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[Senate Hearing 109-193]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 109-193
 
ROUNDTABLE DISCUSSION: WHEN TERROR STRIKES--PREPARING AN EFFECTIVE AND 
                    IMMEDIATE PUBLIC HEALTH RESPONSE

=======================================================================

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                                   ON

  EXAMINING AN EFFECTIVE AND IMMEDIATE PUBLIC HEALTH RESPONSE IN THE 
                    AFTERMATH OF A TERRORISM ATTACK

                               __________

                             JULY 14, 2005

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions

                    U.S. GOVERNMENT PRINTING OFFICE
22-568                      WASHINGTON : 2005
_____________________________________________________________________________
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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                   MICHAEL B. ENZI, Wyoming, Chairman

JUDD GREGG, New Hampshire            EDWARD M. KENNEDY, Massachusetts
BILL FRIST, Tennessee                CHRISTOPHER J. DODD, Connecticut
LAMAR ALEXANDER, Tennessee           TOM HARKIN, Iowa
RICHARD BURR, North Carolina         BARBARA A. MIKULSKI, Maryland
JOHNNY ISAKSON, Georgia              JAMES M. JEFFORDS (I), Vermont
MIKE DeWINE, Ohio                    JEFF BINGAMAN, New Mexico
JOHN ENSIGN, Nevada                  PATTY MURRAY, Washington
ORRIN G. HATCH, Utah                 JACK REED, Rhode Island
JEFF SESSIONS, Alabama               HILLARY RODHAM CLINTON, New York
PAT ROBERTS, Kansas

               Katherine Brunett McGuire, Staff Director

      J. Michael Myers, Minority Staff Director and Chief Counsel

                                  (ii)

  

                            C O N T E N T S

                               __________

                               STATEMENTS

                        Thursday, July  14, 2005

                                                                   Page
Burr, Hon. Richard, a U.S. Senator from the State of North 
  Carolina, opening statement....................................     1
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah, 
  opening statement..............................................     2
Enzi, Hon. Michael B., Chairman, Committee on Health, Education, 
  Labor, and Pensions, opening statement.........................     3
    Prepared statement...........................................     4
O'Toole, Tara, M.D., MPH, ceo and director, Center for 
  Biosecurity of the University of Pittsburgh Medical Center; 
  Elin Gursky, M.D., Msph, principal deputy for biodefense, 
  National Strategies Support Directorate, ANSER; John M. 
  Clerici, McKenna, Long, and Aldrige; George Barrett, president 
  and chief executive officer, Teva North America; Chuck Ludlam, 
  Esq., former legal counsel to Senator Joseph Lieberman; David 
  P. Wright, president and chief executive officer, PharmAthene; 
  Clay Elward, benefits plan design manager, Caterpillar Inc.; 
  Leah M. Devlin, State Health Director, North Carolina 
  Department of Health and Human Services; Bronwen A. Kaye, 
  senior director, Government Relations; George W. Conk, adjunct 
  professor, Fordham Law School; David Franz, director, National 
  Agricultural Biosecurity Center; and John Pournoor, 3M 
  Corporation....................................................    12

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Gursky, Elin A., Sc.D., principal deputy for biodefense, 
      National Strategies Support Directorate, ANSER, prepared 
      statement..................................................    43
    Response to questions of the committee by Chuck Ludlam.......    45
    Response to questions of the committee by Mr. Wright.........    49
    Elward, Clay, benefit plan design manager, Caterpillar, Inc., 
      prepared statement.........................................    51
    Response to questions of the committee by Clay Elward........    52
    Pournoor, John, 3M Company, prepared statement...............    55

                                 (iii)

  

ROUNDTABLE DISCUSSION: WHEN TERROR STRIKES--PREPARING AN EFFECTIVE AND 
                    IMMEDIATE PUBLIC HEALTH RESPONSE

                              ----------                              

                        THURSDAY, JULY 14, 2005

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:03 a.m., in 
room SD-430, Dirksen Senate Office Building, Hon. Richard Burr 
presiding.
    Present: Senators Enzi, Burr, and Hatch.
    Staff present: Dr. Bob Kadlec, David Schmickel, Kira Bacal, 
David Dorsey, and Jennifer Romans.

                   Opening Statement of Senator Burr

    Senator Burr. Good morning. Let me call the Roundtable to 
order, if I can, and let me take this opportunity to welcome 
all of our guests.
    As is the fashion on the Hill, our plans are going to 
change, and I want to apologize to everybody in the room. We go 
into a series of votes momentarily, a series that will probably 
last well past noon. I have asked Bob Kadlec to chair this 
Roundtable in our absence and I have asked the appropriate 
committee staff people to be available to ask questions. So we 
are trying to adapt to make your time as efficient as we can 
and to also get the valuable information that we need as we 
proceed further down the road to the constructive legislation.
    But let me thank all of you for coming this morning to the 
first formal Roundtable. For the purposes of a time line, let 
me suggest to you that we will hold two additional hearings 
this month. It is our intent to be at a point where we can 
begin to talk about legislative language at that point. Next 
week, I think we will have the authors of the current 
legislation that has been introduced, who will testify in front 
of the subcommittee. And the last hearing, probably the last 
week of July, will deal specifically with surveillance. So we 
have covered a lot of ground in a very short period of time, 
and we are certainly anxious to listen to the information that 
you are here to provide us with today.
    Clearly, I am grateful to this distinguished group of 
panelists who have come today to help us try to overcome the 
challenges and take advantage of the opportunities that 
confront us. My subcommittee, with the support of Chairman Enzi 
and Senators Frist, Hatch, and Kennedy, is committed to draft 
legislation that will significantly improve our Nation's 
ongoing biodefense efforts; now, as I see it, to be prepared 
for the inevitable--a disease outbreak that is deliberate or 
accidental or, in fact, natural.
    Before inviting my two colleagues on each side to make any 
opening remarks they would like to, let me introduce our 
participants, if I can.
    Ms. Bronwen Kaye, Senior Director of Government with Wyeth, 
welcome.
    Dr. Elin Gursky, Principal Deputy for Biodefense, ANSER.
    Mr. Clay Elward, Benefit Plan Design Manager at 
Caterpillar.
    Mr. David Wright, President, CEO of PharmAthene 
Pharmaceutical.
    Dr. Leah Devlin, whom I am proud to have here, State Health 
Director from my home State of North Carolina.
    Mr. John Clerici from McKenna Long and Aldridge.
    Mr. Chuck Ludlam, former Legal Counsel to Senator 
Lieberman. Welcome back, Chuck. You never thought retirement 
would be like this, did you? Just a different side of the 
table, right?
    Dr. David Franz, Director of the National Agricultural 
Biosecurity Center at Kansas State University.
    Dr. Tara O'Toole--welcome back, Tara--CEO, Director of the 
Center for Biosecurity at the University of Pittsburgh Medical 
Center.
    Dr. John Pournoor from 3M Corporation.
    Mr. George Barrett, President and CEO of Teva 
Pharmaceutical.
    And finally but not least, George Conk, Adjunct Professor 
for Fordham Law School.
    At this time, I would like to recognize Senator Enzi.
    The Chairman. I defer to Senator Hatch, who was here before 
I was.
    Senator Hatch. Oh, no, that is fine. I defer to you. We are 
always happy to defer around here to our friends.

                   Opening Statement of Senator Hatch

    Senator Hatch. Let me thank Senator Burr for convening this 
and, of course, holding this meeting as part of a series of 
hearings on the area of public health preparedness. As you all 
know, this topic is one of great concern to the three of us 
here and, of course, Senator Lieberman as well.
    Senator Lieberman and I, joined by Senator Brownback, 
introduced S. 975, the project BioShield II. And as we will 
hear, this bill provides a comprehensive approach to engaging 
private enterprise in the area of bioterror prevention and 
countermeasures.
    I appreciate the committee's desire to ensure that we will 
pass the best possible bill by investigating all of the 
possible options. I want to say on a note of caution, however, 
that this issue is just plain too large and too serious for us 
to just nibble around the edges. Only broad, sweeping, 
innovative approaches will allow us to realign the Public 
Health Service, develop the necessary medical countermeasures, 
and protect our agriculture.
    Now, this is my belief and I believe it is shared not only 
by the cosponsors of BioShield II, but also by the groups that 
have endorsed our bill, including the Infectious Diseases 
Society of America, the International AIDS Vaccine Initiative, 
and of course the American Society of Tropical Medicine and 
Hygiene. To me, this is an extremely important bill and it is 
extremely important that we have the best input and ideas that 
we can possibly get.
    I want to particularly thank the members of the staff of 
the various Senators involved--Mr. Chuck Ludlam here, who is 
more than a good advisor. I have to say he has been around here 
a long time and understands this place very well and has been 
very helpful. And I want to thank all of you for being willing 
to participate and assist us here in this understanding.
    We are sorry that we have these votes so the members are 
going to have to be over there on the floor. But we are going 
to pay very strict attention to what you folks suggest to us 
and hopefully we can all come together and do what is right for 
our country.
    Thanks, Senator Burr.

                   Opening Statement of Senator Enzi

    The Chairman. Well, I do want to thank Chairman Burr for 
putting together this Roundtable and I want to thank this great 
group of participants from very diverse backgrounds that can 
supply us with answers to at least three key questions that we 
posed. We found the Roundtable format to be a quicker way of 
gaining more knowledge and involving more people. And one of 
the ways of involvement, of course, would be through written 
questions that we will have in some other areas of your 
expertise that we hope that you will respond to following the 
hearing. This helps us to build a body of knowledge that is 
very useful when we come to drafting the legislation, and 
probably even more critical when it comes to selling the 
legislation. None of it is worth anything unless we get it 
finished, although there are a lot of spinoff ideas that come 
out of roundtables such as this, that often can be put into 
effect even without legislation. So you will have some short-
term effects, you will have some long-term effects.
    We do appreciate all of you participating in it. The 
attacks last week in London served as a reminder that there is 
some terrorism out there yet and there is an important job to 
be done. And while we pray for the victims of the atrocity and 
their families, we also have to strengthen our resolve and 
ensure that we do the right thing in all of the areas of 
terrorism that will keep this country safe.
    We have made some remarkable strides, but we have to 
identify and address our Nation's weaknesses in regard to the 
biological threats. We know that there is a lot that still has 
to be done. At present, our pharmaceutical industry is not 
commercializing enough drugs to fight infectious diseases, 
whether they spread naturally or through the intentional or 
accidental efforts of man. Last week the New York Times 
reported an outbreak of influenza in Cambodia that inundated 
hospitals with thousands of infected children. In this country, 
the rise in incidence of antibiotic resistant infections is 
troubling and demands our immediate attention.
    As I have said before, the lack of productivity in this 
area is not a market failure but a reaction to the incentives 
that encourage companies to allocate resources to tackle 
chronic diseases instead of infectious diseases. We have to 
enact legislation now that encourages new resources to be 
allocated to address the threat posed for infectious diseases.
    Mr. Chairman, I would ask that my full statement be 
included in the record. It will save a little time.
    Senator Burr. Without objection.
    [The prepared statement of Senator Enzi follows:]

             Prepared Statement of Senator Michael B. Enzi

    Thank you Mr. Chairman for holding today's Roundtable on 
the scope of our biodefense bill. I look forward to continuing 
to work with you as we lead the HELP Committee in the work that 
must be done to craft a bill that will enable us to respond 
effectively and immediately to a biological outbreak or a 
bioterror attack.
    The attacks last week in London served as a harsh reminder 
of the importance of the job that is before us. While we pray 
for the victims of this atrocity and their families we must 
also strengthen our resolve to ensure we are as prepared as we 
can be for an attack in this country. Although in the past 
couple years we have made remarkable strides in the effort to 
identify and address our Nation's weaknesses with regard to 
biological threats, the fact remains that more must be done. 
More countermeasures are needed to protect us from infectious 
disease. The public health system needs to be strengthened and 
we need to ensure our Nation's food supply is safe and 
protected from harm. Our bill must address all of these 
challenges.
    At present, our pharmaceutical industry is not 
commercializing enough drugs to fight infectious diseases--
whether they are spread naturally, or through the intentional 
or accidental efforts of man. Last week the New York Times 
reported an outbreak of influenza in Cambodia that inundated 
hospitals with thousands of infected children. In this country, 
the rise in the incidence of antibiotic resistant infections is 
troubling and demands our immediate attention. As I have said 
before, the lack of productivity in this area is not a market 
failure, but a reaction to the incentives that encourage 
companies to allocate resources to tackle chronic diseases 
instead of infectious diseases. We must enact legislation now 
that encourages new resources to be allocated to address the 
threat posed by infectious diseases.
    When the public health system was conceived and developed, 
bioterrorism was not even a remote consideration. With an 
appropriate infrastructure and information technology systems, 
infectious disease can now be tracked and addressed. The public 
health infrastructure can grow to help us with bioterrorism and 
infectious disease.
    Each weekend when I travel to Wyoming I see miles and miles 
of beautiful farm land that is vulnerable to attack. That 
vulnerability needs to be addressed, too.
    When it is written, the committee bill will include 
provisions to encourage product development, strengthen the 
public health care system and protect our food supply. This 
Roundtable and the hearing next week will help shape the scope 
and terms of our bill.
    In this country, we are blessed with the resources we will 
need to respond to these challenges. Our economy is very 
dynamic. We are home to some of the greatest minds in the 
world, and industry in this country has risen to meet similar 
challenges before. This committee has harvested our American 
power to innovate before. For instance, the pharmaceutical and 
biotechnology industries responded to the orphan drug 
legislation championed by my colleagues and friends Senator 
Kennedy and Senator Hatch. The challenge of that legislation 
resulted in treatments for diseases like multiple sclerosis, 
where no therapies had existed before. It may be that more of 
those incentives are needed, or that a new paradigm is needed 
with a different role for government to play in the battle that 
lies before us.
    Again, I thank Chairman Burr and each of you for coming 
here today to engage in this Roundtable discussion of how we 
might best address the challenges that lie before us.
    The Chairman. I defer back to you so you can get started on 
gathering information.
    Senator Burr. Thank you, Mr. Chairman.
    Before we begin, let me just sort of give you the ground 
rules. At about 10:30 I will adjourn from the formal nature of 
this Roundtable for what I understand to be Senate procedural 
reasons, at which time the staff will take over and we will 
take your answers in the same way we did if we were in a formal 
Roundtable.
    We have provided for each of you three questions, and I 
think, for the most part, we have received answers to those. I 
will try to delve into some specific areas that I think we need 
further guidance and knowledge on. I think staff will continue 
on that format. These questions will be thrown open to our 
entire panel. If you feel the urge to respond, which I hope you 
will, if you will raise your hand. I was going to have you turn 
your cards, but I see a piece of tape on your cards, so that 
might be a little more difficult. So if you would just raise 
your hand, we will call on you.
    And if I could get under way specifically as it related to 
Question 1, which was: What additional incentives or other 
measures will ensure the timely availability of sufficient 
amounts of effective biodefense medical countermeasures, and is 
the cost of such incentives acceptable?
    Let me focus on liability, if I can, for a second. What are 
our options for liability protections, and should liability 
protections for countermeasures be something that we consider 
on a case-by-case basis versus a statute that covers 
everything?
    Chuck.
    Mr. Ludlam. Mr. Chairman, I think it is an absolute minimum 
for BioShield II, and I mean a minimum, to cover the liability 
issue. And I think what you have to say to the companies is 
that if they enter into a contract to produce something, risk 
their capital to produce a product that we need either for 
infectious disease or bioterrorism, they will absolutely get 
liability protection without any doubt whatsoever. You have to 
tell it up front before they risk a single dollar of their 
capital to develop the product. And if you don't tell them 
that, the conversation will end.
    Dr. Clerici. Mr. Chairman, if I can add to that--and I 
worked very closely with both Chuck and Senator Hatch and 
Senator Lieberman as well as Senator Gregg on the liability 
provisions both in S. 3 and in S. 975. That work on those bills 
was informed by our experience in working with companies such 
as Sanofi Pasteur that bid on the initial BioShield 
procurement, the anthrax vaccine procurement. And quite 
frankly, liability was the threshold issue that prevented 
Sanofi, or at that point Aventis Pasteur, from proceeding.
    We have seen again and again companies of any sort of 
size--quite frankly, anyone who is publicly traded--shy away 
from this market because of shareholder liability issues as 
well as the manufacturing capacity challenges of manufacturing 
for a market that is unknowable and puts the company at 
completely unknowable risks.
    These products that will be derived from BioShield will be 
administered without the usual battery of tests and FDA 
approval that a normal drug will have. They can be administered 
under emergency use authority having been only tested in 
animals, not humans. To ask a company, particularly a publicly 
traded company, to participate in this market without liability 
protections is, frankly, irresponsible to the shareholders and 
is an absolute--I agree with what Mr. Ludlam said. A threshold 
question has to be overcome.
    Senator Burr. I want to go to Tara, but can I ask for a 
better understanding of whether, John, you and Chuck talked 
about two different things or whether it is the same. Chuck 
talked about the liability protection is a key to triggering a 
capital investment on the part of research and development by 
anybody. Yours was sort of that future liability that was 
focused after the approval process. Are they connected? Or let 
me ask more specifically, Chuck, if there was a mechanism where 
that cost for research and development was not incurred by the 
company, does that now change how we look at the liability 
piece?
    Mr. Ludlam. Well, as I think you know, I think that for the 
Government to become a bio--to set up a biotech company of its 
own and basically to take on either the R&D responsibility or 
maybe even just the manufacturing, probably it will be the most 
costly, least effective way to proceed. So the Government could 
try that. I think if the Government sets up any kind of a GoCo, 
any kind of a mechanism like that, it will definitively end the 
interest of the pharmaceutical industry in its research. They 
will say basically, whew, we don't have to do it. The 
Government is going to do it. We won't be blamed for not doing 
it. The Government can go off and spend any amount of money on 
a defense contract or model, and whether it will succeed or not 
is their problem; it is no long our problem politically or 
scientifically or medically or legally.
    So I think that is an extremely risky last-gasp desperation 
strategy if we have tried every other possible way to get this 
industry to play at their own risk and their own expense, which 
is obviously the preferred method in BioShield I and BioShield 
II.
    So if they spend the money and they take the risk, then 
they are entitled to both dramatic incentives at the end, 
including liability protections, because they took the risk. 
Because if they don't succeed, they don't get the procurement, 
the IP, or the liability protections. And that is the way it 
should be. We should shift the risk to them instead the 
Government trying to take it on itself.
    Senator Burr. Tara.
    Dr. O'Toole. Following your second question, Senator, I was 
going to say I think there are a lot of different aspects to 
this liability question. I think if the bill does not address 
the liability associated with giving a drug that doesn't go 
through the usual safety testing procedures in an emergency 
situation and giving it to large numbers of people, if the 
companies aren't protected from nonnegligent harm in that kind 
of crisis situation, that will be read by the pharma-bio 
industry as the Congress not being serious about BioShield. I 
don't think it will trigger anything, but I think it will be a 
bellwether and seen as a very serious signal of intent or lack 
of seriousness on the part of the Congress.
    There are a lot of other aspects to liability even in that 
narrowly defined space of what happens in an emergency, such as 
what is the animal -- all about, what are the FDA regulations 
for getting something through that cannot be tested in the 
usual clinical trial format? All of that has to be delved into 
and made much more transparent than is the case.
    I also think, however, that you are going to have to 
consider some form of at least minimal compensation for people 
who are harmed--again, not through negligence, but who suffer 
harm in the event of a public health crisis when we are asking 
everybody, for example, to be immunized in a certain city. If 
you don't do that, you are going to have the kind of situation 
we had with the smallpox vaccine where a lot of people were 
reluctant to put their livelihood or their lives on the line. 
So I think it is a complicated question.
    Senator Burr. Something like the children's vaccine 
compensation program?
    Dr. O'Toole. Yes. Exactly.
    George.
    Mr. Conk. I think there are a lot of false alarms. I don't 
think that there's any significant change in the liability 
system that is needed. What is needed is a more considered 
approach to what the actual threats are. Protection from 
nonnegligent harm is the norm. Companies are only liable if 
they are negligent. That is, if they fail to produce a product 
that conforms to specification if it is negligently designed or 
if they withhold necessary information. So that is the norm.
    I don't think that--let's look at the points that have been 
raised about emergency measures. The essence of fault-based 
liability is that you are liable only if, under the 
circumstances, you acted unreasonably. If an emergency compels 
us or if technical necessity or ethical necessity prohibits us 
from doing anything more than animal testing and releasing 
medicines after they have been tested on animals but it wasn't 
possible or wasn't permissible to test them on humans, then 
there is no fault and there is no sound basis for liability.
    Every law student in America learns in his first year in 
law school, his or her first year in law school that the rabies 
vaccine, which carried substantial health risks and faced the 
patient with the choice of developing rabies if the animal 
proved to be rabid or taking the medicine and saving his life, 
but at significant risk, is not a defective product. And there 
is no reason to believe that a vaccine developed with animal 
testing would be considered to be defective and a basis for 
liability.
    As to who should be compensated, I think those who are 
compelled to assume risks and those who volunteer to assume 
risks should be compensated. That means children who are 
compelled to be vaccinated we provide for. I think volunteers 
who do things like take the smallpox vaccine, I think 
participants in clinical trials who volunteer and assume risks, 
I think they should be compensated. As to everyone else, I 
don't think we should volunteer to just wildly assume--I am 
sorry, unqualifiedly assume costs, and I think that we should 
essentially leave the current system in place, making 
individual product-by-product, situation-by-situation 
adaptations.
    Senator Burr. George.
    Mr. Barrett. Yes, Mr. Chairman, I think we have discussed 
liability, at least around the table here, in two different 
ways, and maybe one is liability and one is risk. I do believe 
that as a pharmaceutical company who is engaged both in 
production of generic pharmaceutical and a company that does 
patent-based research pharmaceutical, the issue of product 
liability is relevant. If we are going to fast-track the 
approval process, which I think is a very workable and 
appropriate measure to consider as we think of this effort, 
then liability protection would be, I think, a natural 
connection to this.
    The other question that I heard, which was one of liability 
related to the production, is really one that I think is 
addressable and may not be in these provisions, but this is the 
idea of guaranteed purchases of that material that has been 
stocked. So I think that that would be--not just, by the way, 
for new products but for existing products that are in the 
system, a guaranteed purchase of material that was prepared for 
this effort, I think, would be appropriate and would go a long 
way in encouraging us to work on this.
    Senator Burr. Let me assure you, I feel certain you will 
field questions as it relates to the current procurement 
process and the clarity of understanding of it today.
    David, I am going to allow staff to come to you. I have to 
formally adjourn this Roundtable. It will resume in an informal 
capacity when Bob Kadlec steps to the table.
    Let me once again thank you on behalf of all of the members 
of the subcommittee and full committee. This may be the single 
most important thing we do, and we have a lot of things that 
are going to come out of this committee this year. Some of you 
have volunteered to be here multiple times, and I can't thank 
you enough for that. I think it displays just how difficult the 
task is for us to craft something that addresses a robust 
willingness to participate, the protection that one needs if 
there is a difference between public and private companies, and 
the recourse, George, that I think you expressed. And the 
question is, can we find a way to encompass all of that. And 
that is certainly the first intent.
    If that can't be done, then the decision has to be made 
where do you begin to pare back and find the balance that we 
need. And to do that in the context of not knowing in the 
future what the threat is, but also not knowing whether we do 
this in a period of time that has a sense of urgency of a 
matter of years or a matter of months or a matter of weeks to 
be able to produce something is, in fact, a target that is 
ever-moving.
    So I can't thank all of you enough for your willingness to 
be here.
    The formal Roundtable is now adjourned.
    [Whereupon, at 10:25 a.m., the formal Roundtable was 
adjourned.]
    Dr. Kadlec. If I could just for a moment here invite my 
fellow staff members to come forward. If we could just limit it 
to one from each Senator's office. We will make brief 
introductions so you know the people asking the questions. And 
I do want to pick up--apparently there was one other--oh. We 
had one other comment to make on the liability, and we will 
continue that theme of questioning from my colleagues here.
    Senator Burr was kind enough to make a brief introduction. 
I am Bob Kadlec, the staff director for the Subcommittee on 
Bioterrorism. I will turn to my left and just introduce David 
Schmickel, who is with Senator Enzi's staff in the Health, 
Education, Labor, and Pensions Committee. To his left is Kira 
Bacal, who is with Senator Hatch's office. David Dorsey, to my 
right, from Senator Kennedy's office, and Jennifer Romans from 
Senator Frist's office.
    Do we have any others?
    So if you will pick up the discussion on liability, if we 
may, at this point.
    Bronwen, please.
    Mrs. Kaye. I wanted to address briefly what Mr. Conk had 
talked about; liability and being related to negligence. I 
think maybe that is the way it works on paper, but 
unfortunately it doesn't play out that way in the court. I 
would like to point out, as manufacturer of oral polio vaccine, 
as an example, it has been a well-known, well-established fact 
that oral polio vaccine in about 1 in every 3 million 
recipients will cause a vaccine-acquired case of polio. It is a 
known, warned-of side effect. We had a judgment in the past 2 
or 3 months, $8.5 million against us. We have had $10 million 
judgments. There was clearly no negligence involved and there 
was no design defect.
    I think another unfortunate thing that happens with 
products like vaccines, which I think everyone views as a 
cornerstone of biopreparedness, is that they are given across a 
broad population and one suffers liability costs even for 
occurrences that are not connected to vaccine just because they 
are given to an entire population, and inevitably certain bad 
things will happen to certain people at any given point in 
time. And if it occurs in a temporal relationship to vaccines, 
vaccines get blamed.
    I would like to offer a slightly different perspective here 
since we are talking about vaccines as a cornerstone, that we 
have a very tenuous ability in this country to manufacture 
vaccines. There are only four companies that manufacture the 
routinely available vaccines. Only three of those companies 
manufacture in the United States, and only two of them are U.S. 
corporations. And that precarious situation has the potential 
to become even more tenuous because of the liability burden 
that we are facing right now, which, by the way--going to this 
negligence issue--has to do with an allegation where scientific 
evidence has already shown that the vaccine does not cause this 
particular injury. And yet, we are facing a crushing litigation 
burden.
    I think if we want to have companies that are available and 
willing to make vaccines, it is not a viable business to be an 
only-bioshield type situation; you have to be in the commercial 
market as well. It is too expensive and too difficult to make 
vaccines to not have a commercial side of your business. And 
the commercial side of the vaccine market is under threat from 
liability right now.
    Dr. Kadlec. Mr. Wright.
    Mr. Wright. Thank you. Just two quick points. No. 1, I 
think this applies not only to vaccines, but to therapeutics. 
And it does because whether or not the current system works--
and I won't get into that, but there has been a lot of debate 
whether the current system is even working--the fact is the 
current system is based upon known events. With the products we 
are talking about, the testing is much less than will occur on 
any product that reaches the market through commercial avenues.
    There are going to be--there has been proposed that safety 
tests for an anthrax therapeutics will be around 300 subjects. 
There has been proposed that the safety test for an anthrax 
vaccine will be somewhere around 2,000 to 5,000 subjects. This 
is a fraction of the number of people who would undergo testing 
if these products were normal commercial products. And it is 
for the reason of it is unethical to put a product in a patient 
who hasn't got a condition. And so when you treat these 
subjects that aren't patients, you have to do lower numbers.
    So there are going to be side effects and there are going 
to be conditions which we are not going to know about until 
these are used in mass populations. And that liability has to 
be protected against. And a company cannot afford, especially a 
major company cannot afford to bring a product to market with 
that kind of liability facing them.
    Thank you.
    Dr. Kadlec. Mr. Conk.
    Mr. Conk. I think the problem there is that companies don't 
accurately perceive what the law is. This whole area of law had 
its origins in the asbestos cases, where virtually no testing 
was done. Here, what you have is a highly regulated environment 
in which publicly determined necessity determines that only 
limited testing can be done. In such cases there is no fault 
and there is no basis for liability.
    Regarding the polio vaccine, it is absolutely correct that 
in a small number of cases people get polio. We don't use that 
vaccine anymore. Five years ago, we came to the belated 
decision that we should have made 20 years earlier, when France 
did, to stop using that design and to stop using live polio 
vaccine--and to use the enhanced injected killed virus which 
was adopted in Europe in 1968--and which we persisted in using 
for over 20 years.
    And so if you have a handful of people every year who end 
up gravely injured for life and the legal system compensates 
them for that enormous loss, I submit that that is just fine.
    Dr. Kadlec. Mr. Clerici.
    Dr. Clerici. I learned before my first day of law school 
that in America anyone can sue anybody for anything at any 
time, and they do.
    Dr. Kadlec. And lose.
    Dr. Clerici. Well, but in the process of losing, these 
companies are losing--certainly Ms. Kaye's company and other 
similarly situated companies are spending upwards of $50 
million in defending these needless and, quite frankly, 
baseless lawsuits. And remember, in the context of this 
question we are not talking about entering a market that is 
particularly profitable, that is particularly a broad market 
that people want to get into. We are talking about this 
question of liability in the terms of incentives: How do we 
incentivize companies that are responsible, that are capable of 
entering this market.
    I agree 100 percent that if you are coming into a market 
where your profit and your market are both unknowably large, 
then perhaps that risk is better borne by the company that is 
taking that market choice electively. That is simply not the 
case with the biodefense market. And if we want the best and 
brightest companies in the world to participate, we need to 
incentivize them and protect them against this unknowable 
liability.
    Dr. Kadlec. If I may, Chuck.
    Mr. Ludlam. Just to follow up on the same point, we are 
dealing with an industry that has essentially no interest in 
this market at all to start with. Basically none. I was in one 
of the large pharmaceutical firms several months ago, one of 
the only ones left with an infectious disease division at all. 
And they were hanging by a thread. As soon as a merger happens, 
they are gone. They are finished. That is what has happened in 
a number of other firms.
    Now, the vaccine industry has basically been destroyed. We 
basically don't have one at this point. We have essentially 
nothing in the pipeline for antibiotics, and we are facing an 
antibiotics resistance crisis even without bioterrorism. As a 
former Peace Corps volunteer and a future Peace Corps 
volunteer, I am going to see people--I have seen people die of 
infectious disease and I will see more of them in Senegal when 
I get to Senegal. And we don't have products for them. We don't 
have an antiviral that kills the AIDS virus. And until we do, 
millions more will die.
    That is the problem. And to recreate almost from scratch in 
the face of massive disincentives to play in this space, we 
need to take unbelievably aggressive actions which, at an 
absolute minimum, include liability protections and all of the 
rest of the stuff which I assume we will get into in the 
discussion. And if we don't do it, we will be facing infectious 
disease and bioterrorism forever on a scale that could be 
absolutely ruinous to the economy, ruinous to the 
civilizations. And that is the threat that we face.
    So it is time to get serious, and liability protection is 
an absolute bare minimum.
    Dr. Kadlec. Tara O'Toole.

    O'TOOLE, TARA, M.D., MPH, CEO AND DIRECTOR, CENTER FOR 
  BIOSECURITY OF THE UNIVERSITY OF PITTSBURGH MEDICAL CENTER; 
  ELIN GURSKIY, M.D., MSPH, PRINCIPAL DEPUTY FOR BIODEFENSE, 
    NATIONAL STRATEGIES SUPPORT DIRECTORATE, ANSER; JOHN M. 
CLERICI, MCKENNA, LONG, AND ALDRIGE; GEORGE BARRETT, PRESIDENT 
AND CHIEF EXECUTIVE OFFICER, TEVA NORTH AMERICA; CHUCK LUDLAM, 
 ESQ., FORMER LEGAL COUNSEL TO SENATOR JOSEPH LIEBERMAN; DAVID 
 P. WRIGHT, PRESIDENT AND CHIEF EXECUTIVE OFFICER, PHRMATHENE; 
 CLAY ELWARD, BENEFITS PLAN DESIGN MANAGER, CATERPILLAR INC.; 
     LEAH M. DEVLIN, STATE HEALTH DIRECTOR, NORTH CAROLINA 
   DEPARTMENT OF HEALTH AND HUMAN SERVICES; BRONWEN A. KAYE, 
 SENIOR DIRECTOR, GOVERNMENT RELATIONS, WYETH; GEORGE W. CONK, 
 ADJUNCT PROFESSOR, FORDHAM LAW SCHOOL; DAVID FRANZ, DIRECTOR, 
NATIONAL AGRICULTURAL BIOSECURITY CENTER; AND JOHN POURNOOR, 3M 
                          CORPORATION

    Dr. O'Toole. If I could echo that a little bit. You know, 
the chairman said that these issues are very complex and you 
can't solve the problem of biosecurity in one bill. And that is 
certainly true. Although I can understand a desire to kind of 
break the different parts of our security into modules and 
address them one by one--take on liability, for example--I 
think there is an urgent need to talk and think in strategic 
terms and to put before the country in these bills what is at 
stake, as Chuck said, and what we are really doing here.
    There are public implications for how we handle liability 
that go way beyond legalistic claims and financial 
considerations. We need to find a way to signal to the public 
that if we use these countermeasures it could well be in a time 
of national crisis when the existence of the country is at 
stake. We are going to be using medicines and vaccines that 
have not been tested in ways that the American people have come 
to expect. And we have to signal to them way in advance that 
that is the case, that the Government understands that this is 
going to be a lot more risky than oral polio vaccine and yet we 
think it is a good idea to take this pill or accept this 
immunization. And that is part of what liability is going to 
have to do.
    We are also going to have to invent whole new procedures in 
FDA for figuring out what is sufficient testing. There is a 
huge gray morass in terms of what is safe enough. I mean, you 
know, you are talking like a lawyer. Speaking like a physician, 
we don't know nuthin'. We are going to be guessing at what is 
good enough and hope that the benefits outweigh the risks. For 
some people that won't be the case.
    But the public messages we are sending about the overall 
import of biosecurity and biodefense are as important as the 
specific parts of these bills.
    Dr. Kadlec. Let me just follow up with a question, I think, 
which really was the opener that Senator Burr raised and asked: 
What are our options? I think it has been highlighted that it 
seems like comprehensive liability seems to be the suggested 
approach, if you will, for the manufacturers. I think it was 
mentioned, also, the notion of protecting those who provide the 
product as well as providing liability coverage.
    Is there any reason to believe that you can create a case-
by-case liability provision that would make sense? Or what 
would be, if you will, the ying and the yang of liability 
options as it is considered today?
    Mr. Conk. Well, let's look at a couple of epidemics and see 
how they were dealt with in the legal system. One that I am 
personally familiar with is a small group of companies that 
were completely immunized by what is called the blood shield 
laws, and those were the companies that developed the 
concentrated protein that substituted for the genetic defect in 
hemophiliacs. They had complete immunity. All their patients 
got hepatitis and/or HIV, and virtually all of them died. And 
no liability burden was borne. There was a token settlement in 
product liability litigation of $100,000 a claimant and there 
was a compassionate payment afforded by the Congress.
    I count that up as Exhibit A on why complete immunity from 
liability should not be afforded. The pasteurization of those 
products was perfected within 12 months of the time that the 
alarm went off when AIDS was identified.
    Let's look at a more recent epidemic, one that didn't 
happen. That was the epidemic from complications of vaccinia on 
the smallpox issue. Now, I think that that has certain 
strengths. And the strength of that compensation was based on 
the fact that we asked, virtually required, health care workers 
to assume a risk to their own health in the face of no 
identifiable risk at all. It turned that there wasn't any risk. 
And people didn't volunteer. So I think that the compensation 
nonetheless that was afforded was a good idea and could help if 
properly handled, encourage people to volunteer for such 
efforts.
    And I do think that the point regarding public education of 
the inevitability of risks is key not just for these 
medications but for all medications, that FDA approval is not 
an on-off switch, it is simply a stage in our study of a drug 
and its effects on the human organism.
    Dr. Kadlec. Mr. Clerici.
    Dr. Clerici. I think your question, Dr. Kadlec, was what is 
the current regime--or what is the one-up regime that we are 
living in today. There is a statute on the books which has been 
used in this context. The supplier of the smallpox 
manufacturers, the companies that donated the old existing 
vaccine following the events of 9/11, received indemnification 
under a statute that is over 50 years old, Public Law 85-804. 
And that is, quite frankly, the way that the Government has 
approached liability to date, because there is no substitute 
for Public Law 85-804 that Congress has addressed. It doesn't 
work. The predictability of whether or not a company is going 
to receive indemnification from the Federal Government is not 
enough to incentivize the company to scale up a manufacturing 
facility, to dedicate its production and its opportunity costs, 
if you will, to a biodefense market. It just doesn't happen.
    The second problem with that is one of pure fiscal 
concerns. In the political environment we are living in, Public 
Law 85-804 puts the Government on the hook, if you will, so the 
Government steps in the shoes of the manufacturer and itself 
faces unknowable and unlimited liability outside of the 
appropriations of Congress. We have seen again and again the 
Office of Management Budget refuse to grant this authority and, 
quite frankly, it simply doesn't work as an incentive to get 
companies to participate in this market.
    Mr. Dorsey. If I can shift gears just a little bit. The 
definition of countermeasures includes products that affect or 
would treat the side effects of any countermeasure. And many of 
these many, many vaccines or treatments have very common side 
effects, like headache, you know, upset stomach, things that 
people encounter all the time and for which there are extremely 
large commercial markets now.
    So it is conceivable, given the way some of these proposals 
have been drafted, that products with very large commercial 
markets would be--all of the incentives that these proposals 
provide would be available for all of such products. So we 
might see a waiver of product liability, for example, with 
respect to a vast majority of the largely commercialized drugs 
on the market. Is that an acceptable approach?
    Mr. Ludlam. BioShield, at least as we have drafted it, only 
applies to what the Government chooses to procure in that 
market. It doesn't apply outside of that context in the way 
that both are drafted. There is nothing that applies to the 
vaccine market generally. Maybe it should. It doesn't apply to 
the antibiotics market generally unless the Government procures 
it under BioShield. If the Government decides that that side 
effect is sufficiently serious, that it wishes to deploy the 
scheme in BioShield in favor of that and whatever that entails 
in terms of liability or tax, IP, whatever else, it can do it. 
But I think you have to think it is quite unlikely, if there is 
a substantial commercial market, that they would feel it 
necessary to deploy BioShield in order to secure the 
development of that product at the industry risk and expense. 
They could, but as a practical matter I think it is extremely 
unlikely.
    Mr. Dorsey. But to follow up, certainly it makes sense that 
the Government would want to stockpile such measures for 
treatment in the case that they have to deploy a 
countermeasure.
    Mr. Ludlam. Maybe.
    Mr. Dorsey. So under your proposal, there would be--you are 
suggesting that there should be product liability protections 
for a product that, arguendo, has gone through the complete FDA 
approval process, no just studies in animals, studies in 
humans, we have a lot of knowledge about its use in the 
marketplace because it is a commercialized-use product. What is 
the justification for liability protection then?
    Mr. Ludlam. Well, if the Government decides that it--I 
mean, the BioShield is about getting things done that would not 
otherwise get done. The only purpose of it is to involve the 
Government to secure the development of products that are not 
going to be developed for some other reason already without the 
necessary tools of BioShield. Now, if the Government--if this 
is going to be developed anyway because there are lots of dual 
use, I don't see any reason to deploy BioShield. And certainly 
wouldn't need to stockpile it. If there is just a substantial 
regular commercial market, there is no reason for the 
Government to stockpile it. It will exist in the pharmacies 
around the country and they can use it.
    Mr. Dorsey. Well, I mean, as we learned with Cipro, there 
was a substantial commercial market for Cipro, but there 
weren't adequate supplies of Cipro available at the time to 
respond to the anthrax threat that we experienced in October of 
2002. I mean, there were stockpiling issues with an otherwise 
commercially available product.
    Dr. Kadlec. Tara, if I may, and then Mr. Wright.
    Dr. O'Toole. I think there is a big difference between 
covering vaccinia immunoglobin, which is probably the classic 
case of something that would be used to treat a side effect of 
the smallpox vaccine, and covering aspirin or something else. I 
think the test of what gets covered under a liability rule--and 
I think there should be one rule, should be something other 
than did we acquire it for the stockpile. I think that should 
be a kind of product-by-product decision made at the time we 
start supporting the product as early in production as possible 
and there is one liability coverage for everything. But I think 
part of the, I think this ball got rolling because of the VIG 
issue. And, you know, ought to be more narrowly construed.
    The problem with Cipro is if we are going to be using it 
for conditions for which we do not have much scientific 
evidence. So you may have a product that is in wide commercial 
use for many conditions other than inhalational anthrax that 
you are now going to use in a context that we have very little 
data on. That probably needs some kind of coverage.
    Mr. Dorsey. Is the data we don't have data on efficacy or 
data on safety, in that context? Isn't it mostly on efficacy?
    Dr. O'Toole. Both. I mean, you know, clearly people with 
inhalational anthrax are desperately ill very quickly.
    Mr. Ludlam. I have to add that there Cipro is the perfect 
case for some of the larger points here. That was the case 
where it wasn't procured for BioShield. They had some 
stockpiles, I presume. But it wasn't used for that. Unlabeled, 
because Bayer, at their own expense had gone forward and gotten 
a label for anthrax at the Government request. It was the 
stupidest thing Bayer ever did. Because as soon as we got hit 
with the anthrax attack, the Government said--Bayer donate 4 
million courses of Bayer (sic) to the Government--donated. And 
the Government, we would like to buy 2 million doses. And by 
the way, if you don't give it to us at one-fourth your market 
price, we might challenge your patent. And that came partly 
from the Hill and partly from HHS.
    Now, the Government had no basis for challenging the 
patent, but it would have tanked the stock price of Bayer. It 
was their lead product. And then every other person who bought 
Cipro came in and said, we want it at one-fourth the market 
price. Now, Bayer has never gone public with the damage that 
was done by this little incident. But it has plagued our 
ability to engage this industry in this research. They 
understand if they have the perfect product, in the middle of 
an attack, whether there was procured under BioShield or not, 
the Government will steal it. That is what they believe.
    Now, that is why we have to overcome--that is the 
suspicions we have to overcome in BioShield II. And that means 
liability, tax, patent, procurement, the lot. Because we are 
dealing with uninsurable risks, political risks that a senior 
Government official will play a mafioso tactic against a 
company and tank their stock price.
    Dr. Kadlec. David, if I could, I would like to get Mr. Mr. 
Wright.
    Mr. Wright. I think we are getting into many issues here. I 
think the first step, if we want companies to develop products 
for BioShield, there has to be protection, liability protection 
for those products approved under the animal rule. All right? 
And that is a simple first step.
    The issue of Cipro is much more complex. And I totally 
agree, the Government cannot steal products from companies. And 
that has kept a lot of investment out of this industry. Our 
company was almost not financable because of that and because 
of what was expected that could be done if we spend all this 
venture capital money developing these products and then all of 
a sudden someone comes along and takes them away.
    Products, though, that are on the market, that have gone 
through human testing, who are used on label, the liability 
issue is different from those products who are being used 
either off label, at the Government's request, or products who 
have not been through the standard FDA approval and have been 
approved by the animal rule. And that is where the first step 
needs to be taken, in my opinion.
    Thank you.
    Dr. Kadlec. Mr. Elward.
    Mr. Elward. Well, I think, you know, Caterpillar has to 
face the risk-reward in every product we develop, and I don't 
think this is any different. Whether or not we have protection 
out there is just going to affect, you know, to Mr. Ludlam's 
point, we are going to have to have higher rewards in place. So 
there is a continuum there. And one size never fits all. That 
is why we will have to evaluate it on a case-by-case basis, 
just like any commercial industry does, or business does out 
there, look at it on a case-by-case basis. And if the 
protections aren't there, then we are going to have to have 
higher incentives in place at the end, you know, at the end of 
the day to get the action that we want.
    Mr. Dorsey. Mr. Conk suggested that companies that are 
protected from liability don't have an incentive to exercise 
due care in producing or manufacturing their product. That was 
the example suggested by the blood products he mentioned. If we 
afford liability protections to companies, how do we ensure 
that we do in fact exercise due care when they--the best care 
they can, when they make a countermeasure?
    Mrs. Kaye. The swine flu situation was another example, an 
analogous situation where the Government stepped in and 
provided liability protection for manufacturers because 
manufacturers were unwilling to produce that vaccine in any 
other scenario. And in that instance, the Government had the 
right to subrogate claims, so if there was some negligence on 
the part of the manufacturer, the Government could turn around 
and do that. I actually think that is a far better way to deal 
with these situations than throwing this open to regular 
plaintiffs and juries.
    Getting, again, back to this polio situation, it is a very 
analogous situation. That is a vaccine that the U.S. Public 
Health Service said needed to be used in this country. It is 
the only effective vaccine when there is circulating wild polio 
virus. And the U.S. Government said this is the vaccine you 
must use in this country. We as a company manufactured that 
vaccine according to specifications, and suffered a lot of 
liability on account of it. It is a very analogous situation. 
No negligence involved.
    I absolutely think that it is important to have a standard 
across-the-board liability system in place, product by product, 
it can be decided whether this product should have this system 
available to it. But I hope what you are not suggesting when 
you talk about should this be on an ad hoc basis is that 
different products would have different levels of protection, 
because then you would never know what you were getting 
yourself into when you started down the path.
    Dr. Kadlec. John.
    Dr. Clerici. There are legislative proposals being floated 
now that have a bad actors exception to this, and I think that 
that would probably be acceptable to the majority of folks that 
I work with. In other words, if there is clear proof of gross 
negligence or willful misconduct, companies are more than happy 
to accept that sort of exception to any sort of liability 
regime, because, you know, the responsible company is not going 
to be willfully negligent or commit gross misconduct.
    Dr. Kadlec. Mr. Barrett.
    Mr. Barrett. Yeah, I just want to make a comment about the 
Cipro discussion. You know, we have talked--it started with a 
discussion, I think, as to whether or not you can carve out, 
from a liability standpoint, the treatment, the use when it is 
in a countermeasure versus the broader use. And I think there 
are people at this table who are far better equipped to answer 
that legal question than I am.
    I just want to make sure that we--because I heard the Cipro 
discussion as the example here and I am not sure that we don't 
take the wrong messages from that Cipro example. I don't know 
if we are going to come back to it--I hope we do. But there are 
ways of ensuring there was information available on other drugs 
that could be used as treatment for anthrax. We did 
eventually--Secretary Thompson did respond, after this occurred 
and information was circulated to the medical community, there 
is work that can be done ahead of time to look not just at how 
do we get that drug into the system, but are there other 
possible treatments. And again, I think that it is going to be 
important for us, as we think about Cipro, to take all the 
lessons from it. And I am not sure that I would necessarily 
draw the same conclusion that I heard earlier.
    Dr. Kadlec. If I may at this time, maybe we can shift gears 
slightly. I won't say we answered all the issues on liability, 
but certainly what has been discussed here has certainly, I 
think, moved our thinking and understanding of the number of 
issues associated with it very forward.
    But if I could turn now to maybe, we could shift to the 
issue of intellectual property, something, again, not so 
contentious, I am sure.
    Mr. Dorsey. Another small issue.
    Dr. Kadlec. And I would invite my colleagues, if there are 
any questions on intellectual property, we could open it up at 
this point. Otherwise, I do have one. And really, it is a more 
general one, is to just kind of get a sense of the page here, 
what are the varying opinions on intellectual property and what 
should we--we, being Congress--be mindful of as we move forward 
with consideration of a number of potential intellectual 
property-related considerations or provisions, that run from 
wild card patent to patent restorations and others?
    So with that, I will just open it up to seek comments from 
the panelists.
    David.
    Mr. Wright. I think if we want to get Large Pharma involved 
in this industry, we are going to have to do something dramatic 
to make it worth their while. BioShield legislation has put 
$5.6 billion over 10 years into a pot to cover all the 
products. And while that seems like a large number, if you do 
the math that is $560 million a year. In most large pharmas, 
that is not a big enough market for them to even look at a 
product in. All right? They would not spend money developing. 
In most large pharmas today, it is $750 million to $1 billion 
market opportunity before they will spend their money trying to 
develop a product for that.
    So there is somehow that we are going to have to increase 
an incentive for them to get involved and spend their money. It 
takes just as much money to develop a biodefense drug with a 
market cap of $150 million possibly over 3 years, maybe, if the 
Government decides to buy it, if they think they are going to 
need it. It takes a Bigco just as much money to develop that 
product as it does to develop a billion-dollar product. And 
shareholders just will not stand for it.
    So whether it is patent extension, whether it is on other 
products for every product that is developed in that field, or 
something like that, and while there are those that will say 
that is, you know, using Peter to pay Paul, it is somehow going 
to have to be done. Otherwise, big companies are not going to 
be able to get involved.
    Dr. Kadlec. Mr. Elward.
    Mr. Elward. I would agree that we definitely need to have 
the right incentives in place. Caterpillar is the world's 
leading manufacturer of--mining equipment, and we currently 
provide health care benefits that cover more than 140,000 lives 
here in the U.S. and we spent last year over $600 million on 
that. Like other companies that provide quality benefits, we 
are concerned about rising health care costs and prescription 
drug costs in particular. In the past couple of years, our 
prescription drug costs have increased 20 percent and there is 
no end in sight to that.
    But to help address that trend, we have encouraged our 
employees and retirees to opt for generic drugs when available, 
and they do that quite frequently. When that is out there and 
they know about it, 90 percent of the time they are using 
generic drugs. And that is a huge savings for them. When they 
use generics, our employees save over 80 percent of what they 
would have spent on name-brand drugs. And our company benefits 
substantially as well. It is not uncommon for us to save 30 
percent on our drugs-spend when our employees use those drugs, 
so it is both good for them and it is good for us as an 
employer and allows us to continue to provide those benefits to 
our employees.
    We do believe that Congress can and should strengthen 
BioShield I and we need to have certain incentives in there--
product liability protection, guaranteed purchasing, tax 
incentives, and the like. But in the current form, we could get 
some unintended results. And these higher prescription drug 
costs for our consumers and reduced pharmaceutical access for 
uninsured are those risks, especially our employees, our 
retirees who are on fixed incomes.
    So those two areas of concern: One, the legislation could 
actually undermine the goal of developing novel countermeasures 
by merely encouraging minor changes to already approved 
products. And two, the legislation offers patent extensions, 
which would delay the introduction of new generic products to 
the marketplace, which is so important to our being able to 
provide those benefits and for our employees and retirees to be 
able to support their families that way.
    So we believe that Congress can and should implement some 
additional incentives to help this legislation, but we need to 
make sure it is equitable and that it doesn't end up negatively 
impacting the people that rely on this so much.
    Dr. Kadlec. Mr. Barrett, and then I will get Chuck and then 
Tara.
    Mr. Barrett. Yeah, again, I would like to remind everyone 
that we are a large producer, the second-largest pharmaceutical 
company in the United States, measured in prescriptions 
produced. And we are both a generic company and we are a, 
again, patent-writing, filing, research-based pharmaceutical 
company. So I think maybe we bring a slightly different 
perspective to this.
    We are very supportive, and I think all of us here, 
obviously, of some of the provisions that we have seen in both 
BioShield I and BioShield II. We talked about some of them this 
morning--product liability protection, fast track, etc, etc. 
Our concern with some of the intellectual property provisions, 
that they really are indirect and we wind up essentially 
shifting the cost of our homeland security into the health care 
system.
    And so, particularly as we started to look at the wild card 
provisions that we have seen in legislation, our concern was 
that it would have these unintended and really unmeasurable 
consequences related to the health care system. They lack 
transparency, as ability to know where you are spending the 
money and where it is going, and proportionality.
    So in particular, we thought that anything that essentially 
slows down the access of affordable drugs probably was bad 
policy. There are direct ways of encouraging innovation and 
there are direct ways of encouraging our existing 
infrastructure to make products available to us. But the use of 
an indirect tool usually leads to a bad outcome. If you create 
an incentive that is indirect, we are unquestionably going to 
wind up with an unintended consequence. To me, the idea of 
putting that consequence into the health care system rather 
than dealing with it as part of the national defense and the 
homeland security seems like questionable policy.
    Dr. Kadlec. Chuck.
    Mr. Ludlam. If we don't get the products we need to deal 
with these pathogens, we absolutely know for certain already 
that millions of people will die--from AIDS, malaria, TB. We 
know we will have an antibiotic resistance crisis and people in 
the United States will die of earaches. We will be in a 
postantibiotic era. We know if SARS gets loose that hundreds of 
thousands or millions will die. If avian flu gets loose, at its 
current lethality rates of 55 percent, millions, probably 
hundreds of millions, perhaps a billion people will die. We 
will have Rwandas and Cambodias all over the world. The 1918 
flu was 1.8 percent lethal. Avian flu is currently running 55 
to 70 percent lethal.
    The question is what wouldn't you do to make sure that we 
have products that deal with these pathogens. And I think the 
answer is absolutely nothing that we shouldn't be willing to do 
to fill this gap with these medicines.
    Now, I am absolutely certain, based upon hundreds of 
conversations with Big Pharma people, that probably the only 
incentive in the bill, the bills that are pending, the only 
incentive in the bill, assuming you do all the rest of it, the 
only incentive in the bill that will work, that will actually 
turn their heads and actually convince CFOs to play in this 
space are the IP provisions included in the wild card. Phil 
Russell in the Wall Street Journal article on Monday said God 
help us if we don't get some of the Big Pharmas to play. There 
is nobody with more credibility in this space than he is, and 
more frustration at trying to get these products developed. OK.
    We want to get one large pharma company in every RFP that 
the Government puts out to get any countermeasure for any 
countermeasure for any pathogen, at least one. And then we want 
the small companies as well, because they are obviously 
innovative as well. It clearly is an indirect subsidy, there is 
no doubt about it. The generics have one or two legitimate 
points to make. And the Congress has to decide whether or not 
that argument, which I think is classically a NIMBY argument--
it is a good argument, but it is a NIMBY argument--is trumped 
by the larger concerns.
    Dr. Kadlec. Tara.
    Dr. O'Toole. Well, again, I think we have many compelling 
and conflicting public issues at play here. If you believe that 
biosecurity is a real problem, if you believe that a 
bioterrorism attack, or indeed, a natural pandemic is an 
existential threat to the country, then the biopharma industry 
becomes a critical national security resource that we have got 
to protect and indeed promote. We have to find a way to not 
only ensure U.S. preeminence in these industries, but to 
promote innovation. And intellectual property and the ability 
to make money on it is one of the ways that we have succeeded 
historically in promoting innovation.
    And we certainly need countermeasures. And I have heard 
from Big Pharma companies--I am not a Big Pharma company nor am 
I a small biotech company, but I have heard from Big Pharma, 
too, that what they are most interested in is these indirect 
incentives, which everybody agrees, I think, are a nightmare to 
manage, from the Government's point of view, and will indeed be 
an indirect cost on the health care system. And we don't want 
to crush the health care system in our pursuit of bioterrorism 
countermeasures.
    So what to do. I do not think there is any way out of this 
pickle unless we figure out how to rapidly accelerate the time 
needed to make new drugs and vaccines. Time is the real cost 
here. And we need to be able to predict the winners and the 
losers a lot earlier in the process than we can now. I think 
the Government should enter into a long-term very ambitious 
commitment to radically accelerate the production of drugs and 
vaccines, and figure out how to get Big Pharma and the 
universities and the biotech companies involved in such a 
measure. If we don't drive down the cost of drugs and vaccines, 
we are cooked, both from a health care perspective and from a 
biodefense perspective.
    Dr. Kadlec. John.
    Dr. Pournoor. Actually, I would like to maybe blend a 
couple of themes that were emerging in our discussions here. 
The central intent of any business is to develop a sustainable 
business model. I think risk management, protection of patents, 
expenditures in areas of R&D to be able to augment what is 
already--and R&D infrastructure in many companies are the kind 
of themes we need to emphasize.
    I am also a believer in the fact that the long-term 
sustainability of it definitely has to do with not only 
development of new pharmaceutical, but these patients, above 
and beyond needing pharmaceutical and vaccine, will need 
hospitalization at some point in time, may need isolation. We 
need to register and credential health care workers--the kinds 
of themes that I think you would see probably emphasized from 
the public health perspective here. Decontamination, personal 
protective equipment--all of these will carry some level of 
risk with them and some level of liability. Clear articulation 
of the boundaries, I think, are fairly important.
    But in the intellectual property area specifically, to 
incentivize companies to participate I think three key areas 
are quite important. First, I would say, is the initiatives 
around patent reform, from first to invent to first to file. To 
us, it is a key area that needs emphasis so that if there are 
activities going on in organizations in their R&D functions 
which, before filing, is unbeknownst to anyone in the world--no 
one really would know that that activity is going because it is 
confidential, proprietary information--that there is sustenance 
in that moving forward.
    Prior user rights, I think, is a theme that we would like 
to see emphasized. With prior user rights, you give extension 
and a larger domain to investments that do not carry as much 
risk if they do not make it to filing in time.
    And also research exemptions so you can see what the 
tangential extrapolations from existing themes that people are 
doing R&D on in the long run are going to be.
    To us, those three pillars, from an IP perspective, I 
think, are important. But again, indemnification boundaries is 
yet another aspect of risk, as well as, I think, the amount of 
R&D investments that it is going to take. Sustainability of the 
overall business model requires a right cocktail of the various 
components.
    Dr. Kadlec. Mr. Barrett.
    Mr. Barrett. I want to back us up a little bit. I think we 
do ourselves--I don't think we take ourselves in the right 
direction when we frame this as a generic/Big Pharma question. 
The question, really, is how do we mobilize our entire 
pharmaceutical productive capacity around the country to kick 
into this effort.
    And again, I just want to remind you, companies like Wyeth 
and Pfizer, Major Pharma, are significant producers of 
pharmaceutical products in this country, as are companies like 
Teva. Three of top five largest producers in the U.S. economy 
of pharmaceutical are generic companies as well. So we need to 
mobilize the entire system. And the question is how do we do 
that. And I think there are aspects of IP that should be 
examined. The use of wild card, as I said, for me has really 
significant policy implications for all of us and I think, for 
that reason, should be looked at with some concern.
    But when we look at the development of a truly novel 
treatment, if it is superior to anything that is available, if 
it is unique and there is no other therapy, then we should look 
carefully at whether or not there are tools that we can use in 
the IP area. But it should be direct. We should be able to see 
what we are spending, what we are spending it on, and what the 
outcome is that we want. And that is the reason that I express 
this concern about these indirect tools.
    But I think, again, we will do the most work if we ask 
ourselves how do we mobilize the entire system. That includes 
all manufacturers, wholesalers, distributors, everyone, to 
participate at the right time, at the right speed, and at the 
right scale to be effective.
    Dr. Kadlec. Mr. Elward.
    Mr. Elward. What we are talking about here is insurance 
policies. And nobody wants to buy insurance. I don't want to 
but insurance, nobody here does, but we feel like we have to, 
and in this case, the national interest, we decided we want to 
do this. And it is like air defense. We don't want to go to 
Boeing and spend a bunch of money with Boeing to build fighter 
jets if we didn't think, you know, if we didn't think we needed 
them and we hopefully don't have to use them.
    But I can't imagine going to Boeing and saying, OK, we are 
going to--we want you to build the latest and greatest in 
avionics for the next generation of fighter jets, and to 
incentivize you to do that, we are going to protect you from 
competition on the commercial side of your business. So don't 
worry about the next generation of AirBus competing with you on 
the 777 because they are not going to come--you know, they are 
not going to be in the game here if you can do this.
    It drives completely the wrong behavior and it is not in 
the best interest of consumers and competition. And that is 
what we are all about.
    Dr. Kadlec. Dr. Franz.
    Dr. Franz. Thanks. I would just like to underscore a point 
that Tara made about our ability to respond very quickly. I was 
involved in a study on the use of vaccines in biodefense in the 
last year, and I essentially concluded that, beyond smallpox 
and anthrax, because of the nature of the agents, because of 
the way they present themselves, and because vaccines by 
definition are prophylactic, there may be very little space for 
vaccines in bioterrorism and emerging infectious disease. Our 
system just does not respond quickly enough.
    To give you a concrete example, in 1996, at USAMRID we 
produced the first GMP lot of RPA, the recombinant anthrax 
vaccine which is now the subject of the BioShield I 
legislation. That is almost 10 years ago. We were at that time 
trying to get the animal rule in place. We were talking about 
the animal rule in place, putting it in place in the mid-1990s. 
It is finally in place. There is only one product, to my 
knowledge, that has gone through that system, and that is 
pyridostigmine, a prophylactic for chemical defense.
    So I believe there are areas where the Government does have 
control in which these processes can be speeded. It is very, 
very difficult, even with the animal rule in place, to get 
answers from the FDA about how to move these products forward 
into advance development.
    Dr. Kadlec. Mr. Ludlam and then Mr. Wright.
    Mr. Ludlam. I am absolutely delighted at George's comments 
about where we can go on the intellectual property provisions. 
And I think actually it forms the basis for a consensus, 
perhaps, on these issues that look to be so intractable. 
Because BioShield II says, page 79, lines 19 through 24, that 
it must be a novel product, not previously approved ever. And 
on page 80, lines 1 through 4, it must be superior. The word 
``superior'' is also in the bill. It has to be novel and 
superior. And no wild card could possibly be granted unless it 
is both novel and superior. And I think George has suggested 
that that is a place where perhaps intellectual property 
incentives might be useful.
    Previous to that, it says that in addition to those flat 
limitations, which always apply, it can only be deployed at the 
discretion of HHS when they find that there is nothing 
available, the other factor--considered. It is a truly a last 
resort in the most dire cases. That is the way it is drafted. I 
in fact was working with some of the generic pharmaceutical 
firms when I drafted it, under the table, behind the scenes. 
They actually came to me, they actually provided me language, 
they made sure that I was drafting something that didn't seem 
inadvertent. I won't reveal who it was because I told them I 
wouldn't out them on the process. Very carefully drafted, and I 
think George's statement gives us a great way to move forward.
    Dr. Kadlec. Mr. Wright.
    Mr. Wright. Just a comment. I think the comparison to the 
biodefense and the defense arena is very appropriate, because 
what we are talking about are incentives. And what we are 
talking about here is giving an incentive for a company to 
develop a product that they would not ordinarily develop.
    Now, when the aerodefense agencies are asked to develop a 
new F-15 or F-16 or Stealth bomber, there is a process by which 
they risk none or very little of their money in developing 
that. There is a competition that goes forward; they are paid 
for that. There is then a certain set of milestones that are 
set up, that if they meet and develop this product, then it is 
brought forward, they develop it, and it is purchased. And they 
know up front that they are going to have a market, that X 
number are going to be purchased, and that they will be able to 
make a profit and a return for their shareholders.
    This does not currently exist in this business. Pfizer, 
Wyeth, Roche--and I can't speak for them, but I am a cochair of 
the Alliance for Biosecurity, that has all those people on it 
and I have heard them talk. And I am not speaking for the 
alliance here today. But what they say is we are not going to 
go out and develop a product for anthrax just because we have 
money to spend to do it. There is no reason to do this, there 
is no market.
    So whether it be wild card, whether it be a totally 
different system, I think the point that I would like to make 
is that something has to be done to get everyone involved. Do I 
want Big Pharma in here? No. I am a small biotech company. I 
can't compete with Big Pharma. I have nothing to gain from 
having Big Pharma in. But the country has everything to gain 
because of the millions of people and the economic devastation 
that could occur from one anthrax attack.
    Dr. Kadlec. Dr. Devlin.
    Dr. Devlin. From a public health perspective, we certain 
appreciate the issues that are being discussed here today, and 
we recognize that there is a governmental role to providing a 
sustainable, predictable market for these countermeasures. And 
also, the liability issues have got to be resolved.
    We learned a lot in the small pox vaccination issue. The 
public health workforce is going to be the one that delivers 
the medications that we're talking about today. We have got to 
be strong. We have got to make a very strong commitment to the 
public health infrastructure or this conversation is 
meaningless.
    We manage the IND process, which is cumbersome. We manage 
the adverse effects process around small pox. We learned a lot.
    In the last year's flu vaccine shortage, we were very 
grateful that the Federal Government and industry were able to 
get together to commandeer the amount of vaccine that was 
available and manage that through the public governmental 
infrastructure.
    That is the only way that we are going to get maximum 
health protection when resources are short and the need is 
great. And the public health workforce is also going to be the 
ones that manages that public information and that public fear.
    When you send anthrax through the mail, that puts every 
person in this country at risk and on alert. And managing fear 
is a huge part of any management of a vaccine or antidote 
distribution.
    So I want to say we were grateful for industry and 
Government at the Federal level's participation last year. And 
I want to say that we have a strong vaccine distribution system 
for children's vaccines. We do not have that for adult 
vaccines. And that is a real problem.
    So we were kind of flying by the seat of our pants last 
year. We were lucky that we had a light flu season, but we do 
need to work that system out.
    And last, is I ask for your support here on the Hill and 
with our Senators of the public health system so we can get 
these drugs to the people that need them.
    Thank you.
    Dr. Kadlec. David, if you have a question.
    Mr. Dorsey. I have a question about the level of incentives 
needed to get companies to play in this area. The argument is 
made is that is costs $800 million to a billion dollars to 
produce a pharmaceutical. And we need to make the market big 
enough to be people to play in that.
    And I am wondering if that truly is the case with 
countermeasures. Countermeasures, everyone is arguing , are 
products that are not tested in humans or in very small numbers 
of humans. My impression has always been that the high cost of 
developing pharmaceutical is mostly, at least in a majority and 
perhaps even mostly in the clinical trials needed to get the 
products to market. But we do not apparently have that with 
countermeasures because they will be tested in animals, very 
small numbers of humans.
    To what extend does that reduce the cost of developing 
these things and therefore suggest that we do not need the kind 
of large incentives that some have proposed to get these things 
developed?
    Dr. Kadlec. Mrs. Kaye.
    Mrs. Kaye. I think you bring up a valid point but in terms 
of whether the large scale clinical trials will be the largest 
portion of the costs for a product, I think it will vary from 
product to product.
    On a biological product and a large part of the expense is 
the scale up and the development of the process, which you 
would have whether or not you had large clinical trials.
    On a chemical entity, what you are seeing is probably 
correct because the scale up on the development of a chemical 
entity is not as significant a part of a cost of bringing a 
product to market.
    But I think one thing that also needs to be kept in mind is 
that for large companies, I think there may be some analogies 
to the aerospace industry, but not completely. My understanding 
of companies like Boeing is that their opportunities in the 
commercial market are pretty limited, and they are struggling.
    Whereas, in the bio-pharmaceutical industry, we routinely 
turn down research projects that are in our pipeline that we 
could develop because we have to limit. We do not have endless 
resources, and we have to pick only certain projects that we 
can fund and let others go by the wayside.
    So we are talking about opportunity costs in Big Pharma 
companies saying, well, we are going to shelve this commercial 
product that could have a large commercial market and instead 
devote our scientists to this BioShield measure. And that is, I 
think, something that needs to be overcome in order to 
incentivize large companies that have a large portfolio of 
possibilities out there.
    Dr. Kadlec. Mr. Wright.
    Mr. Wright. In addressing the cost, you are absolutely 
right. The cost of developing a product that does not have to 
go through full clinical trials is less. So it may be $150, 
$500 million to develop a bio-defense product.
    Our little company so far has worked on three products. The 
first product we worked at, we had spent almost $35 million of 
our money on and then found out it did not work.
    OK, so while that is costs that are sunk, and it is this 
type of costs that it may take $200, $300, $400 million until 
you find a product that works. And then you have to develop it.
    I also agree that Big Pharma opportunity costs are key, 
because it takes just as much time to develop this product that 
they may make $100 million on as a product that they make a 
billion on. And shareholders just do not tolerate that.
    Dr. Kadlec. Mr. Barrett and then Mr. Ludlam and then Mr. 
Conk.
    Mr. Barrett. Yes, I think that--I want to back up for one 
second, because as much as I love it when somebody agrees with 
me, I wanted to clarify something from earlier. [Laughter.]
    It does not happen often enough.
    My comment about the IP is very important, that my 
objection to wild card is across the board, and I want make 
that clear. And I appreciate your observation.
    So my comment really was about IP provisions that would 
possibly provide extensions to specific products or the 
restoration of specific products. But wild cards, from our 
view, are bad policy.
    On this issue, it is important to consider whether or not 
direct funding of clinical work is actually much more efficient 
that in the direct system. And that, while it seems expensive 
for the Federal Government to consider the real funding of the 
work, it is probably considerably less expensive than some 
system where we are going to pay the price and some way we do 
not see or do not have visibility on.
    So I would encourage us to consider systems in which we 
actually pay directly for the clinical work, for the scale-up 
if it is a bio-tech facility or whatever it may be. And that 
may seem on the surface quite expensive. In the long run, I 
think it is actually very productive. And we should really be 
considering it.
    Dr. Kadlec. Mr. Ludlam and then Mr. Conk.
    Mr. Ludlam. I knew you would oppose--I did not say you did, 
I just thought I would be a gentleman.
    I completely agree that if there was a way to pay through 
the front door, that would be the way to do it.
    We are heading for a budget collapse. We are heading for an 
implosion of Government finances. And the idea that the 
Government is going to put billions and billions of dollars as 
the procurement for products it may never use, I think is 
unlikely. And in fact, one of the strategies--I will be 
honest--in BioShield II, who has to pay the industry in ways 
that do not involve discretionary appropriations alone. Pay 
them through tax. Pay them through IP. Pay them through 
liability.
    That is all money. Now if we could pay them entirely with 
procurement and maybe liability and forego the tax and patent, 
fine, I think that is completely out of the question in terms 
of what the Government will actually pay.
    Five billion six hundred thousand dollars for this entire 
space is a joke. It is absolutely a joke. We are spending $9 
billion this year on missile defense. Now if we are spending 
that kind of money on these products, yes, maybe we can pay 
them through the front door.
    Anyway, I am just being honest. We did put the IP on the 
table because it was a form of money that we could pay that 
does shift costs to the health care sector. That is true. I 
would say that is a small price to pay for the collapse of the 
health care system if we get hit with a pathogen for which we 
have no countermeasures. Fine.
    In terms of the animal models, we are assuming we have the 
animal models. One of the massive problems here is we do not 
have the animal models. And we need a whole animal model 
industry.
    If you go Jackson Labs or Charles River, why are they going 
to create an animal model for a product that may never go into 
animals? Because there are other reasons why the industry is 
not playing.
    You have to have the animals on line, and alive in quantity 
in BSL III, IV facilities before they will start the research.
    You have to have manufacturing facilities for biologics on 
line, ready to go, available before they will start the 
research.
    So that is why our bill applies to research too as 
including animal models. It applies all of this energy, 
including wild cards to research tools. Because if we do not 
have better research tools within the animal models, the 
industry will never start the research for that reason along, 
aside from the other disincentives.
    Dr. Kadlec. Mr. Conk.
    Mr. Conk. Well, if what Mr. Ludlam says is true, as far as 
what drives Government policy, I think that is a shame.
    What I would like address is the point first raised by Dr. 
O'Toole and the whole idea about accelerated development.
    It is true that what we are talking about is the down side 
of biodiversity. We do not know what little scrapes of RNA in 
birds or cat-like animals in China or somewhere in the African 
rain forest are going to succeed in reproducing in humans.
    But if we want to look at this whole picture, let us start 
with the basics. The question I think we should ask first is 
how does each of these things serve our public health system, 
which is the fundamental structure through which we are going 
to administer public education and all mass medical defense 
regardless of its origin whether criminal or naturally 
occurring diseases.
    If we are to accelerate these processes and do with kinds 
of testing that may be shorter and perhaps less thorough than 
we hoped for in the past, then what we need to do as a 
corresponding measure is we have to greatly increase the amount 
of money that we spend in studying the biological effects of 
the various substances, whether biological or chemical, that we 
are administering to the population.
    We have this idea, and this affects the liability 
discussion too, that when something is approved by the FDA, 
that it is an open gate and everything is free now. I think 
that we should look at the whole thing in a staged way.
    FDA approval of marketing we should see as the beginning of 
a new stage in product development. Unfortunately, today it is 
a stage that I think we could describe as the mass poorly 
controlled experiment stage where we not take small numbers--we 
have small numbers of people on whom we have tested, and now we 
have tested it millions and do very little to see how that is 
carried out.
    So I think that the burden on companies for stewardship of 
their products is something that we should increase 
correspondingly to the advantages of accelerated testing, etc, 
that have been proposed.
    Dr. Kadlec. Well, thank you, Mr. Conk.
    What we are going to do is now if you do not mind, is we 
are going to transition to question two.
    I think the public health people have been quietly waiting, 
biding their time to address this. Just so we have some idea of 
the timing of this, under normal circumstances, 11:30 the 
formal round table would conclude. But I think given that staff 
members are now running the show, so to speak, we will go as 
long as it takes-- [Laughter.]
    Dr. Kadlec. I think to address the issues that we have 
before us. So if we could open this question two. And what I 
would like to do is kind of blend an issue here a little bit 
and that is talk about the workforce, the public health work 
force first, but also kind of highlight, if you will, something 
that I think is relevant to the bio-defense industry and that 
is the issue of immigration requirements and the need for 
providing grants in education and increased training.
    So if we could kind of open that up as our segue to the 
public health discussion. I would like to open that first and 
then maybe broadly discuss what we know or do not know in terms 
of the status of our public health infrastructure, particularly 
the readiness of it and what does it mean to be ready? What are 
the metrics around that?
    So if I could just open that up first with the workforce 
part, and then we will transition, if you will, to what does it 
mean to be prepared?
    Dr. Devlin.
    Dr. Devlin. I think I mentioned earlier the notion that it 
is going to be the public health workforce that has to carry 
out the early detection of any kind of intentional or 
unintentional disaster and respond with quarantine, isolation, 
also the distribution of the vaccine and any counter measures 
that would be developed, going all the way through mass care to 
recovery to public information.
    All of that requires a well-trained workforce. And we have 
a tremendous variety of professionals working in teams in the 
communities, in the States. They are nurses. They are 
epidemiologists. They are laboratorians. They are environmental 
health specialists, industrial hygienists, all of them 
requiring a specific amount of expertise to be able to 
contribute to the preparedness effort.
    It is very difficult to recruit these individuals. About 20 
percent of the graduates of schools of public health actually 
go into the practice of public health. They are in your 
industries. They are in hospitals. They are in research, 
academic centers and so forth.
    So we have also an aging workforce. Our public health 
workforce in general is about 7 years older than the rest of 
the State Government, local Government workforce.
    We have nationally about half of our nurses would be able 
to retire, and that is our largest group of the workforce 
within the next several years.
    So we have concerns about preparing the workforce, 
retaining, recruiting, all of those challenging and effective 
local, State, Federal response to preparedness. So it is a 
critical issue, and I am very glad that you have had that on 
your sights.
    There is a bill, Senate bill 506, by Hagel and Durbin, that 
has been developed in partnership with Federal, State, local 
officials. It would be similar to the rural health act of maybe 
30 years ago where there would be funding created for 
scholarships for recruiting students into the field from the 
schools of public health and also loan repayment programs.
    We think this is a very important tool for the future of 
the public's health in terms of getting the expertise into the 
communities in a sustainable way.
    Thank you.
    Dr. Kadlec. Dr. Pournoor.
    Dr. Pournoor. Under current HRSA requirements, general 
readiness levels for public health are set at a minimum level 
of 500 per million. Being able to receive 500 patients per 
million in population. That is 500 of 1 percent of the 
hospitalization rate. So this is sort of a threshold national 
readiness that collectively we are working toward.
    If you take that 500 per million and extrapolate what the 
number of individuals needed and the amount of space for this 
surge of patients, even at 500th of 1 percent, there is a 
requirement for a greater workforce than we have sustainable.
    One of our challenges today is that we reward our health 
care systems in a very lean manner, in a just-in-time manner. 
And just-in-time operations means that you have only as many 
beds as you need. You have a lean staff to be able to minimize 
the investment of and time and energy and dollars in your 
system. And also, you carry a minimum of inventory or products 
that would help the patients that would be coming in.
    In a just-in-time consumption and production world, the 
worst thing that can happen to it is an epidemic or a pandemic. 
Because very little demand elasticity exists in the system.
    Whether it is demand for pharmaceutical or medical supplies 
or staffing, I think the challenge is really focusing on 
demand-planing tools and demand-planning models that give us a 
recognition of what the boundaries of the problem may be and a 
strategy to be able to absolve ourselves of some of the issues 
in a practical manner.
    Dr. Kadlec. Dr. O'Toole.
    Dr. O'Toole. There is lots of evidence that the public 
health workforce and our capacity to respond to the 
professional needs in mass casualty disasters is a mess. It 
just is very, very scanty.
    Half of all of the Federal workforce now engaged in bio-
defense is eligible to retire in the next 4 years. And that's a 
small number to begin with.
    People do not go into public health in part because the 
schools of public health do not teach anything about public 
health practice. And I think docs, for example, are mostly 
doing disaster response as assistance professors and as an add-
on task that is assigned to them by their department chairs.
    There is, I agree, no coherent process for hospital 
preparedness at all. And that is something the bill has to 
address in one form or another.
    I think the solutions to the workforce problems are very 
simple and very cost effective. But they are going to be 
costly. We ought to have training programs keyed in to 
requiring medical schools and schools of public health to offer 
practical training to people who wish to go into these areas. 
And there ought to be Government service pay back either at the 
local, State or Federal level in exchange for those kind of 
scholarships.
    We ought to also make it a lot easier for more senior 
people who have experience under their belt in medicine or 
public health to come in and out of the Government, which would 
require personnel changes in the Federal workforce and would 
help everybody. It would acquaint the medical and public health 
systems with what Government is really up against and who they 
can look for an allies. And it would also help, I think, the 
workforce in the Federal work place.
    Dr. Kadlec. Elin.
    Dr. Gursky. Thank you.
    Thank you for the opportunity to speak here today, and I 
look forward later on to be talking about the system as a 
whole.
    I agree with Dr. O'Toole. We have a number of very serious 
public health system issues that we need to discuss, not the 
least of which is the public health workforce.
    I concur that we most definitely need to incentivize people 
going into public health as Dr. Devlin has discussed, but I 
think it is long overdue that we develop a credentialed 
professional public health workforce, and would suggest that 
merely incentivizing people to take public health training 
without requiring to get some kind of license or certificate, 
would be a very shortsighted approach.
    Our tatoo artists and our hairdressers in this country need 
to have a license and have to have proof that they are 
competent to do what we expect them to do. And we should have 
no less a standard for people who are very much responsible for 
life and death decisions, for risk communications, for releases 
of vaccines to medical facilities for postexposure.
    So the treats that we have been facing in the past two 
decades, the threats that are coming at us from African rain 
forests and strange looking cats and whatever else Mother 
Nature and terrorists have to throw at us, must be met by a 
workforce that is educated, not just trained.
    As I look at some of the anecdotal reports of the past few 
years, the bioterrorism funding, I see a lot of training 
courses. And it is my opinion that what we are doing is not 
just training people in new pathogens and bioterrorist threats. 
We are actually training people in some of the fundamental 
skills they should have in public health practice.
    And in fact, because we are not assuring governors that 
funding is sustainable, we are not really building into our 
public health workforce. We are hiring people who are short-
timers and people who are contractors. So the turn over is 
great, and then we wind up having to train over and over again.
    So I think in terms of the potential catastrophic 
ramifications to the health of the country and costs, the most 
cost effective measure we can make right now is to look to the 
year 2010 and say that people graduating from public health 
schools who wish to practice must have a certain standard of 
education and a license.
    Dr. Kadlec. Chuck.
    Mr. Ludlam. Just two quick points. The 9/11 Commission said 
that our failure on 9/11 was a failure of imagination. And I 
think we have a total failure of imagination regarding public 
health, consequences of an infectious disease outbreak or a 
bioterror attack.
    Talk to the officials in Toronto and China about what 
happened with SARS. There is not anything we would not throw at 
this problem in terms of resources, training, incentives or 
everything else in this country. Beijing, Shanghai, Hong Kong, 
they were closed down for several months.
    Now what if we close down DC, New York, and Boston for a 
few months?
    There was a death sentence on the books in China for the 
willful spreaders of SARS. The first thing they lost were some 
of their hospitals because people go to their hospitals.
    You can lose your hospitals for all of the other things 
that hospitals are doing. And the worst situation is if you do 
not have medicines to treat people with. And you say, I do not 
know what it is. It is whatever you are going to quarantine. 
And that is the absolute collapse of the health care system.
    In the center of attack, they said, get your ass on Cipro 
and stay on it until you get off and you will be fine. And 
there was no panic.
    And we tell them we do not know what it is, that we do not 
know how to treat it, that we have no vaccine, we have no 
therapy. We do not even have a diagnostic. We cannot separate 
the worried well from the people who were exposed.
    We have no diagnostic for small pox right now. We've got to 
wait and see whether they break out.
    OK, the last issue is command and control. There is no 
consensus on who is in charge federally. It is absolutely a 
muddle created largely by the Congress between DHS and HHS. And 
this committee and the Homeland Security Committee have to work 
this out in this bill.
    We have got to know who is in charge, and they have to have 
resources.
    NDMS, the administration proposed to cut funding for NDMS. 
MMRS is a complete mess also. We have hardly any boots on the 
ground to send. We have no way to coordinate them with the 
State and local officials, who are the principle work forces in 
this area.
    We are probably going to have to deploy the National Guard. 
They are totally unprepared for this.
    We are not taking this seriously in the slightest.
    Dr. Kadlec. Dr. Bacal, I think you have a question.
    Dr. Bacal. I am Kira Bacal from Senator Hatch's office.
    I would like to build on what Mr. Ludlam and Doctors Devlin 
and Gursky's comments and ask we have often, particularly and 
appropriately this morning, tended to focus our discussion on 
biological threats be they weaponized, small pox or new 
diseases like SARS. But I think it is also important to 
remember that our public health system must also respond 
conventional attacks such as mail bombs in Israel, shopping 
malls or car bombs in Oklahoma City.
    And particularly, after last week's attack in London, 
subway as well as Secretary Chertoff's comments about 
reorganization as Chuck was saying of the Department of 
Homeland Security.
    I would be very interested in hearing some remarks and some 
comments about what our guests feel should be the template for 
our Federal, State and local authorities to work together on 
both conventional as well as biological crisis.
    Dr. O'Toole. If in the event of a explosive device or a car 
bomb, even a very big explosion--let's leave out nukes and rads 
for the moment--the real response is going to be the medical 
system, not the public health system, particularly immediately. 
And that has been a neglected piece of homeland security 
preparedness in general that really needs a lot of attention.
    The problem is that that system is disconnected from 
government and highly fragmented. And as was said earlier, 
very, very pressured financially and just operationally. So it 
is going to be very difficult to fix.
    I think the way forward for dealing with mass casualties 
situations is we are going to have to create regional consortia 
of hospitals for starters. No one knows who the organizing 
authority to put that consortia in place is going to be. For 
the most part, mayors and governors have not been interested in 
messing in those worlds. But some organizing authority to 
ensure hospitals could cooperate and collaborate is going to be 
absolutely essential.
    And then we are going to need to spend money on thinking 
through how to get them prepared in a cost-effective way.
    One critical aspect of all kinds of responses is going to 
be the ability to have situational awareness both in the 
medical care system and in the public health system. And the 
key component of that is being able to move information from 
the hospitals to public health. So public health has a broader 
view of what is going on. Is this one anthrax case? Is this 
100? Is this one hospital? Is this every hospital in my region? 
Is everybody overflowing with burn victims, etc, etc?
    We need to start drilling down with great specificity on 
what aspects of the huge spectrum of public health and medical 
response we really think are the most essential and start 
building those systems. And they are systems.
    I would offer that the medical and the public health 
systems--and I have been part of both--are so broken and so 
stressed that there is no hope of tweaking these systems and 
getting them into good-enough-to-go fashion. We are going to 
have to start building whole new systems and committing 
ourselves to that.
    Dr. Kadlec. Pardon me, Dr. Devlin and then Dr. Gursky.
    Dr. Devlin. One of things that happened well after 9/11 is 
that the funding for public health preparedness and the funding 
from CDC and then the funding from HRSA for the trauma system, 
hospital preparedness, did come to public health.
    And we have done, if I may say so, a very fine job in North 
Carolina of integrating those two systems so that we do have 
the specificity that you are talking about. We can tell you 
what beds are available and move people around in terms of mass 
care.
    And then homeland security, of course, has funding for 
equipment that supports hospital work. So it is integrated in 
some States. And we are working on it in all States. If I 
might, I would like to hand out North Carolina's story. I will 
not go through it, but I will say that what we see the biggest 
issues are is that we do have to consider that this all threat, 
all hazards, and that we are dealing with radiological, 
nuclear, biological, chemicals. And we are dealing with 
hurricanes. And we are dealing with explosives. And that early 
detection, surveillance are absolutely critical. And that it is 
going to take a strong workforce at a local level, a regional, 
State, a multiState approach as well as the Federal response, 
because these are not respecters of any kind of boundaries.
    So we understand this. And so the other notion is that, we 
talk about certainly we want to do everything we can to save 
lives. And we are going to have some devastating epidemics. I 
mean, we are at 36 years since our last flu pandemic. It is 
time.
    So there is lots of national things that can wrong too. But 
the reality of it is, we are not funding the public health 
workforce and effort in a sustainable way.
    Last year we had redirected $39 million for the cities 
readiness initiative. Not that we don't need to protect major 
populations, but we are all at risk, the school in every 
community, the nuclear power plants and we could go on and on.
    This year the administration recommended a $130 million 
reduction or transfer to the SNS but taking it from the State 
and local public health infrastructure. The Senate has 
concurred with that, it is my understanding. The House did not.
    But we are not putting everything that we can out there to 
protect, to detect, to put in place interventions that are 
going to literally save lives in addition to the industry 
issues that are here today.
    So I thank you for your question and for yours.
    Dr. Kadlec. Dr. Gursky.
    Dr. Gursky. If I may, I would like to move a little bit 
from workforce to systems given the question that is on the 
table. Because I think systems is the issue we have to address.
    We do not have a public health system in this country. We 
have 50 State and 3,000 local health departments who work very, 
very hard on behalf of their citizens and has been extremely 
taxed over the past 25 years by new pathogens, clearly with no 
end in sight.
    We are long overdue for rethinking the need for the 
building of something that works systematically in this country 
for public health.
    And the question I frequently raise is what does a 21st 
century public health system look like?
    We have already discussed one of the issues, which is 
workforce. So you know my thoughts on that.
    Having an educated workforce that can respond quickly, 
agilely to new threats, to be able to make the decisions needed 
to deploy stockpiles and to provide risk communication 
messages.
    One of the things fundamental for this would be an 
information sharing system, a health intelligence system. We 
have seen evidence of building parts of information systems now 
for a lot of years, on top of which we are building early 
warning and detection systems.
    This should not be rocket science. In fact, we know how to 
build information systems pretty darn well. What we have done 
is give a lot of funds to our States and special cities to 
build systems without giving them requirements first, without 
providing the standards and the architecture.
    If, indeed, we want to be serious about dealing with 21st 
century global threats, we have to build a system where we can 
rapidly share information, the situational awareness that Dr. 
O'Toole discussed, the connectivity between the public health 
medical and hospital sectors, as well as intelligence and law 
enforcement. That is absolutely critical.
    The third thing we have to decide is, indeed, who is 
responsible for what. And as we saw on anthrax, it was very 
unclear if it was local, State or Federal CDC responding to 
events. We have that same problem in terms of anticipated 
relief at this point. I speak with people, public health 
professionals who feel the National Guard is going to be 
deployed to help them. CDC is going to be deployed and come to 
the rescue of multiple cities at one point in time. The 
Department of Defense is going to be deployed.
    And maybe these are all possibilities, but our assumption 
of who is going to be involved and who is going to be in charge 
in a large mass health disaster has got to be decided so that 
we can plan efficiently and so that we can use our preparedness 
dollars efficiently.
    Putting preparedness dollars in a community that has a 
public health staff of 13 people and allowing them to hire a 
14th person is not going to make them more prepared.
    We have to look at 21st century solutions. We have to look 
at what Dr. O'Toole was discussing in terms of regional 
approaches and bringing all of the potential responders and 
important stakeholders to the table and deciding what the 
response paradigm is going to be.
    Dr. Kadlec. John.
    Dr. Clerici. I think as Chuck pointed out, this issue of 
preparedness is one that is actually driving the decisions on 
countermeasures being purchased. And we've seen this first 
hand. The issues need to be dealt with together.
    Mr. Barrett in Chuck's exchange reminds me of one that 
President Bush and Senator Kerry actually agreed on in the 
debates and that was that the number one threat facing America 
is nuclear detonation.
    A few weeks ago Governor Keane and Lee Hamilton both said 
that it is not a matter of if, it is a matter of when there 
will be a nuclear detonation on U.S. soil.
    And yet, as we sit here today, there is nothing in the 
stockpile to treat acute radiation sickness. And the reason why 
is the Government is waiting for a cure that can be delivered 
within 12 hours via push-pack. That is not going to work. That 
is not going to treat the victims of a nuclear blast that are 
going to be downstream of the plume that are going to be 
exposed to radiation. And we do have something at hand that can 
be purchased. It just cannot be distributed in a way because 
the system is broken in order to get it to the potential 
victims in time.
    Interesting the way the Government relies on the fact that 
they've stockpiled drugs such as Neopugen. Neopugen has to be 
administered in a hospital by a doctor. There are not enough 
hospital beds in America to treat the potential victims of a 
single nuclear blast in any major city.
    So until these two halves of the equation are talking to 
each other, we are not going to be protected. And the 
countermeasures that are going into the stockpile are not going 
to help us.
    Mr. Ludlam. Just to follow up on the same point, we 
obviously did pass BioShield I. So we are supposed to be on the 
road to procuring a few things.
    I have to say that the administration of BioShield I, which 
I basically wrote, is grotesque. One, it is not being used, you 
know, about one tenth as much as it should be. They do not have 
the long list of things they are trying to procure, including 
the radiation countermeasures. So the industry has no idea of 
what is the 5-year plan under BioShield. How many products are 
you going to procure and give us some warning.
    They are asking the companies to have an IND before they 
bid. The company would have to preposition themselves with an 
IND. That takes lead time of a year or more to get ready to 
even bid on a BioShield contract.
    So there is no sort of scheme here. Are they going to have 
20 products or five products or 80 products? Or what is it? 
Nobody knows.
    The few procurement that they have put out, I mean the 
anthrax RFP procurement, was utterly and totally bizarre. I 
mean, this is the disease that killed people in 2001. We still 
do not have any effective countermeasure for late-stage 
inhalation anthrax. Cipro does not help you. At that point the 
toxins start going, you are dead.
    OK, they're trying to get a therapeutic. Fine. But put out 
a procurement that says, we'd like 10,000 to 100,000 courses of 
this product. And the industry said, 10,000?
    Well, I mean if somebody dropped a pound of anthrax in a 
tall skyscraper even, it would infect 10,000 people, let alone 
if they did it upstream, upwind in Bethesda.
    Then they said, we will take your product and we will test 
it in some animals, and we will not tell you what animals we 
will test it, and then we will get back to you, because there 
are several animal models in the field. And the industry was 
not sure which animal model would be used or how they would be 
testing it.
    Now they are still dickering on it and still adding clauses 
to the contracts. I am not sure if they will ever meet with any 
company that will play.
    Now this is leaving the public health system without 
countermeasures which we probably could get, you know, in a 
reasonable period of time. Not all of them but a few of them.
    Dr. Kadlec. Tara.
    Dr. O'Toole. I think we need a lot more focus on systems 
and less on stuff. And let's talk about what we might be able 
to do.
    I would urge you to consider something radical. For 
example, perhaps we should require all governors to create a 
conduct of operations plan with doctrine and assigned 
responsibilities for dealing with a mass casualty event. And if 
they do not and if it does not get approved by HHS, they do not 
get a certain percentage of Medicare funding.
    I mean, obligate them in some way that really conveys the 
seriousness of the situation.
    If you do that, let me tell you that will get the hospitals 
to the table real quickly if they think they are suddenly going 
to be told what to do by their commissioners of health.
    I think also that we need to talk with much more 
specificity and clarity about the public health system, versus 
the health care deliver system. They are not the same, and they 
are not even connected. And right now, when we say public 
health preparedness, the health care delivery system assumes 
that does not include them.
    I would suggest shifting some of the operational 
responsibilities for epidemic response, in particular, such as 
giving out vaccines and antibiotics to the medical care 
delivery system. I think they are going to be better at it, and 
it would depressurize public health.
    North Carolina may have this under control, but a lot of 
the big States just are not going to be able to do it with 
their public health system.
    I also think there are innovative things we can do for 
distribution. For example, a lot of the flu vaccine in this 
country gets given out by Giant and Super Fresh and Costco. And 
we have done research on this recently. All of those entities 
are willing to participate. They don't know how to connect with 
the public health system, which is frankly too busy and 
overburdened to reach out to the private sector. But innovative 
ways of doing massive distribution I think are available, but 
somebody has to be the catalyst.
    We are being too global and too general in our approach to 
public health preparedness. We need to really drill down on 
what systems and what capabilities we need in the next year and 
what we want to build for 5 and 10 years and start off all of 
it at once. But we have got to get very concrete and very 
specific. And you have got to assign stuff in ways that are 
meaningful.
    Dr. Kadlec. I was just going to ask, and again not to 
truncate the discussion here, but ask a follow on question to 
the system question, and that really involves, if you will, the 
food safety piece and the ag piece. Because there is an 
entirely different set of systems, but yet overlapping and the 
public health community seems to be the nexus for that.
    I was just wondering what is the state of affairs, if you 
will, in the good safety and ag piece of this that give us 
confidence that the agricultural world, the traditional 
veterinarians and ag health community is connected with the 
public health and the medical care community.
    Dave.
    Dr. Franz. Just to follow on a point that Dr. Gursky made 
in that regard, and Dr. O'Toole as well, talking about 
communication among the various sectors, medicine and public 
health, for example, I think, it is very important. In one 
portion of the ag threat, we have that kind of communication 
with the veterinarian and agricultural sector as well.
    I split the threat really into two pieces. One is 
preharvest, and one is postharvest. The postharvest one is the 
one that we are talking about here, and this is adulteration of 
the food chain that eventually affects humans.
    It is a public health problem much like bioterrorism is a 
public health and medicine problem.
    And that is where the communication has to occur because 
many of those are zoonotics or they are food adulteration 
issues.
    Then there is the other sector of the agricultural threat 
that I think we have to parse out because it is strictly an 
economic problem. Because of the way we value human, animal and 
plant life, and we should, when animals or plants are injured 
in some way, that is an economic problem. And that one is 
fairly easy to sort out actually because there are a lot of 
small kinds of effects that can occur which involve millions or 
tens of millions of dollars much like what occurs when we have 
a high-path avian influenza outbreak in our fighting roosters 
in California and it spreads to commercial flocks or when we 
have an outbreak of soybean rust or something like that.
    Those are things that our systems are resilient enough to 
deal with.
    There is one big outlier in agriculture with regard to 
economics and that is foot and mouth disease. And we have to 
separate that one out and look at it very carefully, 
specifically as we have done with small pox and anthrax on the 
human side.
    So I think as we look at all of this, we need to lay that 
out and see that there is a public health piece to the ag 
threat and an economic piece to the ag threat, and clearly the 
public health piece because of the zoonotic issues has to be 
carefully integrated with what we have just been talking about.
    Thank you.
    Dr. Kadlec. I was going to go to Chuck. I wanted to come 
back here, but we will just come across.
    Mr. Ludlam. I think this zoonotic disease issue is 
obviously critical. SARS is zoonotic, avian flu is zoonotic, 
ebola is zoonotic, West Nile, malaria, TB, they're all zoonotic 
diseases.
    They go back and forth to animals.
    Some of them will be obviously chronic diseases. I mean, 
maybe the avian flu becomes a chronic disease or SARS and we 
can never get it out of our populations because they are wild 
flocks, for example or they are in pigs or whatever.
    So and in market failures for developing products to treat 
these diseases in animals, similar market failure that we have 
for treating diseases in humans.
    Surveillance issues, very similar. Obviously, surveillance, 
we ought to do surveillance in zoos. I mean, that it not quite 
the same as surveillance of human beings, but we need 
surveillance in zoos. We need surveillance in natural 
populations or in agriculture populations.
    So I think that this is actually a critical part of the 
bill.
    Now to be clear, the ag title is not in the jurisdiction of 
this committee. The tax title is not. The IP title is not in 
the jurisdiction of this committee. Command and control is only 
partially in the jurisdiction of this committee. 
Decontamination, this is EPA, is not in the jurisdiction of 
this committee. You get into export licenses, that is in the 
Commerce Committee. We have accounting issues dealing with the 
pediatric vaccinations; that is in the Banking Committee.
    S. 3 doesn't have ag at all. Obviously, BioShield II has 
got all of these issues.
    Now the big question on any of the issues we are talking 
about is how do we get to a comprehensive bill?
    This committee, I think, could not be exercising better 
leadership, more decisive leadership, more visionary 
leadership, but you have about one-tenth of the jurisdiction 
that you need.
    And the only person who can move us to a comprehensive bill 
is Senator Frist, the only individual anywhere, who wrote the 
book called, ``When Every Second Counts,'' his book about 
bioterrorism. And every second is now counting on whether he 
will lead and bring all of the committees together. Because 
what I fear is he will hang the HELP Committee out to dry and 
not bring in the other committees. And you'll report out a 
bill. And Senator Burr and Senator Enzi will be managing a bill 
that will be an embarrassment, a trivial bill, another 
incremental, ineffective bill.
    And the only way to get the help of the other committees is 
Senator Frist.
    So the entire success of this effort depends on him and 
ultimately also the administration to work with him.
    So that is the challenge that we have here is that we don't 
have leadership at the top yet. We have got it here in decisive 
ways, and we do not have it where it counts with Senator Frist 
and the administration yet.
    Dr. Kadlec. Dr. Devlin.
    Dr. Devlin. I was just going to say two points. One is that 
I am going to respond to the food security issue, but just that 
I just want to make the point that we have a public health 
system that is Federal, State and local. The investment is 3 
year's old in asking public health to assume their 
responsibilities on the frontline with the police, fire, crime 
control and public safety.
    We have come an incredibly long way in this effort. And we 
really need to sustain that. And I am sorry things are not good 
in Pennsylvania, but I am aware of many, many States that are 
just doing outstanding networking with their medical 
colleagues, with their agricultural colleagues.
    We have a one-medicine approach with our veterinarians in 
North Carolina. It is all the same.
    Now I had the opportunity to participate at the Federal 
level on the Government coordinating council and the industry 
coordination council as we try to bring--I am switching to food 
safety now--bring Government and the food industry together to 
talk in open communications. And we have a farm to fork 
approach. And we have got to talk about the threats. You know, 
they are an industry that we regulate. There is some discomfort 
there about telling us where their vulnerabilities are, or 
accepting our insights into where we think their 
vulnerabilities are. We have got to communicate. We have got to 
assess the threats. We have got to harden the different nodes 
that are vulnerable along the farm to fork continuum. We have 
to got to share out data and have a common multithreat data 
base that is automated, that we share so that we have good 
surveillance, farm to fork, of what is going on in the food 
industry so that we can again detect something early and make 
an appropriate intervention.
    So we have to have a plan. We have to exercise it. And we 
have had wonderful cooperation. We actually fund veterinarians 
through our terrorism initiative in agriculture. We use their 
trucks. They use our radios. We use our command centers 
together.
    We have a very strong partnership with agriculture. Of 
course, we are a $62 billion industry in North Carolina. 
Twenty-two percent of our income is agriculture. So it is a 
very critical infrastructure, not just in North Carolina but of 
course in the whole country.
    So it is something that we have got to get more serious 
about. And we have not funded agriculture at all. We have 
funded food security at all. What we have been dealing with for 
the last century is food safety--are hot foods hot and are cold 
foods cold.
    We do not know about the driver that brought the food in 
the back door and whether the back door was locked before they 
got there.
    So there is a lot we need to do around food safety and 
security. We are just beginning.
    Dr. Pournoor. 3M of course is a global company. In January 
I launched an avian influenza campaign in Asia. There are a 
number of countries that are approaching us asking us to help 
them with getting themselves prepared both from a public health 
as well as a hospital perspective. And I think that speaks to 
some of the infrastructure questions that came up.
    One of the very boring topics that nobody seems to focus on 
is supply chain issues. It is not as flashy as developing 
pharmaceuticals, and it is not as exotic as some of the other 
things we emphasize, but supply chain, in essence, feeds our 
hospitals, our public health systems to be able to sustain 
themselves as they respond to all sorts of emergencies.
    One of the facts that we often gloss over is the situation 
where today, as we manage all of the goods and services that we 
need to deliver the care that is required, these goods and 
services partly are produced in the United States and partly 
abroad. If there is an epidemic or a pandemic, how is global 
trade influenced and how can the flow of goods and services 
from various countries to and from the United States affect it? 
I see that as something that, for instance, is not touched 
upon.
    I think we have the wherewithal and the knowledge amongst 
folks in this room and beyond in being able to put good demand 
plans together. Logistics and demand planning are sort of two 
critical links in the chain. Demand planning requires that our 
intuition about what happened in an event be brought down into 
quantitative, tactical and operational detail.
    We have developed some demand planning tools that we use to 
work with first responders and public health officials in 
trying to help them, but to go from very generic statements 
that believe at generic levels because we want each State to 
have the autonomy to implement them the way they wish, is a 
long way from making those generic statements about 
preparedness to actually having tactical and operational plans. 
And not everyone is taking those statements of preparedness, 
minimal levels of readiness, and implementing it in the same 
manner.
    Implementation--the devil is in the details--and demand 
planning and logistics I believe is one of the key pieces.
    Dr. Kadlec. If I could just maybe leverage what you just 
said as a last question, and to clean this up as we get to the 
close of this very informative roundtable is really kind of 
open in terms of what is the view concerning our status or 
State of preparedness for avian influenza? And I think you 
touched on that, and maybe we will be here for another two 
hours.
    Dr. O'Toole. [Off microphone.] [Laughter.]
    Dr. Kadlec. Yes, really. It is all relative, Tara, as you 
know.
    Mr. Barrett.
    Mr. Barrett. I think the thing that John spoke to about 
the, as he described it, boring issues of execution and supply 
chain, are really in a way the low-lying fruit. And while the 
conversation that we had in the earlier part of the day is very 
important, and obviously, we need to work on both these 
dimensions, I think there is so much here in the flow of 
information, the flow of product, the flow of services that can 
be dealt with.
    Again, there was a comment earlier about we need to take 
extraordinary action. All true. We also need to take 
extraordinary action on this very mechanical part of the 
process, and that is the part that at times does, again, from 
my perspective, seem a bit absent, and it is really this detail 
that I think could bear some fruit for us.
    Dr. Kadlec. And again, could I just solicit some comments 
about avian influenza as we kind of wrap up? Elin?
    Dr. Gursky. I think we need to leave here with both the 
strategic issues and the tactical, and they are both equally 
important, and I cannot afford to not say once again what we 
want the 21st century public health system to do.
    And we have heard from Dr. O'Toole and Dr. Devlin, and 
these both have validity. I think it is a matter of what we 
wish to invest, what our expectations are, and from that 
decision we clearly have to look at the tactical issues because 
right now we have 3,050 different approaches to delivering risk 
communications, stockpiles, exercises, and it is really a 
recipe for disaster.
    Dr. Clerici. I will come back full circle, Dr. Kadlec. 
Until we address the liability issue, we are not going to be 
prepared for a pandemic. The pandemic vaccine manufacturers 
will not produce product absolutely 100 percent without 
liability protections. They are not bluffing. You are asking 
them to displace their entire manufacturing process. Childhood 
vaccines, adult vaccines will not be produced in the event when 
we turn to pandemic production, and they will not play until a 
pandemic is addressed. And if I can take one thing away from 
that, the issue of pandemic liability must be addressed now.
    We have a luxury, frankly, with bioterrorism because we can 
stop, we can arrest, we can use intelligence to prevent the 
terrorists from hitting us. There is nothing we can do about 
pandemic, and unless and until we address it, we are very much 
at risk. It is absolutely the scariest thing I work on every 
day, and the thing that keeps me up at night.
    Dr. Kadlec. Tara.
    Dr. O'Toole. I think the situation of avian flu in Asia is 
terrifying. I am in a State of disbelief at how little America 
is doing to understand the threat or to respond to it. We ought 
to be leading the world. We are essentially doing nothing. And 
I suspect that rather than bioterrorism, our supine posture and 
failure to act, let alone lead the world in meeting this 
threat, is going to be probably the most important statement on 
where America is and where it is heading of our generation, to 
sum up.
    Mr. Ludlam. Avian flu is not the last new disease we are 
going to see. Certainly, I mean it is one of 20 we have seen in 
the last 20 years, 20 new diseases. The capacity of 
bioterrorists to concoct new things, hybrid GM, or 
sophisticated chemical weapons like bioregulators and 
biomodulators is completely unbelievable. What the Soviets had 
in 1992 was unbelievable.
    Now, if we do not have the ability to more quickly develop 
products in response to Mother Nature or things we first see 
from terrorists, if we cannot go from bug to drug, or bug to 
vaccine, or bug to diagnostic, in a fraction of the time that 
we now have, we are going to be surprised because we do not 
know what avian flu is going to look like in its final--of the 
human. Maybe it is similar to what we have seen, or maybe it is 
sufficiently different that whatever we might have developed 
will not work. Maybe the diagnostic will not work. Maybe the 
vaccine will not work. Maybe the therapeutic will not work.
    So the single most important revision in every bill I have 
drafted on the subject is the research tool provision, saying 
that whatever we do in the way of creating products for known 
threats--and obviously we ought to knock those off in a 
discrete period of time with dramatic incentives to create 
antidotes to all of the things we know about--we need a 
research tool industry, including animal models and all of the 
rest, so that we can tear the pathogen apart and find its 
vulnerabilities, find out how to attack it, figure out how to 
develop a product, and do that in a fraction of the time at a 
fraction of the cost, with much more reliability than we can 
now.
    We have to know in advance whether it will work and who it 
will hurt. We do not know that now. We are getting products 
like Vioxx was pulled after years on the market, and this is 
the failure of research tools. We are making terrible mistakes 
already. Products are dying in Phase III clinical trials or 
after they are approved. We need to know much more about what 
we are creating, how it is going to work, if it is going to 
work, and what the side effects are going to be in advance. And 
this is research power that we need in the infectious disease 
context like we need it nowhere else.
    And ultimately the only preparedness will be more powerful 
research tools, assuming we have stockpiled all the products 
for the known diseases.
    Dr. O'Toole. Could I say one thing on that because I do not 
want to leave--I agree with everything Chuck says except that I 
think it is very dangerous to lump avian flu in with all the 
other emerging diseases or bioterrorism attack. It really is 
special because of the way it spreads, the fact that you are 
contagious before you are symptomatic, and because of the 
immunological naivete that is definitely going to be there 
whatever the final bug is that ends up spreading in humans, if 
in fact that happens.
    There ought to be something going on in Congress right now 
to look at what we could do about avian flu. I know there have 
been lots of hearings. My impression is that the administration 
says everything is fine, we are under control. We do not need 
any more money. That is ridiculous. We ought to actually have a 
list of things that we could be doing right now about avian 
flu. Someone in the Government has to generate that, and we 
ought to be doing it right now. There are things to be done.
    Dr. Kadlec. Dr. Devlin.
    Dr. Devlin. Just in conversations this week with 
representatives at CDC, they were indicating, in a more 
specific response to your question, that we are at least 3 
years away from enough vaccine for the whole population and 
probably 18 months or so away--and I know you all have to make 
it, but that is what they are saying--and that we would be 
about 18 months away from having enough antivirals in place, 
which is also something that we are very short on.
    Having said that, you know, the first thing that is going 
to happen is that we are going to have to put in the time-
honored restraints on movement and place of people, and that we 
are going to have to be into quarantine and isolation, not 
holding the ball game, and looking at whether schools are open 
or not. So there are going to be some very dramatic things put 
in place very quickly that contain the spread of the infection 
while we wait on the antivirals and the immunizations.
    But one thing I know that we were trying to be creative in 
how we break down the stockpile, exercise the plans, get the 
medicines out to the population, and the administration is 
considering some other innovative strategies like using the 
workforce in the postal system, and some pre-event deployment 
of medical kits. We have some great questions about pre-
deployment to the populations of medicines that they may use 
when something else happens, or that they may lose, or they may 
get outdated. We believe that--I mean I have some questions 
about if something happens in one part of the country but you 
have pre-deployed your assets somewhere else, that is a real 
concern. So I just mention that.
    Dr. Kadlec. Thank you. We will leave that as, if you will, 
the final word.
    First of all, on behalf of my colleagues, I would like to 
thank you very much, to all the panelists for kind of hanging 
in here maybe a little longer than you anticipated, but it was 
of great value and will be great value to our members as we 
will be highlighting many of the points that you have raised 
here today. I can only thank you all for your travels, 
particularly those who have come out of State, and certainly 
your time. But again, unless there are any further comments or 
questions, I just say thank you and wish you safe travels home. 
Have a good day.
    [Additional information follows:]

                         Additional Information

              Prepared Statement of Elin A. Gursky, Sc.D.
  ``what is necessary to build and maintain a robust national public 
    health infrastructure to meet future biodefense requirements?''

                            SUMMARY REMARKS

    Health security is threatened by the intentional release of 
biological weapons and the occurrence of natural disease outbreaks; 
these events are likely inevitable and potentially catastrophic. 
Although the responsibility for communicable disease containment has 
historically resided within public health, today's homeland security 
challenges and microbial burdens exceed the capacities and capabilities 
currently residing within this sector.
    Following the 2001 anthrax attacks, the authorization of almost $1 
billion through the Frist-Kennedy bill (S. 1765) and subsequent awards 
and supplemental funding have provided critical support to a long-
neglected public health infrastructure. However, we must acknowledge 
woefully limited evidence of strategy and systems that can work 
consistently, uniformly, and durably on a national scale in the event 
of a deliberate or naturally occurring infectious disease epidemic. 
Such an event will stand little likelihood of being confined within a 
single State, and will represent a crisis of national security 
significance.
    Bioterrorism preparedness has exposed the frailty of the patchwork 
quilt that is comprised of the country's 3,000 local and 50 State 
health departments. Our public health agencies are a local enterprise, 
with a tradition of employing unique activities to promote the health 
of their communities and serve the needs of their local elected 
officials. However, the capabilities required--and in large part absent 
to protect populations include decision-support to manage uncertainty 
during a large-scale infectious disease outbreak; training in the use 
of sophisticated technologies that sustain disease surveillance, 
detection, and information sharing; leadership to integrate efforts 
with the medical, legal, and intelligence communities; and skills to 
coordinate mass care such as prophylaxis and vaccination.
    Twenty-first century threats require a re-envisioned public health 
system that is agile, well trained, accountable, and uniformly 
effective across the Nation. Before investing another $3 billion, we 
must develop a strategy that will ensure the health security of our 280 
million citizens.
                                 ______
                                 
    Few experts dispute the inevitable and potentially catastrophic 
threat of a large-scale biological attack from Mother Nature or 
terrorists. The decades concluding the last century offered ominous 
insights into the evolutionary transmutations of emerging and 
reemerging pathogens such as hantavirus, West Nile virus, and HIV-AIDS 
fueled by ecological change, the global migration of humans and 
agriculture, and drug resistance. The 21st-century awoke to SARS and 
monkeypox; outbreaks of avian influenza, Ebola hemorrhagic fever, 
Marburg hemorrhagic fever, and polio can be found in areas less than a 
day's plane ride away. The threats to health security from terrorists 
by the dispersal of biological weapons such as smallpox and anthrax or 
by dispersal of naturally occurring diseases such as Ebola or plague 
are augmented through their arsenal of time, resources, and 
increasingly sophisticated biotechnology. Whether the pathogen is 
exotic and bioengineered or common, bioterrorism expands the element of 
intervention upon standard public health management. Bioterrorism can 
be a single attack with a single pathogen, or multiple attacks with 
multiple pathogens on multiple targets. Interventions in the attack(s), 
in the behavior of potential victims, and by the requirements for 
swiftly administered medical prophylaxis are among the challenges that 
must be rapidly and accurately assessed and to which a coherent 
response must be generated.
    The majority of experts agree that it takes a special army to 
combat these threats--an army that understands incubation periods, the 
transmission of infectious agents across susceptible populations, and 
strategies such as isolation, mass vaccination, and prophylaxis to 
control an epidemic. The army is the public health sector. The Frist-
Kennedy bill (S. 1765) authorized almost $1 billion following the 2001 
anthrax attacks to build public health infrastructure and strengthen 
our response to bioterrorism, a prescient acknowledgement of the 
critical role of public health in this war against bugs. Subsequent 
Federal awards and supplemental funding followed. Four years and $3 
billion later we can see evidence of strong preparedness initiatives in 
a number of States.
    However, before we spend another $3 billion, we must acknowledge 
woefully limited evidence of strategy and systems that can work 
consistently, uniformly, and durably on a national scale in the event 
of a deliberate or naturally occurring infectious disease epidemic--an 
event that will stand little likelihood of being confined within a 
single State and that, not which will represent a crisis of national 
security significance.
    The responsibilities facing today's public health departments are 
broad. Beyond communicable diseases, health departments confront a wide 
spectrum of tasks that include chronic disease screening and education 
(cancer, diabetes, asthma, and hypertension); community outreach to 
seniors; family planning, maternal health, and prenatal care; dental 
health; injury control; and social marketing to decrease tobacco use, 
teen pregnancy, and violence. Moreover, public health departments find 
themselves increasing the level of effort they must devote to serving 
as a medical safety net as the number of uninsured Americans rises to 
45 million. Historically, crisis management has not been a developed 
capability of public health. In fact, the skills and talents required 
to accomplish and manage uncertainty and to lead effectively during a 
biological attack are quite dissimilar to those needed in outreach 
efforts for chronic disease.
    Bioterrorism preparedness has exposed the frailty of the patchwork 
quilt that is comprised of the country's 3,000 local and 50 State 
health departments. Both research data and anecdotal reports indicate 
that preparedness efforts have interfered with routine day-to-day 
responsibilities and have engendered frustration and resentment as 
State budget crises force cuts or curtail traditional public health 
programs designed to promote community health status and provide a 
social good. Preparedness for events such as anthrax attacks have not 
been embraced as a ``core mission'' of public health, but are perceived 
as usurping fundamental responsibilities of the community. We must 
concede several key tenets before redoubling our preparedness efforts:
     Our amalgamation of State and local health departments is 
a local enterprise, bounded by the principles of federalism and 
directed by the needs of governors, county managers, and mayors.
     Fifty State and 3,000 local health departments comprise a 
sector--not a system. There are few shared practices across that sector 
that can translate into a systematic approach evidenced by regional 
public health response paradigms, ``mutual aid,'' or surge capacity. 
Public health itself is highly fragmented and represents a wide 
spectrum of professional interests and backgrounds.
     Confusion regarding public health authority and 
responsibility abound. As was seen during the anthrax attacks and 
remains evident still as Federal preparedness funds flow from State to 
local health departments, there is no consensus regarding the roles and 
responsibilities of CDC, State, and local public health agencies during 
a large-scale biological attack. Note that the median number of staff 
in our local public health agencies is 13. Note also that after several 
phone calls to the CDC and speaking with 15 different individuals, it 
is apparently not known how many of its 9,000 staff is deployable and 
fully trained for a response role in the field.
    There is no terminal degree or education that defines a ``public 
health practitioner,'' and a large portion of our public health 
workforce relies upon on-the job-training. This may well serve their 
health promotion responsibilities, but is inadequate to effectively 
address health protection and security challenges of the 21st-century.
    The public health sector remains essentially disconnected from many 
critical partners, especially the medical and hospital sectors, 
creating a dangerous gap between efforts to detect a disease outbreak 
and assure the rapid medical interventions necessary to avert a full-
scale epidemic. Historically, the majority of emerging diseases and the 
anthrax events of 2001-02 were recognized by clinicians in clinical 
settings, typically outside the realm of public health. The Nation's 
medical system is in crisis, with very little spare capacity with which 
to care for an increased number of patients. Medical facilities are 
largely not-for-profit businesses that acutely experience the effects 
of changes in health care funding and liability.
    Despite the availability of exercises and short courses implemented 
since 2001, the public health sector and the vast majority of clinical 
caregivers remains untrained, inexperienced, and naive regarding the 
scope of a potentially lethal and unremitting infectious disease 
outbreak. Note that at the June 9th Library of Congress meeting led by 
Senators Burr, Clinton, and Lieberman, and Representative Cox, former 
Deputy Homeland Security Advisor to President Bush, Richard Falkenrath, 
stated that no public health department could swiftly distribute and 
administer medical countermeasures from the Strategic National 
Stockpile.
    Prudence compels us to assess the return on our preparedness 
investment thus far as we proceed on a course to protect America's most 
critical infrastructure--its 280 million citizens--many of whom will 
bear the responsibility of treating the sick, operating utilities and 
transportation systems, assuring civil order, and maintaining our 
business and industry in the event of a ``catastrophic'' disease event.
    Twenty-first-century threats require 21st-century public health 
strategy. We must balance public health's traditional role of promoting 
the health of Americans, while ensuring a critical new role protecting 
the health security of America. Should we re-purpose public health and 
remove the financial and labor-intensive burden of persuading Americans 
to overcome their proclivity to obesity, lethargy, and tobacco? Should 
we retain health promotion responsibilities at the State level and 
federalize the public health protection components? Should we continue 
to invest in the entirety of the public health infrastructure, hoping 
we will accrue critical capabilities for detecting and responding to 
pandemic influenza or plague? Should we invest in more practitioners, 
or in technology-based solutions like BioWatch?
    Difficult decisions are necessitated by the exigencies of the 
current threat environment, heightened just a week ago by the bombings 
in London. The 21st-century demands that we build a public health 
system, an entity that responds with consistency, uniformity, and 
efficiency across the Nation. A number of efforts will help us 
implement the necessary systematic approach to disease detection, 
intervention, and containment.
    I would urge this committee to consider the following short-term 
steps:
    We must focus efforts and resources to build a national health 
security information infrastructure that connects our public health, 
hospital, and medical communities (and also law and intelligence). 
Current efforts are languishing from a State-by-State approach that has 
been absent national standards and requirements. Real-time response to 
infectious disease occurrences are a critical component of national 
security. Note that four cases of cutaneous anthrax went unrecognized 
prior to Bob Stevens' diagnosis with inhalational anthrax.
     We must rebuild our public health workforce through 
principles not unlike those applied in the DoD's force transformation 
efforts. We must strive to achieve public health ``special forces'' to 
address the war on emerging and deliberately released pathogens. Grants 
and loans will help recruit new cohorts of public health professionals, 
but we must require that those choosing to be practitioners (not 
researchers or academics) attain a level of skill demonstrated by 
earning a license or certificate. The individuals who make critical 
decisions about the health of populations must be subject to 
professional accountability as are our physicians, attorneys, and even 
tattoo artists and hair stylists. Schools of public health must devise 
specific public health practice curricula. National credentialing exams 
must be formulated and administered by an impartial outside agency.
     We must clearly articulate the roles, responsibilities, 
and authorities of local, State, and Federal (CDC) public health 
agencies during a large-scale public health crisis. Specifically, the 
horizontal connections between agencies sharing responsibility and 
authority in a biological attack must be strengthened.
     We must foster closer integration of roles and operations 
between the public health and hospital sectors, through such strategy 
as joint planning and funding. Hospitals must receive funding to 
incentivize increased training and capacity and be assured relief from 
liability during crisis response. Public health has authority to direct 
care, and hospitals have capability to provide care for victims. This 
linkage should be specifically supported and exercised.
     We must assess the effectiveness of preparedness through 
strict measures of accountability and through performance in rigorous 
full-scale and tabletop exercises. To fully stress and shape the public 
health response systems, we must avoid instances where public health 
writes, participates in, and then evaluates its own performance. 
Demonstrated competence and capabilities, not attendance at a course or 
tabletop, are the goals.
    The job of leading the effort to protect the public from 
potentially lethal infectious diseases falls to public health. But 4 
years after the 2001 anthrax attacks, the burden of overcoming decades 
of underfunding, shrinking ranks, and expanding chronic health and 
medical care responsibilities has hampered the public health 
preparedness effort. Bioterrorism has not become a core mission, and 
funding State and local agencies has thus far demonstrated that the sum 
of the parts will not make up a ``whole'' national preparedness effort.
    Before we invest another $3 billion, we must take the necessary 
steps to build a 21st-century public health system! Thank you.

         Response to Questions of the Committee by Chuck Ludlam

    By way of introduction, I have spent the last 4 years of my public 
service career on a crusade to highlight the near total lack of 
preparedness of our Nation and the international community to the 
bioterror and infectious disease threat. I was the principal author of 
the 2001 Lieberman bioterror bill, the 2002 and 2003 Lieberman-Hatch 
bioterror bills, and the 2005 Lieberman-Hatch-Brownback bill, BioShield 
II, S. 975. I was also the principal author of S. 3, the Republican 
Leadership bill. And I was the principal organizer of an international 
panel of 600 experts to draft these bills.
    Now that I have retired from public service, I am finally free to 
say what I know to be true: The response of the Administration and, 
with some notable exceptions, the Congress to these critical challenges 
has been grossly inadequate. As for the Administration, it has been 
reported to me that a high-ranking Administration official admitted 
that it proposed BioShield I solely to protect its right flank when 
Senator Lieberman was running for President, not as part of a serious 
bioterror strategy. It's obvious that BioShield I was poorly calculated 
and the industry response to it has been to yawn. Yet, despite the 
introduction of S. 3 and S. 975, there is no indication that the 
Administration will join in the effort to enact them. As for the Senate 
Democrats, in crafting the four Lieberman bills, and despite extensive 
efforts, I was never able to recruit a single Democrat to cosponsor 
these bills. The reason they all give is that ``the generics hate it.'' 
Finally, in terms of Senator Frist, we've seen bold words, but few 
discernable actions. He is, of course, the only person who can ensure 
that the Congress takes up a comprehensive response to these threats. 
If we fall short in enacting some combination of S. 3 and S. 975, it 
will be principally his fault.
    On the day I retired from public service, June 24, I sent a 
``parting shot'' email to my panel of 600 experts and a copy of it is 
printed below. It's being made public here for the first time. I am 
happy for it to serve as my valedictory regarding the quality of my 
efforts and the Congressional response.
    Unfortunately, it may take overriding political considerations to 
drive consideration of the deadly serious public policy issues 
addressed in this roundtable. On June 23 Mort Kondracke wrote a 
prescient article in Roll Call entitled, ``Avian Flu Could Become Top 
2008 Issue. Seriously.'' He accurately quotes me as saying, ``You have 
a fascinating conflation of presidential politics and serious substance 
at work here. You have three presidential candidates interested in this 
issue--Sen. Frist, Sen. Hillary Rodham Clinton (D-N.Y.) and Sen. Sam 
Brownback (R-Kan.), a co-sponsor of the Lieberman bill. [Also, Evan 
Bayh] Whoever is out in front will look pretty good if the worst 
happens. Anyone who's behind the curve will look like a dolt. There 
will be 9/11-style commissions all over the place and hundreds of 
Richard Clarkes testifying that they warned about what was coming and 
higher-ups didn't listen.'' I stand by these words. I am proud to have 
issued these warnings and provided this leadership.

    Question 1. What additional incentives or other measures will 
ensure the timely availability of sufficient amounts of effective 
biodefense medical countermeasures, and is the cost of such incentives 
acceptable?
    Answer 1. The Lieberman-Hatch-Brownback BioShield II legislation, 
S. 975, was developed with the active assistance of my panel of 600 
experts and it reflects a consensus of that group. It proposes in 29 
titles and 360 pages a comprehensive and aggressive strategy of 
incentives for the development of effective bioterrorism and infectious 
disease medical countermeasures and addressees a host of other critical 
issues. The cost of the proposed incentives is trivial compared to the 
cost of a bioterror attack or infectious disease outbreak. If we are 
hit with a bioterror attack, or a pandemic, and if we have not secured 
the development of these medical countermeasures, we're likely to see 
public panic on a scale similar to that depicted in Spielberg's War of 
the Worlds, Camus' The Plague, and Bergman's The Seventh Seal. We'll be 
forced to go straight to quarantines, which will be exceedingly ugly. 
Those enforcing the quarantines might be given ``shoot to kill'' orders 
to enforce the quarantine.
    Unfortunately, we are almost totally lacking in these medicines. In 
the summer of 2000 the Defense Science Board found that we had only 1 
of the 57 diagnostics, drugs and vaccines most needed to respond to a 
Bioterror attack. At the time, the Board projected that we'd have 20 of 
the 57 within 5 years and 34 within 20 years. But, 4 years later, we 
have only 2 of the 57 countermeasures; we've added a diagnostic for 
anthrax. At this rate, we won't have 20 countermeasures until 2076 and 
34 until 2132. This list doesn't include medicines for bioterror 
pathogens engineered to be antibiotic resistant, hybrid pathogens (like 
the Plague-Diphtheria hybrid developed by the Soviet Union), 
genetically modified pathogens, and a host of other exotic pathogens 
like autoimmune peptides or antibiotic induced toxins.
    To be clear, it makes no sense to focus solely on countermeasures 
for bioterror pathogens. We know that Mother Nature is a terrorist who 
will attack even if terrorists don't. We need vastly more effective 
medicines to cure and prevent AIDS, malaria, TB, and a host of 
intestinal parasites, naturally occurring antibiotic resistance (where 
we face a national crisis), and a host of other debilitating diseases, 
like Hepatitis A, B, and C--that kill millions each year. In terms of 
the death toll, this is a moral and practical crisis similar to World 
War I and II combined, yet the public policy response has been 
pathetic.
    Because the infectious disease threat is evolving, we need to 
establish biodefense, infectious disease, and vaccine industries able 
to develop countermeasures, perhaps hundreds of them, as the threat 
evolves. The Administration's $5.6 billion budget for BioShield I is 
not remotely realistic. The procurement cost for these medicines will 
run in the many tens of billions of dollars and it'll be worth every 
penny.
    We also need to establish a research tool industry that will give 
us the power to more quickly develop countermeasures to new threats. 
Ultimately, this is the only way we can respond to novel pathogens. We 
need to repeal the NIH Research Tool Guidelines to establish sufficient 
economics to establish a research tool industry and not divorce it from 
NIH funded research regarding new tools.
    From the industry's point of view, it's obvious that the 
``markets'' for infectious disease products are deeply flawed. I am 
intimately familiar with the industry viewpoint because I served for 
7\1/2\ years as the principal lobbyist for the biotechnology industry. 
For example, I've heard many executives say it'd be ``crazy'' to engage 
in research on AIDS because of ``forced genericization.'' BIO and PhRMA 
played no role in the drafting of the Lieberman bills because their 
members don't want Congress to enact incentives that would press them 
to take up research in which they have no interest. Some in the 
industry have told me to ``shut up'' about incentives they feel would 
press them to ``risk their company.''
    They say, ``Look what happened to Bayer,'' which was subject to 
virtual expropriation of its antibiotic, Cipro, by HHS following the 
2001 anthrax attack. In fact, the outrageous actions of HHS in that 
case have plagued our ability to engage this industry in this research. 
We must have credible Administration officials state categorically that 
these Mafioso tactics will never ever be seen again against a company 
that develops countermeasures for infectious pathogens. The companies 
must be rewarded, not vilified.
    S. 3, and even more so BioShield II, propose bold and innovative 
incentives to create a viable market for these medical countermeasures. 
These bills seek to shift the cost and risk of development of these 
countermeasures to the biotech and pharmaceutical sector in exchange 
for substantial and appropriate rewards if--and only if--these 
companies successfully develop the countermeasures we need to defend 
ourselves against an attack or outbreak. This is no windfall for the 
industry. Companies are rewarded for success, not subsidized for 
running their meters. Conveniently, this is the business model the 
industry prefers; the better companies all believe that is the 
government funds the research, the companies will receive a cost-plus 
rate of return, which is totally inadequate to satisfy their investors. 
Creating a GoCo will definitely end any possibility that we'll be able 
to recruit the industry to take up this research. In fact, the industry 
tells me that they'd welcome a GoCo because it'd let the industry off 
the hook. Adopting a defense contractor model, where the government 
assumes all the risk as in a ``Manhattan'' model, has been tried and 
proven to be the most expensive and least productive way to proceed. S. 
3 and BioShield II are premised on the notion that we can and should 
use the biopharma industry's entrepreneurial culture to our advantage. 
This is the only approach that might succeed.
    The opposition of the generics to the intellectual property 
incentives in S. 3 and BioShield II constitutes a classic and 
predictable NIMBY response. Its opposition is based almost entirely on 
misstatements about the terms of the proposed incentives and 
exaggerations about their potential impact on the cost of health care. 
It is true that there might be some increase in the cost of healthcare 
if bio/pharma companies assume the risk and expense of this research 
and successfully develop a high priority new chemical entity that we 
need to protect ourselves against a bioterror attack or to cure AIDS or 
another deadly pathogen, but this cost should be weighed against the 
devastating costs if we fail to secure the develop the needed medical 
countermeasures. In the end, the Congress must calculate the costs and 
benefits of the IP incentives, such as it did when it voted to provide 
patent extensions when biopharma firms secured pediatric labels on 
pharmaceuticals.
    Biopharma industry representatives have told me on innumerable 
occasions that the ``only'' compelling and realistic incentives in S. 3 
or S. 975 are the IP incentives that the generics oppose. They say that 
if we enact all of the proposed incentives in S. 3 and S. 975 without 
dilution, we stand a reasonable chance that we will be able to overcome 
the deep industry skepticism about this research. It's imperative that 
we do so. In Monday's Wall Street Journal Retired U.S. Army Major 
General Phil Russell, a physician who until recently was a senior 
adviser to HHS on biodefense issues, States, ``God, if Merck or Glaxo 
or Aventis were involved, it would make life infinitely easier. With 
small companies, you have to watch them like a hawk.'' If you want the 
large pharma companies to help us, you have no choice but to enact bold 
incentives, including IP incentives. If the Congress buckles to the 
opposition of the generics and fails to include these IP incentives, it 
is quite likely that the legislation will fail to achieve its 
objectives in terms of countermeasure development and we will remain 
vulnerable to catastrophic morbidity and mortality, public panic, and 
quarantines.
    If you interview the officials in Toronto or China about what they 
experienced with SARS, it'll transform you're approach to this 
legislation. You'll conclude, as I have, that developing medicines for 
these pathogens is an unprecedented and overriding national imperative 
that justifies the most aggressive and innovative incentives. You will 
brush aside the NIMBY opposition to these measures.
    The IP and tax incentives proposed in BioShield II are not, of 
course, issues pending in the HELP Committee. I have suggested that the 
HELP Committee report out a bill with the architecture for a 
comprehensive bill with brackets, each of which would be left blank 
except to say ``Judiciary Committee,'' ``Finance Committee,'' 
``Agriculture Committee,'' etc. (indicating where to insert the 
contributions of the other committees). This is the only way for the 
HELP Committee to demonstrate that it supports enactment of a 
comprehensive bill. S. 3 includes subject matter within the 
jurisdiction of at least 4 Senate Committees and S. 975 at least 8 
committees. Only Senator Frist can bring all the committees together to 
fashion an appropriately comprehensive bill.
    Finally, BioShield II also addresses the entrenched ineffectiveness 
of the NIH technology transfer program, undoubtedly the most 
bureaucratic and risk averse program anywhere. It proposes to 
strengthen the NIH approach to technology partnerships and protect the 
value of its patents. If this is not done, then essentially nothing 
that is funded at NIH will be useful at the beside to patients. The 
academics who receive NIH grants, represented by AAMC, oppose these 
reforms because they oppose holding NIH and its grantees accountable 
for the impact of NIH funded research on ``healthcare,'' but this puts 
AAMC deeply at odds with the patient groups for whom ``healthcare'' is 
the only bottom line. Of course, it was the patient groups, not the 
academics, who won the doubling of NIH funding. I suggest that the NIH 
reauthorization be folded into S. 3/S. 975; the two are complementary 
and interrelated.

    Question 2. What is necessary to build and maintain a robust 
national public health infrastructure to meet future biodefense 
requirements?
    Answer 2. BioShield II, S. 975, also proposes an effective strategy 
for building and maintaining a national public health infrastructure to 
meet future biodefense and infectious disease requirements. One key 
issue is command and control. To be blunt, today no one is clearly in 
command in the event of an attack or outbreak. This issue must be 
resolved by the Senate Homeland Security and HELP Committees. Again, 
this will only happen if Senator Frist brings the committees together 
to fashion a comprehensive bill.

    Question 3. What is necessary to protect our food supply and 
agriculture from biodefense threats?
    Answer 3. BioShield II, S. 975, also includes an effective strategy 
for protecting our food supply and agriculture from bioterror and 
infectious disease threats. Approximately 60 percent of the infectious 
disease pathogens we fear, including Avian Flu, SARS, Ebola, Marburg, 
Malaria, Chagas, Schistomiasis, Hantavirus, and Lyme Disease/West Nile 
Virus, are zoonotic--they go back and forth between man and animals. 
Only Senator Frist can ensure that we engage the Senate Agriculture 
Committee.
    Overall, with regard to S. 3 and S. 975, we need to act as if the 
fate of civilization depended on it, which is a fair characterization 
of the reality of the situation.
                                 ______
                                 
    ``PARTING SHOT'' E-MAIL FROM CHUCK LUDLAM TO 600 BIOTERROR AND 
               INFECTIOUS DISEASE EXPERTS (JUNE 24, 2005)

    This is my last e-mail to this group. It's now 40 years since my 
first day as an employee on Capitol Hill. Paula and I leave to start 
Peace Corps training in Senegal on September 25. I very much appreciate 
all the kindness that you have shown to me. It's been quite 
overwhelming. Several hundred of you helped us to write BioShield II.
    It is urgent that you maintain very high expectations of Senator 
Frist and the Administration. The fate of this legislation lies almost 
entirely in their hands. Senators Lieberman, Hatch, Brownback, Enzi, 
Burr, and Gregg have provided superb leadership, but there are severe 
limits on what they can accomplish without the leadership of Senator 
Frist and the Administration.
    Only Senator Frist can bring together all of the Senate Committees 
with jurisdiction over elements of BioShield II. And nothing will 
happen until the Administration finally states unequivocally that we 
need to enact something like BioShield II.
    The key problem is jurisdiction. The HELP Committee has limited 
jurisdiction. Senators Enzi, Burr, and Gregg can only report out a bill 
covering a few of the subjects in S. 3 and even fewer from S. 975. I 
have suggested to the committee that it report out the architecture of 
the entire bill, with open brackets to accommodation the contributions 
of the other committees. This is a way to force Senator Frist to lead. 
He's given a sensational speech at Harvard on these issues, but it 
contains nothing about his plans for the legislation. This is odd for a 
person in his position when he has command of what the Senate will 
fashion as a response.
    I have sent out hundreds of emails to this group. Senator Frist's 
staff has received them all, and so have about 40 top ranking members 
of the Administration. We have here a public record of the warnings 
that are contained in these e-mails. If they do not heed these 
warnings, there is no possible excuse.
    For anyone who understands the potentially catastrophic 
consequences of a bioterror attack or infectious disease outbreak, 
BioShield II is a modest and minimal proposal. Those that seek to cut 
back on what we're proposed in BioShield II--particularly the generic 
pharmaceutical industry and their Senate supporters--take a terrible 
risk with the public health. If they succeed in limiting the incentives 
in BioShield II, they will bear personal and moral responsibility if we 
experience an attack or outbreak for which we are unprepared. Their 
Nimby position and reflexive hatred for the pharmaceutical industry put 
the nation in peril. Given the dire nature of the threats we face, the 
misrepresentations they have spread about the terms of BioShield II, 
particularly the Wild Card patent, cannot be excused as routine 
lobbying hyperbole. It is possible that thousands and millions might 
die in an infectious disease outbreak. With Avian Flu running at a 55-
70 percent lethality rate, it's possible to see a billion people 
dying--the lethality rate of the 1918 Flu Pandemic was 1.8 percent and 
20-100 million died.
    To those who say that BioShield II and this email are ``over the 
top,'' I am happy to let history judge. Others can take full 
responsibility for ignoring the warnings I have published here. They 
can also take responsibility for the millions who may die if we delay 
development of an anti-viral that kills the AIDS virus, a malaria 
vaccine, and a new class of antibiotics. There is simply no price that 
is too high to pay for the development of these critical medicines. 
Unfortunately, I expect in Senegal to see many of my villagers die of 
infectious disease and in every case I will blame the opponents of 
BioShield II. My only consolation is in knowing that I have done 
absolutely everything possible to secure the development of these 
medicines, with no holds barred.
    In terms of the Congress and Administration, there is zero 
political risk from backing an aggressive set of incentives and 
programs. The only risk is in not taking these threats seriously enough 
and cutting back on BioShield II. If politicians do not lead, they also 
will bear personal moral responsibility for our lack of preparedness.
    Thank you all again for you support. This is your legislation to 
win or lose. It's yours to win now. My role is over. I wish you the 
best and will be forever grateful for your support.
                                              Chuck Ludlam.

          Response to Questions of the Committee by Mr. Wright

    Question 1. What additional incentives or other measures will 
ensure timely availability of sufficient amounts of effective 
biodefense medical countermeasures and is the cost of such incentives 
acceptable?
    Answer 1. There are a number of incentives that will improve the 
Nation's ability to acquire effective countermeasures in a timely way. 
These include:
     Transparency--The USG should define and guarantee the 
countermeasure market. This includes a clear and predictable process--
timelimes, deliverables, and deadlines should be articulated clearly 
and as early as possible. It is difficult for companies to make long-
term business decisions about which countermeasure programs to invest 
in if there is not a clear message from the government regarding what 
it intends to buy, how much, and when.
     Valley of Death--There is a funding gap between proof of 
concept and advanced development including scale up and production. 
Successful countermeasure development is dependent on a partnership 
between industry and the USG. Funds should be made available to bridge 
the current funding gap. DOD has experience funding countermeasures and 
is a good case example for Project BioShield.
     Contract Funding--BioShield I allows DHHS to provide up to 
10 percent of the value of a procurement contract in advance payment to 
support development activities associated with fulfilling a the 
contract, however, DHHS has interpreted the law to only allow payment 
upon product delivery. We believe progress or milestone payments are 
appropriate, particularly in the absence of ``valley of death'' funding 
and the financial commitments required for scale up and production.
     Coordination--A number of agencies and Departments are 
involved in the countermeasure requirements process. These include 
DHHS, DHS, DOD, OMB and many others. The process is too complicated and 
cumbersome and it is unclear who or which department has the ultimate 
decision-making authority. The process should be streamlined. It may be 
appropriate to consider moving all of the various components (threat 
analyses, research, development, and procurement) to one agency or 
department to improve better coordination and cooperation. The 
Biodefense agency could be housed at DOD, which is familiar with the 
development of complex weapons systems, with no commercial market, or 
at DHHS. If housed at DHHS the research and development (NIH) piece 
should be much more closely linked to OASPHEP. Greater coordination 
between the two would allow the identification and support of promising 
technologies at a much earlier stage.
     Liability--Currently, companies must negotiate liability 
protection as part of the contract process. This is not a rational way 
to do this and it leaves companies with potentially untenable exposure 
for the development and use of, in some cases, unapproved products 
under an emergency use authorization. The USG should provide explicit 
liability protection for companies and provide fair compensation for 
those harmed.
     Manufacturing--Scale up and production requires extensive 
up front financing. Further, U.S. capacity to manufacture biologics is 
limited. We believe DHHS should consider as part of any procurement 
contract, directly funding scale up and production as has been the case 
with the VaxGen anthrax vaccine and the Acambis smallpox vaccine. 
Additionally, ex-US manufacturers should be considered for Project 
BioShield procurements.
     Funding--$5.6 billion is insufficient to adequately 
support the breadth of technologies needed to protect this Nation. If 
the USG is truly committed to a strong biological and chemical defense, 
it will need to commit the funds necessary to do it right.

    Question 2. What is necessary to build and maintain a robust 
national public health infrastructure to meet future biodefense 
requirements?
    Answer 2. Efforts to improve communication and coordination between 
CDC, local public health agencies and target providers are necessary. 
In our discussions with hospital officials who would likely administer 
our products in the event of an emergency, we found that there was a 
disconnect between the CDC's plans for SNS countermeasure distribution 
and management and how hospitals on the front line view their role. 
Public statements by CDC officials indicate that CDC plans to use the 
existing public health infrastructure to distribute SNS IND products 
during an emergency. Distribution would occur within 12 hours and CDC 
would work with local public health officials and target hospitals to 
coordinate protocols, screening, tracking (adverse events, response 
rates), safety monitoring, protocol adjustments, and liability issues, 
etc.). However, discussions with a key hospital in the Washington area 
with likely responsibility for patient care in the event of an 
emergency identified the following issues:
     The hospital had little, if any, interaction with the CDC 
regarding emergency planning and the USG's plans under Project 
BioShield.
     The hospital was not aware that the USG planned to 
stockpile and distribute (when appropriate) IND products.
     The hospital would have a very difficult time during an 
emergency obtaining approval from their IRB (which they would have to 
do) for use of an experimental product. Staff had little confidence 
that hospital attorneys could work through liability issues, if not 
vetted in advance.
     The hospital had little confidence that the local public 
health infrastructure could handle/coordinate distribution of SNS 
products.
     The hospital did not have a good understanding of the 
expanded nature of the SNS. They are familiar with the distribution of 
push packs etc., but did not view that process as compatible with what 
would be needed in a bio/chem. emergency.
    Activities that might improve the local public health 
infrastructure and ensure that needed countermeasure products are 
provided to those who need them quickly and efficiently in the event of 
an emergency include:
     Instituting mechanisms now to involve target hospitals in 
key cities that are likely to be impacted in an emergency to 
participate in strategy discussions with the USG.
     Providing funding through the procurement process to 
support company lead efforts to educate front-line hospitals about 
products being purchased for stockpile after contract award. This 
education process would ensure hospital staff:
     Become familiar with the products--given many would not be 
licensed or if licensed likely unavailable for other uses,
     Learn how to administer and store them,
     Develop protocols for their use, and
     Place on formulary or whatever mechanism is necessary to 
allow use during an emergency, and vet any legal or liability issues in 
advance.
     Allowing the distribution of SNS products through 
established drug distributors (McKesson, and Cardinal, etc.) rather 
than relying on CDC and the public health infrastructure to get drugs 
out in an emergency. Develop these plans and execute agreements now in 
advance of an emergency.
     Providing small stockpiles of SNS products to hospitals in 
advance of an emergency.
     Coordinating with DOD to develop plans for countermeasure 
distribution and administration in the event of an emergency.

    Prepared Statement of Clay Elward, Benefit Plan Design Manager, 
                            Caterpillar, Inc

    Dear Senator Burr, Senator Kennedy and members of the committee, 
thank you for the opportunity to participate in this important 
Roundtable ``When Terror Strikes--Preparing an Effective and Immediate 
Public Health Response,'' as part of the national discussion of 
America's readiness in the face of a bioterrorist attack or other 
source of infectious disease epidemic.
    Caterpillar is committed to working with you and the Administration 
to strengthen America's biodefense response in ways that will 
accelerate research, development and manufacturing of novel 
countermeasure agents \1\, as well as diagnostic and environmental 
warning/detection devices. We believe that this committee can and 
should strengthen Bioshield I by considering the addition of certain 
incentives, such as needed product liability protections, guaranteed 
purchasing, expanded tax incentives, additional Federal research 
dollars, and fast-track FDA review of drug and device applications.
---------------------------------------------------------------------------
    \1\ The term ``novel'' as used throughout this document means new 
molecular entities and new and modified vaccines.
---------------------------------------------------------------------------
    However, as explained below in response to the specific questions 
posed by the committee, the provisions in the Project Bioshield II Act 
of 2005 (S. 975), though an admirable effort to protect U.S. citizens, 
will have unintended consequences in higher prescription drug costs for 
consumers and will actually undermine the goal of the development of 
novel countermeasures by merely encouraging minor changes to already 
approved products.

Introduction

    For more than 80 years, Caterpillar Inc. has been building the 
world's infrastructure and, in partnership with its worldwide dealer 
network, is driving positive and sustainable change on every continent. 
With 2004 sales and revenues of $30.25 billion, Caterpillar is a 
technology leader and the world's leading manufacturer of construction 
and mining equipment, diesel and natural gas engines and industrial gas 
turbines.
    And like all employers--including other members of the Coalition 
for a Competitive Pharmaceutical Market, a group of businesses, 
insurers, generic drug manufacturers and others--Caterpillar is very 
concerned about the costs of healthcare in the United States today. Our 
company provides benefits that rank among the best available anywhere, 
covering 140,000 lives. But at a cost of more than $600 million a year 
and rising, that commitment comes with challenges that must be 
addressed. Rising U.S. health care costs--including double-digit 
increases in pharmaceuticals, the fastest growing category of health 
care costs--have become a significant, long-term competitive issue that 
is impacting our ability to compete with a U.S. manufacturing base in a 
global market. From 2002 to 2004, our prescription drug costs increased 
20 percent.
    Caterpillar is addressing health care cost issues at every turn. 
We're working hard with providers to address cost and quality issues. 
We established networks to capitalize on large concentrations of 
employees to take advantage of the economies of scale. And we've asked 
health plan participants to help share more of the costs. We are asking 
them to be better consumers of healthcare, specifically in the area of 
prescription drugs, and providing them the tools to do so. As a result, 
our plan beneficiaries are choosing generics 90 percent of the time 
when they're available and that is helping control costs without 
impacting quality of care.
    Moreover, as an industry leader, Caterpillar understands and 
appreciates the value of innovation. Our company has received more than 
2,500 patents in the last 5 years and in 2004 alone, we spent $928 
million on research and development. We also understand the competitive 
environment and the value of a level playing field in patent 
protection, which is why we have serious concerns about provisions in 
S. 975 that would add additional patent protections and market 
exclusivities to the law but would do nothing to facilitate the 
development of these new medicines.

         Response to Questions of the Committee by Clay Elward

    Question 1. What additional incentives or other measures will 
ensure the timely availability of sufficient amounts of effective 
biodefense medical countermeasures, and is the cost of such incentives 
acceptable?
    Answer 1. Caterpillar believes that the Bioshield I legislation 
enacted last year provides a solid foundation for meeting the challenge 
of preparedness against bioterrorist attacks. Indeed, we believe that 
this law exemplifies what can result when the Federal legislative 
process works best--producing bipartisan legislation that uses private-
public partnerships in research, procurement and contracting to ensure 
that our Nation has the countermeasures we need, when we need them 
most, without imposing addition cost burdens on America's health care 
system.
    As Congress seeks to enhance Bioshield I, Caterpillar recommends 
the following additional provisions:
     Product Liability Protections: These necessary provisions 
protect drug manufacturers as they develop and produce these 
potentially life-saving novel treatments.
     Guaranteed Purchasing: The Federal Government must commit 
to and follow through on purchases of countermeasures in sufficient 
quantity to stockpile so manufacturers have predictability for their 
business models.
     Research and Development Tax Incentives and Manufacturing 
Grants: The majority of pharmaceutical research in America is 
outsourced by brand drug companies to biotechnology and other smaller 
companies. The expansion of Bioshield I's funding approach would 
energize these entities to create a biodefense pharmaceutical sector. 
Also needed to ensure production are tax credits, grants and consistent 
government funding throughout the full development cycle of 
countermeasures . . .
     Support Building Facilities In America: Domestic 
production facilities will facilitate additional manufacturing capacity 
and assure availability.
     ``Fast-Track'' FDA Review: Allowing the Food and Drug 
Administration to expedite the introduction of countermeasures to 
marketplace will help ensure countermeasures are available when needed.
     Full Funding: Pharmaceutical companies that attract 
investment for research and development often experience financial 
hardship while awaiting Bioshield procurement contracts to materialize. 
The time lag creates a ``valley of death'' for companies developing 
countermeasures that could be overcome by full funding.
    Americans deserve strong protections against bioterrorism, but this 
security must not--and need not--cripple our Nation's health care 
system through dramatic cost increases. As Congress considers 
incentives for the creation of new and better countermeasures against 
terrorist threats, it must strike a balance between the cost of the 
program and the potential benefit. Under Bioshield I, Congress 
established a straightforward government contract and procurement model 
that spreads the burden of this national defense initiative among all 
U.S. citizens. But S. 975 moves away from that model and places the 
cost burden on only one segment of the population--America's sick--
forcing those that are most vulnerable to pay for this Nation's 
biodefense pharmaceutical preparedness. And, unlike the current 
proposals, an appropriate model will reward only the actual production 
of a novel medicine designed to address a specific security need 
without jeopardizing the future affordability of the healthcare system. 
Several incentives being debated would not facilitate the development 
of new medicines. As Congress seeks to enhance Bioshield I, Caterpillar 
opposes the following additional provisions:
    Broad definition of the term ``countermeasures:'' By broadening the 
definition of ``countermeasure,'' many drugs in today's medicine 
cabinets--such as hypertensive medications and cholesterol lowering 
drugs--would qualify as a countermeasure, and would be eligible for 
patent extensions. The term ``countermeasure'' is not limited to novel 
countermeasures and could apply to drugs to treat indirect or secondary 
effects of an attack (e.g. Post Traumatic Stress Disorder) as opposed 
to direct harm caused by the bioterror agent. Therefore, already 
marketed treatments would therefore receive ``windfall'' benefits. 
Simply put--a broad definition of ``countermeasure'' (1) does not 
properly incent companies to bring new products to market to better 
protect the American people and (2) unnecessarily adds cost to the U.S. 
health care system.
    Patent term extensions: Apply to prescription medicines that are 
already on the market--not entirely new products, and not drugs that 
are solely related to bioterrorism.
    Current law grants market monopoly status to a brand company that 
holds a patent for a new, or novel, drug product. The length of this 
status, or patent life, is determined by two calculations: the amount 
of time it takes the Food and Drug Administration to review the new 
product, and the amount of time that the brand company conducts its own 
research on the product. Brands are allotted up to 5 years of patent 
restoration time to account for FDA's review time. They also are 
allotted up to a total of 14 years of monopoly status for the 
development of the product, although the patent life is frequently 
longer because of other provisions in current law, such as pediatric 
exclusivity.
    S. 975 would lift all of the caps on this monopoly status, 
extending it indefinitely. The bill removes entirely the 5-year patent 
restoration limit for the FDA review and sets no limit on the monopoly 
status awarded for the overall development period. And, instead of 
counting the monopoly time from when the drug application is being 
researched and reviewed by the FDA, it begins when the product is 
submitted as a rough idea in an application to the Patent and Trademark 
Office (PTO). Thus, the monopoly would stretch for a much longer time 
period than 14 years.
    Of additional concern, under S. 975, a brand company could conduct 
a small study--related to bioterrorism or otherwise--on a drug that is 
currently on the market and has a capped patent life. By doing this 
study, the product would be eligible to receive additional monopoly 
status based on the time that the product was submitted to the PTO. 
Thus, a product whose patent is about to expire could enjoy a new 
extended monopoly period. Even more egregious is the fact that the 
product only needs to be ``successfully developed''--the product never 
has to be approved or reviewed by the FDA, nor must it be produced or 
stockpiled. It merely needs to be studied for a countermeasure 
indication.
    The provisions in this bill allow brand pharmaceutical companies to 
game the patent system and block affordable medicines from coming to 
market for an indefinite period of time. At a time when consumers are 
struggling to manage increasing prescription drug costs, the brand name 
pharmaceutical industry should not be asking Congress to extend their 
monopolies and maintain higher prices for consumers for years to come.
    Extended Marketing Exclusivity: Marketing exclusivity delays the 
entry of generic drugs despite expired patent protections. Truly novel 
medicines already receive 5 years of marketing protection under current 
law. Extending the length of this exclusivity to 10 years would 
unfairly delay consumer access to generics.
    Wild card exclusivity: The wild card is a 6-month to 2-year patent 
extension that could be placed on any product in a company's 
portfolio--even a product that is completely unrelated to bioterrorism. 
The countermeasure does not have to be related to a bioterror agent, 
but could include drugs to treat non-weaponizable diseases if the 
Department of Health and Human Services deems those drugs to be in the 
national interest.
    A brand company also could apply more than one wild card to the 
same product, thus extending the monopoly and maintaining higher prices 
for consumers. Brand drugs are covered by 10 or more patents, and each 
of those patents could be extended. This is an unreasonable and costly 
incentive that provides a windfall to the brand name pharmaceutical 
industry, while imposing huge costs on an already overburdened 
healthcare system.
    Taken together, those provisions would inflate drug expenditures; 
impose major obstacles to the entry of generic drugs into the market; 
worsen the healthcare crisis for uninsured and older Americans who pay 
for prescription drugs, and impose and inequitable burden on health 
care purchasers. Thus, the proposed provisions in S. 975 give a blank 
check to brand companies in the form of a patent extension on non-
bioterror blockbuster drugs.

    Question 2. What is necessary to build and maintain a robust 
national public health infrastructure to meet future biodefense 
requirements?
    Answer 2. Caterpillar believes that we owe it to our employees, 
communities and shareholders to look toward the future and make 
decisions today that enable continued success tomorrow. That is why we 
support measures that will build upon the foundation of Bioshield I to 
ensure America's biodefense preparedness.
    In addition to the product liability protections, guaranteed 
purchasing and stockpiling, research and development tax incentives and 
manufacturing grants, and fast-track FDA review tools proposed above, 
Caterpillar also recommends that the Committee focus on incentives for 
biotechnology companies and universities that research novel 
countermeasures--not for entities only interested in extending current 
product monopolies that are already economically viable.

    Question 3. What is necessary to protect our food supply and 
agriculture from biodefense threats?
    Answer 3. When Caterpillar was founded in 1925, we offered only one 
product: the track-type tractor. The machine quickly became our 
flagship product and a favorite among farmers because of its reduced 
soil compaction. Although Caterpillar does not manufacture agriculture 
specific products today, we do supply the industry with components 
including diesel engines and drive trains. In addition, farmers 
continue to find multiple uses for Cat equipment such as skid steer 
loaders on farms--large and small--across the United States.
    Caterpillar supports the Unites States Department of Agriculture 
(USDA) in its biodefense readiness endeavors. Through their coordinated 
efforts, the USDA can focus on key areas of America's food supply and 
agriculture production. Caterpillar endorses the USDA's focus on 
protection through prevention, for example avoiding the introduction of 
agriculture health threats at our borders and reducing the opportunity 
for disease outbreaks and pest infestations among our farm animals and 
crops. In addition, the USDA's efforts to increase laboratory capacity 
for testing to identify hazards, such as biological agents, and monitor 
food-related consumer complaints will help ensure American's enjoy a 
safe supply of meat, poultry, and egg products.

Conclusion

    Caterpillar thanks the committee for the opportunity to participate 
in this critical national debate. Given the high cost implications for 
all involved, it is Caterpillar's hope that policymakers will adopt 
means to assure the safety and security of U.S. citizens without 
jeopardizing the future affordability of our health care system as done 
by the above-identified provisions in S. 975.
    We look forward to continuing to work with the committee and the 
administration on this matter.

Summary

    Caterpillar Inc. is honored to participate in the Senate Health, 
Education, Labor, and Pension Committee's Roundtable, entitled ``When 
Terror Strikes--Preparing an Effective and Immediate Public Health 
Response.'' The discussion, to be held July 14, 2005, will help 
Congress put measures in place to advance America's readiness in the 
face of a bioterrorist attack or other source of infectious disease 
epidemic.
    As a global business headquartered in Peoria, IL, Caterpillar 
supports the work of Congress and the Administration to strengthen 
America's biodefense response. Of primary focus for Caterpillar are the 
implications of bioterrorism preparedness activities on the U.S. health 
care system. Clay Elward, Benefit Plan Design Manager, will represent 
Caterpillar before the panel.
    Currently the Senate HELP Committee is considering the Project 
Bioshield Act of 2005 (S. 975) as a means for improving protections of 
the American people from bioterrorist attack. Caterpillar supports much 
of the proposed legislation, including provisions, which will 
accelerate research, development and manufacturing of novel 
countermeasure agents, as well as diagnostic and environmental warning/
detection devices.
    However, while the company applauds the intent of the legislation, 
it has concerns with particular provisions of the bill.. If implemented 
in its current form, S. 975 could produce the unintended result of 
higher prescription drug costs for American consumers, reduced 
pharmaceutical access for the uninsured and added strain for the 
delicate U.S. health care system.
    We believe that Congress can--and should--implement additional 
biodefense legislation to help protect the United States, but in so 
doing, it must strike a balance fair to all Americans.

About Caterpillar Inc.

    For 80 years, Caterpillar Inc. has been building the world's 
infrastructure and, in partnership with its worldwide dealer network, 
is driving positive and sustainable change on every continent. With 
2004 sales and revenues of $30.25 billion, Caterpillar is a technology 
leader and the world's leading manufacturer of construction and mining 
equipment, diesel and natural gas engines and industrial gas turbines.

            Prepared Statement of John Pournoor, 3M Company

    Mr. Chairman (and members of the committee): I would like to thank 
you for calling today's round table on ``Preparing an Effective and 
Immediate Public Health Response,'' and for inviting 3M to share its 
experiences and perspective in this area.
    3M is a diversified global technology company with international 
operating units in 65 countries and more than 67,000 employees 
worldwide; roughly one-half of our employees are located in the United 
States. 3M's worldwide sales in 2004 were $20.0 billion, of which 61 
percent--or $12.1 billion--were international sales outside the United 
States. Of note, exports from our U.S. plants were a critical component 
of our international sales: In 2004, 3M exported almost $3.8 billion in 
finished and semi-finished goods that were manufactured in our 
facilities in the United States. This ranked 3M as the Nation's 39th-
largest exporter in 2004, up from the 50th-largest exporter in 2003, 
giving 3M an almost 4-to-1 trade balance in favor of exports. 3M also 
annually invests more than $1 billion on research and development. We 
manufacture over 50,000 products and are world-class producer of 
respiratory protection products, medical supplies, and food 
microbiology solutions among many other categories.
    Mr. Chairman, I chair CBRTA, an alliance of industrial, non-profit 
and academic institutions successfully leveraging our own investments 
in R&D with both accountability and IP protection to more rapidly 
prototype needed government solutions. CBRTA focuses on chemical, 
biological and radiological solutions. I have facilitated State 
homeland security exercises, and have worked with our teams on our 
Public Health Solutions initiatives, and recently launched, with our 
international teams, our Avian Flu preparedness campaign in the Asia-
Pacific region.
    3M works with many local, regional and national agencies and 
institutions on fulfilling requirements for emergency preparedness and 
response. Our products and service offerings help local and State 
governments in areas of patient surge, isolation, registration and 
credentialing, stockpiles, personal protective equipment, 
decontamination, triage and trauma, information technology, education, 
training and preparedness exercises. My role has placed me at the 
crossroads of needs and capabilities in certain areas of Homeland 
Security, Defense and Public Health. It is from this tactical and 
operational perspective that I would like to share our perspective with 
members and participants in this forum.
    Mr. Chairman, today, the United States is investing in a variety of 
national preparedness programs stretching in outcomes from the 
development of new vaccines, to stockpiles of pharmaceuticals, personal 
protective equipment and medical supplies and many others in order to 
raise our levels of readiness in response to natural or man made bio-
events.
    Because we operate in a just-in-time and lean manufacturing economy 
that also applies to health care delivery systems, little supplies 
inventory exists to respond to a sudden surge of patients for threats 
like epidemics, pandemics or mass casualty events. Accordingly, the 
timely availability of effective bio-defense medical countermeasures 
requires that first, projections of potential patient loads be made, 
and then proportional demand plans be put in place to respond to such 
patient loads. NIH, HRSA and CDC are stimulating and fueling 
consideration of preparedness levels and augmentation of the system 
with needed caches. These demand plans must address adequate supply, 
purchase and distribution of needed medical countermeasures as well as 
stratification of priority groups receiving care.
    The wrinkle in this new era of public health demand planning is 
that not only both the local characteristics of the health care 
networks and the epidemiology of the event must be considered, but 
supply chain and logistics factors must also be incorporated. Supply 
chain and logistics is often not viewed as a function of public health. 
Yet, it happens to be one of the core competences of U.S. industry and 
a requirement for effective public health surge-response. This suggests 
an opportunity for public-private pre-event planning and partnership 
assuring uninterrupted flow of needed goods and services during a bio-
event. 3M is developing unique demand planning tools aligned with each 
of these principles in such areas as health care personal protective 
equipment, decontamination, medical supplies, and mass clinics.
    One can zoom out from the view of flow of needed goods to local and 
regional health care systems to the global economy and the flow of 
manufactured goods across borders. In many cases our consumption 
demands are met with production both at home and in other parts of the 
world. Uninterrupted flow of these goods and services requires that we 
assure continuity at a global trade levels during worldwide bio-events. 
This makes it even more imperative that, today, during the pre-event 
period, we build a cushion for a future surge in demand in the system. 
Surge in demand during an event will cause a surge in production and a 
consequent surge in needed capacity and needed raw materials. These 
core elements of good manufacturing practices are to now be also viewed 
as fundamental elements of an effective public health response.
    Aside from preparing for greater supply-demand elasticity during a 
surge in needed health care resources, measures can be taken to 
stimulate development of new solutions in response to new challenges 
and threats. Some of these opportunities have or will be touched upon 
by other participants at this round table discussion.
    Creation of incentives to leverage commercial investment in 
technology towards developing new solutions is key imperative. The 
incentives for such a leverage span from continued R&D funding of 
government-industry partnerships from small businesses to large ones, 
clear articulation of risk management and indemnification boundaries, 
protection of intellectual property rights and ultimately development 
of sustainable and practical business models around bio-defense.
    We know intimately how R&D expenditures--and the protection of 
intellectual property assets--can spur innovation. Last year for 
example, 3M received close to 600 U.S. patents--a direct result of our 
$1 billion-plus R&D investment. In the intellectual property area, 
patent reform, prior user rights, and research exemptions can play a 
significant role in reducing risk of R&D investment. In this area a 
good place to observe lessons learned is the Orphan Drug Laws. We 
believe creation of analogue tracks to spur commercialization of bio-
defense solutions is appropriate.
    3M and I are thankful for the opportunity to provide input and work 
toward solutions with you. I hope I was able to touch on a few key 
topics from a manufacturers perspective in the time allotted to me and 
will be happy to answer any questions you may have.

    [Whereupon, at 12:20 p.m., the Roundtable was adjourned.]

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