PROJECT BIOSHIELD 

REAUTHORIZATION ISSUES 

HEARING 

BEFORE THE 

SUBCOMMITTEE ON HEALTH 

OF THE 

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

APRIL 6, 2006 

Serial No. 109-97 

Printed for the use of the Committee on Energy and Commerce 

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

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WASHINGTON : 2006 

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29-726PDF 
COMMITTEE ON ENERGY AND COMMERCE 

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

 Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

 Vice Chairman

VITO FOSSELLA, New York 

ROY BLUNT, Missouri

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOHN D. DINGELL, Michigan 

 Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, General Counsel

REID P. F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON HEALTH 

NATHAN DEAL, Georgia, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

FRED UPTON, Michigan 

PAUL E. GILLMOR, Ohio 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

STEVE BUYER, Indiana 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

SUE MYRICK, North Carolina 

MICHAEL C. BURGESS, Texas 

JOE BARTON, Texas 

 (EX OFFICIO)

SHERROD BROWN, Ohio 

 Ranking Member 

HENRY A. WAXMAN, California 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

TAMMY BALDWIN, Wisconsin 

JOHN D. DINGELL, Michigan 

 (EX OFFICIO)

(II)
CONTENTS 

Page 

Testimony of: 

Azar, Hon. Alex M., Deputy Secretary, U.S. Department of Health and Human 

Services ......................................................................................................................... 8 

O’Toole, Dr. Tara, CEO and Director, Center for Biosecurity, The University of 

Pittsburgh Medical Center.............................................................................................. 33 

Young, Peter F., President and CEO, AlphaVax, Inc., on behalf of Biotechnology 

Industry Organization..................................................................................................... 41 

Cohen, Bruce, President and CEO, Cellerant Therapeutics, Inc. ....................................... 48 

Wright, Dr. David P., President and CEO, PharmAthene, on behalf of Alliance for 

Biosecurity...................................................................................................................... 53 

Blaser, Dr. Martin, President, Infectious Diseases Society of America............................. 59 

Additional material submitted for the record: 

Azar, Hon. Alex M., Deputy Secretary, U.S. Department of Health and Human 

Services, response for the record ................................................................................... 78 

(III) 

(1) 

PROJECT BIOSHIELD 

REAUTHORIZATION ISSUES 

THURSDAY, APRIL 6, 2006 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 1:02 p.m., in Room 

2123 of the Rayburn House Office Building, Hon. Nathan Deal 

(chairman) presiding. 

 Members present: Representatives Deal, Cubin, Shimkus, Rogers, 

Myrick, Burgess, Pallone, Eshoo, and Green. 

 Staff present: David Rosenfeld, Acting Chief Health Counsel; Ryan 

Long, Counsel; Nandan Kenkeremath, Counsel; Bill O’Brien, Legislative 

Analyst; Brandon Clark, Policy Coordinator; Chad Grant, Legislative 

Clerk; John Ford, Minority Counsel; and Jessica McNiece, Minority 

Research Assistant. 

MR. DEAL. We are pleased to have a very special group of 

individuals to testify before the committee today on two separate panels. 

Today, we are going to be reviewing one of the critical pieces of our 

biodefense structure. This committee has important responsibilities in 

this area and has passed a number of pieces of legislation to deal with 

chemical, biological, radiological, and nuclear threats. I want to 

commend the leadership of the President in leading the way on pandemic 

flu preparedness and biodefense preparedness. I know activities are 

underway at multiple Departments, including HHS, the Department of 

Homeland Security, and the Department of Defense, dealing with these 

issues. A great deal has been done with respect to the first round of 

material threats as defined by the Department of Homeland Security. 

There are many continuing questions about how to access threats, 

whether these should include naturally occurring threats, and how to 

develop an appropriate response. 

 We want to make sure that the various Departments and offices are 

properly coordinating and have the right expertise. We know that 

biodefense is an area where the Federal government must take a strong 

role. There is no business model that will support the investments we 

need without a clear path from the Federal government. We also know 

that the expertise is in the private sector, so we must make sure that we 

have a working partnership there as well. We want to work closely with 
2

HHS and other agencies to improve Project BioShield and our overall 

pandemic and bioterrorism preparedness. I thank our witnesses for their 

attendance today and we will look forward to hearing their testimony, 

beginning with the first panel as soon as we complete the opening 

statements. 

 MR. DEAL. I will now recognize my friend, Mr. Pallone from New 

Jersey, for his opening statement. 

 MR. PALLONE. Thank you, Mr. Chairman, and thanks also to the 

witnesses for participating in today’s hearing and I know the 

subcommittee is eager to hear your testimony. Nearly two years ago 

Congress passed the Project BioShield Act with tremendous bipartisan 

support. Democrats and Republicans worked together to establish a 

process that would help our Nation respond to bioterrorism threats and 

attacks. Today’s hearing will give us an opportunity to assess how well 

the program is working to meet this important goal. 

 Since going into effect, a number of criticisms have been make 

against the program and much of that criticism has come from the 

biotech industry and has been leveled against the Department of 

Homeland Security and the Department of Health and Human Services. 

The complaint I hear most often is that the Federal government has been 

too slow to assess bioterrorism threats and award contracts to the 

acquisition of effective countermeasures. Now the Homeland Security 

Department has been accused of taking too long to issue material threat 

determinations, which is needed before Health and Human Services can 

acquire necessary countermeasures. And while this may be a legitimate 

criticism, as I understand it, even if DHS were to provide these 

assessments in a more timely manner, HHS currently lacks the necessary 

resources to take appropriate action. Indeed, it is not clear to me that the 

current organizational structure or staffing levels at HHS are adequate to 

provide for the timely acquisition of effective countermeasures, and I 

would certainly be interested to hear from Mr. Azar. I think I heard them 

name Mr. Azar on this subject. 

 Furthermore, I am not certain that those at HHS charged with 

administering the program have the proper background or expertise to 

successfully carry out its mission. For example, Mr. Chairman, I don’t 

think it is in the best interests of the country to have an Assistant 

Secretary of Public Health Emergency Preparedness who has no 

background in public health or emergency preparedness, and I would 

hope that the Administration keeps that in mind as they seek to replace 

Mr. Simonson. 

 There has also been a number of complaints about Administration 

officials being vague and allusive in their discussions about the types of 

products they might want to purchase, what quantity, and at what price. 
3

Industry representatives have said that this type of uncertainty is a 

detriment to the process and has discouraged many companies from 

participating in the program. The biotech industry would prefer a system 

more akin to the Department of Defense’s countermeasure program, 

where government purchasing is much more reliable. And I would be 

interested to hear recommendations from the witnesses about how we 

can bridge the difference between these two models, even though the 

populations they are designed to protect vary greatly. 

 The obvious concern and another complaint is that the program 

simply does not provide enough incentives for biotech firms to research 

and develop countermeasures. Industry has said that they need 

significantly more incentives in order to play in the game. One such 

proposal, commonly referred to as a wild card extension, would extend 

the life of a patent for any drug of a company that develops new defenses 

against biological weapons. This would allow drug makers to extend its 

patent on its most profitable drugs, even though it may be completely 

unrelated to a bioterrorism threat. The drug industry claims that 

extending the patent on blockbuster drugs is needed to encourage firms 

to make up for the loss they incur by developing less profitable 

countermeasures, but I could not disagree more with that. Such a 

proposal simply is another way to provide windfall profits for the 

pharmaceutical industry and would keep prescription drug prices 

unnecessarily high, in my opinion. 

 Furthermore, I would think that enough incentives currently exist for 

drug manufacturers and biotech companies to enter the market, after my 

Republican friends provided them with sweeping new liability 

protections as part of the Defense Authorization Bill for 2006. In fact, 

last year, in the dead of night, Republicans included a provision that 

would allow lawsuits against vaccine manufacturers only in the case of 

willful misconduct, and this is a much higher standard than negligence, 

which is more commonly used in product liability cases. Furthermore, 

the Secretary can apply this liability shield to any product used to treat an 

epidemic or a pandemic, which is left to be defined by the Secretary. If 

that isn’t enough incentive for the drug industry to enter the market, I 

don’t know what is. 

 And finally, Mr. Chairman, as we examine the success of Project 

BioShield, I think it is important for us to consider whether or not the 

funding level we authorized two years ago is adequate to accomplish the 

goals that we laid out. Congress authorized only $5.6 billion over ten 

years for Project BioShield and established specific timeframes in which 

that money could be spent. Incidentally, more than $1 billion of that 

money has already been obligated to the four contracts currently 

approved under the program. Accordingly, as we move forward, we may 
4

want to consider adding additional funds, especially for greater 

government investment in research and development. 

 But again, thank you for calling today’s hearing, Mr. Chairman. 

Clearly, there are some areas of Project BioShield that may need to be 

fixed for the program to work properly and to that end, I look forward to 

working with you and the rest of my colleagues on the committee in a 

bipartisan fashion to meet these goals, the same way we did two years 

ago, and the health and safety of our citizens deserve, certainly, no less 

than that. Thank you. 

 MR. DEAL. I thank the gentleman. Ms. Myrick, do you have an 

opening statement? All right. Well, we will proceed to our panel, then. 

 [Additional statements submitted for the record follow:] 

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY 

AND COMMERCE

Thank you, Mr. Chairman. 

 I want to commend you for holding this important hearing. The known threats of the 

20th Century have given way to new unforeseen threats we cannot ignore. While there has 

been no successful attack on our homeland since 9-11, the Committee must diligently 

oversee and strengthen the components of the U.S. biodefense structure that we helped 

launch. 

The legislative pieces of this biodefense structure include: 

• The Public Health and Bioterrorism Preparedness and Response Act; 

• The public health provisions of the Homeland Security Act; 

• The Small Pox Emergency Personnel Protection Act; 

• The Project Bioshield Act; 

• Provisions in the Faster and Smarter Funding for First Responders Act; and 

• The Public Readiness and Emergency Preparedness Act. 

These authorization efforts have been matched by substantial increases in spending 

by the Department of Health and Human Services, the National Institutes of Health, the 

Department of Homeland Security, and the Department of Defense. The money goes for 

research, development and acquisition of medical countermeasures against chemical, 

biological, radiological and nuclear threats. In fact, Congress recently appropriated 

billions of dollars to take countermeasures against pandemic flu. 

 The Energy and Commerce Committee has a strong record of accomplishment in 

homeland security, including on biodefense. We must continue to develop policies which 

improve biodefense capabilities. Real risks must be matched with useful and effective 

countermeasures. We need to ensure these programs are working well together. I look 

forward to hearing from today’s witnesses on the status of Project Bioshield and on ideas 

for its improvement. 

PREPARED STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS 

FROM THE STATE OF WYOMING

Thank you Mr. Chairman. 

I have always been a national security hawk, something that has taken on new 

meanings as the American people face emerging threats to their safety and well-being. 

By passing the Project Bioshield Act of 2004, Congress recognized the need for 

countermeasures to chemical, biological, radiological and nuclear threats. While there is 
5

no question Project Bioshield has proven useful, questions remain as to how to improve 

both the law itself, as well as how to facilitate a more cohesive implementation of the law 

by the various Executive Branch agencies involved. 

I hope today’s testimony will also call more attention to the threat posed by 

naturally-occurring infectious diseases. An influenza pandemic, for example, is certainly 

on par with the threat of bioterrorism in terms of its national security implications. And 

yet the U.S. currently lacks the vaccine supply and production capacity to mitigate such a 

pandemic. 

That’s why myself and Rep. Brian Baird have introduced H.R. 3154, the Infectious 

Diseases Research and Development Act of 2005. This bipartisan bill would provide the 

market incentives needed to spur private research and development into infectious 

disease products, which are simply not as lucrative as the drugs you might see advertised 

on television. 

The threat of bioterrorism is very real, and very dangerous, but we cannot let it 

overshadow other public health threats that hold the potential for equally devastating 

consequences. 

We will hear calls for more funding today in order to produce a more comprehensive 

approach under Project Bioshield, though we must face the reality that it would be 

impossible to stockpile an adequate supply of drugs for each and every bio-threat. I hope 

our panelists will have suggestions for how we can streamline countermeasure 

development so we can make them quickly when we need them. 

 Amidst calls for funding, I would also encourage my colleagues to also consider 

potential market-based solutions to our drug development problems, such as the ones 

included in H.R. 3154. 

 MR. DEAL. I am pleased to introduce the first panel. First is the 

Honorable Alex M. Azar, Deputy Secretary, U.S. Department of Health 

and Human Services. Next, Mr. Jean D. Reed, and I am going to have to 

take a deep breath to read this one, Special Assistant, Chemical and 

Biological Defense and Chemical Demilitarization Programs, Office of 

the Assistant to the Secretary of Defense for Nuclear and Chemical and 

Biological Defense. I don’t know what that acronym is, but it has got to 

be one doozy. 

 MR. REED. It is unpronounceable, sir. 

 MR. DEAL. Gentleman, we are pleased to have you here today. 

Your written statements have been made a part of the record, and we 

would welcome your oral testimony and hopefully summarize the written 

portion that you have submitted. We will begin with you, Mr. Azar. 

STATEMENTS OF THE ALEX M. AZAR, DEPUTY 

SECRETARY, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES; AND JEAN D. REED, SPECIAL 

ASSISTANT, CHEMICAL AND BIOLOGICAL DEFENSE 

AND CHEMICAL DEMILITARIZATION PROGRAMS, 

OFFICE OF THE ASSISTANT TO THE SECRETARY OF 

DEFENSE, U.S. DEPARTMENT OF DEFENSE 
6

MR. AZAR. Good afternoon, Mr. Chairman and members of the 

subcommittee. Thank you very much. I am pleased to be here today to 

update you on the steps that HHS has been taking to implement the 

Project BioShield Act. 

 Many countermeasures for potential agents of terrorism realistically 

have no market other than the Government and thus have not generated a 

great deal of manufacturers. Because the market for developing 

countermeasures is speculative, without government interest private, 

companies have not invested and engaged in developing the 

countermeasures that the current situation warrants. Project BioShield 

was intended to provide such an assurance of a market. I want to 

acknowledge the important role of this committee in enactment of 

Project BioShield and thank you for your continued support of this 

critical program. 

 The Office of Research Development Coordination within the Office 

of Public Health and Emergency Preparedness at HHS exercises and 

coordinates the procurement authorities utilizing the Special Reserve 

Fund authorized under Project BioShield. Prioritization and 

development of requirements for medical countermeasures and medical 

countermeasure acquisition programs is coordinated by the expert 

interagency Weapons of Mass Destruction Medical Countermeasures 

Subcommittee, another long name. In setting priorities for medical 

countermeasure acquisition under Project BioShield, this interagency 

subcommittee considers a number of factors. The credibility and 

immediacy of the specific threats are driving factors and are informed by 

material threat assessments that are conducted by the Department of 

Homeland Security. Other factors include an evaluation of the 

availability of appropriate countermeasures, both current and projected, 

and the target population for which medical countermeasures would be 

used. 

 To date, HHS has implemented acquisition programs addressing 

each of the four threat agents determined to be material threats to the 

U.S. population by the Department of Homeland Security: anthrax, 

smallpox, botulinum toxins, and radiological/nuclear agents. HHS has 

used the special reserved fund to award two contracts for vaccines 

against anthrax, one contract for a liquid formulation of a drug to protect 

children from radioactive iodine exposure following nuclear events, and 

one contract for agents countering the effects of internal exposure to 

transuranic radioisotopes. 

 In addition, negotiations are underway currently for the acquisition 

of anthrax therapeutic antitoxins, and countermeasures to address the 

blood-related deficiencies associated with acute radiation syndrome. 

With respect to smallpox vaccines, an award will be made for the 
7

manufacture and delivery of up to 20 million doses of a next generation 

attenuated smallpox vaccine called modified vaccinia Ankara. 

Additionally, negotiations are underway for procuring 200,000 doses of 

botulinum antitoxin. 

 The experience implementing BioShield has highlighted challenges. 

The potential payoff for a breakthrough in medical countermeasures 

against chemical, biological, and nuclear/radiological, CBRN threats, is 

modest when compared with other drugs. For example, the global 

market for just one cholesterol-lowering agent exceeds the global market 

for all vaccines together, not just those that comprise a security 

countermeasure. Additionally, it is estimated that the cost of developing 

and bringing to market a new drug is between $800 million and $1.7 

billion per drug. In addition, for a countermeasure to be eligible for 

Project BioShield, solid clinical experience and/or research data must 

support “a reasonable conclusion that the countermeasure will qualify for 

FDA approval or licensure within eight years after the date of a 

determination.” Only then is the countermeasure eligible for funding 

from the $5.6 billion Special Reserve Fund. Late stage research and 

development funds that can support advanced product development of 

potential BioShield candidates before they are BioShield eligible are 

therefore critical to ensuring a robust pipeline. To address this, HHS has 

proposed $160 million for advanced research and development in the 

fiscal year 2007 budget to support promising candidates while shifting 

risk away from Project BioShield acquisition programs. 

 We recognize that more can and must be done to aggressively and 

efficiently implement Project BioShield. Secretary Leavitt has already 

announced his intention to establish a dedicated strategic planning 

function in HHS that more efficiently integrates biodefense requirements 

across the full range of threat agents, with the execution of advanced 

development and procurement of medical countermeasures. He will 

assign and empower the Office of Public Health Emergency 

Preparedness as the responsible office to develop and implement a 

strategic plan for this purpose, and will ensure that HHS component 

programs and functions are properly aligned and that their respect 

strengths are leveraged to support the Office of Public Health Emergency 

Preparedness’ efforts. We will also work to streamline and make more 

effective the current BioShield interagency governance process. We will 

make this process more transparent and work to educate the public and 

industry about our priorities and opportunities. As part of this, HHS will 

convene an outreach meeting with external stakeholders later this year. 

 During the first 20 months of Project BioShield, HHS has used this 

legislation to initiate major acquisition programs for medical 

countermeasures to biological and radiological/nuclear threats, to 
8

expedite the award of grants and contracts for research to identify and 

develop medical countermeasures to protect the U.S. population from 

chemical, biological, radiological, and nuclear threat agents, and to 

provide access to the best available medical countermeasures in 

emergency situations. 

 Mr. Chairman, thank you once again for inviting me to testify on our 

efforts and to update you on the Department’s plans for the future, and at 

the appropriate time, I would be happy to take any questions. 

 [The prepared statement of the Hon. Alex M. Azar follows:] 

PREPARED STATEMENT OF THE HONORABLE ALEX M. AZAR, DEPUTY SECRETARY, U.S.

DEPARTMENT OF HEALTH AND HUMANS SERVICES

Good afternoon Chairman Deal and Members of the Subcommittee. I am pleased to 

be here today to update you on the steps the Department of Health and Human Services 

(HHS) has taken to implement the Project BioShield Act of 2004 (P.L.108-276). Project 

Bioshield, as announced by President Bush in his State of the Union address on January 

28, 2003, was proposed to accelerate the process of research, development, purchase, and 

availability of effective countermeasures against agents of bioterror. Then HHS 

Secretary Tommy Thompson and Department of Homeland Security (DHS) Secretary 

Tom Ridge jointly transmitted the "Project BioShield Act of 2003” to Congress on 

February 26, 2003 and it was signed into law by President Bush on July 21, 2004. 

Project BioShield enables the Government to develop, procure, and make available 

countermeasures to chemical, biological, radiological, and nuclear agents for use in a 

public health emergency that affects national security. Pharmaceutical research and 

development historically has focused on development of products likely to attract 

significant commercial interest. Many countermeasures for potential agents of terrorism 

realistically have no market other than the government and thus have not generated a 

great deal of manufacturer interest. Because the market for developing countermeasures 

is speculative, without government interest, private companies have not invested and 

engaged in developing the countermeasures that the current situation warrants. Project 

BioShield was intended to provide such an assurance of a market. I want to acknowledge 

the important role of this Committee in enactment of Project BioShield and thank you for 

your continued support of the program. 

Project BioShield is a critical part of a broader strategy to defend America against 

the threat of weapons of mass destruction. It provides HHS with several new authorities 

to speed the research, development, acquisition, and availability of medical 

countermeasures to defend against chemical, biological, radiological and nuclear (CBRN) 

threats. Defending against such threats is a top priority for the Bush Administration and 

having an appropriate armamentarium of medical countermeasures is a critical element of 

the response and recovery component of the President’s “21st Century Strategy for 

Biodefense.” HHS acts to accomplish this mission through integrated efforts of several 

components, including: research and development at the National Institutes of Health 

(NIH); regulatory activities related to medical countermeasure development and 

availability at the Food and Drug Administration (FDA); acquisition of medical 

countermeasures through the Office of Public Health Emergency Preparedness (OPHEP); 

and storage and deployment in an emergency by the Centers for Disease Control and 

Prevention. 
9

NIH BioShield Authorities 

HHS’s National Institutes of Health (NIH) is assigned the lead role in the research 

and early development of medical countermeasures to prepare for and respond to CBRN 

agents and in the conduct of research to expand our understanding of the human health 

impact of these agents. The National Institute of Allergy and Infectious Diseases 

(NIAID) is the NIH institute with primary responsibility for carrying out this assignment. 

Thus far, NIAID has used Project BioShield authorities to award $35.6 million in grants 

and contracts. These awards will promote development of countermeasures toward 

possible future procurement with Project BioShield funds. Twelve grants and two 

contracts have been awarded to support research directed against the Category A agents 

that cause anthrax, smallpox, tularemia, plague, botulism, and viral hemorrhagic fevers. 

NIAID has awarded 4 grants and 3 contracts to support research on medical 

countermeasures against radiological or nuclear terrorist attacks, including 

countermeasures to protect the immune system against radiation and improved treatments 

for the elimination of internal radionuclide contamination that can be given by mouth 

rather than intravenously. 

Medical Countermeasure Acquisition 

The Office of Research and Development Coordination (ORDC) within OPHEP 

exercises and coordinates the procurement authorities utilizing the Special Reserve Fund 

authorized under Project BioShield. ORDC works with NIH, CDC, and FDA to 

coordinate the transitions between medical countermeasures development at NIH, 

procurement by ORDC, storage and development by CDC, and 

approval/licensure/clearance by FDA. Prioritization and development of requirements 

for medical countermeasures acquisition programs is coordinated by the Weapons of 

Mass Destruction Medical Countermeasures (WMD MCM) Subcommittee. By defining 

requirements for medical countermeasures the Subcommittee enables policy makers to 

identify and evaluate acquisition options to address immediate and future needs. 

In setting priorities for medical countermeasure acquisition under Project BioShield, 

the WMD MCM Subcommittee considers a number of factors. The credibility and 

immediacy of the specific threats are driving factors and are informed by Material Threat 

Assessments (MTAs) conducted by the DHS. Other factors include an evaluation of the 

availability of appropriate countermeasures, both current and projected, and the target 

population for which the medical countermeasure would be used. In addition, logistical 

issues are considered such as the feasibility of deployment in a public health emergency, 

shelf life, and the storage and maintenance requirements. 

To date the WMD MCM Subcommittee has defined USG requirements and 

acquisition options for eight medical countermeasures. These HHS acquisition programs 

address each of the four threat agents determined to be Material Threats to the U.S. 

population by DHS [Bacillus anthracis (anthrax), smallpox virus, botulinum toxins, and 

radiological/nuclear agents]. Such agents are determined to present a material threat to 

the U.S. sufficient to affect national security. HHS has used the Special Reserve Fund 

(SRF) to award two contracts for vaccines against anthrax, one contract for a liquid 

formulation of a drug to protect children from radioactive iodine exposure following 

nuclear events, and one contract for chelating agents for countering the effects of internal 

exposure to transuranic radioisotopes. 

In addition, negotiations are underway for the acquisition of anthrax therapeutics, 

and countermeasures to address the blood-related deficiencies associated with acute 

radiation syndrome. With respect to smallpox vaccines, an award will be made for the 

manufacture and delivery of up to 20 million doses of a next generation attenuated 

smallpox vaccine, modified vaccinia Ankara (MVA). Additionally, negotiations are 

underway for procuring 200,000 doses of botulinum antitoxin. 
10

These countermeasures are being added to the Strategic National Stockpile (SNS) 

that currently includes vaccines, antibiotics to counter infections caused by anthrax and 

plague, antitoxins, chemical antidotes and radiation emergency medical countermeasures. 

Emergency Use Authorization 

 Project BioShield thus provides an important tool for the acquisition of safe and 

effective medical countermeasures, licensed or approved by the FDA for addressing 

CBRN threat agents. BioShield also recognized however that, should CBRN agents 

threaten the U.S. before these countermeasures are procured, the American people should 

be provided access to the best available alternatives. These could include products that 

are FDA-approved for a different use or those that have not yet obtained FDA-approval, 

but for which sufficient safety and efficacy data is available to support their emergency 

use. 

The HHS Secretary delegated the authority to issue “Emergency Use 

Authorizations” (EUAs) to the FDA Commissioner and to date FDA has issued one 

EUA. The Deputy Secretary of Defense determined in December 2004 that there was a 

significant potential for a military emergency involving a heightened risk to U.S. military 

forces of attack with anthrax. Based on this determination, then-Secretary Thompson 

declared an emergency justifying the authorization of the emergency use of anthrax 

vaccine and in January 2005, the FDA authorized the emergency use of the licensed 

Anthrax Vaccine Adsorbed (AVA) for the prevention of inhalation anthrax for 

individuals between 18 and 65 years of age who are deemed by the DOD to be at 

heightened risk of exposure due to attack with anthrax. As conditions of this 

authorization, each potential AVA recipient was informed of the benefits and risks of this 

emergency use of AVA and of their option to refuse or accept AVA administration. The 

authorization for this emergency use of AVA ended one year from the declaration of the 

emergency in January 2006. 

Strategic National Stockpile 

Medical countermeasure availability also requires well-planned stockpile and 

deployment strategies, and all acquisitions made under Project BioShield include close 

consultations with the CDC to ensure these medicines will be rapidly available if needed. 

CDC operates HHS’s Strategic National Stockpile (SNS), which contains large quantities 

of medicine and medical supplies to protect the American public if there is a public 

health emergency severe enough to cause local supplies to be inadequate. Once Federal 

and local authorities agree that the SNS is needed, medicines and medical supplies can be 

delivered to any State in the U.S. within 12 hours. Consequently, each State is now 

required to develop plans to receive and distribute SNS medicine and medical supplies to 

local communities as quickly as possible in the event of a deployment. 

Challenges to Implementation 

The experience implementing BioShield over the past 21 months has highlighted a 

number of issues that make acquisitions under Project BioShield challenging and unique. 

For example, while liability issues have not prevented the completion of any 

countermeasure acquisitions to date, liability protection remains a major source of 

concern to industry, and a recurring theme in the Project BioShield acquisition process. 

Therefore, we are pleased that Congress last year passed the "Public Readiness and 

Emergency Preparedness (PREP) Act" as part of the 2006 Defense Appropriations Act 

(P.L. 109-148). This legislation included liability protections for manufacturers of 

security and pandemic countermeasures. We believe this will further create industry 

interest and progress in this area. 

Project BioShield acquisitions have also not drawn the attention of large 

pharmaceutical or biotechnology firms. The potential payoff for a breakthrough in 
11

medical countermeasures against CBRN threats is modest when compared with other 

drugs. For example, the global market for just one cholesterol-lowering agent exceeds 

the global market for all vaccines together, not just those that comprise a security 

countermeasure. Additionally, it is estimated that the cost of developing and bringing to 

market a new drug is between $800 million and $1.7 billion. 

Smaller companies have been attracted to participate in Project BioShield, which 

results in an expansion of pharmaceutical manufacturing capacity and expertise. A cost 

to building this capacity among smaller, less experienced companies, however, requires 

more intensive technical assistance. Unlike the larger, more experienced pharmaceutical 

firms, these smaller companies require increased levels of federal government assistance 

and oversight to meet the requirements of Project BioShield procurement contracts and 

mitigate the risk of failure. HHS has demonstrated a successful track record of enhancing 

the infrastructure of smaller, less established biotechnology firms, as evidenced by the 

HHS acquisition programs completed before Project BioShield. Continued successes 

will require a sustained commitment of federal resources to ensure proper contract 

oversight and administration, and to ensure that such less-established contractors meet 

their regulatory and production milestones as may be contractually required. 

Notwithstanding limited Secretarial authority to make payments up to 10 percent of 

the contract cost, the Project BioShield Act of 2004 provides “that no payment shall be 

made until delivery has been made of a portion, acceptable to the Secretary, of the total 

number of units contracted for.” This requirement constitutes a significant risk for small 

biotechnology firms, in particular, that may not have the necessary financial resources 

available to support final advanced product development prior to receipt of payment. 

Finally, for a countermeasure to be eligible for Project BioShield, solid clinical 

experience and/or research data must support “a reasonable conclusion that the 

countermeasure will qualify for [FDA] approval or licensure within eight years after the 

date of a determination.” Only then is the countermeasure eligible for funding from the 

$5.6 billion Special Reserve Fund. Late stage research and development funds that can 

support advanced product development of potential BioShield candidates before they are 

BioShield eligible are therefore critical to ensuring a robust pipeline. To address this, 

HHS has proposed $160 M for advanced development in the FY07 budget to support 

promising candidates while shifting risk away from Project BioShield acquisition 

programs. 

Future Plans 

We recognize that more can and must be done to aggressively and efficiently 

implement Project BioShield. Secretary Leavitt has announced his intention to establish 

a dedicated strategic planning function in HHS that more efficiently integrates biodefense 

requirements, across the full range of threat agents, with the execution of advanced 

development and procurement of medical countermeasures. HHS will assign and 

empower the Office of Public Health Emergency Preparedness (OPHEP) as the 

responsible office to develop and implement a strategic plan for this purpose, and will 

ensure that HHS component programs and functions are properly aligned, and that their 

respective strengths are leveraged, to support OPHEP’s efforts. We will also work 

closely with other departments and agencies to streamline and make more effective the 

current BioShield interagency governance process. We will make this process more 

transparent and work to educate the public and industry about our priorities and 

opportunities. As part of this, HHS will convene an outreach meeting with these external 

stakeholders later this year. 

As we move forward, we would also like to thank Members of Congress for their 

interest in improving the BioShield program, and we look forward to continuing to work 

with you. 
12

Conclusions 

During the first 21 months of Project BioShield, HHS has used the provisions of this 

legislation to initiate major acquisition programs for medical countermeasures to 

biological and radiological/nuclear threats, to expedite the award of grants and contracts 

for research to identify and develop medical countermeasures to protect the U.S. 

population from chemical, biological, radiological, and nuclear threat agents, and to 

provide access to the best available medical countermeasures in emergency situations. 

Thank you once again for inviting me to testify on our efforts and update you on the 

Department’s plans for the future. 

 I would be happy to take any questions. 

 MR. DEAL. Thank you. Mr. Reed? 

MR. REED. Mr. Chairman, thank you very much for inviting me to 

appear before the committee today. I am, as you have already indicated, 

the Special Assistant for Chemical and Biological Defense and Chemical 

Demilitarization Programs. No, it is not pronounceable as an acronym. 

The office is essentially that of the Deputy Assistant to the Secretary of 

Defense for Nuclear and Chemical and Biological programs. In that 

area, I support Dr. Dale Klein, who is the Assistant to the Secretary of 

Defense for Nuclear and Chemical and Biological, and the office was 

established in the early 1990s by Congress to centralize and provide a 

focal point for the Chemical and Biological Defense Program within the 

Department of Defense. I have been on the job for about three months. I 

came to that job from 15 years as a professional staffer for the House 

Armed Services Committee. In that role, I had the enjoyable task of 

working with your staff in the development of the Defense BioShield Act 

of 2003 and then working in concert with them on BioShield Act of 

2004, and I found that an exceedingly rewarding experience. You have a 

very dedicated staff on that, and sir, I give my compliments. It has been 

delightful to work with them, although we, at times, had differing views 

on certain issues. 

 Nevertheless, I find myself today in this position on the other side of 

the table, faced with a very challenging position as we prepare U.S. 

forces for both action on the battlefield and being prepared to operate in 

a potentially contaminated environment, contaminated by chemical and 

biological agents, and also from the standpoint from the ability of that 

force to operate in support of homeland defense and homeland security. 

 The Assistant to the Secretary of Defense for NCB programs, as I 

indicated, serves as the focal point for overseeing the Department’s 

chemical and biological defense research, development, and acquisition. 

In preparation of the fiscal year 2007 President’s budget submission of 

approximately $1.5 billion for this program, a process was used which 

ensures that the Department’s efforts in CBRN, chemical, biological, 

radiological, and nuclear defense, are closely aligned with strategic 

guidance and are driven by operational requirements rather than being 
13

driven specifically by technological approaches. A major aspect of the 

planning phase, following from the National Military Strategy and the 

National Security Strategy, is a joint capabilities development process. 

That approach to planning serves to focus attention on the requirement 

capabilities, while providing guidance to fit programs within the 

resources available, and to meet defense goals. A top priority is given to 

dissuading, deterring, and defeating those who seek to harm the United 

States directly, including those extremist individuals or organizations 

that may possess and employ weapons of mass destruction. 

 The current strategy emphasizes a capabilities-based approach rather 

than the approach in the past, which provided greater emphasis on 

prioritizing threat agents and targeting budgetary resources based on 

validated intelligence. You may remember that the law was changed a 

couple of years ago to get away from the fact that we could only focus 

the Chemical and Biological Defense Program against validated threat 

agents. Because of the developments in medical technology, the 

potential threat posed by bioengineered threats, that law was widened to 

permit the program to concentrate on almost anything that could be out 

there, but to do it in a very measured manner. 

 Key capabilities within the Chemical and Biological Defense 

Program are structured within the operational elements of sense. That is, 

remote sensing standoff detection and identification systems; shape, 

battle space management, including modeling and simulation and the 

communication and decision systems that enable the commander to make 

appropriate responses and plans; shield, collective, and individual 

protection and preventative medicines, such as vaccine; and sustain 

capabilities for decontamination and medical diagnostics and 

therapeutics. As a supplement to this joint capabilities development 

process, the Secretary of Defense has provided direction to enhance the 

overall chemical and biological defense posture. A major element 

coming out of the Quadrennial Defense Review is the establishment of a 

program called Green Line, nickname, or Transformational Medical 

Technology Initiative, that is aimed specifically at attacking the threat of 

bioengineered diseases, bioengineered agents. Approximately $1.5 

billion over the future years defense plan has been allocated to that. That 

program is in source selection at this point and is being closely 

coordinated with what is going on within Health and Human Services 

and Homeland Security, and we will be able to say more about that in 

detail after the source selection process is completed in about another 

month or so. 

 It is a challenging program that faces us. It is closely coordinated 

with the efforts of the Departments of Health and Human Services and 

with the Department of Homeland Security, and it also does address what 
14

is going on in the BioShield Program. One of the features of the defense 

BioShield legislation, when we did that in 2003, was to emphasize to the 

Secretary of Defense the necessity of coordinating closely with Health 

and Human Services and with Homeland Security in the development of 

the overall research and development programs and acquisition programs 

so in fact the Department of Defense would be able to leverage their 

efforts and vice versa. That work is ongoing. We can get into that in the 

question and answer period, if you so desire. And it is again a pleasure 

to be here and I look forward to your questions. 

 MR. DEAL. I thank you. We will start the questioning at this time. 

Mr. Azar, I understand that under Project BioShield, the Department of 

Homeland Security has a role in determining material threats and the 

Department of Defense has its own program, that has just been outlined 

by Mr. Reed, to address chemical, biological, radiological and nuclear 

threats. But it seems to me that HHS has the most expertise with respect 

to medical and health issues and emerging threats, the Department of 

Homeland Security has expertise on terrorism as a threat. Would you 

explain to us how these responsibilities have been working? And would 

it make more sense if HHS was allowed to determine the medical aspects 

of what constitutes a material threat, and how does DOD threat 

assessment process work in relation to the material threat process? 

 MR. AZAR. Thank you, Mr. Chairman. In terms of the Department 

of Homeland Security’s material threat assessment and determination 

process, they play a very critical role in this process. We at HHS, we 

know health, but we don’t know the threats that our Nation faces. We 

aren’t an intelligence agency, and what DHS has the ability to do is to 

pull together all the strands of information in the intelligence community 

and assess across the broad spectrum the threats and help prioritize them 

for making those material threat assessments and determinations. We 

certainly assist them in that process by providing our health expertise. 

They have their own, but we also provide that, as do the health experts 

within the intelligence community. So I am quite satisfied that the health 

expertise input happens and gets into that process. But it is important for 

an agency like DHS, that has the ability to pull all of the different strands 

of intelligence into it and compare threats, to make those material threat 

determinations. And then we, of course, under the Project BioShield 

statute, Secretary Leavitt have to also make a determination that the 

acquisition is necessary for the public health. And so this gets 

coordinated also through these interagency weapons of mass destruction 

subcommittee. That is where really a highly technical qualified expert 

body of individuals drives the engine of this process. 

 MR. DEAL. Mr. Reed, do you agree and would you comment further 

on that coordination? 
15

 MR. REED. If I may. As it happens, and it wasn’t done with a 

forethought with respect to today’s hearing, but coming out of the 

meetings of the Weapons of Mass Destruction Medical Countermeasures 

Subcommittee last week, was a meeting at the action officer level of 

Department of Defense Health Affairs, my office, the Department of 

Health and Human Services, and the Department of Homeland Security, 

to address specifically this area. You know, coming back into the 

Department, even though I watched the program very closely from my 

vantage point on the House Armed Services Committee, to look afresh at 

the overall threat to our military forces. 

 But now, in the broader context of homeland security as well, we 

met with the Defense Intelligence Agency, began to discuss the sorts of 

issues that needed to be looked at in terms of near-term threats and a 

near-term assessment of that, extending on perhaps to something as long 

term, a year, perhaps a year-plus, of development of a new national 

intelligence estimate on the part of the DIA. Now that will need to be 

something that represents the entire intelligence community as it comes 

forward, and we are just making, really, the first steps in that, to begin to 

update what is there right now. The threat is changing, there is no 

question about that, and we need to have our eyes open as we approach 

that. 

 MR. DEAL. Mr. Azar, under Project BioShield, the Secretary of the 

Department of Homeland Security, in consultation with the Secretary of 

HHS, is charged with assessing current and emerging threats of 

chemical, biological, radiological, and nuclear agents, and determines 

which of these agents present a material threat against the United States 

population sufficient to affect national security. What I would like to 

know, because we have had a lot of testimony on this issue, is if the 

H5N1 virus, or pandemic flu in general, fits under this definition, and if 

it doesn’t, would you explain why it doesn’t? 

 MR. AZAR. Mr. Chairman, as you know, $5.6 billion is in the 

Special Reserve Fund for Project BioShield, and that is a lot of money. 

But in the scheme of developing medical countermeasures and drugs and 

devices that would be used for chemical, biological, radiological, and 

nuclear incidents, it is not an infinite supply of money. That is why this 

threat analysis that has to occur by DHS becomes so important that it is 

intentional, that if we expand beyond intentional threats, those harms, we 

could rapidly dissipate that limited amount of money that we need for the 

very real intentional threats against our country out of that. Now, when 

it has come to issues like pandemic influenza, we thank you and other 

Members of Congress for the strong support you have given when we 

have had naturally occurring threats. Coming to Congress and working 

with you to get the first year of the President’s requested funding on 
16

pandemic avian influenza to respond to that threat, as you know, that 

only, pandemic influenza preparedness alone would have evacuated the 

Special Reserve Fund here, just as one example. So I think both are 

critical, but I do think it is important to keep, in this context of BioShield 

acquisition, those two separate. Now, if we talk advanced research and 

development, certainly there is an important role that we ought to be 

playing, and I think we ought to be doing a better job of supporting 

advanced R and D for both the intentional threats and the naturally 

occurring threats. 

 MR. DEAL. I take it that the policy answer is that it does not fit the 

definition. Could I ask you, if you would, to have legal counsel within 

HHS to answer the question as to whether it meets the legal definition or 

not? 

 MR. AZAR. Yes, sir, absolutely. We will get back to you on that. 

 MR. DEAL. Okay. And my time is expired. Mr. Pallone. 

 MR. PALLONE. Thank you, Mr. Chairman. Mr. Azar, I wanted to 

ask you some questions about this liability language and then also about 

the wild card patent extension. As you know, the fiscal year 2006 DOD 

appropriations conference report contained liability language that was 

not part of either the House or Senate-passed appropriation bills. But 

first, I would like to know if you or anyone in your department was 

involved in drafting or reviewing or providing technical assistance, 

policy advice, or in any other way was involved in the development of 

the language that found itself in that DOD appropriations conference 

report. 

 MR. AZAR. Congressman, yes, we were involved in providing 

technical assistance on the drafting of that and trying to provide the best 

advice. This is a process driven by Congress, but it was something the 

President had asked for, and said that as part of pandemic influenza 

preparedness, a critical element of being able to get manufacturers to 

produce the products that we need was removing the liability barrier. So 

this was very much a centerpiece, a sine qua non of moving towards 

pandemic preparedness. 

 MR. PALLONE. All right. Then, in the same line, I mean, obviously, 

you are familiar with the liability language. Can you provide us with 

your views on the substantive merits of that language in the conference 

report and specifically, does it, in your view, take complete care of all 

legitimate liability concerns of the Administration, in terms of attracting 

private sector participation in BioShield, or do you think further changes 

are either necessary or desirable? 

 MR. AZAR. As we were working on developing the pandemic plan, 

the President’s plan, he, the Secretary, and others met with those who we 

needed to work with on developing the type of countermeasures, the 
17

vaccines, the antivirals, in this area and the vaccine industry came to us 

and it was quite clear, in our own experience demonstrated this, that 

there were several barriers, one of which was liability. And we believe 

that the language that was produced here should remove the hurdle of 

liability in terms of moving forward here. Obviously, industry will end 

up providing its perspective, but we believe that this should resolve the 

liability concerns that we had heard about in the process, and plan to be 

moving forward on the pandemic acquisitions on that basis. 

 MR. PALLONE. Now, what about whether or not you think any 

further changes are necessary or desirable to attract private sector 

participation in BioShield, beyond the liability provision? 

 MR. AZAR. Well, on the separate issue of BioShield, we do believe 

that some of the proposals that are currently being put forward, Senator 

Burr has been very active on the Senate side with a package of 

legislation that really goes in the right direction in terms of focusing 

attention this period on advanced research and development. There is the 

earlier stage of basis primary research that NIH does, and then there is 

Project BioShield, which is about acquiring products that are already 

ready to put into the stockpile. But there is this hurdle between those 

two, of advanced research and development, where we do believe there 

needs to be this type of collaborative working with industry, incubating 

that along, providing funding in partnership with industry to remove 

some of the risk of the very risky development. That is why we have 

requested the $160 million in the 2007 budget for that, and that is why 

part of the pandemic plan has significant advanced R and D funding on, 

for instance, agetent research, next generation antivirals, on advanced R 

and D to deal with that interim period. 

 MR. PALLONE. Well, let me just ask one other thing. You know, the 

liability language only mentions compensation for persons who are 

injured by a covered countermeasure. Do you have any intention to 

submit any kind of legislative language for a compensation program? I 

mean, would you support some sort of compensation program for people 

who are injured? 

 MR. AZAR. The hurdle and the issue that we were trying to, and had 

to, overcome to be able to move forward and make the money that 

Congress appropriated useful was the liability concern, getting the 

manufacturers to actually be willing to produce the products, to test the 

products and allow us to acquire them. Compensation is an issue that, as 

we move along, we would be happy to work with Congress on and talk 

about. It is not the hurdle towards the development and-- 

 MR. PALLONE. But you don’t have a specific compensation program 

that you are thinking about or funding for at this point? 

 MR. AZAR. No, sir. 
18

 MR. PALLONE. Okay. I wanted to ask about the wild card patent 

extension. I only have a couple of minutes here, Mr. Chairman. You 

know, I am concerned, as I said before, about providing incentives at the 

expense of the American public and U.S. health care. I mean, I think this 

is the type of thing that the pharmaceuticals industry could simply take 

advantage of. So I guess my question really would be do you want to 

comment on that at all, on this wild-card patent extension? I mean I am 

obviously critical of it. I think that it has the potential to just provide, 

you know, some kind of windfall for the industry. 

 MR. AZAR. We do not have any views established on the issue of 

this wild card separately. We do agree with you, as you said in your 

opening statement, that we do need to focus on the incentives for getting 

businesses into the Project BioShield CBRN countermeasures industry. 

It is a very risky industry. We are the only purchaser for most of these 

products. It is an uncertain market, and that is why a lot of what we want 

to do is make ourselves a better business partner as we move forward on 

implementing Project BioShield, in terms of transparency, in terms of 

predictability. We really want to move that focus forward and so that is 

where the focus of-- 

 MR. PALLONE. You don’t have a position on that? 

 MR. AZAR. No, we don’t. 

 MR. PALLONE. All right, thank you, Mr. Chairman, for the extra 

time. 

 MR. DEAL. You are welcome. Ms. Myrick, you are recognized for 

questions. 

 MS. MYRICK. You asked the question I had. 

 MR. DEAL. All right. Mr. Shimkus is next. 

 MR. SHIMKUS. Thank you, Mr. Chairman. Secretary Azar, we seem 

to have two camps with separate priorities on how money should be 

spent on this issue. Some believe we should spend money procuring 

vaccines that are readily available, and the others believe we should 

spend money to develop future vaccines. How do we bridge the gap on 

this conflict and what is the Administration’s priority? 

 MR. AZAR. Congressman, thank you for that question. It is a 

difficult issue and this is where this relying on the scientific experts and 

technical experts that are out there, whether it is the Institute of Medicine 

providing advice or the Interagency Subcommittee of Medical 

Countermeasures, that brings together the real technical experts from the 

Defense Department, from the Office of Science Technology Policy, 

from DHS, from HHS. That is where, frankly, we need to rely on the 

scientists to decide and to provide us with the recommendations. Is 

current technology good enough on a certain product, or are we at the 

time where we need to start pushing forward in developing that next 
19

generation technology? And so these are not easy issues. They are 

science-based, they are technical issues, and that is why getting as much 

input as we can, I think, is very critical. 

 MR. SHIMKUS. From the public policy arena, and just following up, 

obviously, this is real appropriated dollars, real money. And then, in the 

event of an attack, if we are not prepared, here is the dilemma: we either 

have the vaccines or we don’t. The public is not going to understand our 

decision not to have readily accessible vaccines, when we say, well, we 

were preparing for the next case down the line. I am not sure if I should 

let you off the hook that easy. I mean, we are looking for some help in 

reconciling this and, Mr. Chairman, I don’t know what the answer is. 

 MR. AZAR. Congressman, sometimes, depending on the nature of 

the product, some vaccines are pre-event and it would depend on the 

nature of the threat assessment of an event occurring and the populations 

that would be hit by it in terms of what size, for instance, you might need 

to have in your stockpile. Other vaccines, perhaps, could be of 

assistance in a post-exposure context and it would depend on the product 

and whether there has been clinical evidence, scientific studies, and FDA 

approval of post-exposure administration of certain vaccines, whether 

they might be beneficial. 

 MR. SHIMKUS. And if I may, prior to shelf life, too? Probably some 

of these might expire. You buy a whole bunch and nothing happens and 

they you throw it out. 

 MR. AZAR. Right. And as we mentioned earlier, $5.6 billion is a lot 

of money, but it is not indefinite amount of money and so it does require 

a balance between current acquisitions and new acquisitions. And the 

core, at least my understanding of Project BioShield, is to not just 

acquire for the stockpile. We have the strategic national stockpile for 

buying products, generally, already on the market. One of the core 

purposes of Project BioShield was really to incent, drive, and build the 

markets for those next generation countermeasures, and I do think it is 

important, as we implement that, to keep our eye on that ball of incenting 

and building those markets as the only purchaser or they will never 

develop. 

 MR. SHIMKUS. Well, let me move to Mr. Reed. Mr. Reed, when you 

contract with private entities to develop products, how are issues of 

liability and ultimate purchase of those products usually handled? 

 MR. REED. Congressman, the DOD does provide indemnification 

for liability issues related to immunization of military personnel, and 

with respect to the relationship with industry, those are normally 

negotiated as a part of the contract. I would like to provide, however, a 

reply for the record on that, because we are three months on board and 

about a half an inch deep in this area right now. 
20

 MR. SHIMKUS. I am sure the Chairman would appreciate seeing that, 

so we will readily accept it. 

 MR. REED. Yes, we will. 

 MR. SHIMKUS. And, Mr. Chairman, that is all I have right now. I 

yield back. 

 MR. DEAL. I thank the gentleman. Ms. Eshoo, you are recognized. 

 MS. ESHOO. Thank you, Mr. Chairman, first of all, for holding this 

important hearing on the process of reexamining bioterrorism and public 

health security, and a warm welcome to the panelists today and thank 

you for your public service. I am sorry I wasn’t here to make my 

opening statement which, of course, will be placed in the record. I also 

want to recognize that a very distinguished constituent of mine is going 

to be testifying on the next panel, Bruce Cohen, and he is the CEO of 

Cellerant Therapeutics. I am very pleased and grateful that he would 

come across the country to share with us his views today, and thank you, 

Mr. Chairman, for allowing him to testify. 

 Let me ask this. I want to echo some of the concerns that 

Congressman Shimkus just touched on in his time with you. Now, it is 

my understanding that what the Congress appropriated in 2002, $5.6 

billion, correct? 

 MR. AZAR. Yes, ma’am. 

 MS. ESHOO. Correct. How much do we have left now of the 5.6. 

 MR. AZAR. We have obligated about $1.089 billion so far out of that 

fund. 

 MS. ESHOO. All right. Well, I think the most important issue with 

BioShield, I mean, there are so many facets to this, so I don’t want to 

give short shrift to anything or diminish in any way, shape or form, but I 

think the most important issue, relative to the criticisms of BioShield, is 

whether we are doing all we can to develop the countermeasures as 

quickly as we can. And how do you step up to that, either, what is 

perceived or real in terms of the concern, and what can we do to improve 

it? This is no doubt, no doubt in my mind, and I think in the entirety of 

the Congress and the American people would chime in, that the threat of 

a terrorist attack, whether it is biological or chemical or nuclear weapons, 

I mean, God help us all, and our top responsibility is to secure the 

American people. So while $5.6 billion is something that I don’t think 

any of us will ever have in our checking accounts, it was a good start in 

terms of a very serious commitment of the Congress to address this. So 

maybe you can both enlighten all of us about where we are right now. 

 MR. AZAR. Congresswoman, I think you are right. We have made 

great progress so far in the first 20 months of implementing BioShield. 

We have had four material threat assessment determinations; anthrax, 

smallpox, botulinum toxin, and radiological/nuclear agents, that we have 
21

been dealing with. We have had eight procurement processes underway, 

but there is much more that we can do to make this process more 

efficient, faster and better for-- 

 MS. ESHOO. So when you say that the procurements have been 

made, this is what is presently stockpiled? 

 MR. AZAR. There are four procurements that have been made. 

Some are in process of delivery. Some have been delivered into the 

stockpile. Some are being made. And then we have open procurements 

right now that are still pending decision. 

 MS. ESHOO. Of the procurements that have been made, what 

percentage is stockpiled? 

 MR. AZAR. If I could just go through the ones that have been made 

in terms of the stockpile, the anthrax vaccine absorbed, the first of the 

five million doses has been delivered to the stockpile. The pediatric 

potassium iodide, the first 1.7 million one-ounce bottles, has been 

delivered to the stockpile. And then on the-- 

 MS. ESHOO. Is that the entire order? 

 MR. AZAR. There has been a contract option exercised in February 

of 2006 for additional pediatric liquid potassium iodide and that is still 

pending delivery. And then we have the chelating agent DTPA, a 

radiological/nuclear product and that, to my understanding has been 

delivered. That is correct, I am told. But we need to speed up this 

process. What we need to do in terms of our efforts is first, we have got 

to develop a broad strategic plan here on moving forward. Instead of 

individual material threat assessments-- 

 MS. ESHOO. So this is not part of our plan? 

 MR. AZAR. No, these are, in a sense, low hanging fruit assessments, 

in that we know these are threats, but what we need to do is an integrated 

strategic plan that pulls together the broad range of threats. And we need 

to do this in as transparent a way as possible. For that reason, later this 

year, we are going to convene all stakeholders in this, and as the process 

of developing an integrated strategic plan on using the rest of the money-

- 

 MS. ESHOO. Well, what I am a little disappointed in, with all due 

respect, is that these dollars were appropriated in 2004, as I understand it. 

 MR. AZAR. I believe 2004, ma’am. 

 MS. ESHOO. All right. Well, you know, there is an important nexus, 

at least in my view, and I think others, probably yours, that scientific 

discoveries and the dollars that drive them are twins. I mean, it is an 

explicable set of bookends. And what I am concerned about is you have 

spoken to the low-hanging fruit, that is important, and there has to be an 

important timeframe around all of this when the dollars get out there in 

order to push the discoveries that are needed that will then find their way 
22

to the stockpile. And I think that that is something that we need to have 

more knowledge about. Is this what your plan is being directed toward, 

and do you have in mind what percent of this budget you are going to 

dedicate to that? 

 MR. AZAR. The idea on doing a strategic plan like this that is public 

is that it will also streamline the procurement process. If you can front 

load as much of the decision making about that we ought to procure 

certain products, that they fit into the strategic plan, and you make that 

public, it creates greater predictability for industry about the areas that 

we are going in and the types of quantities that we are looking at so that 

we can be a better business partner with them and then streamline this 

interagency process and decision making. So I think this is all very 

important and constructive. 

 MS. ESHOO. But when do you anticipate this plan, not only to begin, 

but do you have a timeframe for it that you anticipate when the plan will 

be done? 

 MR. AZAR. We are beginning, obviously, it is not beginning now, 

but this has been getting worked on. Later this year is when we will have 

the public engagement with it to make sure that we aren’t missing things 

in the plan, that the stakeholders are bought into it, then sometime soon 

thereafter is when it would be finalized. 

 MR. DEAL. The gentlelady’s time has expired. 

 MS. ESHOO. Thank you, Mr. Chairman. 

 MR. DEAL. Dr. Burgess, you are recognized for questions. 

 MR. BURGESS. Thank you, Mr. Chairman. Secretary Azar, in 

response to one of Mr. Pallone’s questions about liability, you spoke 

about the industry’s response to liability protection. Can you expound on 

that just a little bit? How has industry responded to the fact that some 

liability protection has been built into the legislative language? Do we 

need to do more? Are there areas in the rulemaking process that are 

going to need attention? Where are we with that? Is industry 

comfortable with what we have done? 

 MR. AZAR. My understanding from what I have been hearing from 

industry and from the process is that, yes, they are comfortable with what 

has been done. We have obviously not yet exercised the prep act liability 

protections in our procurements. We will be moving forward clearly in 

the context of the pandemic implementation of doing that, but I have not 

personally heard any concerns that the liability protections that were 

implemented by Congress are not adequate. We are working forward on 

the regulatory development process. Congress commissioned us to do 

some definitional work with the Justice Department and that process is 

moving forward on just laying out that architecture. 
23

 MR. BURGESS. Is that regarding things like potential antitrust 

violations if industry talks amongst itself? 

 MR. AZAR. If I remember correctly, that is about providing some 

definitions of the willful misconduct exception, laying out and fleshing 

out what that exception is. 

 MR. BURGESS. To follow up on what Ms. Eshoo was asking you, do 

you think we are doing a good job of providing that platform of 

predictability for industry from all areas, from a liability standpoint, from 

a regulatory standpoint? Is private industry going to be our partner in 

this? 

 MR. AZAR. Well, that is our goal and I think that the liability 

protections were a major advance. I believe the administrative changes 

that we are working towards in terms of a transparent strategic plan up 

front are a major, major move forward. I believe that the effort of the 

Administration and of some of the work in Congress towards funding 

and pushing towards advanced research and development will really 

enhance that concept of us working in partnership on developing these 

products and helping to remove some of the scientific and business risk 

on developing these types of products, also. 

 MR. BURGESS. And when can we in Congress and we on this 

committee, expect to hear about some of the comfort with scientific and 

business risk so that we can be comforted and in turn project that feeling 

of confidence to our constituents? 

 MR. AZAR. Well, I think some of it is the $160 million that is in the 

President’s fiscal year 2007 budget for this advanced research and 

development, getting that passed and start to implement. That will be a 

critical step. We have the money on pandemic influenza advanced 

research and development that we are moving forward on implementing. 

And so I think, in the pandemic influenza context, we should very soon 

start to get the feedback on is this type of advanced research and 

development approach. And so I think it is going to be an iterative 

process over the next several months of learning from the feedback, is 

this working, and is this providing the right incentives. 

 MR. BURGESS. Well, I would point that Mr. Shimkus correctly 

pointed out that the public doesn’t have yet general confidence, and 

doesn’t understand why we don’t have protection from the pandemic flu. 

And I would further submit that the public doesn’t understand why they 

don’t have protection from the regular seasonal flu every year, from 

which 15,000 to 30,000 people die. So it is a real concern out there 

amongst the people we represent, and I will just tell you that it is a real 

concern of mine here in Congress. I guess one of the other things, and I 

don’t know whether this falls under your jurisdiction or not, but what 

about the distributive networks that are out there in the event of a 
24

pandemic. How comfortable do you feel about where we are with 

developing those things? 

 MR. AZAR. We still have a long way to go on ensuring that State 

and local distribution plans really will line up. The Secretary and I have 

been traveling around to all 50 States with the Governors hosting the 

pandemic flu summits. And one of the key messages there is, we can 

have everything in the stockpile, but it is not going to do any good if it 

can’t effectively be distributed. This is an area where the Federal 

government has a role, but the dominant role on distributing 

pharmaceuticals or vaccines is going to be through the State and local 

arenas, and we are working with them on plans. We have the Cities 

Readiness Initiative that this committee has been very involved in to 

enhance the capability in the larger cities of how do you get drugs and 

vaccines to people in the right period of time. So this remains a major 

challenge, is the distribution. 

 MR. BURGESS. Sure, and Mr. Shimkus just pointed out to me that it 

would be a major concern if it were eliminated in, say, a devastating 

event such as a Katrina or an earthquake. For that reason, I would just 

point out that north-central Texas is very stable. We have no hurricanes. 

We have no earthquakes. Occasional dust storms. I will yield back, Mr. 

Chairman. 

 MR. DEAL. I thank the gentleman. Ms. Cubin, you are recognized 

for questions. 

 MRS. CUBIN. Thank you, Mr. Chairman. I also want to thank you 

for calling this hearing today. I would like to start by questioning 

Deputy Secretary Azar. Does the Administration’s BioShield portfolio 

include naturally occurring infectious diseases? The reason I ask that is 

because given the threat that is posed by drug-resistant diseases and 

infections, it seems that those threats should qualify as threats to national 

security. 

 MR. AZAR. The threat from drug-resistant bacteria is real. It is 

important, and we have to be very concerned about the antibiotic pipeline 

out there. We have to work together with industry to try to make sure 

that the FDA regulatory process is--this is where the Critical Path 

Initiative at FDA becomes so important to try to help that pipeline along-

-streamline for approval to minimize as much as possible, consistent with 

safety and efficacy, that process. It is where the advanced research and 

development that we do, and the primary research at NIH, we have focus 

on this, and then this new effort towards advanced research and 

development, where we can lend a helping hand on these types of 

naturally occurring infectious agents. The concern that we have is with 

Project BioShield itself, $5.6 billion dollars is a lot of money to anyone, 

but to a pharmaceutical company, and when thinking about developing 
25

these types of chemical, biological, radiological/nuclear threat 

countermeasures, spread around, it doesn’t end up being an infinite 

amount of money. So we have got to prioritize there on the intentional 

threats. There is a marketplace for antibiotics out there. We need to help 

encourage it along, and do what we can on primary research and 

advanced research and development. But unlike the BioShield products, 

there is a marketplace out there for buying these, if we can just help push 

them along to help get them developed. 

 MRS. CUBIN. Right. And do you think that should be part of the 

BioShield format, if you will? 

 MR. AZAR. I don’t think-- 

 MRS. CUBIN. The pushing along of pharmaceutical companies. 

 MR. AZAR. The BioShield element itself is limited to simply 

procuring into the strategic national stockpile. It is about buying 

products that are ready for licensure. The non-BioShield elements, the 

primary research at NIH, the advanced research and development that 

might be out of it, it is not really BioShield itself. I do believe these are 

areas that, yes, we ought to be focused on naturally occurring areas. For 

instance, with pandemic, I believe it is $350 million in the 2006 money 

that Congress appropriated, is precisely going to this type of naturally 

occurring advanced research and development for agivents that could 

help do dose structuring on the H5N1 vaccine, and also for that next 

generation of antiviral drugs, precisely the area you are talking about. 

 MRS. CUBIN. But if there is not help from the Government, the 

market is simply not good for antibiotics. Antibiotics, as you know, are 

drugs that are taken for a very limited amount of time, and the bottom 

line for a pharmaceutical company simply isn’t there to develop new 

antibiotics. So while I am not saying that necessarily all the money for 

research should come from NIH, obviously, the pharmaceutical 

companies have to have a role in that, but I just think that it ought to be 

identified as a national security problem. Because, in fact, I think the 

next panel of witnesses will prove, if you will, that it is a national 

security problem. And I also think that if we find a pathway to being 

able to deal with these naturally occurring infections and diseases that 

are getting ahead of us now, that that would be a good blueprint to use 

for any sort of biological attack that could occur to us, which would fit 

exactly into your area. Could you describe what types of support HHS 

provides to smaller firms that do not have adequate funds to follow 

through in Phase III clinical trials? 

 MR. AZAR. Well, and that is an excellent question because that is 

exactly the type of support, that clinical trial support, advanced research 

and development support that we are asking for $160 million in the 2007, 

where we could really team with and seed that process along, because it 
26

is very expensive, there is often a very high failure rate there for small 

entities. In particular, it is difficult or impossible for them to absorb all 

of that cost, and we can share in that risk. I think you have put your 

finger exactly on the construct of advanced research and development, an 

area we are getting increasing experience in through pandemic influenza 

preparedness with the money Congress already has given us and we are 

implementing, and then the $160 million that we have asked for. This 

would be the area in the CBRN context for doing precisely that. I think 

it has been highlighted as a very important issue. Thank you. 

 MRS. CUBIN. To just go back to the antibiotic situation. What we 

have been talking about so far is just one incentive for development of 

new antibiotics, but we need a series of incentives to develop new 

antibiotics. We need tax credits, patent extensions, FDA-expedited 

review, plus other things that maybe aren’t even on the table yet. And 

once again, I think that that should be included in HHS’s overall plan for 

the country. I just have one other questions, if you wouldn’t mind, Mr. 

Chairman. What consideration is given to rural areas in formulating 

countermeasure distribution plans in the event of a bioterror attack? 

State and local healthcare systems vary from region to region, and in 

rural areas, in particular, there is a lack of providers. Has any special 

attention been given to rural care areas? 

 MR. AZAR. As we have been working with the States on their 

distribution plans, especially in the pandemic context, we have been 

focusing the States’ energy on developing distribution plans which, of 

course, for them is statewide. So it is really in their hands on developing 

those comprehensive plans. What we have been providing through the 

Cities Readiness Initiative is a separate program to focus some of the 

extra energies on the complexities of major metropolitan area 

distribution challenges that we would have, where you have high 

concentration of individuals. And hopefully, as we learn best practices 

through that focus and maybe even come up with new better ways of 

distributing medicines, a tremendous challenge, those will become 

broadly applicable lessons learned that we can help spread around 

throughout the country. But I think you are right, we need to keep the 

focus, but distributing countermeasures is a nationwide issue. 

 MRS. CUBIN. Thank you and will you keep in mind that cities of 

population over 50,000, there are only two cities in the entire State of 

Wyoming, a hundred thousand square miles, so there are special needs 

out there in rural America. Thank you, Mr. Chairman. 

 MR. DEAL. Mr. Rogers is recognized for questions. 

 MR. ROGERS. Thank you, Mr. Chairman. I just want to follow up 

on Mrs. Cubin’s question for a minute. That $160 million you talked 
27

about, Mr. Secretary, is that outside of BioShield for advancing drugs, 

getting them through trials in that? 

 MR. AZAR. Yes, sir, that is a new money request as part of the 2007 

budget, $160 million for advanced research and development. Yes, sir. 

 MR. ROGERS. And for naturally occurring. So it wouldn’t have the 

same target set, maybe, as a BioShield-- 

 MR. AZAR. No, that $160 million is actually focused on chemical, 

bio, and radiological/nuclear advanced research and development. It is 

meant to be in league with the implementation of the BioShield 

purchasing. It is part of the pulling effort there to get these products 

closer to the BioShield contracting point. 

 MR. ROGERS. And just for my own education, how much of the 

money have you spent that has been allocated for BioShield in 2004? 

 MR. AZAR. We have obligated, so far, $1.089 billion out of the $5.6 

billion Special Reserve Fund. Now, of course, we do have, I believe, 

four open pending procurements going on right now that would, if they 

end up in awards, would result in additional obligations of amounts 

within that. 

 MR. ROGERS. Okay, so you are asking for $160 million more. You 

haven’t spent all the money since 2004, because I want to make sure I 

understand that. I won’t get into that. My time is short, but I just want to 

make sure I understand that. You made a statement earlier, and I am 

confused, because I caught earlier testimony briefly, so please correct me 

if I am wrong here. But you said that BioShield, when you were 

answering Mrs. Cubin, was about procurement and stockpiling and 

buying product that is ready for licensure. If not a direct quote, that is 

pretty close. Is that correct? 

 MR. ROGERS. Well, obviously, under BioShield, the products that 

we acquire, I believe, at the time that we accept them for delivery, they 

need to be on a track towards final approval by FDA within eight years. 

So these are products that eventually would need to be on the pathway 

towards licensure under the BioShield Act. 

 MR. ROGERS. Okay. Now, is single sourcing of vaccines a good 

idea? 

 MR. AZAR. By single sourcing, do you mean-- 

 MR. ROGERS. Sole source, that is it. 

 MR. AZAR. Sole source contracting? 

 MR. ROGERS. Yes. 

 MR. AZAR. Sole source contracting, where there has been no fair 

and open competition, it would obviously depend on the nature of the 

market, and that is where we do a request for information to learn about 

are there even other players in the field. Of the four procurements that 

we have done under Project BioShield, three of them have been what are 
28

called sole source or justification without full and open competition. We 

have had one procurement, which has been the RPA anthrax vaccine 

procurement, which was done with full and open competition under the 

Federal acquisition regulations. 

 MR. ROGERS. Okay, my question is about, is it good policy to have 

sole source in vaccines when it comes to bioterrorism? Let me back up. 

I thought the President was almost visionary when he proposed 

BioShield. He laid out a niche of a future threat, of which, over time and 

budget constraints, can get pulled a lot of different ways. And he sat 

down and said, you know what, this is a real threat that is only going to 

get worse and we better do it today. And one of the things, as I 

understand your testimony, is you want to try to expand and we want to 

take advantage of innovation, and innovation solely happens in sole 

source contracts. You can’t point to too many places in history where 

sole sourcing of any particular item leads to innovation benefits. As a 

matter of fact, I would argue that it degrades innovation in that particular 

area of research. So my understanding of BioShield was to stockpile, 

which you said that is correct, procurement of something that is likely to 

be licensured, and according to this $160 million, is to try to find new 

sources, advancements, and innovation in the field, is that correct? 

 MR. AZAR. Of course the $160 million is not part of the BioShield. 

That is-- 

 MR. ROGERS. But you just said a minute ago that it would target 

some of the vaccines. 

 MR. AZAR. Oh yes, it is targeting towards bridging the gap between 

primary research and actual acquisition. I think-- 

 MR. ROGERS. And bridging is a good idea, don’t you think? 

 MR. AZAR. Absolutely. 

 MR. ROGERS. Good. I want go through just a series of events here 

that have frustrated me beyond recognition, and I still can’t figure out if 

this is bureaucratic bungling at its best, just lack of interest in what 

Congress intends, or mismanagement. I can’t tell. On April 20 of 2005, 

myself, Congressman Dingell, Congressman Stupak and Congressman 

Upton contacted HHS and the Secretary. We expressed concern over the 

delay of the Department of acquiring a national stockpile for postexposure and pre-exposure use of FDA licensed anthrax vaccine. Now, 

they responded back. It took a little longer than we wanted, and said, no, 

we are going to go ahead and do that, because bridging is important. I 

think multi-source, bridging, all important stuff, I think, in this. That 

was April 20 of 2005. On August 4, we contacted the Secretary’s office 

again, Stewart Simonson, regarding a similar purchase of this vaccine, in 

correlation with the previous letter in conjunction with Mr. Dingell and 

Mr. Stupak and myself, and they again assured us that this was going to 
29

happen. Fall 2005, I had a phone conversation with the Secretary on the 

progress on the order of those five million additional doses and the 

commitment was, at that time, he told me it was moving forward and 

would be done. January 12, 2006, February 15, 2006. March 8, the 

testimony, the Secretary himself said, let us see, “buy the other five 

million doses and that we authorized it about a week-and-a-half ago.” 

March 24, I won’t get into that. 

 But as of today, there has been no contracting movement at all, and 

my argument here is this, and I use this, obviously, because I have 

probably the most knowledge about this particular area of BioShield, but 

if this is the way we are operating, it makes complete sense to me that 

you don’t have a strategic plan two years after you have almost $6 

billion. That is a fundamental failure to the American people, if you ask 

me. You are talking about right now setting up a plan, and this is the 

kind of thing that can exactly happen. Obviously, the concern was 

enough that you said we need 75 million doses to protect America; good 

idea. And I am all for new technology. This is recombinant, great. That 

is fine. That is a wonderful thing. But how many do we have in our 

stockpile now? Not even close and they have just again asked for an 

extension. So my argument is it makes no sense to me that you say you 

are going to do it. You don’t do it almost a year later. Either you guys 

don’t know what you are doing--I mean, help me out here. Help me 

understand why this is such a big issue and a big problem. 

 MR. AZAR. As you know, the issue here is between two types of 

anthrax vaccine. There is the old anthrax vaccine absorbed, the AVA 

vaccine, which we acquired five million doses of and received delivery 

of it completed in February of 2006, and we have an additional five 

million option on that. That is the old type of vaccine. And the Institute 

of Medicine recommended, the interagency scientific body 

recommended that we move towards the second generation of the RPA, 

the engineered vaccine, because the hope for greater consistency and 

greater characterization of the vaccine. As Secretary Leavitt said, 

exercising the additional five million there, we have stated our intention 

to exercise that additional five million, subject to the availability of 

appropriations. As you know, Congress, in Project BioShield, required 

certain approvals beyond the Secretary of HHS in order to actually 

implement contracts. We do agree that these procurement procedures 

need to be faster, more transparent, more effective, and we are working 

to try to streamline those interagency processes. That is where an 

upfront strategic plan that is adopted by everybody will allow the 

implementation of individual procurements to hopefully move much 

faster through that process. So we share the frustration of the duration 
30

that individual procurements take, and we want to work to make that 

happen more efficiently, Congressman. 

 MR. ROGERS. With your indulgence, Mr. Chairman, and I 

understand that. So this is a little bit different answer than we received 

on April 20, August 4, the fall of 2005, January 12, February: are you all 

making it up as you go along? I know you can sense my frustration here. 

 MR. AZAR. And I-- 

 MR. ROGERS. Because I have been told it is fixed, it is done, it is 

coming, don’t worry, about and I wouldn’t worry about it. I would take 

the Secretary, I would take you at your word. I am disappointed that the 

Secretary didn’t show up today. I can understand why. This is an 

abysmal performance by any standard. I wouldn’t expect that I would 

tell you that I am going to do something that many times, and if I hadn’t 

accomplished it, that you wouldn’t be absolutely irate with me. It is not 

just about me and the issue, it is a fact that we thought that there was a 

threat big enough in the United States that we are searching for new 

technology, great, 75 million doses to protect America. That continues 

to get extended. Okay, we ought be flexible enough to understand that 

we have to have bridging technology. We should have multiple source 

in case something like this happens. That was my understanding of 

BioShield to begin with. And if we are this far behind and this far off 

and this bureaucratically inept, I am very, very worried about this, and 

one of the reasons I have called for an investigation. And I was an old 

FBI agent, and I wasn’t the brightest one in the world, but this does not 

pass the smell test to me. 

 MR. AZAR. As you know, for anthrax, antibiotics are the front line 

of defense there and we have dramatically increased the stockpiles. We 

have enough antibiotics now to treat, post-exposure, I believe it is 

780,000 people, and prophalax, with a 60-day course of treatment on 

antibiotics, 40 million people. That is our frontline defense against an 

anthrax attack. No vaccine is currently licensed for post-exposure use. 

They are pre-exposure. So we have five million in the stockpile now for 

pre-exposure. That would be used for health care workers, other critical 

personnel, in terms of pre-event vaccination. It is not yet we have an 

IND, investigational new drug application, at CDC for post-exposure use 

of the existing vaccine, but it is not an approved product for that and that 

is part of, in terms of building up this next generation vaccine, part of the 

requirement there. And the contract, to my understanding, is that it 

actually be approved for post-exposure vaccination use. And so-- 

 MR. ROGERS. And which I understand the one current supplier, and 

this really isn’t about that, but they in fact have used some therapeutic--

the testing, to my understanding, was done through you folks. I guess 

my whole point is you have made this commitment, which I thought was 
31

a good one. You logically said why you want to spend the money for the 

bridge. It made a lot of sense to me. Why does it take so long? Can you 

tell me today that this is going to be fixed fairly shortly, or is this number 

eight and we will be back again soon? If you can help me out on that. 

 MR. AZAR. I cannot give you a date by which the decision making 

that is required with the joint secretarial letter of approval, and then the 

presidential determination of selection will be done. 

 MR. ROGERS. So when the Secretary authorizes it, and about a 

week-and-a-half ago, by the way, after they told us that it had already 

been done, what does that mean? 

 MR. AZAR. He is one step in the process that the BioShield statute 

set up that requires several levels of approval on any type of exercise. 

 MR. ROGERS. And that is between DOD and HHS. 

 MR. DEAL. The gentleman’s time is greatly expired here. 

 MR. ROGERS. Sure. And, Mr. Chairman, I appreciate your 

indulgence. I think this is an important issue and I think it shows a huge 

shortcoming in our effort on BioShield and this ought to scare a lot of us. 

It certainly scares me. Thank you, Mr. Chairman. 

 MR. DEAL. Gentlemen, well, thank you for your attendance and 

your testimony today and we will excuse you at this time. Thank you. 

 MR. AZAR. Thank you, Mr. Chairman. 

 MR. DEAL. I will ask Panel two if they will come to the table. 

Thank you and welcome. Let me introduce the second panel: Dr. Tara 

O’Toole, CEO and Director of the Center for Biosecurity of the 

University of Pittsburgh Medical Center; Mr. Peter F. Young, President 

and CEO of AlphaVax, Incorporated, on behalf of the Biotechnology 

Industry Organization, Mr. Bruce Cohen, President and CEO of Cellerant 

Therapeutics, Incorporated, who Ms. Eshoo alluded to earlier, I believe 

in her statements; Dr. David P. Wright, President and CEO of 

PharmAthene, and here on behalf of the Alliance for Biosecurity; and Dr. 

Martin Blaser, President of the Infectious Diseases Society of America. 

Lady and gentlemen, we are pleased to have you here. Once again, your 

written testimony is already in the record, and, Dr. O’Toole, I will start 

with you for your statement. 

STATEMENTS OF DR. TARA O’TOOLE, CEO AND DIRECTOR, 

CENTER FOR BIOSECURITY OF THE UNIVERSITY OF 

PITTSBURGH MEDICAL CENTER; PETER F. YOUNG, 

PRESIDENT AND CEO, ALPHAVAX, INC., ON BEHALF OF 

BIOTECHNOLOGY INDUSTRY ORGANIZATION; BRUCE 

COHEN, PRESIDENT AND CEO, CELLERANT 

THERAPEUTICS, INC.; DR. DAVID P. WRIGHT, 

PRESIDENT AND CEO, PHARMATHENE, ON BEHALF OF 
32

ALLIANCE FOR BIOSECURITY; AND DR. MARTIN 

BLASER, PRESIDENT, INFECTIOUS DISEASES SOCIETY 

OF AMERICA. 

 DR. O’TOOLE. I appreciate the opportunity to speak on this 

important topic. I represent the Center for Biosecurity at the University 

of Pittsburgh Medical Center. We have been working since 1998 on the 

issues of biodefense, which I know all the members of this committee 

agree are of critical importance to national security. The prior 

discussion, I think, was very interesting and illustrated both the essential 

importance of the BioShield legislation that was passed a few years ago, 

as well as the complexity of this issue. At the core of the questions about 

what do we buy, when, and how much do we buy, and what should we 

invest in technologies versus which of the existing countermeasures 

should be put in the stockpile, is a question of cost. It is my view that we 

are still, as a country, thinking about biodefense on the wrong scale. We 

are thinking about it as another health problem as opposed to a major 

national security threat. 

 BioShield was an important piece of legislation. It is a very good 

start, but it is not nearly enough money for the purpose that has to be 

served. We are off by about a magnitude of order right now. And that 

cost is going to go up as the threat of bio-weapons emerges more clearly, 

and that will include the emergence of bioengineered weapons, which are 

probably viable today. We need to recognize that the problem 

biopharma is having engaging in this process is partly about opportunity 

costs. They simply make lots more money, not just two or three times 

more money, but ten or a hundred times more money investing in stuff 

that does not have to do with infectious disease. This is true whether you 

are talking about drugs against biological weapons-induced diseases or 

drugs against naturally occurring infections. And what we are seeing is 

the biopharma industry, as a whole, fleeing from investments in antiinfectives, in vaccines, antibiotics, and so forth. We need to do 

something about this. This is a strategic problem. I think the most 

important part of it for national security’s sake is no doubt bioterrorism. 

But as the congresswoman noted, the rise of antibiotic-resistant bugs and 

so forth is also a real issue, and we are going to have to figure out a way 

to spend more money in the future on this critical problem. 

 Now, I think HHS has done work in trying to step up and implement 

this new legislation, but the fact of the matter is, biodefense generally 

and the procurement of new drugs and vaccines and the investment in 

whole new areas of drugs and vaccines is a new mission for HHS. They 

have lots of good people working their hearts out over there trying to 

administer BioShield, but they fall far short of what is needed. We need 
33

more people at HHS, a lot more, I would say a hundred more just to 

administer BioShield appropriately, and they need to have the right 

expertise. We need people at HHS who have experience in the 

biopharma field and who have managed complex, long-term acquisition 

contracts, such as DOD does all the time, but HHS has never done 

heretofore. 

 And finally, I think we are going to rapidly run out of the strategy of 

trying to find a drug or a vaccine against each bug that might present a 

biological weapons threat. We are going to be faced in the future with 

unanticipated threats, some of the bioengineered agents that come upon 

us and to which we have to respond very quickly. Right now, it takes 

about ten years to create a new drug. We need, as a matter of national 

security strategy, to start instituting research projects in partnership with 

the biopharma industry that can radically reduce how long it takes to 

develop a drug. We need to go from ten years to about two weeks. We 

can do this if we apply our know how across the spectrum of drug 

development, from improving R and D to helping us through this middle 

phase valley of death to improving clinical trial efficiencies to getting 

our regulatory apparatus even more efficient than it is now. We need to 

take this project on as a matter of high national security priority and we 

can do it, but that is going to take some time. In the meanwhile, we have 

to stockpile drugs, but this notion of having a cupboard full of drugs for 

all of the possible biological weapons agents, especially for the 

bioengineered agents that are upon us, is not going to be viable, even for 

the United States of America for very much longer. It is a stopgap 

measure that we need to take, but we need to take the next step into this 

new strategic world of radically accelerating drug development. Thank 

you, Mr. Chairman. 

 [The prepared statement of Dr. Tara O’Toole follows:] 

PREPARED STATEMENT OF DR. TARA O’TOOLE, CEO AND DIRECTOR, CENTER FOR 

BIOSECURITY OF THE UNIVERSITY OF PITTSBURGH MEDICAL CENTER

Mr. Chairman, Congressman Dingell, and members of the committee, thank you for 

the opportunity to address the vital issue of biodefense and the difficult challenges 

surrounding the US government’s efforts to procure medicines and vaccines against 

biological agents that could be used in terrorist attacks against US civilians. My name is 

Tara O’Toole. I am the Director and CEO of the Center for Biosecurity of the University 

of Pittsburgh Medical Center and a professor of medicine at the University of Pittsburgh 

Medical School. The Center for Biosecurity is a non-profit, non-partisan, 

multidisciplinary organization located in Baltimore which includes physicians, public 

health professionals, and biological and social scientists. The Center is dedicated to 

understanding the threat of large-scale, lethal epidemics due to bioterrorism and natural 

causes. My colleagues and I are committed to the development of policies and practices 

that would help prevent bioterrorist attacks or destabilizing natural epidemics, and, 

should prevention fail, would mitigate the destructive consequences of such events. 
34

For several years now, the Center for Biosecurity has been working in collaboration 

with academia, industry, and government to stimulate development and procurement of 

new medicines and vaccine for biodefense. In March 2005, we initiated the formation of 

the Alliance for Biosecurity, a collaboration between the Center and leading 

biotechnology and pharmaceutical companies with the intention of working together in 

the public interest to promote the creation of a robust and sustainable biomedical research 

and development infrastructure that we believe is needed to prevent and treat the 

infectious disease threats that present US and global security challenges in the 21st

century. These threats include large-scale epidemics of natural disease as well as 

bioterrorist attacks using conventional or bioengineered weapons. 

Biological weapons have been proven to work, are capable of causing massive 

lethality, are relatively cheap, and are increasingly easy to design, build and disseminate. 

We are in the midst of a bioscientific revolution that will make building and using 

biological weapons even more deadly and increasingly easy. Finally, the materials and 

technical know-how needed to make a bioweapon that could infect hundreds of thousands 

of people are already widely distributed around the planet, and the number of people who 

possess the expertise needed to create bioweapons is rapidly growing as biotechnology 

and pharmaceutical research and production expand into developing countries. 

Preventing either a natural epidemic or a bioterrorist attack is, unfortunately, 

unlikely. Therefore, the nation’s ability to rapidly and effectively respond in the face of a 

biosecurity crisis should be a central pillar in our biosecurity strategy. The nation’s 

response to an outbreak must be designed to prevent potentially destabilizing social, 

economic, and political consequences, in addition to preventing illness and death on a 

large scale. Medicines and vaccines that can counter illnesses caused by exposure to 

bioweapons agents are obviously an essential component of biodefense and would be 

critical to controlling the spread of contagious disease. A recent report from the Institute 

of Medicine found that the array of biological agents that pose a significant threat to 

biosecurity is much larger and more diverse than any of today’s “threat lists.”1

 Yet, since 

2001, the US has acquired only a single countermeasure – smallpox vaccine. Why is this? 

Funding for biodefense countermeasures is not comprehensive and is not 

commensurate with the threat of bioattacks. 

Thus far, the US government has focused efforts to acquire biodefense 

countermeasures on basic research investments and on Bioshield funding for acquisition 

of countermeasures that are sufficiently advanced that they are eligible for Investigative 

New Drug (IND) status. What’s missing from the US government’s biodefense funding 

strategy is support during the so-called “valley of death”, the crucial middle phase of 

drug development between basic research and acquisition of final products (see figure). 

 

1

 “Globalization, Biosecurity, and the Future of the Life Sciences,” Institute of Medicine, January 

2006. 
35

Drug and vaccine development is an expensive, high risk undertaking. Of 5000 drug 

“candidates” identified by scientists, only 5 make it to clinical trials and only one of 

these, on average, will become a licensed product.2 The lack of support from the US 

government during the crucial intermediate stages of development results in premature 

failures of potential countermeasures as biopharma companies struggle to maintain 

operations through long periods of uncertainty without outside support. The priorities of 

the private capital markets, instead of the priorities of government, are driving products 

through the “valley of death.” Unfortunately, countermeasure development is 

unattractive to private investors because there are no markets outside of governments for 

most of these products, and even in the most profitable scenarios, biodefense 

countermeasures – as with anti-infectives generally – cannot generate profits comparable 

to successful medicines for chronic disease that are taken for years by large populations.3

This is one of the prime reasons that there are only 5 major vaccine manufacturers left in 

the world. One expert in drug development was quoted in a 2004 study performed by the 

Center for Biosecurity and the Sarnoff Corporation as saying: 

“You make a new antibiotic and if it’s really terrific you’ll have peak sales of $300–

500 million per year. If you make a drug for cancer that extends life by 4 months, 

you can charge $40,000 per dose. The difference is so staggering....”4

Without some form of government support for the “valley of death,” perhaps in the form 

of grants, contracts, or significant milestone payments such as the Department of Defense 

uses in the acquisition of complex weapons systems, few companies will be able to 

secure outside financing or invest their own capital in countermeasure development. 

Government-funded basic research is an essential part of biodefense strategy, partly 

because research into infectious diseases has, in recent times, been less well funded by 

the private-sector than research for cancer and other types of illness (HIV/AIDS is the 

exception). As noted, the private sector has been systematically abandoning R&D 

investments in infectious disease generally because other investment opportunities are 

much more lucrative.5

 As a result of industry’s retreat from infectious disease research, 

there is less innovation. Since 1998, FDA has approved just 10 new antibiotics – only 

 

2

 “2004 Survey: Medicines in Development for Infectious Diseases,” PhRMA, 2004; Nwaka, S. and 

R.G. Ridley “Virtual drug discovery and development for neglected infectious diseases through 

public-private partnerships,” Nature Reviews Drug Discovery, vol. 2, p. 919-28, 2003. 3

 “Bad Bugs, No Drugs,” Report from the Infectious Diseases Society of America, July 2004; 

Kennedy, D., “Drug Discovery” (editorial), Science, vol. 303, p. 1729, 2004. 4

 Gilfillan, L. et al., “Taking the Measure of Countermeasures: Leaders’ Views on the Nation’s 

Capacity to Develop Biodefense Countermeasures,” Biosecurity and Bioterrorism, vol. 2, p. 320-27, 

2004. 

5

 “Bad Bugs, No Drugs,” Report from the Infectious Diseases Society of America, July 2004. 

BioShield Contract 

Basic 

Research 

(Years) 

“Lead” 

Discovery 

(6-24 mo) 

Preclinical 

Development 

(30-36 mo) 

Clinical Trials & 

FDA Approval 

(54-60 mo) 

Production 

IND 

FDA 

Approval 

NIH Funding Industry Investment 

“Valley of Death” 

Lead Discovery to FDA Approval: 8-12 Years 

(This timeline is for development of medicines/drugs, length of vaccine development is similar.) 

5000 Candidates 5 Candidates 1 Product 
36

two of which had a novel mechanism of action.6 The strong support Congress has 

accorded basic biodefense research though the NIH should continue. Efforts to facilitate 

the transition from discoveries in the laboratory to the development of useful products by 

offering more support to innovators trying to traverse the “valley of death” could result in 

many more success stories and more “bang for the buck” from basic research 

investments. 

With the passage of the 2004 Bioshield legislation (P.L. 108-276), the nation 

undertook to pay for the acquisition of countermeasures. The Bioshield Purchase Fund of 

$5.6 billion sounds like a lot of money, particularly in the context of public health 

expenditures. But it is not much money when viewed as a necessary national security 

investment. A single Nimitz class aircraft carrier costs about $4 billion; ten such ships 

have been built for the US Navy. The size of the Bioshield procurement fund must also 

be examined in light of the actual costs of drug development: it is estimated that the 

average out-of-pocket cost of developing a new drug is $400 million; if opportunity costs 

are included, the cost is $800 million.7

 A more recent study calculates the costs of drug 

development could be even higher.8

 Indeed, the first Bioshield contract, for 75 million 

doses of recombinant anthrax vaccine, amounted to $877 million. The reality is that $5.6 

billion will not go far, particularly when the entire threat spectrum is considered and the 

costs of actually acquiring (not just developing) medicines and vaccines are 

contemplated. 

Current HHS Structure and Staffing Levels Need to be Strengthened 

Biodefense is a relatively new and complex mission for the Department of Health 

and Human Services (HHS). Although many competent people within HHS are working 

hard to manage countermeasure development and acquisition, too few federal staff, many 

with little relevant experience, are trying to do too much under ferocious time pressures. 

It is imperative that HHS be granted the authority to hire about 100 new staff, many of 

them at the senior level, to manage these important programs. It is especially important 

that HHS hire people with experience in drug and vaccine development and production. 

The current processes associated with threat identification, countermeasure 

development and acquisition are poorly coordinated, slow moving, confusing and often 

contrary to routine business practices. This is due in part to the number of different 

agencies involved (OPHEP, ORD, FDA, NIH, DHS). But it is also the case that HHS 

lacks experience managing complicated, long-term acquisition projects such as DOD 

handles routinely. The Federal government has chosen to pursue biodefense 

countermeasures through partnerships with the biopharma industry. Such an approach is 

a sensible way to make efficient use of the prodigious know-how and resources of the 

private sector. But for this approach to work, the Federal government must be a reliable 

partner. From biopharma’s perspective – and the perspective of investors – it is critical 

that the government maintain a transparent, predictable process with clear timelines, 

explicit liability protection and fair compensation rights, and develop predictable rules for 

the protection of intellectual property rights. Failure to recognize these realities means 

that few companies will choose to pursue countermeasure development and production, 

and the country will not have the medicines it needs in times of crisis. 

After the terrorist attacks of 2001, HHS was tasked to take on a welter of new 

missions related to homeland security. The management structure and staffing of HHS 

 

6

 Spellberg, B. et al., “Trends in antimicrobial drug development: implications for the future,” 

Clinical Infectious Diseases, vol. 38, p 1279–86, 2004. 7

 DiMasi, J.A. et al., “The price of innovation: new estimates of drug development costs,” Journal of 

Health Economics, vol. 22, p151–185, 2003. 8

 Adams, C.P and V.V. Brantner, “Estimating The Cost Of New Drug Development: Is It Really 

$802 Million?”, Health Affairs, vol. 25, p. 420-28, 2006. 
37

has simply not kept pace with these assignments. HHS is larger in dollar terms than the 

Department of Defense – and yet HHS does not have a single undersecretary. Secretary 

Leavitt has noted that he has 27 direct reports – a situation he recognizes as “not at all an 

ideal organizational structure.” 

Cabinet Secretaries should have broad discretion in how their agencies are 

organized, but I believe that Congress should consider authorizing HHS to establish at 

least one – or better, two or three – Undersecretary positions. This would provide the 

agency with more senior managers capable of coordinating HHS’s vast programmatic 

span of control. In the realm of public health preparedness, an Undersecretary for Public 

Health (which could be combined with the present Assistant Secretary for Health or the 

position of Surgeon General) could better coordinate the varying HHS programs now 

spread among the Assistant Secretary for OPHEP, CDC, HRSA, NIH, AHRQ, and 

ONCHIT. In addition, an Undersecretary would be better able to represent HHS in the 

interagency process. 

Focus on Accelerated Development of Countermeasures 

The US does not yet have a coherent biodefense strategy, nor do we have a strategy 

for countermeasure research, development, and production that takes account of the full 

spectrum of possible bioweapons agents, including engineered threats. It is clear that a 

handful of pathogens such as anthrax, smallpox, plague, etc. are at the top of most threat 

lists because of their availability, lethality, contagiousness, historic development as 

bioweapons, etc. Developing and stockpiling specific countermeasures against these 

high-priority threats is a rational and pressing national security need. 

However, in the long term, the current approach of developing countermeasures 

against each potential bioweapon agent will prove futile. Natural outbreaks of novel 

infectious diseases (e.g. SARS) are commonplace, and there are dozens of naturally 

occurring pathogens which could serve as bioweapons agents today. Moreover, the 

ongoing revolution in bioscience will enable the creation of more and more bioweapons 

agents covering an enlarging spectrum of targets.9 As the “threat space” expands, it will 

become increasingly difficult and costly to use a “one-bug-one-drug” strategy to define 

the appropriate armamentarium of countermeasures that must be developed and 

stockpiled – and perhaps never used. In addition, the country will have to confront the 

specter of covert bioattacks using heretofore unanticipated bioengineered agents. 

Avoiding the destabilizing effects of a large-scale, lethal campaign of such attacks will 

require the ability to rapidly design, develop and produce new countermeasures from a 

standing start – in weeks, if not days. The need to anticipate and prepare for such 

bioengineered weapons is not in the far-off future. We are already living in the age of 

bioengineering. Scientists estimate that in five years it will be possible to synthesize any 

virus from non-living components. 

A major strategic goal of US biosecurity strategy should be the radical acceleration 

of drug and vaccine development. The US government should embark on an ambitious 

program to incrementally reduce drug development and production time across the entire 

development spectrum. Important reductions in development time might be achieved 

across the timeline of drug and vaccine development with efforts such as: 

• technology improvements such as in silico modeling, genomics, and synthetic 

biology; 

• wider sharing of, and access to, improved research tools such as toxicological 

databases, test-tube and animal models of diseases, chemical libraries of 

possible medicines, and high throughput screening of potential drug candidates; 

 

9

 Petro, J.B., T.R. Plasse, J.A. McNulty, “Biotechnology: Impact on Biological Warfare and 

Biodefense,” Biosecurity and Bioterrorism, vol. 1, p. 161-68, 2003.
38

• more efficient clinical testing, such as might be accomplished with integrated 

electronic health records; 

• streamlined regulatory review such as might be achieved by adding staff and 

leadership in FDA and developing policies that account for the unique aspects 

of biodefense countermeasures; 

• the creation of public-private consortia to facilitate sharing of information 

between developers, to address predictive safety testing (i.e. to focus on 

scientific ways to predict toxicity), and to tackle other key countermeasure 

development challenges. 

This is not just about developing new technologies. The US government will need 

to foster new systems to enable private sector developers – many of whom are direct 

competitors – to work together with the government and academia so that we can take 

advantage of the complete storehouse of knowledge and expertise available. 

If the US were to undertake an ambitious long-term effort to focus on accelerated 

countermeasures development, it is likely to be successful. The US currently has the 

advantage in bioscience expertise and experience – invaluable assets that could be well 

leveraged in such an effort, although we are also rapidly outsourcing most drug and 

vaccine development overseas, mostly to India and China. 

Success in such a venture would bring many benefits in addition to forming the 

foundation of a coherent and sustainable biodefense strategy. In biopharma, time is 

money; the average drug now requires a decade to develop from concept to licensed 

product. Learning how to accelerate countermeasure development would necessarily 

mean that the costs of countermeasures would decrease, probably substantially. This 

effect would have direct implications for the costs of pharmaceuticals generally – even 

during “peacetime” – thereby reducing health care costs and placing the cost of vital 

drugs and vaccines within reach of developing countries. 

Such a program of accelerated drug development should proceed in partnership with 

biopharma companies in the private sector, much as the Department of Defense 

developed partnerships with major military contractors. If such a project was ambitious 

enough, and properly structured and financed, and if the Federal government made a 

long-term commitment to such a project, it is likely that the leaders of biopharma would 

agree to participate. 

It would not be easy to achieve radical acceleration of countermeasure production. 

But incremental progress is almost certain, and would over time have potentially 

significant impacts. I am convinced that such a project will be undertaken; the remaining 

question is whether the US will make such a commitment before we experience a largescale bioevent, such as a terrorist attack or a naturally occurring pandemic, or after. 

The Biodefense and Pandemic Vaccine and Drug Development Act (S. 1873) being 

proposed by Senator Burr as a next step beyond Bioshield is not perfect. It is a modest 

bill that will not transform countermeasure R&D or dramatically reshape HHS. But it is 

an extremely useful piece of legislation and should be enacted into law. The bill makes 

important incremental improvements in the structure of HHS, allowing the agency to 

acquire competent staff and bring more clarity and transparency to its countermeasure 

procurement processes. It provides mechanisms for supporting companies in the “valley 

of death”, in a manner similar to the DOD acquisition process and appropriate to the 

development of complex products with limited markets. The related bill being proposed 

by Senator Kennedy (S. 1880) also makes the point that improvements in the current 

approach to countermeasure development are needed. These bills send the message that 

the US government is concerned about biodefense and wants to improve countermeasure 

development. Should the Congress fail to pass meaningful Bioshield legislation this 

session, there is a real danger that the biopharma industry will read this as a clear 

message: Congress is not serious about biodefense. 
39

 MR. DEAL. Thank you. Mr. Young? 

MR. YOUNG. Mr. Chairman, thank you for the opportunity to testify 

before the committee today. AlphaVax is a small 70-person, privately 

held R and D stage biotechnology company based in North Carolina, and 

we are working to develop and commercialize a vaccine technology, a 

platform technology, and I am here today testifying on behalf of BIO. 

 Since 2002, AlphaVax has received four NIH peer-reviewed 

biodefense vaccine early-development grants. These grants represent 

about $38 million in total awards, and it is our long-term goal to use 

these grants, BioShield monies, and if commercially viable, private 

capital to develop bioterrorism countermeasures. If it weren’t for Project 

BioShield and the Government’s grant funding in this arena, my 

company would not be working on biodefense vaccine targets at all. We 

have no sales. We have no profit. The only money we have is money 

from people who believe we might be able to produce important new 

vaccines one day. That is a long, costly, and inherently uncertain 

process. We have limited amounts of time, people, and money with 

which to deliver on these expectations. 

 As we consider the pressing need to improve preparedness, we must 

recognize the enormous challenges intrinsic in that and the successes to 

date. The public/private sector partnership necessary to protect the 

Nation from bioterrorism and pandemic threats is unprecedented in the 

area of biopharmaceutical development, and it must have an 

entrepreneurial and innovative spirit. Dedicated personnel, and we have 

heard today from many agencies who have already devoted countless 

hours to build the effort from the ground up, and these efforts and 

accomplishments ought to be recognized, and HHS has given examples 

of contracts that are already underway. However, as important as these 

contributions are, more must be done. Essential reforms to the BioShield 

partnership are necessary to better enable the successful development of 

biodefense and pandemic countermeasures. Incremental change can 

increase capacity for existing products or achieve modest improvements 

on existing countermeasures, but to achieve dramatic success BioShield 

needs to adopt a culture and methodology consistent with innovation, the 

innovation it wants to stimulate. This is an approach that is modeled in 

the private sector by a technology investment. 

 I am going to emphasize just three areas. First, Congress must 

reform Project BioShield to fill the important funding gap that has been 

alluded to between early development and the ultimate commercial 

marketing of a product, which companies like mine without self-funded 

R and D refer to as the valley of death, with good reason. The 

development process for drugs and biologics is complex, time 

consuming, costly, and high risk. There are added challenges to that in 
40

developing countermeasures, and these countermeasure opportunities 

compete for investment dollars with other markets. The Government is 

usually the only purchaser for countermeasures and because of all of this, 

it is extremely difficult for small companies to raise private funding to 

cover the costs incurred after early stage NIH funding but before the 

Government begins paying for a final product. So to address the funding 

gap, BioShield ought to reform to allow the sharing of risk between 

industry and the Government during the entire course of product 

development, and funding to bridge that advanced development valley of 

death is a key element to a successful and meaningful partnership. 

 A second recommendation would improve the coordination and also 

the character of the staffing that animates the Government activity in 

this. The partnership required for successful countermeasure 

development includes a number of different agencies, and each plays a 

role in the process. The objectives and requirements of the various 

agencies must obviously be aligned and coordinated with contract 

solicitation terms and be part of an early dialogue. The expectations of 

regulators for licensure and emergency use authorization ought to be 

coordinated with the contract terms. Ambiguous, additional, and 

unforeseen requirements that arise outside of contract terms magnify 

companies’ financial risk. Clear and strong leadership, with a 

fundamental understanding of biotechnology development, is required to 

coordinate the many agencies and objectives and to ensure that 

development is not choked by bureaucracy or inexperience. The 

challenges and complex nature of countermeasure development, coupled 

with the urgent need to prepare, require that critical staff level positions 

be adequately funded. HHS needs not only sufficient resources to 

expedite the procurement processes, but flexible hiring authorities are 

needed to staff key positions with the expertise and understanding of the 

pharmaceutical industry, both small and large companies that animate it. 

 The final point of emphasis is just the need to clearly and predictably 

identify future needs. Countermeasures can’t be developed in the 

absence of clear and reliable articulation of the needs and commitments. 

Effective product development requires an understanding of the end goal, 

and to date there have been too few material threat assessments that have 

resulted in requests for proposals and acquisitions. There have also been 

instances where expected needs were dramatically reduced upon 

solicitation of the contract. Lack of clarity and predictability of technical 

requirements can further frustrate planning and execution. To enable an 

effective public/private partnership, requirements ought to be developed 

through dialogue with industry and there must be a shared understanding 

of objectives, purchase solicitations, and the consideration of the 

complexities of the industry and the development process. 
41

 In conclusion, BioShield has been an important first step. Enactment 

of some of the more modest reforms I have alluded to will spur more 

bioterrorism and pandemic countermeasure participation by the private 

sector, but without reform and additional funding, that participation will 

still fall short. Many companies like mine will have no choice but to 

avoid the biodefense valley of death and many promising 

countermeasures will never progress. Our industry is based on a 

productive relationship and understanding of the link between risk and 

innovation, and to achieve similar productivity and countermeasures, 

BioShield needs an approach that cultivates innovation. Thank you. 

 [The prepared statement of Peter F. Young follows:] 

PREPARED STATEMENT OF PETER F. YOUNG, PRESIDENT AND CEO, ALPHAVAX, INC., ON 

BEHALF OF BIOTECHNOLOGY INDUSTRY ORGANIZATION

Good afternoon and thank you for the opportunity to testify before the Committee 

today on behalf of BIO, the Biotechnology Industry Organization. My name is Peter 

Young, and I am the President & Chief Executive of AlphaVax, Inc. AlphaVax is a 

privately held pre-revenue biotechnology company based in North Carolina that is 

working to develop and commercialize a vaccine technology that was originally invented 

in part at the US Army Medical Research Institute for Infectious Diseases. In addition to 

vaccine development funding we receive from the Division of AIDS in the National 

Institute of Allergy and Infectious Diseases (NIAID) at the National Institutes of Health 

(NIH), my company has since 2002 received four NIH peer-reviewed biodefense vaccine 

early development grants for the Marburg virus, botulinum toxin, viral encephalitis 

viruses, and small pox, as well as grants against SARS and pandemic influenza. These 

six grants represent $38 million in total awards, not including clinical support funded 

separately by the NIH on some of the programs. My company consists of 70 people. 

BIO represents more than 1,100 biotechnology companies, academic institutions, 

state biotechnology centers and related organizations across the United States and 31 

other nations. BIO members are involved in the research and development of healthcare, 

agricultural, industrial and environmental biotechnology products 

I wish to preface my general remarks by noting that if it were not for Project 

Bioshield and the government’s grant funding in this arena, my company would not be 

working on biodefense vaccine targets at all. We have no sales and no profit: the only 

money we have is money from people who believe we might be able to produce 

important new vaccines for diseases they are interested in. Biotechnology companies like 

mine have a limited amount of time, people, and money with which to show they can 

deliver on these expectations. If they don’t deliver, they can’t attract investment capital, 

and they die. If I were a big company with my own sales and profits, I would have a little 

more leeway, but I would still be critically answerable to the expectations of investors 

and the capital markets. 

The intrinsic risks and costs of developing biodefense vaccines are not different 

from other vaccines the private sector invests in. However, to justify working on 

biodefense vaccines, the private sector – big company or small - must ask itself additional 

questions before pursuing countermeasures: 

• Is the potential market big enough to be attractive? 

• Are the risks no greater? 

• Are the costs subsidized or covered? 

• Are there technical or financial leverages that advance the technology? 
42

If the answer to these questions are negative or absent compared to other opportunities, 

companies won’t participate. 

As we consider the progress to date in medical countermeasure development and the 

actions needed to improve preparedness, we must recognize the enormous challenges and 

the successes to date. The magnitude of the public-private partnership necessary to 

protect the nation from bioterrorist and pandemic threats is unprecedented in the area of 

biopharmaceutical development. This is an enormous task for the Department of 

Homeland Security (DHS) and the Department of Health and Human Services (HHS) and 

its agencies, and much hard work by dedicated individuals was needed to build the 

initiative from the ground up several years ago. These efforts and accomplishments must 

be recognized. HHS has contracts underway for vaccines for anthrax and 

countermeasures for acute radiation syndrome and other radiological indications. Over 

180 million doses of a smallpox vaccine have been delivered to the Strategic National 

Stockpile. Additionally, NIH, through NIAID, has issued numerous grants for millions 

of dollars that have been essential to spur early stage research in biodefense products. 

Grants have also been issued to foster the construction of biosafety containment facilities 

necessary for the research and development of countermeasures for harmful pathogens. 

Dedicated personnel from many agencies have devoted countless hours to this effort in 

national security. 

However, as important as these contributions have been, more must be done. 

Essential enhancements to the commitment of a public-private partnership are necessary 

to enable the successful development of biodefense and pandemic countermeasures. The 

urgency of timing must be reinforced. As a nation we have faced a heightened threat of 

terrorist attacks, and the threat of an influenza pandemic and news of the spread of avian 

influenza grows each day. We must approach these reforms with a recognition that we 

currently do not have nearly enough vaccine and therapeutics to protect all Americans 

from a pandemic. With this in mind, I would like to offer perspectives on three key areas 

of need: 

• Clear and predictable identification of needs that are developed in a 

public/private partnership with dialogue. 

• Strong leadership and coordination. 

• Strong and predictable funding that addresses both development and 

acquisition of critical medical countermeasures. 

In order to understand what changes are necessary to better engage industry in the 

development of medical countermeasures, an understanding of the factors that affect the 

drug development process is helpful. The development process for drugs and biologics is 

complex, time-consuming, and costly. It often involves many partners through different 

stages, and it includes a number of complicated intellectual property and licensing 

agreements. The development of a biopharmaceutical product can cost tens or hundreds 

of millions of dollars and take years from initial research to commercialization. 

Companies interested in drug development typically engage in sophisticated market 

analysis to assess what demands exist for products before engaging in costly and timeconsuming research and development. An understanding of the market is important not 

just at the time of manufacturing and sale - it is a critical component that drives risk 

assessments through the product development cycle. Because the costs of drug 

development generally increase substantially as the product moves from one phase to the 

next, careful risk assessments are made during all phases of development. It is a reality 

that the stability and robustness of the final market is a key determinant in these risk 

assessments and the viability of product development. 

Understanding of the final market includes information on volume of demand and 

economic factors. But important technical considerations are also incorporated into the 

development cycle. For example, the mode of administration, dose and formulation 

requirements, and shelf-life requirements are important factors in product development. 
43

Uncertainty in these specifications, or a change late in the development cycle, can have a 

profound impact on risk assessments, and ultimately the time and cost of development. It 

is also important to recognize that even with clear market needs, few products move from 

early development to licensure without some technical changes. This is expected, as a 

goal of advanced development is to optimize the product for the best effectiveness and 

safety. 

While these considerations exist for all biopharmaceutical development, biodefense 

and pandemic products face heightened challenges. The government will generally be 

the only or primary purchaser, and thus will set the market demands. Lack of clarity and 

stability of government requirements translates directly to lack of clarity and stability in 

development goals. This in turn has a direct impact on whether or not companies can 

step forward and contribute the expertise of the private sector. 

Biodefense and pandemic products also face increased risks for liability claims, so 

liability protections and an injury compensation program are necessary to spur industry to 

participate in these challenging markets at the government’s request. These products will 

likely be administered in the face of an emergency to otherwise healthy individuals. 

Companies must be assured that they will not face financial ruin due to unforeseen and 

unavoidable adverse reactions. The Public Readiness and Emergency Preparations Act 

(PREP Act), passed as part of the 2006 Defense Appropriations Act, provides responsible 

liability protections, coupled with a compensation program for those injured by medical 

countermeasures. It is important to note that liability protections are necessary to enable 

all stages of development – not just final sale of product. Small companies must attract 

investors and capital to move products through the development cycle. The ability to 

attract such capital is severely constrained if strong, responsible, and stable liability 

protections are not in place. 

Bearing in mind these factors that influence biopharmaceutical investment decisions 

and the competition for investment dollars, there are a number of critical and interdependent areas that need to be addressed. Incentives must be in place to both engage 

and sustain industry participation in this important partnership. 

First, we need clear and predictable identification of needs that are developed in a 

public/private partnership with dialogue and coordination. A predictable demand is 

needed to allow companies to consider and assess their ability to enter this market. 

Without this, the ambiguity and uncertainty will cause investment dollars to be directed 

to other efforts. As noted earlier, effective product development requires an 

understanding of the end goal. 

To date, there have been only a handful of material threat assessments that have 

resulted in requests for proposals (RFPs) and acquisitions. There have also been 

instances where expected needs were dramatically reduced upon solicitation of a contract. 

Lack of clarity and predictability of technical requirements, such as expiry dating and 

filling and storage requirements, can further frustrate planning and execution. This 

creates uncertainty in the market, and severely challenges business planning necessary for 

commercialization of countermeasures. Demand drives the product development 

process, and realistic requirements, developed with dialogue with industry, need to be 

incorporated early into the drug development process. Countermeasures cannot be 

developed in the absence of clear and reliable articulation of needs and commitments to 

purchase successfully developed products. 

To enable an effective public/private partnership, requirements should be developed 

through dialogue with industry. It is essential that industry and government have a 

shared understanding of objectives, and that purchase solicitations are developed in a 

framework that addresses the complexities of the biopharmaceutical industry and contain 

the appropriate level of specifications and delivery terms. 

Second, strong leadership, coordination, and sufficient funding and flexibility in 

staffing are essential to success. The public/private partnership required for successful 
44

countermeasure development includes numerous government departments and agencies, 

each playing a key role in the process. The objectives and requirements of the various 

agencies must be aligned and coordinated with solicitation terms and must be part of the 

early dialogue. These activities include funding for early and late stage research and 

development, regulatory support, and contract management. For example, production 

and delivery of products are inherently affected by regulatory requirements. The 

expectations of regulators for licensure and emergency use authorization should be 

coordinated with the contract terms. Ambiguous, additional and unforeseen requirements 

that arise outside of contract terms magnify companies’ financial risk. Strong and clear 

leadership is required to coordinate the many agencies and objectives. 

Also, the challenges and complex nature of countermeasure development, coupled 

with the urgent need to prepare, require that critical staff level positions be adequately 

funded and staffed. In order to sufficiently expedite the procurement processes, HHS 

needs sufficient resources. Flexible hiring authorities can also help ensure that key 

positions are staffed with expertise and understanding of the biopharmaceutical industry 

and the functioning of both small and large companies. In order for a true public/private 

partnership to succeed, both sides must be resourced to rapidly address the full array of 

development issues with experienced judgment to reach effective, expeditious outcomes. 

Third, the funding for biodefense and pandemic countermeasures must be strong and 

consistent, and should recognize the shared-risk of a public/private partnership. A 

comprehensive preparedness strategy is needed that addresses the various threats for 

which we must prepare, and sufficient funding to achieve their commercialization. 

Potentially life-saving products are at risk of dying in the gap between the “push” of early 

stage development and “pull” of commercialization – a gap referred to as the “Valley of 

Death”. 

Shared risk in advanced development should be incorporated into the funding plans, 

as it is another important element of a successful public/private partnership, and critical 

to bridging the “Valley of Death”. Biopharmaceutical development is inherently risky, 

and as noted earlier, costs go up significantly through each development phase. Because 

of this, companies carefully evaluate investment decisions at each phase. Important 

products for biodefense and pandemic preparedness may not survive these risk 

calculations without sufficient government partnering and transparency in interactions 

with government entities. 

In non-biodefense/non-pandemic markets, in which there is a “natural” market for 

products without government participation, venture capitalists, partnering companies, and 

company equity are vehicles used to fuel the development of these expensive phases 

based on marketing and risk-assessment forecasts. It is very difficult to attract and justify 

these vehicles for biodefense and pandemic products in the absence of a predictable and 

robust market. Even with clear and predictable identification of government needs, the 

reality is that the overall market for many of these life-saving products that are essential 

to national security may be relatively small. 

Because of this, many promising technologies stall in early and mid-stage 

development, not due to technical failure, but because the market “pull” is not sufficient. 

Again, it is important to recall that biodefense and pandemic countermeasures must 

compete for investment dollars that can be directed to other markets. Funding of 

advanced development to bridge the “Valley of Death” is a key element in a successful 

and meaningful effort to produce countermeasures essential for our national security. 

The comprehensive strategy should include an appropriate array of diagnostics, 

preventatives, and therapies against threat agents. Research tools that facilitate our 

understanding of targeted pathogens and facilitate product development are also an 

important component of a comprehensive strategy. 

The task before us is large. Prior to the events of 9/11 and the subsequent anthrax 

attacks that fall, there was no significant demand for biodefense products for the civilian 
45

population. Facing the growing threat of an influenza pandemic, based on our current 

vaccine technology and manufacturing capabilities, we are currently simply unable to 

produce enough vaccine for all Americans. The good news is that with sufficient 

investment, promising biotechnologies in development offer potential advances in 

multiple dimensions. New recombinant and cell-culture vaccine technologies have the 

potential to greatly enhance capacity and production efficiencies. New antivirals are 

being developed with the potential to treat multiple strains of influenza, and diagnostic 

tools are in development to rapidly detect bioterrorist agents and pandemic strains and 

allow for faster response and containment efforts. 

When considering the cost of funding countermeasure development and purchase, 

full consideration must be given to the cost of not making this investment – in terms of 

lives, health, and economic costs. For example, economists from the CDC have 

estimated that the impact of a pandemic in the United States could be 90,000 to 200,000 

deaths, hundreds of thousands of hospitalizations, and tens of millions of outpatient visits 

and illnesses. They estimate the economic impact in our country could be between $71 

billion to $166 billion – excluding disruptions to commerce and society.1

 A World Bank 

leading economist estimated that the worldwide cost of an influenza pandemic could be 

$800 billion, with $550 billion of this affecting industrialized nations.2 The costs to life, 

health, and the economy could be overwhelming, and these staggering numbers don’t 

express the societal challenge of recovery. 

Additionally, the public health synergies of investing in robust anti-infective and 

diagnostic markets must be recognized. If a pandemic does not arise or a bioterrorist 

event does not occur by a certain date, our investments should not be considered 

misguided. These investments should be viewed as a pathway to securing our future and 

assuring that the United States will be poised to deal with future threats. In addition to 

responsibly preparing for public health emergencies and national security, new 

technologies and manufacturing and infrastructure capacities fostered through these 

efforts will likely yield public health benefits in other infectious diseases that face market 

challenges. 

Investments are also needed in animal models and other research tools. Pandemic 

and biodefense countermeasure development is characterized by constraints on human 

efficacy trials, tight controls of pathogen agents, and rapid changes in potentially 

pandemic strains. Because of this, the development of knowledge and tools that will 

allow us to anticipate, approximate, and characterize the agents, and model the effects of 

the agents and their countermeasures in humans, is an essential part of pandemic and 

biodefense preparedness. In addition to animal models, investments in assay 

development and standardization, correlates of protection, predictive toxicology, host 

response, and other tools are an important part of an effective countermeasures 

program. As with the countermeasures themselves, the market for research and 

diagnostic tools in this area has generally been too uncertain and too small to warrant any 

significant investment by commercial firms. 

In conclusion, enactment of the modest reforms outlined above will spur 

bioterrorism and pandemic countermeasure development more than is the case at this 

moment. Because of Project BioShield, more companies like mine are now doing 

research into these countermeasures. Without reform, however, clarity, coordination, and 

predictable commitment within the government will still be lacking. Without reform, 

many companies will find themselves in the Valley of Death, unable to bring their ideas 

from the bench to the bed, and many others, both big and small, will stay on the sidelines. 

 

1

 M. Meltzer, et al., “The Economic Impact of Pandemic Influenza in the United States: Priorities for 

Intervention,” Emerging Infectious Diseases, 5, no. 5 (September-October 1999): 659. 2

 “Bird Flu Will Cost $800 billion, says World Bank,” Times Online, accessed on November 7, 2005 

at http://www.timesonline.co.uk/article/0,,25149-1861483,00.html.
46

Once again, thank-you for the opportunity to testify before the committee today on 

behalf of BIO. BIO and its member companies are committed to addressing the public 

health needs of the Nation and look forward to working with this Committee to address 

these priorities as potential legislation moves forward. 

 MR. DEAL. Thank you. Mr. Cohen? 

MR. COHEN. Thank you. Mr. Chairman and members of the 

committee, I would like to thank you for giving me the opportunity to 

speak to you today. I would also like to thank Congresswoman Eshoo 

for her long history in support of the biotechnology industries, 

commitment to innovation, job creation, and improvements to our 

Nation’s health. I am the CEO of Cellerant Therapeutics, an early stage 

biotechnology company based in California, and we are developing 

novel adult stem cell-based therapies for cancer and genetic blood 

disorders like sickle cell disease and autoimmune disease. I am here 

today to talk to you because one of our programs in preclinical 

development is being developed also for acute radiation syndrome, the 

principal effect on humans that is likely to result after a nuclear terror 

attack. We know from our experience at Chernobyl what happens to 

people who are exposed to lethal doses of radiation, and we are learning 

through our treatment of people who are being treated for chemotherapy 

and radiation how to deal with those consequences. 

 At Cellerant, we are developing a program that is designed to be a 

bridge therapy for people to control the opportunistic infections and the 

bleeding implications of radiation exposure, and through support from 

NIH and our investors, we have developed a novel product that, through 

peer review research, seems to indicate that it will rescue a substantial 

number of civilians, that it is stable over a long term in a frozen state, 

that can be infused by trained medical technicians, and most importantly, 

that can be administered four to seven days after exposure. If we learn 

nothing else from the experience with Hurricane Katrina, we know that 

we need a lot of time to get to people after a mass casualty situation. 

 I would like to focus specifically on the valley of death, as my 

colleagues have described the gap between NIH and Project BioShield 

funding that affects our ability to do process development, commercial 

scale-up, and clinical trials. The valley of death makes it difficult for us 

to raise capital and there are three instances of Catch 22 I would like to 

outline to you. The first is that without human data, you cannot compete 

for BioShield contracts, but there are no funding mechanisms today to 

support clinical trials for these agents. The second is many agents like 

ours have novel manufacturing problems because they are human cell 

derived, but there is no support for process development in the current 

legislation. In the third, as is evidenced by the current HHS request 

proposals, is that you can’t get paid until after you produce the drugs and 
47

no one in our state can afford to take that financial risk. It makes the 

program a nonstarter. 

 The irony of the situation is that many of the incentives in BioShield 

are for big pharma, but big pharma has little interest in these programs 

because the markets aren’t large enough for them. Small companies are 

different, and we have different needs. Adding as few as ten people is an 

agonizing decision for a company of my size, and we can’t afford to take 

the risk without government support. Our investors place a huge 

premium on our ability to get modest grants from the Federal 

government that reduces the risk for other investors, it helps us manage 

our cash, and it provides scientific validation for other investors. For us, 

big supply contracts are unimpressive because it is not clear we will ever 

see that money. 

 There are solutions to the current situation. Specifically, we 

recommend that the Government find a way to fund the valley of death, 

the ability to process development, scale-up, and clinical trials that exist 

between NIH and HHS, and to reduce the risk of the uncertainty 

associated with some of these very large supply contracts. We think the 

grant process can be streamlined, as it has in other parts of the 

Government, and that we can learn how to rely on peer-reviewed 

published data showing animal efficacy as a basis to fund clinical trials. 

We can involve the FDA in that process, and they have been terrific in 

this regard thus far. We can follow some of the examples from DARPA 

in its ability to provide a commitment to funding, provided milestones 

are met. And I want to make a point about that. 

 In our business, a lot of our funding is based on milestones. We get 

commitments from investors subject to our ability to deliver, and we 

think the Government should follow that model rather than make us 

continuously compete for small grants. If we could get up-front 

commitments subject to milestones, our scientists could focus on doing 

research instead of writing grant applications. It will allow us to 

leverage the money from the Government and go out and raise private 

capital, and it would align our interests with those interests of the 

country. We are not asking for handouts. There is plenty of capital 

available for products that have large commercial opportunities. What 

we are asking for is very modest support to advance programs for the 

national stockpile. 

 Business as usual isn’t working. The need is urgent, the time is 

short, and the capacity of our industry is there. We have the resources 

and we have the talent. What we need is the will to make the required 

changes to the current system so that we can make rapid progress in 

fulfilling the Nation’s need. Thank you very much. 

 [The prepared statement of Bruce Cohen follows:] 
48

PREPARED STATEMENT OF BRUCE COHEN, PRESIDENT AND CEO, CELLERANT 

THERAPEUTICS, INC. 

Summary of Prepared Testimony: 

Cellerant Therapeutics, Inc. has a preclinical product, CLT-008, that is being 

developed for civilian applications for the treatment of infections and neutropenia due to 

radiation therapy and chemotherapy. It also possesses characteristics that make it suitable 

as a treatment for Acute Radiation Syndrome after a nuclear terror incident: 

• It is a safe, universal, off-the-shelf cell based medicine; 

• It can be stored frozen in the Strategic National Stockpile for at least 10 

years; 

• It can be deployed to the site of disaster in high density cold storage; 

• It can be administered up to 7 days post-exposure and still be effective; 

and 

• It can be easily administered to patients by intravenous infusion.

Cellerant has received some modest NIH grant funding to support the development 

of CLT-008 for biodefense, but has identified three major issues with the current 

implementation of Bioshield: 

(1) Project Bioshield (current law) does not provide specific funding mechanisms 

for scale up, process development and clinical trials. 

(2) The current system does not provide sufficient incentives for small, private 

companies and seems to favor large corporations. 

(3) Current law does not encourage innovation.

Cellerant suggests the following solutions: 

(1) Authorize funding, through an existing or new agency, to address pre-clinical 

scale up and cost reduction: the current “Valley of Death” for Bioshield product 

development. 

(2) Authorize a new or existing agency to fund human safety trials for 

countermeasures being developed for Bioshield. 

(3) Establish an improved formal mechanism, other than SBIR, for funding small 

companies engaged in biodefense research and product development. 

Good afternoon and thank you for the opportunity to testify before the 

Subcommittee today. My name is Bruce Cohen, and I am the President and Chief 

Executive Officer of Cellerant Therapeutics, Inc., a clinical stage biotechnology company 

developing adult stem cell based therapies for cancer, genetic blood disorders and 

autoimmune disease. I am presenting this testimony because one of our pre-clinical 

products is also being developed as a universal counter-measure to improve survival and 

treat Acute Radiation Syndrome resulting from a nuclear terror incident. While the 

devastation of such an attack is difficult to contemplate, it is incumbent upon us to 

develop strategies that can rescue as many victims as we possibly can. 

Radiation is an important therapy in the treatment of various cancers. Doses of 

chemotherapy and radiation that damage the blood-forming and gastrointestinal systems 

are frequently employed in the treatment of cancers or preparation for hematopoietic cell 

transplantation. Our product, CLT-008, is a cultured myeloid progenitor cell product that 

we have developed to address a pressing need in medicine – patients with compromised 

immune systems as a result of chemotherapy and radiation treatments. Despite advances 

in medical care, these patients are highly vulnerable to infections and internal bleeding 

with a significant risk of mortality. 
49

From a medical perspective, these patients are very much like those we would 

encounter in the aftermath of a nuclear terror incident such as an attack on a nuclear 

power plant or the detonation of a nuclear weapon smuggled in a container vessel. Much 

of what we know about the impact of radiation on civilian populations is based on our 

experience at Chernobyl. Depending upon the dose of radiation to which a person is 

exposed, a variety of medical problems can ensue with serious organ involvement, 

described generally as Acute Radiation Syndrome, the precise manifestations of which 

will be highly variable and dependent on the nature of the exposure. The most 

therapeutically addressable manifestation of ARS is known as hematopoietic syndrome, 

in which the blood-forming and immune system is damaged. Following a nuclear terror 

incident, civilians and first responders would receive doses of radiation that would 

profoundly damage their blood-forming and immune systems to the extent that they 

would not be able to resist common infections or recover from internal bleeding. Even 

temporary failure of the blood-forming and immune system without adequate medical 

support can be lethal, especially in a mass casualty setting. 

Our extensive studies in preclinical animal models of lethal irradiation have been 

published in peer-reviewed scientific journals and predict that our product, CLT-008, will 

be capable of rescuing a significant number of victims of nuclear terror. Our studies 

suggest that CLT-008 protects against lethal infections and can be administered 4-7 days 

after radiation exposure. Decades of clinical experience in cell cryopreservation and 

infusion predict that our product will be stable in frozen vials for as long as 10 years, 

making it suitable for inclusion in the Strategic National Stockpile. CLT-008 can be 

infused by any medical technician trained in the administration of intravenous infusions. 

Our product offers the potential for a bridging therapy, providing victims with temporary 

immune competence for 30-45 days, allowing them time to seek more durable treatments 

when the situation becomes more stable. 

No other pharmaceutical product, whether approved or in development, is able to 

permanently or temporarily reconstitute the immune system to the degree necessary to 

rescue large numbers of civilians, first responders, or warfighters. Of the limited number 

of products proposed, most would have to be given before or immediately after exposure, 

something that is unlikely to be practical in the event of a catastrophic nuclear terror 

incident. Most medical experts agree that orally-available drugs are unlikely to be 

effective in restoring an immune system which has suffered profound damage from 

radiation. Cell-based medicines, like the one we have under development, hold the 

promise of being able to rescue large numbers of otherwise lethally irradiated victims, in 

a timely manner and with the limited medical capabilities that are likely to be available in 

the aftermath of a nuclear terror event. 

Our experience with the U.S. Government in developing this product as a countermeasure to nuclear terror has been mixed. We have been awarded modestly sized, peerreviewed research grants from the NIH. However, we have been frustrated by the 

limitations of the current system in its ability to support the next stage of development – 

confirmation of safety and efficacy in humans. I would like to outline the limitations of 

the current system and suggest some alternatives. 

(1) Project Bioshield (current law) does not provide specific funding mechanisms 

for scale up, process development and clinical trials. 

While it is technically possible under existing law for the NIH to fund projects 

related to commercial scale-up, process development aimed at cost-reduction, and the 

initiation of human clinical trials, grant mechanisms to support this activity for private 

companies do not exist or are extremely limited in scope. The NIH peer-review grant 

process has been an extraordinary contributor to the advancement of science and 

medicine in the U.S., but it has not focused on translating those discoveries toward 

commercial applications in the private sector. For most medical products, this is 
50

appropriate, as the pharmaceutical industry, venture capital community and public 

investors have been able to make the necessary investments that have made the U.S. the 

world’s leader in biotechnology. However, those sources of capital are not available for 

the development of medical products whose primary customer is the U.S. Government 

through Project Bioshield acquisition. Typical private investors will not assume the risk 

of doing business with the Government, specifically making a large investment in 

research without a firm commitment to make the contemplated purchase. 

Since the current Bioshield program does not allow the Government to enter into 

contracts with companies until they have shown human safety and have a defined, and 

cost-effective manufacturing process, companies like Cellerant find themselves in the 

Valley of Death. That is, we do not have adequate financial resources to move our preclinical programs aggressively into human clinical trials, but without the results of those 

trials, we cannot compete for contracts under Project Bioshield. In addition, to the extent 

we are developing novel agents that have not previously been manufactured, we are 

likely to have production economics that will make the purchase contract unattractive, 

either from the Government’s perspective of total cost or the company’s perspective of 

generating an adequate return on investor capital. 

This Valley of Death funding gap means that, in our case, we have had to slow 

development of our product in accordance with our ability to raise venture capital based 

on a non-Government application of our technology. That funding is available, but it 

takes an enormous amount of time and effort, and our investors are not prepared to have 

us use their capital for a program whose financing is beyond the control of the 

commercial pharmaceutical market. 

(2) The current system does not provide sufficient incentives for small, private 

companies and seems to favor large corporations. 

The current Bioshield program is biased toward the purchase of products which have 

been developed and approved for other reasons and which are being re-directed toward 

biodefense countermeasures. For example, the currently pending Bioshield nuclear 

countermeasure acquisition offer from HHS requires that eligible contractors 

manufacture a minimum number of doses prior to being paid by the Government. That is 

practical for a product which already has a defined commercial market, since the 

inventory could be used for other purposes in the event the Government decides not to 

complete the purchase. For an innovative product like ours, which has higher 

manufacturing costs, the risk of producing a large lot with no guaranteed buyer is 

unacceptable. That risk may well be borne by a larger company with greater capital 

resources, but it discourages small companies from competing. 

The irony of the current system that seems to favor large companies is this: for most 

large pharmaceutical companies, the economics and market potential associated with 

producing biodefense products do not justify the commitment of significant resources, 

because their investors are expecting the development of blockbuster products and do not 

value the financial impact of a Government contract. For emerging biotech companies, 

what appears to be a relatively small market to a larger company may well be considered 

a substantial business opportunity. In addition, investors in biotech companies highly 

value the award of even a modestly sized contract because it is significant relative to the 

company’s cash requirements and because it is seen as a form of scientific validation. 

Small companies are also more efficient in developing innovative new medical therapies, 

particularly for specialty applications. 
51

(3) Current law does not encourage innovation. 

Innovation comes from taking a fresh look at a problem and leads to the 

development of novel entities. The current process unfortunately encourages derivative 

development, i.e., finding new uses for old inventions. Thus, it becomes quite practical 

for a company to identify a new indication for an established drug (e.g., Ciprofloxacin as 

a treatment for anthrax), but the current rules do not encourage small, innovative 

companies to challenge current thinking, create novel paradigms, and make therapeutic 

breakthroughs. 

In our domain, adult-derived cell therapies, we have a very different approach to the 

development of medicines. Our products are based on human cells. The science behind 

our approach has been translated into clinical practice for more than 40 years with 

relatively low risk for toxicity. However, cell-based therapies uniformly incur high 

manufacturing costs since they are derived from human source material and must be 

processed in controlled environments. We do not enjoy conventional pharmaceutical 

economics where the cost of the product itself is relatively modest compared to the cost 

of research and development. Both (a) the inability of the Government to fund research 

related to cost-reducing the manufacture of cellular medicines and (b) the procurement 

policies related to the need to produce numbers of doses prior to getting paid make it very 

difficult for innovative approaches to succeed. Successful translation of scientific 

innovations to protect us from the medical consequences of nuclear attack requires 

innovation in the funding mechanisms. 

We believe that there are a number of solutions to the problems that we and others 

have encountered. 

(1) The first solution would be to specifically authorize funding to address the Valley 

of Death. The Government, either through a new agency, the NIH, or 

HHS/Bioshield, should be able to enter into non-competitive contracts for the 

achievement of very specific tasks, relating to the nation’s priorities in national 

defense, for pre-clinical scale up for promising products that have demonstrated 

potential based on peer-reviewed animal experiments. Competitive review is 

appropriate for early stage work, where it is not possible to determine the 

probability of success except with highly trained peer reviewers. However, the 

rigor of a well established academic and private sector peer-review process, as 

evidenced by publications in major journals or presentation at recognized national 

meetings, can be used to accelerate programs which have already demonstrated 

scientific and clinical merit. There is no need to delay the award of contracts for the 

achievement of very specific purposes by insisting on a prolonged scientific 

competition. 

(2) The second solution would be to direct, not simply authorize, a new or existing 

agency to fund human safety trials for products being developed as priority 

biodefense countermeasures, particularly nuclear countermeasures. While such 

authority technically exists within current authorities throughout HHS and DOD, a 

Congressional mandate to address this key element of the Valley of Death would 

encourage innovation and ensure the participation of smaller companies. The 

Government could easily put into place the necessary controls and require the 

concurrence of the FDA as to the readiness of the product for human trials, a 

rigorous process that has served the industry and our country quite well. 

(3) The third solution would be to establish an improved formal mechanism for funding 

small companies engaged in biodefense research and product development. The 

limitations with the current SBIR program, including the relatively low level of 

funding provided in the first year and the modest levels provided in additional 

years, make this program an inefficient and time-consuming mechanism for funding 

research to address urgent and potentially catastrophic terror events. One such 
52

option would be to provide promising technologies with multi-year commitments 

that would be subject to the completion of specific milestones, in much the same 

way as private investors commit capital contingent on technological achievements 

being met. This would make the grant programs more attractive because the 

promise of milestone-driven funding would then justify the expense and time 

associated with grant preparation, provided, of course, that the technology proved to 

be valuable. 

Throughout the country, there are academic and commercial enterprises that have 

access to extraordinarily talented people and ideas. A modest investment by the 

Government, coupled with the relaxation of a few counter-productive restrictions would 

unleash this capacity and provide the nation with the ability to respond to an event of 

unimaginable consequences. 

Thank you again for the opportunity to testify today. I would be pleased to answer 

any questions you may have. 

 MR. DEAL. Thank you. And Dr. Wright? 

DR. WRIGHT. Thank you, Mr. Chairman. For the record, it is Dr. 

Wright. Mr. Chairman, members of the committee, I welcome the 

opportunity to testify on behalf of the Alliance for Biosecurity and 

commend this committee for its focus on the vital issues of biosecurity 

and the Project BioShield legislation. I am David Wright, Co-Chair of 

the Alliance for Biosecurity, President and CEO of PharmAthene, a 

biotech company focusing totally on biodefense. The Alliance for 

Biosecurity is a consortium of 12 biotechnology and pharmaceutical 

companies committed to promoting a new era in the prevention and 

treatment of severe infectious diseases, particularly those that present 

global security challenges, through innovative and accelerated research 

and development and through production of countermeasures. 

 The majority of medicines and vaccines needed to protect our 

citizens during attack does not now exist, and creating a robust 

biodefense infrastructure and pipeline of countermeasures simply cannot 

be accomplished overnight. The modest number of companies now 

working on biodefense projects are increasingly unlikely to continue to 

invest in this challenging area, absent strong new biodefense legislation 

that supports and facilitates countermeasure development and production 

for our strategic national stockpile. For these reasons, we urge you to 

support passage of focused and strategic biodefense legislation this year. 

 On behalf of the Alliance, I would like to discuss three key areas. 

First, clarity in establishing a central authority is necessary. Currently, 

there is a littering away of agencies and overlapping conflicting 

authorities over biosecurity. A biodefense structure that streamlines 

decision-making and identifies a clear point of accountability within the 

Government is urgently needed. The Alliance supports a restructuring of 

the current process that creates a clearly identified centralized biodefense 

authority. The centralized authority should coordinate with NIH to 
53

identify and prioritize early countermeasure development, fund advanced 

development of promising countermeasures, the period which has been 

referred to here as the valley of death, and oversee all strategic national 

stockpile procurement. 

 Second, building a partnership between the Government and industry 

is a critical component to the success of Project BioShield. The 

development of bioterror countermeasures is a very risky endeavor, even 

more risky, in fact, than traditional pharmaceutical development for 

several reasons. There is only one customer, the U.S. Government. 

Procurement funds are limited, and only one or a limited number of 

products per category will actually be purchased. It is therefore crucial 

that DHHS outline publicly its priorities across all countermeasure 

targets and estimated timelines for procurement. We urge DHHS to 

actively communicate with companies and to include industry thoroughly 

and often in the process. 

 Finally, a real commitment to fund biosecurity is paramount. The 

current reserve fund of $5.6 billion established under Project BioShield 

is insufficient to address all but a few of the pressing biological threats. 

Industry is looking to Congress and the Administration to signal that 

biosecurity preparedness is a national security priority justifying a 

considerable commitment by industry. In order to do this, a major 

paradigm shift is needed in how our Nation thinks about defense against 

emerging infectious diseases that have the potential to be significant and 

destabilizing. We urge this committee to champion a level of funding for 

countermeasure development that is commensurate with the magnitude 

of the national security threat and corresponding requirements. 

Sufficient, sustained funding is absolutely critical to the success of 

Project BioShield. 

 In summary, developing a central authority for biosecurity, 

improving cooperation and communication between the Government and 

industry by forming a real partnership, and committing the necessary 

funding to make meaningful scientific and commercial progress are each 

practical recommendations for improvement. On behalf of the Alliance 

for Biosecurity and its member companies, I respectfully submit these 

recommendations for your consideration. Thank you. 

 [The prepared statement of Dr. David P. Wright follows:] 

PREPARED STATEMENT OF DR. DAVID P. WRIGHT, PRESIDENT AND CEO, PHARMATHENE,

ON BEHALF OF ALLIANCE FOR BIOSECURITY

Mr. Chairman, Members of the Subcommittee: I welcome the opportunity to testify 

before you today on behalf of the Alliance for Biosecurity and commend this committee 

for its focus on the vital issue of biodefense and Project BioShield legislation. 

I am David Wright, Co-Chair of the Alliance for Biosecurity and President and 

Chief Executive Officer of PharmAthene, a biotechnology company specializing in the 
54

development and commercialization of biological and chemical defense countermeasures. 

The Alliance for Biosecurity is a consortium that includes the Center for Biosecurity of 

the University of Pittsburgh Medical Center and 12 biotechnology and pharmaceutical 

companies committed to promoting a new era in the prevention and treatment of severe 

infectious diseases -- particularly those that present global security challenges -- through 

innovative and accelerated research, development, and production of countermeasures. 

The Alliance includes companies focused on infectious disease like GlaxoSmithKline, 

Chiron, and Pfizer. Other member companies, such as Acambis, VaxGen, and BioPort 

have been successful in garnering contracts under Project BioShield and its precursor 

programs, while members like PharmAthene and other Alliance companies are poised to 

compete for new procurement contracts. We believe that based on this considerable 

collective experience, the Alliance is well positioned to address lessons learned from 

current implementation of Project BioShield and assist in the development of solutions to 

improve the program going forward. A list of our members appears at the conclusion of 

this testimony. 

Project BioShield was a critical first step in demonstrating the government’s 

commitment to biodefense. The Alliance applauds the commitment demonstrated by 

Congress towards this initiative as well as the hard work undertaken by government 

officials to implement a complex new program. Now that the foundation has been laid, 

the Alliance believes that more targeted action, expanded public/private partnerships, and 

clear and accountable leadership is needed to provide the support and incentives 

necessary to develop the robust biodefense industry as envisioned in the original 

BioShield legislation. The majority of medicines and vaccines needed to protect our 

citizens during an attack do not now exist, and creating a robust biodefense infrastructure 

and pipeline of countermeasures simply cannot be accomplished overnight. The modest 

number of companies now working on biodefense projects are increasingly unlikely to 

continue to invest in this challenging area absent strong new biodefense legislation that 

supports and facilitates countermeasure development and production for our nation’s 

Strategic National Stockpile. For these reasons, in considering the reauthorization of 

certain provisions under the current Project BioShield Act, we urge you to support 

passage of focused and strategic improvements to this critical biodefense legislation this 

year. 

On behalf of the Alliance, I would like to discuss three key areas, which, if 

addressed, could significantly advance the biodefense market and the availability of 

critical countermeasures to protect the American people. 

 

• Clarity in Establishing a Central Authority

The first issue involves clarifying who is in charge and ensuring that the responsible 

Government agencies understand the intricacies and challenges of drug development. 

Such a critical knowledge base should inform the Government’s research, development 

and procurement decisions. Currently, there is a bewildering array of agencies with 

overlapping and conflicting authority over biosecurity. A biodefense structure that 

streamlines decision-making and identifies a clear point of accountability within the 

government is urgently needed. The Alliance supports a restructuring of the current 

process that creates a clearly identified centralized biodefense authority. The centralized 

authority should coordinate with NIH to identify and prioritize early countermeasure 

development, fund advanced development of promising countermeasures (the period 

sometimes referred to as the “valley of death”) and oversee all SNS procurement. This 

central authority could also coordinate closely with DHS on the threat assessments. It is 

absolutely critical that the new central authority be led and staffed by people who are 

knowledgeable about commercial drug development, including medicine and vaccine 

research and development, clinical testing, and manufacturing processes. A major influx 

of personnel with expertise and experience in drug development would greatly improve 
55

the central authority’s ability to work quickly and efficiently with industry to acquire 

needed countermeasures for our nation’s stockpile. Ideally, such people would also have 

experience with biodefense drug development and some experience with non-clinical 

testing under the FDA’s “Animal Rule”. 

These changes could be accomplished through, for instance, the establishment of the 

proposed Biomedical Advanced Research and Development Agency (BARDA) in Senate 

bill 1873 if it were explicitly given clear authority, or through other administrative 

mechanisms. 

In March, Secretary Leavitt indicated in testimony before the Senate his intention to 

restructure the Office of Public Health Emergency Preparedness to improve the 

efficiency of development and procurement of countermeasures. He expressed a 

willingness to work with Congress on these changes and we strongly desire and hope he 

will reach out to industry as well. I emphasize that we will only be successful in this 

endeavor if government and industry work together in partnership. This brings me to my 

second recommendation: 

• Building a Partnership Between Government and Industry 

This is another critical component to revitalizing Project BioShield. The 

development of bioterror countermeasures is a very risky endeavor, more risky in fact 

than traditional pharmaceutical development for several reasons: there is only one 

customer – the US government, procurement funds are limited and only one, or a limited 

number of products per category will actually be purchased. It is, therefore, crucial that 

DHHS work with industry to communicate in a transparent fashion its priorities across all 

countermeasure targets, estimated timelines for procurement, and expected procurement 

quantities. We urge DHHS to actively communicate with companies and to include 

industry early and often in the process. We wish to closely partner with government to 

accomplish our nation’s biodefense goals. The Alliance believes that improved 

information sharing and partnering between the US government and industry would 

result in more companies entering this market and better products that meet the 

government’s specifications. For example, the new centralized authority could improve 

communication with industry by: 

 Instituting a consistent update mechanism (for example with a list serve or website) 

to alert industry to key activities – issuance of a new Material Threat Assessment or 

Determination, or an upcoming RFI, RFP or other notice. 

 Holding an annual or biannual Advance Planning Briefing to share information on 

current programs, identify new areas of interest, and seek industry partners. DOD 

does this routinely.

 Allowing industry to present data on their technologies to inter-agency working 

groups. The decision-making process for bioterror products is fragmented and 

involves many different agencies and departments. DHHS should provide an 

opportunity for companies with promising technologies to regularly present products 

to the group and engage in a discussion with working group members. These types 

of interactions would help industry to develop products that better meet the 

government’s needs.

 Allowing industry access to data on relevant animal models. Initiating research with 

the appropriate animal model(s) is a key factor in the success of drug development. 

It is also critical in the acceptance of company data by the FDA. Unfortunately, 

there is no direct mechanism to establish communication/relationships with US 

government scientists. Allowing communication between US government resources 

and companies developing products in this area will provide an opportunity for 

industry to more consistently design the animal studies, which are critical in 

determining efficacy. 
56

 Clearly identifying a lead/group/point of contact with specific responsibility for 

interfacing with industry on a daily basis. Maintaining good relations and 

facilitating clear communications with an active and engaged industrial base is 

critical for the success of the BioShield program, now and in the future. 

• Commitment to Fund Biosecurity 

The final point I would like to address today focuses on the U.S. government’s 

commitment to fund biosecurity. The current reserve fund of $5.6 billion established 

under Project BioShield, to be used over a 10-year period, is insufficient to address all 

but a few of the most pressing biological threats. Potential public health disasters caused 

by exposure to known and emerging pathogens must be viewed as a pressing national 

security issue. We know that the raw materials and scientific knowledge necessary to 

develop bioweapons are widely available. The scale of social and economic disruption 

that would be caused by a bioterror attack could be unlike anything in recent US history – 

even the aftermath of Hurricane Katrina. Yet, the current levels of funding for 

biosecurity do not match the threat. Further, discussions among Alliance companies and 

DHHS officials indicate that after only two years into the BioShield program, the paucity 

of funding and limitations on how much can be spent annually is already adversely 

affecting the willingness or perceived ability of government staff to make procurement 

commitments and issue RFPs. 

Industry is looking to Congress and the Administration to signal that biosecurity 

preparedness is a national security priority justifying a considerable commitment by the 

government. In order to do this, a major paradigm shift is needed in how our nation 

thinks about defense against bioterrorism and, at the same time, defense against emerging 

infectious diseases that have the potential to be significantly destabilizing. 

We urge this committee to champion a level of funding for countermeasure 

development that is commensurate with the magnitude of the national security threat and 

corresponding requirements. Sufficient, sustained funding is absolutely critical to the 

success of Project BioShield. Currently, the average chance for a drug that enters Phase I 

clinical trials to eventually be approved is about 8 percent; for cancer drugs, it is about 5 

percent. For companies to face similar odds in developing biodefense countermeasures, 

it is critical for them and their investors to feel confident that the government has defined 

and will support a reliable market for the procurement of the countermeasures. 

If additional direct funding cannot at this point be provided, we urge Congress to 

consider in biodefense legislation indirect incentives that could greatly increase the 

number of companies prepared to invest in countermeasure development. Bioterrorism 

countermeasures are much like drugs intended for diseases that afflict very few people 

(so-called “orphan” drugs), in that neither class of medicine has a sufficient market to 

adequately encourage development. Congress recognized that market-based incentives 

such as additional marketing exclusivity could provide an efficient means of encouraging 

drug development when it enacted the Orphan Drugs Act, and that Act has been 

successful in encouraging the development of new drugs for orphan diseases. In a similar 

way, other forms of incentives could be explored as a means of encouraging the 

development of bioterrorism countermeasures. The Alliance is available to dialogue with 

the Subcommittee to explore such options. 

In summary, if we wish to create and maintain a biodefense industry that fosters 

innovation and investment by the private sector, then we must heed the lessons learned 

from current implementation and apply new solutions to the challenges posed by such a 

marketplace. Developing a central authority for biosecurity, improving co-operation and 

communication between government and industry by forming a real partnership, and 

committing the necessary funding to make meaningful progress, are each practical 

recommendations for improvement. On behalf of the Alliance for Biosecurity and its 

members, I respectfully submit these recommendations for your consideration. 
57

Members of the Alliance for Biosecurity:

Acambis, Inc. 

Caprion Pharmaceuticals, Inc. 

Center for Biosecurity of the University of Pittsburgh Medical Center 

Chiron Corporation 

DOR BioPharma, Inc. 

Dynport Vaccines Co., LLC, a CSC company 

Emergent BioSolutions 

GlaxoSmithKline 

Human Genome Sciences, Inc. 

Idenix Pharmaceuticals, Inc. 

Pfizer Inc. 

PharmAthene 

VaxGen, Inc. 

 MR. DEAL. Thank you. Dr. Blaser? 

DR. BLASER. Mr. Chairman and committee members, thank you for 

inviting the Infectious Diseases Society of America to present our views. 

I am Martin Blaser, President of the IDSA and Chair of Medicine and 

Professor of Microbiology at the New York University School of 

Medicine. 

 IDSA is a national medical society representing 8,000 infectious 

disease physicians and scientists. Today, we highlight the critical need 

for new drugs, vaccines, and diagnostics to detect, prevent, and treat 

naturally occurring infectious disease agents. In particular, we highlight 

our patients’ need for new antibiotics to treat resistant bacterial infections 

as this pipeline is rapidly drying up. As this subcommittee considers 

reauthorization of the BioShield Act, IDSA urges you to strengthen the 

emphasis on products intended to be used against naturally occurring 

infectious diseases, including infections resistant to antibiotics. We ask 

that you consider adding several new incentives to BioShield to spur the 

development of infectious disease products. BioShield guarantees a 

market, but to develop antibiotics for resistant organisms, we need 

broader incentives. 

 In its 2003 report on the BioShield Act, the Energy and Commerce 

Committee linked natural conditions, including antimicrobial resistance 

in dangerous viruses, to natural security concerns. The report stated, 

advancing the discovery of new antimicrobial agents to treat resistant 

organisms may well pay dividends for both national security and public 

health. We agree. In 2004, IDSA issued a report entitled “Bad Bugs, No 

Drugs, As Antibiotic Discovery Stagnates, A Public Health Crisis 

Brews.” Copies of that report are available here today. Our report 

highlights that drug companies are withdrawing from antibiotic R and D. 

As a result, the pharmaceutical pipeline simply is not keeping pace with 

drug-resistant bacterial infections. Antibiotics have saved millions of 

lives for more than 60 years, however, without new R and D, we may 
58

soon be back in the dark ages of medicine. Imagine a world without 

antibiotics; but that is where we are heading. Companies have lost 

interest because antibiotics simply are not as profitable as drugs that treat 

chronic conditions. 

 Most antibiotics are used for short durations and face restrictive uses 

to avoid the development of resistance. Antibiotic-resistant infections 

have created a silent epidemic in communities and hospitals across the 

country. Methicillin staph aureus is crippling and killing a growing 

number of athletes, children, and military recruits. Resistant bacteria can 

strike anyone; the young, the old, the healthy, and the infirm. Resistant 

pathogens lead to higher healthcare costs in part because they require 

extended hospital stays. The hospital care earlier this year for Bryce 

Smith, a 14-month-old toddler from San Diego, cost more than $800,000. 

The total cost of antimicrobial resistance to the U.S. healthcare system 

was about $5 billion in 1998, according to the Institute of Medicine. It is 

believed that true costs far exceed that amount today, since resistance is 

increasing. Importantly, since 1998, FDA has approved only 13 new 

antibiotics, only two of which are truly novel. In 2002, among 89 new 

medicines emerging on the market, none was an antibiotic. 

 In addition to antibiotics, vaccines and diagnostics are needed across 

the spectrum of infectious disease medicines, including to address the 

growing threat of pandemic flu. The impact of an influenza pandemic 

cannot be overstated. The CDC estimates that between 100,000 and 

250,000 U.S. deaths would result from a mild pandemic, and that 

900,000 to two million Americans will die from a virus as bad as the 

1918 virus. Therefore, robust industry R and D programs are urgently 

needed across the spectrum of infectious disease medicine, but market 

forces alone are not sufficient. This is why we need the Infectious 

Disease Research and Development Act, a bipartisan bill introduced by 

Representative Cubin last year. IDSA strongly endorses this bill and is 

particularly grateful to Representative Cubin’s leadership. We 

encourage the committee to consider this bill as it moves forward to 

reauthorize Project BioShield. 

 The Cubin Bill will establish a commission to identify the most 

dangerous infectious disease pathogens and their associated diseases. 

Based on the commission’s recommendations, several incentives would 

be used to spur development of new antibiotics, antivirals, diagnostic 

tests, and vaccines. Until the commission gets up and running, the 

incentives outlined would be available immediately to spur products to 

use against MRSA, acinetobacter, a bacteria that has caused wound 

infections and hospitalized patients, and wounds in U.S. soldiers in Iraq, 

and against influenza. The Cubin Bill includes a number of incentives 

for qualified products, including full restoration of patent terms to 
59

account for the time lost during FDA review; and a tax credit for 

facilities used to manufacture, distribute and for R and D, allowing 

manufacturers to take a tax credit on research expenses. 

 We also encourage the subcommittee to consider three other 

incentives: providing an FDA priority review voucher to companies that 

obtains an approval for a qualified product; extending the patent term on 

qualified products for two years or even six months. We recommend 

strengthening CDC’s Antimicrobial Program by doubling its budget in 

fiscal year 2007 to $50 million so it can better lead our Nation’s response 

to antimicrobial resistance. 

 In conclusion, we cannot take a business-as-usual approach. The bad 

bugs are not waiting and neither should we. The IDSA appreciates the 

opportunity to testify today and to work with your committee. Thank 

you. 

 [The prepared statement of Dr. Martin Blaser follows:] 

PREPARED STATEMENT OF DR. MARTIN BLASER, PRESIDENT, INFECTIOUS DISEASES 

SOCIETY OF AMERICA

Chairman Deal, Ranking Member Brown and Members of the Subcommittee, thank 

you for inviting the Infectious Diseases Society of America (IDSA) to present our views 

on how best to strengthen Project Bioshield as the Subcommittee considers its 

reauthorization. I am Dr. Martin J. Blaser, President of IDSA and a Frederick H. King 

Professor and Chair of the Department of Medicine, and Professor of Microbiology at 

NYU School of Medicine. 

IDSA represents 8,000 physicians and scientists devoted to patient care, education, 

research, prevention, and community health planning in infectious diseases. Our 

members care for patients of all ages with serious infections, including antibiotic-resistant 

bacterial infections, meningitis, pneumonia, tuberculosis, food poisoning, HIV/AIDS, and 

those with cancer or transplants who have life-threatening infections caused by unusual 

microorganisms, as well as emerging infections like severe acute respiratory syndrome 

(SARS). Housed within IDSA is the HIV Medicine Association (HIVMA), which 

represents more than 3,200 physicians working on the frontline of the HIV/AIDS 

pandemic. HIVMA members conduct research, implement prevention programs, and 

provide clinical services to individuals that are infected with HIV/AIDS. Together, IDSA 

and HIVMA are the principal organizations representing infectious diseases and HIV 

physicians in the United States. 

I am testifying today on behalf of IDSA to highlight the critical need for new drugs, 

vaccines and diagnostics to treat, prevent and detect infectious diseases agents. As 

Members of the Subcommittee move forward to consider the reauthorization of the 

Project Bioshield Act, IDSA urges you to extend the statutes’ scope beyond products 

intended to address bioterrorism-related pathogens and apply current incentives to 

products to be used against naturally occurring infectious diseases, including 

antimicrobial resistant infections. We also ask that you add several new provisions to 

Bioshield that will help to eliminate disincentives and to spur infectious diseases product 

development both related to naturally occurring infections and biodefense. 

Members of the Energy and Commerce Committee have shown that they understand 

the connection between naturally occurring infections and bioterrorism and understand 

our nation’s vulnerability. In its 2003 Committee report on the Project Bioshield Act, the 

Committee linked natural conditions, including antimicrobial resistance and dangerous 
60

viruses, to national security concerns. The Report stated “advancing the discovery of 

new antimicrobial drugs to treat resistant organisms ... may well pay dividends for both 

national security and public health.” 

IDSA believes that there is an inextricably linked, synergistic relationship between 

the research and development (R&D) needed to protect against both natural occurring 

infections and bioterrorism agents. Research in both areas seeks to understand how these 

organisms cause disease, the immune system response to these pathogens, the 

development of drug resistance, and how antibiodies and medicines protect against them. 

Moreover, antibiotic resistant organisms that currently threaten Americans in hospitals 

and communities can have future national and global security implications. Virtually all 

of the antibiotic-resistant pathogens that exist naturally today can be bio-engineered 

through forced mutation or cloning. Expanding the government’s product development 

priorities to include naturally occurring infections will enhance the research needed to 

develop bioterrorism countermeasures and vice versa. 

Background

On July 21, 2004, the same day that President Bush signed “The Project Bioshield 

Act”, IDSA issued its landmark report entitled, Bad Bugs, No Drugs, As Antibiotic 

Discovery Stagnates, A Public Health Crisis Brews. Copies of that report are available 

here today. Our report calls attention to a serious public health problem—at the same 

time that emerging infections and antibiotic resistance are increasing, drug companies are 

withdrawing from antiinfective R&D. IDSA is particularly concerned about antibiotic 

R&D, an area in which many pharmaceutical and biotechnology companies have shown 

the least commitment in recent years, either withdrawing totally or seriously downsizing 

their dedicated resources and staff. 

Let me be very clear from the start: IDSA is here today on behalf of patients. We 

are not here at the request of the pharmaceutical or biotechnology industries nor is our 

Bad Bugs, No Drugs advocacy campaign financed in any way by industry. Infectious 

diseases (ID) and HIV physicians on the frontline of patient care see patients every day 

who face lengthy and expensive hospitalizations, painful courses of treatment and even 

death because of drug-resistant and other infections. We are here because our patients 

desperately need new weapons to protect them against these diseases. 

Why Policymakers Should be Concerned

Policymakers have recognized the urgent need to spur biodefense R&D, which led 

to the establishment of Project Bioshield. While concern about bioterrorism is 

appropriate, it is important to keep things in perspective. Not one American has died 

from bioterrorism since President Bush first announced Project Bioshield in February of 

2003, but drug-resistant bacterial and other infections have killed hundreds of thousands 

of Americans in hospitals and communities across the United States and millions of 

people across the world during that same short period of time. 

Here are some surprising facts about the impact of drug-resistant bacterial infections 

in the United States:

• Antimicrobial resistant infections have created a “silent epidemic” in 

communities and hospitals across the country—methicillin-resistant 

staphylococcus aureus (MRSA), for example, is crippling and killing a growing 

number of athletes, children, military recruits, and prisoners. 

• Infections caused by resistant bacteria can strike anyone—the young and the 

old, the healthy and the chronically ill. Theresa Drew recently shared the story 

of her son, Ricky Lannetti, with congressional staff. Ricky, a healthy and 

strong 21-year old college football player from Philadelphia, Pennsylvania 
61

succumbed to an MRSA infection in December 2003. Ricky’s story is just the 

tip of the iceberg. 

• About 2 million people acquire bacterial infections in U.S. hospitals each year, 

and 90,000 die as a result. About 70 percent of those infections are resistant to 

at least one drug. Community-acquired resistant infections also are on the rise. 

The trends toward increasing drug resistance in both hospitals and communities 

show no sign of abating. 

• Resistant pathogens lead to higher health care costs because they often require 

more expensive drugs and extended hospital stays. The hospital care for Bryce 

Smith, a 14-month old toddler from San Diego, cost more than $800,000 in the 

beginning months of 2006. The total cost of antimicrobial resistance to the 

U.S. health care system was nearly $5 billion in 1998, according to the Institute 

of Medicine (IOM). It is believed true costs far exceed that amount today. 

What policymakers should know about pandemic influenza: 

• The impact of an influenza pandemic cannot be overstated. The Centers for 

Disease Control and Prevention (CDC) estimates that between 100,000-

250,000 U.S. deaths would result from a "mild" pandemic and 900,000–2 

million Americans will die from a virus as deadly as the 1918 virus. 

• The Congressional Budget Office estimated that a pandemic could cost $675 

billion and decrease the real gross domestic product (GDP) by five percent. 

• H5N1 avian influenza has spread rapidly in the past few months to more than 

40 countries in Asia, Africa, the Middle East and Europe. Experts agree that it 

is only a matter of time before it appears among birds in North America. 

• H5N1 virus is showing continued evolution, and has infected an increasing 

variety of mammals. A moderate number of human cases continue with a high 

death rate. Fortunately, the virus is not yet capable of easily spreading from 

person to person; should this happen, a dramatic pandemic will occur. 

• Despite the increased attention and progress that has been made in preparing 

for an influenza pandemic, the Institute of Medicine and virtually all experts 

conclude that the United States is woefully unprepared to sufficiently respond 

to pandemic flu and many gaps and challenges remain. 

• Moreover, seasonal influenza accounts for 36,000 deaths and more than 

200,000 hospitalizations in the United States and 250,000 to 500,000 deaths 

globally each year. 

Here are some important facts about other infectious diseases:

• Three of the biggest killers—HIV, tuberculosis (TB) and malaria—account for 

nearly 40 percent of deaths caused by infectious diseases (5.6 million deaths in 

2002). 

• Diarrheal diseases and respiratory infections are equally as deadly, accounting 

for 5.7 million deaths in 2002. 

• More than three-dozen new infectious diseases have been identified since the 

1970s that have impacted the United States and more vulnerable countries, 

including HIV/AIDS, SARS, West Nile virus, Lyme disease, hepatitis C, a new 

form of cholera, waterborne disease due to Cryptosporidium, foodborne disease 

caused by E. coli 0157:H7, and a plethora of neglected diseases that primarily 

affect patients in the developing world. 
62

The Product Pipeline is Drying Up 

Infectious diseases are the second leading cause of death in the world and, by far, 

the leading cause of premature death and disability. Unfortunately, many of these 

diseases have no treatment except for supportive care. New medicines and diagnostics 

are desperately needed across all areas of infectious diseases medicine. 

Of particular concern, the pipeline of new antibiotics is drying up. Major 

pharmaceutical companies are losing interest in the antibiotics market because these 

drugs simply are not as profitable as drugs that treat chronic, life-long conditions and 

lifestyle issues. The pharmaceutical pipeline is not keeping pace with drug-resistant 

bacterial infections, so-called “superbugs.” Antibiotics, like other antimicrobial drugs, 

have saved millions of lives and eased patients’ suffering. The withdrawal of companies 

from antibiotic R&D is a frightening twist to the antibiotic resistance problem and, we 

believe, one that has not received adequate attention from federal policymakers. 

A recent analysis published in the journal Clinical Infectious Diseases found only 

five new antibiotics in the R&D pipeline out of more than 506 drugs in development. 

The authors evaluated the websites or 2002 annual reports of 15 major pharmaceutical 

companies with a track record in antibiotic development and seven major biotechnology 

companies. Their analysis revealed four new antibiotics being developed by 

pharmaceutical companies, and only one antibiotic being developed by a biotech 

company. By comparison, the analysis found that the pharmaceutical companies were 

developing 67 new drugs for cancer, 33 for inflammation/pain, 34 for 

metabolic/endocrine disorders, and 32 for pulmonary disease. The biotech companies 

were developing 24 drugs for inflammation/immunomodulators, 14 drugs for 

metabolic/endocrine disorders, and 13 for cancer. 

The end result of the decline in antibiotic discovery research is that the Food and 

Drug Administration (FDA) is approving few new antibiotics. Since 1998, only 13 new 

antibiotics have been approved, two of which are truly novel—i.e., defined as having a 

new target of action, with no cross-resistance with other antibiotics. In 2002, among 89 

new medicines emerging on the market, none was an antibiotic. 

The Institute of Medicine’s (IOM) 2003 report on microbial threats reinforces the 

point, noting that although at first glance the situation with respect to antibiotics currently 

in clinical development looks encouraging, not one new class of antibiotics is in latestage development. “Rather these ‘new’ antibiotics belong to existing classes, including 

macrolides and quinolones, that have been used to treat humans for years,” IOM said. 

Unfortunately, both the public and private sectors appear to have been lulled into a 

false sense of security based on past successes. The potential crisis at hand is the result 

of a marked decrease in industry R&D, government inaction, and the increasing 

prevalence of resistant bacteria. 

IDSA has investigated the decline in new antibiotic R&D for more than three years, 

interviewing stakeholders from all sectors. We have met with officials from FDA, the 

National Institute of Allergy and Infectious Diseases (NIAID), CDC, congressional 

members and staff, executives from leading pharmaceutical and biotechnology 

companies, representatives from public-private partnerships that are focused on infectious 

diseases-related product development, patients, and other stakeholders. 

Based on our investigation, IDSA is convinced that the pharmaceutical and 

biotechnology industries are clearly best situated to take the lead in developing new 

antibiotics needed to treat bacterial diseases. They are the only player with a track record 

of success. Consequently, industry action must become the central focus of an innovative 

federal public health effort designed to stimulate antibiotic R&D. 

Some people have placed the blame for the decline in R&D on the pharmaceutical 

industry, saying that companies should act responsibly and ensure that new drugs and 

vaccines are available as needed. The pharmaceutical industry supports many good 

works pro bono. Some examples include Merck & Co.’s efforts related to River 
63

Blindness; efforts by Bristol-Myers Squibb, Pfizer, and other drug companies related to 

global AIDS; and GlaxoSmithKline’s malaria and AstraZeneca’s TB drug discovery 

initiatives. Nevertheless, companies are responsible to their shareholders and cannot alter 

their fundamental business strategies in ways that would place their bottom lines at risk. 

Drug and vaccine R&D is expensive, risky, and time-consuming. As such, 

companies are most likely to invest in products for which a strong return on investment is 

likely, such as drugs that treat long-term, chronic illnesses, lifestyle issues, and products 

that benefit people in developed countries who can afford to pay for them. Most 

antiinfectives, particularly antibiotics, which are used for short durations (7-14 days), 

face restricted use to avoid the development of resistance, resistance limits effectiveness 

and profitability, etc.; vaccines; and medicines desperately needed in the developing 

world are being left out. 

Spurring Infectious Diseases Product Research and Development 

Policymakers and the public should have no illusions that future pharmaceutical 

charity will be sufficient to address the existing and emerging infectious pathogens that 

threaten U.S. and global health. Instead, IDSA believes the burden is on the federal 

government to entice industry to antiinfective R&D as a means to protect U.S. public 

health and strengthen national security. 

Robust R&D programs are needed to respond successfully to existing infectious 

diseases as well as new threats on the horizon. Market forces alone will not solve the 

current crisis in infectious diseases drug, vaccine and diagnostic R&D—that’s why we 

need innovative public policy changes such as those that have been contemplated in the 

“Infectious Diseases Research and Development Act”, a bipartisan bill introduced by 

Rep. Barbara Cubin last year. IDSA has strongly endorsed this bill and is particularly 

grateful to Rep. Cubin’s commitment in this area. We encourage the Subcommittee to 

consider the bill as it moves forward to reauthorize Project Bioshield. 

The “Infectious Diseases Research and Development Act” will provide incentives 

for pharmaceutical companies and biotechnology companies to invest in research and 

development with respect to antibiotic drugs, antivirals, diagnostic tests, and vaccines 

that may be used to identify, treat, or prevent a “qualified infectious disease product.” 

The bill defines a “qualified infectious disease product” as “any antibiotic drug, 

antiviral, diagnostic test, or vaccine that is developed for the purpose of treating, 

detecting, preventing, or identifying...an infectious pathogen identified by the [new] 

Commission [on Infectious Diseases Product Development, discussed below.]” 

Prior to the establishment of the Commission and its initial report of infectious 

pathogens, the incentives outlined in the bill will be available in the interim to infectious 

diseases products addressing the following issues: 

• methicillin-resistant staphylococcus areus—can infect the heart, bones, lungs, 

and bloodstream. 

• life-threatening gram negative bacteria including, among others:

o Acinetobacter, a type of bacteria that has caused stubborn wound 

infections in at 100 U.S. solders and civilians stationed in Iraq, and is 

an increasing cause of pneumonia in U.S. hospitals. 

o Escherichia coli and Klebsiella species, which are major causes of 

urinary tract, gastrointestinal tract, and wound infections. 

• influenza–of particular note, the bill would entice the manufacture of products 

to treat influenza within the United States borders—an urgent need. 

• Additional infectious pathogens as may be identified by the Secretary of Health 

and Human Services (HHS), in concurrence with infectious diseases clinicians. 

As noted above, the bill establishes the Commission on Infectious Diseases Product 

Development. The Commission is required to identify the most dangerous infectious 

disease pathogens and their associated diseases that are or are likely to become a danger 
64

to public health. The Commission would provide an annual report to Congress, the 

President, and the Secretary of Health and Human Services (HHS) on its findings, 

conclusions, and recommendations, including an updated list of emerging infectious 

pathogens. 

Not later than 90 days after the date of enactment of the bill, the Commission also 

would be required to report recommendations on the actions the Secretary of HHS should 

take to ensure that a sufficient quantity of vaccines and anti-virals are available to treat 

the American population in the event of a pandemic influenza outbreak. 

The Commission would be comprised of 19 voting members appointed by the 

President; 12 members to be appointed from among the leading representatives of the 

infectious disease medical, research, pharmaceutical, and biological communities, 7 

members from the general public; additional nonvoting members would be appointed 

from the leading federal health agencies. 

The Cubin bill also includes several incentives to spur R&D for qualified infectious 

diseases products that IDSA supports. Pathogens/diseases identified by the Commission 

as priorities for action would be eligible for these incentives. IDSA supports that 

following incentives: 

o Full restoration of patent terms to account for the time lost during FDA review 

of a new drug application.

o Fast-track FDA review of designated qualified infectious diseases products.

o Intensified efforts to assist small businesses in conducting end-stage clinical 

trials through NIH small business awards.

o Tax Credits for R&D: Allows manufacturers of qualified infectious diseases 

products to take a tax credit equal to 35% of the qualified infectious diseases 

research expenses for the taxable year. 

o Manufacturing Facilities Investment Tax Credit: Provides a tax credit of 20% 

for a facility that is used for manufacturing, distributing, or for research and 

development of a qualified infectious diseases product.

o Clinical Trial Guidelines for Antibiotic Drugs: Requires the FDA to issue 

guidelines, within one year, for the conduct of clinical trials with respect to 

antibiotic drugs, including antimicrobials to treat resistant pathogens, bacterial 

meningitis, acute bacterial sinusitis, acute bacterial otitis media, and acute 

exacerbation of chronic bronchitis. 

To strengthen the bill further, IDSA would encourage the following incentives be 

considered: 

o FDA Priority Review Voucher—Under this concept, a voucher would be 

provided to a company that obtains an approval for a “qualified product” that 

treats a disease identified by the Commission. The company could then apply 

the voucher to a separate product (i.e., a potential blockbuster) of its choosing 

or, alternatively, the company could auction the voucher to another company. 

The voucher concept was raised in the March/April 2006 edition of Health 

Affairs. The authors say that this concept may reduce FDA’s review time of a 

product by a year, which could be worth "more than $300 million for a 

potential blockbuster". Even if the FDA review time was reduced only by 6 

months, IDSA believes this concept would have merit. A significant advantage 

of this approach is that it would not extend the length of the patent. As such, it 

should not be a threat to the generics industry. Instead, it would permit a 

company to market a product months in advance of when it otherwise would. 

This also would be an advantage to patients as they would be able to enjoy the 

product’s benefits sooner. The Health Affairs articles authors report the cost of 

changing FDA’s review from standard to priority review may be $1 million, 

which could be recovered through a user fee by the voucher user. Of note, 
65

under the authors’ approach, the company would have to forgo patent rights—

this is an idea that IDSA does not support. 

o Extension of Patent Term for Qualified Infectious Diseases Products—

Although fraught with politics, the extension of the patent term of critical 

needed qualified infectious diseases products for 2 years or even 6 months is 

one sure way to pique industry’s interest. There are so few solutions available 

to address the lackluster pharmaceutical pipeline for antibiotics and other 

antiinfectives. It may be time for Congress to consider this idea. 

o Tax Credits for R&D—IDSA would suggest increasing the amount of the tax 

credit for R&D in the Cubin bill to 50% to mirror the amount provided to 

orphan drugs under the Orphan Drug Act. IDSA also would suggest applying 

this tax credit to preclinical research as well as product clinical research and 

development. 

o Protocol Assistance—In addition to the development of clinical guidelines by 

FDA, we also would support the agency’s provision of additional protocol 

assistance similar to what is provided with regard to orphan drugs. 

o Waiver of User Fees—We would support the waiver of all user fees related to 

FDA review of qualified infectious diseases products. 

o Antitrust exemptions—additional flexibility for certain company 

communications is needed. 

o Guaranteed Market—While it can be loosely argued that Project Bioshield may 

be applied already to naturally occurring resistant organisms, it is not likely that 

the Administration will view such infections as priorities unless Congress 

strengthens its emphasis in this area. 

o Funding for CDC’s Antimicrobial Resistance Program—Although it may be 

outside the scope of the Subcommittee’s reauthorization effort, we appeal to 

you to help strengthen CDC’s resistance program so that the agency may better 

lead the nation to respond to the silent epidemic that antimicrobial resistance 

has created. A multi-pronged approach is essential to limit the impact of 

antibiotic resistance on patients and public health. For this reason IDSA 

supports a $25 million increase in this program to a total commitment of $50 

million in FY 2007. This will enable CDC to expand its surveillance of clinical 

and prescribing data that are associated with drug-resistant infections, to gather 

morbidity and mortality data due to resistance, to educate physicians and 

parents about the need to protect the long-term effectiveness of antibiotics, and 

to strengthen infection control activities across the United States. Broadening 

the number of CDC’s extramural grants in applied research at academic-based 

centers also would harness the brainpower of our nation’s researchers. 

Conclusion

The reauthorization of Project Bioshield provides a critical opportunity to spur the 

development of new tools to protect Americans and the global community against the 

scourge of infectious diseases, particularly antibiotic resistant organisms, and 

bioterrorism. We urge congressional leaders to show bold leadership as it renews this 

legislation. 

Specific to antibiotics, the past two decades of antibiotic development clearly have 

demonstrated that we no longer can rely on existing market forces to keep companies 

engaged in this area of drug discovery and development. Should additional companies’ 

antibiotic R&D infrastructures be dismantled, it will take years to establish new 

programs—or this expertise could simply be lost forever. New antibiotics are desperately 

needed to treat serious as well as common infections. The bacteria that cause these 

infections are becoming increasingly resistant to the antibiotics that for years have been 

considered standard of care, and the list of resistant pathogens keeps growing. It is not 
66

possible to predict when an epidemic of drug-resistant bacteria will occur—but we do 

know it will happen. 

Drugs, vaccines and diagnostics also are needed across the spectrum of infectious 

diseases medicine, including to address the growing threat of pandemic influenza. 

Conquering AIDS, TB, malaria, the neglected diseases found primarily in developing 

countries, and the next emerging infection will require renewed vision, creative 

policymaking and righteous action. 

We appreciate the opportunity to testify. We look forward to working with you in 

the coming months to develop federal legislation to spur the tools infectious diseases 

physicians need to treat our seriously ill patients. Thank you. 

 MR. DEAL. Thank you. Very interesting testimony. Let me start 

with a few of the issues that each of you sort of touched on. Mr. Wright, 

you said that the first principle that you would suggest to us is clarity in 

establishing a central authority, and in my earlier questions to the first 

panel, I sort of overviewed the relationship and the roles DOD, 

Homeland Security, and HHS each play in the current structure. Are you 

suggesting by this recommendation that the current bifurcation of those 

functions is not appropriate and should be consolidated, is that what you 

are saying? 

 DR. WRIGHT. Yes, sir, the Alliance believes that the way it is 

currently being done, there are just too many players involved with too 

many different agendas, and there is not a clear person or place that 

Congress can go to and say, why don’t we have this? It goes from one to 

the other. The DOD actually has a process that is much clearer and has 

worked for years in the procurement of products which there are no other 

markets for. 

 MR. DEAL. If you were to recommend where you think that 

consolidation should occur, do you have any recommendations? 

 DR. WRIGHT. Boy, that is a loaded question. No, I really don’t. I 

actually think it probably belongs in the NIH as a separate committee. 

 MR. DEAL. Have any of the panel members had any opportunity to 

compare the different methods that are used, the DOD process versus the 

HHS process, with respect to countermeasure development? And if you 

have had that opportunity to observe the two approaches, do you have 

any comments you would like to make about those? 

 MR. COHEN. Mr. Chairman, if you are speaking of through DOD, I 

could speak to the way DARPA does it, which is very different from the 

way HHS does it. In a previous company, we were able to secure a 

multi-year commitment from DARPA for a countermeasure; it was an 

antibiotic. It was a fast process that involved the submission a rather 

modestly sized white paper that they used to compare the applications to, 

and was followed by a very large grant application. But the key 

difference was that the money was committed for three years, subject to 

ability to meet certain milestones, and we took that award and turned 
67

essentially a $6 million grant into about $50 million of private equity 

capital. That was very helpful to us raising money to build a program. 

 Within HHS and NIH in particular, you have to do very complicated 

grant applications that can be for as little as $200,000, and then a year 

later you get to apply for more money and each process takes a year. It 

has uncertainty related to the peer review process and also the 

appropriations process, and so you can’t take those awards to investors 

and say I am going to take part of the risk off your shoulders and put it 

on the Government’s. So that ability of the Defense Department, 

through DARPA at least, to give you a commitment subject to your 

meeting certain milestones makes a huge difference in our ability to raise 

what is substantial outside capital. 

 MR. DEAL. Which was the model that you suggested in your 

testimony? 

 MR. COHEN. Yes. 

 MR. DEAL. Mr. Young. 

 MR. YOUNG. This doesn’t presume to make a structural or 

organizational recommendation and, to the little bit of familiarity I have 

with how DOD historically has approached vaccine development, I am 

not sure that that is the model I would recommend. But I think what it 

does suggest, from an industry’s perspective, you would approach this 

with three paramount criteria in mind. You would want people involved 

who had an intimate understanding and experience level in the objective 

in question, which is actually practical development of products. There 

are wonderful people, expert scientists, dedicated and experienced civil 

servants and public health officials that inhabit many of these agencies, 

but there aren’t many people who have actually developed products 

successfully in an industry setting, and that is a time consuming, very 

sophisticated process that requires a lot of judgment and the ability to 

handle a constantly evolving landscape towards a reasonably certain and 

clear ultimate product target. 

 On that point, I think what is clearly missing now is something to 

address the compartmentalization. You can get early stage funding, you 

can get late stage procurement support, but there is no coherent 

integrated picture of the whole development process that is evident to an 

industry participant in the effort. Thank you. 

 MR. DEAL. Thank you. Mr. Wright, my time is up, so maybe 

someone else will pursue this further. Ms. Eshoo, you are recognized for 

questions. 

 MS. ESHOO. Thank you, Mr. Chairman, and I want to thank all the 

panelists. I think that you have done an excellent job and you have also 

set some of the seeds popping in my mind. I think, first of all, and this is 

an observation, Mr. Chairman and my colleagues that are here today for 
68

this hearing, I think what is lacking in all of this is a real sense of 

urgency, and, Dr. O’Toole, you spoke so eloquently to that. There is a 

rhetoric war, and we know it and we hear it, and there is urgency to it. 

There isn’t in this program. If we were to parse out in the Department of 

Defense whether there should be tanks or munitions or whatever, there 

would be a great deal of dissention in the Congress and in the country 

over that, and yet we are doing that with a program that deserves the 

same kind of defense, so to speak. We have now lived through and 

witnessed the disorganization within a Government agency, Homeland 

Security, in response to Katrina, and I can’t help but think that we are not 

prepared. We are not prepared if, God forbid, any of these catastrophes 

were to be visited upon the United States. And so I think more than 

anything else, the way for the committee to approach this is with a great 

sense of urgency. If, in fact, we do that, then it is not going to be--and I 

am paraphrasing Dr. O’Toole--a stockpile of medicines. It is going to be 

larger than that. 

 The second point I want to make here and what I have learned from 

the panelists is, is that whatever dollars are in the pot, the Federal pot, 

they are really not being used as the right kind of magnet for the private 

sector to develop what needs to be developed. It is not working. I mean, 

there is the valley of death, all the other things that have been described. 

So the opportunity costs for the private sector are just too great in order 

for them to be attracted to do anything relative to this effort. So I think 

in some ways we are kidding ourselves. I think the program is aptly 

named, but it seems to kind of fall apart after that, and I am not saying 

that the people involved in it are not earnest. They are solid public 

servants, they want to do the right job. I think this committee, Mr. 

Chairman, needs to begin to redirect this. The whole notion that the 

Government is the only customer, we need to understand that, and that 

the companies are not going to engage in, as Bruce Cohen said, the 

companies are simply not going to be able to engage in it. Especially 

small companies, biotech companies, are not going to be able to engage 

in this, because they don’t have the capital to do it. So if we don’t 

capitalize on the issue that is before us with a great sense of urgency, 

then I think we are going to have a lot more hearings with reports that 

don’t have the sense of urgency that they need to have. 

 Now, anyone who wants to chime in, I mean I am putting the ball in 

your court, but I think your testimony has been outstanding, and I think 

that you have, for me at least, struck a match here and cast some light on 

it. I think this needs to be revisited in a very serious way. How much 

more funding do you think is appropriate in this program? Anyone from 

the panel, Dr. O’Toole? 
69

 DR. O’TOOLE. I think we are off by about a magnitude of order, so 

ten times as much. But you know, part of the problem, I think you are 

right, one does not perceive this sense of urgency when you are looking 

at the HHS program from the outside. Part of the problem is that the 

urgency, the need to get something in the stockpile fast, is at war with the 

complexity-- 

 MS. ESHOO. Yes. 

 DR. O’TOOLE. --of creating new drugs and figuring out what drugs 

we ought to be buying for the stockpile and what we ought to be 

investing in, in the future. These are new problems for the Government 

and they are new problems for the world. There isn’t a prototype out 

there for how to do this. So HHS is in the position of inventing new 

processes for high stakes decisions, you know-- 

 MS. ESHOO. Is that what the plan was that was alluded to or 

mentioned earlier from the first panel? 

 DR. O’TOOLE. That was the first I have heard of the strategic plan. 

It is a good idea to have a strategic plan. 

 MS. ESHOO. But it is the first you have heard of it? 

 DR. O’TOOLE. Yes. 

 MS. ESHOO. So you all are the modern day defense contractors. I 

think that is the way we have to think of this. I think that is the way we 

need to be thinking of this. Yes. 

 DR. BLASER. I would like to mention, from the standpoint of the 

Infectious Diseases Society, we also believe it should not be business as 

usual. We have to move things up a magnitude. 

 MS. ESHOO. Yes. 

 DR. BLASER. I am reminded of two analogies. One is the Manhattan 

Project where $2 billion in 1940 dollars were given for a major problem 

in national security. We were fighting a war then. In today’s dollars, 

that is probably $20 billion. I think that is the scale we should think 

about. The other analogy is Katrina. We know that hurricanes occur, we 

don’t know when, but we have to build up the infrastructure to protect 

us. In most years, the levees don’t do us any good, but when we need 

them, we need them, and antibiotic resistance is the level of the water 

rising and influenza is the big storm. So when we put those together, we 

need to have that infrastructure of research and development for 

bioterrorism, for flu, for antibiotic resistance. They are all related. 

 MS. ESHOO. Bruce, did you want to say something? 

 MR. YOUNG. I would just add that there is another underlying 

difficulty here for the Government, is how does the Government bet on 

innovation? 

 MS. ESHOO. Yes. 
70

 MR. YOUNG. It is intrinsically risky. The way the private sector 

does this, it expects, it knows that within a portfolio of effort, it is going 

to have failure. I think it is very difficult in this climate to spend this 

kind of money and not say, what are we getting for the money, when you 

can predict that a significant percentage of what you are going to get is a 

dry well. But if you don’t do that, if you don’t have a culture and an 

approach and a willingness to embrace the risk, you will get no change, 

no improvement, no innovation. 

 MR. COHEN. I would like to speak to Congresswoman Eshoo’s point 

about the defense analogy. Right now, we are stuck in a place where you 

can either get a very tiny and insignificant amount of money, or you have 

to bet on a $700 million contract, and that isn’t the way the defense 

industry basically built Silicon Valley. At least those of us from 

California know that you make relatively modest sized grants and 

contracts, you take lots of bets, and we are not talking about tens of 

millions of dollars, but that enables people to go do interesting 

innovation. But it also, as we have learned, draws private capital in, and 

the system right now is not drawing private capital because it is too 

unpredictable and the amounts of money are in the extreme, they are not 

in the middle. And that can be changed. It is not that hard to do that. 

Some of us have products that have crossover applications and some 

don’t, but regardless of the degree to which there is a so-called civilian 

application for what you are doing, the ability to get the private capital 

into the game is really essential and that can be fixed. 

 MR. DEAL. Thank you. Very interesting question and comments. 

 MS. ESHOO. Thank you, Mr. Chairman. 

 MR. DEAL. Mr. Shimkus? 

 MR. SHIMKUS. Thank you, Mr. Chairman. And if we have 

accomplished one thing, we have struck Anna Eshoo’s match and as I 

know from past activities, when you do that, you really do get a 

response. I will just go back to our E-911 aspect. She was complaining 

about the fact that you couldn’t find people years before it became a d’ 

jour item, and now we are almost getting to a point where with your cell 

phone, people now know where you are at. And I don’t want to 

harangue my colleagues, but you know, look at this committee hearing 

room. You know, you have interested Members, but we ought to have 

more here if it is that serious of an issue and we don’t and so that is part 

of the dilemma. I always talk about raising capital. Really, most 

businesses borrow, go to the private equity markets, go to Wall Street, 

assume a risk, hoping to get a rate of return. Well, you all are doing it 

for hopefully no consumers. I mean, in a perfect world, we have the 

ability to respond, but we never have to use it, and so then that is the 

ultimate risk. All this money poured out and no return, so that is far as I 
71

read it, that is this valley of death and how do you bridge that. And you 

know, Mr. Cohen, I really appreciated your comments, because there has 

got to be a way if we addressed a couple things. 

 By centralizing this whole operation, maybe we can target individual 

grants, which then would incur private capital and you leverage that, and 

we do that on water projects, in fact, you almost want that, because you 

want people empowered to it. You just don’t want the Federal 

government doing it. You want to incentivize other folks. And I think 

we have a problem with this monetary debate. We need a magnitude of 

10. Well, a magnitude of ten of what, the $5 billion that we have 

authorized but have only spent one, or $50 billion, $50 billion or, as I 

have come to know, we have got $5 billion now, but we have got $2 

billion in the NIH budget, we have got DOD dollars, so I think there is a 

lot of money out there. But, because we are not centralized, we are not 

maybe effectively using it or at least we don’t know where it is at. 

 But you have brought up a lot of good debate for us to get our hands 

on this, because the public is just not going to accept our response that 

we had a hearing and the country is not prepared to respond. Dr. Cohen, 

I don’t want to get off on an issue, but I am also interested in knowing 

where do your adult stem cells come from? 

 MR. COHEN. In the case of the part that we are talking about for 

nuclear countermeasures, they come from donors. 

 MR. SHIMKUS. I mean, is it blood, is it teeth, is it adult fat, tissues, 

where? 

 MR. COHEN. It is called mobilized peripheral blood and we pay 

people to essentially donate blood and we extract stem cells from that. 

 MR. SHIMKUS. Now, in just using that as an example, one of the 

concerns is, as I mentioned before, how do you have an antidote or a 

drug for immediate application? What is infectious time? And then, is 

there a debate on how you can rapidly create it? Do we have to have a 

stockpile of all this stuff or, through research and development, can we 

have dispersed sites that can rapidly deploy and make antidotes in a 

timely manner? I mean, I don’t know. I am not a doctor. So, in your 

field, which is radiology and the aspects, do you have to have stuff on 

hand? 

 MR. COHEN. Well, first of all, I am not a doctor, either, but in the 

treatment of radiological injury, because we treat those patients when 

they undergo chemotherapy or radiation therapy, we know a lot about the 

time between exposure and when you have to treat. 

 MR. SHIMKUS. And that is why you have a private application which 

people are willing to invest capital in? 

 MR. COHEN. That is right. And so what it appears from the animal 

models that we have done, and I think clinical experience is you can 
72

imagine the national stockpile some place in a cave where it is safe, 

where you could store enough doses that you get to the affected area 

within, say, four to seven days. And if you use a cell-based medicine, 

which is a regenerative therapy, then you have the ability to wait that 

much more time before you treat the patients, so you don’t have to have 

it deployed in their house, and that is only for radiological injury. What 

would happen in practice is that they would be stored frozen, and it 

appears, based on perhaps 30 years of experience, that this, a cellular 

product, is safe for at least a decade in a frozen state. Then you would 

have it transported to the site of the incident, and it would be 

administered by the kinds of people who work as emergency medical 

technicians in ambulances who can do simple infusions. In animal 

models, this rescues a substantial number of animals, not everybody, 

because sometimes you get too much radiation and nothing works and 

there is some population, and the Government has this all sort of worked 

out, what the radiological dose would be. Some people would survive 

with basic antibiotic therapy. Some people wouldn’t survive. We are 

focused on the middle of people who are rescuable but otherwise 

wouldn’t, and I think the only real live experience of that is Chernobyl, 

and most of the people at Chernobyl died of what is called hematopoietic 

failure, too many of their stem cells died to populate their immune 

system, and we know pretty certainly you can replace that with a cellbased medicine and you should have enough time to get there. 

 MR. SHIMKUS. And I appreciate that. It just highlights one other 

question I was going to ask and I am just going to throw it out there. I 

still think that in the previous panel, Mr. Chairman, they talked about the 

local health providers being able to, then ramp up the thing in the local 

health providers. Well, if you have a nuclear explosion in a major 

metropolitan area, that is similar to a Katrina, where you just overwhelm 

the local providers and that is where the national debate, and I know we 

have got this issue about the military intervening. But I am an Army 

infantry airborne guy, so you parachute the 82nd in, they set up their 

field hospitals, they receive the drugs and then they try to do that in an 

expedited manner, which is more efficient than if you try to cobble 

together the first-line responders who, in a large geographical area, could 

be all gone and that still has got to be part of this debate. And I do agree 

with, again, my colleague, Anna Eshoo, we should take the lead and even 

though it is not hip and not cool, but we ought to pursue this, Mr. 

Chairman, and I thank you for the hearing and I yield back. 

 MR. DEAL. I thank the gentleman. Dr. Burgess. 

 MR. BURGESS. Thank you, Mr. Chairman. And you know, the 

timeline that is before us with, say, avian flu is something none of us can 

know, but there is reasonable evidence that, because of the migratory 
73

flyways, this hemisphere could see its first outbreak in northern Canada 

midsummer, August, in the southern tier of Canadian provinces, and 

three weeks before Election Day in East Texas and Georgia. So it is not 

just a theoretic application that we are talking about here, and we do need 

to be prepared. And it is difficult to get Congress mobilized, but I 

appreciate your efforts in this hearing to do that. 

 Dr. Wright, I will just say I sympathize with you when you told the 

Chairman that the whole process was too diffuse, and there was no 

jurisdiction. You can imagine my surprise of getting to here that there 

was no committee on health that I could join. I looked around for it for a 

long time, but I finally found a home here on Energy and Commerce and 

I was grateful for it. But even amongst our subcommittee, we have 

division of labor with some other committees and it does make 

inherently difficult to do at the congressional level. And at the same 

time, the world is a menacing place and we do need to be able to move 

with a great deal more facility, and I do appreciate the comments of all of 

you today. Ms. Eshoo spoke about the urgency. Unfortunately, the 

urgency may be provided for us, and I hope that is not the case, but 

certainly there are scenarios that are being modeled out there right with 

computer simulation that dictate that there may be more urgency to the 

avian flu than any one of us would like to admit. 

 Dr. Blaser, I was intrigued by one of the comments you made about 

the antibiotic-resistant bacteria and how, perhaps, one of the tools at your 

disposal might be to lengthen the time in patent for development of some 

antibiotics and I wondered if you had some additional thoughts for us 

about that. 

 DR. BLASER. The urgent need is to develop new antibiotics for 

resistant organisms. That is where our great focus is and our 

recommendation, which is completely consistent with Representative 

Cubin’s bill, is to develop a national commission that will recommend to 

HHS situations in which we need to develop qualified products. And for 

those qualified products, for those targeted areas, then we would offer a 

package of incentives to bring our industrial, our biotech, and our small 

and big companies back into the marketplace so that it is economically 

viable. We are interested in a variety of approaches, including tax 

credits, including expedited review, including patent extension for those 

qualified products. 

 MR. BURGESS. But those things wouldn’t necessarily just be under 

the purview of Project BioShield, right? Those are for any drug out there 

on the development horizon. 

 DR. BLASER. Well again, our interest is in what we would call these 

qualified products. They could be for pandemic influenza as part of the 

pandemic flu preparedness, it could be for antibiotic resistance, it could 
74

be for bioterrorism. Right now, under BioShield, there is an apparatus in 

terms of the Government being a single supplier, but listening to the 

testimony today, I am impressed by the need to have middle level kinds 

of support, not tiny ones and not the mammoth ones, but develop a very 

broad pipeline. Now that is our strength in America and we can’t predict 

exactly where the great innovation is coming from. We need to seed it 

broadly. 

 MR. BURGESS. Well, Mr. Cohen, in your discussions of your 

product to protect people from radiation, from the hematopoietic 

syndrome, it sounds to me like you are talking about the Phase III trials 

that your company is finding difficult to getting funding. Is that correct? 

 MR. COHEN. No, in our case, we can’t get the Phase I trials funded, 

so-- 

 MR. BURGESS. You are getting some help from NIH? 

 MR. COHEN. We have grants from NIH for preclinical research. 

And while, technically, NIH can fund clinical trials, it doesn’t, and 

BioShield doesn’t, and those trials cost several million dollars which, for 

a company of my size, is a substantial amount of money. 

 MR. BURGESS. I thought it cost several hundred million dollars, in 

actuality. Is that not correct? 

 MR. COHEN. Not necessarily. So the Phase I trials are several 

million dollars and the Phase II trials can be perhaps ten times that. 

 MR. BURGESS. Right. 

 MR. COHEN. BioShield can, under the current law, you can get 

approved without a definitive Phase III trial, particularly if the 

application is to something you can’t test for. 

 MR. BURGESS. I see, okay. 

 MR. COHEN. So we may not be needing to go to this sort of gigantic 

trial that people contemplate in our industry, typically, so I don’t think 

we are talking about that. And if we were going to do a trial that big, it 

would probably be because we had a private market, and then that would 

be something private investors would pay for. 

 MR. BURGESS. So they could absorb some of it. Yes, Dr. Wright? 

 DR. WRIGHT. However, in a vaccine, even in BioShield, you are 

going to be looking at 2,000, 3,000, 5,000 patients in a Phase I safety 

trial. We are developing a product for anthrax. We are right now, we 

have finished our first Phase I trial. We are in the process of having to 

go to scale-up. There is no RFP. There is no commitment to buy. We 

don’t know how much the Government will buy. Our venture capital 

partners are backing out from funding us because there is no market, 

there is no active RFP, and the company needs to spend $12 million to 

do a tech transfer in a scale-up to be ready to manufacture it so we can do 

our final proof of principal trials. We are not alone in that. This is a 
75

scenario of every company in this industry. It runs from a scale of $20 

million to probably $300 million that is needed to fund this middle area. 

But also what is needed is to know on the end that there is a market for 

your product. There has got to be an RFP out there saying, hey, if you 

do this, we will buy your product, otherwise, venture, the street, and 

private capital will not come in. That is missing from the current 

BioShield legislation. 

 MR. BURGESS. Thank you, Mr. Chairman. I will yield back. 

 MR. DEAL. Mrs. Cubin. 

 MRS. CUBIN. Thank you, Mr. Chairman. I was taken by your 

testimony, Dr. O’Toole, when you said what I believe to have been that 

stockpiling isn’t the only answer, and I certainly believe it isn’t the only 

answer. So I wonder, do you think that methodology--and I am speaking 

in reference to R and D done on antibiotic, new antibiotics like we have 

talked about a little bit and that Dr. Blaser talked about that my bill 

would help facilitate development of. Do you think that methodology or 

a new research-type roadmap or something produced through the R and 

D on mutated microorganisms could be used to find countermeasure 

development treatments for bioengineered weapons? In other words, you 

know, it seems to me that what we learned from treating these mutated 

microorganisms, if we found the gene in MRSA, for example, that 

caused it to mutate, could that information be translated and used to help 

develop potential treatments for bioweapons? 

 DR. O’TOOLE. Well, increasing the store of biological knowledge 

and knowing better how the parts and circuits of living organisms work 

is going to help us across the board. In dealing with bioengineered 

organisms, we are going to have a number of strategies that we are going 

to have to choose between. It may be that some drugs that we never 

thought of using against, for example, antibiotic-resistant anthrax or a 

new kind of engineered virus, would work against this biological 

weapon, but we would have to be able to screen those drugs against the 

weapon very carefully. We could set up a kind of consortium of rapid 

throughput screening and have library banks of current drugs that we 

could turn to in an emergency, if we wanted to do that. That would 

require cooperation amongst the many drug companies who own those 

databanks. We might be able to develop therapies that would boost 

immune response at least for an interim period of time, not necessarily 

like Mr. Cohen’s product does, but along the same lines. You could get 

a kind of generic boost to the immune system to help tide people over 

and get them through acute stages. Or you might, in the future, if we 

were very successful and very ambitious, be able to come up with new 

drugs in very short periods of time, tailor made to fit the bioengineered 

drug. My point is the Nation is going to have to undertake a strategy of 
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radical acceleration of drug development to deal with this threat. If you 

do that, you are going to decrease the cost of drug development 

generally, which is going to have enormous benefits for the cost of 

healthcare, et cetera. I think the problem will be forced upon us either by 

a pandemic flu, maybe of a strain that we do not have a vaccine for, or by 

a bioattack. I think it will come and we are going to have to take it on. It 

would be better if we did it before such a calamity befell us. 

 MRS. CUBIN. Well, and it seems to me that there could be not a 

direct appropriation from the Government, but an influx of private 

investment, if the advantages that are in my bill that Dr. Blaser spoke 

about were made available to pharmaceutical companies. Dr. Blaser, are 

naturally occurring drug-resistant diseases being overlooked by current 

biothreat preparedness today? 

 DR. BLASER. It is a little hard for me to answer that question, so I 

may answer it a little differently and say that we could think that there 

are three threats in front of us, bioterrorism, pandemic and regular 

influenza, and antibiotic resistance. We can just take these as three 

major threats, and for each of these, we have to develop vaccinology, 

antivirals, antibiotics, and new diagnostics, and there is tremendous 

crossover between these fields. As Dr. O’Toole said, what we do in 

bioterrorism vaccinology will help us in influenza and vice versa, and so, 

in many ways, we see these natural or manmade threats as a continuum. 

And like Dr. O’Toole, we think, even though the country is scaling up, it 

is probably not scaling up enough, and we wouldn’t necessarily propose 

to take away from bioterrorism to put into the other. We think this pie 

has to be enlarged and if we don’t do it, it is going to cost us much more 

later. 

 MRS. CUBIN. I certainly agree with that, and I certainly don’t think 

my bill by any means is the only solution. I think it is a piece to an 

enormous puzzle. I would like the rest of you to respond, if you would, 

on how you think a bill like what you have heard described without 

holding you to it, since you haven’t read the details. But theoretically, do 

you think that that could fold into, help with BioShield, and do you think 

that this problem that we are addressing in that bill would actually fold 

into--even though I understand that is not what BioShield does, but 

should it, should we be considering these resistant drugs and the 

mutation of resistant microorganisms and other mutated 

microorganisms? 

 DR. WRIGHT. I think from the Alliance perspective, we have 

discussed this a lot; where does infectious disease and biodefense 

overlap. And there is a tremendous overlap, and it is very hard to rule 

out one having an effect on the other. We believe that the technology 

involved in infectious disease can do nothing but help with the 
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biodefense products that are needed to be developed, especially in the 

area of engineered biodefense or bioterrorism products. And so that is 

when someone takes anthrax and makes it antibiotic resistant. That is 

when this type of bill and the technology could really help out events. 

 MRS. CUBIN. Mr. Young. 

 MR. YOUNG. Thank you. I have an industry infectious disease 

background, it is a little stale, but I think what I would say on this is that 

it sounds to me like a bill that supports the effort to identify new 

technology targets is all to the good so you have a pipeline of new 

scientific insights coming to bear that can be used to develop practical 

applications. My concern, however, is that I think the experience of 

BioShield so far to date is that the agencies involved have insufficient 

focus on the practical requirements of product development where there 

are some product opportunities a little further down the pipeline in the 

development pathway. NIH has experience in early stage research. 

They have migrated laterally into product development, but that expertise 

is still substantially undeveloped and we have talked a lot about the 

coordination to try and fill the gaps, the funding to support the gaps, to 

move the product opportunities along. So I would agree with the 

perspective that says this is a big puzzle, it is woefully underfunded, and 

that what you are describing should be a piece of the puzzle. 

 MRS. CUBIN. Mr. Cohen, did I see you raise your hand? Okay. Dr. 

O’Toole. 

 DR. O’TOOLE. I would just say that a drug-resistant bacteria makes a 

great weapon. 

 MRS. CUBIN. Thank you. Thank you, Mr. Chairman. 

 MR. DEAL. Thank you. And thanks to the very distinguished panel. 

Your testimony, I think, has added greatly to our consideration of the 

reauthorization of this legislation. We thank you, and with that, this 

hearing is adjourned. 

 [Whereupon, at 3:25 p.m., the subcommittee was adjourned.] 
78

RESPONSE FOR THE RECORD BY THE HON. ALEX M. AZAR, DEPUTY SECRETARY, U.S.

DEPARTMENT OF HEALTH AND HUMAN SERVICES

The Honorable Tom Allen 

Questions for The Honorable Alex M. Azar. Deputy Secretary 

U.S. Department of Health and Human Services 

April 6, 2006 

Subcommittee on Health 

Hearing entitled: “Project Bioshield Reauthorization Issues”

1. Take a hypothetical case where the Secretary determines that the most effective 

countermeasure to an emerging bio-threat is being developed overseas by a 

foreign-owned manufacturer. What barriers, if any, are there to the 

procurement of such a countermeasure produced overseas? 

As provided by the Project BioShield Act of 2004, security countermeasures are 

drugs, biological products, or devices (as defined under the FD&C Act) which are 

among other things, (1) approved or cleared, or (2) have sufficient and satisfactory 

clinical experience or research data to support a reasonable conclusion that the 

countermeasures will qualify for approval or licensing within 8 years, or (3) are 

authorized for emergency use under section 564 of the FD&C Act. While the 

Federal Government would prefer to obtain medical countermeasures from domestic 

sources due to the inherent risks involved in product development, imported 

products manufactured in foreign FDA-inspected facilities that meet the criteria 

established by Project BioShield are eligible for BioShield procurement. 

Generally speaking, medical countermeasures produced by foreign manufacturers 

may be legally imported into the U.S. if they are FDA-approved, licensed, or 

cleared, if they are under an investigational new drug application (IND) or an 

investigational device exemption (IDE), or are authorized for emergency use, and if 

they are otherwise in compliance with the FD&C Act. These legal standards also 

apply to domestically produced countermeasures. 

2. The Project BioShield Act allows for the purchase of unapproved and 

unlicensed countermeasures if the Secretary determines there is a reasonable 

conclusion that the product would be approved and licensed. The Act also 

allows the Secretary to authorize use of medical products that have not been 

approved by the FDA or HHS if emergency circumstances merit. 

a.) Does the authority under this Act, or any other Act, also allow for the 

import of medical products to meet an emergency need if there is no domestic 

source? 

As provided by the Project BioShield Act of 2004, security countermeasures are 

drugs, biological products, or devices (as defined under the FD&C Act) which are 

among other things, (1) approved or cleared, or (2) have sufficient and satisfactory 

clinical experience or research data to support a reasonable conclusion that the 

countermeasures will qualify for approval or licensing within 8 years, or (3) are 

authorized for emergency use under section 564 of the FD&C Act. While the 

Federal Government would prefer to obtain medical countermeasures from 
79

domestic sources due to the inherent risks involved in product development, 

imported products manufactured in foreign FDA-inspected facilities that meet the 

criteria established by Project BioShield are eligible for BioShield procurement. 

Generally speaking, medical countermeasures produced by foreign manufacturers 

may be legally imported into the U.S. if they are FDA-approved, licensed, or 

cleared, if they are under an investigational new drug application (IND) or an 

investigational device exemption (IDE), or are authorized for emergency use, and if 

they are otherwise in compliance with the FD&C Act. These legal standards also 

apply to domestically produced countermeasures. 

b.) If so, does this authority supersede the requirement under the Medicine 

Equity and Drug Safety Act [MEDS] that the Secretary must certify that a 

reimportation of a pharmaceutical product will "pose no additional risk to the 

public's health and safety? " 

The purpose of the Medicine Equity and Drug Safety Act (MEDS Act) is to provide 

a means for prescription drugs manufactured in the United States and exported to 

certain foreign countries to be reimported from those countries for sale to American 

consumers by any pharmacist or wholesaler. BioShield countermeasures are 

developed and purchased through contracts with the Federal Government for the 

purpose of safeguarding the homeland and are not available for commercial sale. 

Therefore, the provisions established in the MEDS Act are not relevant within the 

context of Project BioShield procurements. The Project BioShield Act of 2004 is a 

unique statutory provision that addresses the need for countermeasures that address 

chemical, biological, nuclear, and radiological (CBERN) threats. 

3. What remedies does the U.S. government have if confronted with the case 

where the Secretary finds that the U.S. patent holder to a particular 

countermeasure has insufficient manufacturing capacity to produce a 

sufficient quantity of the product to meet a bio-threat? 

As part of the BioShield award process, prior to the contract award, qualified 

experts from industry, academia, and government perform technical evaluation of 

BioShield proposals to ensure that contractors have suitable manufacturing capacity 

to meet strict government requirements. Prior to award, the government requests 

information from contractors concerning their current manufacturing capabilities, 

the proposed production plan, and the estimated manufacturing capacity available to 

expedite the manufacture of the specified doses of product in the event of a national 

emergency. A contract would not be awarded if it appeared that the applicant has 

insufficient capacity to deliver the needed product. 

4. Take the case where the Secretary determines that there is insufficient domestic 

manufacturing capacity for a countermeasure to meet a bio-threat, but that 

there is sufficient capacity overseas to produce generic versions of the same 

countermeasure. Does the Secretary have the ability or the authority to import 

such countermeasures in such circumstance? 

As noted in the answer to question one above, the BioShield Act does have 

provisions to obtain countermeasures from either domestic or foreign sources. The 

issue of manufacturing capacity is addressed in question three above. Products 

acquired under Project BioShield are solely for national security purposes. This 
80

program is focused on the development of new countermeasures - products for 

which generic versions generally would not exist. 

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