run 

as an American public? It all comes down to, everybody comes to 

our door. Everybody wants money. Everybody has got an idea. Everybody has got something to protect. 

Aside from the biological, we have all sorts of things happening, 

our borders, our ports, our airports, shoulder-to-air missiles to 

shoot down aircraft, what are we going to do with our nuclear 

power plants, our water, what about health crises, what about 

SARS in the United States? I mean, the list can go on and on and 

on. 
34

My question is, first of all, the type of money that we are talking 

about to invest in these five known biological threats, is that really 

prudent in the sense that if I understand it, not only do they naturally change over time, sometimes short time, sometimes longer, 

but also couldn’t terrorists genetically be changing them, all of the 

time with us, and how—how does trying to find a vaccination or 

antibiotic or whatever we would toward this, could we ever really 

keep up with what is going on? 

And what about—I mean, why those five? Why are we taking a 

look at how they can affect our food, and you know why just people? I mean, I guess I am trying to ask you, is this really where 

we should be starting with these five? 

Dr. FAUCI. These five are five of the six of the original, what we 

called, Category A Agents as determined by the CDC, which very 

closely mimics the high priority agents of the Department of Defense. And they are based on a number of criteria, with some degree of flexibility because it is empiric. And it has to do with known 

threat, known intelligence of nations such as the Soviet Union 

early on and Iraq and Iran and others that had the capability and 

were, in many respects, proven to have the capability to do that, 

as well as the ultimate impact, something that is easily made and 

easily disseminated like anthrax or something that is contagious 

and has a track record throughout civilization of wreaking havoc 

like smallpox, something that would strike terror in the population 

even if it were not efficiently spread, just the threat of having 

Ebola or the hemorrhagic fevers showing on CNN in our living 

rooms at night could disrupt our society greatly. 

So it was a combination of known or suspected threat, efficiency 

of delivery and ultimate impact on the public health that brought 

things into the Category A Agents category. 

Ms. SANCHEZ. But, Doctor, if we are telling the world that these 

are the five that we are researching and trying to find something 

for, wouldn’t our opponents, whoever they may be, go off and start 

on something else that we are not taking a looking at? 

Dr. FAUCI. Sure. You can never touch every base of the threat. 

But, there are some good bets that it makes sense to address for 

the reasons that I just gave you. To say that we are not going to 

cover every single option, therefore, we should not do our most likely, I don’t think would be prudent. I think we should do the most 

likely, but be flexible enough to move for agents that could be genetically modified to circumvent the defenses that we already have. 

That is part of the program, is the degree of flexibility that would 

allow us to do that. 

Ms. SANCHEZ. Yes, Doctor. 

Dr. PETERS. A brief comment. These agents have sort of intrinsic 

properties that—the way they can become aerosol infectious or the 

way they spread and so on. When these properties are weighed, 

some of these are bad actors. And anthrax is a bad actor. And others are just not as bad. They are not as lethal, they have a higher 

dose, they are harder to grow, they are more difficult to work with 

and so on. 

So I think the prioritization has been a very important issue. If 

we can take these off the table, I think we will be way ahead in 

terms of protecting against large numbers of casualties. 
35

Ms. SANCHEZ. My second question is about, again comes back to 

these—I am actually thinking of these private companies, I guess 

they would be pharmaceutical companies. I am trying to think of 

where the profit incentive is. I mean if I am a company, I am a 

pharmaceutical company making the largest profits of any companies in the Nation by the way, and you know I am developing, and 

I am researching and developing, and we are actually giving them 

money to do this, which by the way, we do anyway because we give 

tax breaks and stuff for research and development, especially for 

pharmaceuticals, but the real payoff for these companies is to find 

a broad audience, and to actually be selling whatever it is that they 

come up with, that is the way that they make their profit. 

Why would I taking my best and brightest and put them in a situation where they would be looking for the answers that you are 

looking for, only to not really have manufacturing base or to really 

have a base by which to sell it across, because hopefully we never 

use these. So where is the payoff to a pharmaceutical company to 

actually, even if we are paying for research and development to 

some extent, to actually put their best and brightest on this piece 

of work? 

Dr. FAUCI. You have just articulated the rationale for Project 

BioShield, which is to create the incentives that they would not 

necessarily pursue because of the lack of the initiatives and the 

lack of the incentives that you just very well said. 

Ms. SANCHEZ. So you have essentially articulated the fundamental rationale for why we need an incentive, a Project BioShield 

incentive, to get the industry to know that if they get involved, 

there will be a secure funding source to purchase their product, 

even if it is put in a stockpile. And the interactions, and you will 

hear from industry shortly, but in the interactions that I have had, 

a very common refrain or interaction would be, that they want to 

get involved, or they already are involved. 

But, for them to go to the next step of the risk of investment on 

the part of the permission that they would need from their board 

of directors or from their stockholders to invest a considerable 

amount of money, they need assurances that if they are successful 

in developing a product, that their success would not be met with 

a lack of a commitment to buy that product. 

So, in essence, that is the reason why Project BioShield was put 

forth. 

Chairman COX. The gentlelady’s time has expired. The gentleman from Kentucky, the Chairman of the Homeland Security 

Subcommittee on the Committee on Appropriations, Mr. Rogers. 

Mr. ROGERS. Thank you, Mr. Chairman. 

Dr. Fauci, let me address the last answer you just gave. How did 

we come up with this dollar figure of the amount of incentivization 

that the companies would need? I think it is what, $5 or $6 billion. 

How did we come up with that figure? 

Dr. FAUCI. That was an estimate based on what we knew was 

already beginning to come into the pipeline, as well as our best scientific projection of what might be able to be pursued, either because a concept has already been established and proven, or we felt 

that the proof of concept was something that was imminently doable. All of those things, that is the point that I was trying to make 
36

before, Mr. Rogers, that the number is a number that can be justified, based on the accounting of these five agents. But, depending 

upon the success or failure of these, as well as things that might, 

without our being able to predict, ultimately come up. And by predict, I mean either predict as a new threat, or predict as a scientific 

breakthrough, that that was the reason for the flexibility in saying 

that it could be less than that, or it could be more than that. But 

that was our best guesstimate based on our scientific information. 

Mr. ROGERS. It would amount to about $900 million a year, if I 

am not incorrect? 

Dr. FAUCI. The first year we estimated about $890 million in 

2004. 

Mr. ROGERS. Now, what is the size of the pharmaceutical industry in the country, in terms of annual sales? 

Dr. FAUCI. Well, I don’t think that I am qualified to give you an 

exact number. But you will soon hear from the pharmaceutical industry, who could give you a much more accurate number. But it 

is in billions and billions and billions. 

Mr. ROGERS. It is hundreds of billions, is it not? 

Dr. FAUCI. Yes. 

Mr. ROGERS. So $800, $900 million a year is chicken feed, frankly, to this industry, is it not? 

Dr. FAUCI. Well, I don’t know if I would characterize it as chicken feed. I am not qualified to do economic cost accounting. 

Mr. ROGERS. Isn’t that a scientific term? But, nevertheless, the 

point I wanted to make was, the amount of money we are talking 

about here is not a huge amount of money in terms of the size of 

that industry. 

Number two, you say in your statement with Project BioShield, 

quote, on Page 6, we would be able to tell these companies that if 

they partner with us, meet certain milestones, and devise a licensable countermeasure, they will have our assurances that there will 

be money available to them for the purchase of that product, end 

of quote. 

That is not unlike the commitments that we make in any number of other governmental purchases, For example, or financing, for 

example, when we finance mass transit projects around the country, hundreds of billions of dollars worth. We do that by what is 

called full-funding grant agreements, where we sign, the Federal 

Government signs a contract with a local community on the funding amounts and process and procedures and the like. And then annually, we appropriate the funds to fulfill the commitments that we 

make under that multiyear commitment. Say it is 6 years, that 

full-funding grant agreement lasts for the full 6 years. We appropriate each year the annual installment for that contract. 

What is different here? Why could that not work in this kind of 

a situation? 

Dr. FAUCI. Well, sir, I certainly respect the analysis that you 

made about that. The experiences that we have had with what we 

would call the viscidities of the appropriation process, we feel, and 

this has been I think confirmed in discussions with the pharmaceutical companies, that although the intention of appropriating on 

a yearly basis might be there, there are many things that account 
37

for the difference between an authorization and an actual appropriation. 

The other issue is, that when funds are appropriated, there is, 

in some respects when the money is appropriated up there, as opposed to being available, that things can get earmarked—money 

might be spent for things that might not necessarily be the very, 

very best, whereas in this particular program that has been proposed, the company would get money for something that would ultimately be a deliverable product. 

And the incentive, the incentive for them and again, sir, I say 

this with a great deal of respect for the process that you have gone 

through, the incentives to the company to rely on an appropriation 

process that we know from experience does not always proceed in 

a manner such that there are guarantees, that they will not necessarily be incentivized. And the whole rationale for the program 

is to get them involved in something that they may not otherwise 

be involved with. 

Mr. ROGERS. I understand that. However, we have never failed 

to pass annual appropriations bills. And we have a Constitution 

that requires no moneys to be spent other than by an appropriation 

of the Congress. We frown very strongly on advance appropriations 

beyond our term of office. 

We have too many programs now that are mandatory. It is slowly taking over the whole Federal budget. We only appropriate a 

third of the Federal budget now. So we have got to put some sort 

of a brake on the appropriations process which the Constitution 

guarantees. 

Number two, those mass transit projects I talked to you about 

where we issue a full-funding grant agreement from the executive 

branch to the community to finance let’s say a 6-year project, the 

community then goes out and sells bonds to finance the upfront 

money to build the project. 

We pay off those bonds over the 6 years of that period with annual appropriations. We do the same thing with the FAA in building airports. They issue bonds to build the project. We pay off the 

bonds with appropriated moneys annually over the term of the contract. We are now doing the same thing with the modifications of 

airports to accommodate the new x-ray machines, it is hundreds of 

millions of dollars. 

And the local authority will be selling bonds based on that commitment. I don’t understand why if bonding companies and people 

that buy bonds on the market can’t be—if they trust us to do what 

we say we will do by a written agreement, I don’t understand why 

anybody else would want to question that. Have you got an answer 

for that one? 

Dr. FAUCI. Well, I don’t think there is a totally satisfactory answer to that. I might say, Mr. Rogers, again that we respect the 

rationale that you are putting forth on this. But, we realize, and 

the Administration realized that this is something extraordinary 

that we are asking for. But we believe that the circumstances within which we are asking this are extraordinary. 

We often get asked a somewhat similar question of why not do 

it the way we do it when we make an authorization and ultimately 

an appropriation for things like battleships or different types of 
38

bombers or what have you. And one of the—I wouldn’t say arguments—but one of the rationales to counter that, is that people 

who make battleships and people who make airplanes don’t really 

have any other arena to operate in than having the Federal Government be their customer. 

We are trying to incentivize companies who really do not need 

us. We need them. That is the reason why we put that forth. 

Mr. ROGERS. Well, I don’t know whether Boeing would agree 

with you or not. Mr. Dicks might want to chime in on that one. 

But, Boeing I think sells commercial products other than to the 

U.S. Government as well as to the government. And yet, they are 

very anxious to get government contracts with no real assurance 

that the money is going to be there except by annual appropriations. Is that not correct? 

Dr. FAUCI. I think the proportional relationship of the dependency of a company that makes aircraft carriers, their dependance 

on the Federal Government compared to an analogous situation of 

drug companies dependent upon vaccines or countermeasures that 

might not be used, I believe, sir, is a different story. They could 

just as easily go, and that is the reason why I put the slide up. Unfortunately, you all were out for a vote. When you look at all of the 

money that is made in vaccines, it equals one individual product 

that one drug company makes. 

So that is getting back to the point that I was making with respect, sir, that they don’t really need to make countermeasures for 

us. They can do just fine doing other things. 

Mr. ROGERS. Perhaps we could, and I am finishing, Mr. Chairman, perhaps we could, as we do in the projects that I mentioned, 

issue bonds, sell them and get your money up front. 

Dr. FAUCI. Thank you, sir. 

Mr. ROGERS. Thank you, Mr. Chairman. 

Chairman COX. Thank you. 

I think it is very helpful to this process of the development of 

this legislation that the Homeland Security Chairman from the Appropriations Committee is also a member of this committee, and 

this discussion obviously needs to continue. 

I next recognize the distinguished gentleman from the State of 

Washington, where TOPOFF II is still underway, Mr. Dicks. 

Mr. DICKS. Well, thank you very much. 

I appreciate your testimony. We are all trying to learn more 

about this subject. Chairman Rogers, of course, has the responsibility for the Homeland Security Subcommittee, newly created on 

the Appropriations Committee, and is the former Chairman of the 

Transportation Subcommittee. 

Is it your understanding that—and the budget request that the 

President asked for, he wanted this—this would be an entitlement? 

In other words, he would have an open-ended source of funding 

that he can draw upon in order to pay for the work that is being 

done by the companies? Is that your understanding of it, Dr. Fauci? 

Dr. FAUCI. Sir, I wouldn’t call it an entitlement, because there 

are a lot of checks in that. First of all, money is not given for anything other than, essentially, a deliverable product, namely something that is ultimately licensed. 
39

So it is not an entitlement for money to go somewhere without 

essentially knowing that you will get something for that. Also—

Mr. DICKS. But Medicare, and they are getting something for 

Medicare. They are getting something for Medicaid. Those are entitlements. We have to appropriate the amount that is actually utilized. And that makes it an entitlement. There are restrictions on 

all of those programs as well. 

All I am trying to get to here, maybe this is the one of those situations where we may have to do that. I am waiting to hear all of 

the companies testify about their requirements. 

And the idea is, that that is a better way to go than having the 

NIH, do these vaccines. And the reason for that is because you 

want to involve these private sector companies—you can’t get there 

without having their expertise and their talent. It is just like the 

Defense Department. They can’t build weapons systems. They have 

to go to the private sector to do that, because that is where the capability resides. Is that what you are basically saying? 

Dr. FAUCI. What I am saying, sir, is that the NIH and other of 

the agencies of the government who do research, have an important role in feeding the basic concepts and the proof of concept that 

would allow you to ultimately make that transition into the advanced development of a product. 

So there is clearly an important role of discretionary funding in 

that research arena that we already do now and have done since 

the beginning of the funding streams. 

The point that I was trying to make is that we, for example, have 

a vaccine research center at the NIH that was originally developed 

for HIV/AIDS but now is getting involved in other arenas, which 

was part of the original mandate including biodefense. 

What I am saying is that, that this is just one small component 

of the enormous capabilities that our pharmaceutical and biotech 

industry has. So we feel strongly that we need to embrace them 

and incentivize them, as opposed to trying to do it, essentially, all 

by ourselves. We want to be partners in it, but we don’t want to 

exclude the enormous capabilities that these pharmaceutical companies have us to get us where we want to go. 

Mr. DICKS. So the question is, how do you involve them? And 

how do you make it attractive for them to be involved? 

Dr. FAUCI. Right. Well, I know you will get some good solid, wellthought-out answers from them. 

But the way that we see it, sir, is that we show them that we 

have a secure funding source to be able to purchase their successes 

with them, and to share some of the risks, but make sure that they 

also take a risk. 

We will pay for deliverable products if they do not have a true 

assurance that if they are successful, that someone will buy it. I 

have had CEOs tell me, we are not afraid of the risk of failure. 

What we are afraid of is the risk of succeeding and having no one 

assure us that they will buy the product. 

Mr. DICKS. Let me ask you this hypothetical. Let’s say you have 

got two companies doing something like a cure for anthrax. They 

are both incredibly positive ideas. They look good when they use 

animals for testing. And both of them are very attractive. At the 

end of the whole effort, one turns out to be just a whole lot better 
40

than the other one. Are you going to pay for both of them? Are you 

going to compensate both of them, because both of them looked attractive enough to have entered into a contract, and then the one 

that is really good, you use that for a stockpile? How would you do 

that? 

Dr. FAUCI. Well, again there are different scenarios. The one you 

gave, I am sure, could be modified defending upon the circumstances. But you would really pay essentially for the success, 

except if you contract for a certain amount of knowledge or even 

material that would get you here, the secondary and tertiary contract might ultimately get to one company, but you would pay the 

company for what it is they contributed to you. 

Mr. DICKS. We do that in Defense a lot of times. We have two 

different companies do the R&D, and we get down and make a decision and procure one of the two products. But the company that 

did all of the work gets compensated. Would that help make this 

a better way of doing it? Or can that be done under the proposal? 

Dr. FAUCI. That can be done under the proposal, if you look at 

it from a comprehensive standpoint of the fact that there are contracts for the actual procurement, which is what the specific issue 

that we are talking about. And there are research and development 

contracts that we get involved with now. 

I can give you a real-life example of what we are trying to do 

right now with the recombinant protective antigen, anthrax, the 

second generation anthrax that we have R&D and ultimately some 

preadvanced and development contracts with a couple of companies. We are going to recompete the next RFP that would push us 

totally closer to procurement. 

It is likely that one of those companies will be able to take it totally to procurement. But that doesn’t mean that we are not, in our 

predevelopment contracts, paying the company to get us to the 

state of knowledge where we can then go to advanced development. 

But BioShield, as it is strictly laid out, will pay ultimately for the 

delivery of a product that can be used or put in our stockpile. 

Mr. DICKS. Some people have looked at this proposal and say it 

is too timid. How do you react to that concern? 

Dr. FAUCI. Well, I think it is an excellent start. If you don’t take 

the ball guaranteed over the goal line, you can say it is too timid. 

You have to ask the question. There are constraints. We know that 

we need to live within a budget resolution. We have worked with 

members of this committee discussing that, although you would 

like to have X amount of money, the realties of a budget resolution 

would say that, in fact, you may not be able to spend over a certain 

amount in year 1 or year 5 or 10 year. So there are the realties 

of budget resolutions. So if you were to say that you have an absolute, give me $20 billion and try and bring everyone in to do that, you probably can get 

some very good science and some good products. So, my answer to 

the people who say that this falls short is that we believe it is a 

very good start. 

Mr. DICKS. Thank you. 

Chairman COX. Thank you. The gentleman from Massachusetts 

for 8 minutes. 

Mr. FRANK. Thank you, Mr. Chairman. 
41

Let me just begin right there. I take it, Dr. Fauci, what you were 

telling Mr. Dicks is that if it weren’t for budget constraints, you 

could spent more money usefully? 

Dr. FAUCI. Well, yes and no, Mr. Frank. 

Mr. FRANK. Yes, I understand. Explain no, please. 

Dr. FAUCI. The reason, and it gets back to the question of mandatory versus discretionary appropriation, we feel that the incentive that we are talking about is the concept that if they come up 

with something that would work—

Mr. FRANK. So you have got enough as a starting point. The 

question is, you might need more later? 

Dr. FAUCI. Right. 

Mr. FRANK. By the way, on this little debate that you were having with the gentleman from Washington about whether entitlement means that you get something for nothing, that is really only 

true in agriculture. I just want to say that. That is where people 

are entitled to get something for nothing. 

Chairman COX. Would the gentleman yield on my time? 

Mr. FRANK. Yes. 

Chairman COX. As you know, the Energy and Commerce Committee has marked up this bill. Both the Energy and Commerce 

Committee and this committee have an agreement with the White 

House now that we are not going to go the mandatory route. 

So notwithstanding the importance of this discussion—

Mr. FRANK. I thank the gentleman. But can I ask you, you said 

this committee has an agreement. As a member of this committee, 

did I agree to that agreement? I am just wondering. What was the 

process by which this committee of which several of us are members agreed to the agreement? 

Chairman COX. The leadership on both sides of the aisle were 

part of these discussions. But, of course, the member will have his 

opportunity during markup to—

Mr. FRANK. You mean—well, I mention that because that is the 

second question that I had. I was told that the representative from 

the Department of Homeland Security is not going to be here 

today. Is that accurate, Mr. Chairman? 

Chairman COX. We have another panel next of industry, private 

industry. 

Mr. FRANK. But there is nobody from the Department? We had 

someone listed from the Department of Homeland Security for that 

panel. 

Chairman COX. That is correct. 

Mr. FRANK. But he is not going to be here? 

Chairman COX. These are science panels and commercial. 

Mr. FRANK. Well, at least, maybe you weren’t in on the agreement, because the listing, and, in fact, we have a statement from 

someone from what used to be FEMA, now Homeland Security, and 

I am told that he is not coming. I guess—here is the problem. I 

mean, we were talking about what happens if things get wiped out, 

et cetera. 

At this point, I have got to be honest with you, I think if this 

committee got wiped out, nobody would notice. We are the Committee on Homeland Security. We are talking about legislation 
42

which affects the Department of Homeland Security. We have a 

hearing with nobody from the Department of Homeland Security. 

Chairman COX. If the gentleman would yield, this committee has 

already had such a hearing at which, I believe, the gentleman was 

not present, with the Department here. 

Mr. FRANK. We had today—when was that hearing? I was at a 

hearing when we had a technical corrections hearing? 

Chairman COX. No, this was a hearing on BioShield. 

Mr. FRANK. When was that hearing? 

Chairman COX. A couple of weeks ago. 

Mr. FRANK. Was there a public hearing on BioShield? A subcommittee. Not being a member—that is why I wasn’t at the hearing. But I do have—we were—I saw a statement in here from 

someone from the Department of Homeland Security. Maybe that 

directorate out in California ought to try to find him. Listen, the 

reason I say that is I had some questions, because the things that 

I am most concerned about, frankly, I am not a technical expert 

here, and I am not going to debate which paradigm is better for 

organizing the research. I am concerned about some of the local impacts. 

And we have a statement from a Mr. Tolbert dated May 15th, 

2003, which is today, and he isn’t going to deliver that statement 

and can’t be questioned about it. He is from the Department, about 

responsibility for a system that assists State and local governments. 

I think we are doing a terrible job as the Federal Government 

in providing help to the State and local governments. I would have 

liked to have been able to talk about that. 

Second, I do have a question about the legislation. I noticed that 

the Energy and Commerce Committee has already marked it up. 

Is there going to be a markup? Has it been recovered to this committee? Are we getting a sequential markup? What kind of markup? 

I yield to Chairman. 

Chairman COX. The markup will occur either next week or if we 

see the need for additional hearings after the break. 

Mr. FRANK. So we are going to have a markup on this bill? 

Chairman COX. Yes. 

Mr. FRANK. Well, that is reassuring, because we had previously 

not—I was told by our staff—heard that. 

Chairman COX. No, that is not correct. This committee has always intended to mark it up. 

Mr. FRANK. Well, Mr. Chairman. 

Chairman COX. That goes back to the very first—

Mr. FRANK. Excuse me, Mr. Chairman. I haven’t yielded. You are 

supposed to enforce the rules. The fact is that we were told it 

hadn’t been referred to us yet. And we inquired at the Parliamentarian’s office, and we were told it hadn’t been referred yet. 

I am glad to know that, but I don’t think we ought to be in the 

position of mind reading. I am glad to be reassured, but we had 

asked. 

Chairman COX. The gentleman will suspend. The Chair will take 

the prerogative of—
43

Mr. FRANK. No. Under—point of order, Mr. Chairman. I don’t 

recognize any right for you to order me to suspend on my time. 

Under what rule of the House is that appropriate? 

Chairman COX. The gentleman will suspend. I am going to address the committee for a moment not on the gentleman’s time. 

This committee was asked, and both Mr. Turner and I were invited to the White House on Day 1 to discuss this legislation with 

the President, with the Secretary of Homeland Security, and with 

the Secretary of Health and Human Services. 

The President and those Secretaries asked this committee to 

move this legislation on an urgent basis. We are doing everything 

that we can to accommodate that request. 

But that has been in prospect since Day 1, and there has never 

been any question about that on either side of the aisle. I am sorry 

the gentleman had any mistake about it. And I yield back. 

Mr. FRANK. Well, I disagree very sharply with that. I don’t know 

when Day 1 was. I don’t know what the holdup was. We have been 

in committee for several months and haven’t done as much as we 

should. But I requested, today, information from the staff, was 

the—was the markup—was this going to come before us? Was it referred? I was told that the Parliamentarian said that it hadn’t been 

referred to the committee yet. It wasn’t clear that the Speaker was 

going to do that. 

Now, the gentleman tells me, yes. But I can only go on the information that we were then given. If there was, in fact, a determination that it was going to be sent to us, apparently that information 

wasn’t shared with the staff that asked about that. 

I would also say, if we are going to mark it up, I am particularly 

troubled by the inability to get questions to Mr. Tolbert, because 

much of what we have here are problems about the adequacy of our 

interaction with State and local governments. 

He says in the statement that he won’t deliver, this system assists State and local governments by providing primary care, et 

cetera. It is to supplement State and local medical resources. I 

would be very interested as to what is involved with that. I don’t 

know if, Dr. Fauci, is it something that you would know about? It 

doesn’t come within your jurisdiction. 

Dr. FAUCI. No, it doesn’t. I am sorry, Mr. Frank. 

Mr. FRANK. That seems to me a real hole in our ability to legislate on the subject. Let me just ask the other three witnesses then, 

because, obviously we have heard from Dr. Fauci representing the 

Administration’s approach here, and I know there are alternative 

proposals. The ranking member read from Dr. Vagelos an alternative way to go about it. But within the framework that has been 

selected within this legislation, are there improvements, tweaks, 

changes you would make within this framework? I guess there is 

a broader question about a whole different framework, but within 

the framework that we are talking of here, I would ask any of the 

other three witnesses whether there are any specific proposals for 

changing in any way the financial system, the terms, the incentives, anybody have any proposals in that regard? 

Dr. PETERS. I certainly don’t have a proposal, but one of the 

things that Dr. Fauci has said that is implicit, but perhaps he has 

not made it explicit, is that vaccines making is not a guy in a white 
44

coat who goes in a room and makes a vaccine. There are starts, 

failures. You make preliminary lots, you do testing. And the flexibility in this seems to me to be very advantageous. And being able 

to allow academia, small industry, NIH itself, to be able to make 

these starts and stops and have these failures and see the light at 

the end of the tunnel to go on. 

Mr. FRANK. All right. I thank you for that. 

Chairman COX. The gentleman’s time has expired. I think the 

witnesses are free, however, to address the questions. 

Dr. ADAMS. A point on scientific rigor in the process. And Dr. 

Fauci has implied that over and over is absolutely essential to 

produce the highest quality product possible. 

And so the scientific rigor, while you might be building mass 

transit there is engineering rigor and we understand, but it is a bit 

more predictable than the biological systems that we are working 

in. And so the stop-start that Dr. Peters just mentioned, and the 

testing, coming back to animal testing, testing in test tubes and 

then in animals, that rigor has to be met to have a safe, effective 

product that can be used in mass populations. 

And so, I think that scienctific rigor is a part that has to be 

upheld, and that is an absolute essential part of the BioShield 

Project. 

Chairman COX. Thank you. The gentleman’s time has expired. 

The gentleman from Connecticut, Mr. Shays. 

Mr. SHAYS. Thank you, Mr. Chairman. And I thank our panelists. 

I have a sense that BioShield is basically to incentivize and accelerate research and development for vaccines and therapies, that 

is kind of what the—and I am—I would like the panel to tell me, 

how do we decide what vaccines and therapies we need? I would 

like to ask our three scientists not working for the government to 

walk us through that. 

Dr. CRYSTAL. Well, Mr. Shays, one can prioritize based on two 

aspects. One is, what are the organisms, the pathogens that appear 

to be the most dangerous. That is the first. And the second are, 

what are the opportunities that we think that we have strategies 

that we can solve the problem. 

And you can use those two priorities to make the list as to what 

you go after. So there may be a pathogen that is bad, but we have 

no idea, right now, how to go about it. And so it would not make 

sense to do anything other than basic research. 

On the other hand, if you have a pathogen that is bad, but you 

have a strategy, you have to leverage the infrastructure of the 

pharmaceutical industry to be able to produce it so the public can 

access it. 

Mr. SHAYS. Anyone else want to disagree with that or add to it 

or subtract from it? Dr. Peters. 

Dr. PETERS. I think one of the important things is that this program be slanted towards civilian priorities. And I think in our current status of uncertainty as to what the threat is, this dictates 

that we not only look at vaccines, but we give an important look 

at drugs. 

If you take, for example, the smallpox vaccine situation—

Mr. SHAYS. I think of drugs as being the therapies? 
45

Dr. PETERS. Being therapies, especially anti-infectives, but possibly other ways to treat the condition that are not strictly antiinfectives. 

Mr. SHAYS. Since this isn’t a traditional marketplace, how do we 

know how much to order? 

Dr. PETERS. We will have to make an estimate of the size of the 

event and the amount that we will need to treat, or at least to initiate treatment. 

Mr. SHAYS. So we are basically having—it is basically—it is basically the concern of a human inducement of a disease, not a natural cause, primarily? 

Dr. PETERS. Primarily. 

Mr. SHAYS. So we have to understand the intent of the terrorist 

and the capability of the terrorist, and we also have to throw into 

that mix which things are—where we are most vulnerable, what 

can be the most fearsome and so on? 

Dr. PETERS. Yes, sir. 

Mr. SHAYS. How certain can we be of the shelf life of whatever 

vaccines we develop or therapies we develop? 

Dr. PETERS. That will depend entirely on the chemical nature of 

the therapy or on the nature of the vaccines. We are still using 

smallpox vaccine that was made in the late 1970’s. 

Mr. SHAYS. How do we know what vaccines or therapies need financial inducement and which ones could technically be out there 

without needing to, you know, have the motivation of a profit margin in them? Are we saying there is none? 

Dr. PETERS. Well, I think that the experience with emerging infections, is there is not a market that is big enough to drive any 

drug that is being developed for an emerging infection, up to and 

including Dengue Hemorrhagic Fever, in which there are hundreds 

of thousands cases every year in the third world. 

So I think that almost all of this will have to be driven, it is my 

opinion, almost all of this will have to be driven by some other 

mode. 

Mr. SHAYS. It doesn’t just have to be Dr. Peters, but what I 

would love to understand is, will we—in my work in the National 

Security Subcommittee, I wrestle with this issue. 

Do we publicize what we are going to be making, and let the 

world know that we have so much of this, or so much of that? And 

I think you can gather where I am going. 

Dr. PETERS. Yes, sir. I think the exact nature of the stockpiles 

should be quiet. But, I think the nature of our society is that we 

have to publicize where we are going. That is the way science 

works, that is the way we get there, and we need the consent of 

the people to proceed in that direction. 

Mr. SHAYS. The reason is, as you said, we would be prioritizing, 

because how many would we need if we needed everything? 

Dr. PETERS. I am—

Mr. SHAYS. That is my point. The number would be large. So 

then we would prioritize. And then we have a list. And then the 

bottom line, and my time is up, but the bottom line is, they just 

do the one thing we don’t have if they have any brains whatsoever. 
46

Dr. PETERS. But I think, sir, that the—these bugs are of differential badness. They have different capabilities to kill large numbers 

of people. 

Mr. SHAYS. Fair enough. So we do all of the bad ones, and we 

don’t have to prioritize within that bad list. We do all the bad lists, 

and the terrorists know, so they have a choice of doing the bad list 

where we will have antedates, or they can do the not so bad list 

which we don’t have an antidote. 

Dr. PETERS. Yes, sir. To use an analogy. We are trying to get 

them down from a nuclear capability with anthrax, to cluster 

bombs with plague, and finally down to a car bomb. 

Mr. SHAYS. Thank you. 

Thank you, Mr. Chairman. 

Chairman COX. Thank you very much. 

The gentleman’s time has expired. The gentlelady from New 

York. 

Mrs. LOWEY. Thank you, Mr. Chairman. 

Dr. Fauci, I would like to pursue an issue that was discussed 

previously, and you and I and Dr. Thompson, Secretary Thompson, 

have discussed this as well. 

If BioShield is successful and new countermeasures are developed, the success of these projects will depend on a public health 

system’s ability to distribute and deliver the serums to the general 

public in a timely, safe and orderly fashion. 

Mrs. LOWEY. In the case of smallpox, the cost of vaccinating— roughly $200 per vaccination because of screening, testing, postvaccination surveillance and treatment of adverse reaction—has 

been a significant impediment to the program. Thus, it seems to 

me the key to effective countermeasures depends on a lot of factors 

and costs other than buying these products and putting them in 

the strategic stockpile. 

You mentioned before Secretary’s Thompson commitment to put- ting—I think you mentioned $1.3 billion—and it happens to come 

from the Labor, Health, Human Services, Education Committee, 

but you and I know that basic health programs are really starved 

for cash for their core public health missions. In fact, there are a 

whole lot of reasons—the decrease in the reimbursement rate. So 

here we are asking them to take on greater responsibility in the 

terrorism preparedness area. 

It seems from my perspective that we should seriously consider 

funding for our hospitals, for our public health network as part of 

our Project BioShield. I can remember a hearing we had in the 

committee with one of my colleagues sent a strong message to Secretary Thompson—I am not sure if you were there at the time—

saying, now, remember, the money for homeland security cannot be 

taking the place of basic needs of hospitals, it seems to me, unless 

we have got to fund the basic needs of hospitals. 

If someone is coming in—one of you gentlemen referred to cough. 

If someone is coming in, until they discern that it is SARS or it 

is something minor, they have to be prepared. In fact, the first 

tranche of money to the hospitals in New York State amounted to 

about $10,000 a hospital. Since then, more has come. As one hospital said to me in a meeting with all my chief financial officers, 

pay for a shower and my decontamination unit. They all have to 
47

expand their emergency rooms. They are all cutting back on staffs. 

They are not prepared to handle this. 

So my question is, do you believe this is an issue that should be 

seriously addressed in Project BioShield and not depend upon Secretary Thompson or anyone else pleading for an additional appropriation, or should we continue to fight about reimbursement rates 

for Medicare, or should we deal with this in Project BioShield? 

Chairman COX. Would the gentlelady yield? 

Mrs. LOWEY. I would be delighted. 

Chairman COX. While you are all contemplating the best answer 

to that question, Dr. Crystal, I understand, needs to make an airplane. He alerted us early on that he needed to leave at 3:15. That 

time having approached, I wanted to excuse him and also give you 

the opportunity to leave us with final words if they are top of the 

mind. Either way, we are very pleased that you could join us today. 

Dr. CRYSTAL. Thank you. I guess you are the closest congresswoman to where I live—

Mrs. LOWEY. And I am very grateful that you are here. 

Dr. CRYSTAL. In response to your question, working in one of the 

large urban hospitals, I would love to see that, but that is response 

to these infections, and if we don’t do something about preventing 

the patients from coming in, we will never solve it at the hospital 

level per se. We have to do both, but we have to do something in 

terms of preventing these kinds of attacks, and that is vaccines and 

therapies. 

Mrs. LOWEY. Oh, I understand that. But is it realistic, given the 

knowledge that your hospital and others have shared with me—

and I have met with many, many CFOs, CEOs of the hospitals. 

They are absolutely not prepared to deal with emergencies; and 

many of what may not seem like an emergency, if not handled correctly at their hospitals, could be an emergency. 

If I remember correctly in talking to Sam Nunn of WTI and 

Peggy Hamburger, whom you know very well, the number that 

they gave me just this morning was, in World War I, 50 million 

people died of flu, more than any others dying of any other combatrelated death. 

So my question is, isn’t this part of any solution? And if we are 

really going to fund BioShield at the rate that is requested to do 

the job, don’t we have an obligation to consider delivery of services 

as part of that effort? 

Dr. CRYSTAL. I can’t comment as to what is best, but I agree absolutely with you that our hospitals are markedly underprepared 

for these kinds of problems. 

Mrs. LOWEY. Thank you. Have a good flight. 

Dr. CRYSTAL. Thank you. 

Mrs. LOWEY. Dr. Fauci or any of the other gentlemen, one other 

question. We are living in a global world. I am not sure of the number, maybe a hundred million people enter somewhere between—

I think I read 100, 200 million people enter the United States every 

year. People are travelling all over the world. Can this money—has 

this money or the prospect of this money served as an incentive? 

Are you in touch with others? 

This is an international issue, an international crisis. Do you 

think that if we appropriate this money in an effective way the 
48

President could be encouraging other nations who certainly will 

benefit—we are all in it together—to match the money or provide 

some important, significant dollars as well? 

Dr. FAUCI. You asked two questions, Mrs. Lowey. The first one 

was, do I believe that the ability to shore up our capability of responding is important? It indeed is a very important issue. As you 

know, Project BioShield was formulated to expedite the process of 

the research concept development to the ultimate development and 

delivery of a product. That was the rationale for BioShield. 

The addressing of the problem of our public health and hospital 

infrastructure is certainly a critical issue. Where that gets addressed, that is not for me to say, except to say that you put your 

finger on an important issue, our capacity to respond, which in fact 

is not what BioShield is about. BioShield is about getting the countermeasures that we need, which is part of the big picture of how 

we respond. One of them is the point that you made. 

The other question that you mentioned is the international nature of it. I think if we incentivize the industry in this country, the 

pharmaceutical industry is also a global phenomenon, so there is 

no reason to believe that that won’t, in fact, entice companies that 

are not just domestic companies but that have international interests. So we feel we will tap, if successful, the best of the pharmaceutical companies in a global fashion. 

Mrs. LOWEY. Well, my time is probably up, but—

Chairman COX. It has indeed expired. 

Mrs. LOWEY. Pardon me? 

Chairman COX. It has indeed expired. 

Mrs. LOWEY. I was thinking of other nations, not just of the 

pharmaceutical companies. 

Dr. FAUCI. Well, I would hope so. I mean, we face the same issue 

in so many things where we take the initiative, because we have 

administrations—and the Congress have always been so supportive. We don’t generally see that kind of support that we get 

from our own Congress from other countries; and, unfortunately, 

we have seen that with HIV/AIDS, where the vast majority of the 

burden of the funding, of the research, of the things that go into 

vaccine development are due to the generosity of our committees 

and our administrations who support it. 

Mrs. LOWEY. To be continued, and thank you for your very important leadership. 

Chairman COX. The gentleman from Massachusetts, Mr. Markey. 

I would—before recognizing Mr. Markey, I would point out to all 

members we do have a second panel, and I leave it to you how you 

want to accumulate the time. It is entirely up to each member. 

Mr. Markey is recognized for 8 minutes. 

Mr. MARKEY. So if he wanted to, I could save it all for the second 

panel and then question Haseltine for 16 minutes. 

Chairman COX. Thirteen minutes. 

Mr. MARKEY. All right, 13 minutes for Bill Haseltine. No, I don’t 

think I will do that. 

How are you feeling down there, Dr. Peters? 

Dr. PETERS. I am OK. 

Mr. MARKEY. You can take a break, you know. If you want to go 

outside and—you know, you can come back in for a couple minutes. 
49

Dr. PETERS. I think that would be helpful for—

Mr. MARKEY. Yeah. We can see that. 

I am not going to ask Dr. Fauci all the questions, anyway. 

So, first of all, we did mark up in the Energy and Commerce 

Committee today the bill; and, amongst other things, we changed 

it from an appropriations for an indefinite period of time, 5 years 

or 10 years—we don’t do that even for the CIA or the FBI—to an 

authorization, so that it would have to compete for money each 

year and justify itself each year as a program, which I think is a 

good idea, and I am glad we were able to make that change. 

Second, I was able to add in language that has a GAO evaluation 

of the various aspects of BioShield’s effectiveness and to evaluate 

whether or not the money was spent well, which I think is important. 

And, third, the committee did adopt my language, which instead 

of having no limit on what any outside expert could be paid and 

having an exemption to the Federal employee pay standards for 

anyone who would come in and consult and help us, I finally was 

able to, I think, persuade people that we should at least establish 

the limit as to salary of the President of the United States—although I would have preferred it to be your salary, Dr. Fauci, because there is no one who is going to consult with the government 

who is going to know more than you do. So for them to be paid two 

or three times as much as you get paid I think is in itself absurd, 

given the national importance, but nonetheless at least capping it 

at the President’s salary is something that is a good start in terms 

of the overall legislation, but I do think we have to work on that 

even more. 

The bill places no limits, however, Doctor, on what the companies 

can do with the countermeasures that they do develop with taxpayer money. So, for example, during this whole conflict with Iraq, 

we were afraid that they had developed a potent nerve gas vaccine 

which they could then immunize their troops so that they could use 

it against American troops. 

So one of my concerns would be that we develop this series of 

vaccines at government expense and then the companies have no 

restrictions on which countries they can sell it to, which could then 

be used as a countermeasure against American forces. Do you 

think it makes sense that no company should be allowed to sell any 

of these vaccines to any country in the world that is on a terrorist 

list or any list that could endanger America without the express 

written consent of the U.S. Government? 

Dr. FAUCI. Well, Mr. Markey, as a government witness, I don’t 

think that I can speak authoritatively to represent the administration on this, but—except to say that it makes some common sense 

that if there is a countermeasure that is developed that might potentially ultimately lead to the harm of American citizens that you 

need to seriously consider how you can somehow put a process in 

place that would address that. So I essentially agree with the concept, but I am a little bit reluctant to make an official declaration 

of what administration policy would be on that. 

Mr. MARKEY. Dr. Adams, does that make sense to you? 
50

Dr. ADAMS. Well, it would make sense to me that any weapon 

that could be used against us shouldn’t be given to our enemies, 

yes. 

Mr. MARKEY. OK. Great. So North Korea, Iraq, Iran, do you 

agree a pharmaceutical company shouldn’t in and of itself be able 

to make the decision to sell this vaccine then to those countries? 

I mean, in the absence of a smallpox breakout in their civilian population, which, of course, you know, would change the scenario, 

but, in the absence of that, you do agree that we shouldn’t be selling this, that we shouldn’t allow the pharmaceuticals to sell this 

stuff that can be used to protect their populations—

Dr. FAUCI. It makes sense. 

Mr. MARKEY. Do you agree, Dr. Adams? 

Dr. ADAMS. Yes, it makes sense. However, the products coming 

out of this will have global application for human health and wellbeing. 

Mr. MARKEY. I appreciate all that, but I understand that in the 

hands of sociopathic leaders of countries that they actually view it 

a different way. I mean, a nuclear power plant that generates electricity in our country is viewed as a nuclear bomb factory in North 

Korea or Iran. So I don’t know if we want to be selling nuclear 

power plants to North Korea or Iran. So that is my point. I do understand that. 

Now, with regard to what the accountability should be—you 

know, when we engage a defense manufacturer in the process of 

making weapons we have very tight control over their books, access 

to their records to ensure that there is accountability. Now, do you 

believe that the same should now be true for pharmaceutical companies who are going to be enlisted in this effort in terms of our 

ability to have access to their books and records to guarantee the 

accountability so that we are not overpaying? Dr. Fauci. 

Dr. FAUCI. Again, I hadn’t seen that proposal before, since I was 

not—I didn’t get the results of the markup this morning. 

Mr. MARKEY. Oh, no, it is not in the bill. I am asking you, does 

that make sense to you that, given the fact that we are going to 

have this unprecedented government subsidy of an industry, that 

in all other industries, we do have—you know, we mandate access 

to the books and records so we can make sure that the government 

is not overpaying so that we get the best result for our dollar? Do 

you think that makes sense, that we ensure that the pharmaceutical companies give us the access to their books so that we can 

guarantee that there is no overpayment? 

Dr. FAUCI. I think the fundamental principle of accountability for 

what the government pays for is something that I certainly would 

be in favor of. I hesitate to agree to issues in which I don’t know 

the exact, specific details of access to books, because often I would 

say something, yes, you should, and then there is some technical 

issue that I did not consider because of my own lack of expertise. 

But I would like to be able to be on the record to say that we 

certainly—if the Federal Government funds certain projects, that 

they should certainly be able to have the people who are the beneficiaries of the funding show responsibility and accountability to 

them. 
51

Mr. MARKEY. Well, the pharmaceutical industry says that, on av- erage, it costs about $800 million to develop a new drug. Is that 

what the U.S. Government should expect to spend for each one of 

the new antidotes that might be developed? 

Dr. FAUCI. Approximately. But, again, Mr. Markey, when you talk about $500 million to $800 million, it sometimes is—the number is as high as that, is that that is the whole process from the 

proof of concept up through and including the advanced development and the production and the manufacture of it. 

There will be other funding streams that will go into the process 

of the development of a countermeasure. For example, a lot of the 

discretionary money that we put into the research for the development of countermeasures will feed into what ultimately will be 

that. I am not so sure that the actual procurement of a particular 

product would be that $500 million. We feel when we calculated it 

that $500 million is a reasonable calculation on the part of the 

company. So if you are trying to figure out how much each would 

cost, that is not an unreasonable number to hold on to. 

Mr. MARKEY. All right. You know, except for Jeff Skilling at 

Enron, most people think that $500 million is a lot of money to 

keep track of. That is why my question in terms of accountability 

and looking at the books are important, because, obviously, we are 

running huge deficits, maybe $500 billion this year in the U.S. 

Government. So we are going to have less and less flexibility as 

each year goes by, given the perhaps trillion dollar deficit we will 

have within another 5 to 8 years in the country here per year. So 

we have to get the maximum return, and as a result I think this 

accountability will be necessary. 

Dr. FAUCI. When we let contracts typically, Mr. Markey, we build 

in accountability into that contract that we make. 

Mr. MARKEY. Yeah. I—

Chairman COX. The gentleman’s time has expired. 

Mr. MARKEY. I thank you. 

I just hope that the people who we bring in from the outside are 

as qualified as you are, Dr. Fauci; and I hope that would be the 

standard that we would establish if we are going to pay them twice 

what you get paid. Thank you. 

Chairman COX. The gentlelady from Texas, Ms. Jackson-Lee, is 

recognized for 5 minutes. 

Ms. JACKSON-LEE. Thank you very much, Mr. Chairman. 

Out of a sense of humor, I thought I had heard 8 minutes, but 

I imagine—

Chairman COX. I was just checking to see if you made an opening statement, and I take it that you have. 

Ms. JACKSON LEE. Next time I won’t use those 30 seconds, but 

I thank you, Mr. Chairman, very much for the time, and the ranking member as well. 

It is, I think, important to restate—this panel is obviously aware 

that this committee was appointed by the speaker and the leader 

of the House as an all-encompassing committee that includes expertise for many different of our jurisdictional committees, and I 

would expect and hope that in the course of our questioning that 

we do rise above—not just regard but do rise above some of the jurisdictional issues and really respond to what I hear often when I 
52

travel around the Nation is the urgency that many Americans express in terms of their concern about what is transpiring, what is 

going on, what are we doing. 

This hearing is particularly interesting in the backdrop of the 48-

hour-ago tragedy in Saudi Arabia where we lost a number of Americans. I think we are fully aware of the fact that terrorism still 

very much exists, and it is very much alive. So I think this hearing 

couldn’t be more timely, but I also am concerned about whether or 

not we are moving fast enough with the kind of respectful attention 

to detail that we should have. 

I do want to acknowledge, if I might, two fellow Texans. Dr. Peters, we welcome you; and, Dr. Adams, we welcome you and are 

gratified that you are here; and, Dr. Fauci, we thank you very 

much for being here. 

Let me just restate for the record what I understand the BioShield program to be—and that is that we can give NIH authorities 

to move quickly on research and development, on medical countermeasures. We know how thorough the NIH has typically been, and 

so that is to sort of jump-start and leap ahead to move us quickly. 

The other is spending authority for the delivery of next-generation medical countermeasures, and that is, of course, the whole 

question of incentivizing or giving incentives to move people on 

quickly. 

Then the other one is, of course, the FDA utilizing some form of 

emergency use authorization. 

Might I just throw in a comment that everyone always remembers? I would be cautious on how we use fast-tracking, inasmuch 

as all of us either remember or have heard the history about the 

babies and the severe deformities that came about during the use 

of something that had not been so reviewed before the time that 

we were doing such, and so I know that we want to be cautious 

on that. 

As I ask these questions, I am going to read them all off so that 

I can be mindful of the time. I want us to think not only of this 

mysterious concept of bioterrorism and mysterious diseases, and I 

want us to think of the impact of someone that is infected with tuberculosis going into a crowded school, someone who has SARS and 

going from one crowded place to another, as I understand the 

transmission there. These are familiar infectious diseases, SARS 

now becoming a household word, the ability of someone to take infected mosquitos and take them into an area and thereby putting 

in an epidemic of the West Nile. 

So I would like us to realize that all of what may be dangerous 

or may be part of bioterrorism—and I may be reaching—may not 

be all of the unthought-of elements. 

We have certainly begun immunizing on smallpox. We have 

heard that word over the centuries, but that has been considered 

one of the dangerous elements. 

So let me quickly say to the panelists, the worst thing that could 

happen would be if we promised a billion dollars for a new vaccine 

and then find out in 5 years, for example, that nothing had happened. The whole idea of accountability when you go—and you talk 

about going into the private sector, how will we have that? 
53

Also, if we implement the BioShield plan tomorrow, 6 months 

from now, how many companies do we predict would start new programs to develop such vaccines or drugs to combat bioterrorism? 

Where is the attractiveness, and why do we have to provide these 

incentives? As I started my opening remarks, why isn’t it good to 

do just the right thing? And how many companies have already 

done—are involved in this business and already in the business 

will boost their programs? 

Lastly, quickly, considering the relative lack of transparency in 

the private sector, how long will it take to realize that the mobilized industry is or is not getting the job done? Again, accountability. And considering that many pharmaceutical companies are 

publicly traded, do you expect them to be forthcoming about 

progress or the lack of progress? 

I simply want to know, does it work or will it work? And I think 

that is our responsibility in this committee, is to look globally, not 

how many people we make happy but how many people we will 

help and whether or not it will work. 

If you could begin, Dr. Fauci; and I would appreciate it very 

much. 

Mr. Chairman, I ask your indulgence now for them to be able to 

answer that—

Chairman COX. By all means. The gentlelady’s time has expired, 

but the panel may take as much time as you wish to answer those 

questions. 

Ms. JACKSON LEE. Mr. Chairman, I am sorry. I may have been 

out of the room. Did you say we were going to mark this legislation 

up? 

Chairman COX. Yes. We will have a markup on the legislation. 

The bill has not yet been introduced, which is one of the reasons 

that people—

Ms. JACKSON LEE. Thank you for enlightening me. I guess I was 

listening to someone saying that there had been a markup in another committee. 

Chairman COX. There has been a markup in another committee; 

and, as I serve on that committee, I can report to you firsthand 

that even that bill had not been introduced at the time of the 

markup. It may well be introduced today. 

Ms. JACKSON LEE. I thank you very much, Mr. Chairman. That 

shows how creative and forward-thinking we are in this body, and 

I hope that we will look forward to seeing that bill as it comes forward. Thank you. 

Chairman COX. Would the gentlewoman yield? 

Ms. JACKSON LEE. I would be happy to yield. 

Chairman COX. In fact, yield to the time you don’t have. The legislative language is available to all Members. It has been for some 

time. 

Ms. JACKSON LEE. That would be helpful. Is it on our Web or—

Chairman COX. It is available by committee e-mail, yes. 

Ms. JACKSON LEE. Great. We will make that happen. Thank you 

very much. 

Dr. Fauci, if you would, and to the other two gentlemen, it is all 

about how it works and will it work. 
54

Dr. FAUCI. You asked—and I will briefly answer three categories 

of questions. 

What about other common diseases? We have a major emerging 

diseases program—a research program at the NIH that addresses 

things like tuberculosis, things like West Nile fever and things—

ultimately, now we have a program that we are developing on 

SARS. We would consider these if, in fact, they fell under the category of being a threat to be used as bioterror agent and would 

have impact on our national security. They do not fall under the 

high categories for the reasons that were articulated by a number 

of us on the panel, particularly Dr. Peters. So although we are 

aware of them, they are not on our high priority, but we do address 

them in our emerging diseases program. 

Second, how many companies? It is very difficult to tell. Right 

now, for example, there are four companies involved in vaccine research, just four entirely for the whole vaccine research—not research but vaccine development arena. We would like to get several 

more companies involved. 

I can’t give you the number. I would imagine it is not going to 

be a hundred, it is not going to be 50, but I think 15 to 20 companies involved, including Biotech and others, I would feel would be 

a very important step forward. 

Also, the idea about accountability, the way the program has 

been proposed is that there will be some risk on the part of the 

companies, and I think you will hear some more about that when 

you discuss this with the pharmaceutical company panel, but 

Project BioShield as it now has been put forth would pay for a deliverable product. So there will be funds expended when the material of the product that has been contracted for is delivered. 

Ms. JACKSON LEE. And not before? 

Dr. FAUCI. There will likely be some modifications of some advances perhaps to get them going, but it is not going to be paid for 

something that would ultimately be an undeliverable product. 

Ms. JACKSON LEE. Gentlemen, I am trying to get—if the two doctors could at least comment on how they think it might work in collaboration with the private sector and if you have one comment on 

using the less dangerous SARS in a dangerous way. I mean, someone could be infected and use it in a dangerous way. 

Dr. PETERS. Well, I am not sure about the possibility of the 

SARS scenario, but one thing is important to recognize, is strengthening the public health infrastructure for bioterrorism strengthens 

it for SARS, for TB across the board, even though some of those 

resources will not be used on a daily basis for nonbioterror events. 

Some of the issues that would revolve around a smallpox case introduced into this country would revolve around a SARS case introduced into this country. Isolation of the patient, quarantine, search 

for contacts, these types of things work with both of these agents. 

Hopefully, someday we will have a SARS vaccine and a smallpox 

vaccine, strategies which would then give us a basis for SARS vaccination strategies. 

So I think that it is very important issues that we are not just 

working in isolation. Many of the agents that are bioterrorist 

agents are also natural threat agents. Smallpox, of course, is the 

exception, not existing as a natural disease. But we—to the extent 
55

that we develop anti-infective vaccines and other treatments for 

these, they can be used in the Third World. 

As a matter of fact, it is my contention that many of these will 

have to be tested overseas to assure safety and indeed, if they can 

find them, to assure efficacy, and indeed, if they can find a market, 

the usual market forces will dictate their use and determine their 

safety in an extended group of people who are actually at risk and 

who are not just chosen as experimental subjects. Thank you. 

Chairman COX. I thank the panel. I thank the gentlelady. I am 

sorry. 

Dr. ADAMS. No comment. These are both outside my area of expertise. 

Chairman COX. The gentlelady from the Virgin Islands. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. I will try to be 

brief because several of my questions have been answered. 

I want to say that, at the outset, I share the concern that was 

voiced by Congresswoman Lowey. Because what happened is we 

began the process not at the beginning, so we don’t even have an 

overview of where the whole health piece is. We came in with BioShield. So a lot of the questions you are getting is because we don’t 

have the whole picture, we don’t know where our public health system is, the overall picture, so we are at a handicap. 

I want to kind of follow up briefly, hopefully, on the issue, just 

using SARS as an example. We realize that we have been very 

lucky over in the United States, but had the Toronto experience 

happened here, if we had enacted Project BioShield, how would it 

have helped us to deal with a new disease coming in like SARS? 

Dr. FAUCI. If you look at BioShield today—let’s say we have an 

agreeable legislation that launches BioShield today and SARS 

came tomorrow. The impact of BioShield on how we handle SARS 

next week, the week after, the month after would be negligible, if 

not at all. 

Mrs. CHRISTENSEN. And if it had been enacted 5 years before, 

say, and this was a new thing that we had never seen or heard of 

before. 

Dr. FAUCI. Right. What Project BioShield does is the three things 

that Ms. Jackson had actually mentioned: expedite the research, 

develop secure funding capability and to make it available through, 

where appropriate, an emergency use. 

That is to develop countermeasures against perceived or real 

threats. If something hits now, we are not going to be able to implement the BioShield mechanism to help us today, but what BioShield will do is it will create the incentives to get pharmaceutical 

companies involved in certain areas of development so that if we 

have an unknown attack on us that is delivered, it could be a 

SARS-like phenomenon, that we will be much better prepared to 

have countermeasures to hit the ground running. 

The SARS—the response to SARS that you mentioned goes directly to our public health capability, and I think that is the 

point—

Mrs. CHRISTENSEN. That is the point—

Dr. FAUCI. That is exactly right, and that is the point that you 

are making, that we in this country did well for two reasons: One, 

we rapidly implemented infection control and public health meas-
56

ures; and I can tell you that we are much better off at it today because of the intensity of the effort that has been put in over the 

past year and a half following the anthrax attack on our awareness 

and ability to move rapidly to public health emergencies. 

Mrs. CHRISTENSEN. But the disease doesn’t really start here—

Dr. FAUCI. That is the point. 

Mrs. CHRISTENSEN. It never got here. We—

Dr. FAUCI. Exactly. 

My second point—if you will allow me, the second point is that 

we were pretty lucky, because we were a few days ahead of the 

curve. We knew what we needed to do with this new disease before 

it actually came here. Unfortunately, the people in Hong Kong and 

Vietnam did not know they were dealing with a disease that was 

transmissible the way it was and that—their health workers were 

vulnerable to it. So it was a combination of our rapidly moving but 

also being somewhat lucky. 

Mrs. CHRISTENSEN. Can I just ask for clarification? At what point 

in that arrow do we start to pay the private sector out of that permanent, open-ended and definite authority? 

Dr. FAUCI. Right from the advanced development till the actual 

procurement. 

Mrs. CHRISTENSEN. Somewhere around the middle of that? 

Dr. FAUCI. No, it is probably closer to the product. Because the 

concept to the preclinical, to the preadvance and then advanced development is probably closer to the advanced development and the 

actual procurement of the product. 

Mrs. CHRISTENSEN. OK. Because just looking at one of the testimonies from PhRMA of 5,000 compound screen, 250 into preclinical 

testing. Will we be paying at the 5,000 or the 250? 

Dr. FAUCI. No. 

Mrs. CHRISTENSEN. Because out of that 250, maybe only one drug 

gets approved, and I realize we are talking about expedited approval, but—

Dr. FAUCI. Yeah. As I mentioned, essentially, on that, the monies 

that would come through for BioShield would be for the procurement of the product. Now, obviously—

Mrs. CHRISTENSEN. But there is some money to incentivize early 

on to even do the research, isn’t there? 

Dr. FAUCI. The research part of it on the far left of the slide, is 

what we do in discretionary research must be to prove the concept 

and get something into preclinical development. BioShield is talking about the far right-hand side, which is advanced development 

and procurement. 

Mrs. CHRISTENSEN. One of the concerns, obviously, and I said it 

earlier, was this independent permanent contract authority and 

how do you actually price a fair contract without bidding? How do 

you decide—with not having bidding, this is going to be just going 

to a company that—the homeland security or—

Dr. FAUCI. No, there will be bidding. 

Mrs. CHRISTENSEN. There will be bidding. 

Dr. FAUCI. There will be bidding. For example, we will say that—

or companies would come to us. It goes both ways. If we feel that 

we need to have a product, for example, to develop a monoclonal 

antibody for botulism toxin or, as you will hear from our industry 
57

partners, other countermeasures, that we would put a request for 

a proposal to develop and deliver this product, and we would expect 

that hopefully we would have more than one company come in, because that would make the chances of getting to that goal line 

much greater. 

Chairman COX. The gentlelady’s time has expired. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. 

Chairman COX. The gentleman from Rhode Island, Mr. Langevin. 

Mr. LANGEVIN. Thank you, Mr. Chairman; and I will probably 

have some additional questions that I would like to submit for the 

record, if that would be possible. 

What I would like to ask are questions that might be a little 

more broad-based, and that is what do we as policymakers and perhaps even the executive branch need to know, what steps could be 

taken to better protect the population from either a bioattack or 

emerging pathogens that we are going to see come on the scene in 

the near future? Are there things that we should be more aware 

of, that we should be doing to better prepare ourselves and protect 

the population? 

Dr. FAUCI. Well, yes, sir. As you know, some of these we have 

already discussed, but I will capsulize it very briefly. 

It is a multi-facetted phenomenon. It is going to be one thing to 

do to cover all the bases, and it goes from everything—all we mentioned just a while ago to building up our public health infrastructure and capability to respond. That is one thing that we can do. 

The other is a robust fundamental research base to feed into the 

concepts. As you know, the increase in biomedical research allocation to the NIH for biodefense in fiscal 2003 and continued into 

2004 was the largest single increase in research endeavors in the 

history of the NIH in 1 year. So a robust research base. And now 

what we are trying to do with BioShield is to expedite the process, 

A, and, B, strongly create incentives for industry to partner with 

us so that we can use their considerable capabilities to ultimately 

develop the countermeasures. So it is public health, fundamental 

research and procurement. 

Dr. PETERS. Dr. Fauci certainly reflects my views. I will leave 

these with you if you want to read more detail about the Institute 

of Medicine going into some of the factors of emergence. 

Many of these are beyond my control. We can’t control climate, 

development. Many of them are very contentious. Do we dam this 

river or not? And so I think it is a very complicated issue. If I may, 

I will leave these with you later. 

Mr. LANGEVIN. Also, a second question, and my final one. About 

a year and a half ago, I held a forum back in my district on West 

Nile virus, and we had several experts come and testify as to what 

type of impact this was having on an area, what we could do to better protect our residents. And Dr. Bandy, who works in our Department of Health, suggested that we are going to see more and more 

of these types of pathogens coming on the scene that we need to 

protect ourselves from in the near future. And I just ask you if you 

could speculate about the types of things we need to be concerned 

about in the next ten years or so, where will we be, what type of 

timeline are we facing in terms of these various pathogens coming 
58

on the scene that we need to be concerned about? How much time 

do we have, in other words, to prepare ourselves, as a best guess? 

Dr. FAUCI. It is a continual dynamic, an infinite process. The relationship of emerging and reemerging microbes with the human 

species has been going on from the evolution of the human species 

and will be with us throughout the duration of the human species. 

We have the continuing emergence and re-emergence of microbes. 

Historically some of those have shaped civilization, like smallpox 

and measles. Some of them are little blips on the radar screen 

where they are interesting curiosities in their natural occurrence, 

but they don’t have global health impact. Some of them do. 

In the last century, in the 20th century, there were two major 

ones. One was the 1918 flu pandemic and the other was the HIV/

AIDS epidemic. Right now in the 21st century, we have had some 

interesting forays into emerging and reemerging diseases. We have 

had the reemergence of West Nile Virus, because it was with us before, but it reemerged in an unusual location, namely the United 

States of America. And then we have had the emergence of a new 

disease that didn’t exist before, namely SARS. 

So the answer to your question, sir, is that this is a process that 

will continue. The best that we can do is to prepare ourselves by 

keeping our public health infrastructure able to respond at a public 

health level, and also create a robust research and development 

program that allows us to rapidly respond to these emerging diseases as, in fact, they do emerge. 

Dr. PETERS. As a footnote to that very eloquent and complete 

statement, it is not just in the U.S. It is overseas. To the extent 

that we can deal with some of these issues overseas, enhanced surveillance and response overseas, then we are protected here. 

Dr. ADAMS. I would like to also add on the point of surveillance 

and intelligence, modern diagnostics with large platforms to detect 

these before they become an issue is preemptive in nature, and 

that is something we need to be on the front end of as well as the 

vaccines and therapeutics, but the intelligence of what is going on 

in many places with modern diagnostic techniques will be essential 

for protecting ourselves. 

Mr. LANGEVIN. Gentlemen, thank you for your time. 

Chairman COX. I thank the panel. The gentleman’s time has expired. 

The gentleman from Florida Mr. Meek. I thank the gentleman 

from Florida and the gentleman from Rhode Island for your patience as well. 

Mr. MEEK. Thank you, Mr. Chairman, and I want to thank all 

of our witnesses that are here today. I, too—I am from Miami, 

Florida, and I had a forum in my district and local health providers, first responders—I would like to—many of you are involved 

in front-line delivery or have some experience in it from reading 

your biographical information. A lot of our first responders are saying, especially with these exercises that we are having throughout 

the country—many of them are saying, well, that is fine what they 

are seeing on C–SPAN or the national news, but it is not necessarily reality if we were to see a full-scale bioexperience in our 

community. 
59

As it relates to SARS and as it relates to other viruses that are 

moving around in our community, and as you know, terrorists, they 

look to economically cripple an economy, if they can, tourism, 

which is important to Florida and many other destinations in our 

country. 

How do you feel as it relates to not only the vaccine movement 

but the communications with some of the front-line people that are 

not necessarily getting the message or the work that you are doing 

here or in your perspective locations towards bringing not only 

comfort but equipment, know-how, knowledge to them on the front 

line as it relates to health care workers? 

Dr. FAUCI. As a Nation, we certainly have a ways to go to do 

that, and that is part of the multi-factorial and multi-facetted issue 

that I mentioned a little while ago with regard to emerging diseases there. The public health in the trenches infrastructure, the 

ability to be able to communicate with the citizens of this Nation 

in the case of an emergency, be it a naturally occurring or a deliberately perpetrated emergency is something that is a critical part 

of what we do, and we need to pay attention to that. That has been 

addressed and will continue to be addressed, because we are not 

where we want to be yet in part of the response to the biodefense 

initiative, which included the shoring up of the State and local 

health public capabilities as well as our communication capabilities. 

So the point you make is right on. 

Mr. MEEK. Well, let me just—furthermore, if I can—and maybe 

some—all of you want to chime in on this. They are very concerned 

not only in this field but also in the general application of homeland security. We have taken precautions in our water plants. 

Homeland Security has asked us to beef up security or buy a new 

filter or what have you, surveillance equipment, and as it relates 

to front line health providers, need it be in the hospital, need it be 

setting up an emergency triage situation in a bioterrorism situation, they feel that even though they are drilling, even though they 

are hearing a good game over television, they are not necessarily 

seeing it there. You say, yes we recollect do have a long way to go. 

I am asking you realistically, how long do you think it will take for 

us to get there, especially when it comes down to the training 

and—the training for those responders? 

Dr. FAUCI. Again, if there is to be perfection, I don’t think we will 

ever get there, but if there is getting better and better as opposed 

to staying static or getting worse, I think we are getting better and 

better. And I understand, because I too vat the local level have spoken to people who still feel that there is a lot of uncertainty. That 

is one of the reasons to have a TOPOFF II-like exercise as well as 

what the CDC is trying to do and is doing well, I think, over the 

past year and a half: partnering with the public health officials at 

the local and State level. 

So we can’t give total comfort and assurance that everything is 

going to get to where we want it to be very soon, but what we can 

say is that we are going in the right direction, and I think we can 

say that with some confidence. 

Dr. ADAMS. I think the response in the—the exercises under way 

right now are where one really finds out where the deficiencies are, 
60

and communication and education are certainly a big part of that. 

Within the organization, at the local level, all the way up to this 

level. 

So I think education to the public may be one of the—the public 

itself may be one of the best weapons we have for the initial detection and initial reporting to public health authorities for the response. 

I don’t know how you find that out. In the first exercise we have 

done on foot and mouth in Brownsville, Texas, right on the tip, it 

was in Canada within the next day. The next exercise, much better, because of communications. And the next exercise even better 

than that. So there is hope for it, but will it ever be reduced to zero 

risk? No. But we can reduce it to a level where we can live with 

it and contain it and control it. 

Mr. MEEK. Mr. Chairman, if I may, I understand that—I know 

what that is like in the perfect world, and I think we all know that, 

in all aspects, it is a reach to get there. The first responders, those 

individuals that will be—we know communications, communications as it relates to an incident, sometimes quarantine, sometimes 

paying attention to what you are doing so you don’t want to spread, 

whatever the situation may be. That kind of training at the home 

front is very, very important. As we learn in these exercises that 

we are doing throughout the country and the one that is going on 

right now, the discussion amongst the first responders, they are 

saying when can we as a local community have that kind of exercise outside of what the sheriff is doing, what the police chief is 

doing, who may not have a great understanding as do all of you 

do on this panel of the—what needs to happen in a bioterrorism 

kind of situation. 

So I will leave it at that in the interest of time. If any of you 

feel propelled that, the reason why I am glad that we are having 

this hearing here today, and I have rebooked my flight so that not 

only I would have a chance to be here to pose a question, but also 

hear the second panel. 

Thank you, Mr. Chairman. 

Chairman COX. The gentleman’s time has expired. 

Does anyone on the panel wish to address themselves to this? 

Dr. PETERS. I hate to take up another minute, but let me just 

say there is such a dearth of microbiological understanding in the 

public and the press, that we I think are finding a real uphill battle. If we could get some kind of thorough briefing of reporters—

and I work with this all the time—to get them up to a level where 

I can communicate to them in a relatively straightforward fashion, 

because when the balloon goes up, we are going to need a lot of 

help, and it will come mainly through the media. 

Chairman COX. Well, I want to thank each of the members of the 

panel for contributing to a solution to that particular problem in 

your way today. You have shown both extraordinary patience and 

exceptional wisdom and good judgment. We appreciate your expertise that you shared with us today. 

As you know in Congressional hearings we have essentially the 

opportunity for all members to ask questions. I think the reason 

that you have endured several hours here and the panel behind 

you as well, is that there is such member interest in this. This is 
61

a very vital subject for our country, and so we appreciate very 

much your contribution. 

I would like to dismiss this panel and welcome the next program. 

While our next panel is getting seated, I would like to thank my 

colleague Mr. Meek for rebooking his flight so that he could be 

here. Certainly, you are doing everything you can as a member of 

this committee to contribute, and we appreciate it. 

Our second panel consists of representatives from the private 

sector, pharmaceutical and biotech industry experts who will be 

able to testify from the private sector point of view about some of 

the subjects that we have had under discussion this afternoon. I 

hope that this panel will be able to help us understand some of the 

factors that companies will consider when determining a line of research to pursue. 

We have with us next Dr. William A. Haseltine, Chief Executive 

Officer of Human Genome Sciences; Alan A. Pemberton on behalf 

of the Pharmaceutical Research and Manufacturers of America, 

PhRMA; Robert J. Sutcliffe, Director, President and Chief Executive Officer of Digital Gene Technologies; and Frank M. Rapoport, 

a partner at McKenna, Long & Aldridge, who is an expert in public 

health procurement. 

I very much appreciate the contribution that each of you have 

made in providing us your prepared testimony for today, the contribution that you have made in terms of your time and indeed the 

contribution that you have made by observing the first panel and 

being here with us here such a significant portion of the afternoon 

already. 

Chairman COX. Without further delay, we will proceed from left 

to right, my left to right, with this panel. 

Dr. Haseltine, your testimony, of course, has already been submitted for the record, and you have 5 minutes to summarize. 

STATEMENT OF WILLIAM A. HASELTINE, PHD, CHAIRMAN AND 

CHIEF EXECUTIVE OFFICER, HUMAN GENOME SCIENCES, INC. 

Mr. HASELTINE. Thank you, Mr. Chairman. 

Members of the Select Committee, thank you for the invitation 

to appear before you today on behalf of Human Genome Sciences. 

My name is William A. Haseltine, and I am Chairman and Chief 

Executive Officer of Human Genome Sciences, the company I 

founded in 1992. Prior to that, I was a professor at the DanaFarber Cancer Institute at Harvard Medical School and at the Harvard School of Public Health. 

Human Genome Sciences is a biopharmaceutical company located 

in Rockville, Maryland that discovers, develops, and manufactures 

gene-based drugs to treat and cure disease. Currently we have 

eight drugs in human trials. The primary focus of Human Genome 

Sciences has not been the development of drugs to protect against 

attack by biological and chemical weapons. Nevertheless, just over 

17 months ago, we realized that our company had the technology 

and capability to develop an effective near-term countermeasure 

against one of the Nation’s most immediate and serious bioterrorism threats, anthrax. 

As a company headquartered just outside Washington, D.C., we 

witnessed firsthand the potential devastating effects of the use of 
62

anthrax as a terrorist weapon in 2001. Thus, while using private 

funds, Human Genome Sciences developed a fully human 

monoclonal antibody drug we call ABthrax that specifically binds 

a key anthrax toxin, thereby preventing or treating the lethal effects of the bacteria. The drug fills a gap that exists in our existing 

defenses against an anthrax attack and can be used alone or in 

conjunction with current vaccines and therapies. 

In contrast to the anthrax vaccine, a single dose of ABthrax confers protection immediately. In contrast to antibiotics, the drug is 

effective against the lethal toxins released by the anthrax bacteria 

and may prevent and treat infections by antibiotic-resistant strains 

of anthrax, a subject you heard about earlier from the previous 

panel. 

Moreover, the drug can be used both to prevent as well as to 

treat those exposed to anthrax. For example, ABthrax may be used 

to protect rescuers entering a contaminated building, soldiers in an 

infected environment or exposed individuals after an attack. 

We have shown in animals that ABthrax is highly effective 

against many times the lethal dose of anthrax spores, and we are 

now ready to initiate human safety trials and to begin large-scale 

manufacture of the drug. 

However, to move forward, we need commitment from the Federal Government to purchase the drug. With the necessary funding, 

ABthrax could be available for emergency use as early as the end 

of next year. A properly designed and implemented BioShield 

would provide the mechanism for this to happen. 

Many companies have the capability and may be willing to develop new products to protect against attack by biological and 

chemical weapons. However, only a few firms such as Human Genome Sciences have actually already done so. The primary challenge we all face is the absence of a commercial market for such 

drugs. In most cases, the only viable market is the Federal Government and, potentially, the governments of our foreign allies. 

Project BioShield, which aims to harness public and private resources, is an innovative effort to develop defenses against bioterror. It could create such a market. 

While HES currently has—while HHS currently has the authority to purchase and stockpile drugs such as ABthrax, this specific 

framework created by Project BioShield would clarify and enhance 

that authority. A defined and transparent process with a clear path 

between threat evaluation, scientific validation and product procurement will go a long way toward giving companies the assurance they need to develop innovative new products to protect the 

public from chemical or biological attacks. 

With respect to BioShield, I would like to urge the Select Committee to consider three broad points. First, in order to be as effective as possible, the program must be flexible. The vast differences 

between biological pathogens is mirrored by the diversity of potential treatments. 

For example, small molecule drugs, such as Cipro, are manufactured by simple building blocks. In contrast, biologicals, such as 

ABthrax, are manufactured in genetically-engineered living organisms and require a process that is expensive, complex and timeconsuming. 
63

Thus, a one-size-fits-all procurement model will ultimately discourage the development of certain countermeasures. Project BioShield should provide not only for procurement of products that 

have already been developed, but also for late-stage development of 

promising drugs. 

Second, Project BioShield should be an equal partnership between the Federal Government and those companies willing to 

commit their expertise and resources to defeat weapons of bioterror. A critical element of such partnership is the mutual willingness to take and share measured risks. Thus, provisions in BioShield legislation that allocate contract risk in an unbalanced manner could have a chilling effect on collaboration. 

In particular, BioShield should provide for early funding of products in order to fairly allocate the risk between the parties. 

Similarly, in the absence of a commercial market for drugs such 

as ABthrax, a permanent and secure source of funding is vital to 

encourage private investment. Pharmaceuticals and biological 

drugs in particular have enormous development costs that can only 

be recouped well into their procurement phase. Without guaranteed 

funding, companies will face substantial risks in development of 

these products and will likely choose instead to pursue other products. 

The President’s proposal for the creation of the funding authority 

will stimulate innovation, spur private investment and enable the 

government to purchase novel therapies without delay. 

This brings me to my final point. Timing is critical. Agencies responsible for administering Project BioShield should take a 

proactive approach to identifying, evaluating and procuring effective drugs. Near-term delays in evaluating and securing the production of viable countermeasures can disproportionately prolong 

the procurement of such drugs. 

In the case of ABthrax, Human Genome Sciences is ready to 

move the drug into production now, which will require significant 

investment to secure manufacturing facilities and to perfect the 

manufacturing process. Due to the demand for such specialized facilities, a delay of months now could postpone the delivery of a 

drug by over a year. 

I thank you for this opportunity to testify and look forward to addressing your questions.

PREPARED STATEMENT OF WILLIAM A. HASELTINE, PHD 

Mr. Chairman, members of the Select Committee, thank you for the invitation to 

appear before you today on behalf of Human Genome Sciences, Inc. My name is Dr. 

William Haseltine, and I am Chairman and Chief Executive Officer of Human Genome Sciences, which I founded in 1992. Prior to that, I was a professor at DanaFarber Cancer Institute, Harvard Medical School and Harvard School of Public 

Health from 1976 to 1993. 

Human Genome Sciences is a biopharmaceutical company located in Rockville, 

Maryland, that discovers, develops and manufactures gene-based drugs to treat and 

cure disease. Currently, we have eight drugs in clinical trials and a broad pipeline 

of preclinical compounds. These include novel human protein and antibody drugs 

discovered through our genomics-based research, as well as new, improved, long-acting versions of existing proteins created using our albumin fusion technology.

ABthrax 

The primary focus of Human Genome Sciences has not been the development of 

drugs to protect against attack by biological and chemical weapons. Nevertheless, 
64

1 Inglesby TV, O’Toole T, Henderson DA, et al. Anthrax as a Biological Weapon, 2002: Updated recommendations for Management. JAMA May, 2002. 287(17): 2236–2252 2The FDA-approved anthrax vaccine, known as Anthrax Vaccine Absorbed (AVA), is only administered to persons at high risk of exposure, like U.S. military personnel, but it is not recommended for the general population. BioPort, Inc. Anthrax Vaccine Adsorbed (BIOTHRAX??) 

Product Insert. Jan. 31, 2002. An improved version of the vaccine is currently under development, but its efficacy and suitability for civilian use are unknown, and it is not projected to be 

available until 2005 at the earliest. 3 Bioengineered strains of anthrax that are resistant to multiple antibiotics, including 

Ciprofloxacin, have already been produced both domestically and overseas, and can be readily 

made using ordinary laboratory procedures. Friedlander A.M. Anthrax: clinical features, pathogenesis, and potential biological warfare threat. In: Remington J.S., Schwartz M.N., eds. Current clinical topics infections diseases. Vol. 20. Malden, Mass.: Blackwell Science, 2000:335–49. 

Brook et al. In vitro resistance of Bacillus anthracis Sterne to doxycycline, macrolides, and 

quinolones. Intl. J. Antimicrob. Agents. 2001; 18:559–562. 

just over seventeen months ago, we realized that our company had the technology 

and capability to develop an effective, near-term countermeasure against one of the 

nation’s most immediate and serious bioterrorism threats—anthrax. As a company 

headquartered just outside Washington D.C., we witnessed first-hand the potentially devastating effects of the use of anthrax as a terrorist weapon in late 2001. 

Thus, using private funds, Human Genome Sciences developed a fully human 

monoclonal antibody drug—called ABthrax—that specifically binds to a key anthrax 

toxin, thereby preventing or treating the lethal effects of the bacteria. 

The drug can be given prior to or after exposure; and it could be used alone or 

in conjunction with the current vaccine and antibiotics. We have shown, in animals, 

that ABthrax is effective against high doses of anthrax, and are now ready to begin 

manufacturing of this product and to initiate human safety trials. In order to move 

forward, however, we need a commitment from the Federal Government to purchase 

the drug. With proper funding, this product could be available for emergency use 

as early as the end of next year. A properly designed and implemented BioShield 

would provide the mechanism for this to happen. 

Anthrax infection is caused by a spore-forming bacterium, Bacillus anthracis, 

which multiplies in the body and produces lethal toxins. Most anthrax fatalities are 

caused by the irreversible effects of the anthrax toxins. Research has shown that 

protective antigen is the key facilitator in the progression of anthrax infection at 

the cellular level.1 After protective antigen and the other anthrax toxins are produced by the bacteria, protective antigen binds to the anthrax toxin receptor on cell 

surfaces and forms a protein-receptor complex that makes it possible for the anthrax 

toxins to enter the cells. ABthrax blocks the binding of protective antigen to cell surfaces and prevents the anthrax toxins from entering and killing the cells. 

Currently, two options are available for the prevention or treatment of anthrax 

infections—a vaccine and antibiotics. Both are essential to dealing with anthrax, but 

both have limitations. The anthrax vaccine takes several weeks following the first 

doses before immunity is initially established. The vaccine also requires multiple injections over a period of eighteen months, in addition to annual boosters, to maintain its protective effect.2 Antibiotics are effective in killing anthrax bacteria, but 

are not effective against the anthrax toxins once those toxins have been released 

into the blood. Antibiotics also may not be effective against antibiotic-resistant 

strains of anthrax.3

In ABthrax, Human Genome Sciences has discovered a third defense against anthrax infections. In contrast to the anthrax vaccine, a single dose of ABthrax confers 

protection immediately following the rapid achievement of appropriate blood levels 

of the antibody. In contrast to antibiotics, ABthrax is effective against the lethal toxins released by anthrax bacteria. It may also prevent and treat infections by antibiotic-resistant strains of anthrax. 

Results from preclinical studies conducted to date demonstrate that a single dose 

of ABthrax administered prophylactically increases survival significantly in both 

rabbits and nonhuman primates exposed by inhaling many times the lethal dose of 

anthrax spores. In both models, we observed an absence of bacteria in the blood of 

all ABthrax-treated animals that survived. The rabbit and nonhuman primate models of inhalation anthrax are regarded as sufficient to demonstrate the efficacy of 

therapeutic and prophylactic agents in treating or preventing anthrax infection. A 

single dose of ABthrax also fully protected rats against a lethal challenge with the 

anthrax toxins. Full results of these studies will be disclosed in upcoming scientific 

meetings and publications as appropriate; they have already been shared with key 

government scientists. 

Based on our preclinical results to date, we believe that ABthrax has the potential 

to be used both prophylactically and therapeutically. For example, ABthrax may be 
65

4 Remarks by President George W. Bush on the BioShield Initiaitve (Feb. 3, 2003), at http:/

/www.whitehouse.gov/news/releses/2003/02/20030203–13.html. 5 Current versions of the Project BioShield authorizing legislation do not grant the Department of Health and Human Services the authority to engage in ‘‘other transactions’’ for R&D 

and prototype development, thereby limiting the agency’s ability to engage in collaborative R&D 

arrangements. In contrast, the Department of Defense has such ‘‘other transactions’’ authority 

to make acquisitions through transactions other than contracts, grants or cooperative agreements, allowing the military to reap the benefits of research and development being done by 

non-defense contractors for commercial applications. The Department of Homeland Security was 

recently granted similar authority through the Homeland Security Act of 2002. See Pub. L. No. 

107–296, 116 Stat. 2135, § 831 (2002) 

used to protect rescuers entering a contaminated building, soldiers in an infected 

environment, or exposed individuals after an attack. In addition, post-exposure 

treatment may lessen the natural progression of anthrax infection and increase survival. Human Genome Sciences plans to file an Investigational New Drug application in the near future, seeking clearance from the U.S. Food and Drug Administration (FDA) to begin clinical trials to evaluate the safety, tolerability, and pharmacology of ABthrax in healthy adults.

Project BioShield 

Many companies have the capability and are willing to develop new products to 

protect against attack by biological and chemical weapons or other dangerous pathogens. A few firms, such as Human Genome Sciences, have already done so. The primary challenge we all face is the absence of a commercial market for such drugs. 

In most cases, the only viable market is the Federal Government and, potentially, 

our foreign allies. 

Project BioShield, which aims to harness public and private resources in an innovative effort to develop defenses against bioterror, could potentially create such a 

market. While the Department of Health and Human Services currently has the authority to purchase and stockpile drugs such as ABthrax, the specific framework created by Project BioShield would clarify and enhance that authority. Indeed, overlapping jurisdictions between HHS and the Department of Homeland Security have 

complicated the picture, at least temporarily. A defined and transparent process—

with a clear path between threat evaluation, scientific validation and product procurement—will go a long way toward giving companies the assurance they need to 

develop innovative new products to protect the public from chemical or biological attacks. 

With respect to Project BioShield, I would urge to Select Committee to consider 

three broad points: 

First, in order to be as effective as possible, the program must be flexible. President Bush recently stated that, ‘‘Project BioShield will give our scientific leaders 

greater authority and flexibility in decisions that may affect our security.’’ 4 The vast 

differences between biological pathogens is mirrored by the diversity of potential 

treatments. For example, traditional small-molecule drugs, such as Ciprofloxacin, 

are manufactured from simple chemical building blocks or extracted from natural 

sources. In contrast, biologics such as ABthrax are manufactured in genetically engineered living organisms (bacteria or mammalian cells) and require a process that 

is more expensive, complex, and time consuming. The process of transitioning from 

an early-stage process to large-scale manufacture often can take anywhere from 12 

to 16 months to complete. Thus, a (one size fits all( procurement model will ultimately discourage the development of certain countermeasures.5 Project BioShield 

should provide not only for procurement of products that have already been developed, but also for late-stage development of promising drugs. 

Second, Project BioShield should be an equal partnership between the Federal 

Government and those companies willing to commit their expertise and resources 

to defeat weapons of bioterror. As Secretary Tommy Thompson stated before the Select Committee’s Subcommittee on Emergency Preparedness and Response: 

‘‘[Project BioShield] must be a public and private partnership. The pathway from 

idea to final product is complex. The best scientific approach to identifying the best 

drug and vaccine candidates must be based on laboratory studies. Testing must be 

performed in appropriate animal models to document safety and appropriate protective or treatment response, and to help determine dosing. Human studies must be 

carefully initiated to assure the basic safety of the product, and then appropriate 

dosing and response must be determined based on measurements of levels of drug 

or antibody predicted to have a protective effect. Steps must be taken to assure that 

the materials used to make the product and the final product itself can be manufactured safely, free of contaminants, and with reproducible and predictable purity, potency, and composition. Careful trials in humans, or where not possible, animal 
66

6Statement by HHS Secretary Tommy G. Thompson on Project BioShield before the Committee on Energy and Commerce Subcommittee on Health and Committee on Homeland Security Subcommittee on Emergency Preparedness and Response (Mar. 27, 2003), at http://

www.hhs.gov/asl/testify/t030327.html. 7 Current versions of the Project BioShield authorizing legislation would preclude payment 

under a contract until delivery is made of a ‘‘substantial portion’’ of the product. In contrast, 

existing procurement laws and regulations provide for a variety of payment procedures that are 

negotiated by the parties based on the unique reqirements and risks of each contract. Similarly, 

the BioShield legislation permits the termination of a contract if a reasonable quantity of the 

product is not delivered within 3 years. In such a case, the contractor is not entitled to any 

payment. 8 Under the Bioterrorism Act of 2002, the FDA specified the evidence required to demonstrate 

the efficacy of new drug and biological products used to counter biological agents, when traditional efficacy studies in humans are not feasible. Public Health Security And Bioterrorism Preparedness And Response Act Of 2002: Section 123. http://www.fda.gov/oc/bioterrorism/PL107–

188.html. According to the guidelines set forth in the Act, successful studies in relevant animal 

models will be considered sufficient to establish efficacy for licensure and marketing approval. 

ABthrax is effective in preventing anthrax infection in two relevant models, rabbits and 

nonhuman primates. According to the guidelines, human clinical trials will be required to establish safety, tolerability, and pharmacology, but not efficacy.

models, must be performed to show that the product is safe and effective for the 

types of populations who might receive it and against the methods of infection or 

exposure that could be encountered. All of these steps require careful planning, experience, and ongoing management and scientific evaluation. Costs to develop and 

manufacture high quality biological products and perform and evaluate the needed 

animal and human studies are high. Grants and contract mechanisms may not always be sufficient or attract the most experienced manufacturers. Manufacturing 

capacity for biological products, particularly for vaccines, is not substantial. For all 

these reasons, the best possible support and public-private partnerships and teamwork are essential.’’ 6

A critical element of such a partnership is the mutual willingness to take and 

share measured risks. Thus, provisions in the BioShield legislation that allocate unfairly contract risk in a manner inconsistent with current Federal procurement policy and practice could have a chilling effect on collaboration with the private sector.7

In particular, BioShield should provide for early funding of products in order to fairly allocate the risk between the parties. 

Similarly, in the absence of a commercial market for drugs such as ABthrax, a 

permanent and secure source of funding is vital to encourage private investment in 

the development of medical countermeasures. Pharmaceuticals—and biologic drugs 

in particular—have enormous development costs that can only be recouped well into 

the procurement phase. Without guaranteed funding, companies will face substantial risk in developing these products and will likely choose instead to pursue more 

commercially viable projects. The President’s proposal for the creation of a permanent indefinite funding authority will stimulate innovation, spur private investment, 

and enable the government to purchase novel therapies without delay. 

This brings me to my final point: Timing is critical. Agencies responsible for administering Project BioShield should take a proactive approach to identifying, evaluating and procuring effective drugs. I applaud the Select Committee for acting expeditiously in considering the BioShield legislation and the Administration for making 

its enactment and implementation a priority. Near-term delays in evaluating and 

securing the production of viable countermeasures can disproportionately prolong 

the procurement such drugs. In the case of ABthrax, Human Genome Sciences is 

ready to move the drug into production, which will require significant investment 

to secure a manufacturing facility and perfect the manufacturing process. Due to the 

demand for such specialized facilities, a delay of months now could postpone delivery of the drug by over a year. We are also ready to begin clinical safety trials in 

humans, having already demonstrated the drug’s efficacy.8 To date, ABthrax has 

been developed entirely with private funds, but in order to move forward the company needs a commitment from the Federal Government to develop, manufacture 

and purchase the drug. With sufficient government support, Human Genome 

Sciences can begin producing significant quantities of ABthrax by the end of next 

year. 

Thank you again for this opportunity to testify and I look forward to answering your questions. 

Chairman COX. Thank you. 

Mr. Pemberton, you are recognized for 5 minutes. 
67

STATEMENT OF MR. ALAN PEMBERTON, PHARMACEUTICAL 

RESEARCH AND MANUFACTURES OF AMERICA 

Mr. PEMBERTON. Thank you, Mr. Chairman. Good afternoon 

members of the committee. 

I am Alan Pemberton representing the Pharmaceutical Research 

and Manufacturers of America, PhRMA. I am a lawyer at the firm 

of Covington & Burling here in Washington, and I have been practicing government contracts law at the firm for 20 years. I head our 

firm’s government contracts practice. 

PhRMA appreciates the opportunity to share with this committee 

the views of the research-based pharmaceutical industry on the 

Project BioShield Initiative. We understand the seriousness of the 

threat of biological agents if used as weapons of war. At last count, 

PhRMA members were developing 256 new medicines for infectious 

diseases. The potential delivered use of infectious agents against 

targeted populations raises grave concerns. Numerous government 

reports make clear that a large number of countermeasures to bioterror agents must be developed. 

PhRMA and its members are already working closely with Federal agencies and with academia on research about potential bioterror pathogens. A biosurveillance work group involving PhRMA, 

private companies, Federal agencies and the WHO is working to establish a global infectious disease surveillance network. 

The President’s BioShield Initiative is an important step to promote the timely and efficient development of modern effective countermeasures. We generally support the three main components of 

the President’s proposal. One, permanent indefinite funding authority for purchase of countermeasures. Two, new authority for 

NIH to speed promising R&D through streamlined hiring and procurement mechanisms. And three, new FDA emergency use authorization for promising treatments still under development. 

Any legislation to implement the President’s initiative must take 

into account the significant technical and economic risks that will 

face companies that develop and produce bioterror countermeasures. 

In addition to the normal uncertainties with commercial R&D 

and production, biothreat countermeasure research involves additional challenges, working with dangerous pathogens without a full 

picture of the risk of disease and without being able to test for efficacy in the normal manner because there may be no patients who 

currently have the disease. 

Moreover, manufacturers that develop countermeasures may be 

exposed to potentially devastating product-liability suits. Private 

insurance could be unavailable or prohibitively expensive for such 

products. 

In light of the special risks and obstacles of bioterrorism research 

and production, PhRMA has developed several legislative recommendations. 

First, meaningful liability protection is essential. Provisions in 

current law, namely the SAFETY Act and the indemnification in 

Public Law 85–804, have too many uncertainties and may discourage participation by the industry. PhRMA supports liability protection modeled on either the Swine Flu legislation or the Homeland 

Security Act protections for smallpox vaccine manufacturers. 
68

Second, the procurement process should be flexible and reliable 

and more like the private market. We have a number of suggestions in this regard. One, the Secretary of HHS should be given 

flexible ‘‘other transactions authority’’ similar to that given to the 

Department of Defense. The Homeland Security Act already gives 

such authority to DHS for other R&D, but not to countermeasure 

R&D through HHS. 

Too, the legislation should recognize that contract pricing may 

take into account the actual cost of development, including costs incurred after contract execution. 

Three, the Secretary should be permitted to enter into single contracts for both R&D and production. 

Four, the Secretary should be able to purchase antibiotics and 

antiviral agents that have potential uses other than as countermeasures. 

Five, the Secretary should be authorized to include performance 

based or milestone payments in procurement contracts. 

Six, contracts should not be subject to termination for convenience or nondelivery within a fixed statutory period. 

Seven, contracts should not be limited to countermeasures that 

can be developed within a fixed period of 5 years. We have been 

discussing these provisions with members of the administration 

and Congress, and we are hopeful they will be included in the final 

legislation. 

Finally, within the model of competitive R&D, there may be instances where a narrowly tailored antitrust exemption would be 

appropriate in order to permit sharing of information among companies with careful government safeguards. America’s pharmaceutical companies look forward to doing their part to protect the 

country against bioterror threats. 

Thank you for your time, and I look forward to answering your 

questions.

PREPARED STATEMENT OF MR. ALAN PEMBERTON 

The Pharmaceutical Research and Manufacturers of America (PhRMA) appreciates the opportunity to share with this Committee the views of the research-based 

pharmaceutical industry on countering the bioterrorism threat and on the Project 

BioShield initiative. 

PhRMA represents the country’s leading research-based pharmaceutical and bio- technology companies, which invested an estimated $32 billion in 2002 in developing 

new medicines to help and heal patients. PhRMA member companies join others 

who are convinced that biological weapons present a serious and increasing danger 

to people around the world. The pharmaceutical industry is dedicated to the development of innovative therapies and vaccines to counter unmet medical needs. Because a substantial proportion of the unmet medical need in the United States and 

worldwide is both directly and indirectly related to infectious diseases, we understand the seriousness of the threat of biological agents if used as weapons of war. 

The complexity of the problem of biological weapons is amply demonstrated by 

science’s continuing difficulty in dealing with infectious agents as the cause of natural disease. The threat represented by infectious diseases—such as HIV, malaria, 

and tuberculosis—is real and all too well demonstrated by the deaths of over 5 million people annually from these three diseases alone. All together, infectious diseases claim more than 100,000 American lives each year and cost more than $30 

billion annually in direct treatment expenses alone. At last count, PhRMA member 

companies were developing 256 new medicines to treat or prevent infectious diseases—medicines which include brand new classes of antibiotics, new vaccines (including edible vaccines), antifungals, antivirals, and immune enhancers. 

Particularly in light of continuing difficulties in infectious agent research, the potential use of these agents in intentional concentrated exposures of targeted popu-
69

lations raises grave concerns. Reports from the National Academy of Sciences, the 

NIH Blue Ribbon Panel for Biodefense Research, and the US Defense Science Board 

make clear that a large number of countermeasures to biothreats must be developed. Indeed, existing medicines are not sufficient to combat the biological weapons 

already developed. Needed countermeasures will include vaccines, therapeutics, and 

diagnostics. 

The basic science research required for countermeasure development has already 

been stimulated by funds appropriated to various Federal agencies including the Department of Health and Human Services and the Department of Defense. It is widely recognized, however, that a cooperative and collaborative research and development effort, which engages industry, government, and academia, will be essential 

to the development of a complete arsenal of countermeasures against bioterrorism 

agents. 

PhRMA and its member companies are already working closely with Federal 

agencies and academia to move forward with this research. For example, PhRMA 

is working with CDC, DoD, NIH, FDA, and academia to support in vitro studies of 

five pathogens—B. anthracis (anthrax), Y. pestis (plague), Brucella spp. (brucellosis), F. tularensis (tularemia), and Burkholderia Spp. (Glanders)—for testing of existing antibiotics. Several companies are working with the National Institute of Allergy and Infectious Diseases (NIAID), the Department of Defense, and the FDA to 

test existing antibiotics against plague, and PhRMA will cosponsor a workshop with 

interested parties to determine how best to expand labeling of other existing antibiotics that may be effective against the top biothreat agents. PhRMA committees 

continue to work with FDA to clarify and improve existing regulations that pertain 

to biothreat countermeasure research, such as the ‘‘Spore Formers Rule,’’ 21 C.F.R. 

Part 610, which imposes requirements on use of facilities or equipment that have 

been used with spore forming organisms, and the ‘‘Animal Rule,’’ 21 C.F.R. 

§ 314.610, which allows efficacy testing in animals where testing in humans would 

be impossible or unethical. We have prepared educational materials for the public 

on anthrax, smallpox, and vaccinia, and we are working on materials addressing tularemia and plague. Dr. Gail Cassell, PhRMA’s Chief Scientific Officer for Emergency Preparedness and Vice President, Scientific Affairs at Eli Lilly & Co., sits on 

Secretary Thompson’s Advisory Council on Public Health Preparedness. A Biosurveillance workgroup involving PhRMA, other private sector companies (TIGR, 

IBM, and Roche Diagnostics), Federal agencies (CDC, DoD, and NIH), and the 

World Health Organization is working to establish a global infectious disease electronic surveillance network. 

Project BioShield, announced by President Bush in his 2003 State of the Union 

address, is an important step forward in the effort to ensure the development of 

modern, effective countermeasures and to ensure that these products become available in a timely and efficient manner. PhRMA generally supports the three main 

components of the President’s proposal: first, the creation of a permanent indefinite 

funding authority to spur the development of medicines and vaccines by the private 

sector; second, new authority for NIH to speed promising R&D through streamlined 

hiring and procurement mechanisms and increased flexibility to award contracts 

and grants; and third, new FDA emergency use authorization for promising treatments still under development. 

Any legislation to implement the President’s initiative must—if it is to be successful—take into account the significant scientific, legal, and economic impediments to 

the research and development of biodefense products. 

Research and development into new medicines is itself a lengthy, risky, and expensive endeavor. Bringing a drug from concept to market takes 10 to 15 years. The 

average cost to develop a new drug has grown from $138 million in 1975 to $802 

million in 2000. The risks involved in the new drug development and approval process are substantial. Of every 5000 compounds screened, only 250 enter preclinical 

testing, and of every 250 drugs that enter preclinical testing, only one is approved 

by FDA. Only 3 of 10 marketed drugs produce revenues that match or exceed average R&D costs. 

Moreover, research into biothreat countermeasures involves many challenges 

above and beyond those encountered in non-biodefense R&D. For example, biodefense R&D requires working with dangerous pathogens in highly specialized facilities, and developing countermeasures without a full picture of the risk of disease 

(because we cannot see into the mind of the terrorist) or the benefit of the treatment 

(because there are often no patients with the disease, which prevents clinical testing 

for efficacy). 

The decision to divert resources from the research and development of medicines 

for serious illnesses like heart disease also can be financially risky, especially when 

a countermeasure may never be purchased or used, and especially for companies 
70

with few products in the pipeline. (Diverting resources from research and development of these other medicines will also affect the future availability of treatments 

and cures for patients with other serious health conditions—especially since less 

than ten percent of all drugs that enter testing ever demonstrate sufficient safety 

and acceptable efficacy.) 

Finally, manufacturers that develop countermeasures may be exposed to devastating product-liability suits. Some of these would arise out of adverse events that 

are unavoidable given the nature of the products, and some could arise simply because the products were made available without the usual battery of clinical trials 

required for FDA-approved products. Private insurance could be unavailable or prohibitively expensive for such products. 

In light of the special obstacles to research and development in the bioterrorism 

context, PhRMA has developed recommendations for any legislation that would implement Project BioShield. 

First, PhRMA believes that meaningful liability protection is an essential component of any legislation to encourage the development of bioterrorism countermeasures. Provisions in current law—namely the SAFETY Act, 6 U.S.C. §§ 441–444, 

and the indemnification available under Public Law 85–804—are associated with too 

many uncertainties, limitations, and conditions to make them effective in this 

unique context. Accordingly, PhRMA supports liability protection modeled on either 

the Swine Flu legislation or section 304 of the Homeland Security Act. 

Second, in order to engage the private sector most efficiently and effectively in 

this research, the procurement process must be more flexible and reliable, and it 

must more closely resemble the private market. We have a number of suggestions 

in this regard, the most significant of which follow: (1) the Secretary of Health and 

Human Services should be given flexible ‘‘other transactions authority’’ similar to 

that given to the Department of Defense, particularly the Defense Advanced Research Projects Agency, under 10 U.S.C. § 2371; (2) the legislation should provide 

that procurement contracts may recognize that pricing should take into account the 

actual cost of development including costs incurred after contract execution; (3) it 

should expressly provide that the Secretary may enter into single contracts for both 

R&D and production; (4) it should permit the Secretary to purchase antibiotics and 

antiviral agents that have potential uses other than as countermeasures; (5) the 

Secretary should be authorized to include performance-based (milestone) payments 

in procurement contracts—rather than limited to repayable ‘‘advance payments’’ and 

payment conditioned on ‘‘substantial delivery’’; (6) contracts should not be subject 

to termination at the convenience of the government or for non-delivery within a 

fixed statutory period; and (7) contracts should not be limited to countermeasures 

that can be developed within five years. We have been discussing these provisions 

with members of the Administration and members of Congress, and we look forward 

to continuing these discussions so as to work toward the inclusion of these provisions in the legislation. 

Finally, although the overall model of bioterrorism countermeasure research and 

development should build on competition among private companies, the need for urgent development of medicines may require the sharing of information and cooperation among companies, which can raise antitrust concerns PhRMA therefore believes 

that it would be appropriate to provide a narrowly tailored antitrust exemption to 

facilitate certain meetings and activities, under careful governmental safeguards. 

A strong commitment from all parties will be necessary in the months and years 

to come, as our nation seeks to protect itself against the terrible threats of biowarfare and bioterrorism. America’s pharmaceutical companies look forward to doing 

our part. 

We thank you for your time and look forward to answering your questions.

Chairman COX. Thank you very much. Mr. Rapoport, you have 

5 minutes. 

STATEMENT OF MR. FRANK M. RAPOPORT, ESQUIRE 

PARTNER, McKENNA LONG & ALDRIDGE LLP 

Mr. RAPOPORT. Mr. Chairman and members of the committee, it 

is an honor for me to testify with regard to Project BioShield, 

which we think is a superb start. We want to, however, offer four 

ideas if you are truly serious about jump-starting the creation of 

a new industry in America called the biodefense industry. 
71

I appear before you today having represented 35 pharmaceutical 

companies in their dealings with the VA and the DOD, the largest 

hospital system in the world. I have also had the privilege of working on both the smallpox vaccine procurement out of CDC pre-9/11 

based on Ken Alibek’s information that we had pre-9/11, and more 

recently on NIH’s anthrax procurement. 

I am not going to be critical of NIH, but I want to point out that 

you must give procurement officials additional flexibility in trying 

to build this Department of Defense and Homeland Security biodefense industry. My four ideas that I offer are similar to my colleague next door who just gave you two or three of them, but I will 

just run through them quickly. 

I am the president of a drug company. I am not interested in accepting R&D work from the Federal Government. I am not Lockheed, I am not Boeing. I don’t want my books audited. I would 

rather do research to come up with the next Viagra or an 

antidepressant. Yes, I am patriotic, but I have shareholders. I will 

do business with you as the president of a large pharmaceutical 

company if you promise me if we build it, they come. If I am successful on the R&D under the same contract, and that is not what 

is crystal clear under BioShield, I want to be the one who does the 

production. I don’t want to go through with what just happened in 

Dr. Fauci’s anthrax procurement where you had the winning bidders were two very fine companies, but are not the companies that 

are one of the four large vaccine manufacturers. Why? Because the 

R&D was all that was offered in that contract. There was no production contract. In fact, any minute now the bid will come out of 

NIH for the production contract. It is going to be massive chaos 

and confusion about who owns the intellectual property under the 

original contract, whether the two contractors working on their 

own nickel get the R&D work and the proprietary data. 

Second, in the same contract, you must allow the Secretary to 

make clear that corporate America has the worldwide intellectual 

property rights. I am going to share with you a story you have 

probably not heard elsewhere. 

In Secretary Thompson’s smallpox procurement, it was won by 

Acambis. Up to 250 million doses were allowed to be produced. 

There was an option clause for another 250 million doses. We 

asked the Secretary’s people who is that for because there are only 

300 million people in America and the answer we thought we got 

back was that the President wants to give away the vaccine that 

is developed under this contract to Tony Blair and his friends. 

That may be a policy decision, but I am the president of the drug 

company, and I say, you have just destroyed my worldwide rights. 

I want to do business with you, I am willing to share my R&D 

costs, I don’t want you to fund it all, as long as you give me the 

production contract, but don’t negate my worldwide markets. I 

want to sell this same vaccine to the Japanese, the French and to 

the Brits. 

We need to have a clear statement from Congress that the intellectual property rights will be respected. I don’t have time to go 

through each, but that does not do it because right now the government could take the intellectual property rights of any of the contractors working under the cost contracts at NIH and give them to 
72

Dr. Haseltine’s company. I would argue that should not be done, 

but there must be clarity. 

My second point, and I will echo the term ‘‘other transactions,’’ 

which Mr. Pemberton referred to is a fancy way of saying don’t 

make me adhere to all of the Federal acquisition regulations. Do 

a commercial deal with me, and then I will come forward and work 

on your behalf. 

The Predator, which is an unmanned vehicle used in Afghanistan, was done on ‘‘other transactions.’’ 

Third, the Safety Act must be amended so that it applies to anything under BioShield. The protection the contractors get under the 

Safety Act is only triggered some say in the event of a terrorist attack. Dr. Haseltine is working on anthrax now. He should be able 

to have the protection of the Safety Act before that time. 

Finally, I will leave with you one idea if you are clearly serious 

about jump-starting this industry. There is a law called the Defense Production Act. It is a very unusual law but allows the Secretary of the DOD to convene a meeting and put all of the bidders 

in one room, forget antitrust issues, and it can make allocations of 

market share and discussions between Merck and Human Genome. 

You can dispense with the bidding process and you jump-start the 

industry by using the Defense Production Act. 

I will leave with you, if you care to have it in the record, an article which spells out how that is done. 

[A copy of the article ‘‘Smallpox as a Biological Weapon’’, JAMA. June 9, 1999: Vol. 281. No. 22:, and the article ‘‘Plague as a Biological Wapon’’, JAMA, May 3, 2000, Vol. 283, No. 17, 2281, are 

maintained in the Committee files.] 

Mr. RAPOPORT. Mr. Chairman, thank you very much for your 

time.

PREPARED STATEMENT OF MR. FRANK M. RAPOPORT 

Mr. Chairman and members of the Committee, it is an honor for me to testify 

before you today regarding Project BioShield and how to jump-start the creation of 

a sustainable biodefense industry. Mr. Chairman, I applaud your immediate consideration of the steps necessary to incentivize the pharmaceutical and biotech industries to join as partners with the Department of Health and Human Services, the 

Department of Homeland Security and the Department of Defense to combat the 

evolving nature of agents of bioterrorism. 

I appear before you today as a private attorney who has represented over thirty 

pharmaceuticals and biotechs in their contracting with the Department of Veterans 

Affairs, the Department of Defense, the Public Health Service, as well as directly 

representing companies in their individual bids to create a smallpox vaccine pre-9/

11 from the CDC, a post-9/11 smallpox procurement by the Center for Disease Control and a recombinant protective antigen for anthrax issued by the National Institutes of Health. 

Based on my view of how government agencies have operated in these procurements, as well as my intimate knowledge of what it will take to incentivize those 

to participate in a biodefense industry, I offer, with supporting analysis, four ideas 

for your immediate consideration. 

1. Agency procurement officials should create for each needed drug and diagnostic 

a Master Agreement between a successful bidder(s) and HHS which identifies clearly who will pay or share in the research development phase of the agreement, clarify 

there is a linkage between successful R&D and a guaranteed production contract 

within the same Master Agreement, set forth the allocation of intellectual property 

rights including a private company’s unfettered right to commercialize the product 

for worldwide sales, and that the Master Agreement will recognize payments sufficient to amortize investment, which would include return on capital and return of 

capital, particularly in the event of early termination should the needs of the agency 

be directed elsewhere due to changes in bioterror threats. 
73

2. The procurement vehicle identified above as the Master Agreement should 

allow a Secretary to depart from the very stiff and burdensome Federal Acquisition 

Regulations which govern contracts, grants and cooperative agreements, and instead 

embrace ‘‘Other Transactions’’ which provide for commercial-like terms and conditions which are more likely to attract private industry, yet can also provide for protection of the Federal Treasury. 

3. Provide a clear statement that participating industry will be protected from 

product liability law suits by invocation of Public Law 85–804 or direct statutory 

immunization. Since it appears that the Safety Act—which embraces the Government Contractor Defense—may be interpreted to apply on in the event of a terrorist 

attack—there should be a clarification that it, as well as Public Law 85–804, applies 

during the development and production phase of any counter measure under the 

Master Agreement. 

4. Consider jump-starting the biodefense industry by seizing upon the express authority under the Defense Production Act (‘‘DPA’’) of 1950, as amended to convene 

a meeting of all relevant companies competing for government contracts requesting 

the development and production of certain vaccines and counter measures for national defense purposes. Under such authority, the government may provide immunity from potential anti-trust liability to a company that participates in a process, 

the objective of which is to address issues of common concern to industry and the 

government. The government may, in exercising this authority, require a competitor 

to act in collaboration or share information that otherwise that could not be shared 

due to anti-trust laws and regulations. 

I expand upon these four points below: 

I. Provide for Express Authority to Enter into a Single Agreement for Research, Development and Production, A/K/A, The Master Agreement 

We support strongly the need to provide for the possibility of the Federal Government entering into agreements (including contracts, grants, cooperative agreements, 

and ‘‘Other Transactions,’’) that permit a biodefense contractor to engage in research 

and development with the assurance of production under a single agreement. While 

this appears to be the intention of the BioShield legislation, the proposed legislation 

does not make this authority crystal clear. It is essential there exists a certainty 

that satisfactory completion of research and development will lead to a manufacturing agreement. 

It is also my experience in order to stimulate private investment and biodefense 

counter measure research, development and production, private investors must be 

assured that they have the potential to receive a return on their investment, both 

in the price of the end product and in the event the government elects to terminate 

the agreement for its convenience. The proposed BioShield legislation does not account for the implications of using private investment to finance research, development, and production of biomedical counter measures. 

I suggest language be included in the proposed legislation that permits the Secretary of Health and Human Services to enter into agreements that allow the end 

price of any biomedical counter measure to reflect the cost of private financing, including cost of capital and return on equity. 

In addition, under the current Federal Acquisition Regulations (‘‘FAR’’) when a 

contract is terminated for the convenience of the government, contractors may recover the cost of performance through the date of termination plus a reasonable 

profit on those costs in addition to settlement expenses associated with ceasing performance, negotiating termination liability, and disposing of equipment and materials. The terms vary slightly depending upon the specific language of the (Termination for Convenience( Clause used in the contract. However, one of the costs the 

FAR expressly prohibits—and one which very likely will apply to Project BioShield’s 

contract—is capital financial cost. 

Specifically, the program envisioned by the proposed BioShield legislation likely 

will be awarded via competitive negotiations. In such instances, the agency, here, 

HHS, negotiates proposals with one or more contractors. In such cases, the FAR expressly prohibits contractors from recovering as part of their contract price interest 

on borrowings (however represented) as well as cost of financing and refinance capital. See, FAR 31.205–20. Therefore, to recover return on equity costs and other capital financing arrangements, the existing regulations must be overridden. 

In order to facilitate this change, I suggest language be included in the proposed 

legislation that requires the Secretary of Health and Human Services to include 

within an agreement a termination clause that requires costs of capital and return 

on equity to be included in any settlement in any event the government terminates 

the agreement for convenience. 
74

1There is precedent for the term Master Agreement as by federal law pharmaceuticals which 

manufacture branded drugs enter into a Master Agreement with the Secretary of the VA to be 

eligible to participate in Medicaid and sales to the VA. 38 U.S.C. 8126. 2 I note that fixed price development contracting has long been prohibited by Congress for 

DOD weapon system contacting and it appears the lesson has not been learned here. 

Additionally, I propose that any Master Agreement 1 entered into between the 

government and the industry allocate clearly intellectual property rights. There is 

currently a problem, as discussed below, by reconciling the Bayh-Dole law with how 

the agencies have conducted their procurements for smallpox and anthrax. 

In particular, the Bayh-Dole Act, in general, permits election by contractors to 

title of intellectual property made in performing federally funded R&D contracts. 

The government gets at a minimum a royalty free use called ‘‘government purpose 

license rights.’’ The contractor’s elections must include notification to the government of the invention, pursuant of the patent rights, or else the government has 

the right to march in and take over those rights or give them to a third-party. In 

a nutshell, the problem is that even in the event of a timely and successful election, 

the government’s retention of government purpose license rights arguably allows the 

government to use these rights to meet ‘‘certain health and safety needs.’’ It is unclear under this standard whether the intellectual property developed by one contract or could be given by the government to another for future R&D and production 

purposes in the event of a so-called health emergency. 

An example of this confusion is found in both the recent smallpox and anthrax 

procurements. In the smallpox procurement for one hundred and fifty million doses, 

the successful bidder was to develop a new vaccine on a fixed-price per dose 2 It is 

unclear who will own the intellectual property rights for the newly developed vaccine. 

Likewise, the anthrax procurement recently awarded by NIH was only for R&D 

(in two phases) and not production. Indeed, the solicitation issued April 22, 2002 

provided that in the first phase (Phase One) (up to twelve months), the successful 

contractor was to develop a pilot lot and two thousand doses, as well as protocols 

for Phase One and Phase Two clinical trials. The contractor was also to produce a 

plan to produce twenty-five million doses. The contractors were to be notified that 

on or before the twelve-month period, HHS would convene a blue ribbon panel to 

select one or more of the Phase One contractors to be permitted to complete with 

government money clinical studies over the next six months, i.e., Phase Two. This 

was then to be an overall eighteen month development contract finishing in March 

2004, eighteen months from the award date of September 2002. 

Most interestingly, the RFP also stated that the production contract—not related 

to the R&D contract—would be assembled and put out for a bid by May 2003. It 

is certainly unclear how any intellectual property being developed over the eighteen 

month period from the award date of September 2002 through March 2004 will be 

allocated between the R&D contractor and those bidders interested in a production 

contract under a solicitation issued May 2003. 

Based on the foregoing, the various Secretary should have the authority to ‘‘link’’ 

R&D with production so that there is certainty through this process. I am not suggesting—as discussed below under ‘‘Other Transactions’’—that the government be 

the sole financier of the R&D phase, but instead announce clearly that the development of a successful counter measure will vest the contractor a long-term production 

contract (absent a change in ‘‘threat’’ ‘‘when a termination for convenience is appropriate). Indeed, the actual price of the items to be manufactured can be determined 

at the end of the R&D phase by negotiation in accordance with established government contracts procedures and other guidance negotiated in the initial contract 

award. 

II. OTHER TRANSACTIONS 

The term ‘‘other transactions’’ comes from legislation at 10 U.S.C. 2371 where 

Congress authorized DOD to enter into to ‘‘transactions... other than contracts, cooperative agreements and grants’’ to fund research and development efforts. It also 

covers efforts to develop ‘‘prototype’’ weapon systems under more recent legislation, 

namely Section 845 of the 1994 DOD authorization Act. Other transactions are 

viewed as being enormously helpful in expanding the field of companies that are 

willing to perform government contracts, specifically those companies that are predominately commercial like pharmaceuticals and biotech companies which are otherwise not willing to sign-up to the government’s requirements regarding intellectual property, cost accounting, pricing and other circumstances which they consider 

unacceptable to the conduct for their business. 

Under 10 U.S.C. 2371, the Department of Defense will pay no more than fifty percent of the total R&D costs, and this guideline could be used to allocate the respon-
75

sibility for R&D costs under the first phase of the Master Agreement. As stated previously, after the R&D phase, the government and industry can enter into a price 

determination for the cost of each production unit. 

The added benefits of ‘‘other transactions’’ are that they depart from the very stiff 

Federal acquisition regulations which afford the government with almost unfettered 

discretion to terminate contracts, audit costs, eliminate foreign places of production, 

gain strong IP rights, and provide no indemnification. Under other transactions, 

several of these authorities could be minimized yet still give the government over 

the procurement. In particular, rather than terminating a contractor for default 

should it miss one deadline or determine the scope of the work is commercially impossible, the parties can agree to a termination at will that would allocate responsibility for costs incurred to date; also, the government can under other transactions 

minimize the amount of audit requiring review of contractors books and records; 

likewise, there could be a more clear allocation of intellectual property and patent 

rights than as provided under the Bayh-Dole Act now; and finally, Public Law 85–

804 indemnification and coverage is clearly permitted under other transactions. 

III. PROVIDE FOR THE AUTHORITY TO INDEMNIFY AND/OR LIMIT 

THE EXTENT OF LIABILITY FOR ANY CONTRACTOR ENGAGING IN RESEARCH, DEVELOPMENT AND PRODUCTION IN BIO-DEFENSE COUNTERMEASURES 

The issue of the potential liability for any entity that provides, or performs research and development related to, biodefense countermeasures absolutely must be 

addressed in order to stimulate private sector interest in entering into agreements 

for such countermeasures. My experience was that the absence of liability protection 

was a major obstacle in the recent procurement for NIH for the development for the 

next generation anthrax vaccine, was a major obstacle in the pre-9/11 first CDC procurement for forty million doses of smallpox vaccine where the winning contractor 

was required to carry its own insurance, and continues to be a major hurdle today. 

Contractors will try to obtain commercial insurance, but the practical reality today 

is that it is unlikely to be available for these projects given their nature. The proposed legislation is silent with respect to addressing liability. 

Both the Secretary of Health and Human Services and the Secretary of Homeland 

Security currently have the authority to provide for Federal indemnity to private 

entities engaging in research, development, and production of biomedical countermeasures under Public Law 85–804. However, use of such authorities are extremely 

rare. It is important to note that President Bush recently revised Executive Order 

10, 789 governing use of the authority to provide for indemnity under Public Law 

85–804. These revisions add two additional levels of coordination and approval for 

all agencies other than DOD before indemnification may be given to a contractor. 

I am also concerned that the use of the government contractor defense under the 

Safety Act only applies in the event of a terrorist act, and could be read to not apply 

to the development of vaccines and counter measures after 9/11 or until there is another similar incident. 

Finally, while HHS is currently exercising its authority under Public Law 85–804 

in very limited circumstances, it is my understanding the agency is not providing 

indemnity until a contract is awarded—and will not guarantee that the indemnity 

is forth coming as a part of the award process. 

IV. USE THE DEFENSE PRODUCTION ACT OF 1950 TO CONVENE A 

MEETING OF INTERESTED BIDDERS TO CONSIDER COLLABORATION 

AND ALLOCATION OF PROCUREMENT DOLLARS 

The DPA provides the government with authority to permit companies to enter 

into certain agreements that could include potential competitors and would have the 

effect of altering competitive behavior for the development of vaccines and countermeasures—activities which would otherwise violate anti-trust laws. Under the DPA, 

the government may convene a meeting with or some of the nation’s vaccine and 

countermeasure manufacturers to discuss the government’s procurement requirements. If the DPA statutory prescriptions are satisfied, the government’s valid exercise of its DPA authority would provide complete protection against the operation 

of anti-trust laws for the private—entity participants in this process. Given the fifty 

or more bioterrorist agents identified by the Defense Science Board, it seems reasonable to consider using the Defense Production Act to stimulate and accelerate interest and investment by the new biodefense contractor. 

Mr. Chairman, thank you for the opportunity to testify on this tremendously important issue. I will be pleased to respond to any questions from members of the 

Committee.

Chairman COX. Thank you. Mr. Sutcliffe, thank you for your 

written testimony. You have 5 minutes to summarize it. 
76

STATEMENT OF MR. ROBERT J. SUTCLIFFE, DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER, DIGITAL GENE 

TECHNOLOGIES, INC. 

Mr. SUTCLIFFE. Mr. Chairman, it is an honor for Digital Gene 

Technologies to be included on the panel, and to represent the hundreds of small, intensely science-driven biotech companies that are 

exploring the lessons which have been taught by the human genome. 

It is also great to be on a panel with my friend Bill Haseltine, 

who has made a success of such a company but, more than that, 

was actually present at the creation of an entire scientific era that 

we now call genomics. And I think his insights from what it took 

to get from here to there are useful in trying to craft something 

that will take us through the next phase. 

I have submitted my testimony and I come to this issue with a 

somewhat different background than most CEOs of biotech companies. I was a venture capital and corporate lawyer. Under the umbrella of no good deed going unpunished, I ended up running a client, and I think I have had an opportunity to look at the science 

from both ends. 

I think the previous panel made some excellent points about the 

breadth and diversity of the risk that we face. They also made a 

point about the need for speed in responding. I think a number of 

the questions from the committee made it clear that the speed we 

are talking about on the customer side is a lot quicker than the 

speed we are talking about in developing particular antidotes to 

particular threats. 

I think it also was clear from that discussion that a problem exists in the discussion about the customer and the market. It is 

clear that in connection with a number of these potential countermeasures the government is the customer in the future. But I don’t 

think that means that there is any reason to suppose the government would not be a good customer. Our military may well be the 

user of some of these antidotes, and in the public health context 

a lot of them will only be used in situations that we would hope 

to prepare for but not need. 

At the same time the market for some of the technologies that 

can answer this need can be very great, and I think it would be 

creating a perverse incentive for BioShield to immediately disqualify technologies that might actually have commercial promise 

as well as an answer for the government’s own need. 

In my submitted testimony, I actually make observations about 

three standards that we would hope the committee would apply in 

looking at something like BioShield and in biodefense generally. 

The first relates to scientific merit. I think that you have heard 

an example today from Dr. Haseltine of a product that may well 

be both excellent science and an answer to something we have long 

needed. He and I have both, however, read a number of reports 

about failed biotech projects that are now being recast as bioterrorism defense projects, and as much as the need is great, we need 

to maintain the high scientific standards to make sure that we get 

an answer the public will accept. 

Second, flexibility on two levels is important: Flexibility in the 

science that is pursued, and flexibility in the funding. Dr. Fauci 
77

talked about the idea that the research element of biodefense is 

being taken care of as part of BioShield, but also as part of NIH’s 

typical assignment. 

Both Dr. Haseltine’s solution and some of the research we have 

done at DGT to find new molecules that may more quickly and 

more accurately deliver pathogens and antigens to the immune system for response will come from basic research approaches rather 

than the development of specific antidotes to the known threats. 

If we are going to get a handle on the threats that we can’t predict exactly, it is going to have to be through the application of the 

science that particularly the biotech industry and the pharmaceutical industry have invested in over time. 

I would suggest that the flexibility that is needed is flexibility in 

the kinds of solutions. Because we can only talk about five major 

known threats out of several hundred, it may well make greater 

sense, or at least equal sense, to look closely at the issue of delivery, absorption, how immunity is actually conferred on the recipient of a threat, and work on that angle such that our solutions and 

the results of the very considerable expenditure you are considering 

is something that can be used again and again to protect the patient rather than necessarily launch another development program. 

Finally, accountability. I think that the original version of the 

BioShield proposal that was submitted suggests an opportunity to 

buy into a threat that we know, and yet what most of us are concerned about are the threats that we can’t predict and can’t know. 

There has been some good testimony about the potential for modification and mutation of the very agents we are worried about. So 

whatever program is adopted ought to continually reassess both 

the threat that we face as citizens and the response that industry 

is providing. I think the government stepping up to take its share 

of the market responsibility as customer will create any number of 

opportunities for the venture industry and our normal free capital 

markets to fund solutions as long as we are flexible and insist on 

scientific merit and keep both sides accountable. 

Thank you, Mr. Chairman.

PREPARED STATEMENT OF MR. ROBERT J. SUTCLIFFE 

It is an honor for Digital Gene Technologies to be included on the panel today 

and in so doing to represent the hundreds of small, intensely science-driven biotechnology companies that are pursuing the newly-revealed lessons of the human 

genome in search of solutions to unmet medical needs. 

It is also a pleasure to be in the distinguished company represented by my colleagues on this panel, including Dr. Bill Haseltine of Human Genome Sciences, who 

made a success of just such a science-driven company but also brings the insights 

of a researcher who was as they say (present at the creation(, and for whom the 

genomic science we take for granted today was just and truly a (vision(; I suspect 

his reflections on the blinding lights and blind alleys of that 30 year journey will 

be helpful to this committee’s inquiry and to the proper structuring of a BioShield 

initiative. 

The proposed BioShield program is an important and timely initiative, and I know 

each ofus on the panel approaches your inquiry as fellow Americans who share your 

alarm at the range of risks posed by the biological component of modern terrorism. 

As citizens it is our obligation to acknowledge those risks and also our much-lessthan-perfect capacity to know their true dimension—let alone to answer them. 

Only second do we approach your inquiry as industry participants and then—I believe—only to help determine which answers our industry can provide or contribute 

to, not which initiatives or decisions will benefit or burden some or all of us. 
78

Indeed, our company, Digital Gene Technologies, approaches the issue of the BioShield much like other Americans do: asking what we can do to help, based on what 

we know and do best. We are not a ‘‘biodefense’’ company nor do we focus our research specifically on ‘‘countermeasures’’. Our research platform has been developed 

and deployed over the past seven years to identify and characterize particular genes 

and groups of genes that explain the source and progress of human disease and suggest target points and pathways for medical intervention and cure. Our TOGA technology is unique in its capacity to simultaneously track all genes active in a cell 

and assess even the most subtle changes in their expression that might mark the 

onset of an affliction or a promising point for protective intervention. 

In the course of our research, we have identified a number of previously unrecognized genes whose special function appears to be the constant surveillance of the 

human gut, lungs and nose for novel antigens—and the rapid delivery of those antigens to the immune systems for assessment and response. 

These molecules, central to the human immune response mechanism, now may 

offer promising roles as direct transporters of new vaccines directly to the immune 

system, offering potential for more more robust and more reliable protections. As 

such, they may offer one—but only one of our future lines of defense to biological 

assault. 

Interestingly, while these discoveries derive from research funded exclusively by 

a commercial partner with a commercial motive: the development of better delivery 

systems for oral and nasally administrable vaccines, the technology that made these 

discoveries possible—DGT’s TOGA—Platform invented at The Scripps Research Institute in La Jolla—is the product of academic research funded by grants from the 

NIH, with additional basic research support from industry. Without both sources of 

funding, the technology—and these promising discoveries—might not exist. 

Today, as you consider components of a national effort to combat bioterror, I’d like 

to suggest that three standards be scrupulously applied to scientific and monetary 

components alike regardless of the pressure, the fear, and the uncertainty that surround this threat. 

Those three standards are MERIT, FLEXIBILITY, and ACCOUNTABILITY 

Merit 

The imperative of our defense must require merit in the science you fund and 

merit for the dollars delivered. It is axiomatic that medical need invites unworthy 

science parading as greater commitment. 

Since September 11 we’ve seen too many failed projects retooled as ‘‘biodefense’’. 

Unworthy science wastes valuable resources and raises unrealistic and counterproductive hopes. The increase in funding contemplated for biodefense should not 

be an excuse for lowering of the threshold for peer review and peer respect. The 

prospect for this in a time of strained financing resources in the biotech industry 

should not be underestimated. Indeed the risk seems even greater if, as suggested, 

the absence of commercial viability becomes a positive qualification. 

However, if the government—on behalf of its own use and the demands of the 

public—can speak for the existence of a market, the traditional combinationof peerreviewed science and entrepreneurial financing represented in the venture markets 

( should have no trouble promoting creative and prompt contributions whose scientific merit will insure their success. 

Flexibility 

The inherent unpredictability of the biological threats we face argues for maximum flexibility in the science we pursue and for flexibility in the funding mechanisms for biodefense you establish. 

The potential for modification and mutation of threatening agents suggests we 

place emphasis on countermeasures that are adaptable and exchangeable. For example, focus on the mechanisms of absorption, resistance and immunity may provide us with a broader arsenal of useful protectants than would slavish pursuit of 

antidotes to individual agents whose creative modification or mutation could render 

our warehoused arsenal instantly obsolete. Similarly, research progress on speed 

and coverage of delivery of countermeasures may be a force multiplier for previously 

marginal defenses. 

To support this flexibility of approach to the relevant science, an equally flexible 

allocation of biodefense dollars between basic research and product development 

may buy us more defense sooner. 

Accountability 

Finally, a word should be said about accountability. 

For those of us who experience the scientific world as observers, its marvels include its constant reinvention, creativity and unscrupulous honesty about results. 

These marvels will also be our greatest assets in addressing the unknowable risks 

of tomorrow. 
79

In structuring our national approach to biodefense, care should be taken to avoid 

creation of perverse incentives, absorption of an undue share of precious resources, 

or the diversion of creative scientific talent from its noble calling. Maintaining such 

a delicate balance will require supervision, continued reassessment of the threat as 

well as the effectiveness of the response, and a fair dose of candor, from scientists, 

government and industry alike. 

As with any great effort, continued oversight of its goals and means will protect 

and preserve it. 

With these observations in mind, I’d like to assure you that the people and the 

science of the biotechnology industry are ready for and capable of major contributions to the successful combat of bioterror: in articulating the range of risks, identifying the vulnerable targets, and generating an arsenal of countermeasures creatively broad and flexible enough to respond to the range of misapplied genius we 

will no doubt face in the years ahead. 

Thirty years ago, the War on Cancer gave us a model of government stimulated 

science that has permitted measurable success against that scourge—but of even 

greater importance, that war trained a generation of research soldiers in new technologies and ways of thinking that are directly responsible for the leadership position U.S. science holds in the world and the capacity we’ve had to sustain and respond creatively to each new and horribly different health scourge of the intervening 

years. 

Thoughtfully structured, funded and overseen, the BioShield initiative could again 

provide both immediate answers to a current threat and a new model for government stimulation of scientific progress that will insure our pursuit and perfection 

of technologies capable of meeting threats we can’t yet know. 

Thank you.

Chairman COX. Thank you, and I thank the entire panel. This 

panel has the benefit of having heard the first panel and the discussion that took place with members. As we write this BioShield 

legislation, we are concerned with the mechanisms for engaging the 

private sector. One of the ways that this might be accomplished, 

as Dr. Fauci outlined, is a contract relatively early in the process 

that anticipates work being done towards the achievement of a solution and then a commitment to purchase all that is necessary for 

the defense of the country in the event that a cure or an antidote 

is developed. 

There are really two ways to go about this in principle. One is 

explicit contracts up front, the other is the reward model in which 

the government stands ready to buy what anyone successfully produces in answer to a generalized call to action. We send out the 

alarm, we need this, you provide it. Because we are going to be offering for this purpose, albeit in the billions a fixed amount of 

money, which direction you choose here matters significantly. 

I wonder if I can ask each member of the panel to react to that 

point and help us with your suggestions about how to design this 

legislation. 

First, Dr. Haseltine. 

Mr. HASELTINE. Thank you. This is a very real issue for us because we are at that point where I as CEO have to make a decision 

as to whether to put a program on hold or to go forward with it 

based on our perception of what the reality is for government funding or potential funding. It is a very real issue. It is not a hypothetical for us. 

I think it would be helpful if I gave the outlines for what that 

means. We did all of the R&D on our own based on years of research of understanding the anthrax vaccine organism to come up 

with a specific drug. As far as we can tell from discussions with 

HHS and DOD and others, this is a needed solution. This drug is 
80

a very powerful addition to what already exists, and I think there 

is consensus that that is the case. 

We are prepared to manufacture it for the first of two clinical 

trials. That is what is called the pharmacology phase. When it 

comes to finding a dedicated manufacturer for the second of the 

clinical trials and for the production phase, we cannot make that 

commitment absent a government commitment because it is simply 

too big. We have to go outside, find an outside manufacturer, compete on commercial terms for a long-term, multi-year contract to 

produce the material that will be needed to validate the safety of 

this particular drug. We are talking a minimum of $30 million the 

first year, 50 or $60 million the second year. Those are the numbers that we are talking about just to secure the facilities for the 

manufacturer. So it is vital how this legislation gets written. 

It should support both the advance development and the procurement of that material because the material that is used for the advance development would actually be material that could also be 

stockpiled, in addition to the stockpile. It is very, very important 

to us how that decision gets made by your committee. 

Chairman COX. Mr. Pemberton. 

Mr. PEMBERTON. Mr. Chairman, I think it is important that the 

legislation as it develops be flexible because there are many different kinds of solutions and many different kinds of problems that 

are going to be addressed, and it is important that the Departments that are going to be actually applying and implementing this 

law will have as much flexibility as possible to see what works and 

to make sure that they have procurement mechanisms that they 

can respond to different sorts of industry needs and different sorts 

of industry problems. 

That is why I think you want as the current bill has, it has an 

R&D portion, which I think is good. It also has a procurement portion. We believe it is important to tie the two together and to have 

a provision for the R&D to be linked to the ultimate procurement 

so that those who develop the original solution will naturally transition into production if that is desirable. 

That will provide an additional incentive there to the R&D effort. 

It will be kind of both push and pull, as Dr. Fauci was saying. 

It is important whatever mechanism is selected to maintain the 

maximum flexibility, but also maximum certainty for contractors in 

this area. It is extremely important to members of industry to 

know that the money will indeed be there when the process is 

done. 

Chairman COX. Mr. Rapoport. 

Mr. RAPOPORT. Mr. Chairman, I think we are very close. We just 

need to tweak the back portion of the BioShield bill to allow the 

Secretary to have authority not just to do procurement, but also 

have R&D money in there at the same time. We are very close. We 

have offered some language to a couple of other committees, and 

I have not seen the new draft that came out today from one of the 

committees, but we are very, very close. 

The only other thing that I would also offer is Mr. Turner read 

a letter, and probably because I don’t represent a pharmaceutical 

company I can be more candid and share what I have heard. Mr. 

Vagelos is one of the most respected people in the field. I can share 
81

with you, though, that I think his views are not shared by the industry. They want a go at this as your partner. They do not want 

to have a government-owned, contractor-operated facility named a 

GOCO. They do not want to have a government think tank. They 

already have NIH, which is fantastic. 

I think they are ready to come to the table with a little tweaking 

of the legislation, but they do not want some humongous government facility that is going to compete against them. Mr. Vagelos is 

so respected, but I am hearing that is not really right on message 

with the rest of the pharmaceutical industry. 

Mr. SUTCLIFFE. Mr. Chairman, I think the issue that Dr. 

Haseltine raises about the initial production is a valid one and it 

is worth further investigation to ask whether it would be possible 

to finance that kind of risk in the private market on the reward 

basis, that there is a high reward left, and that will assume that 

the reward is still going to be high. 

At the same time it would be disappointing I think to other companies attempting to solve the same problem to learn that the market actually had been foreclosed even for a better product. So the 

separation of the two, which was addressed in an earlier panel 

about what happens if the second best answer has the government 

contract, do we not get the first answer, do we get both or neither, 

I think the answer is we probably get the second because we have 

already identified that the major market is one that is controlled. 

So I would think that the preservation of the reward opportunity 

would do a lot to spur private capital to invest in these kinds of 

projects. 

At the same time, Dr. Haseltine is focused on an issue that is 

really pharmaceutical companies versus biotech companies. It is 

difficult for most biotech companies to imagine undertaking the 

kind of project that Dr. Haseltine has in mind, and his is not a 

small biotech company. He has been very successful at it. But still, 

I think, the pharmaceutical companies would have the resources to 

undertake that. So it would be worth investigating whether or not 

the reward model could in fact encourage private investment in the 

phase that Dr. Haseltine currently faces purely on a pot of gold at 

the end of the rainbow. 

Chairman COX. I thank the panel for your help on that question. 

You have stimulated several more questions, but I will hold back 

and yield to the ranking member, Mr. Turner. 

Mr. TURNER. Thank you, Mr. Chairman. 

I think we all have the same objective here, and that is to figure 

out how to get the vaccines that we believe we need to address the 

threats that are there and get it quickly. I am not sure I have 

heard anybody say anything about the ability to accomplish this 

task in any given period of time. 

Obviously the risks that we face in this endeavor is the same 

risk that the pharmaceutical industry faces in trying to develop 

product. Those risks, from what I understand, are greater in this 

field than any other. I think the reason we all have to be cautious 

about how we structure this is, number one, we want to be sure 

that we can assure the American people that the goal that we are 

after is going to be achieved. Number two, if we do it wrong, we 

obviously have the potential of wasting literally millions of tax-
82

payer money because we could, as I understand it, go down a lot 

of rabbit trails, spend a lot of money and get nothing. 

I guess I was interested in the comment that was made a moment ago about the letter that I read because I think Dr. Vagelos 

had really not made any comment on this subject to my knowledge 

until we asked him to review the bill, which he did yesterday, and 

forwarded this letter to us today. 

My fundamental question is, if we really are serious about getting this job done, what is wrong with trying to do it all? What is 

wrong with trying to do an incentive program in the form in which 

we have proposed, along with trying to mobilize a government research center, which we have plenty of examples of success with 

from our nuclear labs to our National Institutes of Health and others where we have successfully achieved some objectives by trying 

to mobilize the collective power of the Federal Government, to address the task? So explain to me why the two would be inconsistent 

with one another. 

Dr. Haseltine? 

Mr. HASELTINE. First of all, they are not inconsistent with one 

another. second, I don’t think a special biodefense effort is required. I will give you two reasons for that. The first is you have 

generously funded NIH to do almost precisely what that government, super-government agency would propose to do; i.e. the broad 

scale research into new and emerging diseases. NIH has been very 

generously funded over the past 2 years, and it looks like it will 

continue to be funded. That research takes place at NIH and draws 

upon the very fine expertise in our best universities all over the 

country. 

We are creating new generations of people who have the requisite expertise, and we are funding our current experts in that 

field. So many of the goals, and very laudable goals, are being met 

through the current biodefense initiatives. 

I should say something we have not talked about is the admirable biodefense legislation that has already been enacted that does 

a number of very positive things for the creation of new biodefense 

agents, including allowing new pathways for rapid approval, speeding the time from concept to realization. 

Let me give another example in a different field which I was 

deeply involved with as a university professor, and that was in the 

very early days of the AIDS epidemic trying to mobilize our government’s efforts, as well as the private sector effort, to fight the problem of AIDS. That was done in a two-part program. 

First, by generous funding from Congress of the NIH. Beginning 

in 1985, there was a steady ramp-up of funds. That money flowed 

first to NIH and then around the country and built a very powerful 

research organization. second, direct involvement of industry 

through transfer technology programs, not as big as the programs 

we are talking about here, but very definite transfer programs that 

led to the creation of the current generation of AIDS drugs. 

Now there was one thing that allowed that to work which we 

don’t have for many of these kinds of drugs, and that is there was 

a natural market for the AIDS drugs so we didn’t need special government incentives. 
83

Here we need that. But if you take the power of what exists at 

NIH, which you have already generously funded, and couple that 

to the power of industry, which is what BioShield can do, I think 

you will have achieved almost all if not all of the objectives that 

have been laid out. 

Mr. TURNER. With regard to where you are in your efforts with 

anthrax, Dr. Haseltine, and to put it in context for me, I was reading Dr. Pemberton’s statement about the risks involved in new 

drug development, and he said for every 5,000 compounds screened 

only 250 enter preclinical testing, and of every 250 drugs that enter 

preclinical testing, only one is approved by the FDA. Where are you 

in that chain with your anthrax product? 

Mr. HASELTINE. We are down to 1 in 10. Probably even higher. 

One of the things that biodefense did for us is it set a clear definition of what was required for approval. You have to demonstrate 

efficacy in two animal models of human disease. Our drug has already met that. You then have to test it for safety in human volunteers. That is what we are about to do. We are about to submit our 

drug to the FDA for safety testing. We presume, because we have 

done it many times before, that we will meet all of the government 

criteria, all of the FDA criteria, to allow us to do the safety testing. 

Let me give one additional concern which has not yet been 

raised, but it is very important at an early stage. When you submit 

a drug for testing, it not only is reviewed by the FDA, it is reviewed by institutional review boards for ethical considerations. We 

are talking about exposing healthy people to a drug. Is it ethical 

to expose people to a drug for which there will never be a market? 

That is a question we are wrestling with today. Can we in all conscience go ahead with our phase 1 clinical trials before we get a 

green light from the government saying if you make it, we will buy 

it. That is an issue that has not been addressed, and it is why for 

some drugs it is really important to link the two, the advanced development and the procurement. I think my colleague to my left 

said it very well when he said what we need is flexibility. 

Mr. TURNER. You gave us some numbers a minute ago. You mentioned to proceed from where you are you would need $30 million 

this year and $50 million next year. When you give those numbers, 

are you saying that is what you need from the Federal Government? 

Mr. HASELTINE. That is what we need from the Federal Government. I would estimate in direct dollars we have invested about 

$15 million, and if you add in our facilities another $15 million, so 

a total of about $30 million we have already invested in this. 

Mr. TURNER. At the end of that 2-year period, where are we then 

with regard to this project? 

Mr. HASELTINE. You have approximately 150,000 doses or more 

stockpiled, perhaps more. I would have to check the numbers; but 

you already have a stockpile. 

Mr. TURNER. So as part of that investment in the second year in 

production facilities, is that what—

Mr. HASELTINE. Even in the first year you are making materials 

that could be stockpiled. Both first and second year, the material 

you make could be stockpiled. 
84

Mr. TURNER. So a large portion of the $80 million relates to production? 

Mr. HASELTINE. Absolutely. It all relates to production. Some is 

technology transfer so it can be produced, and the rest is for production itself. 

Mr. TURNER. When we are talking about production, are we talking about building a plant or facility? 

Mr. HASELTINE. We are talking about contracting an existing 

plant that is already approved so we can get this product moving 

forward quickly. Eventually we would talk about building our own 

plant. 

Mr. TURNER. That is after the $80 million? 

Mr. HASELTINE. Yes. This would be a multi-year stockpile, and 

over time since the drug is relatively stable, we would build up a 

larger and larger stockpile over time. 

Mr. TURNER. At what point in the expenditure of $80 millionp In 

other words, we could spend the $80 million and end up not achieving anything, or would you know that sooner? 

Mr. HASELTINE. You would know it sooner. We have two efficacy 

trials, and the next trial is a safety trial. You will know after the 

safety trial whether you have something that is suitable for stockpile. 

Mr. TURNER. How many million would that cost to get us to the 

point where we know whether we have a winner or not? 

Mr. HASELTINE. About $30 million. 

Mr. TURNER. If our intent is to have a program to develop, and 

the initial number I heard was 5 vaccines for various biological 

agents, then we might move to 10 or 12 and I heard somebody say 

there may be a hundred out there we need to be prepared for, is 

there any way the government can achieve some cost savings if we 

are going to make this investment in production facilities? You are 

going to lease a facility initially, but eventually you would want to 

build one, and since the bulk of these dollars are in production facilities, is there any way the government can say OK, we will do 

this and build such a facility, but then we want it to be able to be 

used for the next pharmaceutical company that we enter into an 

agreement with to produce something else? 

Mr. HASELTINE. I would imagine that for most of these products 

you will have an ongoing stockpile requirement, and although these 

drugs may have a long shelf-life, it will not be indefinite so there 

would be a requirement for renewal. So at some point you will need 

dedicated facilities for manufacture of that drug for continual 

stockpile. There are such programs that currently exist for stockpile of certain materials today. 

The simple answer is that I don’t think that is a model that will 

work particularly well. 

Mr. TURNER. In other words, you are thinking that for these vaccines that we hope over time to stockpile, that we would need for 

each vaccine to have a separate manufacturing production facility 

in order to accomplish that? 

Mr. HASELTINE. I think the answer is more complicated than 

that, but to the first approximation, that is the answer. 

Mr. TURNER. Maybe you can educate me a little more on that, 

but I am not sure I quite understand the logic of why a production 
85

facility which in the private sector apparently is used for multiple 

production runs—I guess because you are initially going to lease 

one from somebody else—why that kind of facility could not be 

used for the production of more than one vaccine. 

Mr. HASELTINE. It really depends on the size of the facility, it depends upon the materials that you are producing. For biologicals, 

it is very different from chemicals. A biological, which is a protein 

or antibody, which many of these products will be, you have dedicated manufacturing facilities for them, especially once you have 

an ongoing, recurrent need. 

Let me just emphasize the dollars that I mentioned do not buy 

hardware. They are solely production costs. That is what these dollars are. They are not to buy and build factories. 

Mr. TURNER. Mr. Rapoport, I think your comment earlier in response to Dr. Vagelos’ suggestion was that you did not want the 

government to be in the business of having another agency to try 

to help solve this problem. Dr. Haseltine said those two approaches 

are not inconsistent. Do you believe they are inconsistent? 

Mr. RAPOPORT. What I think the industry is concerned about is 

engaging down a slippery slope which ends up with the government 

taking over this business. 

Again, these are not companies that have ever taken a cent of 

government R&D money. They are not Lockheed or Boeing. I think 

they want to keep a separateness working as partnerships, but 

they do not want to see their resources be drained off into a time 

and period down the road, and maybe we are getting ahead of ourselves, where the government says I can take over that business, 

you know. How about hepatitis A, hepatitis B, we have a platform 

now to take it all over. That was the only caution I was making. 

So perhaps they are not totally inconsistent that you would add to 

NIH’s already sensational capabilities. 

But I also wanted to share what happens if we go down this 

route and there is failure. I worked for the Reagan Justice Department, and I was assigned to represent the NIH. They are very 

skilled at handling contractors and terminating contracts that are 

not going anywhere. In this industry, you probably have to be a little more gentle than you would with a Boeing or Lockheed who 

does not perform and they are used to getting terminated for default. Here the government could terminate for convenience a contract where they have promised production contracts where the 

company simply wasn’t getting there, or that solution wasn’t the 

right solution any more. 

But the point I want to leave with you is if you terminate those 

contracts for convenience, you have to recognize additional costs 

that are now unallowable such as financing costs and equity, costs 

of equity. So BioShield, one of the pieces we are trying to suggest 

is give the government the contracting officers’ discretion. They are 

going to protect your purse, but make sure if they have to stop the 

deal in the middle of the procurement, they reimburse companies, 

not just for the widget to date or how far they have gone, but for 

a lot of their investor costs that traditionally would not be allowable under the FAR. 

I have heard that the venture capitalists who obviously, look at 

the stock of biotechs now, it is very low. But the venture capital-
86

ists, and Leighton Read, who was the founder of Aviron testified 

before other committees that they are ready to participate and help 

co-fund the development, so this is not a handout. I don’t think the 

pharmaceutical industry is looking for a handout. At least what I 

am hearing from the board rooms is we will share in the R&D, just 

as Dr. Haseltine’s company has shared, but I need to know that 

there is a guaranteed market for some period of time. 

Mr. TURNER. I have no doubt that what you are saying in that 

regard is true because every bit of information I have ever collected 

says it is going to be very hard to get the pharmaceutical industry 

to participate in this. 

When we first had this presentation to the chairman and I, the 

big piece of this proposal was to have this unlimited power in the 

administration to write a check for whatever it cost without even 

going through the usual appropriations process. It seems pretty 

clear as this proposal has been vetted through the Congress that 

Congress is not likely to give up its power of the purse. If that was 

such a big part of this, I guess the question I would have for each 

of you, if that is not in the final bill that passes, is that a deal killer? In other words, are we wasting our time here talking about all 

of these other details like liability protection and other things, that 

if you don’t eliminate the uncertainty of what has been described 

at least by Dr. Fauci as the ‘‘vicissitudes of the appropriations process,’’ that this is all not going to work anyway? So can you live with 

the Congress still exercising its role in the appropriations process? 

Chairman COX. If the gentleman would yield, this is a very important question. What is being proposed and what was in the bill 

as marked up by the Committee on Energy and Commerce today 

does not leave you subject to the vicissitudes of the appropriations 

process. It does, however, cap the total amount and it puts an end 

date on it of 10 years so that Congress would have to become involved at some point in increasing the amount beyond $5.6 billion 

or extending the program beyond 10 years. But within that period 

of time, the government would have complete flexibility and authority to disburse the entire amount of $5.6 billion and you would 

not need to come back to Congress between year 1 and year 10. 

The question is still the same question: How does that affect the 

real world? 

Mr. TURNER. Mr. Chairman, I want to be sure that I understand 

the question. My impression is that there still would have to be an 

annual appropriation. They authorized in the bill, but the annual 

appropriation would still have to take place in the appropriations 

process. I see somebody shaking their head out there. 

Chairman COX. The discussions we have had with Chairman 

Rogers, who was with us earlier, as well as the Committee on Energy and Commerce contemplates that we would make directed appropriations over a period of years. This is akin to no year money, 

the sort of thing we did after 9/11 with New York City with all of 

those billions, and there would be of course ongoing oversight, retained jurisdiction and so on by the Committee on Appropriations 

but the full amount of $5.6 billion would be appropriated up front 

in year 1. 

Mr. TURNER. I may have misunderstood. 
87

Mr. SHAYS. Would the gentleman yield? I am just curious when 

other members will be able to question witnesses. 

Chairman COX. I appreciate the gentleman’s comment. 

Mr. SHAYS. They are very important questions, but there needs 

to be some framework. 

Chairman COX. The gentleman’s time has expired, and the other 

members are being very tolerant. The point is well taken. 

Mr. TURNER. And I apologize if I overextended my time. I hadn’t 

noticed. 

Chairman COX. The bill passed today is styled as an authorizing 

bill, and so further action by the Committee on Appropriations 

needs to be taken. So you will not know from reading the four corners of the legislation what I have described to you, but that is the 

understanding that we have as of this moment. 

Mr. TURNER. Let them answer as they see fit and then we will 

yield. 

Mr. HASELTINE. Certainly permanent and definite funding authority would be desirable. But if we cannot have it, what we 

would like are multiyear contracts with firm commitments. That is 

extremely important, multi-year contracts with firm commitments. 

Mr. PEMBERTON. The permanent and definite appropriation was 

a very important part of the bill to PhRMA, but that is not to say 

it is the only solution, and the multi-year money is certainly one 

that we will study and work with. 

Mr. RAPOPORT. I will pass on that question. 

Mr. SUTCLIFFE. My impression is the same as Mr. Turner indicated, and that is that the venture community is interested in this, 

and what they really wanted was a sign that the government recognized the problem and was prepared to stimulate, or assist in 

stimulating, both the science and the width that is required to get 

it moving. I think most companies that have an angle on a solution 

would find a government indication of a willingness to participate—or to be the customer and to step up to being the customer 

when the product is available—as a tremendous assistance to finding private capital to do the interim work. 

Chairman COX. Next is the gentleman from Connecticut who is 

being rewarded for extraordinary patience by God, if not this committee. 

Mr. SHAYS. I sense that this bill is incentivize and accelerated research and development for vaccines and therapies, and I am wrestling with a whole host of questions. I, for one, do not know the 

ethics of how you qualify a vaccine for a disease that does not really exist. I mean with polio, you got to try it on real people. How 

do we do that? 

Mr. HASELTINE. The way the biodefense legislation handles that 

is to use two animal models of human disease followed by a safety 

study in humans of the drug, but these are humans that are obviously healthy. 

Mr. SHAYS. So technically we do not know the efficacy of the 

drug on humans? 

Mr. HASELTINE. That is true, and you cannot know it. 

Mr. SHAYS. Fair enough. We are going to have to be making 

some tough choices. The legislation is basically going to speed up 

research and development for countermeasures. It is going to speed 
88

up delivery for these countermeasures, and it is going to basically 

overrule FDA emergency authorization. It is going to provide for 

emergency authorization to bring out a drug that may not be fully 

tested. That is the world we are kind of living in. 

Mr. HASELTINE. Already the Biodefense Act allows drugs to be 

registered which meet the two animals plus human safety. That is 

already existing. 

What this would allow to happen is if a drug were in the process 

of being tested in humans but hadn’t been finished and hadn’t been 

registered, the FDA could decide. 

Mr. SHAYS. I get that. I understand. 

Mr. Rapoport, you are the most vocal on this end, and all of you 

are very effective in your presentation. I want to basically have a 

sense if we eliminate the risk and provide a promised revenue 

stream, what will we get beyond the product? Let me put it this 

way, would we get the product below at what would be a typical 

cost of a company that hopes to recoup research and investment? 

Mr. RAPOPORT. The DOD and HHS are very sophisticated at 

price negotiations with government contractors. Obviously the more 

R&D money you take from the government, the less should be the 

price of the product. What we are suggesting is if you enter into 

one contract that has R&D in it and a commitment for production, 

at a certain point in time you enter into price negotiations and 

then the contractor and the government can decide what is a reasonable price. 

Mr. SHAYS. And you recognize that? 

Mr. RAPOPORT. I do. I don’t think that Congress needs to go 

down into those details. I think the government is very good at 

this. I spend half my day fending off the government doing audits 

on contractors. I think there are many guidelines within the FAR 

that could be useful under other transactions to guide what is a 

reasonable price for the product. 

Mr. SHAYS. Would any of you respond to what this world is going 

to look like, and first off when we do these top-off experiences and 

we see smallpox run amuck and we think how are we going to 

catch up, and we look at the plague and question how we are going 

to deal with that, the plague has been in both top-off 1 and topoff 2, and in both cases we don’t have an antidote to the plague 

right now. Tell me, when will we? 

Mr. HASELTINE. I think it could be available within several 

years, 2, 3. You asked a question, and the answer to your plague 

question actually is part of the answer to your previous question: 

What else do you get if you support these early programs? What 

you get is full involvement of the biotechnology and pharmaceutical 

industry to address a broad range of questions. 

Many people, including ourselves for follow-up programs, are 

waiting to see what happens with these programs, because if these 

programs don’t go very well, then other programs don’t get developed. It could happen really quickly. There are plenty of technologies around that would allow relatively rapid development of 

ways to contain plague, for example. 

Mr. SHAYS. It seems to me like it is a crapshoot. In my hearings, 

I have had 40-plus hearings in my National Security Committee, 

and the list is a long list of potential pathogens that we might 
89

want to defend against. I realize the first panel said you are going 

to look at those that could be the most catastrophic and so on; but 

admittedly, this is a big list, true? 

Mr. HASELTINE. The answer is yes and no. I think the first panel 

tried to address that question. 

There are some big threats that are obvious that we know are 

major threats. Those include plague, anthrax, and smallpox. 

Mr. SHAYS. The ones that tend to be the most contagious? 

Mr. HASELTINE. Or already known to be weaponized. 

Mr. SHAYS. Are we talking about five big ones? 

Mr. HASELTINE. No more than 10. 

Chairman COX. Mr. Dicks. 

Mr. DICKS. Thank you, Mr. Chairman. 

Mr. Haseltine, I wanted to ask you, what do you need to get this 

deal done? In other words, what is it that you would like to have 

to accelerate getting your product purchased by the government? 

Mr. HASELTINE. Enactment of BioShield. 

Mr. DICKS. All you need is BioShield? 

Mr. HASELTINE. Then we are happy to compete. The money does 

not exist in any easy form. BioShield would allow us to move forward, and allow the government to move forward, because we have 

talked to every agency that we can talk to in government, and they 

all tell us the same thing. I hope it is true. If Project BioShield is 

passed, we can help you. Without Project BioShield, it is very difficult for us to help you. 

Mr. DICKS. So we have to get the bill through and then we have 

to appropriate. I am on the Committee on Appropriations. Then we 

have to appropriate the money? 

Mr. HASELTINE. That is right. 

Mr. DICKS. If that is the way we are going to go? 

Mr. HASELTINE. That is right. 

Mr. DICKS. I hate to use the defense system because if it takes 

us 15 years to build a weapons system and it is not always a great 

one. But what about the idea of a situation where you would be reimbursed like they do in R&D where instead of you putting up $30 

million, which is what you are doing here, you would be contracted 

by the government if they thought your idea was good enough, to 

pay for the R&D? What about that concept? You just don’t think 

that is viable? 

Mr. HASELTINE. I think that would buy you a lot more research 

from a lot more smaller companies. I think it would be very welcomed by certain segments of the biotechnology industry. I think 

it is a very interesting concept. 

Mr. DICKS. That is basically what we do in defense. They use 

some of their money, companies do, and they obviously raise resources to do it, but then they get a contract to do the R&D if they 

have an idea that people think is worth doing. I bring that up so 

as we consider this legislation that is an alternative. 

Mr. HASELTINE. Flexibility is the word. Part of that could be 

done through existing NIH mechanisms. Part of it could be done 

through other mechanisms as well. I think flexibility in the way 

this language is crafted is very important. 
90

Mr. DICKS. How do you read the language on partnership as it 

is now? How do you decide who pays how much? Or what the 

shares are going to be? Is that defined in the legislation? 

Dr. HASELTINE. I don’t think it is defined. And I think it should 

be flexible. 

Mr. DICKS. So they can enter a deal. So in other words, between 

the NIH, whoever is going to do the contracting, and your company, you can negotiate an agreement about how much is going to 

be done as a partnership. 

We do that in some other areas too, so that concept is interesting. I kind of like the other idea, because I think you get more 

done sooner. 

Let me ask Mr. Rapport about—Did you want to say something, 

Mr. Sutcliffe? 

Mr. SUTCLIFFE. Yes. I think you are on the right track. In fact, 

what will happen under this legislation, except in the case of companies like Dr. Haseltine’s, is that the large pharmaceutical companies will subcontract this work to biotech. 

Most of the large pharmaceutical companies can’t solve these 

problems the way that they will need to be solved with their existing research. They will subcontract the work by supporting 

the esearch, and will take the guaranteed contract. 

The problem it presents is that the market will be tied up, and 

so it will—we really are using, in this case the government is using 

the large pharmaceutical companies to solve this problem by doing 

the subcontracting that you are suggesting could be done directly. 

I think you are right, under your approach, more answers would 

come forward without the government having made a commitment 

to any of them. 

It would perhaps spend more in terms of initial R&D funding, 

but at much smaller dollars than we are talking about committing. 

The numbers Dr. Haseltine is talking about in $30 and $50 million don’t add up to $800 million a year. The number $800 million 

a year comes from the number of the total amount spent on research in the pharmaceutical industry divided by the number of 

successful profit-making drugs. That is what the average of what 

it costs to get a drug to market is. 

But that is not actually what it costs to develop any particular 

answer. Some are obviously expensive and lose, some may be less 

expensive and win. So the more—the flexibility that we are talking 

about is, the more answers are sought out, the better the chances 

that the public will have the protection that they want at the end, 

which is not that we have made a good investment and got a pretty 

good antidote, but that we actually got something that works at the 

end. 

Mr. DICKS. I appreciate your answer. 

Mr. Rapport, let me ask you this, you talked about the Defense 

Production Act. Give me a little more on that. How would you see 

that operating? You could have a situation where we can say, if the 

President declares an emergency, you can use the Defense Production Act. That can be a paragraph in a this bill. So if we did get 

into a crisis like you are suggesting, and we really had to move, 

we would have this on the books. 
91

Mr. RAPOPORT. I think what I would offer is that you can put in 

BioShield that the Secretary has authority to engage in a prototype 

plan, where they could—he could within his discretion use the Defense Production Act in a limited circumstance to see how it works. 

It has recently been used involving shipping lines in the Middle 

East, after the First World—after the First War, in that part of the 

world. 

But it has not been used often. But it certainly could be helpful 

to jumpstart the industry. I wanted also to just address, I am trying to be as plain speaking as I can, because you are a leader on 

the defense issues, you understand this. 

Lockheed and Boeing are used to having auditors roam their 

plants. I assure you that my clients, the thought of having government auditors audit the costs of an R&D contract, all of a sudden 

brings nightmares to them of toilet seats and overpriced widgets. 

And so I think at least from a big pharmaceutical company, they 

would be more inclined to at least try to go it on their own and 

not accept the R&D money, because they don’t want to become part 

of that, you know, government contractor audit establishment that 

the FBI and prosecutors somehow get the money back at the end 

of the deal, in over zealous prosecutions. Some of them are obviously merit-based. 

But that is what I am hearing, that I am the President of a 

multi-billion dollar vaccine company. The last thing I want to take 

is a hundred million dollars in government money, because then I 

have got to pay Ernst & Young and McKenna, Long and Aldridge 

and everyone else to come in and set up these cost accounting systems that your constituents have had for years. 

Mr. DICKS. Thank you, Mr. Chairman. 

Chairman COX. Thank you. Mr. Andrews. 

Mr. ANDREWS. Thank you, Mr. Chairman. I wanted to thank the 

witnesses for their testimony. I regret not being able to hear it, but 

I read it. 

I share with the author of the BioShield Act the basic premise 

that the way to prepare our country to deal with this problem is 

a combination of money, markets and immunity. I think the concept is exactly right. 

I think there are—the question Mr. Turner was pursuing about 

the proper means of government oversight is one we have to explore. I would like to explore another one, which has to do with my 

amateur understanding of the future of scientific inquiry. 

Some of the most impressive breakthroughs in the areas of biology and chemistry have occurred by accident, where there is a task 

that is different than the task that eventually winds up serving, 

where someone is involved in pursuing project A and they make 

some discoveries that are collateral to project A that lead to a new 

project B, which leads to a new project C and so forth. We do not 

want to foreclose that scientific dynamic. 

My question to you is, how can we be sure that the umbrella of 

immunity and the financial reach of the subsidies that BioShield 

suggests, and the benefit of the guaranteed market that it suggests, would reach beyond the original stovepipe competitors in this 

field? 
92

In other words, that is a bit theoretical. What I really mean is, 

if someone working in one of the outstanding pharmaceutical companies, all of which are in New Jersey I might add, is working on 

a cure for SARS, and in the process of that, makes some findings 

which are quite relevant to dealing with inhaled anthrax, I am not 

sure if that is an apt technical example, but you understand my 

point. 

Does the BioShield legislation set up a sufficient mechanism so 

that that scientist’s SARS-related discoveries can be sold, conveyed, 

shared, joint ventured with someone who is working on anthrax? 

If not, how do we do that? 

Dr. HASELTINE. Thank you for the question. 

It is a very interesting question about research and cross-fertilization. I think that that can happen. And the way it happens 

is, first of all you first create a market for these drugs. A market 

is extremely important in motivating researchers at all levels. 

Once a market for a potential product exists, it is in people’s 

minds that if I make a discovery, I have an outlet for it. If you 

don’t have a market, they may never make that connection. I have 

been involved in creation of seven biotechnology companies myself, 

and overseen the creation of another 20 through involvement in 

venture capital advising, et cetera. 

And that is a process that is fascinating to watch. The companies 

that I have started haven’t come out directly of the research that 

I have done. They have come out of collateral ideas realizing that 

there might be a market. You create a market and people will 

come. 

Mr. ANDREWS. Here is my follow-on question. Let’s assume that 

because there is consciousness in the scientific community, that 

there is an effort to create an antidote to smallpox, that the scientists who comes across something on the SARS project says, my 

this has cross-applicability. He or she calls the person working on 

anthrax. 

As a legal and policy proposition, let’s assert for the moment that 

we want the ordinary drug laws and antitrust laws and intellectual 

property laws to apply to the pursuit of the SARS problems. But 

we want these special rules to apply to the production of antidotes 

to these national security problems. How do we sort the two out? 

How does a legal relationship get constructed that serves the public 

purpose of expediting and defending this defense venture, but does 

not create the unintended consequence of setting up a whole new 

set of rules and a special commercial marketplace that is not our 

intention? How do we do that? 

Mr. PEMBERTON. The limited antitrust exemption with government supervision would permit technical collaboration among companies in ways that might currently be problematic. And creating 

a kind of opportunity for companies to collaborate on perhaps those 

kinds of cross-fertilization ideas would be one reason why you 

would want to have that. 

Mr. ANDREWS. Let me say this. My own prejudice, I would rather 

err on the side of achieving the antidote for national security faster. If the cost of that is a perversion in the civilian market, much 

as I would not want that to occur, the cost of the attack on the 
93

country is a lot greater, so I would want to err on the side of getting the antidote to the market. 

Mr. SUTCLIFFE. Mr. Andrews, I am not sure that the cross-fertilization won’t take care of most of the problem. I think that communication will take place. I mean, in the scientific world that information will cross. 

The immunity problem comes in terms of doing the follow-on experiment, and that is a situation where it is the limitation of most 

institutions that would keep a researcher from performing the research, and you can be sure that you or the people who have the 

immunity under BioShield will get that call. 

Mr. ANDREWS. Thank you. I see my time has expired. Thank you, 

Mr. Chairman. 

Chairman COX. Thank you. Ms. Jackson-Lee. Thank you all also 

for your patience. 

Ms. JACKSON LEE. Thank you very much, Mr. Chairman. And 

thank you, the ranking member. 

And I would like to also associate myself with the remarks of 

Congressman Andrews with respect to having perused your remarks. I was in another meeting outside of the room, but I do appreciate your testimony. 

Just for clarification, because it is a little difficult to see the 

names, and I wasn’t sure whether Eric Tolbert was here. 

Mr. Chairman, I just—let me just make a comment, and not specifically about Mr. Tolbert. But I do think it is crucial that we have 

a hearing that includes, or that we are able to cover the question 

of the threat assessment, which I assume might have been discussed from the perspective of this Director of the Response Division. And I hope that we will be able to, one of the—one, be able 

to secure that. 

One of the points that we have been consistently making, some 

of us, is that a threat assessment is crucial. I know that one of our 

colleagues has been speaking eloquently about that, Ms. Harman 

from California. 

So I hope that we can have that response. I am not sure why she 

was not here, Mr. Chairman. 

Mr. Chairman, I would like to yield to you for a moment. I am 

not sure why the Director of the Response Division was not able 

to make it. I am concerned about the threat assessment issue, that 

hopefully we are going to address that. 

Chairman COX. We are going to pursue that. 

Ms. JACKSON LEE. Is it likely then that we will have witnesses 

that will be able to respond to some of those concerns in hearings 

to come? 

Chairman COX. I will ensure that members of the minority and 

the majority have the opportunity to put questions to the Department, either at a subsequent hearing or in writing, and have them 

answered before we mark up. 

Ms. JACKSON LEE. Thank you very much. Certainly it is not the 

fault of the panel that is here. But, in any event, I wanted to make 

that point. 

I also want to associate myself with the remarks in a previous 

panel of Congresswoman Lowey, in terms of how all of this impacts 

the unpreparedness for the needs of our hospitals and emergency 
94

rooms, and may have a question to you gentlemen along those 

lines. Because, as I said, if you have any thought on that, I would 

appreciate the oversaturation. 

I had the opportunity to read some of the works of Professor 

Calabresi, formerly of Yale Law School, now on the Second Circuit. 

He makes a—I think a long-standing theory, he made it some 

many, many years ago about choices and cost. And that we ultimately wind up making choices on how many—what the loss will 

be, and if we lose one or two in the course of our research and 

work, we consider those lives expendable. 

It is not his proposition that they are expendable, but he gives 

us sort of a model for how many decisions are made. I believe that 

a lot of his work was geared toward how insurance companies 

make determinations. 

We know that we are in a crisis. We know that the last 2 days, 

that terror exists, by the tragedy in Saudi Arabia. I said that earlier, but I also asked the question in the earlier panel about accountability, and the answer was given that—it is paid only or 

moneys would be given only to the pharmaceutical companies and 

other research institutions on the basis of the deliverable. 

So I would like to ask Dr. Haseltine and Alan Pemberton on 

the—how assured are we of that process working? And I would also 

like to pose the question, because as I said, we all bring a different 

perspective to this committee, of what kind of immunity from liability would you be looking for? So, would you be encountering the 

same problem with the first responders not being able to be protected by liability coverage out of this type of legislation? 

I think that would be extremely important. And any of the gentlemen who would care to answer that, I would encourage you to 

do so. 

Let me start with Dr. Haseltine on some of the questions that 

I posed. 

Dr. HASELTINE. There are actually three questions that I can address briefly. The first is, certainly preparedness of our health care 

services is very important, part of our response. However, for many 

diseases, if there is no adequate drug, no matter how prepared you 

are, you can do little. 

One of the key aspects for preparedness of health care systems 

is the appropriate drug for the appropriate threat. And I think we 

have seen, to some extent, that in SARS. There are some things 

you can do, but for some people you can unfortunately, at this 

point, do very little. 

The second issue that you raised was the issue of guarantees, 

that if we had a product it would work. Is that your question? 

Ms. JACKSON LEE. The question is—the answer was given to me 

before about accountability. And the answer I was seeing, give 

pharmaceuticals and other research institutions a billion dollars, 

how do you know they ever come back with anything? The answer 

was, you do it based upon what is delivered. 

My question to you is, does that work? 

Dr. HASELTINE. Yes. 

Ms. JACKSON LEE. How does that guarantee that we will get a 

product? 
95

Dr. HASELTINE. You give the money in relatively small chunks 

and based on very specific performance criteria, and if you don’t 

meet these performances, you don’t get the next installment. And 

if the quality of the product that you are delivering isn’t up to the 

specified standards, then you don’t get it renewed. 

Ms. JACKSON LEE. You have the hammer—the nail by a hammer 

on the head. That is the quality of the product. And that is what 

I would be concerned about, is the quality of the product. That is 

what I would be concerned about as we move this legislation and 

look at what we are doing, quality of the product. Because I can 

always hand you a bowl of cherries; that may not be the answer, 

and that would be what I would be concerned about. 

Dr. HASELTINE. The third issue you touched on was liability. I 

would say that liability should be looked at on a case-by-case basis. 

Many of the drugs that we will be developing may be FDA approved, and FDA approval provides you some measure of protection, as well as explicit legal liability. So I think that there should 

be case-by-case, perhaps not blanket liability protection. 

Ms. JACKSON LEE. Before you answer, may I just throw this sort 

of curve in there, so that this could be included, and if anyone 

wanted to conclude on that, since I notice that the light is on. 

The follow-up to all of that, where I am leading with this is, I 

sort of want to ensure that whatever we do is evenly distributed 

to all who are in need. And if we stockpile vaccines, the question 

becomes, how they will be distributed. We now know that we made 

a determination, we are doing first responders for smallpox. But 

what about the 40 million people in the United States that have 

no health insurance? Does that make them less able to secure access to protection from terror? 

And I believe that the BioShield approach is good, but we may 

need to look at those aspects as well, because we know that we are 

a Nation with a huge amount of working individuals who are uninsured. If I can add that to the thought processes for anyone who 

wants to finally answer that. Yes, thank you. 

Mr. PEMBERTON. The payment provisions in the current legislation, we believe, would be improved by adding flexibilities so that 

the payment, we agree that payment should be based on achievement of definite criteria. But whether those criteria, in all cases, 

are delivery of finished doses of medicine, should be left to the 

case-by-case determination. 

There may be specific kinds of very long-range production 

projects or development projects that might warrant some other 

kind of milestone payments. And, in our view, it would be unwise 

to have the BioShield legislation tie the hands of the Administration in designing a system of payments for special cases. 

As far as liability, liability from the point of view of the PhRMA 

members is an extremely important issue. And, if liability protection for potentially catastrophic tort suits is not provided, it will be 

a very significant disincentive to participation by many of the 

members of the industry. 

We recommended that it be done along the model of the Swine 

Flu or the current—what is currently being done with the smallpox 

production contract. 

Ms. JACKSON LEE. Yes, sir. 
96

Mr. RAPOPORT. I think the issue is liability protection. During 

the anthrax solicitation, HHS took the position that when you were 

involved in Clinical 1 studies, you didn’t need the government to 

give you liability protection. The industry, I think, probably feels 

differently. 

What I have tried to suggest in my testimony is the Safety Act, 

which, I believe, Mr. Armey and others wrote, does give protection 

across-the-board to companies who are willing to participate in 

homeland security. That was the reason they wrote it, because a 

lot of companies were even talking about a mail-handling machine 

that could detect anthrax. 

A defense contractor might not do this work if it could be found 

liable. What the Safety Act says very clearly, some say, is that it 

applies only in the event of a terrorist attack. So that if you fail, 

if your machine fails, we know that it was only used during a terrorist attack. But when I am developing a new drug, there is no 

terrorist attack. 

So the Safety Act, we respectfully submit, ought to be amended 

slightly to say that it applies to any procurement under BioShield. 

Chairman COX. The gentlelady’s time has expired. 

Ms. JACKSON LEE. Mr. Chairman, and I am not going to pursue 

it, but I would like to get in writing my question about the uninsured Americans access to such care. That was a question that I 

had asked, what happens if you don’t have money, insurance and 

otherwise, are they going to be left out of the coverage against terrorism? 

Chairman COX. I thank the gentlelady. 

The gentleman from Florida, Mr. Meek. 

Mr. MEEK. Thank you, Mr. Chairman. 

I would definitely like to thank all of you for spending, not only 

your time here on this late Thursday evening with us, I know that 

there is no better place that you could be right now, but I definitely 

want to—I think this is very not only informative for me as a member of the committee, but as it relates to everyday Americans, because we are definitely out in the cold as it relates to having vaccines or preventative medicines to be able to protect many Americans and those friends abroad of bioterrorism. 

Mr. Rapport, I hope I am pronouncing your name correctly, I can 

tell you that your testimony was just as good as the other panelists, but you define—it was kind of like a contract kind of thing, 

just cut and dry, let’s don’t sugarcoat it or put any icing on the 

cake as it relates to things that will prevent us from being able to 

achieve what we want to achieve through this piece of legislation. 

And I think that when we start looking into intellectual property 

rights and cost of accounting and pricing and the government’s 

nose being in the middle of R&D and things of that nature, that 

is something that would be—when we talked earlier with the first 

panel, about the ideal perfect world, unlike DOD, which I am on 

the Armed Services Committee, we meet here in this room. There 

are things that, historically that have taken place in the Department of Defense that people just kind of said, well, it is the defense 

of the country. Homeland Security new department, lot of attention, lot of concern about Americans, especially when it comes down 

to bioterrorism, or what have you. 
97

You mentioned that you had language that you presented to the 

last committee for them to include in their markup. And I haven’t 

seen their markup yet. I am pretty sure I will see it. I understand 

that they just passed it this morning. So, what are some of the 

things as relates to the cost accounting? I am sorry I stepped out 

for a minute myself. 

Can you define further what could hinder, but also give us comfort as on Oversight Committee and as the Congress that through 

the Peer Review that I hear, see a lot in the literature of the R&D 

process of the—of making sure that we don’t have cost overruns, 

things of that nature? 

How does that work and how do we give Americans comfort in 

allowing that flexibility, because we do want all of you and your 

peers to participate in this process? Because this is something that 

we have to not only have an answer but a result. 

Mr. RAPOPORT. Sure. Those are excellent questions. I think what 

Mr. Pemberton and I were suggesting is we deal with this world, 

as you do, of defense contractors who have regulations on top of 

regulations which Coopers and Lybrand, I think once did a study 

and said, for every dollar we spend there is 20 cents of it just to 

deal with the regulations. 

What we have proposed is to give the authority to the Secretary 

to enter into transactions that don’t come with stacks of regulations. And again, it has got a weird name, just other transactions. 

Came out of DARPA. It was a way to get a company like 3M who 

had never done business, but has a fantastic research capability, 

they wouldn’t do business with the government, hypothetically. I 

think that it was perhaps 3M. 

But they entered into a commercial-like deal. And I think what 

I am suggesting to you is, the contracting people at NIH are not 

going to allow the store to be given away. They are not going to 

enter into a one-page commercial deal, because even commercial 

contracts do have terms and conditions. But I think we can eliminate some of the ability to look at, you know, cost records down to 

the fine-toothed comb with months of auditing on every purchase 

order by saying in this commercial-like document that it is within 

the discretion of the contracting officials to go ahead and do some 

selective auditing, but they don’t have to follow the Federal Acquisition Regulations. 

Mr. MEEK. Quick question. What do you think would be—you 

have identified the Defense—I can’t remember. 

Mr. RAPOPORT. Production Act. 

Mr. MEEK. Are you recommending that being the course outline 

as it relates to accounting and auditing? Because I am seeing in 

the backdrop the fact that you are pharmaceutical companies, and 

it is like some Members of Congress, you know, some people feel 

negative about that whole experience. I pay too much for my prescription drugs. So they are automatically thinking that there is 

some sort of deal that is going on somewhere, and we are not really 

getting the big bang for our buck, in that it is a blank check, even 

though as it relates to research and development. 

And on the last panel, one of our panelists was really heavily 

into the AIDS/HIV research, and knowing that you have to spend 

millions of dollars, now a billion dollars almost to really get into 
98

good research. How do you—I am trying to figure out, how do we 

get a level of comfort? Because this is not—this is something that 

all of the news stations, all of the writers are going to be focused 

on. 

You start talking about individuals, appointees and pharmaceutical companies, kind of going off to the corner and saying, OK, 

we have the deal. I am not saying that that is a bad thing, because 

we have to move, and we have to move expeditiously. We don’t 

have time, like you said, to be topping at every point because someone has to check the No. 2 pencil you bought last week. 

Could you define more about a good example that is existing that 

we haven’t had abuse? Because when we look at regulation, it is 

the reason why we have it, just like we have a stoplight in some 

intersections, a certain amount of casualties took place there. 

Mr. RAPOPORT. Sure. I am certainly not the one to defend the 

pharmaceutical industry. I think they can do that on their own. 

Mr. MEEK. Don’t get me wrong. I am just saying, because we 

have to explain this. 

Mr. RAPOPORT. Sure. I was just simply trying to build on what 

Dr. Fauci says, is that he needs this industry to bring their creativity. 

All I was suggesting with the Defense Production Act, it in no 

way is a relaxation of any audit rights. It is simply a framework 

that allows you to avoid—the anthrax bid took 6 months before 

they even selected somebody who has got now 2 years to come up 

with R&D. 

You could collapse that timeframe, and you could put, again, 

companies like Human Genome or Merck, they are not allowed to 

get in the same room now. But, under this Act, subject to supervision by the Defense Department, they cannot talk, absent someone from DOD or one of the other agencies in there, they can actually divide up the deck and decide, gee, you are going to take 

plague, you are going to take tularemia. 

Is it going to work perfectly? No. But I am just suggesting if you 

want to get past all of the bidding stages that, you know, quite 

frankly the Mercks and the Human Genomes and the Glaxos, they 

are all very competent. They could all help. You don’t necessarily 

need to decide and spend a year which one is going to get A and 

which is going to get B. Let’s make that decision now and see their 

proposals and then hunker down and have a negotiation that protects the taxpayer, which I know that you are worried about. 

Mr. MEEK. Thank you so very much. 

Mr. Chairman, I just definitely want to state for the record that 

I appreciate all of the witnesses here and the work that you are 

doing. 

And the work that you do want to do, not only on behalf of our 

companies but also on behalf of Americans, in making sure that we 

are safe in the effort against terrorism. Simply, you summed it up 

better than I could. On behalf of the taxpayers, I don’t think there 

is anyone in this Congress that wants to abuse their trust that 

they put into us. And we appreciate all of you coming today. 

Thank you, Mr. Chairman. 

Chairman COX. Thank you, Mr. Meek. 
99

I want to be as humane as possible with our panel. You have devoted many hours of your day here today. I am sure you can use 

a stretch if nothing else. 

And so I have just one question I would like to put to you before, 

with the consent of the other members, we will certainly relieve 

you. It is the fulcrum of the discussion that we have been having 

thus far about what incentives are necessary in order to get this 

jump-started in the private sector, and what flexibility the Department should have. 

I have reviewed, as carefully as I can, the legislation in its current forms. There are a couple of them extant. And I don’t believe 

we have clearly stated in the bill as written, an authority for the 

Secretary of HHS or for the United States to make a public bonding commitment to purchase what we have defined as qualified 

countermeasures on such terms and conditions as the Secretary 

might specify in advance at the time of the publication of this binding commitment. 

This is the reward model. And the question is, whether or not 

providing such authority as a supplement to what is already here, 

and Congress not tying the hands of the executive branch in their 

choice of which pitch to throw would be something that would 

make BioShield better or would compromise the effort in any way? 

And I would put it to the panel to help me with that. 

Mr. PEMBERTON. I think if you can make the commitment binding and make it earlier, it would certainly encourage participation 

and would encourage more research earlier in the process. 

Dr. HASELTINE. I am in concurrence with that. 

Mr. RAPOPORT. As well. 

Mr. SUTCLIFFE. It would increase the number of participants in 

the project, certainly from the biotech side and add them to the 

pharmaceutical companies that were already attracted to it. 

Chairman COX. Well, given that unanimous view of this panel, 

what would you like to see in such a public call? What would resound most loudly in the private sector and get people spurred to 

action most successfully? Any essential elements to such a call, or 

to put it obversely, anything that the Federal Government could 

say or do in this model that would cause people to dismiss it? 

Mr. PEMBERTON. I think the essentials are estimated within Minimum quantities of doses or other volumes be purchased and a 

guaranteed minimum price are going to be the two big items. Of 

course, you have to have standards of performance, you have to 

have some sort of measure of efficacy and safety. 

Chairman COX. If the legislation were to leave those metrics up 

to the Secretary of HHS, would that be a flaw in the legislation or 

would that be admirable flexibility? 

Mr. PEMBERTON. I think it has to be left to administrative discretion. 

Dr. HASELTINE. I agree. 

Chairman COX. What I mean is not the price and not the 

amount, but rather the legislation could say, for example, the Secretary shall, at the time that he makes the public building commitment, specify such details as will be necessary for people to qualify, 

which shall include the price, the quantity, what have you, and 
100

some means that everybody could agree upon, in determining the 

efficacy of the countermeasure that is being purchased. 

Mr. RAPOPORT. What I would add to the language is that the Secretary, in his discretion, shall negotiate a reasonable price which 

shall include recognition for the costs of capital and return on equity. 

That is a piece that is not in BioShield that would announce 

clearly that there is a willingness on the government’s part to reimburse the companies for their own sweat-equity costs that they 

have to go out and bring to the company, to the project, again on 

a reasonable basis. 

Chairman COX. Let me just put a fine point on this. If we were 

to include such authority, and if we were to leave essentially all details of what would be in a public call, up to the discretion of the 

Secretary, would that be acceptable from your standpoint for the 

legislation, and would it be a good thing, or should we strive for 

some more specification, some more specificity such as, should we 

say things we ought to include—is your last comment, Mr. 

Rapoport rather advice for the Secretary, if and when he were to 

use this authority? 

Mr. RAPOPORT. I think what I am suggesting is that you give him 

some parameters of issues that he should consider, that if you 

didn’t say so, he wouldn’t consider, because it would be Defense Department business as usual contracting, which is pretty much the 

way they did the smallpox and anthrax procurements, because they 

didn’t have BioShield and not enough money. 

Mr. SUTCLIFFE. I would also hope that such language would 

avoid predetermination that it is doses per dollar that is the solution, rather than, for example, some other form of protection that 

would allow him to encourage other solutions on the response side 

rather than on the drug side. 

Chairman COX. All right. Mr. Turner. 

Mr. TURNER. Just one question. I know the hour is late. 

When, Mr. Rapport, you described the way you would like to see 

the process work, you talked about getting everybody in the room, 

all of the manufacturers and you decide who gets to work on 

plague, who gets to work on anthrax, that kind of thing. And earlier when Mr. Dicks was asking questions to the panel, I think Mr. 

Sutcliffe made a response to him that indicated that you thought, 

Mr. Sutcliffe, that it would be better to have more than one hook 

in the water. And I want to get clear, between the two of you, these 

two approaches and why each of you feel the way you do, and so 

that we completely have an understanding, because I think this is 

a critical issue. 

I will tell you where I have been on this. I thought that the objective here ought to be to get more companies involved in this research and this effort. And that we would be best served in terms 

of achieving the goal of getting these vaccines out there in the 

shortest period of time if we did that. So the concept of simply sitting in the room and divide up the pie seems to me to be the wrong 

approach. 

But if you disagree with that, let me know. But I want to hear 

the contrasting approaches that I think I heard from each of you 

two. 
101

Mr. RAPOPORT. Mr. Turner, I think you rightly took my comments to the extreme. I am a big fan of something called dual 

sourcing or triple sourcing. And when I suggested that we make an 

award of one drug to one company, I was giving the example. 

Again, this would be up to the Department of Defense and Homeland Security who actually would administer this. What we saw in 

the smallpox procurement that Secretary Thompson issued right 

after 9/11, they made an award to one company. In the years that 

I have been practicing government contract law on critical problems, critical programs, they never just source to one. They always 

have two or three, so hopefully at the end, somebody comes up with 

the answer. 

But, Secretary Thompson had no money. He had to go with a 

very fine company, I think it is called Acambis. But, quite frankly, 

they were the low bidder. You didn’t see Merck, you didn’t Glaxo, 

you didn’t Wyeth, or the fourth company in Mr. Andrew’s District. 

The four big manufacturers have yet to participate. It is as if you 

fight the war in Iraq without Northrup Grumman, Boeing, you 

have a bunch of very qualified subcontractors. 

But what I am suggesting is the Defense Production Act, I think 

can be a useful tool. A useful tool in areas where the President and 

his team feel we could get an edge in where maybe one company 

is raring to go and one isn’t, that you consider that in the legislation. 

Mr. SUTCLIFFE. I think you are correct to have perceived a difference in the point of view. My impression of the BioShield Initiative, as written, is that it is an assignment to a handful of companies to provide an already determined product. 

The problem that has been brought out in this committee is we 

don’t know what this product is, we are not sure how broad the 

threat is, and we would really like to have some answers to the 

threats we are going to find out about next week. There is no evidence that these particular companies have anything to offer in 

terms of the discovery side of answering those problems. 

What we really ought to be doing is making sure that we get the 

best answer, more players certainly, and I think, different players. 

The production issue of the ultimate solution is probably the easiest part. There are many people who believe that the future of this 

combined industry is that the discovery side will be the biotech industry as we know it today, and the production and marketing element will be the pharmaceutical companies. 

I think it makes a lot of sense to use the resources of the pharmaceuticals companies to deliver products when they are determined. 

But, the BioShield Initiative is to find the products in the first 

place, or to find the countermeasures, I think that is the correct 

statement. The countermeasures may end up being things that are 

not drugs, that are not vaccines. And the way BioShield is written, 

it is really a one-off approach to each disease. 

I think it was Mr. Dicks who asked, what will we get at the end? 

The answer is we are going to get, ultimately, a hundred individual 

vaccines produced under the same approach, as opposed to any 

chance at a global, ‘‘macro’’ solution to avoiding contact in the first 

place or moderating response to antigens and pathogens in a way 
102

that draws upon the kind of science that Dr. Haseltine was working on 30 years ago, and now we think of as what we know about 

individual patient response. 

So we can learn about that in the context of BioShield. I don’t 

think that the existing NIH authority and approach is enough, because the urgency is not there. Indeed, in just talking with scientists in our company and elsewhere, the impression of BioShield 

is a lot of people are going to go into the vaccine production business for major pharmaceutical companies, because there will be 

jobs to do that. 

I am not sure that gives us an answer. It will give us 

warehoused vaccines. Whether they will answer the need and anticipate the next threat is a bigger question. I believe they probably 

won’t. 

So if we can tweak the BioShield idea, use the urgency that is 

reflected in it and the government attention to bring as many solutions into play, we will get the right ones, and it may well be that 

that means not paying for them up front, not agreeing to pay for 

them up front, but agreeing to pay for them when they are delivered, then allowing private industry and the private capital markets to compete to give you a number of different solutions. 

If we all get in one room and divide up the diseases, we will get 

a hundred thousand left shoes. I think that that is the giant risk 

of the way the structure is currently anticipated. 

Dr. HASELTINE. I have a comment on your question. I think the 

notion of a priority of dividing up who gets what disease is a very 

bad idea. You don’t know who is going to come up with the valid 

solution. On the other hand, at the other extreme, you can’t have 

multiple people making products for the same purpose. We can’t 

have say three or four vaccines for anthrax. That may work in the 

private sector where there is an open market, but it is very unlikely to work where you have the government. 

So there should be something that allows diversity, a priority to 

come up with products that meet certain criteria, at which point 

there is a selection for which company does the production. 

But, I think it would be an extremely bad idea to divide the 

world up before you had proof of efficacy. 

Mr. TURNER. Thank you. 

Mr. PEMBERTON. I think the basic model under the existing language is competitive R&D, and we are certainly comfortable with 

that. But there may be instances where there could be needless duplication of effort that could be discovered through a very limited 

process of meeting, where you would need an antitrust exemption 

to have those kinds of meetings, to discover where you are wasting 

effort, where two people are doing the same thing, that is not necessary. 

Chairman COX. Well, I think you have surpassed yourselves in 

your contribution here this evening. I am sure that every one of our 

panelists is here beyond the hour that you expected depart. So you 

are very, very much appreciated we want you to know. You have 

helped this committee immensely in our task as we go forward. 

We are very, very close to marking up this legislation. So your 

comments are both very timely and very consequential, I think, 
103

and we appreciate your help a great deal. Thank you for traveling 

here, for being with us. 

And with that the hearing is adjourned. 

[Whereupon, at 6 p.m., the committee was adjourned.]

APPENDIX 

ADDITIONAL MATERIAL SUBMITTED FOR THE HEARING RECORD 

QUESTIONS AND RESPONSES FOR THE RECORD FROM MR. ALAN PEMBERTON

Thank you for the opportunity to address further questions from Representative 

Jackson-Lee following the oversight hearing entitled ‘‘BioShield: Countering the Bioterrorist Threat’’ on Thursday, May 15, 2003. 

Representative Jackson-Lee’s first set of questions were as follows: 

I am concerned that we could promise about 1 billion dollars for creation 

of a new vaccine, sit back and think that we have taken care of the problem, and find out in five years that nothing has been accomplished. How 

will we monitor whether this Act is having the desired effect? How many 

companies do you think will start new programs to develop vaccines or 

drugs to combat bioterrorism? How many corn panics in the business will 

expand their programs? Is there some threshold level of new activity that 

you could see that might indicate that the industry is dedicating the appropriate resources?

She also inquired: 

Considering the relative lack of transparency in the private sector, and the fact 

that many pharmaceutical companies are publicly traded—do you expect them to be 

forthcoming about their progress, or lack of progress, on this front? How long will 

it take us to figure out if the industry is not getting the job done, and that perhaps 

a federal effort is necessary. 

On behalf of the Pharmaceutical Research and Manufacturers of America 

(‘‘PhRMA’’) on whose behalf I testified at your Committee’s recent hearing, I am 

pleased to respond as follows: 

First, while it is impossible to predict the specific research initiatives that will be 

undertaken if BioShield legislation is adopted, if the government does not remove 

significant disincentives to the development of such a market (including meaningful 

protections against liability exposure), the pharmaceutical industry is not likely to 

reallocate existing resources to developing countermeasures to bioterrorism. To 

stimulate private industry participation, it is imperative that Congress create a 

guaranteed market and address disincentives such as the liability exposure of participants. PhRImIA favors a liability protection system similar to that enacted currently for smallpox vaccine manufacture. 

The transparency of research efforts will not be an issue. There will be (as there 

currently are) many ways to learn what research PhRMA member companies are 

performing. Information about the nature of the ongoing research and development 

is generally public. Public documents such as the PhRMA annual report, company 

press releases, and SEC filings provide such information. Additionally, government 

entities often are aware and involved in the research process—the NIH and CDC, 

particularly where infectious agents are concerned, and the FDA, once clinical trials 

are underway. 

PhRMA would welcome the opportunity to work with Congress to construct a 

countermeasure contracting and procurement process that operates more like the 

commercial contracting process, which we believe will enhance its appeal to private 

companies. Pharmaceutical companies are accustomed to commercial contracting 

rather than government contracting and structure their research and development 

efforts differently from traditional defense contractors. For instance, authorization 

of ‘‘other transactions authority’’ would provide greater flexibility than is typically 

the case under federal acquisition regulations and would permit agreements that 

more closely resemble commercial transactions, thereby increasing the likelihood of 

research and development initiatives and product introductions in this area.
104

QUESTIONS FOR THE RECORD SUBMITTED FOR DR. FAUCI

QUESTIONS FROM REP. SHELIA JACKSON-LEE

Once vaccines or drugs are developed and we have them stockpiled, how will they 

be distributed? My concern is that we have about 40 million people in the United 

States who have no health insurance. Those without health insurance are less likely 

to go to see their physicians on a regular basis. Many do not even have a doctor 

of record, but instead only go to emergency rooms when extreme circumstances 

arise. If a situation arises where millions of people in an area need to go in for consultation, then inoculation, then follow up—and there are so many people without 

a good working relationship with a physician or clinic—we could have mass confusion. 

What facilities will be in charge of distribution? Will people visit their own physicians or public health clinics? How will they know where to go? Do these facilities 

have the infrastructure to take the deluge of patients we expect? Do they have 

enough people to give appropriate education and advice? Will they be able to treat 

some of the side-effects or allergic reactions that may arise? We have a disparity 

in health and healthcare in the U.S. between the haves and the have-nots. I would 

hate to see a disparity in survival after a terrorist attack. 

I am concerned that we could promise about 1 billion dollars for creation of a new 

vaccine, sit back and think that we have taken care of the problem, and find out 

in five years that nothing has been accomplished. How will we monitor whether this 

Act is having the desired effect? How many companies do you think will start new 

programs to develop vaccines or drugs to combat bioterrorism? How many companies in the business will expand their programs? Is there some threshold level of 

new activity that you could see that might indicate that the industry is dedicating 

the appropriate resources? Considering the relative lack of transparency in the private sector, and the fact that many pharmaceutical companies are publicly traded-

- do you expect them to be forthcoming about their progress, or lack of progress, 

on this front? How long will it take us to figure out if the industry is not getting 

the job done, and that perhaps a federal effort is necessary? 

No Response received by the Committee 

Questions Submitted for the Record From The Honorable Peter DeFazio 

1. With single-source procurement contracts for countermeasures, are the profit 

margin and rate of return pre-established in the contract? 

2. As is customary in conventional government procurement, couldn’t HHS simply 

expedite the RFP and awarding processes for developing countermeasures? Wouldn’t 

a competitive bidding process serve the public interest and public health goals better? 

3. Better still, why shouldn’t DHS start contracting immediately to develop countermeasures for National Institute of Allergy and Infectious Disease High Threat 

List (‘‘A List’’) toxins? 

4. Much of the debate on preparedness revolves around biological toxins. Is there 

anything specifically that’s being done to develop countermeasures for chemical 

agents? 

No Response received by the Committee 

RESPONSES FOR THE RECORD FROM WILLIAM A. HASELTINE, PH.D. 

Thank you for the opportunity to testify last week before the Select Committee 

on Homeland Security. As I said in my statement and in response to questions from 

members of the Select Committee, Human Genome Sciences strongly supports the 

President’s Project BioShield initiative. The program will go a long way toward giving companies the assurance they need to develop innovative new products to protect the public from chemical or biological attacks. 

I also want to share with you some suggestions for improving the BioShield legislation that was approved last week by the House Energy and Commerce Committee. 

In some respects, the bill as currently drafted would offer less flexibility than under 

existing government procurement regulations. In order to be truly effective, the BioShield program must give Department of Health and Human Services the flexibility 

to craft development and procurement contracts that more closely resemble those 

in the private market and reflect a partnership between the federal government and 

companies willing to commit their expertise and resources to defeat weapons of bioterror. 

I have attached three draft amendments, which I am hopeful you will consider 

as the Select Committee marks-up the BioShield legislation. In particular: 

• Amendment 1 would (1) authorize the Secretary of HHS to include performancebased (milestone) payments in procurement contracts—rather than limit contracts 
105

to repayable ‘‘advance payments’’ and payment conditioned on ‘‘substantial delivery’’; (2) provide that the Secretary may enter into single contracts for research, development and production; and (3) ensure that procurement contracts may reflect 

the actual cost of development, including costs incurred before or after contract execution. 

• Amendment 2 would further ensure that contracts may provide for both development and procurement. 

• Amendment 3 would provide necessary liability protections identical to those included in the Homeland Security Act of 2002. 

I believe that all three provisions would be strongly endorsed by the pharmaceutical and biotechnology industries and would be happy to discuss them further 

with you and your staff. 

Thank you again, and I look forward to working with you and the administration 

to ensure that Project BioShield is a success. 

Sincerely,

William A. Haseltine, Ph.D.Chairman and Chief Executive OfficerEnclosures 

AMENDMENT 1

In section 31 9F–2 of part B of title III of the Public Health Service Act (as proposed to be added by section 3 of the bill), strike subclause (I) of subsection 

(c)(7)(C)(ii) and insert the following (and redesignate succeeding subclauses and references thereto accordingly): 

‘‘(I) PAYMENT CONDITIONED ON SUBSTANTIAL DELIVERY.—The contract 

may provide that no payment may be made until delivery has been made of a substantial portion (as determined by the Secretary) of the total number of units contracted for, unless the Secretary determines (in the Secretary’s discretion) that advance, partial, progress or other payments consistent with section 305 of the Federal 

Property and Administrative Services Act of 1949 (41 U.S.C. 255) are necessary to 

ensure the success of a project. 

‘‘(II) SECURITY COUNTERMEASURE DEVELOPMENT.—Notwithstanding any 

other provision of law, the contract may include the procurement of research, development, and production, and may reflect, in its terms and price, the actual cost of 

developing the security countermeasure, including any cost incurred either before or 

after the execution of the contract.’’. 

AMENDMENT 2

In section 319F–2 of part B of title III of the Public Health Service Act (as proposed to be added by section 3 of the bill), insert ‘‘, including procurement of research, development, and production under a single agreement, as necessary,’’ after 

‘‘Secretary for procurement’’ in clause (i) of subsection (c)(7)(B). 

AMENDMENT 3

In section 31 9F–2 of part B of title III of the Public Health Service Act (as proposed to be added by section 3 of the bill), at the end of subsection (c)(7)(C)(vii) add 

the following new clause: ‘‘(viii) LIABILITY.—Any product or service resulting from 

any agreement under this section for procurement, including research, development, 

and production, shall be designated as a ‘‘qualified anti-terrorism technology’’ as defined in section 865 of the Homeland Security Act of 2002 and, notwithstanding any 

other provision of law, shall be afforded any and all protections provided under subtitle G of Title VII of the Homeland Security Act of 2002 without regard to whether 

an ‘‘act of terrorism’’ as defined in Section 865 has occurred.’’. 

QUESTIONS AND RESPONSES SUBMITTED FOR THE RECORD FROM L. GARRY ADAMS, 

DVM, PHD, DACVP 

As requested in your letter of July 1, 2003 pertaining to my testimony before the 

Full Committee oversight hearing on ‘‘BioShield: Countering the Bioterrorist 

Threat,’’ the following statements are my responses to the specific questions of U.S. 

Representative Shelia Jackson-Lee. I have responded from the context of my background over the last three decades as a veterinary medical research scientist participating in the development and implementation of new vaccines and diagnostic tests 

for two successful multi-billion dollar federal animal health regulatory programs, bovine brucellosis and bovine tuberculosis. For purposes of convenience, I have restated each of Representative Jackson-Lee’s questions below.

Questions from Rep. Shelia Jackson-Lee: I am concerned that we could promise 

about 1 billion dollars for creation of a new vaccine, sit back and think that we have 

taken care of the problem, and find out in five years that nothing has been accomplished. 

Question: How will we monitor whether this Act is having the desired effect? 
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Response: First, the specific federal-private enterprise contractual agreements 

must have clearly written time lines and due diligence clauses for completion of 

deliverables. Second, the contractual agreement between the federal government 

and private enterprise for vaccines, diagnostic tests and/or therapeutics must be 

written to have progressive milestones with due dates with demonstrable proof of 

deliverables meeting specific definitions of quantity and quality of products. Third, 

the US House Select Committee on Homeland Security will be expected to maintain 

rigid oversight of the entire process and the timeliness for the quality and quantity 

of deliverables, possibly functioning through single or multiple major federal agencies, e.g. Department of Homeland Security, Department of Health and Human 

Services, and/or Department of Defense. 

An example from a national animal health perspective: For the last 60 years or 

more, the United States Department of Agriculture has been responsible for the implementation and oversight of contractual agreements with private enterprise for 

the timely production of the quality and quantity of vaccines and diagnostic tests 

required for the hundreds of millions of cattle involved in the successful federal brucellosis and tuberculosis regulatory programs. 

Question: How many companies do you think will start new programs to develop 

vaccines or drugs to combat bioterrorism? 

Response: This question is beyond my experience and background, however my 

impression is that current minor and major biologics and pharmaceutical companies 

would be responsive to the demand for vaccines, diagnostic test and therapeutics related to bioterrorism as long as the profit incentive remained viable for the firms. 

Another example from a national animal health perspective: When the new bovine 

brucellosis vaccine was introduced in the mid-90s, the same USDA approved biologics manufacturer continued to produce the former vaccine and quickly expanded 

new manufacturing lines to produce the millions of doses of the new brucellosis vaccine required for the federal regulatory program. 

Question: How many companies in the business will expand their programs? 

Response: Again this question is beyond my experience and background, but as 

long as the profit incentive was viable for the biologics and pharmaceutical companies for several years, and the companies were able to meet the quality requirements for the products and had the capacity to expand production, U.S. enterprise 

would be expected to respond accordingly. 

Question: Is there some threshold level of new activity that you could see that 

might indicate that the industry is dedicating the appropriate resources? 

Response: The federal-private enterprise contractual agreements would need to be 

written with clear indicators that appropriate human resources and fiscal resources 

were invested to comply with the due diligence clauses for completion of 

deliverables. 

Question: Considering the relative lack of transparency in the private sector, and 

the fact that many pharmaceutical companies are publicly traded—do you expect 

them to be forthcoming about their progress, or lack of progress, on this front? 

Response: The federal government-biologics and pharmaceutical company contracts would need to be written such that timely milestone inspections and reports 

are obligatory in order to comply with the due diligence clauses for completion of 

deliverables. 

Question: How long will it take us to figure out if the industry is not getting the 

job done, and that perhaps a federal effort is necessary? 

Response: The frequency of the mandated milestone inspections and reports will 

be the determining factor for how quickly lack of compliance with due diligence 

might occur, i.e. the frequency of these inspections and reports would be expected 

to be no more than each six months throughout the contractual agreement. 

Thank you, Chairman Cox, for the opportunity to respond to specific questions 

from the U.S. House of Representatives? Select Committee on Homeland Security 

hearing on ‘‘BioShield: Countering the Bioterrorist Threat.’’ Should you require clarification for any of my responses, please contact me at your convenience.

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