```

[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]

 
                   CAN BIOSHIELD EFFECTIVELY PROCURE
                      MEDICAL COUNTERMEASURES THAT
                         SAFEGUARD THE NATION?

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

                                HEARING

                               before the

                        SUBCOMMITTEE ON EMERGING
                       THREATS, CYBERSECURITY AND
                         SCIENCE AND TECHNOLOGY

                                 of the

                     COMMITTEE ON HOMELAND SECURITY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 18, 2007

                               __________

                           Serial No. 110-23

                               __________

       Printed for the use of the Committee on Homeland Security
                                     
[GRAPHIC] [TIFF OMITTED] 

                                     

  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html

                               __________

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                     COMMITTEE ON HOMELAND SECURITY

               BENNIE G. THOMPSON, Mississippi, Chairman

LORETTA SANCHEZ, California,         PETER T. KING, New York
EDWARD J. MARKEY, Massachusetts      LAMAR SMITH, Texas
NORMAN D. DICKS, Washington          CHRISTOPHER SHAYS, Connecticut
JANE HARMAN, California              MARK E. SOUDER, Indiana
PETER A. DeFAZIO, Oregon             TOM DAVIS, Virginia
NITA M. LOWEY, New York              DANIEL E. LUNGREN, California
ELEANOR HOLMES NORTON, District of   MIKE ROGERS, Alabama
Columbia                             BOBBY JINDAL, Louisiana
ZOE LOFGREN, California              DAVID G. REICHERT, Washington
SHEILA JACKSON LEE, Texas            MICHAEL T. McCAUL, Texas
DONNA M. CHRISTENSEN, U.S. Virgin    CHARLES W. DENT, Pennsylvania
Islands                              GINNY BROWN-WAITE, Florida
BOB ETHERIDGE, North Carolina        MARSHA BLACKBURN, Tennessee
JAMES R. LANGEVIN, Rhode Island      GUS M. BILIRAKIS, Florida
HENRY CUELLAR, Texas                 DAVID DAVIS, Tennessee
CHRISTOPHER P. CARNEY, Pennsylvania
YVETTE D. CLARKE, New York
AL GREEN, Texas
ED PERLMUTTER, Colorado
VACANCY

        Jessica Herra-Flanigan, Staff Director & General Counsel

                     Rosaline Cohen, Chief Counsel

                     Michael Twinchek, Chief Clerk

                Robert O'Connor, Minority Staff Director

                                 ______

   SUBCOMMITTEE ON EMERGING THREATS, CYBERSECURITY, AND SCIENCE AND 
                               TECHNOLOGY

               JAMES R. LANGEVIN, Rhode Island, Chairman

ZOE LOFGREN, California              MICHAEL T. McCAUL, Texas
DONNA M. CHRISTENSEN, U.S. Virgin    DANIEL E. LUNGREN, California
Islands                              GINNY BROWN-WAITE, Florida
BOB ETHERIDGE, North Carolina        MARSHA BLACKBURN, Tennessee
AL GREEN, Texas                      PETER T. KING, New York (Ex 
VACANCY                              Officio)
BENNIE G. THOMPSON, Mississippi (Ex 
Officio)

                    Jacob Olcott, Director & Counsel

        Dr. Chris Beck, Senior Advisor for Science & Technology

                       Carla Zamudio-Dolan, Clerk

       Dr. Diane Berry, Minority Senior Professional Staff Member

                                  (ii)
                            C O N T E N T S

                              ----------                              
                                                                   Page

                               STATEMENTS

The Honorable James R. Langevin, a Representative in Congress 
  From the State of Rhode Island, and Chairman, Subcommittee on 
  Emerging Threats, Cybersecurity, and Science and Technology....     1
The Honorable Michael T. McCaul, a Representative in Congress 
  From the State of Texas, and Ranking Member, Subcommittee on 
  Emerging Threats, Cybersecurity, and Science and Technology:
  Oral Statement.................................................     2
  Prepared Statement.............................................     3
The Honorable Bennie G. Thompson, a Representative in Congress 
  From the State of Mississippi, and Chairman, Committee on 
  Homeland Security..............................................     5
The Honorable Donna M. Christensen, a Representative in Congress 
  From the U.S. Virgin Islands...................................    23
The Honorable Bob Etheridge, a Representative in Congress From 
  the State of North Carolina....................................    50
The Honorable Jackson-Lee, a Representative in Congress From the 
  State of Texas.................................................    52
The Honorable Daniel E. Lungren, a Representative in Cogress From 
  the State of California........................................    47

                               Witnesses
                                Panel I

James H. Davis, Phd., J.D., Senior vice President and General 
  Counsel, Human Genome Sciences:
  Oral Statement.................................................    14
  Prepared Statement:............................................    16
Mr. Richard Hollis, Chief Executive Officer, Hollis-Eden 
  Pharmaceuticals, Inc.:
  Oral Statement.................................................     7
  Prepared Statement.............................................     8

                                Panel II

Anthony Fauci, M.D., Director, National Institutes of allergy and 
  Infectious Diseases, National Institutes of Health, U.S. 
  Department of Health and Human Services:
  Oral Statement.................................................    32
  Prepared Statement.............................................    34
Jesse Goodman, M.D., MPH., Director, Center for Biologics 
  Evaluation and Research, Food and Drug Administration, U.S. 
  Department of Health and Human Services:
  Oral Statement.................................................    36
  Prepared Statement.............................................    39
Gerry Parker, Ph.D., DVM., Principal Deputy Assistant Secretary, 
  Office of the Assistant Secretary for Preparedness and 
  Response, U.S. Department of Health and Human Services.........    30
Jeffrey Runge, M.D., Assistant Secretary for Health Affairs 
  (Acting) and Chief Medical Officer, Office of Health Affairs, 
  Department of Homeland Security:
  Oral Statement.................................................    27
  Prepared Statement.............................................    28

                             For the Record

Prepared Statement:
  The Honorable Richard Burr, Senator, North Carolina............    53

                   CAN BIOSHIELD EFFECTIVELY PROCURE

                      MEDICAL COUNTERMEASURES THAT

                         SAFEGUARD THE NATION?

                              ----------                              

                       Wednesday, April 18, 2007

             U.S. House of Representatives,
                    Committee on Homeland Security,
           Subcommittee on Emerging Threats, Cybersecurity,
                                and Science and Technology,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1:18 p.m., in 
Room 1539, Longworth House Office Building, Hon. James Langevin 
[chairman of the subcommittee] presiding.
    Present: Representatives Langevin, Thompson, Lofgren, 
Jackson Lee, Christensen, Etheridge, Green, McCaul, and 
Lungren.
    Mr. Langevin. [Presiding.] Good afternoon.
    Today the subcommittee will receive testimony regarding the 
BioShield program, focusing specifically on some recent 
difficulties within the program.
    Biological threats, both manmade and naturally occurring, 
present a real danger to the security of the United States. We 
must, therefore, do everything in our power to create and 
maintain robust tools to protect against these threats.
    Project BioShield can and should be an important component 
of our nation's defenses against such threats. This critical 
program is far too important to fail.
    Unfortunately, since its creation, BioShield has enjoyed 
varying levels of success, and, in recent months, there have 
been some fairly significant setbacks this committee is 
particularly concerned with.
    The cancellation of the $877 million anthrax vaccine 
contract, the largest under BioShield, after VaxGen invested 
$175 million of its own funds, does not bode well for the 
future of the program. Problems must be identified and fixed, 
and we must learn from any mistakes that have been made.
    Also of concern was the decision in March to close the 
request for proposals for a medical countermeasure to treat 
acute radiation syndrome.
    As this subcommittee is responsible for preparation and 
response for both nuclear and biological attacks, we are 
especially concerned about these two cancellations. However, 
our witnesses on both panels should not assume that this 
subcommittee has pre-judged these matters.
    The BioShield process is a complicated one, and we are here 
today to hear from our witnesses about their experiences 
navigating the process.
    Our private-sector witnesses have had different experiences 
working with the program, and this subcommittee asked them to 
be here for precisely that reason. Our witnesses from the 
Departments of Homeland Security and Health and Human Services 
hold additional pieces of the BioShield puzzle.
    Dr. Runge from DHS and Dr. Parker from HHS represent the 
lead offices for BioShield activities in the two departments.
    Although not officially part of the BioShield program, the 
NIH and the FDA have played important roles in the process, 
including the VaxGen contract cancellation, and we have to 
better understand and define their roles if we want the program 
to succeed in the future.
    The new Biodefense Advance Research and Development 
Authority, BARDA, may also have a role to play by supporting 
transitional research and development and bridging the so-
called ``valley of death'' between early basic research 
supported by NIH and final development and production.
    However, that will not happen by itself. I believe we need 
to provide a more definite roadmap on how all these moving 
pieces fit together. That is the proper role of oversight, and 
that is our responsibility on this subcommittee.
    I am hopeful that today's hearing will shed light on some 
of the difficulties of implementing Project BioShield. I am 
also hopeful that after hearing from our two panels, we will 
gain insight on how best to move forward and fix some of these 
problems.
    We must work together to ensure that Project BioShield 
remains an effective line of defense. I believe that today's 
hearing is a good first step towards that goal, but I also 
understand that the solutions will not be simple--they will 
take time, cooperation and diligence on all of our parts.
    I want to thank both of our panels, witnesses, for taking 
time to appear before our subcommittee today and I look forward 
to their testimony.
    The chair now recognizes the ranking member of the 
subcommittee, the gentleman from Texas, Mr. McCaul, for the 
purposes of an opening statement.
    Mr. McCaul. Thank you, Mr. Chairman.
    In my judgment, the greatest threat we face today is a 
chemical, biological or nuclear attack on the United States. 
Such an attack could kill hundreds of thousands, possibly 
millions of our citizens.
    I remember reading the book ``The Hot Zone,'' which 
described the threat of the Marburg virus and whether that 
could actually--we could develop an airborne strain that could 
kill thousands, if not millions of people in a very short 
period of time.
    I also toured several level four facilities and you see up 
close and personal the threats of these biological agents, what 
they call ``the demon on the jar.'' We all know the Soviet 
Union has weaponized many of these agents and after September 
the 11th, we had a scare and a threat from the anthrax strain 
that we have still not to this day, in my judgment, adequately 
addressed.
    Project BioShield plays a key role in addressing this 
threat. It remains unclear how well it is in achieving its 
goals. The basic premise of BioShield is to increase the 
strategic national stockpile with medicines to treat those who 
would be affected by an attack and to encourage private 
industry to develop new countermeasures.
    Obviously, BioShield has had a rough start and it is up to 
us in the Congress to help solve some of the problems that this 
program has faced.
    There have been problems regarding the rate by which DHS 
completes material threat determinations. HHS has made what I 
consider to be missteps. There have also been issues with the 
transparency and the overall management of the BioShield 
program.
    To be fair, though, without BioShield, we would not be 
stockpiling the countermeasures we have today, including an 
antidote to the botchulinum toxin anthrax vaccine and two types 
of anthrax treatments and two kinds of countermeasures against 
radiological and nuclear agents.
    Without BioShield, no companies would be working on these 
countermeasures at all. So I have also seen encouraging chances 
to see how BioShield does business.
    DHS used to take about 4 months to complete a material 
threat assessment on just one agent. They changed their process 
and have significantly reduced that period of time.
    The Pandemic and All Hazardous Preparedness Act, introduced 
by my Republican colleague, Senator Burr, and passed last year 
establishes the Biomedical Advanced Research and Development 
Authority.
    And at this time, Mr. Chairman, I would like to ask 
unanimous consent that that report be entered into the record.

 Prepared opening Statement of Hon. Michael T. McCaul, Ranking Member, 
    Subcommittee on Emerging Threats, Cybersecurity and Science and 
                               Technology

    Thank you Chairman. I' like to preface my remarks by saying if it 
were not for Project BioShield and the government's grant funding in 
this arena, we would not be here today. There would be nothing to 
discuss. While we wouldn't have the failed acquisitions that we'll be 
hearing about, we also wouldn' be stockpiling the countermeasures that 
we are currently--including an antidote to botulinum toxin, anthrax 
vaccine, two types of anthrax treatments, and two kinds of 
countermeasures against radiological or nuclear agents. No companies 
would be working on biodefense vaccine and therapeutic targets at all. 
So while the process may have had a rough beginning, let's bear in mind 
Congress tasked the Department of Homeland Security (DHS) and the 
Department of Health and Human Services (HHS) and its agencies with an 
enormous challenge, building the BioShield initiative from the ground 
up. The magnitude of the public-private partnership necessary for 
BioShield to protect the nation from CBRN threats is unprecedented in 
the area of biopharmaceutical development.
    Drug development is an inherently expensive, slow and risky 
business. It can cost more than $1 billion to launch a technically 
successful drug and take 12.5 years. And only 8% of the products 
entering trials actually make it to the market. Perhaps only the movie 
industry tolerates such enormous costs and failure rates in the search 
for blockbusters, but they can go from concept to commercial success in 
a few years, whereas the average for pharmaceutical development is more 
than a decade. While we sitting here aren't in the movie business, nor 
can we do much to minimize the failure of programs due to scientific or 
technical problems, we can confront this risk and ensure the BioShield 
process has mechanisms in place to address this risk. We must also 
ensure BioShield is managed with the sense of urgency under which it 
was conceived. With the terrorist threat growing every day, we don?t 
nearly have enough medical countermeasures we will need to respond and 
save lives.
    Without a model to provide a blueprint of how best to implement 
BioShield, one common feature of a successful startup is adaptability, 
not being afraid to make decisions and change direction. While 
``adaptability'' and ``Federal Government'' appear to be at odds most 
of the time, I have already seen positive indications that DHS and HHS 
are learning from their experiences and evolving their strategy based 
on both their failures and successes to-date.
    During a past hearing, DHS testified that it typically took them 
four months to complete a material threat assessment on just one agent. 
At that rate, it would take on the order of 9 years to make it through 
all the agents on the CDC bioterrorism list, and this only accounts for 
the biological agents, not the chemical or radiological ones! 
Fortunately, DHS has found a way to fulfill their responsibilities 
expeditiously and have now completed threat determinations and 
associated assessments for all the biological agents and is working on 
the list of chemical agents.
    HHS. Well, HHS has the toughest job of managing risk--risk to the 
government in awarding only one contract for a product that has a large 
chance of failing scientifically or technically during one of the 
lengthy stages of development and testing, or risk to the private 
sector, especially less-established companies, that may not have the 
necessary financial resources necessary to support advanced product 
development prior to receipt of payment upon delivery of their product 
to the stockpile. We owe my Republican colleague, Senator Burr, credit 
for ushering through legislation last Congress that will provide HHS 
with the tools it needs to help manage these risks. The Pandemic and 
All Hazards Preparedness Act establishes the Biomedical Advanced 
Research and Development Authority (BARDA) to provide much needed late-
stage research and development funding and allow for incremental 
payments that will shift some of the risk away from BioShield 
acquisition programs. In theory, funding this part of the development 
process, the so-called `Valley of Death', could allow countermeasures 
to mature further through the development process before competing for 
a Project BioShield contract, and it could allow multiple products to 
be supported in parallel in case one should fail during development. 
This will reduce the risk that a countermeasure will fail while under a 
Project BioShield contract.
    What I believe to be most promising is the formation of the 
interagency Public Health and Emergency Medical Countermeasure 
Enterprise in 2006 in an effort to streamline the BioShield process. 
Just using the term `T3Enterprise demonstrates that HHS and DHS grasp 
the enormous challenges and understand the limitations within which it 
has to work to enable BioShield's success.
         First, an enterprise is a readiness and willingness to 
        undertake new, often risky and complicated, ventures and 
        initiatives. What?s more risky and complicated than drug and 
        vaccine development?
         Second, an enterprise represents a business 
        organization. Businesses need to work in partnership, engage in 
        dialogue and coordination, to develop clear and predictable 
        requirements. Businesses can only be successful in developing 
        products with a clear understanding of the end goal. Businesses 
        develop objectives within a framework that addresses the 
        complexities of their industry, in this case the 
        biopharmaceutical industry, and contains the appropriate level 
        of specifications and delivery terms.
         And finally, an enterprise is diligent and systematic 
        in its activities. A comprehensive strategy is needed that 
        addresses the various threats, current and future, for which we 
        must prepare. BioShield is one part of this strategy, BARDA is 
        another, and the basic research funded by NIH is yet another. 
        The objectives of each must be aligned and as products move 
        through the different phases of development, investments must 
        be reevaluated to avoid potentially life-saving products 
        falling into the ``Valley of Death''.
    Only an Enterprise can take on BioShield. With DHS, HHS, and the 
private sector working together in this Enterprise, to harness modern 
scientific tools and industry expertise and taking smarter approaches 
to drug development and acquisition, we can improve BioShield's 
prospects, making it more efficient--yes faster--with less chance of 
failed contracts, so that new medicines can get to the Nation's 
stockpile and ultimately be available to the patients who may need 
them.
    I thank our witnesses for coming today and I look forward to 
hearing their testimony and hope that this hearing spurs further 
progress in realizing the true potential of BioShield.

    Mr. Langevin. Without objection.
    Mr. McCaul. Thank you.
    In my view, this legislation will provide much needed late 
stage research and development funding and should reduce the 
risk that a countermeasure will fail while under a Project 
BioShield contract.
    And at this time, Mr. Chairman, I would also like to say we 
are seeing changes to how the interagency process works, 
including the implementation of Homeland Security Presidential 
Directive 18 and the formation of the Public Health Emergency 
Countermeasure Enterprise.
    We all know that drug development is an inherently 
expensive, slow and risky business. It can cost more than $1 
billion to launch a technically successful drug and take 
approximately 12.5 years. And we also know that only eight 
percent of the products entering trials actually make it to the 
market.
    While we can't do much to minimize the failure of programs 
due to scientific or technical problems, we can confront this 
risk and ensure the BioShield process has the appropriate 
mechanisms in place.
    The important thing to remember is that the terrorist 
threat is growing every day, and we don't have enough medical 
countermeasures that we need to respond to a weapon of mass 
destruction attack.
    Time is of the essence, and the time to act is now.
    I thank the chairman, and I yield back the balance of my 
time.
    Mr. Langevin. I thank the ranking member.
    The chair now recognizes the chairman of the full 
committee, the gentleman from Mississippi, Mr. Thompson, for 
the purposes of an opening statement.
    Mr. Thompson. Thank you very much, Mr. Chairman, and I 
would like to thank you for holding this important hearing and 
thank our witnesses for being here today.
    As Chairman Langevin noted in his opening remarks, 
BioShield is a new program. That said, new doesn't necessarily 
equate with a license to make mistakes. Yet, mistakes have been 
made with regard to the development and implementation of the 
program.
    I would like to believe that those were honest mistakes and 
that by doing proper oversight, we can figure out what problems 
exist and address them. We need to get the program to a state 
where it is procuring enough medicine and vaccine to protect 
the American people.
    To date, Project BioShield has only awarded contracts for 
immunizing against or treating anthrax, botchulinum toxin and 
radiological sicknesses, even though the CDC has listed over 30 
select agents of concern.
    After the VaxGen contract cancellation, BioShield currently 
has contracts for 10 million doses of the old anthrax vaccine 
currently used by the military, as well as two much smaller 
contracts for new anthrax treatment, one of which is held by a 
witness from Human Genome Sciences.
    Now, the largest contract under BioShield is a $363 million 
contract for 200,000 doses of botchulinum antitoxin. The 
remaining contracts are for protection from radioactive 
materials.
    These contracts account for nearly $1 billion of the $5.6 
billion 10-year BioShield fund and deal with only three agents 
and not comprehensively, by any measures. In contrast to this 
fund, Pfizer, for example, spends over $7 billion annually on 
research and development.
    Does this program make sense at all, Mr. Chairman? Can it 
succeed if we identify the right problems? That is what I hope 
we will get to today in the answers from our witnesses.
    I look forward to the testimony, Mr. Chairman, and I yield 
back the balance of my time.
    Mr. Langevin. Thank the chairman for his statement.
    Other members of the subcommittee are reminded that under 
the committee rules, opening statements may be submitted for 
the record.
    I want to now welcome our first panel of witnesses. Let me 
begin by saying, as you may know, VaxGen was originally 
supposed to be part of today's discussion and I think a very 
important part of today's discussion.
    However, because HHS and VaxGen were unable to reach an 
agreement concerning the testimony, they will, unfortunately, 
not come before our subcommittee today, although their 
testimony, I believe, is critical, a critical element of this 
discussion and I look forward to a time in the near future when 
they may testify before this subcommittee.
    And for the record, I had the opportunity to speak with 
representatives of VaxGen, who very much wanted to testify 
today, and they are here, but for the fact that HHS would not 
sign off and allow them to testify without repercussion on a 
recent settlement between HHS and VaxGen after the cancellation 
of the recent contract to develop the next generation anthrax 
vaccine.
    I am both disappointed and upset that HHS would not grant 
that sign-off, but we will have further discussions as we go 
forward and I hope to have VaxGen before us at the earliest 
possible opportunity.
    Our first witnesses are Richard B. Hollis, founded Hollis-
Eden in August 1994 and currently serves as chairman, president 
and CEO. Mr. Hollis has over 29 years experience in the 
healthcare industry, has a proven track record of launching and 
marketing important new medical products, and a distinguished 
career of managing the growth and operations of companies in a 
variety of senior management positions.
    Our second witness is James Davis, executive vice president 
and general counsel and secretary of Human Genome Sciences, 
where he has served since 1997. From 1995 to 1997, Dr. Davis 
was of counsel to the Washington, D.C., law firm of Finnegan, 
Henderson, Farabow, Garrett and Dunner, LLP.
    Prior to this time, Dr. Davis served in a number of 
capacities with the agricultural biotechnology company, Crop 
Genetics International. Prior to joining Crop Genetics, Dr. 
Davis was a partner in the Washington, D.C., office of Weil, 
Gotshal and Manges.
    Without objection, the witnesses' full statement will be 
inserted into the record and I now ask each witness to 
summarize their statements for 5 minutes, beginning with Mr. 
Hollis.
    Again, I want to thank you both, again, for being here. We 
look forward to your testimony.

 STATEMENT OF RICHARD HOLLIS, CHIEF EXECUTIVE OFFICER, HOLLIS-
                   EDEN PHARMACEUTICALS, INC.

    Mr. Hollis. Mr. Chairman, members of the committee, thank 
you for very much for this opportunity.
    Shortly after 9/11, we were contacted by the Department of 
Defense and asked to develop our investigational drug, Neumune, 
to protect American citizens from a nuclear terrorist event. 
Since that time, we have committed over $85 million in 
developing Neumune and, to our knowledge, Neumune remains the 
leading drug candidate for the treatment of acute radiation 
syndrome, otherwise known as ARS, by the Department of 
Defense's Armed Forces Radiobiology Research Institute.
    To date, Hollis-Eden has been recognized as the world 
leader in developing a drug for this indication because of the 
following--we have the first and only open IND at the FDA for a 
drug candidate specifically for the treatment of acute 
radiation syndrome.
    Neumune is the only compound in peer-reviewed published 
papers to demonstrate a statistically significant survival 
benefit in non-human primates exposed to lethal doses of 
radiation without any other clinical support.
    Over 120 humans have been involved in the clinical trials 
with Neumune and the safety profile is similar to placebo. 
Neumune is further along in the development than any other 
medical countermeasure for acute radiation syndrome.
    With this background, I would encourage you to take a very 
critical look at the government's words and actions in our 
case.
    Let me focus on the law. The purpose of BioShield 
legislation was to incentivize the private sector by setting 
guaranteed markets where none currently exists for promising 
countermeasures to weapons of mass destruction and to award 
advance purchase contracts before a drug is fully approved or 
licensed by the FDA.
    This is a creative and market-driven idea to spur 
investment capital and industry participation. However, that is 
not how HHS is implementing the BioShield bill today. The 
legislation clearly states that a BioShield countermeasure must 
have a sufficient and satisfactory experience or research data 
to support a reasonable conclusion that the drug candidate will 
qualify for licensing with the FDA within 8 years.
    Instead, the agency now requires countermeasures to be 
BioShield eligible, a term that appears nowhere in the law, is 
subjective and can arbitrarily require a drug candidate to be 
significantly further along in development than the law 
requires.
    This undermines the criteria under BioShield legislation 
for advancing purchase contracts for promising medical 
countermeasures well before FDA approval.
    Mr. Chairman, considering the facts, I am totally at a loss 
to explain how the agency could determine our proposal did not 
meet the requirement of BioShield legislation.
    To help us all understand this, allow me to respectfully 
suggest a few questions I would like you to ask the agency.
    If a promising development stage drug like Neumune does not 
meet the requirements for a BioShield advance purchase 
contract, what drug does?
    Why were we told that our company's proposal was in the 
competitive range for this award for 9 months before being 
told, with no warning, that our proposal was technically 
unacceptable?
    The law requires the agency to procure the best possible 
countermeasures in development today. Was the agency waiting 
for something better to be developed?
    Why didn't the agency comply with the legislation and award 
the advance purchase contract to allow our company to continue 
to develop the drug?
    Why did the acute radiation syndrome drug evaluation from 
RFI to RFP take over 2.5 years? And why were there four delays 
in the final 9 months of negotiations from June 2006 to March 
2007?
    Does the final decision to cancel this RFP have anything to 
do with the BARDA legislation that was passed in December of 
2006?
    Is there a conflict of interest between investor-funded 
companies and NIH taxpayer-funded entities when the NIAID, 
which awards research grants to develop biodefense 
countermeasures, is the same agency that advises HHS on which 
drugs to award contracts to?
    These last questions underscore how HHS's own actions have 
created the valley of death, which the agency claims has 
undermined the program.
    I want to be perfectly and absolutely clear about this--
there is no valley of death in the private-sector markets for 
known attractive commercial products and market opportunities.
    By changing the criteria for awarding the advance purchase 
contracts and thereby not setting the markets early for these 
important medical countermeasures, the agency has eliminated 
the investment community from funding BioShield research and 
development.
    So in other words, the legislation, the way it is being 
implemented, has created the valley of death.
    Mr. Langevin. If you could just--
    Mr. Hollis. I am almost done here.
    When government officials tell you that the pharmaceutical 
sector has responded to BioShield and so their agencies need 
more authority, power and money, realize that these actions are 
the same, come from the same officials that have driven 
companies and investors away from the program.
    So the failing of BioShield, from my perspective, will have 
serious consequences for our national security and because HHS 
has failed to act according to the law, we have suspended the 
development of Neumune.
    And in conclusion, as we and other companies have learned 
in this process trying to do business with the government under 
Project BioShield, as implemented by HHS, appears to be more 
about politics than protecting the American citizens and 
following the law that Congress approved.
    Mr. Chairman, thank you very much, and I welcome the 
opportunity to answer any questions.
    [The statement of Mr. Hollis follows:]

                  Prepared Statement of Richard Hollis

    Chairman Thompson, Chairman Langevin, Ranking Members King and 
McCaul, Members of the Committee, thank you for the opportunity to 
appear before you to discuss the state of Project BioShield and the 
experience of Hollis-Eden Pharmaceuticals.
    I have previously testified four times on these issues before 
various Congressional committees during the last Congress. 
Unfortunately, not much has changed to fix the BioShield Program. As I 
have testified before, HHS is not implementing the BioShield 
legislation as Congress intended. Additionally, Project BioShield will 
continue to fail unless it can attract private sector participation--
and that is the result of the lack of transparency, missed timelines, 
poor communication and the inexperience of agency representatives. Mr. 
Chairman, it is my strongest hope that this hearing signals that things 
will be different going forward. Absent such a sea change, the 
BioShield program will remain fundamentally broken. Novel next 
generation medical countermeasures to protect American's from future 
terrorist attacks involving a weapon of mass destruction may never 
materialize. I hope this Committee and the other relevant Congressional 
Committees will do whatever is necessary to remedy this situation.
    Allow me to begin with a brief history of our attempt to answer the 
call by our nation to develop the first practical treatment to the life 
threatening effects of radiation exposure, a condition known as acute 
radiation syndrome or ARS.
         Shortly after 9/11 we were contacted by the Department 
        of Defense and asked to develop our investigational compound 
        NEUMUNE to protect Americans from ARS in the event of a 
        terrorist attack with a nuclear or radiological weapon in one 
        or more of our cities.
         Since that time we have committed $85 million in 
        developing NEUMUNE.
         To our knowledge, NEUMUNE remains the leading drug 
        candidate of DoD?s Armed Forces Radiobiology Research 
        Institute, or AFRRI.
         To date, Hollis-Eden has been recognized as the world 
        leader in developing a drug for this indication because of the 
        following:
                 We have the only open IND with a drug 
                candidate specifically for the treatment of ARS.
                 NEUMUNE is the only compound, in peer reviewed 
                published reports, to demonstrate a statistically 
                significant survival benefit in non-human primates 
                exposed to lethal doses of radiation without any other 
                clinical support.
                 We have shown statistically significant 
                benefits in tests involving more than 300 nonhuman 
                primates
                 Over 120 humans have been involved in clinical 
                trials with NEUMUNE, and the safety profile is similar 
                to placebo.
                 NEUMUNE is further along in development than 
                any other medical countermeasure for ARS.
    With our history in mind as you consider the remainder of my 
testimony I encourage you to take a very critical look at the 
government?s words and actions here?far more critical than has been the 
practice to date.
    The expertise in these matters lies with the private sector, not 
with the government. BioShield is intended to incentivize the private 
sector to develop medical countermeasures to better prepare and protect 
this nation from a terrorist attack using WMD. With all due respect, in 
dealing with HHS we were surprised and disappointed with the reasons 
the agency gave for decisions made during the procurement process. 
Although HHS may have good intentions, the expertise required to 
successfully develop a practical medical countermeasure for a nuclear 
mass casualty scenario resides in the private sector.
    Allow me to illustrate this point. In late 2005, the news show ``60 
Minutes'' did a segment on HHS? failure to protect the American people 
from a nuclear attack by deciding the government needed to stockpile 
only 100,000 treatment courses of a medical countermeasure for ARS that 
could save lives in the immediate aftermath. During the due diligence 
process for the episode, 60 Minutes discovered that HHS? rationale for 
ordering such a small number of treatment courses was because they were 
planning to treat the potentially hundreds of thousands of ARS victims 
in hospitals. Unfortunately, experts who have studied nuclear scenarios 
have concluded this will be very challenging if not impossible. This is 
precisely why a safe and effective practical medical countermeasure 
that could be self administered without any other medical support 
should be embraced by the agency as the only viable option for the 
majority of victims.
    To highlight the lack of understanding of the appropriate medical 
treatment for ARS altogether, when HHS was asked by members of Congress 
as to why the major requirement detailed in the final RFP for the ARS 
drug focused on treating neutropenia (infection) when the major issue 
behind mortality for ARS victims is both neutropenia and 
thrombocytopenia (bleeding), HHS told then-Government Reform Committee 
Chairman Davis in writing that every hospital in America had drugs to 
treat neutropenia as well as a supply of ``flash frozen platelets'' 
that could be utilized in the event of a nuclear or radiological event. 
HHS also suggested to others that there were two Navy ships ``off the 
coast'' with similar stockpiles of frozen platelets.
    When challenged by 60 Minutes, HHS had to admit that there was no 
such thing as ``flash frozen platelets'' and there were no such Navy 
ships, let alone the hospital beds to treat the hundreds of thousands 
of victims who may suffer from acute radiation syndrome in a mass 
casualty scenario. This was not a one-time misstatement; it was the 
agency?s rationale as to why there was no rush to procure too much of a 
practical next generation medical countermeasure that may alleviate the 
need for hospitalization and blood products. The government's response 
was not to fix the problem; rather it sought to find like-minded 
experts to support their position and lack of urgency in providing the 
country with a practical medical countermeasure and adequate nuclear 
emergency response plan.
    As this Committee examines the BioShield program, I would 
respectfully suggest that the starting point must be the BioShield law 
that Congress passed and the President signed. As stated in my previous 
testimonies, the BioShield legislation was written in such a way that 
it would incentivize the private sector pharmaceutical and biotech 
industries by setting guaranteed markets for companies having promising 
technology that might be developed over time and used to protect the 
American people from WMD terrorism. The concept of awarding advance 
purchase contracts that would define the market (identify how many 
doses or treatment courses the government was going to buy and what the 
government would pay upon successful delivery) up to eight years before 
FDA approval was a brilliant market-driven idea. However, unfortunately 
for the American people, that is not how BioShield is being implemented 
today.
    The law clearly states that a qualified BioShield countermeasure 
``is a countermeasure for which the Secretary determines that 
sufficient and satisfactory clinical experience or research data 
(including data, if available, from pre-clinical and clinical trials) 
to support a reasonable conclusion that the countermeasure will qualify 
for approval or licensing within eight years.'' The law further 
provides that in issuing a call for the development of such 
countermeasure the Secretary shall state: ``(i) estimated quantity of 
purchase (in the form of number of doses or number of effective courses 
of treatments regardless of dosage form); (ii) necessary measures of 
minimum safety and effectiveness; (iii) estimated price for each dose 
or effective course of treatment regardless of dosage form; and (iv) 
other information that may be necessary to encourage and facilitate 
research, development, and manufacture of the countermeasure or to 
provide specifications for the countermeasure.'' (emphasis added) This 
is how the law says the program shall work. Implementing the program in 
accordance with these parameters is a nondiscretionary duty of the 
agency.
    Unfortunately HHS has chosen to implement the law in a manner that 
conflicts with these provisions and the Congress' statutory intent. 
They have taken it upon themselves to change the definition of the 
provision ``support a reasonable conclusion that the countermeasure 
will qualify for approval or licensing within eight years.'' HHS has 
stated that countermeasures must be ``BioShield eligible,'' a term that 
appears nowhere in the law, before they can award an advance purchase 
contract. And the bar as to what constitutes ``BioShield eligible'' has 
been applied in an arbitrary manner that is significantly higher than 
what the law provides. HHS' BioShield eligibility requirements, as they 
have been applied to us, are essentially just shy of what we would be 
required to show to obtain full FDA approval. In other words, to be 
``BioShield eligible'' according to HHS, a countermeasure must be 
significantly further along in development than was contemplated under 
the specific language of the BioShield law. This new, arbitrary 
requirement undermines the BioShield Program and Congress' intent for 
awarding advance purchase contracts for promising medical 
countermeasures years before they would be FDA approved.
    When HHS rejected our RFP proposal, after telling us on multiple 
occasions that our proposal was in the competitive range, they did so 
precisely by so changing the criteria for an award. Numerous peer 
reviewed studies have been published demonstrating the efficacy of 
NEUMUNE in animal models of radiation exposure. We have shown that 
NEUMUNE can significantly increase survival rates if administered post 
exposure. This survival benefit derives from the fact NEUMUNE mitigates 
both the neutropenia and thrombocytopenia conditions of ARS without the 
need for other medical support. Over 100 healthy volunteers have been 
involved in NEUMUNE safety trials, without any significant adverse 
health effects. In fact, NEUMUNE?s impact on humans isn?t just safe; it 
is beneficial--increased levels of neutrophils and platelets--such that 
we have been cleared by the FDA to conduct Phase I/II clinical trials 
using NEUMUNE to potentially help patients ward off hospital-acquired 
infections.
    Obviously NEUMUNE still needs to be proven safe and effective in 
large pivotal trials that were planned to take place once an advance 
purchase contract was awarded. That is how BioShield is supposed to 
operate under the law. Further, under the specific terms of the RFP, 
these pivotal studies required pre-approval by HHS after contract 
award. In other words, the reasons HHS gave for rejecting our proposal 
conflicted not only with the statute, but also with the very terms of 
the RFP.
    Mr. Chairman, I am honestly at a loss to explain how HHS decided to 
cancel outright the ARS RFP. We clearly met the requirements of the 
BioShield statutute--we estimate that our drug could have been 
stockpiled for emergency use in 2008 and approved by the FDA shortly 
thereafter, far less than the eight-year requirement provided in the 
law. HHS, even after the RFP was cancelled, admitted we met the 
mandatory requirements of the RFP. The agency repeatedly stated over 
the last nine months we were in the competitive range for a contract 
award, and only on the day of the RFP cancellation were we told 
otherwise. In fact, the agency has confirmed to third-parties we were 
the only company that remained in the competitive range. Peer-reviewed, 
published studies show NEUMUNE has a significant survival benefit 
against acute radiation syndrome, without significant adverse effects. 
We had no reason to suspect that HHS would fail to follow the BioShield 
legislation and not award an advance purchase contract to us, thereby 
preventing Hollis-Eden from being able to continue developing the drug 
to protect the nation.
    As a result, in order to get to the real reasons for HHS' actions 
here, the Committee will need to fully investigate this process. Allow 
me to respectfully suggest a series of questions HHS should be asked to 
answer as part of that investigatory process:
    1. If a promising drug candidate like NEUMUNE does not lead HHS to 
reasonably conclude ``that the countermeasure will qualify for approval 
or licensing within eight years,'' then what product does? The agency 
itself told us that we met the RFP's mandatory requirements even after 
they cancelled the RFP. The Department of Defense?s experts, AFRRI, to 
this day continue to identify this drug as their lead ARS 
countermeasure and are still asking us to develop it. We have shown 
statistically significant benefits in tests involving more than 300 
non-human primates, and to date demonstrated a good safety profile when 
NEUMUNE was tested in human clinical trials. We have achieved all these 
milestones at a cost of more than $85 million of shareholder dollars. 
If NEUMUNE doesn't qualify for an advanced purchase contract, what 
will?
    2. Why were we told that our company was in the competitive range 
for this award for nine months before being told with no warning or 
discussion that we were ``technically unacceptable''? Throughout the 
entire RFP process, we were repeatedly informed that we were in the 
competitive range--meaning that our drug met the mandatory requirements 
of the RFP, or in other words was ``technically acceptable.''. As is 
typical in these types of procurements, in June 2006 HHS requested each 
company in the competitive range to respond to specific technical 
issues raised by the Technical Evaluation Panel regarding such 
company's drug candidate.
    We submitted complete responses to each issue in July 2006. Then, 
after reviewing our responses, and after a successful government audit 
of our costs and accounting system at our facilities, HHS informed us 
in October 2006 that we remained in the competitive range and that HHS 
wanted to conduct face-to-face meetings with us in Washington. At that 
meeting, the agency indicated they expected an award some time in 
January 2007. On January 31, 2007, HHS informed us that the new 
expected date of award would be March 7, 2007. For at least the last 
four and a half months of the RFP process we understand that we were 
the only company remaining in the competitive range. During this time, 
and in fact during the nearly eight months since our detailed response 
to the technical issues raised by HHS, none of the technical issues 
brought up in June were ever again addressed, not even during the face-
to-face meeting with HHS. In fact, the only new information provided to 
HHS after we were confirmed in the competitive range and were the only 
company remaining was information that strengthened the case for 
NEUMUNE.
    We answered all of HHS' questions. We provided them copies of a 
newly published preclinical study demonstrating NEUMUNE provided a 
survival benefit against lethal doses of radiation when given to 
monkeys after exposure. We confirmed and demonstrated for HHS that we 
were not on clinical hold, nor had we experienced any significant 
safety issues. The record will show we acted in good faith and met 
every request--for over a year. Given this record, on what basis could 
HHS determine that a drug candidate that was in the competitive range 
for months, then somehow, without any new negative information, 
suddenly was no longer acceptable? And even if there were any issues 
remaining, if HHS was truly interested in procuring a medical 
countermeasure for ARS to protect the American people, why didn?t the 
agency engage in a good faith dialogue with us to resolve any such 
issues?
    3. The BioShield law makes it patently clear that the agency is to 
procure now the best possible drugs to address the most significant 
threats this nation faces. Congress specifically created this 
requirement to ensure that the agency had a sense of urgency that 
reflected the race against time that we are in against the terrorists 
and others who want to do us great harm. Congress feared the agency 
would waste valuable time looking for the perfect drug at the expense 
of good drugs that could protect people now. Congress also understood 
that science is not linear. Just because one wants a perfect drug or 
cure doesn't mean that one will find it now, or perhaps ever. In 
medicine we constantly rely upon the good now in the absence of the 
perfect later.
    For example, between 1981 and now, NIH, and in particular Dr. 
Fauci's NIAID, has spent billions in taxpayer dollars on HIV/AIDS 
research aimed at a cure, yet NIH still has not found one. In fact, the 
WHO now reports that by 2030 HIV/AIDS is expected to be the third most 
deadly global disease.
    NEUMUNE was judged by HHS? own evaluators to be the only drug in 
the competitive range. After decades of research and testing thousands 
of potential drugs, the experts at DoD's AFRRI have identified this as 
their lead drug candidate. The President and Vice President have both 
repeatedly said the nuclear threat is the greatest threat we face. Each 
day we learn of new nuclear threats. NEUMUNE is the most advanced drug 
for ARS in development today and has an attractive safety profile--
under BioShield that is all that should have mattered. Why didn't the 
agency comply with the legislation and award the advance purchase 
contract enabling the continued development of this important 
countermeasure?
    4. If the Co-Chairman of the 9/11 commission believes 10 million 
treatment courses of an ARS drug would be required to protect the 
American people, and HHS had entered into contracts for anthrax and 
smallpox seeking tens of millions of doses, why was HHS only interested 
in procuring 100,000 treatment courses for ARS? DHS? own National 
Planning Scenario estimate for a single terrorist-size nuclear attack 
against one US city documents that a mere 100,000 treatment courses is 
inadequate under even the most favorable conditions.
    5. Isn't there a conflict of interest when the NIAID, which awards 
research grants to develop biodefense countermeasures, then advises HHS 
on which products are ?BioShield eligible? for an advance purchase 
contract?
    6. How does the determination of technical acceptability relate to 
the actual ability of a counter-measure to save lives? Bioshield has 
spent over $21 million to buy two chelating agents that the well-
respected NEW ENGLAND JOURNAL OF MEDICINE has stated are useless in the 
event of either a nuclear or radiological attack. None of these drugs 
have ever been proven to have a survival benefit against lethal doses 
of radiation. According to their FDA-approved inserts, these compounds 
need to be given as quickly as possible after exposure. And the 
chelating agents must be given by medical personnel, which will be in 
extremely short supply after a nuclear attack. In contrast, our drug 
has been shown in DoD-administered, peer-reviewed studies to increase 
survival from lethal doses of radiation exposure if given up to four 
hours post exposure. It is self-administrable, requires no special 
handling, and needs no supportive medical care. How can a compound that 
has a survival benefit and fits the scenario be determined to be less 
technically acceptable than ones that do not? If such a paradox is 
possible under the program, this is a major flaw in its design.
    7. Why did the evaluation for a drug to treat ARS, from RFI to RFP, 
take over 2 1/2 years--from October of 2004 until March of 2007? Why 
was the award decision delayed four times? In particular, how can the 
agency justify these delays when we were the only company focused on 
developing a drug specifically for this indication and now know that 
ours was the only proposal in the competitive range for much of this 
process? In late October of last year we had a very positive meeting 
with HHS officials where none of the technical issues deemed to make 
our proposal ``technically unacceptable'' were brought up, leading us 
to believe we were headed to a contract award. Did this delay, and the 
final decision to cancel this RFP, have anything to do with the lengthy 
anticipation and ultimate passage of the BARDA legislation in December? 
If BARDA didn't pass, HHS would have to stimulate the private sector by 
implementing BioShield the way Congress intended.
    This last question also underscores how HHS' own actions?the 
agency's history of delays, failure to implement the program in 
accordance with the law, and failure to create markets?has in fact 
created the ``Valley of Death'' that the agency claims has undermined 
the program. Ironically, this is the same Valley of Death that provided 
the rationale and impetus for the recently enacted BARDA legislation.
    Let me be absolutely clear, there is no Valley of Death in the 
private sector. If a technology is promising, there is a market for it 
and the path to approval is clearly defined, companies have no 
difficulty in obtaining investor capital--even though development of 
the typical drug costs hundreds of millions of dollars, takes over a 
decade, and numerous promising compounds never get approved. 
Pharmaceutical and biotech investors understand risk and reward. By 
raising the bar--changing the definition of the criteria required by 
companies to be awarded an advance purchase contract (including 
identifying the market size)--HHS has pushed the investment community 
away from BioShield. They have created their own Valley of Death.
    When you hear government officials telling you that the 
pharmaceutical sector has not responded to BioShield--and therefore 
their agencies need to take the lead in researching and developing new 
drugs for WMD, and be given a bigger budget--realize that these same 
officials and their actions are the precise reason why companies and 
investors are running away from, not towards, this BioShield program. 
They are like the proverbial arsonist who sets the fire so they can 
rush in afterward to save the day.
    With all due respect to the Members who worked hard to pass the 
BARDA bill, it is my opinion that the BARDA legislation, though well 
intended, will only make things worse. BARDA actually shifts biodefense 
efforts away from market-driven development of deployable 
countermeasures, to government research grants. BARDA also shifts the 
risks from the private sector to the taxpayer--with no guarantee of 
results.
    Under the BioShield law, if a BioShield company doesn't produce a 
drug, it doesn't get paid; if a BARDA company fails to develop a drug 
it still gets paid. Let me be clear, if a company fails to deliver on a 
BioShield contract, the government isn't out a penny; if a BARDA-funded 
drug fails, the taxpayers foot the bill. And, given that there are 
hundreds of failures for every approved drug, and that each failure can 
cost a significant amount of money, the cost to the taxpayer will 
quickly add up.
    Finally, given the high-risk, highly technical nature of drug 
development, there is absolutely no reason to believe that government 
agencies with very limited expertise in drug development will have 
nearly the success rate of private industry, which has been doing this 
for decades.
    All that said, perhaps the best way to judge the BioShield program 
is to look at its record of results--or lack thereof:
         Three years into the program and the agency has issued 
        only nine RFP's against just four of the numerous CBRN threats 
        we face--and roughly a third of those RFP's and/or contracts 
        have been cancelled. This despite the fact that the Centers for 
        Disease Control have maintained a priority list of CBRN threats 
        for years.
         Three years into the program and BioShield has yet to 
        produce a newcountermeasure that was not already in existence 
        before the program began.
         The market cap and share values of nearly every 
        company in this sector have fallen sharply since the program 
        was implemented?despite the fact that Congress intended 
        BioShield to drive the development of a vibrant biodefense 
        industry.
         In just the last two months, no less than three of the 
        leading BioShield companies have all stated that they are 
        quitting their program-related drug development efforts and 
        will never again seek to work with the government--my company, 
        Hollis-Eden, is included in that number.
    These failures stand to have real consequences for our national 
security. For example, had HHS awarded this contract, the government 
may have begun  protecting the American people from the life 
threatening effects of ARS in 2008. Instead, because HHS has failed to 
act, we have suspended the development of NEUMUNE indefinitely. 
Fortunately for Hollis-Eden our research was not limited to NEUMUNE. We 
have made great progress over the last few years as we are bringing 
forward several promising drug candidates addressing well-defined 
mainstream global medical markets.
    Unfortunately, as we and other companies have learned in this 
process, trying to do business with the government under Project 
BioShield, as implemented by HHS, appears to be more about factors 
other than sound science. By the actions outlined in this testimony of 
how HHS is handling companies like Hollis-Eden, the government is 
sending the wrong message and is discouraging innovative companies from 
participating in Project Bioshield. Ultimately, the U.S. citizens 
future security won't have the benefit of the ``best and the 
brightest'' technologies and expertise that industry has to offer, as 
originally envisioned in the Project BioShield legislation.
    Only after the horror of 9/11, have we taken steps to improve 
airline security. Only after the levies broke during Hurricane Katrina, 
have we focused on the adequacy of FEMA. Will Americans have to wait 
until terrorists use a nuclear device in one or more of our cities 
before our government addresses our lack of preparedness? If we do not 
act, the weight of those lives lost because we failed to adequately 
prepare for a nuclear attack will fall squarely upon the people who 
knew and did nothing to rectify this situation before it was too late.
    I fear only then things may change.
    Mr. Chairman, thank you for the opportunity to appear before you 
today.

    Mr. Langevin. Mr. Hollis, thank you for your testimony.
    Dr. Davis, the floor is yours.

STATEMENT OF JAMES H. DAVIS, PH.D., J.D., SENIOR VICE PRESIDENT 
           AND GENERAL COUNSEL, HUMAN GENOME SCIENCES

    Mr. Davis. Mr. Chairman, members of the subcommittee, thank 
you for the invitation to appear today. I am Jim Davis, 
executive vice president and general counsel of Human Genome 
Sciences.
    In this capacity, I have been extensively involved with all 
the issues related to the development and anticipated sale of 
ABthrax, HGS therapeutic treatment for victims of anthrax 
exposure.
    As you know, ABthrax is one of several products that have 
been procured by HHS under Project BioShield. Our initial 
contract was awarded in September 2005 and in June 2006, the 
HHS exercised first of several options for delivery of 20,000 
doses of ABthrax to the strategic national stockpile.
    We are on track to deliver that product in 2008, subject to 
FDA approval. We are confident we have the processes and 
capability to manufacture the product for the national 
stockpile and to do so on schedule.
    By way of background, HGS is a biopharmaceutical company 
located in Rockville, Maryland that discovers, develops and 
manufactures drugs to treat and cure disease. The primary focus 
of HGS has not been nor will it be the development of drugs to 
protect against the attack by biological and chemical weapons.
    The principal focus of our company is the pursuit of 
innovative biopharmaceutical products for the commercial 
market.
    But for this very reason, HGS also represents one of the 
successes of Project BioShield. While there is no doubt the 
program faces numerous challenges, the fact that HHS was able 
to attract the participation of a company whose focus has not 
been the biodefense market demonstrates the potential of 
Project BioShield.
    Nearly 6 years ago, we realized that our company had the 
technology and capability to develop an effective near-term 
countermeasure against one of the nation's most immediate and 
serious bioterrorism threats.
    As a company headquartered just outside Washington, D.C., 
we witnessed firsthand the potentially devastating effects of 
the use of anthrax as a terrorist weapon in late 2001.
    Thus, using our own funds, without any assistance 
whatsoever from the U.S. government, we developed a fully human 
monoclonal antibody drug called ABthrax that can prevent or 
treat the lethal effects of anthrax infection.
    In contrast to the vaccine, a single dose of ABthrax 
confers protection immediately. In contrast to antibiotics, 
ABthrax is effective against the lethal toxins released by the 
bacteria and can be used to prevent and treat infections by 
antibiotic-resistant strains of anthrax.
    In a therapeutic setting, we believe that ABthrax could 
significantly reduce anthrax toxicity and increase the survival 
of exposed patients. We have initiated the final efficacy and 
safety studies necessary for FDA approval.
    As the first BioShield procurement for a product developed 
after 9/11, the ABthrax contract allows for the acquisition of 
a therapeutic product to treat U.S. civilians who have 
inhalation anthrax disease.
    HHS has currently agreed to purchase 20,000 doses of 
ABthrax. While it has not yet committed to exercise all the 
options contained in the contract, the contract includes 
options and pricing for quantities ranging from 10,000 to 
100,000 doses.
    As is the nature of biological production, the cost per 
dose of 100,000 doses is significantly less than the cost per 
dose of 10,000 doses.
    Given the limited quantities of vaccine, we believe it may 
be prudent for HHS to consider purchasing additional quantities 
of ABthrax.
    While HGS appreciates its positive experience with Project 
BioShield and HHS, Congress and HHS can take several steps to 
increase industry participation. The BARDA legislation is a 
significant step by Congress to provide HHS with additional 
tools to ensure success.
    We applaud the bipartisan leadership of Senators Burr and 
Kennedy, as well as Representatives Rogers and Eshoo in making 
BARDA a reality. It is now incumbent upon Congress to fund 
fully BARDA.
    HGS strongly supports the industry recommendations to fund 
BARDA with at least $500 million in fiscal year 2008. We also 
urge the agency to hire an individual with private-sector 
development experience to lead BARDA.
    HHS should also enact regulations to take into account the 
regulatory flexibility included in both Project BioShield and 
BARDA. The agency should make clear that the statute does not 
require contractors to comply with burdensome government 
procurement requirements.
    Finally, while HGS has found FDA to be extremely responsive 
in working with us on both the pre-clinical and clinical 
studies required for approval, there remains a need for greater 
clarity about the regulatory requirements for an emergency use 
authorization permit and the decision-making process necessary 
for final approval to stockpile the product.
    I applaud the subcommittee for its continued oversight of 
this critical biodefense program. In the case of ABthrax, we 
are working in partnership with HHS as intended by Project 
BioShield to deliver an effective anthrax therapeutic to the 
strategic national stockpile.
    We look forward to delivering on our commitment to HHS and 
the American people in 2008 and would appreciate every effort 
to ensure that additional quantities of ABthrax are made 
available to the stockpile.
    Thank you again for the opportunity to testify, and I look 
forward to answering your questions.
    [The statement of Mr. Davis follows:]

               Prepared Statement of James H. Davis, Ph.D

    Mr. Chairman, members of the Subcommittee, thank you for the 
invitation to appear before you today on behalf of Human Genome 
Sciences. I am Dr. Jim Davis, Executive Vice President and General 
Counsel of Human Genome Sciences (HGS). In this capacity, I have been 
extensively involved with the business development, regulatory approval 
process, and federal procurement issues related to the anticipated sale 
of HGS' innovative therapeutic treatment, ABthraxTM, for 
victims of anthrax exposure. I have been involved with this project 
since we undertook to develop this product on our own initiative and at 
our own expense immediately following the anthrax attacks of 2001.
    As you know, ABthrax is one of several products that have been 
procured by the Department of Health and Human Service (HHS) under the 
Project BioShield Act of 2004. Our initial contract was awarded in 
September 2005 for purchase of a test quantity of our novel anthrax 
therapeutic. In June 2006, HHS exercised the first of several options 
under the contract for delivery of 20,000 doses of ABthrax to the 
Strategic National Stockpile (SNS), valued at$168 million. We are on 
track to deliver the product in 2008, subject to approval of the Food 
and Drug Administration (``FDA''). We have already initiated both human 
and animal studies and have manufactured the product at scale for those 
studies. We are confident we have the processes and capability to 
manufacture the product for the SNS, on schedule. Of course, if HHS 
elects to exercise the remaining options for delivery of up to 100,000 
doses of ABthrax to the SNS, we stand ready, willing, and able to meet 
that obligation also.
    By way of background, HGS is a biopharmaceutical company located in 
Rockville, Maryland, that discovers, develops and manufactures gene-
based drugs to treat and cure disease. Currently, we have six drugs in 
clinical development, including five monoclonal antibodies, and a broad 
pipeline of preclinical compounds. These include novel human protein 
and antibody drugs discovered through our genomics-based research, as 
well as new, improved, long-acting versions of existing proteins 
created using our albumin fusion technology.
    Let me be clear. The primary focus of HGS has not been - nor will 
it be - the development of drugs to protect against attack by 
biological and chemical weapons. The principal focus of our company has 
been, and remains, pursuit of innovative bio-pharma products for the 
commercial market. We are not a ``bio-defense'' company as that term 
has come to be known in the post-9/11 environment. Our business plan, 
our executives, and our investors do not see the primary focus of HGS, 
now or in the future, to be the federal marketplace.
    For this reason alone, HGS represents, at least in this aspect, the 
success of Project BioShield. While there is no doubt the program has 
faced challenges, the fact that HHS was able to attract the 
participation of a company whose focus has not been--and will not be--
the biodefense market demonstrates that the initial objectives of 
Project Bioshield can be achieved. The background of HGS and ABthrax 
demonstrates that Project BioShield can succeed, and thus, the 
procurement of this product must be examined as the program moves 
forward to address the challenges BioShield has faced, and the 
potential it holds for the future.

History of ABthraxTM
    Nearly six years ago, we realized that our company had the 
technology and capability to develop an effective, near-term 
countermeasure against one of the nation's most immediate and serious 
bioterrorism threats--anthrax. As a company headquartered just outside 
Washington D.C., we witnessed first-hand the potentially devastating 
effects of the use of anthrax as a terrorist weapon in late 2001. Thus, 
using our own funds--without any assistance whatsoever from the United 
States Government--HGS developed a fully human monoclonal antibody drug 
called ABthrax that specifically binds to a key anthrax toxin, thereby 
preventing or treating the lethal effects of anthrax infection. The 
drug can be given prior to or after exposure; and it could be used 
alone or in conjunction with the current vaccine and antibiotics.
    As you know, anthrax infection is caused by a spore-forming 
bacterium, Bacillus anthracis, which multiplies in the body and 
produces lethal toxins. Most anthrax fatalities are caused by the 
irreversible and destructive effects of the anthrax toxins; as we saw 
in the fall of 2001, survival rates for patients who contracted 
inhalation anthrax were only 50%. Research has shown that protective 
antigen is the key facilitator in the progression of anthrax infection 
at the cellular level. After protective antigen and the other anthrax 
toxins are produced by the bacteria, protective antigen binds to the 
anthrax toxin receptor on cell surfaces and forms a protein-receptor 
complex that makes it possible for the anthrax toxins to enter the 
cells. HGS' ABthrax antibody blocks the binding of protective antigen 
to cell surfaces and prevents the anthrax toxins from entering and 
killing the cells.
    Currently, there are only two licensed options available for the 
prevention and treatment of anthrax infections--the AVA vaccine and 
antibiotics. Both are essential in dealing with anthrax, but both have 
limitations for individuals who are suffering from the effects of 
inhalation anthrax. The only available, licensed anthrax vaccine, 
BioThrax, coupled with antibiotics, is recommended--but not licensed--
for use in a post-exposure setting prior to manifestation of symptoms 
of inhalation anthrax. Antibiotics alone, without the vaccine, are 
effective in killing anthrax bacteria from spores that have germinated, 
but are not effective against the anthrax toxins once those toxins have 
been released into the blood, nor will they kill ungerminated anthrax 
spores that linger in the bloodstream. Currently available antibiotics, 
such as Ciprofloxacin, also may not be effective against antibiotic-
resistant strains of anthrax. And neither the vaccine nor antibiotics 
have proven to be effective once symptoms of inhalation anthrax set in.
    In ABthrax, HGS has discovered a third critical defense against 
anthrax infections, including following the manifestation of symptoms. 
In contrast to the anthrax vaccine, a single dose of ABthrax confers 
protection immediately following the rapid achievement of appropriate 
blood levels of the antibody. In contrast to antibiotics, ABthrax is 
effective against the lethal toxins released by anthrax bacteria. It 
may also prevent and treat infections by antibiotic-resistant strains 
of anthrax. ABthrax has the potential to be used both therapeutically 
and prophylactically.
    In a therapeutic setting and based on initial preclinical studies, 
we believe that ABthrax could significantly lessen the natural 
progression of anthrax toxicity when given after inhalation exposure to 
anthrax and increase the survival of exposed patients. Results from 
preclinical studies previously conducted demonstrated that a single 
dose of ABthrax administered therapeutically, after an animal begins to 
exhibit symptoms of anthrax poisoning, increases survival significantly 
in rabbits exposed to many times the lethal dose of inhaled anthrax 
spores.
    HGS now has initiated the final pivotal rabbit studies necessary 
for the approval by FDA under an Experimental Use Authorization and 
under a Biological License Application. HGS is also conducting key 
characterization studies in non-human primates and will be conducting 
additional confirmatory efficacy studies in these animals; HGS has 
previously shown that administration of ABthrax immediately after 
exposure to anthrax significantly increases survival in non-human 
primates. HGS will be conducting additional studies in a therapeutic 
setting. HGS has already conducted a Phase 1 clinical trial in humans 
to evaluate the safety, tolerability and pharmacology of ABthrax in 
healthy adults and has initiated the additional human studies that will 
be required for EUA and BLA approval.
    Our preclinical data also show that ABthrax administered 
prophylactically (before exposure to anthrax) or immediately afterwards 
increases survival rates significantly and thus ABthrax could be used 
to protect rescuers entering a contaminated building or soldiers in an 
infected environment.

Procurement of ABthrax under Project Bioshield
    Many companies have the capability and are willing to develop new 
products to protect against attack by biological and chemical weapons 
or other dangerous pathogens. However, very few companies, such as HGS, 
have already done so. In fact, HGS is among the largest, best funded, 
and most qualified companies to participate in Project Bioshield to 
date.
    The fact that HGS was successful in negotiating a viable business 
relationship with the federal government to purchase ABthrax should 
have sent an extremely powerful, positive signal to similarly qualified 
companies considering whether to enter this market. The primary 
challenge of bio-pharma companies such as HGS is the absence of a 
commercial market for such drugs. In most cases, the only viable market 
is the federal government and, potentially, our foreign allies. Project 
Bioshield, which aims to harness public and private resources in an 
innovative effort to develop defenses against bioterrorism, is 
specifically intended to create such a market. With the consummation of 
the contract for ABthrax, the promise of Project BioShield's ability to 
create a market for anthrax therapeutics was realized.
    As the first Bioshield procurement for a product developed after 9/
11, the ABthrax contract allows for the acquisition and maintenance 
within the SNS of therapeutic products to treat US civilians who have 
inhalational anthrax disease. The remaining development and 
manufacturing will be completed at HGS' Rockville, Maryland facilities 
by 2008, pending FDA approval. HHS has currently agreed to purchase 
20,000 doses of ABthrax for the SNS. While HHS has not yet committed to 
exercise all of the options for production quantities for ABthrax 
contained in the contract, the contract does include options, and 
pricing, for a broad range of quantities ranging from 10,000 doses to 
100,000 doses. As is the nature of biologics production, the cost per 
dose of 100,000 doses is significantly less than the cost per dose of 
10,000 doses. Given the limited quantities of anthrax vaccine currently 
in the SNS, it may be prudent for HHS to consider purchasing additional 
quantities of ABthrax to be available in the event of another anthrax 
attack. The sooner HHS makes the decision, given the lead time required 
for manufacturing, the sooner we will be able to deliver additional 
quantities beyond our initial commitment.

Proposed Implementation Improvements
    While HGS very much appreciates its positive experience with 
Project BioShield and its work with HHS in performing under the ABthrax 
contract, Congress and HHS can take several steps to increase industry 
participation in Project Bioshield.
    To begin, the recently enacted Biopharmaceutical Advanced Research 
and Development Authority (BARDA) legislation is a significant step by 
Congress to provide HHS with additional tools to ensure success of 
BioShield. We applaud the bi-partisan leadership of Senator Richard 
Burr (R-NC) and Senator Edward Kennedy (D-MA), as well as 
Representative Mike Rogers (R-MI) and Representative Anna Eshoo (D-CA) 
in making BARDA a reality. It is now incumbent upon Congress to fund 
fully BARDA to realize the benefits of these powerful tools. HGS 
strongly supports the industry's recent recommendations to fund BARDA 
with at least $500 million in appropriations in Fiscal Year 2008. We 
also urge HHS to hire an individual with private sector drug 
development experience to lead BARDA, as was the clear intent of 
Congress.
    In addition to fully implementing--and funding--BARDA as soon as 
possible, HHS should enact regulations required under the Act that take 
into account the regulatory flexibility included in both Project 
BioShield and BARDA in order to realize fully the legislative intent of 
Project Bioshield. First and foremost, HHS should make clear that the 
statute does not require contractors to comply with burdensome 
government procurement requirements, including the requirement for 
certified cost and pricing data, in order to stimulate the maximum 
interest possible by commercial companies. Similarly, HHS should avoid 
the use of cost-type contracts or contract line items (thus, 
eliminating the need for a proposed contractor to adopt non-GAAP 
accounting practices) wherever possible.
    HHS should also consider structuring Bioshield contracts to avoid a 
``staged'' procurement approach such as what occurred with the Anthrax 
therapeutic contract, wherever possible. While we recognize the need 
for staged procurements under certain circumstances, using this method 
where HHS has conducted proper market research will avoid unnecessary 
delays and unpredictable results, thereby stimulating far greater 
private sector interest. Of course, the advance development authority--
and eventual funding--available under BARDA should provide the 
necessary tools to HHS to avoid this result in the future.
    Finally, while HGS has found the Food and Drug Administration to be 
extremely responsive in working with us on the preclinical and clinical 
studies that will be needed for EUA and BLA approval of ABthrax, there 
remains a need for greater clarity about the regulatory requirements 
for an EUA and the decision making process necessary for final approval 
to stockpile an as yet unlicensed biological product.
    All agencies responsible for administering Project Bioshield should 
take a proactive approach to identifying, evaluating and procuring 
effective countermeasures. I applaud the Subcommittee for its continued 
oversight of this critical bio-defense program. In the case of ABthrax, 
HGS is working in true partnership with HHS, as intended by Project 
BioShield, to bring ABthrax into production, and eventually, into the 
Strategic National Stockpile. We look forward to delivering on our 
commitment to HHS, and the American people, in 2008 and appreciate 
every effort to ensure that additional quantities of ABthrax are 
purchased for the stockpile, as appropriate.
    Thank you again for this opportunity to testify and I look forward 
to answering your questions.

    Mr. Langevin. Thank you, Mr. Davis, for your testimony.
    Just for the record, there is a vote on right now. It is my 
intent to go until there are 5 minutes left on the vote. We 
will recess and then reconvene so that members can continue to 
ask questions.
    Let me begin with Mr. Hollis.
    I guess let me ask, briefly, both witnesses, your 
experience, if you had to summarize, given your experience with 
BioShield, A being the best and F being the worst, what was 
your experience with dealing with BioShield? Just briefly on 
that.
    Mr. Hollis. You said from A to what?
    Mr. Langevin. A being the best, obviously, good experience 
going through the process, and F being the worst, what would 
you give your experience with BioShield? What grade would you 
give them?
    Mr. Hollis. It hasn't been a pleasant experience for us. I 
would have to grade them an F.
    Mr. Davis. I would have to say it is probably a solid B. It 
took us a long time to get the contract, but in working with 
HHS since we have gotten the contract, it has been a very good 
experience.
    Mr. Langevin. Mr. Hollis, when the contract was canceled 
for your company, you said it was without warning.
    Was there any appeal process that was afforded before it 
was just done or the contract was just canceled and no further 
action?
    Mr. Hollis. There was no appeal process.
    Mr. Langevin. Mr. Hollis, you have testified before this 
committee before and I have heard that your company announced 
that it would no longer pursue biodefense work and your stock 
has quadrupled in price, from what I hear.
    Is it solely your company's experience with the BioShield 
process that led to this decision and was it solely your 
decision to no longer pursue biodefense work that was the sole 
reason for the increase in stock price?
    Mr. Hollis. Our stock price actually decreased by 60 
percent and, therefore, we can no longer justify from a 
fiduciary responsibility to invest in this program.
    Mr. Langevin. It was solely the experience with BioShield 
that led to this decision.
    Mr. Hollis. Yes. We were in an RFI/RFP procurement process 
for 2.5 years. It is really unexplainable. And as a publicly 
traded company, to explain to shareholders continued delays 
over 2.5 years.
    Our stock basically has lost $700 million in market 
capitalization because there has been no transparency in the 
procurement process and we could not communicate with Wall 
Street in regards to the transparency and guidance that we were 
receiving from the agency during this whole procurement 
process.
    Mr. Langevin. Thank you.
    Dr. Davis, your company, as you mentioned, is currently on 
track to deliver another anthrax countermeasure. Before 
entering into the contract, you also had some concern and 
confusion about the emergency use designation and initially 
were not going to sign the contract.
    Is that correct? And how was the situation resolved?
    Mr. Davis. I think there was some initial contract 
discussions over how you would define what was the criteria for 
product to go into the national stockpile.
    And there was a series of discussions. We did, in fact, end 
up filing a protest, but we very quickly came to agreement with 
HHS over how to define that definition and the definition was 
one that we were quite satisfied with.
    Mr. Langevin. So you clarified that before you actually 
signed the contract.
    Mr. Davis. Absolutely, yes.
    Mr. Langevin. Very good. Well, in the interest of time, I 
am going to yield to the ranking member for 5 minutes for 
questions.
    Thank you, gentlemen.
    Mr. McCaul. Thank you, Mr. Chairman.
    Mr. Hollis, you talked about the goal of BioShield being to 
incentivize private markets, and I agree with you. I think this 
is a high-risk business. The government needs to incentivize. 
You make profits. And I will touch on BARDA in a minute, but 
you mentioned the word BioShield eligible.
    Could you expand on that in terms of what is your 
understanding of BioShield eligible?
    Mr. Hollis. Well, that is a very good question, because I 
really don't know the answer to it. It is what we heard several 
times when we were here in Washington trying to get guidance in 
developing our drug and participating in Project BioShield and 
it is a term that we heard quite often.
    And when we tried to get clarification from it, we really 
never got clarification and I think that has a lot to do with 
the lack of transparency and leadership and guidance that the 
agency has not provided the industry.
    Mr. McCaul. And as I understand, the RFP was withdrawn in 
your case.
    Mr. Hollis. Yes.
    Mr. McCaul. After about, what, 2 years?
    Mr. Hollis. Two and a half years.
    Mr. McCaul. Did they tell you why it was withdrawn?
    Mr. Hollis. Yes. We had a debriefing here in Washington and 
basically they said that it was technically unacceptable and it 
was compared to the standards basically of an FDA approved 
drug.
    They wanted a more robust dataset of safety and efficacy 
and that can only come through a late stage pivotal trial, of 
which the company had spent 5 years developing the drug and had 
incurred tens of millions of dollars.
    And before a company would actually conduct a pivotal 
trial, it would need an advance purchase contract to justify 
spending that kind of investor money on the project.
    So without setting the markets, without advance purchase 
contracts, you cannot incentivize companies and the capital 
markets and if you don't incentivize the capital markets, then 
this will be a taxpayer-funded program and is exactly--I should 
rectify one of the comments that you made.
    Only eight percent of the drugs actually succeed. It can 
take 10 to 12 years and $1 billion to get a drug approved. With 
all that risk and failure, do we want to spend all the BARDA 
money on that risk and failure and or do you want participation 
by the capital markets and industry?
    I do not think that has really been rectified with this 
legislation.
    Mr. McCaul. Is it your testimony that your drug would have 
been FDA approved at what level, again?
    Mr. Hollis. Excuse me?
    Mr. McCaul. Was it your testimony that your drug would have 
been FDA approved or could be?
    Mr. Hollis. Well, we could have conducted a pivotal trial 
and our expectations were never to receive any award from the 
government until we delivered an FDA approved product and that 
is how the initial legislation was written.
    They would guarantee you a market, give you advance 
purchase contracts and they would pay you upon delivery of an 
FDA approved product.
    So we were never looking for grants or government funding. 
We were going according to the BioShield legislation that was 
approved by Congress.
    Mr. McCaul. And you were not provided any financial 
incentives.
    Mr. Hollis. No.
    Mr. McCaul. With the new legislation, the Biomedical 
Advance Research and Development Authority, BARDA, do you 
believe that that would be helpful?
    Mr. Hollis. No. I think that exacerbates the condition, 
because what happens is you have a single agency that is 
becoming the gatekeeper for all technology.
    What this country needs is the best in innovation and 
ingenuity of the industry and that means all-comers and they 
should open it up to competition for anybody.
    And when you have an agency that is controlling what 
products get grants and what don't, then it is basically 
prejudiced to begin with. If the legislation was to be 
implemented the way that Congress passed, the risk would be on 
industry, not on the taxpayer.
    Mr. McCaul. Let me--my time is running out--go to Mr. 
Davis.
    You had a totally different experience. Why did you have a 
different experience from Mr. Hollis's company? And in your 
view, this new legislation we passed in the last week of the 
last Congress, will that be helpful in terms of BioShield? And 
maybe expand on what Mr. Hollis was talking about. What would 
need to be done to improve that?
    Mr. Davis. Sure. I can't explain why we have had different 
experiences. I can only really talk to my own experience.
    We had an RFP that was very clear as to what sort of 
product the agency wanted, what the criteria had to be met. We 
entered into the contracting process and we were successful in 
getting a contract.
    We had lots of discussions along the way. It is never an 
easy process to come to a meeting of the minds on exactly what 
a product is going to deliver, but we were able to do that and 
we were very successful in getting the contract awarded and now 
we are proceeding very deliberately along that pathway.
    In terms of the BARDA legislation, I think the BARDA 
legislation is a definite right step in the right direction. I 
think you need many different avenues to develop these 
products.
    BARDA provides a way for companies who are not willing to 
fund the initial research themselves to get funding to do the 
development. It helps in those companies who do face the valley 
of death.
    We did not. We developed this product fully on our own and 
we will get paid when we deliver it to the stockpile. That is 
what we signed up for, that is what we were willing to do.
    We are a biopharmaceutical company. That is the normal way 
pharmaceutical companies develop products. You develop a lot of 
products. You take them through clinical trials. Not every one 
makes it and you don't get any reward until the end.
    So we are willing to take that risk and that is clearly a 
risk that you want to encourage companies to take. But there 
are clearly many other companies, smaller companies that can do 
it with BARDA funding and that can help very much, I think, the 
biodefense industry and the U.S. government and the people.
    Mr. McCaul. Thank you. I see my time has expired and we 
have to vote.
    Mr. Langevin. Good, yes. We are going to recess right now. 
There is about a minute left on the vote. So we are going to 
have to go quick.
    But we will return, and we ask your indulgence. The 
committee stands in recess.
    [Recess.]
    Mr. Langevin. I want to thank the witnesses again for their 
indulgence.
    Before I go to other members, I just had one question, if I 
could, for Dr. Davis.
    I understand a while ago that--and this is going back to 
your testimony in terms of your grading and your experience 
with BioShield.
    A while ago you had said that you would never pursue 
another BioShield contract, is what I had been told, and, 
again, during your testimony today, you gave your assessment 
and gave the BioShield process, in your experience, a B.
    Did I hear that correctly in terms of--
    Mr. Davis. No, you did not hear that. I mean, you did hear 
correctly about the B, but not correctly about we would never 
pursue another BioShield.
    What I was saying is it is not our primary focus. If we are 
in a position where we have the right technology and the 
government has the right need, we certainly want to respond to 
that need and seek a BioShield contract. It is not our primary 
business, though.
    Mr. Langevin. I see. And your primary business is?
    Mr. Davis. Is biopharmaceutical products for the general 
public. We are working on drugs for lupus, rheumatoid 
arthritis, cancer, hepatitis C. So we are really a 
pharmaceutical company, but we had the technology, we had the 
capability to develop an antibody for anthrax.
    We saw the need for anthrax. We talked to various people in 
the government when we first started to develop it. We realized 
that there was going to be a need. The Bioterrorism Act was 
passed which allowed for animal testing to prove efficacy and 
with the passage of BioShield, then there was the opportunity 
to get a contract.
    And so that is why we entered this area. We are certainly 
interested in continuing to provide more anthrax therapeutic to 
the government and we would certainly be optimistic as other 
opportunities arise.
    Mr. Langevin. I appreciate you clarifying that for the 
record.
    The chair will now recognize other members for questions 
they may wish to ask of the witnesses.
    In accordance with our committee rules and practice, I will 
recognize those members who were present at the start of the 
hearing based on seniority in the subcommittee, alternating 
between the majority and the minority, and those members who 
are coming in later will be recognized in the order of their 
arrival.
    The chair now recognizes for 5 minutes the gentlewoman from 
the Virgin Islands for 5 minutes.
    Mrs. Christensen. Thank you, Mr. Chairman and Ranking 
Member, for holding this hearing. The BioShield is something 
that I have been interested in and never quite satisfied with. 
So I am glad that we are taking a look at it again.
    I guess I would begin by asking, Mr. Davis, you said that, 
in response to another question, the phrase ``BioShield 
eligible'' had been adequately defined for you. Could you tell 
us in what way it was defined? How did they define it?
    Mr. Davis. Actually, the term ``BioShield eligible'' was 
never used, and I am not familiar with that term.
    What I can say is that the RFP made clear what type of 
products they were looking for, what stage of products and what 
the criteria was. And then, doing the contract negotiation 
process, we further clarified the characteristics that would be 
needed in order to have the product stockpiled and then 
eventually we will obviously be getting BLA licensure.
    So that particular term I am not familiar with, at least in 
our contract discussions.
    Mrs. Christensen. Okay. And these two contracts were 
occurring around the same time.
    Mr. Davis. I am not sure exactly the timing of the Hollis-
Eden one. Ours was originally awarded in 2005.
    Mrs. Christensen. And your RCA process started in what 
year?
    Mr. Davis. I believe 2004.
    Mrs. Christensen. And yours, Mr. Hollis?
    Mr. Hollis. October 2004.
    Mrs. Christensen. So you heard the term ``BioShield 
eligible.''
    Mr. Hollis. We spent a lot of time here trying to get 
clarification in regards to what was going to be necessary to 
get an advance purchase contract and initially--
    Mrs. Christensen. Well, before you answer, because Mr. 
Davis said he was clear on his product, what was required, the 
criteria and so forth, that that was clear. Was that clear to 
you?
    Mr. Hollis. There was a request for proposal that finally 
came out and it had requirements on there and we met all the 
mandatory requirements.
    Mrs. Christensen. So you were clear what was required in 
your RFP and what product was to be delivered, just as Human 
Genome Sciences was. You were clear in your RFP what the 
product was, what was required, what criteria.
    Mr. Hollis. It wasn't spelled out thoroughly. It was more 
broad and general.
    Mrs. Christensen. I think you have answered the question 
about BARDA for me.
    In other testimony and I believe, also, in the GAO report, 
the statement is made that not enough the private medical 
industry is participating in BioShield.
    I am asking the question to both of you and I think maybe 
in the chief medical officer's testimony, it says it encourages 
more companies to participate.
    Well, I would like to hear from you why each of you think 
that this is the case, that not enough companies are 
participating in BioShield.
    Mr. Hollis. I will tackle that first.
    When the president first announced BioShield in his State 
of the Union in 2003, I was also at a conference in New York 
where the president also gave a follow-up speech to that and he 
was calling for the industry to participate in Project 
BioShield.
    And subsequent to that, at the time, Dr. Mark McClellan, 
who was the commissioner at the FDA at the time, also gave a 
presentation to try to stimulate the industry to respond to 
Project BioShield.
    The cornerstones are guaranteed markets, advance purchase 
contracts, pay on delivery. This was going to be a new way to 
finance medical countermeasures.
    At first, industry was very interested and so was banking. 
As a matter of fact, many bankers were looking at a whole new 
biodefense sector and a way to finance companies that were 
going to develop these products.
    If you were to look at this today, most investment bankers 
have dropped out almost completely. The investment banker we 
have no longer funds companies in BioShield.
    Industry can't participate because it really doesn't know 
what the markets are. What are the threats? How many doses do 
they plan on purchasing? How can you make an economic decision 
whether you want to develop a product or not when you don't 
know what the market is?
    And there is no transparency and guidance in regards to the 
procurement process. Is this a government-run program or is 
this a program to drive incentives for the industry?
    Now, if it is one or the other, that is perfectly fine. It 
just needs to be stated.
    Mrs. Christensen. Mr. Davis?
    Mr. Davis. I think what would help the most is if we had a 
clearer idea of exactly what the market is. We know a number of 
the threats that HHS is interested in, but it would be much 
better, as Mr. Hollis said, if we knew exactly what threats, 
what type of products they want and the number of doses they 
wanted to buy, because then you can make the market judgment of 
whether you want to invest in that and I think that is the one 
thing that is lacking and I am hoping that is what comes out of 
the BARDA implementation plans is a clearer indication of what 
those markets are.
    Mrs. Christensen. Thank you. My time is up. I just wanted 
to say for the record that I have asked on a number of 
occasions what was the status of Neumune, had it ever been 
accepted for BioShield, but I could never really get a straight 
answer and this is in hearings that either the committee or 
subcommittee has had.
    So I understand why I couldn't get an answer now.
    Mr. Hollis. Thank you very much, appreciate that.
    Mr. Langevin. I thank the gentlelady for her questions.
    I want to thank the witnesses for your testimony and as I 
said earlier, I look forward to the opportunity to have VaxGen 
back before the subcommittee to offer testimony about their 
experiences with Project BioShield.
    Your testimony today was valuable and I appreciate you 
sharing your experiences with us.
    BioShield is too important to fail and we need to do what 
we can to further dot the I's and cross the T's to make sure 
that BioShield is working at maximum effort and as it was 
intended.
    I am glad to hear, Dr. Davis, that you had a relatively 
positive experience.
    I am disappointed, of course, Mr. Hollis, that you and, it 
is my understanding, VaxGen, two major contracts, did not have 
a good experience. But we hope to get to the bottom of this and 
work to fix the problems.
    Again, I just want to thank the witnesses for their 
valuable testimony and the members for their questions.
    The members of the subcommittee may have additional 
questions for the witnesses and we would ask that you respond 
expeditiously in writing to those questions.
    And, again, I thank you for your testimony. At this time, 
the first panel of witnesses is dismissed and the chair calls 
up the next panel.
    Thank you.
    I want to thank the panel for being here today.
    The first witness today is Dr. Jeffrey Runge, the acting 
assistant secretary for health affairs and chief medical 
officer, Department of Homeland Security. Dr. Runge's service 
to the department began on September 5, 2005 as the 
department's first chief medical officer position, he still 
holds.
    The DHS chief medical officer serves as the principal 
advisor to the secretary for public health and medical issues 
across the department. Dr. Runge is responsible for 
coordination with other federal departments and agencies and 
the Homeland Security Council on issues of biodefense and 
medical preparedness.
    The next witness is Dr. Gerry Parker. Dr. Parker serves as 
the principal deputy to the assistant secretary, office of the 
assistant secretary for preparedness and response at the 
Department of Health and Human Services.
    The office coordinates HHS-wide efforts with respect to 
preparedness for and responses to public health and medical 
emergencies and serves as the focal point for coordination with 
other federal departments, agencies, offices and state and 
local officials responsible for emergency medical preparedness, 
and the protection of the civilian population from acts of 
terrorism and other public health emergencies.
    Next we have Dr. Anthony Fauci, director of National 
Institutes of Allergy and Infectious Disease, a position he has 
held since 1984. He has had the opportunity to testify, I know, 
on a number of occasions before the subcommittee in its prior 
life on prevention of nuclear and biological attacks.
    And I have always appreciated your testimony in the past, 
Dr. Fauci, and look forward to hearing from you today.
    In 1968, Dr. Fauci came to the National Institutes of 
Health as a clinical associate in the laboratory of clinical 
investigation at the National Institutes of Allergy and 
Infectious Disease. In 1974, he became head of the clinical 
psychology section, LCI, and, in 1980, was appointed chief of 
the laboratory of immunoregulation, a position he still holds.
    Finally, we welcome Dr. Jesse Goodman, the director of 
FDA's Center for Biologics Evaluation and Research, which 
oversees a broad range of medical, public health and policy 
activities concerning the development and assessment of 
vaccines, blood products, tissues and related devices and novel 
therapeutics, including cellular and gene therapies.
    He first came to FDA in late 1998 from the University of 
Minnesota, where he had joined the faculty in 1985 and most 
recently served as professor of medicine and director of the 
division of infectious disease.
    Before I turn it over to the panel of witnesses, starting 
with Dr. Runge, I wanted to mention two things.
    First of all, the committee rules require that testimony is 
submitted no later than 48 hours before the subcommittee. We 
received the testimony from HHS only at 9:30 last night. Dr. 
Runge's and Dr. Fauci's testimony was in on time.
    And just for the record, I understand that you all have 
other people that need to sign off before you can actually 
submit the testimony, but we can't do business this way, in not 
having the testimony in in a timely manner. And I would hope 
that in the future it would be in in the 48-hour requirement.
    Second, I wanted to say how deeply disappointed I am that 
HHS would not give a sign-off to VaxGen to testify before the 
subcommittee. As I said earlier on, prior to the start of the 
hearing, that VaxGen very much wanted to testify.
    We need to have VaxGen's testimony so we fully understand 
their experience with BioShield if we had to exercise proper 
oversight and work together to try to fix the problem.
    So I would expect that at the earliest opportunity, that 
the sign-off would be given from HHS and that, in fact, VaxGen 
will be allowed to testify before the subcommittee.
    I can promise you that there will be a follow-up hearing on 
the BioShield issue, at which time I expect that VaxGen will be 
allowed to testify.
    Without objection, the witnesses' full statements will be 
inserted into the record. And I now ask each witness to 
summarize their statement for 5 minutes, beginning with Dr. 
Runge.
    Dr. Runge, thank you again for being before us once again, 
and the floor is yours.

STATEMENT OF JEFFREY RUNGE, M.D., ASSISTANT SECRETARY OF HEALTH 
  AFFAIRS (ACTING) AND CHIEF MECICAL OFFICE, OFFICE OF HEALTH 
                          AFFAIRS, DHS

    Dr. Runge. Thank you, Mr. Chairman, Ranking Member McCaul 
and members of the subcommittee. I appreciate the opportunity 
to be here today.
    I also appreciate the attention that you and your 
subcommittee have given to the subject of bioterrorism 
countermeasures in the past since my arrival 18 months ago as 
chief medical officer.
    We believe Project BioShield to be an essential component 
of the overall strategy to combat the effects of bioterrorism 
and this subcommittee has played a very important role in DHS's 
responsibilities under the Act.
    We have shared with the committee on numerous occasions the 
results of our assessments of biologic agents as they present a 
threat to national security and you have been supportive of our 
maturing relationship with HHS and its various components 
concerning our roles and responsibilities for the program.
    We have deepened our partnership with HHS to become part of 
its public health emergency medical countermeasure enterprise, 
along with members of the executive office of the president, as 
well as the Department of Defense.
    HHS possesses most of the moving parts of this enterprise, 
including the basic sciences of NIH, the advanced research 
authority of the new BARDA, the safety and regulatory capacity 
of the FDA and the strategic national stockpile, the CDC.
    For our part, we have delivered a comprehensive assessment 
of the 28 agents of concern and we have delivered to the White 
House and to this subcommittee a stratified list of agents that 
present a material threat to national security and population 
threat assessments on 13 of those agents, as well as an 
additional assessment for nerve agents.
    We have completed a tool that will allow us to conduct 
detailed modeling of vulnerabilities and consequences as 
changes occur for various possible scenarios of a terrorist 
attack.
    This model was informed by inputs from the intelligence 
community, law enforcement, the science community and public 
health. We will continue periodic assessments to update this 
list and to restratify it as conditions change and we will keep 
our partners abreast of these updates to ensure that all of our 
efforts remain synchronized.
    Once DHS determines which agents are material threats, HHS 
then performs consequence modeling to support the procurement 
of the appropriate countermeasure. When a countermeasure is 
identified that meets the eligibility requirements to warrant 
use of the special reserve fund, both secretaries, HHS and DHS, 
jointly request that OMB release funds to HHS from the special 
reserve fund in order that HHS may acquire the countermeasure.
    We have greatly improved the processes over the last 
several months to realize many efficiencies in what started out 
as a very difficult bureaucratic process.
    While DHS completes its responsibility, as I previously 
described, HHS is ultimately responsible for managing the 
countermeasure procurement process, including the negotiation 
of terms, entering into contracts for research, development, 
acquisition, procurement, storage and distribution of those 
countermeasures.
    DHS is completely supportive of the new enterprise, of the 
BARDA law and the transparency to which Secretary Leavitt is 
committed and we look forward to continued improvements in this 
process.
    Mr. Chairman, from my perspective, what is still missing 
from the enterprise is a commitment, a partnership from the 
nation's medical industry as a whole to invest in our 
biodefense.
    If this public-private partnership is going to work, our 
nation needs investment from both sides. We cannot rely simply 
on the smaller biotech companies to carry the burden of new 
countermeasure development.
    I believe it would be a worthy investment in time, talent 
and treasure for companies, large and small, to come to the 
table, even without the promise of large returns on their 
monetary investments.
    Of course, we can't expect these companies to invest 
blindly in countermeasure research and development without some 
economic incentive, but we really need to recognize that 
success benefits everyone and the lack of success in this area 
carries a potential for harm to our citizens and to our 
economy, including companies, large and small, inside the 
biotech industry and outside.
    So we need the ingenuity and creativity of the entire 
American enterprise to reach a condition of security from 
bioterrorism.
    Mr. Chairman, you have my more detailed remarks for the 
record. I appreciate it. I will just stop here, if that is okay 
with you.
    [The statement of Dr. Runge follows:]

               Prepared Statement of Jeffrey W. Runge, MD

                        April 18, 2007 (revised)

INTRODUCTION
    Good afternoon, Mr. Chairman, Ranking Member McCaul and 
distinguished members of the Subcommittee. Thank you for the 
opportunity to describe the role of the Department of Homeland Security 
(DHS) under Project BioShield.

PROJECT BIOSHIELD OVERVIEW
    The Project BioShield Act of 2004 (PL 108-276) amended the Public 
Health Service Act to provide protections and countermeasures against 
biological, chemical, radiological, or nuclear agents that may be used 
in a terrorist attack against the United States by giving the National 
Institutes of Health contracting flexibility, infrastructure 
improvements, expediting the scientific peer review process, and 
expanding the Food and Drug Administration authority to allow the use 
of unapproved medical countermeasures in a declared emergency.
    Today, Project BioShield is a $5.6 billion program designed to 
stimulate the development of medical countermeasures for natural or 
chemical, biological, radiological, and nuclear threats for which there 
are no existing commercial markets. Both DHS and the Department of 
Health and Human Services (HHS) have major responsibilities under the 
Project BioShield Act.

DHS RESPONSIBILITIES UNDER PROJECT BIOSHIELD
    In accordance with section 319F-2(c)(2) of the Project BioShield 
Act of 2004, it is the DHS' responsibility, in consultation with HHS 
and other agencies, to assess current and emerging threats of natural 
or chemical, biological, radiological, and nuclear agents, and to 
determine which agents present a significant material threat to the 
U.S. population.
    To fulfill this responsibility, DHS conducted detailed modeling of 
threats, vulnerabilities, and consequences for various plausible 
scenarios of a terrorist attack. As a result of this work, DHS 
identified 12 biological threats, plus radiological and nuclear 
devices, meeting the statutory requirement to merit a Material Threat 
Determination (MTD). As of September 20, 2006, DHS completed the MTD 
list based on detailed assessments of the agents with inputs from the 
intelligence, law-enforcement, scientific, and public-health 
communities. This MTD list will be updated, as needed, based on the 
outcomes of biennial Chemical, Biological, Radiological and Nuclear 
(CBRN) risk assessments.
    Accompanying each MTD is a Population Threat Assessment (PTA). The 
PTA estimates the size of the population exposed by the agents 
identified in the MTDs to gauge the impact on the population and 
national infrastructure if that particular agent was released for a 
given high consequence plausible scenario. As of December 2006, DHS 
completed the PTAs of all MTDs. Moreover, DHS remains engaged in 
ongoing threat assessments and communicates regularly with our Federal 
partners to ensure we have accurate, up-to-date material threat 
information.

THE TRANSITION OF RESPONSIBILITY TO HHS
    Once the MTDs are issued and PTAs are completed for any given 
threat, the results are shared with HHS for consequence modeling to 
support the procurement of appropriate countermeasures. HHS created the 
Public Health Emergency Medical Countermeasures Enterprise (PHEMCE), 
under the direction of the HHS Assistant Secretary for Preparedness and 
Response, to identify, develop and acquire medical countermeasures that 
will improve public health emergency preparedness, including preventing 
and mitigating the adverse health consequences associated with the 
priority CBRN threats identified by DHS. On the PHEMCE Executive 
Governance Board (EGB), whose members are the Assistant Secretary for 
Preparedness and Response, the Centers for Disease Control and 
Prevention, the National Institutes of Health, and the Food and Drug 
Administration. DHS serves as an ex officio member along with the 
Department of Defense, the Homeland Security Council, the Office of 
Science and Technology Policy, the Office of Management and Budget 
(OMB), and the Office of the Vice President.
    Upon identification of countermeasures that meet the eligibility 
requirements to warrant use of the Special Reserve Fund (SRF) the 
Secretary of DHS and the Secretary of HHS jointly request that OMB 
release funds to HHS from the SRF, to acquire the countermeasures. DHS 
has worked with HHS to expedite the implementation of BioShield by 
clarifying roles and responsibilities and by establishing mechanisms to 
improve efficiencies in this process.
    Under section 319F-2(c) (7) (C) of the Public Health Service Act, 
as amended, HHS is ultimately responsible for managing the 
countermeasure procurement process including the negotiation of terms 
and entering into contracts for research, development, acquisition, 
procurement, storage and distribution of countermeasures.

THE FUTURE OF THE BIOSHIELD ENTERPRISE
    DHS is confident that the Secretary of HHS' plan for the future of 
BioShield will result in addressing the appropriate needs of the Nation 
in terms of preparedness. In order to address the above, improvement in 
transparency to the program?s stakeholders was in evidence at the 
meeting held in September of 2006. The Pandemic and All-Hazards 
Preparedness Act of 2006 (PL 109-417) provided a missing piece to HHS' 
ability to stimulate the development of needed countermeasures with the 
authorization of the Biomedical Advanced Research & Development 
Authority to help companies through the advanced development process, 
if funded appropriately. The formation of the Public Health Emergency 
Medical Countermeasures Enterprise will provide the HHS Secretary with 
expert advice to make his decisions in collaboration with the 
interagency and its respective stakeholders. The PHEMCE strategic plan 
is a key step in defining, in a transparent way, how BioShield will 
carry out its business moving forward.
    What is still missing from the enterprise is a commitment from the 
Nation's medical industry as a whole to invest in our biodefense. We 
must find ways to involve the private sector more broadly in this 
priority for our Nation. The ability of our private sector to thrive 
depends on their safety and security. It would be a worthy investment 
in time, talent and treasure for companies large and small to come to 
the table, even without the promise of large returns on their monetary 
investments. We thank the Congress for giving us a wide range of 
innovative acquisition and other authorities to pave the way for 
increased private investment. We will need to rely on the ingenuity and 
creativity of the American enterprise to reach a condition of security 
from bioterrorism.

CONCLUSION
    Thank you, Mr. Chairman, for the opportunity to speak to you today 
on the role of DHS under the Project BioShield Act. I am happy to 
answer any questions the Subcommittee may have.

    Mr. Langevin. Dr. Runge, thank you for your testimony.
    Dr. Parker?

    STATEMENT OF GERRY PARKER, PH.D., DVM, PRINCIPAL DEPUTY 
  ASSISTANT SECRETARY, OFFICE OF THE ASSISTANT SECRETARY FOR 
                 PREPAREDNESS AND RESPONSE, DHS

    Mr. Parker. Mr. Chairman and members of the subcommittee, I 
am honored to be here today to discuss the development and 
acquisition of medical countermeasures for chemical, 
biological, radiological and nuclear threats under Project 
BioShield, and the new authorities by the Pandemic and All 
Hazards Preparedness Act.
    I am especially pleased to be here with my colleagues, Dr. 
Fauci from NIH, Dr. Goodman from the FDA, and Dr. Runge from 
the Department of Homeland Security, with whom we coordinate on 
a regular basis.
    Project BioShield, enacted in 2004, authorized the $5.6 
billion special reserve fund for the acquisition of security 
countermeasures. It was designated to incentivize industry to 
pursue the development of next generation products, to improve 
preparedness, and as an important complement to the NIH 
research program and the CDC's strategic national stockpile.
    HHS has already achieved a significant level of 
preparedness against a number of threats. For example, we have 
stockpiled antibiotics that provide a substantial level of 
preparedness for bacterial threat agents, including anthrax and 
tularemia.
    During the 2.5 years of implementation, Project BioShield 
launched eight acquisition programs for the four material 
threats defined by the Department of Homeland Security in 2004. 
These include programs for current and next generation anthrax 
vaccines, anthrax antitoxins, a next generation smallpox 
vaccine, botchulism antitoxins, and three medical 
countermeasures for radiological and nuclear threats, potassium 
iodine, DTPA, and acute radiation syndrome therapeutics.
    Two programs, next generation anthrax vaccines and ARS 
therapeutics exemplify the challenges encountered in 
implementation of Project BioShield.
    Because of these setbacks for the second generation anthrax 
vaccine and RPA and ARS are multifactoral, I will take this 
opportunity to convey, within limitations imposed by the Trade 
Secret Act and Procurement Integrity Act, HHS perspectives on 
lessons learned and intentions with regard to the path forward.
    In December 2006, HHS terminated the acquisition contract 
with VaxGen for RPA when VaxGen failed to meet critical 
contract milestones. This followed a previous contract 
modification that provided VaxGen with substantial time to 
develop and deliver their product.
    HHS developed a comprehensive strategy for advanced 
development and acquisition of current and next generation 
anthrax vaccines. As part of that strategy, the NIH continues 
to support the development of another second generation anthrax 
vaccine candidate and we remain committed to procure RPA.
    HHS will also pursue the acquisition of an additional 10 
million doses of ABA for near-term preparedness, the current 
license anthrax vaccine.
    Last month HHS withdrew a request for proposals for acute 
radiation syndrome therapeutics because no competing product 
was sufficiently mature to warrant a BioShield acquisition at 
this time.
    HHS will continue to pursue research, development and 
acquisition of these medical countermeasures and will take 
advantage of new authorities and scientific advances in 
development of potential candidates.
    We have observed the following lessons in implementing 
Project BioShield. First, for the most part, experienced and 
well resourced companies have not responded to BioShield and 
the contract terms dictated by BioShield were challenging, 
particularly for less resourced companies.
    Second, it is critical that developers establish effective 
relationships with the FDA early to gain a clear understanding 
of the regulatory requirements with respect to their product 
for the stockpile and for emergency use prior to licensure.
    Finally, absence of a robust advanced development program 
has placed too much risk on BioShield acquisition programs.
    We are pleased that the Pandemic and All Hazards 
Preparedness Act provides HHS with biomedical advanced research 
and development authority, BARDA, which includes important new 
tools.
    We will use new authorities, such as advanced and 
milestone-based payments, in future contracts. We will 
facilitate discussions with the FDA and work to improve clarity 
on regulatory requirements to stockpile a product for emergency 
use prior to licensure. But we will also continue to insist on 
and verify demonstrated understanding of those products by 
developers for their products.
    The importance of advanced development is exemplified by 
our pandemic influenza advanced development program and we are 
successfully pursuing a portfolio of countermeasure candidates 
with industry partners to mitigate acquisition risk in that 
program.
    I cannot overstate the importance of advanced development 
and the fiscal year 2008 request for advanced development 
funding is critical to BARDA implementation.
    Finally, last July, HHS established a public health 
emergency medical countermeasures enterprise to coordinate all 
levels of public health preparedness against terrorist and 
naturally occurring threats.
    We today have submitted to the Federal Register, and 
hopefully it will be released today, we submitted it yesterday, 
but hopefully it will be released today, the enterprise 
implementation plan, which identifies the top priority medical 
countermeasure development and acquisition thrust.
    The implementation plan reaffirms and further identifies 
our commitments to acquisition of anthrax vaccines, anthrax 
antitoxins and therapeutics for radiological and nuclear 
threats. It also identifies the need for continued development 
and acquisition of broad spectrum antibiotics, antivirals and 
diagnostics.
    The department is committed to fulfilling its role both as 
a steward of the public's trust and as a reliable and 
predictable partner for industry.
    The release of the enterprise strategy and implementation 
plan signals our commitment to greater transparency in 
partnership with our stakeholders. We will build on past 
successes, lessons learned, and new authorities under the 
Pandemic and All Hazards Preparedness Act to continue to 
improve the implementation of Project BioShield.
    Mr. Chairman, this concludes my testimony, and I will be 
happy to answer any questions. Thank you.
    Mr. Langevin. Thank you, Dr. Parker.
    Dr. Fauci, the floor is yours.

STATEMENT OF ANTHONY FAUCI, M.D., DIRECTOR, NATIONAL INSTITUTES 
  OF ALLERGY AND INFECTIOUS DISEASES, NATIONAL INSTITUTES OF 
                          HEALTH, HHS

    Dr. Fauci. Mr. Chairman, members of the committee, thank 
you for giving me the opportunity today to discuss with you the 
NIH's role in the research endeavor associated with the 
development of countermeasures for emerging public health 
threats, both naturally occurring, as well as deliberately 
propagated.
    I have some visuals here. On this first chart, I just want 
to emphasize the traditional role of the NIH whose activities 
are all based on fundamental matrix of basic research.
    In addition, in our approach to emerging public health 
threats, we have built both physical and intellectual 
infrastructure in the form of training individuals in this 
subspecialty, not only of infectious diseases, but also, most 
recently, in RAD, NUKE and CHEM.
    Importantly, we conduct and have considerable experience in 
clinical trials leading to the ultimate development and use of 
countermeasures. A typical example of that was the pandemic 
H5N1 influenza vaccine that was just approved yesterday by the 
FDA, was done through the NIAID clinical trials network.
    All of our activities are ultimately aimed for the 
development not by us, since we do the research of it, but the 
ultimate development of countermeasures in the form of 
diagnostics, therapeutics and vaccines.
    This slide, Mr. Chairman, I have shown to you before. It is 
a map of the world in which we have listed, over the last 25 to 
30 years, emerging and reemerging threats, ranging, for 
example, from a brand new threat like HIV and SARS to a 
reemerging threat like West Nile and recurrent drug-resistant 
tuberculosis, malaria, staphylococcus, enterococcus, et cetera, 
and, finally and unfortunately, deliberately propagated 
microbes.
    We play a role in this endeavor because we have decades of 
experience in the arena particularly of microbiology and 
infectious diseases, of dealing with naturally occurring 
infectious disease threats.
    This holds us in good stead to be able to extrapolate the 
knowledge, the fundamental basic research, as well as the 
clinical applicability when we are looking at bioterror 
threats.
    And in response to the post-September the 11th anthrax 
attack, we revved up considerably our research component of the 
broader HHS effort. On this slide shown here are the original 
strategic plan and research agendas for the various category A, 
B and C agents together with the progress reports, the most 
recent of which was this past summer.
    In addition, we have published our radiological and nuclear 
strategic plan and research agenda and soon to be published, 
the CHEM component of that.
    With regard to the expansion of our research capacity, we 
have made great strides in the last 5 years. With regard to 
physical capacity, we have two additional extramural, namely, 
in the university, BSL-4, the highest level of containment. We 
have several BSL-313. We have regional centers of excellence 
and note the name, the regional centers of excellence for 
biodefense and emerging infectious diseases, because even if we 
never get and we hope we never will get another bioterror 
threat, the work that is done at the research level will have 
important extrapolation to the things that we know will happen 
and that is naturally occurring and reoccurring threats.
    With regard to some of the accomplishments in biodefense 
research, let me just mention very briefly a few. First, the 
threat-specific. In regard to vaccines, when we started off 
post-September 11, there were 18 million doses of smallpox 
vaccine available for this country.
    Based on the clinical trials, using dilutional techniques 
and the newer generation, we now have a vaccine dose of 
smallpox vaccine to every person in this country. We have 
developed a first hemorrhagic fever vaccine, Ebola, which will 
soon combine with Marburg and Lassa.
    In addition, we have done work with anthrax. You have heard 
about the RPA research that we have done, but also we have 
shown that when the standard original first generation anthrax 
vaccine is given with antibiotics, you can decrease the time on 
antibiotics and allow for greater clearance of those spores.
    In therapeutics, we have had some interesting successes. We 
now have the first what we believe to be effective anti-
smallpox antiviral, the SD-246. Parenthetically, that was used, 
we believe, successfully on the child of the armed forces 
personnel who had a complication of their smallpox vaccine when 
the child developed a vaccinia complication, because the child 
had eczema.
    We also have molecular approaches to Ebola and antitoxins 
against anthrax. In diagnostics, we now have molecular 
capability, Mchip, to distinguish between influenza A that is 
pandemic and that is seasonal. And, finally, you may have read 
in the newspapers just a few days ago, we have the ability now, 
by looking at gene expression in animals that have been 
irradiated, as to what the dose of irradiation that they have 
received, which will allow us to prepare how we might treat 
that individual.
    And then we have these cross-cutting things, such as 
genomic sequencing, therapeutic screening and understanding 
what we call host pathogen interaction, namely, how the body 
responds to threats of microbes.
    This is of great importance, because, again, even if we 
never get another bioterror threat, it will have important 
spin-offs in other diseases.
    And, finally, on this last slide, I thought I would 
schematically diagram the place that the NIH plays in the 
schematic between fundamental basic research up through and 
including the purchase and acquisition by BioShield.
    And as you see, classically, our activities are in the area 
of research that is basic and applied and the early part of 
product development. BioShield does the acquisitions and what 
you were talking about in your introductory statement about 
BARDA and the hopeful role that BARDA will play in bridging 
that gap between the research endeavor and the acquisitions 
through BioShield.
    Thank you very much, Mr. Chairman. I would be happy to 
answer questions for you.
    [The statement of Dr. Fauci follows:]

              Prepared Statement of Anthony S. Fauci, M.D.

INTRODUCTION
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to speak with you today about the role of the National 
Institutes of Health (NIH) in preparing the Nation to respond 
effectively to emerging public health threats. In my testimony today, I 
will describe NIH research that is leading to new and effective 
countermeasures against these threats. I also will discuss the NIH role 
in the implementation of the Project BioShield Act of 2004 and the 
Biomedical Advanced Research and Development Authority (BARDA), 
established by the Pandemic and All-Hazards Preparedness Act of 2006.
    As a Nation, we must be prepared to respond quickly and effectively 
to any threat to public health. The threats we face include new 
microbes that might emerge naturally, such as the virus that caused 
Severe Acute Respiratory Syndrome (SARS), and familiar pathogens that 
re-emerge with enhanced properties or in unusual settings, such as 
bacteria that cause extensively drug-resistant tuberculosis (XDR-TB) 
and influenza viruses with pandemic potential. As was made clear by the 
terrorist attacks of 2001--including the anthrax attacks in the eastern 
United States--we must also be prepared for the deliberate release of 
pathogenic organisms, biological toxins, chemical poisons, or 
radioactive substances. The primary role of the NIH in confronting 
these diverse threats is to carry out basic and applied scientific 
research and early-stage development of potential products, upon which 
late-stage advanced product development and ultimately approval of 
vaccines, therapeutics and other medical countermeasures can be based.

NIH RESEARCH ON EMERGING PUBLIC HEALTH THREATS
    Research to mitigate emerging threats to public health is a key 
focus of the NIH. The National Institute of Allergy and Infectious 
Diseases (NIAID) is the component of the NIH assigned primary 
responsibility for research on emerging and re-emerging infectious 
diseases, including the deliberate use of infectious biological agents 
and toxins that directly affect human health. The NIAID also 
coordinates NIH research into medical countermeasures against chemical, 
radiological and nuclear agents; this research is supported by several 
NIH institutes, including the NIAID, the National Cancer Institute, and 
the National Institute for Neurological Disorders and Stroke.
    Strategic planning to guide the broad NIH biodefense and emerging 
infections research effort has been extensive, and has involved 
substantial consultation with outside experts in academia, private 
industry, civilian government agencies, and the military. The overall 
strategy encompasses three components of NIH biodefense and emerging 
infections research: the infrastructure needed to safely conduct 
research on dangerous pathogens; basic research on microbes and host 
immune defenses that serves as the foundation for applied research; and 
targeted, milestone-driven, early-phase development of medical 
countermeasures to create the vaccines, therapeutics and diagnostics 
that will be needed in the event of a public health crisis. These 
efforts enhance the Nation?s preparedness for both potential 
bioterrorism attacks and naturally occurring infectious disease 
outbreaks.
    The NIH is substantially expanding the Nation?s biodefense research 
infrastructure, which will greatly enhance our ability to safely and 
efficiently conduct research on infectious agents. Facilities currently 
or soon to be under construction will be capable of safely housing 
research on the most deadly pathogens, as well as microbes that are 
more familiar and less virulent, but nonetheless deleterious to human 
health. These facilities include two National Biocontainment 
Laboratories (BSL-4 - the highest level of containment) and thirteen 
Regional Biocontainment Laboratories (BSL-3 ? one level down from 
highest level of containment). In addition, three intramural 
biocontainment labs?on the NIH campus in Bethesda, Maryland (BSL-3), on 
the National Interagency Biodefense Campus at Fort Detrick in Fredrick, 
Maryland (BSL-4), and at the NIAID Rocky Mountain Laboratories in 
Hamilton, Montana (BSL-4)?are operational or nearing completion.
    In addition to building new facilities, the NIH has strengthened 
the Nation's intellectual infrastructure by establishing a network of 
ten Regional Centers of Excellence for Biodefense and Emerging 
Infectious Diseases Research. These Centers conduct research and 
development activities and provide training for future biodefense 
researchers. Most recently, the NIH announced awards to create six 
Centers of Excellence for Influenza Research and Surveillance; these 
centers will bolster influenza research in key areas, including 
understanding how animal viruses can adapt to cause human disease and 
how the human immune system responds to infection with the virus.
    The NIH role in biodefense research is similar to its role in 
biomedical research in general; namely, to support basic scientific 
discovery, applied research and early-stage development activities that 
start new vaccines and drugs down the pathway toward approval. Early-
stage development activities that the NIH often supports include 
preclinical testing, animal model development, and establishment of 
pilot lot-scale manufacturing processes. Late-stage advanced product 
development, such as commercial-scale process development and 
validation, is usually left to industry. On rare occasions, however, 
the NIH has supported late-stage medical countermeasure development 
activities. For example, in 2003, the NIH awarded milestone-driven 
contracts to two companies, Avecia and VaxGen, Inc., for late-stage 
advanced development of second-generation anthrax vaccines. These 
contracts predated the Project BioShield Act of 2004.
    The vaccines are based on a purified, recombinant (r) anthrax 
protein called Protective Antigen (PA), against which the body 
generates a strong antibody response; studies conducted in the 1990s 
showed that rPA vaccines could protect animals exposed experimentally 
to airborne anthrax spores from developing anthrax disease. The Avecia 
and VaxGen contracts supported activities such as advanced 
manufacturing process development, Phase II clinical trials, and 
advanced assay development. As noted above, NIH funding of late-stage 
advanced development for biodefense countermeasures is the exception 
rather than the rule.

RESEARCH PROGRESS
    NIH research has yielded substantial scientific advances in the 
effort to counter emerging public health threats. For example, new or 
improved candidate vaccines and therapies against smallpox and Ebola 
virus have shown great promise. Among these is ST-246, a promising 
smallpox drug candidate that has protected nonhuman primates from what 
would otherwise be a lethal exposure to live smallpox virus, and that 
is now in human clinical trials. Basic research also has proceeded 
rapidly. NIH-supported researchers recently determined the structure of 
botulinum toxin--a Category A bioterror threat agent and the cause of 
botulism--as it binds to its receptor protein on nerve cells; these 
findings may lead to the development of new drugs to treat botulism. 
Further, an NIH program that screens both approved drugs and new drug 
candidates has identified several promising anti-influenza drug 
candidates, including FluDase (which binds host cell receptors to 
prevent viral entry), T-705 (which inhibits replication of viral RNA) 
and Peramavir (which inhibits an influenza enzyme called 
neuraminidase). All three of these influenza drug candidates are 
undergoing further development in partnership with industry sponsors.
    With regard to the development of medical countermeasures against 
radiological, nuclear, and chemical threats, the NIH has established 
eight Centers for Medical Countermeasures against Radiation, and four 
Centers for Countermeasures against Chemical Threats. Basic and applied 
research conducted in these centers and elsewhere is moving forward 
rapidly. For example, researchers supported by one of these Centers 
recently characterized changes in gene activity in mice exposed to 
different doses of ionizing radiation and in cancer patients undergoing 
radiation therapy; these results may lead eventually to a diagnostic 
test to distinguish people who have suffered serious radiation exposure 
from those who have not prior to the onset of clinical illness. That 
capability would allow treatments to be efficiently directed early on 
to those who need them most following a radiological incident.
NIH ROLE IN BIOSHIELD AND BARDA
    Two landmark pieces of legislation designed to speed the 
development, approval, and acquisition of biodefense and emerging 
infections countermeasures have been enacted in recent years: the 
Project BioShield Act (Public Law 108-276), which became law in July 
2004, and the Pandemic and All-Hazards Preparedness Act (Public Law 
109-417), which became law in December 2006.
    The BioShield legislation provided HHS and its constituent agencies 
with several new authorities regarding medical countermeasures against 
a terrorist attack with a biological, chemical, nuclear, or 
radiological agent or device. Three of these authorities were of 
particular relevance to the NIH. First, BioShield provided the NIH 
additional flexibility in awarding contracts, cooperative agreements, 
and grants for research and development of critical medical 
countermeasures. Second, BioShield gave the NIH streamlined personnel 
authority that has allowed expedited hiring to fill key biodefense 
positions. Third, BioShield provided the NIH with additional authority 
for the construction of research facilities. The NIH has used all three 
of these authorities in carrying out its biodefense and emerging 
infections research and development responsibilities.
    Perhaps the most important provision of BioShield was the 
establishment of a secure funding source at HHS for the purchase of 
critical medical countermeasures. Many pharmaceutical and biotechnology 
companies have been willing to help in the development of biodefense 
countermeasures, but they needed reasonable assurances that a market 
for these products would, in fact, exist should they invest the 
resources necessary to fully develop them. To provide these incentives, 
BioShield established a Special Reserve Fund for the purchase of 
biodefense countermeasures to be placed in the Strategic National 
Stockpile for use in an emergency.
    Procurement contracts under BioShield are developed and awarded by 
the HHS Office of the Assistant Secretary for Preparedness and Response 
(ASPR). As is the case with other scientists within the Federal 
government and particularly within HHS, NIH personnel often serve as 
subject matter experts, consultants, and members of committees and 
boards that participate in the planning and execution of the HHS 
preparedness activities, including the development of contracts for 
BioShield acquisitions. Ultimately, however, the decisions regarding 
acquisitions are made by the Office of the ASPR.
    Title IV of the Pandemic and All-Hazards Preparedness Act 
established BARDA within HHS. When BARDA is fully implemented, the 
Office of the ASPR will administer the Biodefense Medical 
Countermeasure Development Fund to support late-stage advanced product 
development. Because the NIH is likely to have played a role in earlier 
phases of development of some of the products that BARDA might support, 
the NIH will coordinate with BARDA staff. However, all decisions 
concerning products to be supported by BARDA will be made in the Office 
of the ASPR.

CONCLUSION
    Emerging and re-emerging public health threats pose a perpetual 
challenge. At one time, some in public health thought it might be 
possible eventually to ?close the book? on the study of infectious 
diseases because of advances in therapies and vaccines. However, it is 
now clear that naturally emerging and re-emerging infections will 
challenge us for the foreseeable future, as will threats from 
deliberately disseminated infectious diseases, chemical, or 
radiological terrorist attacks. The task for the NIH is to continue 
building a strong foundation of basic and applied research and 
development that is needed to counter these threats, and also to be 
nimble enough to respond with speed and precision to new threats as 
they arise. NIH efforts to address these challenges complement those of 
our colleagues in ASPR, CDC, FDA and other agencies in the Federal 
government to protect the health and safety of our Nation.
    Thank you for the opportunity to appear before you today. I am 
happy to answer any questions you may have.

    Mr. Langevin. Thank you, Dr. Fauci.
    Dr. Goodman?

  STATEMENT OF JESSE GOODMAN, M.D., MPH, DIRECTOR, CENTER FOR 
       BIOLOGICS EVALUATION AND RESEARCH, FOOD AND DRUG 
                      ADMINISTRATION, HHS

    Dr. Goodman. Good afternoon, Mr. Chairman and members. I am 
Jesse Goodman, director of the Center for Biologics at FDA, or 
CBER. I appreciate both your interest in this very important 
subject and the opportunity to be here to tell you about our 
role in regulation and development of vaccines, including those 
intended for response to a threat to our national security.
    At CBER, enhancing the nation's preparedness is one of our 
highest priorities, including the development of vaccines and 
other products needed to face natural or potential deliberate 
threats, and I would like to second Tony's comment that really 
we see this kind of preparedness as dual use for the threats 
that occur naturally, building the infrastructure and 
capabilities will also prepare us for threats that occur not 
naturally.
    So when we think about pandemic, we are also thinking about 
bioterrorism.
    It is essential to do everything we can to assure that such 
products, though, which really we need to understand could be 
received by millions of people in an emergency, that those 
products are safe and that they perform as expected, that they 
work.
    Therefore, while we work very closely with many partners, 
including those at this table, to achieve our nation's and 
indeed our global preparedness goals, our responsibility and 
one that only FDA has is to provide an objective scientific 
assessment of the safety and efficacy of these products.
    To help provide some perspective, I am going to briefly 
discuss some relevant issues in vaccine development that 
illustrate some of the challenges there. I won't be discussing 
any particular product in detail, because my understanding is 
that under applicable laws and regulations, FDA cannot normally 
publicly provide information concerning a specific 
investigational product prior to its licensure.
    Vaccines are really different from most drugs in a number 
of respects and achieving the highest quality in manufacturing 
can be especially complex, challenging and critical. It is very 
important to get this, that the vaccine--medical products, in 
general, are not always predictable and vaccines represent a 
particular challenge.
    The manufacturing includes many steps and requires careful 
in-process monitoring to assure that the product is safe, pure 
and potent, and even undetected or poorly understood or not 
understood changes in process or materials can significantly 
affect the product and even its safety and effectiveness.
    Thus, the process must produce a consistent and well 
characterized product. In addition, unlike drug products that 
are often used to treat an existing disease or condition, 
vaccines, as you well know, are given typically to large 
numbers of healthy people.
    So, therefore, any concerns about averse events, for 
example, are very special concerns.
    In developing a vaccine, there are four major stages that 
are worth your while to think through.
    There is the pre-clinical stage, which is predominantly the 
testing that occurs before a product can even be used in 
people, animal testing, toxicology testing, et cetera.
    There is the investigational new drug stage, in which, 
based on that information, FDA may allow a sponsor to then do 
studies in humans to help establish a dose, safety, 
effectiveness.
    These studies, it is very important, because this is 
relevant to some of your concerns, have to be done in a well 
monitored situation and very well understood conditions.
    And then there is the license application stage, where the 
manufacturer submits all of this information together to 
support our review of the manufacturing process and the safety 
and effectiveness of the vaccine.
    And as many of you know, our responsibilities extend even 
after the licensure to look at safety, the quality and ongoing 
inspection and quality assurance of manufacturing.
    So again, while all medical product development is 
challenging, new vaccine development is especially complex and 
we actually expect that challenging issues will arise.
    Such issues can also raise safety concerns or study design 
concerns that result in FDA placing an IND or a study proposed 
by a sponsor on what we call a clinical hold and, as you know, 
that is one of the issues in VaxGen.
    A clinical hold is an order by FDA not to initiate or 
continue human studies until the issues of concern have been 
satisfactorily addressed. Most of these kinds of issues are 
eventually resolved, allowing product development to proceed.
    What are the typical reasons we might place a study on 
hold? One would be if companies are--if patients are exposed to 
an unreasonable risk, for example, a safety risk.
    Another would be if the study plan or the protocol is 
deficient in design to meet its objectives.
    So clinical hold is an important human subject protection 
safeguard and would also help prevent studies in 
investigational products which might be unlikely to provide 
useful information.
    So a study that isn't going to provide useful information 
would be an unethical study, because you would ask people to 
take an investigational product without adequate assurance that 
you were going to get useful information from that study.
    Now, on top of these responsibilities, we strive to develop 
processes that can facilitate the development of these products 
that meet public health needs. An example is the animal rule, 
which provides a mechanism to evaluate the effectiveness of a 
new product based on data from animals when those studies can't 
be done in humans, because, for example, the disease doesn't 
occur or challenge studies would be unethical.
    Such approvals still require demonstration of effectiveness 
in humans. An additional tool made available, in part, under 
BioShield is for FDA to allow the use of unapproved products or 
uses of products in a declared emergency.
    This is under the emergency use authorization, or EUA. To 
authorize such emergency use, FDA needs to find that the known 
and potential benefits of the product's use for that specific 
emergency situation or scenario outweigh the known and 
potential risks of the product and that there is no adequate 
approved and available alternative.
    And our approach has been to try to get as much and as high 
quality of information ahead of time so if we ever face an 
emergency where we have to make these decisions for the 
American public, we can make the best decisions.
    Now, we work very hard with partners to develop and define 
these kinds of innovative pathways and tools. Perhaps most 
importantly, we do provide intensive interactive consultation 
and technical assistance to facilitate development and 
availability of products. This can be hundreds or thousands of 
hours in product development of high priority products like we 
are talking about here today.
    As noted, though, we always come back to our most critical 
core role, which is to protect the human subjects and provide 
an independent scientific assessment of the product both during 
its development, in reviewing an application for approval, and 
particularly in reviewing a request that might come for an 
emergency use authorization.
    Now, I think it is very important to say--I am almost 
done--that to protect and preserve our scientific integrity, 
our independence and judgment and that of our review staff, our 
professional review staff, we do not involve ourselves in 
specific HHS decisions to award or terminate contracts.
    In fact, if myself or staff are present when such issues 
arise, we will actually leave the room. This was our process at 
the time of HHS's VaxGen acquisition and it remains so today.
    We do provide the technical and scientific assistance that 
I mentioned. We may provide technical comments to try to help 
form requests for proposals, et cetera.
    At FDA, we base our important decisions on the available 
scientific information and a careful independent evaluation of 
risks and benefits to patients. That is what you expect.
    We are fully committed, though, and fully engaged in 
continuing to work with our federal partners and also with 
product developers and industry to achieve our nation's highest 
priority public health preparedness goals.
    So I really appreciate the opportunity to come and discuss 
this with you, and I will welcome our discussion and your 
questions.
    Thank you very much.
    [The statement of Dr. Goodman follows:]

          Prepared Statement of Jesse L. Goodman, M.D., M.P.H.

    Good afternoon Mr. Chairman and members of the Committee, I am 
Jesse L. Goodman, M.D., M.P.H., Director of the Center for Biologics 
Evaluation and Research (CBER) at the United States Food and Drug 
Administration (FDA). I am also a practicing infectious diseases 
physician and a microbiologist. CBER is the Center within FDA that is 
responsible for the regulation of most biological products, including 
vaccines, blood and blood products, and cellular, tissue and gene 
therapies. Thank you for the opportunity to discuss FDA?s role in the 
regulation of vaccines including those intended for use in response to 
a threat to our national security.
    At CBER, enhancing the nation?s preparedness is one of our highest 
priorities, whether it is protecting the safety of our blood supply 
from emerging threats like West Nile Virus or facilitating the 
development of vaccines needed to face natural threats or potential 
deliberate threats, from pandemic flu to smallpox to anthrax. It is 
essential to do all we can to assure that such products be safe, and 
that they work. Therefore, while working closely with many partners to 
achieve our nation?s and our global preparedness goals, our most 
critical and unique responsibility is to also do all that is possible 
to provide an objective, scientific assessment of the safety and 
efficacy of these and other biologic products. To help provide 
perspective, I am going to discuss relevant issues in vaccine 
development that illustrate the opportunities and challenges faced in 
developing these important products. As you know, under applicable laws 
and regulations, information provided to FDA concerning a specific 
investigational product is not available for public disclosure prior to 
licensure of the product.
    Vaccines are different from most drugs in several respects and 
achieving the highest quality in manufacturing can be especially 
challenging and critical. Vaccines production frequently utilizes 
living cells and organisms, as well as complex growth conditions and 
materials often derived from living sources. The manufacturing process 
for vaccines usually includes many steps and requires frequent in-
process monitoring of the product and components to assure that the 
product is safe, pure, and potent.
    The production of most vaccines requires the growth of the 
immunizing agent (i.e. bacteria, virus, etc.) or the genetically 
engineered expression, in living cells, of recombinant immunizing 
proteins derived from that agent. The conditions for accomplishing this 
are complex and subtle, and even undetected or poorly understood 
changes in process or materials can significantly affect the 
composition of the vaccine and its safety, efficacy, or both. Thus, the 
process must be well controlled and monitored, and produce a consistent 
and well characterized product prior to its licensure. Even after 
licensure, manufacturers conduct a series of tests on the bulk, 
intermediate and final vaccine products and typically are required both 
to meet all product and process specifications and to submit the 
results of key tests, along with samples of the product to CBER for 
evaluation prior to CBER?s approval of lot release and administration 
of vaccine. The tests performed on the final product may include those 
for sterility, identity, purity, and potency to assess immunogenicity 
and/or antigen content and, depending on the nature of the vaccine and 
its manufacturing process, additional tests as required by CBER to 
assure vaccine safety and quality.
    Unlike drug products that are most often used to treat an existing 
illness or condition, vaccines are generally administered to large 
numbers of healthy individuals in order to prevent infectious diseases. 
Therefore, the potential adverse effects of vaccines, even if the 
events are rare, present unique risk-benefit considerations and may 
give rise to heightened concerns in the public health context.
    From a regulatory perspective, there are four major stages in 
vaccine development. These stages include:
         The preclinical stage which consists of the 
        development and testing of the product prior to the product 
        being tested in humans. Early in the product development 
        process, sponsors test candidate vaccines in-vitro (e.g., in 
        laboratory assays, studies in cell lines, etc) and in animals. 
        These early nonclinical studies give an indication of whether 
        studies would be reasonably safe to proceed in humans and may 
        also provide information regarding the potential effectiveness 
        of the product.
         The Investigational New Drug (IND) stage consisting of 
        multiple phases where the investigational product is studied in 
        human subjects under well-defined conditions and with careful 
        monitoring. In certain cases where studies to demonstrate 
        efficacy in humans are not ethical or feasible, sponsors may 
        conduct studies to demonstrate efficacy of the product in 
        appropriate animal models.
         The license application stage is when manufacturers 
        submit data and information regarding the results of the 
        clinical and nonclinical studies, as well as complete 
        information regarding the product and its manufacturing process 
        to FDA for a complete review of product manufacturing, safety 
        and effectiveness in support of licensure.
         Finally, for products that are approved, FDA continues 
        its oversight during the post licensure stage to include review 
        of post-marketing safety information from adverse event 
        reports, periodic reports, post-marketing studies, review of 
        lot release information and testing, and inspections of 
        manufacturing facilities.
    FDA often provides guidance to sponsors, even prior to submission 
of an IND, in regard to both the types of preclinical studies needed 
and the design of the clinical trials needed to assess the intended 
use(s) of the product. FDA?s guidance is intended both to help protect 
human subjects and to assure that the studies performed are designed in 
such a manner that the study results are likely to provide sufficient 
information to allow a determination of the product's safety and 
efficacy.
    While all medical product development is challenging, vaccine 
development is especially complex, and we expect that new challenging 
issues will arise during the development process. The issues may arise 
in any number of areas, and may affect product potency, quality, and 
safety. Such issues can raise safety or study design concerns that may 
result in FDA placing an IND on clinical hold. A clinical hold is an 
order by FDA not to initiate or continue clinical studies until the 
issues of concern have been satisfactorily addressed. It is important 
to note that most clinical hold issues are eventually resolved, 
allowing product development to proceed. I'd like to describe some of 
the more typical reasons for FDA to place a trial on hold. FDA may 
determine that study participants would be exposed to an unreasonable 
and significant risk of illness or injury. Or, the IND application may 
not have sufficient information for FDA to adequately assess the risk. 
For later phase studies, FDA may place an IND on hold if the study plan 
or protocol is deficient in design to meet its stated objectives. 
Clinical hold is an important human subject protection safeguard and 
also helps prevent the conduct of studies of investigational products 
that are unlikely to provide information that is useful in evaluating 
the product. FDA staff spends a considerable amount of time interacting 
with sponsors to resolve clinical hold issues.
    FDA strives to develop processes that facilitate product 
development to meet emerging public health needs, such as protection 
from terrorist agents and prevention of pandemic influenza and other 
emerging threats. The regulation known as the ``Animal Rule'' provides 
a mechanism for FDA to approve medical treatments based on 
effectiveness data from animal studies when human efficacy studies are 
unethical and/or not feasible. Under the ``Animal Rule,'' effectiveness 
would be evaluated in adequate and well-controlled animal studies that 
establish that the product is reasonably likely to produce clinical 
benefit in humans. Such approvals also require the demonstration of 
safety in humans. These safety studies may be conducted concurrently 
with the animal studies.
    An additional tool available to speed product availability is the 
ability for FDA to allow the use of unapproved products and unapproved 
uses (so-called ``off-label'' uses) of approved products, in a declared 
emergency, under the Emergency Use Authorization (EUA) provision of the 
Food, Drug, and Cosmetic Act. This authority was expanded under the 
Project BioShield Act. To authorize such emergency use, FDA would need 
to find that the agent can cause a serious or life-threatening disease 
or condition; that based on the available information it is reasonable 
to believe that the product may be effective against the disease or 
condition; that the known and potential benefits of the product's use 
outweigh the known and potential risks; and that there is no adequate, 
approved and available alternative.
    FDA works very hard to develop and define innovative and needed 
pathways and evaluation tools, and to provide technical assistance to 
facilitate development and availability of needed products that are 
safe and effective. One of our most critical and core roles is to 
protect human subjects and to provide an independent scientific 
assessment of the product, both during the development process, and in 
reviewing product applications and requests for EUA.
    To protect and preserve our scientific independence and judgment, 
FDA does not involve itself in specific HHS contracting decisions to 
award or terminate contracts. FDA's longstanding practice is to recuse 
ourselves from HHS decision making in specific contracting decisions. 
This was our process at the time of HHS's VaxGen acquisition contract 
and it remains so today. FDA does provide scientific and technical 
expertise on various HHS-led interagency counterterrorism working 
groups, which among other things are involved in defining the needs for 
medical countermeasures being pursued by HHS for the Strategic National 
Stockpile. In addition, FDA may provide technical comments to HHS upon 
request on draft Requests for Proposals for such countermeasures.
    At FDA, providing the American public with safe and effective 
medical products is our core mission. We base important decisions, such 
as to allow specific human studies of an investigational product, or to 
approve a vaccine or allow its emergency use, on the available 
scientific information and a careful evaluation of risks and benefits 
to patients. We also are fully committed and engaged in continuing to 
work with our federal partners and with product developers to provide 
an efficient product development pathway to achieve our nation's high 
priority public health preparedness goals.
    Thank you again for this opportunity to discuss vaccine development 
with the Committee. I welcome your comments and questions.

    Mr. Langevin. Thank you, Dr. Goodman.
    I want to thank all witnesses again for their testimony.
    Let me begin with Dr. Parker, if I could.
    Doctor, VaxGen's original contract from November 2004 
stipulated that the company begin delivering its vaccine to the 
strategic national stockpile once it met the standard for 
contingency use.
    In May 2006, HHS unilaterally modified VaxGen's contract to 
require the company to conduct an additional clinical trial so 
that the vaccine would meet the higher standard of emergency 
use before it could be delivered.
    What was the rationale for imposing this additional 
requirement?
    Mr. Parker. Mr. Chairman, thank you for the question.
    First, there was no additional requirement. It was clear 
that VaxGen was not going to be able to make their delivery 
time by the original contract.
    It was necessary to modify the contract to basically reset 
the clock and give the contractor the ability to continue the 
development and hopefully be able to deliver product that would 
be sufficient to meet the requirements for acceptance into the 
strategic national stockpile.
    We actually even used proposed timelines and the most 
conservative timelines that VaxGen had provided to us in 
resetting that clock for an imposed additional interim 
milestone so we could better track progress of this development 
effort.
    So the bar was not changed. The standards remained the 
same. We had to modify the contract to allow them additional 
time to hopefully be successful.
    Mr. Langevin. Now, when I had discussions with VaxGen, I 
asked the question in such a way that I said that it is my 
understanding that some thresholds were missed and we have 
spoken about that, but that the goalpost, so to speak, was 
moved further down the field. So that there were alterations 
that were made and so which is true, and the answer was 
basically both.
    You are saying that the goalpost was not moved.
    Mr. Parker. The goalpost was not moved. We modified the 
contract because it was clear they were not going to meet the 
original deadline to deliver product to the SNS. We modified 
the contract to allow additional development time using their 
timelines, most conservative timelines for delivery.
    The standards for meeting that requirement did not change 
and that was--in the contract, there was, in fact, spelled out 
very clearly, as an advanced understanding of what is required 
in regards to the clinical, non-clinical data, the need to have 
a validated manufacturing process in three consistency lots, 
and that they needed to--ultimately, these were going to be 
requirements that would be agreed upon by the FDA and also in 
consultation with us.
    It was also incumbent on the contractor, who worked very 
closely with the FDA, to very clearly understand what those 
ultimate requirement were.
    Now, VaxGen perceives and they have an opinion that there 
was a difference in what is defined as contingency use IND and 
emergency use authorization. But VaxGen was informed that the 
requirements, to satisfy requirements for either the use of a 
contingency use IND terminology or emergency use were the same 
thing. And so the requirement didn't change.
    Mr. Langevin. But didn't modification require additional 
tests for phase two?
    Mr. Parker. If it did, it was far into the future, but it 
still was the original terms of the contract did not change.
    Mr. Langevin. But additional tests are moving the goalposts 
down the field. Wouldn't you agree?
    Mr. Parker. No, no.
    Mr. Langevin. Doctors Fauci and Goodman, to what extent, if 
I could ask you, did NIH and CBER participate with HHS in 
review and evaluation of the RFP responses, in particular, 
VaxGen's proposed scope of the work and project plan?
    If they weren't involved with a program of this importance 
and viability, why weren't they? And if they were involved, why 
did CBER claim in December 2005, a year after the contract was 
issued, that they could not provide regulatory guidance 
specific to the SNS program because they were unaware of how 
HHS intended to use the vaccine in the stockpile?
    Dr. Fauci. Mr. Chairman, from the standpoint of the NIH, we 
were not involved in the evaluation of the contract. We did 
provide logistical assistance in the actual drawing up of the 
contract. In other words, people with contracting expertise 
were able to do that.
    We did not get substantively involved at all in the actual 
evaluation of that, but we did, on an ad hoc basis, the way any 
of a number of the agencies within HHS and outside of HHS were 
involved on an ad hoc basis with subject matter expertise, but 
not in the actual evaluation and scoring of the contract.
    Mr. Langevin. Dr. Goodman?
    Dr. Goodman. Mr. Chairman, we were not involved in 
reviewing contract applications for any applicant whatsoever 
and, as I have said, we have really tried to draw a bright line 
to be very clear and independent then in our evaluations of 
these projects.
    We have, as I have also mentioned, provided--to try to help 
the process and make things more likely to succeed, we have 
tried to provide technical input, scientific input to our 
colleagues at HHS as they develop the RFPs, et cetera.
    Now, with respect to your question about, I guess, VaxGen's 
statement that we, in December, when they asked for details 
about requirements, information, wanted to consider an 
emergency use authorization, I can make a couple of points.
    One is that that request was received very close in time, 
is my understanding from the review staff, before a meeting. So 
that in terms of time to review and do some of the fact-finding 
needed, that was an issue.
    What we needed to do at that point was there had been a 
number of changes that occurred over several months, including 
the addition of the licensed anthrax vaccine to the national 
stockpile, and we wanted to check with our colleagues in HHS 
and CDC to understand, in a possible emergency use 
authorization, what was their vision of how this product might 
be used, because part of our assessment are things like what 
kind of patients would get it, for what indication, how many 
patients might get it, how would it be used relative to the 
licensed vaccine.
    Actually, this was an attempt to get the best information 
in order to be able to provide VaxGen with the most up-to-date 
advice, which we then provided them very shortly thereafter. 
And I would say that that advice, also, from talking to my 
review staff, who had very intensive interactions with this 
company over many, many months, that that advice was entirely 
consistent with previous advice that they have received.
    Mr. Langevin. Thank you, gentlemen.
    The chair now recognizes the ranking member of the 
subcommittee, the gentleman from Texas, Mr. McCaul.
    Mr. McCaul. I thank the chairman.
    Mr. Parker, on May 9th of 2006, you appeared before a House 
Government Reform Subcommittee and you were asked by 
Congressman Shays about what you perceived as the number-one 
threat to this country and your response was, as you will 
recall, ``Anthrax, anthrax, anthrax.''
    I think you were correct then and I think it is still 
correct today. Yet, on November the 4th, 2004, a contract that 
was awarded to VaxGen, a company that really had no history of 
any production success, had no history of a successful vaccine 
being produced, a company which since then has defaulted on its 
contract, the contract has been canceled and now they have 
appealed and have apparently settled with the United States 
government.
    I question that contract award, particularly when you had 
companies like Emergent Biosolutions, particularly that 
company, which had an FDA approved vaccine.
    Now, I understand the contract was for a second generation 
vaccine, but I would like to know, and this is more for the 
panel, why was this contract awarded to VaxGen, again, a 
company with really no track record of success, over a company 
which did have a track record, actually had stockpiled doses of 
anthrax, was actually on contract with the Department of 
Defense?
    This is the number-one priority in terms of bioterrorism 
and I don't understand why that award was made the way it was.
    And I will say that I just received word, though, that HHS 
has announced that they will be buying 10 million doses of the 
anthrax vaccine, an additional four million that DOD will be 
purchasing.
    To date, I am only aware of one manufacturer that could 
possibly comply with that.
    And I don't know--and that has happened, Mr. Chairman, 
during the course of this hearing, which, if that is in any way 
attributed to this hearing, a policy success in a bipartisan 
fashion.
    Having said that, as a former federal prosecutor, I 
question the integrity has been compromised in the bidding 
process when you have a copy such as VaxGen getting this type 
of award.
    So I would like to just go ahead and throw that out to the 
panel for your comment.
    Mr. Parker. There is a lot in your question, but let me 
first just take the original award to the VaxGen contract and 
why it was important to pursue a second generation anthrax 
vaccine.
    And I will just summarize very quickly, but that was 
originally a recommendation out of the Institute of Medicine at 
about the same time when formerly BioPort, now Emergent was 
still undergoing their renovation and really coming out of a 
tough period in their corporate history.
    But there was a strong recommendation out from the 
Institute of Medicine to pursue a newer generation vaccine that 
would have some manufacturing advantages, particularly when it 
comes to consistency and characterization of the product.
    And so there was a decision at the time to vet it in the 
interagency and a decision that went to the deputies committee 
to pursue the second generation anthrax vaccine.
    Now, that was a procurement that was an open, competitive 
procurement. There was a technical evaluation panel that 
included government and non-government experts that reviewed 
the submissions against that proposal and VaxGen received the 
highest technical score and cost and was the one that was 
recommended for approval.
    The I.G. has subsequently looked back at that acquisition, 
has rendered an opinion and if you haven't seen it, we will 
make sure that you get a copy of that.
    We are actually going back into doing an acquisition 
analysis, a well, as part of our quality assurance and lessons 
learned in the department to take a real hard look at that, as 
well.
    But it was a straight-up, under the FAR, competitive 
acquisition and was selected. Now, in regard to--
    Mr. McCaul. If I can say it, it is either a competence 
issue or something worse as to why a company with absolutely no 
success gets awarded a contract over one that has an FDA 
approved vaccine.
    It just raises some serious questions--
    Mr. Parker. That particular procurement was only focused on 
second generation, a recomb protective antigen and anthrax 
vaccine absorbed wasn't able to submit under that, because it 
is the current generation's licensed anthrax vaccine.
    Now, we do have a comprehensive--I agree, my statement 
still stands from that former testimony. That is my opinion 
about the seriousness of the threat and it is extremely 
important that as we move forward to pursue a very 
comprehensive strategy for anthrax vaccines, because of--
    Mr. McCaul. If I could just conclude, because I know my 
time has expired.
    It has been 6 years since we have had the anthrax threat 
and since 2004--we don't have anymore time to waste on this. It 
is an urgent matter and I commend the chairman for holding this 
hearing.
    I would hope that when VaxGen returns for their testimony, 
that we will look into this bidding process, as well, and 
conduct an investigation into that.
    Thank you and I yield back the balance of my time.
    Mr. Langevin. I thank the ranking member.
    The chair now yields to the gentlelady from the Virgin 
Islands, Ms. Christensen, for 5 minutes.
    Mrs. Christensen. Thank you, Mr. Chairman.
    Dr. Parker, you were, I think, here when we had the 
previous panel and there was a question of what did ``BioShield 
eligible'' mean, because that is the criteria for eligibility 
for the contract.
    So can you define ``BioShield eligible'' for me?
    Mr. Parker. BioShield eligibility is not a request for 
proposal terminology. I think the heart of your question, 
though, really gets at some of the issues of how we need to 
move forward with BioShield and some of the shortcomings that 
were recognized as we began to look at how to better improve 
BioShield almost a year ago when we began to discuss the merits 
of BARDA and the need for advanced development.
    The BioShield acquisition, they stipulate procurement 
contracts. We also have, although it sounds like a lot, in the 
special reserve fund, $5.6 billion. It is fixed and it is 
limited.
    And when we are talking about the development and 
acquisition of medical countermeasures, when some procurements 
or development costs may be in the realm of $800 million to 
$1.5 billion, there are some limitations.
    We have to exercise fiscal responsibility. So what 
BioShield, as in Dr. Fauci's slide, was at that very end of the 
acquisition procurement and what we didn't have to be able to 
reduce some of the risks was the robust advanced development so 
we could bridge that gap between the basic and applied 
research, whether it is coming from an NIH-funded, whether it 
is coming from DOD-funded, whether it is coming from the 
private sector, without government support, that we could help 
and bridge that gap and hopefully have more candidates in an 
advanced development that would be more mature when it is time 
to do a BioShield procurement.
    Mrs. Christensen. I have a number of questions. I think I 
read it in the GAO report and I am assuming that referred to 
Neumune, that it was canceled because it was not mature, it 
wasn't at the level of maturity.
    So I would like you--
    Mr. Parker. Well, that speaks--
    Mrs. Christensen. --to tell me that and I would like FDA to 
tell me if you get involved at that level to decide whether the 
drug is mature enough to be a part of BioShield, to get a 
contract.
    Mr. Parker. It is a matter of timing and risk and we 
actually discussed this in the barriers report to Congress, 
which we will make sure you have a copy.
    It is an issue of timing and risk when you move a product 
into a BioShield type program.
    Mrs. Christensen. They have 8 years to develop the project. 
So how much further does it have to be is what I am trying to 
figure out.
    Mr. Parker. In any countermeasure, there has to be 
sufficient and convincing data, whether that is clinical, non-
clinical, safety, efficacy data, not just proof of concept, but 
very convincing data.
    There has to be a very strong manufacturing plan and there 
has to be assurance and confirmation that their whole 
developmental plan includes all of the necessary studies that 
is going to allow a product to move in and be eligible for, 
one, licensure, but also eligible to move into the strategic 
national stockpile prior to licensure so they can begin to 
receive payment.
    Mrs. Christensen. Within 8 years.
    Mr. Parker. The law stipulates that there has to be 
convincing data that would support licensure within 8 years.
    Mrs. Christensen. Does FDA get into the decision of level 
of maturity at that point?
    Mr. Parker. No, not normally, although, again, if our 
colleagues ask us, we might provide scientific input. We 
wouldn't evaluate a specific product necessarily.
    Mrs. Christensen. I have a question that comes out of the 
GAO report, actually it is two, that was prepared for us this 
month and you mentioned the limits, the appropriation limits. 
The funding is available during certain time limits.
    To what extent is that limiting factor explaining the 
contracts lagging behind the MTDs and to what extent is another 
factor that was raised in the GAO report, which is problems in 
interagency coordination and communication, a part?
    I would ask Dr. Runge to answer, also, both of you.
    Mr. Parker. I will talk about the--the special reserve fund 
is $5.6 billion over 10 years, $3.2 billion can only be 
obligated through the fiscal year 2008 and the remainder of 
fiscal year 2009 to 2013.
    And what we have done is moved out with the original four 
material threat determinations to establish acquisition 
programs against those original material threat determinations 
and now we have a larger list of material threat determinations 
in our implementation plan that is just now going to be coming 
out, actually establish our development and acquisition thrust 
targeted against the new material and older material threats, 
the complete list of material threat determinations to signal 
what are going to be the priority medical countermeasures, also 
using the principles that we establish in our strategy and the 
national strategy, HSB-18, I think, that was mentioned earlier, 
to make a prioritized list of the highest priority medical 
countermeasures against the highest priority threats against 
those material threat determinations.
    Again, the advanced development is going to be critical to 
help us improve in not only implementing BARDA, but to improve 
the implementation of BioShield which is component of this.
    Now, as far as interagency coordination, we have actually 
done a great deal of work and Dr. Runge and I, with both of our 
leadership, we have been able to work very, very well over the 
last year to really streamline and improve any issues that may 
have been there in the past as far as interagency coordination.
    And so I thank Dr. Runge in his help in doing that.
    Dr. Runge. Dr. Christensen, thanks for the question. Just 
very briefly, your direct question, does the limitation of 
BioShield funding affect lag time and MTD development or 
response to the MTDs, and I don't believe so.
    Those funds are strictly for the acquisition. The funding 
for the material threat determination process and the 
population threat assessment process is, of course, separate 
funding that is given to DHS to do that.
    Dr. Parker is correct and I do think that the original four 
were more common sense based on intelligence and history and 
what we knew at the time. They were not based on the same tool 
that we use now to stratify the material threats or determine 
which are material threats and which are not.
    I do think that HHS moved out smartly in the beginning on 
those and DHS was a bit slow in delivering the rest of the list 
and it was dependent upon the development of a very complex 
tool that was delivered to the White House on February 1st of 
2006.
    Since that time, we have completed the look at all 28 
agents and have come up with the list of 12 biologicals, as you 
are well aware, I think.
    Mr. Langevin. The gentlelady's time has expired.
    The gentleman from California, Mr. Lungren, is recognized 
for 5 minutes.
    Mr. Lungren. Thank you very much, Mr. Chairman.
    I have probably not delved into this as much as some of the 
other members of the panel, so my questions might be a little 
more basic.
    But, Dr. Fauci, you mentioned that one of the great 
accomplishments is that we have gone from smallpox capacity 
from 18 million to you say now we have it for everyone in the 
country and I suppose that is so that if we were exposed to a 
smallpox epidemic either because of natural causes or a 
terrorist threat, we would want to be able to cover all the 
potential victims.
    Then, Dr. Parker, you said that if you were to line up the 
most important threats, it would be anthrax, anthrax, anthrax 
and you said you still look at it that way, correct?
    Mr. Parker. Of the bio threats.
    Mr. Lungren. Of the bio threats, yes. And we just talked 
about material threat determination and population threat 
assessment and I guess if we did all that with respect to 
anthrax, it would be pretty much up towards the top.
    So my question is this--is there something structurally 
wrong with the legislation that we have given you under which 
you operate, that as we are attempting to pursue the second 
generation anthrax medical fix, that we don't do enough to deal 
with the anthrax medical fix that is currently available to us, 
as Dr. Fauci said.
    You have proven that with the first generation plus 
antibiotics, we have got a pretty good answer to those who are 
exposed, if I understand you correctly.
    If that is the case and we have an obligation for a 
strategic stockpile, my question is you have made the 
determination here, Dr. Parker, or at least it was announced to 
us that you made the decision to buy 10 million more units, why 
now? Why not before?
    Are you constricted by funding? Is it because we have given 
you a thrust that you ought to be looking at that which is more 
perfect in the future than that which is available now?
    This is a very practical question. If we had an anthrax 
attack--excuse me--if we had another anthrax attack, only this 
one was based on weaponized and it affected a large population 
base and at least there have been some scenarios to suggest 
that that could be true in my state of California and 
Washington or New York, I take it we don't have the capacity to 
respond right now the way we would want to if we had that, even 
though we know through the work that has been done that Dr. 
Fauci talked about we have a fix for it.
    And if we had that attack, we had a large number of people 
severely injured and died and part of the problem was we didn't 
have enough of the medical response to it, number one, how 
could I look myself in the mirror, but, number two, how could I 
respond to constituents to say that we were looking for the 
second generation that would have really solved the problem, 
but we didn't put enough money to the first generation?
    Is that our fault? Is that Congress, such that we have 
structured it that you don't have the funds to do that? That is 
what I am trying to get at.
    Can you help me?
    Mr. Parker. Well, first, I just want to say that 
antibiotics are the first line of defense and we do have a very 
significant stockpile of antibiotics and that is the first line 
of defense. Anthrax--
    Mr. Lungren. But haven't we learned that antibiotics--
    Mr. Parker. Anthrax vaccines--
    Mr. Lungren. --and the other actually really works?
    Mr. Parker. Pardon me?
    Mr. Lungren. Didn't Dr. Fauci say it is antibiotics and the 
combination of the vaccine that really works?
    Dr. Fauci. But that was an experiment to answer a question 
that was somewhat vaguely answered several years ago that if 
you challenge an animal and you know that you would have to 
give them 60 days of, for example, ciprofloxacin and still not 
be 100 percent certain that you have eliminated every single 
anthrax spore, if you give antibiotics with the vaccine versus 
antibiotics without the vaccine, the time element is less.
    That doesn't take away from the fact that the best approach 
towards anthrax is antimicrobial therapy.
    Mr. Lungren. So I guess my question is if it were your 
child or your family member, would you give them both the 
vaccine and the antibiotic?
    Dr. Fauci. Based on the data in the animal study, based on 
the data in the animal study, it suggests that you would get an 
extra kick out of doing both. However, I would point out that 
following the anthrax attack here in the Congressional area, 
that the people who took just antibiotics in prophylaxis, there 
was zero subsequent cases.
    Mr. Lungren. So what am I get out of that, that we 
shouldn't worry about having any of the vaccine, we can just 
satisfy ourselves with the--
    Dr. Fauci. No, I don't think so, because there are other 
uses for the vaccine besides complementing the antibiotic 
therapy. When you have people who might be first responders 
that would have to go in and, for example, decontaminate a 
building or if there are repeated attacks and you have to have 
the first responders go in and expose themselves, you would 
like to have them vaccinated as opposed to keeping them on 
perpetual antibiotics.
    Mr. Lungren. But I guess I would ask what the Capitol 
physician would tell me if I were exposed to anthrax here. Do 
you think the Capitol physician would tell me to just take the 
antibiotics or do you think he would tell me to take both the 
vaccine and the antibiotic?
    What I am trying to get at is do we have sufficient already 
existing first generation vaccine in the stockpile? That is 
question one.
    Mr. Parker. No, we don't. No. We need--
    Mr. Lungren. Question two is we are how many years past the 
anthrax threat and should we in Congress be directing us to do 
that or would we be wasting money because we want to go for 
another attempt at the second generation?
    Mr. Parker. Yes, we need a balanced approach to anthrax 
vaccines. It is critical that we have anthrax vaccines and, you 
are right, we need to aggressively continue to move forward and 
we need to have not reliance on one technology, because this is 
an evolving field, but our strategy needs to--yes, we need to 
make sure that we can sustain and have the current generation 
anthrax vaccine, but we need to continue to develop and procure 
a second generation vaccine.
    But we also need to look forward to that third generation 
that has better characteristics that make it more deployable in 
an emergency, in a disaster situation.
    So we need that balanced approach for anthrax vaccines.
    Mr. Langevin. The gentleman's time has expired.
    Mr. Etheridge is recognized for 5 minutes, the gentleman 
from North Carolina.
    Mr. Etheridge. Thank you, Mr. Chairman.
    Mr. Langevin. Before I do that, Ms. Jackson Lee has joined 
the committee and I would just ask unanimous consent for her to 
sit in. I don't know that there will be time to ask questions, 
but if there is, she would be invited to ask questions last. 
Without objection.
    Mr. Etheridge. Thank you, Mr. Chairman. Thank you.
    I am going to try to follow that line of questions for just 
a minute, too, if I may, because we are now almost 5 years past 
the anthrax scare here on Capitol Hill.
    Ultimately, in the process of all that, a number of people 
lost their lives. We have yet to find out who was behind it or 
who was involved in it.
    And the VaxGen contract indicates that HHS sees the need 
for the next generation, as you talked about. So let me ask my 
question all three in one.
    Dr. Parker, you first, and then the rest of you may comment 
on it, so we can expedite this.
    What is the current state of the strategic national 
stockpile supplies of licensed anthrax vaccine and 
therapeutics? And, of course, that includes antibiotics, as 
well as the treatment for post-exposure treatment to anthrax.
    Secondly, what is the current state of public health 
systems readiness for another attack, including specifically 
the status of vaccines for emergency responders, critical 
workers at the federal, state and local levels, and should we 
be stockpiling existing licensed medical countermeasures while 
new technologies are being developed?
    And, finally, has the failure of VaxGen caused significant 
damage to our state preparedness and what are HHS's plans to 
meet the required 75 million doses of anthrax vaccine for the 
strategic national stockpile?
    Mr. Parker. I really think I would maybe answer the last 
question as we are going to be moving forward in a multi-
pronged approach on satisfying enough vaccine in the stockpile 
to be able to provide protection to post-exposure prophylaxis 
for 25 million people.
    We have already procured 10 million doses of ABA. We are 
going to and we plan to procure an additional 10 million doses 
of ABA. We continue the development of the second generation 
anthrax vaccine through the NIH program and we are looking at 
the right timing to come out with the next request for proposal 
for the second generation anthrax vaccine, as I have talked 
about, risk and timing and we have to time that perfectly.
    And then I have forgotten now the first question. Let me go 
back to that.
    Mr. Etheridge. Well, the first one dealt with the current 
state.
    Mr. Parker. And another thing that is very important here, 
that another part of our armamentarium, in addition to the 
antibiotics, are the antitoxins, as well, that we need to have 
antitoxins to be able to treat symptomatic anthrax disease.
    And so that is some of the BioShield procurement programs 
that are underway. You heard about one of the candidate 
products earlier this afternoon. So it is the vaccines, it is 
the antitoxins, and it is the antibiotics and currently in the 
strategic national stockpile, we have enough antibiotics to 
provide post-exposure prophylaxis for up to 40 million people.
    And we also have intravenous--
    Mr. Etheridge. And that would take care of all of our first 
responders and emergency personnel.
    Mr. Parker. Antibiotics, that would be in case there is an 
anthrax attack to provide antibiotics for post-exposure 
prophylaxis. And there is also intravenous antibiotics for 
treatment of anthrax disease, as well.
    In addition, what we need is the antitoxins and we have a 
small amount of antitoxins.
    Mr. Etheridge. How small amount?
    Mr. Parker. I don't recall that exact number, but it was--
    Mr. Etheridge. Could we get that number?
    Mr. Parker. We can get that number for you, sir.
    Mr. Etheridge. Thank you.
    Mr. Parker. But another key component of this, though, is 
for emergency response and it continues to be something we are 
going to work very hard on.
    These medications in these stockpile have got to be--we 
have got to be able to get them into patients quickly. So mass 
distribution of medical countermeasures is also a very key 
problem and we have a few programs, like city readiness 
initiative, a program called the MedKit.
    We are working at novel ways to help our colleagues at the 
state and local and the community level be able to--where we 
can more rapidly, once we have a detection that there is an 
anthrax attack, deploy the stockpile and more rapidly be able 
to distribute the medications where they need to be, and that 
is with people that are potentially exposed, are exposed.
    Dr. Runge. Congressman Etheridge, if I could just elaborate 
on that one second.
    Dr. Parker has outlined a comprehensive plan within the 
public health response and I don't think I have to tell this 
committee that that is only one piece of an end-to-end 
strategy.
    DHS is doing planning around everything from biosecurity 
overseas, the intelligence necessary to prevent people from 
coming here to do this sort of thing, working with EPA all the 
way through the ``how clean is clean'' protocols and 
environmental cleanup.
    The importance of anthrax vaccine, I might add, also, is 
that because of these protocols of when do you re-inhabit a 
building, there will also be significant pressure to vaccinate 
people so that they can re-inhabit a building that may have 
been exposed to anthrax.
    We are also engaged in early detection through our BioWatch 
program, which I am sure you all are familiar with.
    So it is a great continuum here of our overall approach to 
what we do believe to be the number-one bio threat.
    Mr. Etheridge. Thank you.
    Mr. Langevin. The gentleman's time has expired.
    We have a vote on right now. My plan is I can go to Ms. 
Jackson Lee for about 3 minutes, if we can be brief, and then 
we could keep you here for another 24 hours, I suppose, and 
keep asking these questions.
    But we will adjourn the hearing at that point and we will 
be back for subsequent hearings and look forward to working 
with you.
    The gentlelady from Texas is recognized for brief 
questions.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman. I will 
speak with all deliberate speed and I appreciate the chairman's 
indulgence.
    I was here in Congress when the Senate buildings were shut 
down with anthrax. I was also in my district when everyone with 
baby powder were suggesting that anthrax was amongst them.
    I was in Asia during the avian flu. It created a great deal 
of hysteria and this is the government and I asked the 
question. I am listening to all of my colleagues and I wonder 
whether or not we are moving fast enough.
    And I know that you will quickly answer this question--
should we not be engaged in what I call reflective hysteria? 
This is a pending crisis, if it ever happened, and do we have 
enough urgency, Dr. Runge, Department of Homeland Security and 
others? If you could answer that quickly.
    Has Congress got their focus on it? Do you have your focus 
on it--I know you have been answering questions--sufficiently?
    And thank you, Chairman.
    Dr. Runge. Thank you, Congresswoman Jackson Lee. I do 
believe that we do feel a tremendous sense of urgency and I 
will confess that our office of health affairs that has been 
tasked with doing planning around this effort is fledgling.
    We were created officially on March the 31st, 2007. So we 
are about 3 weeks ago. We are awaiting a reprogramming to come 
over here to actually give us some funds to engage in this 
planning.
    In the meantime, our science and technology directorate has 
been very actively engaged with HHS, as I have as chief medical 
officer. There is very little I think we can do to speed up 
this process. It is kind of like we need a baby in a month, but 
we can't ask for nine women to produce one.
    Ms. Jackson Lee. Do you have enough money?
    Dr. Runge. The funding that we have right now, as we have 
outlined it, will be sufficient to do what we have to do, yes. 
And, again, welcome to the subcommittee and we would be happy 
to come over and brief you on the timelines for this.
    Ms. Jackson Lee. Quickly, I don't know if you have a quick 
answer.
    Mr. Parker. Actually, I do, maybe about the threat and, 
actually, it is a good discussion. We have had this discussion 
actually about pandemic influenza and that certainly is a very 
predictable threat.
    One thing we do have to caution against and that is 
complacency and I really think that is your issue. That may be 
our biggest threat is complacency.
    And so we have got to work hard and this is a sense of 
urgency. Certainly from my staff, our department, our working 
relationships, you can bet that we have a sense of urgency. But 
we have to guard against complacency.
    Ms. Jackson Lee. Yes, Dr. Goodman?
    Dr. Goodman. I really appreciate the opportunity. One thing 
I frequently say when I go around and talk about what we are 
doing is we are not conducting business as usual and at CBER 
and at FDA, we are looking at this not as that we sit there and 
wait for these products to come in and have a passive process, 
but that we are very active.
    We engage. We are constantly meeting with our colleagues, 
with manufacturers. We have come up with our colleagues with 
new science, new pathways to move stuff forward.
    So I think we see this as a very high priority, but I agree 
with the complacency issue. I think our country is interested 
in the news of the day or the week and we as the government and 
as leaders in the government have to keep this important threat 
on the front burner.
    The other comment that Tony and I both made is the 
investments we make in public health and product development in 
general will help us in general. So the vaccine industry and 
its recovery and its infrastructure getting stronger will help 
prepare for all these threats.
    So whether it is pandemic flu, anthrax, et cetera, we need 
to recognize how important these sort of non-economically-
driven public health needs are and how we need to strengthen 
our infrastructure to deal with those.
    Ms. Jackson Lee. Thank you.
    Mr. Langevin. I want to thank the panel for their testimony 
and thank the gentlelady for her questions.
    Ms. Jackson Lee. Thank you.
    Mr. Langevin. As I said in my opening statement, the bio 
threat is very real. I realize we all take that seriously. We 
need to move with all deliberate speed in developing 
countermeasures.
    We all want BioShield to work as it was intended and we 
want to make sure that you have resources to make sure that it 
does.
    We look forward to working with you in this continued 
challenging issue and, again, I thank you for your expertise, 
your service to the country and look forward to having you back 
before us once again.
    I thank the witnesses again for their valuable testimony, 
the members for their questions.
    The members of the subcommittee may have additional 
questions for the witnesses and we will ask that you respond 
expeditiously in writing to those questions.
    Hearing no further business, the subcommittee stands 
adjourned.
    [Whereupon, at 3:56 p.m., the subcommittee was adjourned.]

                             For the Record

   Prepared Statement of the Honorable Richard Burr, Senator, North 
                                Carolina

    Mr. Chairman, members of the Subcommittee, thank you for the 
opportunity to make a statement before your committee on the 
implementation of the Project BioShield Act of 2004, and the 
improvements authorized in the Pandemic and All-Hazards Preparedness 
Act, which was signed into law in December 2006. Although the 
Department of Homeland Security has a key role to play in successful 
implementation of Project BioShield--namely, timely completion of 
material threat determinations--my comments today will focus on the 
Department of Health and Human Services (HHS).
    Being one of the principle sponsors of Project BioShield in the 
House of Representatives, our intent was for BioShield to provide 
incentives for manufacturers of vaccines and drugs to swiftly bring new 
countermeasures to the market that would help protect us from attacks 
with chemical, biological, radiological, or nuclear (CBRN) agents. We 
have certainly made progress since its passage three years ago, but we 
remain unprepared for the possibility of such an attack. We do not have 
the range of vaccines and drugs necessary to prevent, contain and treat 
potential deliberate, accidental or natural disease outbreaks or 
chemical or nuclear attacks. The pharmaceutical and biotechnology 
industries and academia are still reluctant partners.
    I know there will be criticism voiced today about the recent 
termination of BioShield contracts and cancellation of Requests for 
Proposals. However, I hope we will be able to look back and see how the 
new requirements and authorities provided in the Pandemic and All-
Hazards Preparedness Act will help alleviate some of the concerns. 
There will undoubtedly be areas that still need improvement, and I look 
forward to working with my colleagues to address them in the future. At 
the end of the day, we all want Project BioShield and the new 
Biomedical Advanced Research and Development Authority (BARDA) to be 
successful in order to protect the American people from future threats.

Project BioShield
    The Project BioShield Act of 2004 was an important step forward in 
accelerating the development of medical countermeasures. It established 
a $5.6 billion ``guaranteed market'' for biodefense medical 
countermeasures developed by private industry. It was the right idea, 
but we needed more. BioShield has ended up being primarily a 
procurement mechanism and has not been enough to persuade large 
experienced pharmaceutical companies to redirect their research and 
development dollars towards biodefense. The organizations doing 
biodefense countermeasure research are smaller, less experienced 
biotechnology companies and research institutions.
    Drug and vaccine development is a risky and complicated business--
most products under development never make it to market. Since the 
federal government is usually the only viable market for biodefense 
countermeasures, these companies and research institutions need a 
government partner that accepts some of the risk. We also need to get 
products further along the development pipeline before we expect HHS to 
make billion dollar procurement decisions.
    While the National Institutes of Health supports basic research, 
BioShield was not structured to support the advanced research and 
development of medical countermeasures. A lack of funding for advanced 
development at this critical stage stalls many promising drugs and 
vaccines in the lab. But BioShield was not set up to be a development 
program; rather, it is a procurement program.

Biomedical Advanced Research and Development Authority
    As Chairman of the Senate Subcommittee on Bioterrorism and Public 
Health Preparedness during the 109th Congress, I had the opportunity to 
reevaluate Project BioShield. I developed the model for BARDA after a 
year of public hearings and roundtables to explore the challenges in 
biodefense medical countermeasure development.
    BARDA, established in the Pandemic and All-Hazards Preparedness 
Act, will improve our ability to quickly develop drugs and vaccines to 
protect against CBRN threats. The intent of BARDA is to bring more and 
better medical countermeasures to the public faster in case of 
emergency. BARDA reorganizes and enhances HHS medical countermeasure 
research, development, and procurement activities--providing three 
major benefits.
    First, BARDA is the single point of authority within the federal 
government for the advanced research and development of promising new 
medical countermeasures to meet the government's civilian needs. This 
makes it clear to industry and academic institutions where they should 
go to be connected with necessary guidance, technical assistance, and 
funding. BARDA will be headed by a Director and will have a lean 
management staff that is experienced in product development and is not 
risk averse.
    Second, BARDA will be an aggressive venture capitalist partnering 
with universities, research institutions and industry on the advanced 
research and development of promising drugs and vaccines, through an 
open, transparent, and unclassified process. BARDA will have real-time 
access to the results of drug and vaccine trials and will directly 
invest in the most promising candidates to bridge the ``valley of 
death'' where most products fail. Using milestone-based payments, BARDA 
will become a financial partner with these institutions and companies 
during later stages of development to share some of the risk and prove 
the merit of promising drug and vaccine candidates. Modest investment 
by the government during the critical advanced research and development 
stage can attract four to six times that amount in private investment 
and can ensure that promising products cross the finish line.
    BARDA will cast a wide net in search of promising research on 
possible medical countermeasures being done domestically and abroad, 
and will enable HHS to bring products further along the development 
pipeline, before making a decision to buy them through BioShield.
    Finally, BARDA will bring innovation to a process that is too slow 
to combat terrorist activities or Mother Nature. Modeled after the 
Defense Advanced Research Projects Agency's successes in defense 
research, BARDA will make HHS more dynamic, nimble and accountable. 
There is not enough time or funding to develop one medical 
countermeasure for each identified threat. It still takes up to a 
decade and costs hundreds of millions of dollars to develop a new drug 
or vaccine countermeasure. This one-bug, one-drug strategy must change.
    BARDA has the flexible authorities and necessary resources to 
support research and development of platform technologies, research 
tools, and other devices that have the potential to revolutionize drug 
and vaccine development. For example, BARDA has flexible hiring 
authorities to attract the best and the brightest minds to staff it. 
BARDA has ``other transactions'' authority to enter into more flexible 
arrangements with researchers. And HHS has a limited antitrust 
authority, which enables HHS and BARDA to engage with industry in a new 
way ? possibly linking smaller biotechnology companies with larger 
pharmaceutical companies during advanced development to create new 
synergies of expertise.

Conclusion
    If we fail to overcome the fundamental obstacles to rapidly 
identifying and developing new medicines to counter biological, 
chemical, radiological or nuclear agents and emerging pandemic 
infectious diseases we will miss yet another opportunity to improve 
America's preparedness for all public health threats. BARDA builds on 
BioShield to do just this.
    I am pleased the Senate confirmed Dr. Craig Vanderwagen as the new 
HHS Assistant Secretary for Preparedness and Response, a position 
created in the Pandemic and All-Hazards Preparedness Act. I am 
confident he has the experience to do the job well. Now, HHS needs to 
recruit a BARDA Director who has the necessary skills and experience in 
private sector drug and vaccine development, and Congress must 
appropriate sufficient funds to give BARDA every opportunity for 
success.
    In the fiscal year 2007 supplemental appropriations bills, the 
House and Senate transferred $49 million to get BARDA up and running. 
In the 2008 budget resolution, the Senate accepted my amendment to 
increase funding for BARDA by at least $140 million. This would fully 
fund the President's request of $189 million for advanced research and 
development of medical countermeasures.
    With a strong BARDA Director, and sufficient funding, BARDA has the 
potential to fill many of the voids identified in BioShield and ensure 
that more and better medical countermeasures are available to the 
public faster in case of emergency.

                                 
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