[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
          FURTHERING PUBLIC HEALTH SECURITY: PROJECT BIOSHIELD

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

                             JOINT HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                        COMMITTEE ON ENERGY AND
                                COMMERCE

                                and the

          SUBCOMMITTEE ON EMERGENCY PREPAREDNESS AND RESPONSE

                                 of the

                      SELECT COMMITTEE ON HOMELAND
                                SECURITY

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 27, 2003

                               __________

           Committee on Energy and Commerce Serial No. 108-11
         Select Committee on Homeland Security Serial No. 108-1

                               __________

      Printed for the use of the Committee on Energy and Commerce


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

                               __________


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                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                      Ranking Member
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio                RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania     RICK BOUCHER, Virginia
CHRISTOPHER COX, California          EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina         SHERROD BROWN, Ohio
  Vice Chairman                      BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia             BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois               BART STUPAK, Michigan
HEATHER WILSON, New Mexico           ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING,       GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                THOMAS H. ALLEN, Maine
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho

                  David V. Marventano, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

                         Subcommittee on Health

                  MICHAEL BILIRAKIS, Florida, Chairman

JOE BARTON, Texas                    SHERROD BROWN, Ohio
FRED UPTON, Michigan                   Ranking Member
JAMES C. GREENWOOD, Pennsylvania     HENRY A. WAXMAN, California
NATHAN DEAL, Georgia                 RALPH M. HALL, Texas
RICHARD BURR, North Carolina         EDOLPHUS TOWNS, New York
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
  Vice Chairman                      BART STUPAK, Michigan
BARBARA CUBIN, Wyoming               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           GENE GREEN, Texas
JOHN B. SHADEGG, Arizona             TED STRICKLAND, Ohio
CHARLES W. ``CHIP'' PICKERING,       LOIS CAPPS, California
Mississippi                          BART GORDON, Tennessee
STEVE BUYER, Indiana                 DIANA DeGETTE, Colorado
JOSEPH R. PITTS, Pennsylvania        CHRISTOPHER JOHN, Louisiana
ERNIE FLETCHER, Kentucky             JOHN D. DINGELL, Michigan,
MIKE FERGUSON, New Jersey              (Ex Officio)
MIKE ROGERS, Michigan
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)

                 SELECT COMMITTEE ON HOMELAND SECURITY

                 CHRISTOPHER COX, California, Chairman

JENNIFER DUNN, Washington            JIM TURNER, Texas
BILL YOUNG, Florida                  BENNIE G. THOMPSON, Mississippi
DON YOUNG, Alaska                    LORETTA SANCHEZ, California
JAMES SENSENBRENNER, Wisconsin       EDWARD J. MARKEY, Massachusetts
W.J. ``BILLY'' TAUZIN, Louisiana     NORMAN D. DICKS, Washington
DAVID DREIER, California             BARNEY FRANK, Massachusetts
DUNCAN HUNTER, California            JANE HARMAN, California
HAROLD ROGERS, Kentucky              BENJAMIN L. CARDIN, Maryland
SHERWOOD BOEHLERT, New York          LOUISE McINTOSH Slaughter, New 
LAMAR S. SMITH, Texas                York
CURT WELDON, Pennsylvania            PETER A. DeFAZIO, Oregon
CHRISTOPHER SHAYS, Connecticut       NITA M. LOWEY, New York
PORTER J. GOSS, Florida              ROBERT E. ANDREWS, New Jersey
DAVE CAMP, Michigan                  ElEANOR HOLMES NORTON, District of 
MARIO DIAZ-BALART, Florida           Columbia
BOB GOODLATTE, Virginia              ZOE LOFGREN, California
ERNEST J. ISTOOK, Oklahoma           KAREN McCARTHY, Missouri
PETER T. KING, New York              SHEILA JACKSON-LEE, Texas
JOHN LINDER, Georgia                 BILL PASCRELL, Jr., North Carolina
JOHN SHADEGG, Arizona                DONNA M. CHRISTENSEN, U.S.V.I.
MARK E. SOUDER, Indiana              BOB ETHERIDGE, North Carolina
MAC THORNBERRY, Texas                CHARLES A. GONZALEZ, Texas
JIM GIBBONS, Nevada                  KEN LUCAS, Kentucky
KAY GRANGER, Texas                   JAMES R. LANGEVIN, Rhode Island
PETE SESSIONS, Texas                 KENDRICK B. MEEK, Florida
JOHN E. SWEENEY, New York

          Subcommittee on Emergency Preparedness and Response

                   JOHN B. SHADEGG, Arizona, Chairman

CURT WELDON, Pennsylvania            BENNIE G. THOMPSON, Mississippi
  Vice Chairman                      JANE HARMAN, California
W.J. ``BILLY'' TAUZIN, Louisiana     BENJAMIN L. CARDIN, Maryland
CHRISTOPHER SHAYS, Connecticut       PETER A. DEFAZIO, Oregon
DAVE CAMP, Michigan                  NITA M. LOWEY, New York
MARIO DIAZ-BALART, Florida           ELEANOR HOLMES NORTON, District of 
PETER T. KING, New York              Columbia
MARK E. SOUDER, Indiana              BILL PASCRELL, Jr., North Carolina
MAC THORNBERRY, Texas                DONNA M. CHRISTENSEN, Virgin 
JIM GIBBONS, Nevada                  Islands
KAY GRANGER, Texas                   BOB ETHERIDGE, North Carolina
PETE SESSIONS, Texas                 KEN LUCAS, Kentucky
JENNIFER DUNN, Washington            JIM TURNER, Texas
CHRISTOPHER COX, California

                                 (iii)

  

                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Baker, James, Jr., Ruth Dow Doan Professor, Director, Center 
      for Biological Nanotechnology..............................    49
    Friedman, Michael A., Chief Medical Officer for Biomedical 
      Preparedness, PhRMA........................................    57
    Noble, Gary, Johnson & Johnson...............................    64
    Read, J. Leighton, Biotechnology Industry Organization.......    51
    Thompson, Hon. Tommy G., Secretary, Department of Health and 
      Human Services; accompanied by Anthony Fauci, National 
      Institutes of Health.......................................    13
Material submitted for the record by:
    Baker, James, Jr., Ruth Dow Doan Professor, Director, Center 
      for Biological Nanotechnology:
        Letter dated April 25, 2003, to Hon. Michael Bilirakis 
          and Hon. John B. Shadegg, enclosing response for the 
          record.................................................    94
        Letter dated April 25, 2003, to Hon. John D. Dingell and 
          Hon. Sherrod Brown, enclosing response for the record..    97
    Bowdish, Katherine, President and Founder, Alexion Antiboby 
      Technologies, Inc., prepared statement of..................    82
    Friedman, Michael A., Chief Medical Officer for Biomedical 
      Preparedness, PhRMA, letter dated May 5, 2003, enclosing 
      response for the record....................................   100
    Noble, Gary, Johnson & Johnson, response for the record......    88
    Read, J. Leighton, Biotechnology Industry Organization, 
      response for the record....................................    84
    Thompson, Hon. Tommy G., Secretary, Department of Health and 
      Human Services, response for the record....................   105

                                  (v)

  

          FURTHERING PUBLIC HEALTH SECURITY: PROJECT BIOSHIELD

                              ----------                              


                        THURSDAY, MARCH 27, 2003

        House of Representatives, Committee on Energy and 
            Commerce, Subcommittee on Health, joint with 
            the Select Committee on Homeland Security, 
            Subcommittee on Emergency Preparedness and 
            Response
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:30 a.m., in 
room 2123, Rayburn House Office Building, Hon. Michael 
Bilirakis (chairman) presiding.
    Members present from the Subcommittee on Health: 
Representatives Bilirakis, Greenwood, Burr, Norwood, Wilson, 
Ferguson, Rogers, Tauzin (ex officio), Brown, Waxman, Eshoo, 
Stupak, Green, Capps, and Dingell (ex officio).
    Members present from the Subcommittee on Emergency 
Preparedness and Response: Representatives Shadegg, Weldon, 
Tauzin, Shays, Camp, Diaz-Balart, King, Souder, Thornberry, 
Gibbons, Granger, Sessions, Cox, Thompson, Harman, Cardin, 
DeFazio, Lowey, Norton, Pascrell, Christensen, Etheridge, Lucas 
and Turner.
    Also Present: Representative Dunn.
    Staff present: Brent Del Monte, majority counsel; Steve 
Tilton, health policy coordinator; Eugenia Edwards, legislative 
clerk; John Ford, minority counsel; and Jessica McNiece, 
minority staff assistant.
    Mr. Bilirakis. Would everybody please take their seats. 
Good morning. I do wish to announce to the members that 
Secretary Thompson, who is the first panel, has to leave by 
11:30 to 11:45 at the latest. So I would very much appreciate, 
on behalf of myself, Mr. Brown, Mr. Shadegg and his ranking 
member, if we could waive as many of our opening statements as 
possible so we can get to the Secretary.
    I now call this joint hearing of the Energy and Commerce 
Health Subcommittee and Select Committee on Homeland Security 
Emergency Preparedness and Response Subcommittee--what a 
moniker--to order.
    I would like to thank all of our witnesses for appearing 
before both of our subcommittees today and, in particular, I 
would like to recognize Secretary Thompson and thank him for 
taking the time to be with us for the second time during this 
108th Congress.
    Last year, the Energy and Commerce Committee worked 
together in a bipartisan fashion to produce the Public Health 
Security and Bioterrorism Response Act which President Bush 
signed into law in June of last year. I was proud to have been 
a part of this important effort. However, while our legislation 
has helped get critical resources out to the States and moved 
us closer to the reality of a comprehensive strategic national 
stockpile, more certainly needs to be done, and that is largely 
why we are here today.
    The possibility that our enemies might attack us with 
biological weapons remains a very significant threat. 
Unfortunately, while there has been tremendous and rapid 
progress in the treatment of many serious naturally occurring 
diseases, the medical treatments available for some types of 
bioterrorist attacks have improved little in decades.
    President Bush has proposed a strategy to deal with this 
obvious weakness in our defenses, and that strategy is 
encompassed in the administration's Project Bioshield proposal 
which we are here to discuss further today.
    I will let Secretary Thompson describe the details of this 
new initiative during his testimony. I do want to commend the 
President for offering this thoughtful proposal, and to 
anticipate that, if implemented, it will harness the power of 
our research driven pharmaceutical, biotechnology and medical 
technology industries in developing effective biomedical 
countermeasures.
    I am also interested in hearing about some of the 
challenges affected stakeholders will face in Project 
Bioshield, if Project Bioshield becomes a reality. We have a 
great deal of expertise in our second panel, and I hope the 
members take advantage of this opportunity.
    We are all here today, of course, with a very heavy heart. 
As our Nation commits to securing our safety overseas, it 
remains our responsibility to do what we can to ensure that the 
United States is ready for whatever bioterrorist threat we 
might face.
    Having said that, I say thank you, and I now yield to my 
friend, the gentleman from Ohio, for an opening statement.
    Mr. Brown. Thank you, Mr. Chairman. Welcome, Secretary 
Thompson. Welcome, Dr. Fauci.
    Expanding our arsenal of vaccines, antibiotics and other 
bioterrorism countermeasures is a shared goal, and I appreciate 
the administration's proactive efforts in that way. While I 
have questions about the funding mechanism and would like to 
understand more about the drug development contracts 
envisioned, I am confident we will work on a bipartisan basis 
to move this initiative forward.
    In that context, I hope the administration will consider 
additions that would materially increase our chances of 
achieving that objective. In addition to expanding and 
diversifying our supply of countermeasures, we must protect the 
weapons already in our arsenal. That means addressing anti-
microbial resistance.
    When bacteria are exposed to antibiotics, resistant strains 
survive and proliferate, posing other new threats to human 
health. This phenomenon makes it more difficult and vastly more 
expensive to treat a host of infectious killers and, unlike 
other medical challenges, there is no way to eradicate 
antimicrobial resistance. But by properly managing antibiotics, 
we can render resistance less dangers, less costly.
    If we don't take appropriate steps now to encourage the 
development of new antimicrobial therapies and cut back on non-
therapeutic antibiotic use, defending against bioterrorism will 
be far more difficult in the future. It makes sense to 
incorporate strategies to combat antibiotic resistance into 
Project Bioshield.
    Second, access to bioterrorist countermeasures is a 
function of availability and a function of price. In 2001, 
faced with weaponized anthrax, the administration was forced to 
haggle with Cipro makers for a price we could afford. Faced 
with building a stockpile of medicines to protect Americans 
from biological warfare, Mr. Secretary, you put it plainly, 
saying the price is the question.
    If prices are too high, we will be unable to buildup 
sufficient stockpiles. Public officials may be forced to cut 
corners. In the ensuing dispute the administration acknowledged 
that the Federal Government did, in fact, have the right to 
secure generic versions of Cipro, but was also concerned about 
the uncertain royalty payments that would be required.
    I introduced legislation last year aimed at addressing the 
constraints the Federal Government faced in securing Cipro. 
Under that bill, patent holders would be entitled to reasonable 
compensation, which they deserve as the product innovator, but 
the Secretary would have the authority to determine the 
reasonable compensation for use of a patent in a public health 
emergency under criteria which strike a balance between the 
need to maintain incentives for new drug development and the 
need to protect the public health.
    Project Bioshield certainly aims to spur R&D, as it should. 
Some would argue the safeguards I have proposed will mute this 
incentive. To that, I would answer that virtually every 
developed nation other than the U.S. has compulsory licensing 
laws on the books that apply to prescription drugs.
    Drug companies develop and market drugs, obviously, in all 
of these countries.
    In an ideal world, we could ignore the price component of 
the access equation, because it is invariably the most 
difficult to deal with. R&D is a tradeoff. If prescriptions are 
too expensive to reach those who need them, their inherent 
value is diminished, and the value of the R&D that went into 
them is also diminished. Price is important.
    Secretary Thompson, my compulsory licensing bill is one way 
to address pricing concerns, but it is not the only way. I 
would appreciate the opportunity to discuss price 
considerations with you as we move forward with Project 
Bioshield.
    I want to raise one more issue. If there is one lesson we 
have learned since September 11, it is that public health 
threats change and evolve. That principle obviously applies in 
developing as well as developed nations. Over the last several 
months, attempts have been made to modify the so called DOHA 
Declaration which promotes the ability of developing nations to 
secure lower price medicines to combat public health crises.
    The modifications would limit--that our government sought 
would limit the definition of public health threats to a 
handful of infectious diseases. Needless to say, bioterrorist 
attack was not included in that definition. This static and 
stringent definition ignores the reality that public health 
threats are diverse, and they change over time.
    This definition effectively locks developing nations into a 
cycle of poverty and disease and death. As we fight to protect 
the health and lives of Americans, I urge you, Mr. Secretary, 
to also fight for the health and the lives of individuals in 
impoverished.
    Your chairmanship of the global fund is a major, major 
commitment and step, and we are also pleased with that. I urge 
you to put the weight of the U.S. behind preserving the 
original intent of the DOHA agreement.
    I thank the chairman.
    Mr. Bilirakis. The Chair thanks the gentleman and now 
yields to the co-chairman of this hearing here today, a very 
valued member of the Energy and Commerce Committee and my 
health committee as well as the chairman of the Subcommittee on 
Emergency Preparedness and Response of the Select Committee on 
Homeland Security, Mr. Shadegg.
    Mr. Shadegg. Welcome, Secretary Thompson, and thank you 
very much, Chairman Bilirakis, for this synergistic effort 
between the Energy and Commerce Subcommittee on Health and the 
new Select Committee on Homeland Security's Subcommittee on 
Emergency Preparedness and Response.
    It is a distinct pleasure for me to co-chair this first 
ever hearing of a subcommittee of the Select Committee on 
Homeland Security, and first ever hearing, of course, of the 
Emergency Preparedness and Response Subcommittee.
    Now last November the Congress took a monumental step in 
reordering the priorities of the executive branch to put the 
Federal Government in a position to better protect American 
citizens and secure our borders by passing the Homeland 
Security Act.
    Among the functions that have been transferred to the 
Department of Homeland Security dealing with emergency 
preparedness and response include: the Federal Emergency 
Management Agency; the Integrated Hazard Information Systems, 
formerly at the National Oceanic and Atmospheric 
Administration; the National Domestic Preparedness Office of 
the FBI; and the Domestic Emergency Support Teams of the 
Department of Justice.
    There are two critical missions that have also been 
transferred to DHS which are particularly pertinent to today's 
hearing, those of the Office of Emergency Preparedness in the 
National Disaster Medical System, and the Metropolitan Medical 
Response System, as well as the strategic national stockpile.
    It goes without saying that September 11, 2001, was a wake-
up call for our country. I think we all knew about the 
potential threat for terrorist acts to take place in our 
homeland, but for a lot of us those were big concepts outlined 
by think tanks and policy experts.
    Only a month later we were faced with the prospect of 
anthrax mailings to New York, Washington, and your state, Mr. 
Chairman, Florida. That is when we discovered that the delivery 
mechanism for terror can take on a completely different look 
than a crude bomb or a lone gunman.
    We took our first step in addressing the new bioterrorism 
threat by passing the Bioterrorism Preparedness and Response 
Act overwhelmingly last year. Among the law's provisions was 
$1.15 billion in new funding to expand the country's national 
stockpiles of anti-bioterror drugs and vaccines, and for the 
purchase of additional smallpox vaccines.
    Today, we embark on a further effort in that war on terror, 
Project Bioshield. In an effort to energize and unleash the 
ingenuity of our Nation's best biomedical minds, Project 
Bioshield will direct the national Institutes of Health to 
accelerate research and development in the area of biochemical 
countermeasures. It will allow the Secretary of Health and 
Human Services the ability to procure biomedical 
countermeasures, and last it will give the Secretary the 
authority and ability to accelerate the introduction of 
unapproved drugs, devices, and biologicals to help the threat 
to American lives in an emergency.
    I look forward to the opportunity to fully explore all of 
the issues surrounding this creative proposal from the 
administration to address the bioterrorism threat that our 
Nation faces, including the question of mandatory or 
discretionary funding, whether there should be a sunset date so 
that Congress can take stock of the success or failure of this 
program, whether this effort will be enough to stimulate the 
interest in the private sector to produce the drugs and devices 
needed to protect American lives, and how much of the money 
devoted to this research will go--devoted to this task will go 
into research versus acquisition and countermeasures.
    Chairman Bilirakis, I welcome the Secretary here and look 
forward to the testimony of all of our witnesses, and yield 
back.
    Mr. Bilirakis. I thank the gentleman, and on behalf of Mr. 
Shadegg the Chair now yields to the ranking member of his 
subcommittee, Mr. Thompson.
    Mr. Thompson of Mississippi. Thank you, Mr. Chairman. In my 
capacity as the new ranking member of the Select Homeland 
Security Subcommittee on Emergency Preparedness and Response, 
it is with great pride that I have the opportunity to sit 
before you today to address and voice my concerns on an issue 
that is paramount in the minds of all Americans, safeguarding 
the United States against all acts of terror.
    In the wake of September 11, it has become apparent that 
America, unfortunately, is vulnerable to a vast array of 
terrorist attacks, not only attacks carried out through 
conventional means but unconventional, biological, chemical or 
radiological means as well. Being cognizant of all the possible 
threats lurking out there, we in the Federal Government must do 
everything within our means to give Americans peace of mind by 
knowing that this country has adequate countermeasures.
    It is quite evident that the country currently lacks the 
necessary medical countermeasures to deal with the acts of 
bioterrorism. In a recent study, the Defense Science Board 
found that the country has only 1 of 57 countermeasures 
required to deal with the top 19 bioterror threats. This means 
we need to be more than just a second generation smallpox and 
anthrax vaccine to guarantee the Nation's safety.
    In order to completely guarantee safety, we need a host of 
not just new vaccines but new diagnostic and therapeutics as 
well. I hate to imagine the pathogens out there that we have 
yet to encounter.
    In the past couple of weeks along, we have witnessed the 
emergence of a new virus, acute respiratory syndrome, SARS, for 
which we do not have treatment for spreading throughout Asia. 
Then thinking long term, we have to address the possibility of 
hybrid threats or genetically modified threats made to resist 
antibiotics.
    I say all this not to be an alarmist, but it is just to 
underscore the importance of the task at hand. I am pleased 
that the administration, acknowledging the grave potential for 
unconventional attacks, has created a dialog within Congress in 
hopes of resolving our Nation's deficient preparedness by 
unveiling Project Bioshield.
    Within a goal of stimulating new and accelerating existing 
biomedical research, bolstering the Nation's countermeasures 
stockpile, and implementing mechanisms to make such 
countermeasures widely available in the event of an emergency, 
Project Bioshield is an ambitious and very necessary proposal, 
long overdue. However, I do have some concerns regarding the 
legislation in its current form.
    I am concerned that the legislation is much more focused on 
the short term procurement of countermeasures than long term 
research. Also, I am concerned at the way the legislation 
treats companies potentially involved in or considering doing 
research in developing biological countermeasures.
    The legislation seems to offer narrow incentives for 
companies to get involved. It doesn't seem to promote 
competition among companies, and I am concerned that the 
legislation doesn't seem to provide an adequate recourse for 
companies to appeal decisions made by the Secretary.
    Mr. Chairman, this concludes my opening statement. Mr. 
Secretary, it is good to have you with us here today. I look 
forward to hearing your testimony, as well as the rest of the 
distinguished panel.
    Mr. Bilirakis. The Chair thanks the gentleman, and now 
yields to the chairman of the full Energy and Commerce 
Committee, Mr. Tauzin.
    Chairman Tauzin. Thank you, Chairman Bilirakis. I have two 
welcomes, first of all, first to Chairman Shadegg and to the 
members of the Select Committee on Homeland Security.
    Chairman Shadegg is no stranger to this committee room. He 
is a distinguished member of the Energy and Commerce Committee, 
but I want to welcome all the members of the Homeland Security 
Select Committee as this, I understand, is the first of the 
joint subcommittee process by which we will continue to do our 
work in conjunction with the work that Chairman Cox will do on 
the important select committee that has been created for this 
extraordinary and emergency problem our country faces at this 
time.
    I want to welcome all of you Democrats and Republicans to 
this distinguished room where so much work on protecting our 
country goes forward. I particularly want to thank again 
Secretary Tommy Thompson for coming personally to make the 
administration case on the Bioshield initiative, and thank you, 
Secretary Thompson, for several things. One, of all the people 
whom our committee has jurisdiction over in terms of their 
agency work, you have been the most forthcoming, the most 
cooperative and helpful in helping us develop policy for our 
country of anyone that I am aware of, and I want to thank you 
and your staff for that extraordinary level of cooperation, 
your personal commitment to work with our committee as we go 
forward.
    Second, great thanks for the work done in the last Congress 
on the bioterrorism bill which this committee produced. I 
believe that is going to pay great dividends in helping to 
secure our country.
    What you bring to us today makes all the common sense in 
the world. You basically make a case, as we should all make a 
case, where the market cannot do something critically important 
for our country, that we've got to step in and make sure it 
happens. In this case, there is no market for a plague vaccine, 
for example. No one in their right mind is going to spend 
scarce resources to develop a vaccine for a plague when there 
is no plague yet and there is no market for that vaccine.
    If we don't in government create a market, create an 
incentive for companies to develop the vaccines that are 
critical to protect us against diseases we thought had been 
wiped out and eradicated, but all of a sudden might pose a 
threat to our country in a terrorism sort of venue, who will 
produce that vaccine for us if we don't have a special program 
to make sure it gets produced and that Americans are protected 
because someone took the initiative to make sure that that was 
available for the tens of millions of Americans who might need 
it.
    Likewise, while no one wants to at all threaten the gold 
standard of Food and Drug Administration approval of drugs,if 
we were to have a bioterrorism attack against this country and 
we would be faced with the need to vaccinate and to treat 
millions of Americans, and there was a vaccine or a drug 
waiting approval that had all the evidence of being able to 
protect this country, why would we want to let the process 
stand in the way of dealing with that kind of an emergency.
    So you bring to us this initiative that basically gives our 
country in this extraordinary time, one, the ability to make 
sure there is in fact an incentive to produce the things 
critical to protect our country when the market might not 
otherwise do it, second, to make sure that we stand aside the 
normal processes, should the worst ever happen and we face that 
dramatic emergency, and we are prepared at that point to use 
whatever resources that might be available in the process, 
whether yet approved or not, to protect our citizens from that 
kind of harm.
    That is the kind of thinking we have asked all the agencies 
to do and the kind of initiatives we have asked them all to 
bring to us. We don't think like evil people in America. We are 
generally good people. When a plane went down when some pilot 
decided to commit suicide out of New York, most of us were 
thinking, you know, if he wanted to die, why didn't he just 
kill himself. Why did he have to take all the passengers down 
with him.
    In a cave in Afghanistan, Osama bin Laden was thinking, you 
know, if you just crash that plane into a building, we could 
kill more Americans. Evil people think differently than we do, 
and we've got to force ourselves to take these kind of 
initiatives and to think through the worst case scenarios that 
might happen to our country. I want to thank you for doing 
that.
    I want to thank you and the incredible staff you have for 
thinking of our country in that extraordinarily sensitive and, 
I think, productive way and for helping this committee do the 
right thing.
    Again, Mr. Chairman, thank you and, Chairman Shadegg, thank 
you, and if you will extend my thanks to Chairman Cox for the 
extraordinary way in which these two committees, I think, are 
going to work today and continue to work in the future. I yield 
back.
    [The prepared statement of Hon. W.J. ``Billy'' Tauzin 
follows:]
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Mr. Chairman: I commend you for calling this hearing to examine the 
Administration's Project BioShield proposal. Further, I would like to 
extend a special welcome to the Members of the Homeland Security 
Subcommittee on Emergency Preparedness and Response, who have joined us 
today. Also, while I look forward to hearing from all of our witnesses 
here today, I am especially grateful that Secretary Tommy Thompson has 
taken the time out of his busy schedule to join us to explain Project 
BioShield.
    There is no doubt that in these troubled times we should become 
increasingly vigilant against the threat of bioterrorism. While we are 
doing so much more now, on a proactive basis, to protect the American 
people from those wishing to do harm, we must still prepare for the 
worst.
    Project BioShield is a proposal which will help us prepare for the 
contingency of bioterrorist attack. Not only would it provide the 
government with better flexibility in terms of countermeasure research 
and development, but it also will create a market so that private 
companies will develop countermeasures for use in the event of an 
attack.
    Presently, it makes little sense for a drug or vaccine manufacturer 
to commit their scarce resources toward developing a countermeasure 
for, say, the plague. There is just no market for a plague vaccine. 
Project BioShield, however, would have the government create the market 
through ample funding. While I have concerns about the mandatory 
spending component of this proposal, I want to work with the 
Administration to ensure that whatever market we create is adequately 
funded in order to spur private development of countermeasures.
    Finally, the proposal would allow the use of unapproved drugs, 
vaccines, or devices in times of emergency. This proposal makes perfect 
sense. If there is a clearly superior vaccine on the cusp of FDA 
approval, yet for whatever reason approval has not been finalized, then 
it should be made available in times of emergency. This especially 
makes sense if we need to have tens of millions of people vaccinated in 
a matter of days. No one wants to replace the current ``gold standard'' 
at FDA through this proposal--rather, we need to provide the Secretary 
with utmost flexibility in times of health emergency.
    Again, I commend you for holding this hearing today. I look forward 
to the testimony of the witnesses.

    Mr. Bilirakis. Thank you, Mr. Chairman. The Chair now 
yields to the ranking member of the Select Committee, Mr. 
Turner.
    Mr. Turner. Thank you, Mr. Chairman. It is an honor to be 
able to join with you today in this joint hearing of the Health 
Subcommittee of the Commerce Committee and our Emergency 
Preparedness Subcommittee of the new Select Committee on 
Homeland Security.
    I had the opportunity to have a briefing from Secretary 
Thompson and Secretary Ridge a few weeks ago at the White House 
on this proposal. I think I join with all of us in the 
commitment to take care of this task with dispatch. The truth 
of the matter is there is no greater threat to our security 
than that represented by bioterrorism. Short of nuclear attack, 
there is no threat that can have the catastrophic loss of life 
that could result from bioterrorism.
    So this is a matter that clearly should be a priority of 
this Congress, and I am confident that we will be able to move 
this legislation with dispatch to ensure that we get on with 
the task of preparing to address these threats.
    I would like to say, and I hope Secretary Thompson will 
address this, that I have heard some concern since the initial 
briefing that we received about the unlimited power of the 
purse that is contained in the initial draft of the 
legislation, and Congress obviously will want to maintain its 
traditional role and constitutional responsibility regarding 
the funding of this project.
    I think there are some areas of the bill that could be 
strengthened to provide greater reporting and oversight by the 
Congress. Having said that, I do believe very strongly that 
these differences need to be settled rapidly, because this 
legislation needs to move forward as quickly as it possibly 
can.
    With that, Mr. Chairman, thank you again for the 
opportunity to join with you in this hearing.
    Mr. Bilirakis. Thank you, Mr. Turner, and I see that Mr. 
Dingell, the ranking member of the Energy and Commerce 
Committee, has just arrived. Opening statement, Mr. Dingell?
    Mr. Dingell. Mr. Chairman, thank you for your courtesy. Mr. 
Secretary, Doctor, welcome this morning. Thank you for holding 
the hearing, Mr. Chairman. As we continue to focus our 
attention on the very important and time sensitive issue of 
preparing for the possibility of a biological, chemical or 
radiological attack, I look forward to hearing from our 
witnesses, and I am particularly pleased to welcome our good 
friend from the University of Michigan, Dr. James Baker.
    We are here today to examine the administration's proposed 
Bioshield Act of 2003. It has three components. It seeks to 
accelerated research at NIH for the purposes of developing 
biomedical countermeasures. It proposes a guaranteed market to 
manufacturers of drug and medical device countermeasures, and 
it authorizes new Food and Drug Administration emergency use 
authorization for products and treatments still under 
development.
    The overall goal of the legislation has merit. Some of the 
specific provisions are cause of concern, and I think you could 
have heard my concern in the statement which I just made, 
pointing particularly to the emergency use authorization for 
products and treatments still under development.
    I would say that I am anxious to learn about them, and I 
want to hear what will be done to protect the American public. 
I am also curious, however, what will happen with regard to the 
unlimited, unfettered future appropriations without limits and 
without constraints. This is a blank check of the most 
extraordinary character that I have ever seen, and I will look 
forward to see how this is going to work, particularly with 
regard to its impact on basic procurements laws which are aimed 
at preventing waste, fraud and abuse.
    I could observe that this is very possibly a very bad idea 
and will need to be inquired into carefully by the committee. 
There are other questions of interest, I think, with regard to 
Project Bioshield Act of 2003. How will the government price 
products under the 5-year contract specified in the bill? Why 
does the bill allow for discount prices for unlicensed and 
unapproved products? Shouldn't there be more specific 
definitions for certain terms contained in this bill, such as 
product, significant market, and pressing research needs?
    Mr. Chairman, I thank you for recognizing me, and I thank 
our witnesses for their help as we begin forging the useful and 
well intended administration proposal into what I hope will be 
more sensible and workable legislation.
    Mr. Bilirakis. The Chair thanks the gentleman. As I 
announced early on when not too very many members were here, 
Secretary Thompson has limited time. He can only be here until 
approximately 11:30, maybe 11:45 at the latest. I would ask the 
members, if they possibly can, to waive their opening 
statements and to take that 3 minutes during their question 
time so they might have 8 minutes after that, but obviously I 
can't shut off, and will not shut off, any opening statements.
    So having said that and hoping to receive your cooperation, 
the Chair now yields to Mr. Shays.
    Mr. Shays. I will waive my opening statement.
    Mr. Bilirakis. All right, sir. Ms. Harman.
    Ms. Harman. Thank you, Mr. Chairman. I am happy to be back 
on this committee. I miss my service here, and I will look 
forward to returning to it very soon.
    I also want to welcome our guests, particularly Secretary 
Thompson, and thank you for enormous effort on behalf of the 
public health system of America. I want to thank you 
specifically on behalf of the residents of L.A. County who are 
going to keep our trauma system open because of the efforts by 
you, Tom Scully and others in your department. Thank you very 
much. It is a very, very big deal to southern California.
    I just wanted to say a few things about this legislation 
and try to put it in a context. As you know, I am the ranking 
member on the House Intelligence Committee, a high honor, I 
must say, and I am absolutely persuaded that the United States 
faces a real bioterrorism threat now.
    That makes it absolutely critical that we address market 
failures, as this bill intends to do--this program intends to 
do, to make certain that we have the antidotes and toxins and 
other medical agents that can help us respond effectively. I 
don't think this legislation is perfect.
    There are deficiencies that have been addressed by others. 
I think we should work together to address those deficiencies 
in structure and funding quickly and pass this legislation. A 
good model is the Bioterrorism Act that we passed last year. I 
was proud to play a small role in that. We worked together, and 
we were able to pass, I think, the first really important piece 
of homeland security legislation on a basically unanimous basis 
through the House of Representatives. That is a very good 
thing.
    Let me just tick off a few other issues that are out there 
that require urgent attention. One of them is not addressed by 
these committees, but it is proliferation of biological and 
chemical weapons. We have to get a hold on that. If we don't, 
we are going to continue to have this problem.
    Another is better information for the public about what to 
do in the event of a biological or chemical attack. That part 
of our warning system still needs work.
    The third, I would say, is a good program which we should 
agree on within the next week to make certain that our first 
responders want to get vaccinated with the smallpox vaccine so 
that they can protect the rest of us.
    Lois Capps on this committee has some extremely good ideas. 
I would urge the administration to reach for those ideas, 
incorporated in the administration program, so that we can get 
a truly bipartisan and effective piece of legislation on the 
floor.
    Thank you, Mr. Chairman.
    Mr. Bilirakis. Ms. Granger? Mr. King? Mr. Weldon? Thank 
you. Dr. Christensen.
    Ms. Christensen. I will reserve my time, Mr. Chairman.
    Mr. Bilirakis. Thank you, Doctor. Ms. Lowey. Thank you. Mr. 
Burr. You waive it? Good. Mr. Stupak.
    Mr. Stupak. I waive my time, Mr. Chairman.
    Mr. Bilirakis. Thank you. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Mr. Chairman. Mr. Secretary, 
since I also have conflicting responsibilities--I am sure many 
of us do--and I would like to hear your testimony, I waive my 
opening statement.
    Mr. Bilirakis. The Chair thanks the gentleman. We are 
moving right along here. Mr. Etheridge.
    Mr. Etheridge. Thank you, Mr. Chairman. I will waive my 
time until we get a chance for questions. Thank you.
    Mr. Bilirakis. Thank you. Mr. Norwood, Dr. Norwood.
    Mr. Norwood. Thank you, Mr. Chairman. Out of respect for 
the Secretary, I will waive my time and will require the 8 
minutes.
    Mr. Bilirakis. Thank you. I am sure you will. Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. I will put my statement 
in the record and save my time for the 8 minutes.
    Mr. Bilirakis. Thank you. Of course, the written statement 
of all members of both subcommittees is made a part of the 
record, obviously, with unanimous consent. Mr. Souder. Thank 
you. Mr. Lucas.
    Mr. Lucas. I waive my time.
    Mr. Bilirakis. Ms. Dunn.
    Ms. Dunn. Thank you, Mr. Chairman. I will waive my time, 
and only say to the Secretary, thank you for being here and 
bringing to public knowledge the insights you have into Project 
Bioshield. I think it is vitally important that folks at home 
know how much preparation is being done to provide for their 
security.
    Mr. Bilirakis. Mr. Pascrell.
    Mr. Pascrell. Mr. Chairman, I will submit a longer 
statement, but I want to, first of all, greet the Secretary and 
ask the Secretary to address the issue of oversight. While we 
are trying to expedite here, while we are trying to discover 
agents that need research in working with the pharmaceutical 
industry in this country, this Congress cannot relinquish its 
right to have oversight. We do that with an Apache helicopter. 
We must do it with anything that we are going to do to respond 
to bioterrorism, and I ask the Secretary to address that issue 
of Congressional oversight during the process.
    Thank you, Mr. Chairman.
    Mr. Bilirakis. Thank you. Mr. Kemp. Mr. Rogers. These are 
people who were here, but who have stepped out. Mr. Waxman. Ms. 
Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman. Good morning to you. I 
will place my opening statement in the record and reserve my 
time. Thank you.
    Mr. Bilirakis. I thank the gentle lady. Mr. Sessions.
    Mr. Sessions. Mr. Chairman, I seek no time. Thank you.
    Mr. Bilirakis. Ms. Capps. Thank you.
    Well, does that cover everybody? All right, the Chair 
really appreciates your cooperation.
    [Additional statements submitted for the record follow:]
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming
    Thank you, Mr. Chairman.
    We must be deliberate as well as responsible in how we go about 
developing any plan to combat biological and chemical agents.
    The possibility of such an attack in the United States is unnerving 
to all of us. We know the threat to be real so we must do whatever 
necessary to protect the citizens of this country--and we are.
    The Administration has presented us with Project Bioshield, and we 
are here to see if it meets the expectations of today. From what I know 
of it, I am encouraged.
    It is designed to spur innovation in the manufacturing and 
development of biological countermeasures.
    It gives NIH the flexibility to concentrate more research in this 
area. It provides mechanisms to get new drugs and technologies to the 
public faster when no alternatives exist.
    These are the kinds of things we must have in place if we are to be 
truly prepared for this type of warfare. I commend Secretary Thompson, 
his department, and the Administration in their efforts to do just 
that.
    I do however have questions today about the proposal. More 
specifically as they relate to liability protections, what it means to 
deal with highly dangerous pathogens, and the viability of producing 
drugs and devices solely for bioterrorism prevention.
    I'm simply interested in developing the best biological defense 
plan that we can. That will most assuredly require the collaborative 
efforts of everyone at the table today, and then some.
    We are in unchartered territory these days so we must be careful 
and thorough in how we go about this. It is also obvious however that 
time is not on our side.
    With that, Mr. Chairman, I look forward to hearing from our 
witnesses today, and yield back the remainder of my time.I63
Prepared Statement of Hon. Donna M. Christensen, a Delegate in Congress 
                        from the Virgin Islands
    I want to welcome Secretary Thompson, the first official witness 
that we the members of the newly constituted House Select Committee on 
Homeland Security will get to hear from.
    Today we are here to examine the Project Bioshield Act of 2003, the 
purpose of which is to increase the development of countermeasures to 
bioterrorism, and facilitate their approval for use and mass 
production, so that they would be readily available when needed.
    While research and development of such products is important, I 
think our time would have been better spent on ``furthering the 
question of Public Health Security''--a broader and more immediate 
issue.
    At this first meeting of the Subcommittee on Emergency Preparedness 
and Response, which I am honored to serve on, I want to say that that 
is my primary concern.
    We have long had deficiencies in our public health system. With the 
impact of rising health care costs due to our lack of focus on 
prevention and ensuring everyone's equal access to quality health care, 
and the systems continued deterioration, because of cuts in funding and 
misdirected policies, the nations public health infrastructure is in a 
worse position to provide heath security today than ever before.
    Even if we had the vaccines, medications and devices today to 
counteract all known or predictable bioterrorism agents, we would be 
stymied by the inability of public health systems in many parts of our 
country to act efficiently and effectively.
    So I hope we will spend an appropriate amount of time on the issue 
of public health security, particular because it takes upwards of 5, 
maybe as much as 15 years to develop new vaccines or therapies.
    We can't wait that long for protection.
    On the particular bill before us today, I have concerns about the 
broad powers of the Secretary of HHS; the open ended funding; the 
expedited procedures to make the countermeasures available for use, and 
what might be a lack of important safeguards.
    In conclusion let me once again welcome Secretary Thompson to this 
joint Subcommittee hearing today. I look forward to receiving your 
testimony, and the testimony of all of the witnesses before us today. I 
also look forward to working with you and your Department in developing 
a meaningful solution the Public Health Security needs of country as we 
continue to face the growing threat of terrorism and in our country. 
Thank you.
                                 ______
                                 
Prepared Statement of Hon. Bob Etheridge, a Representative in Congress 
                    from the State of North Carolina
    Thank you to both of our Chairmen for holding this hearing. This 
proposal is an extremely important element in our nation's war on 
terrorism, and I appreciate the opportunity to hear Secretary Thompson 
describe the legislation.
    I have a number of research institutions and pharmaceutical 
development companies in my district, and many of them have expressed 
an interest and desire to help defend our country from terrorist 
threats. Project Bioshield is an interesting proposal and a good place 
to begin the discussion of our support of scientific research and 
development.
    However, the measure also raises a number of questions and concerns 
regarding the lack of funding oversight by Congress, the potential 
safety of products rushed through an expedited approval process, and 
the extreme liability limits that would prevent those harmed or killed 
from the use of the countermeasures from receiving reasonable 
compensation.
    The best defense against terrorism is to prevent attacks. However, 
I know that a determined enemy can breach even the best defenses our 
country can provide, so we must also be prepared to respond to all 
threats. Thank you again for giving us the opportunity to begin 
discussions about this important proposal.

    Mr. Bilirakis. Having said that, I would now recognize 
Chairman Thompson. We will set the clock at 10 minutes, sir. 
Obviously, to get your message across, you will take whatever 
time you please. Please proceed.

 STATEMENT OF HON. TOMMY G. THOMPSON, SECRETARY, DEPARTMENT OF 
   HEALTH AND HUMAN SERVICES; ACCOMPANIED BY ANTHONY FAUCI, 
                 NATIONAL INSTITUTES OF HEALTH

    Secretary Thompson. Good morning, Mr. Chairman. I would 
just like to thank each and every one of you for giving me this 
opportunity to appear in front of this august body and to be 
able to talk about a very important subject. I thank all those 
individuals who have waived their opening remarks and, 
hopefully, have enough time to answer each and every one of 
your questions.
    The truth of the matter is, Mr. Chairman, we have a serious 
problem in America. When I took over as Secretary of the 
Department of Health and Human Services a little over 2 years 
ago, I found that we were ill prepared to deal with a 
bioterrorism threat. Subsequent to that time, we have done a 
lot of things.
    We purchased enough smallpox for every man, woman and child 
in America. We have put in place many different innovative ways 
to do research. We are looking for more. We also have developed 
probably one of the most modern communication--technologically 
advanced communication rooms dealing with information, dealing 
with tracking information on diseases and storms anyplace in 
the world.
    I would advise and suggest and invite each and every one of 
you to come over to the department and see it. I think, if you 
walk through it, you would see how well prepared we are to 
respond to any kind of chemical, biological or radiological 
event that may take place in our country, and I would invite 
each and every one of you, and hope you would do it when I can 
take you personally through it.
    Second, there are six counter-agents, bioterrorist agents 
that we are very concerned about. The first one, of course, is 
smallpox. The second one is anthrax. The third one is botulinum 
toxin. The fourth one, of course, is plague. The fifth one is 
the hemorrhagic fever viruses which includes ebola, and the 
sixth one is tularemia.
    We are also concerned about modifying any one of these 
bioterrorist agents, and we do not have the capacity, ladies 
and gentlemen, to really respond quickly. That is why my 
department, under the auspices of people in my secretarial 
office and also with the good support and ingenuity of people 
like Dr. Fauci at NIH, we have come up with Bioshield which I 
will explain to you in a moment.
    Before I begin, I thought it would be helpful to give you a 
brief update on SARS. As we speak, scientists from a number of 
countries are working around the clock to solve the mystery of 
SARS. In fact, this morning before I came over here, we had a 
teleconference with the WHO.
    There are approximately 1500 cases now, and it is spreading 
a little bit faster than we had anticipated. There are 45 cases 
in the United States, and we do not know--have not been 
confirmed that are SARS, but are cases that we are 
investigating.
    Now we are also working around the clock to solve the 
mystery of SARS. Most of the laboratories around the world had 
determined at the first blush that this was a paramyxovirus 
which is in the family of the viruses of measles and mumps and 
pneumonia. Our scientists question that, and luckily so. Our 
scientists at CDC came up and decided that this was the 
coronavirus or the common cold, but it is a generation removed 
from the cold and is much more virulent, and approximately 4 
percent of the people that get SARS currently have died.
    So we are very, very concerned about it. We do not know how 
to control it as of yet. We do not have a therapy for it yet, 
but we are working around the clock to develop it, and I 
Thought you individuals would want to know that.
    Mr. Chairman, my goal at HHS is to do everything I possibly 
can to ensure that Americans are strong, that they are health 
and independent. Every time we take a dollar from the 
taxpayers, we must be confident that we can use that dollar in 
order to promote their health, security and independence better 
than they can, and that is our solemn responsibility and one 
that I take very seriously.
    Private investment should drive the development of most 
medical products. Bioterrorism, however, is different. None of 
us ever expected that 16th century illnesses and diseases could 
be used and be weaponized and can be used as bioterrorist 
threats in the year 2003, and that is what we are facing.
    There is no market out there to develop the vaccines, the 
antiviruses, the antidotes and the antibiotics. That is why 
Bioshield was developed, and we worked very hard to come up 
with a procedure in which we could accelerate the research, 
accelerate the purchase and accelerate, if need be, the 
emergency usage of that particular medicine or vaccine or drug.
    The attacks of September 11 made it clear that the threat 
of terror is graver and more imminent than at anytime in modern 
history. The anthrax attacks made it clear that the threat of 
terrorism includes weapons of unprecedented power and ingenuity 
and that we need to be prepared. The anthrax that was sent to 
Congress had enough anthrax potential to kill 100,000 
individuals, if it was used properly and, therefore, we have to 
be protected. We have to protect the American citizens.
    We have already done a great deal. Today the United States 
is better prepared than ever to meet the threat of terrorist 
attacks with a biological, chemical, radiological or nuclear 
agent, and I would hope that you would once again come over and 
see it. I am confident you would come away from that with a lot 
of your fears allayed that we could respond very quickly in 
America.
    The national stockpile of medical countermeasures is large 
and getting more extensive all the time. We have 12 
strategically located sites, 50 tons of medical supplies and 
equipment, antibiotics and so on in every one of those sites, 
and we can move those within 7 hours to any city in America. It 
requires 9 semi-truckloads or 1 KC-135 to do that. But the 
stockpile may not be enough, unfortunately.
    The medical treatments available for many pathogens have 
improved little in decades. The smallpox vaccines available 
today hardly differ from those of the 1960's, in fact are the 
same almost. Some treatments for radiation and chemical 
exposures have not changed much since the 1970's, and some 
diseases such as ebola have never had any effective medical 
countermeasure.
    These diseases lack effective or modern treatment in part 
because they are rare. By contrast, the treatment of the vast 
majority of common, naturally occurring illnesses has improved 
dramatically as a result of continuing innovations from 
biomedical research and development. Heart attacks, for 
instance, were often fatal in the 1970's, but they are much 
less so today.
    Better detection and therapeutic options have significantly 
improved survival rates for many kinds of cancer over the last 
years. We must bring that sort of progress, ladies and 
gentlemen of this committee, to the rare yet deadly threats 
posed by bioterrorism and by bioterrorists.
    That is why President Bush announced Project Bioshield. It 
would spend roughly $5.6 billion over 10 years on new 
countermeasures to prepare America for a bioterror attack. This 
proposal would be able to speed up the research and the 
approval of vaccines. You will be able to see the concept, the 
current law, and the Project Bioshield, how much more we can 
accelerate it if, in fact, we are able to get Project Bioshield 
through.
    This proposal would speed up that research and approval of 
vaccines and treatments and ensure--this is one of the most 
important parts--ensure a guaranteed funding source for their 
purchase. That is why it is mandatory and not discretion.
    Just the latest in our forward looking efforts in order to 
protect America's homeland: For example, the President's budget 
foresaw and also prepared for an influenza outbreak. Pandemic 
flu in 1918 caused 500,000 Americans to die. It proposes under 
the President's budget to spend $100 million to ensure the 
Nation has an adequate supply of influenza vaccine in the event 
of pandemic. We were not prepared for that, and we still have a 
long ways to go in order to get prepared for a pandemic flu.
    Due to the constant changes in the circulating influenza 
strains, we cannot stockpile influenza vaccine, and the current 
manufacturing methods do not meet the Nation's need in the 
event of pandemic. For instance, we use the old procedure of 
developing flu vaccines using eggs, but an avian flu strain 
would kill the eggs which would prevent us from creating the 
flu vaccine. So it is important for us to come up with a new 
cell kind of vaccine.
    Funds will be used for activities to ensure a year-round 
influenza vaccine production capacity in the development and 
implementation of rapidly expandable production technologies. 
We will work closely with industry to accomplish all of these 
goals.
    The bill before you today, Mr. Chairman and members, the 
Project Bioshield Act of 2003, has three main parts. First, it 
would give the department, working through NIH and the National 
Institutes of Allergy and Infectious Diseases run by the famous 
Dr. Tony Fauci who I believe is one of the paramount scientists 
in the world and is with me today. He will have new authorities 
in order to speed up his research and be able to allow him in 
his development phase to promising areas of medical 
countermeasures against potential bioterrorism agents.
    Second, it is going to allow us to create a permanent 
indefinite funding authority, because we need that in order to 
be able to tell a company that we are the only ones that are 
going to buy this. There is no other market out there to buy 
plague or botulinum toxin vaccines. We are the one, and we will 
have the money in order to purchase. We will enter into a 
contract to purchase that from you. Then, of course, we can 
also put it in the inclusion in our strategic national 
stockpiles.
    Third, and this was described very aptly by Chairman 
Tauzin, in a national emergency the bill would allow me to 
suspend the full lengthy FDA approval process if a product in 
the approval pipeline is absolutely urgently needed and has 
great potential to protect, diagnose, treat or prevent a 
serious disease caused by a bioterror agent.
    In other words, Mr. Chairman and members, we would use NIH 
to push research through the process and our procurement 
authority to pull the treatment into the stockpile.
    I look forward to discussing all three parts of the bill. 
The President has made improving our Nation's health and health 
care one of his biggest priorities for this year. By working 
together--and I was just very excited to hear the bipartisan 
kinds of remarks made by members of the committee today, 
wanting to work to improve the bill, and I would like to say in 
conclusion, we want to work with each of you on a bipartisan 
basis to come up with the best bill possible, because we are 
all in this together, in order to protect America.
    I thank all of you for your dedication, your leadership, 
first on the bioterrorism bill and also on health issues, and 
now, of course, this very important issue in front of us today. 
Thank you, Mr. Chairman, for giving me this opportunity.
    [The prepared statement of Hon. Tommy G. Thompson follows:]
  Prepared Statement of Hon. Tommy Thompson, Secretary, Department of 
                       Health and Human Services
    Chairmen Bilirakis, Shadegg and Members of the Committees, thank 
you for inviting me here today to discuss the Administration bill, 
Project BioShield Act of 2003. As you know, the Department of Health 
and Human Services has been heavily engaged in the Federal government 
efforts to prevent, prepare for, and respond to acts of terrorism, 
particularly those involving chemical, biological, radiological and 
nuclear threat agents. This bill is a continuation of such efforts. It 
would enable the Government to develop, procure, and make available 
countermeasures to chemical, biological, radiological, and nuclear 
agents for use in a public health emergency that affects national 
security.
    Pharmaceutical research and development historically has focused on 
development of products likely to attract significant commercial 
interest. Many countermeasures for potential agents of terrorism 
realistically have no market other than the government and thus have 
not generated a great deal of manufacturer interest. Because the market 
for developing countermeasures is speculative, without government 
interest, private companies have not invested and engaged in developing 
the countermeasures that the current situation warrants. However, in 
the vaccine development area, representatives of the pharmaceutical 
industry have stressed that, to the extent that the federal government 
can define its vaccine requirements and assure up front that the 
requisite funds will be available to purchase the vaccines, the 
industry will meet the challenge.
    In these post-9/11 times of increased potential for chemical, 
biological, radiological, and nuclear and other terrorist attacks, it 
is important now more than ever for the United States to take all 
necessary steps to protect its citizens from these agents. The current 
security environment dictates the need for rapid acquisition of 
countermeasures. Armed with technology that only recently was the stuff 
of science fiction, the U. S. armed forces are better equipped than 
ever to take military actions against threats to our national security 
and defend U.S. citizens against missiles, aircraft, guns and other 
traditional weaponry. But other not-so-traditional threats are lurking. 
Our enemies seek, and in some cases have already obtained, the ability 
to acquire and manipulate biological, chemical, and nuclear weapons 
that could penetrate our military defenses and civilian surveillance 
systems, and cause significant harm. We need your help to confront 
these threats to our homeland.
    The possibility of the intentional use of chemical, biological, 
radiological, and nuclear agents presents a true threat to our society. 
You have heard about many of these threats: anthrax, smallpox, 
tularemia, botulinum toxin, hemorrhagic fevers and plague. We will 
fight these new weapons, not with bombs and guns, but with 
countermeasures such as vaccines, therapeutics, and early diagnosis. We 
may be called upon to provide mass inoculation or drug treatment. The 
personnel who will lead the efforts to develop, acquire, regulate, and 
administer these medical tools will not necessarily wear military 
uniforms or be headquartered at the Pentagon. They are civilians and 
scientists of the Department of Health and Human Services located in 
such places as the Centers for Disease Control and Prevention (CDC), 
the Food and Drug Administration (FDA) and the National Institutes of 
Health (NIH), as well as State and local health officials.
    We are making rapid progress in acquiring countermeasures for the 
agents of greatest concern such as smallpox, anthrax, and botulism 
toxin and have made advances in development of new products. We have 
sufficient Aventis smallpox vaccine to vaccinate the country in an 
emergency and the new ACAM2000 cell culture vaccine is coming into the 
stockpile at a rapid rate. We expect to have 155 million doses by this 
summer. NIH intitiated the industrial development of a safer next 
generation smallpox vaccine by signing two contracts with manufacturers 
last month. We will have a stockpile of antibiotics to deal with an 
attack with anthrax, plague and tularemia. In addition, we have access 
to stockpile of the current anthrax vaccine and are optimistic that an 
accelerated development program involving two manufacturers begun last 
October will result in production of a new recombinant anthrax vaccine 
sometime next year with Bioshield funding. Tularemia and plague 
vaccines are in the research phase and expected to move into advanced 
development in the coming year. We have acquired additional quantities 
of botulinum antoxins for the treatment of botulism.
    Because of a relative lack of focused research on terrorist agents, 
the medical treatments available for some types of terrorist attacks 
have improved little in decades while there has been tremendous and 
rapid progress in the treatment of serious natural-occurring diseases. 
At a time when Americans must confront the realities of terrorism 
directed at the United States, it is imperative that the Federal 
government be prepared to protect our citizens from potential agents of 
bioterrorism.
    Many of the available countermeasures have been made using 
traditional, older technologies, and some have significant side effects 
(e.g., smallpox and botulism vaccines). Newer products produced using 
advanced technologies such as recombinant proteins against anthrax and 
botulinum toxin or more attenuated viral strains to protect against 
smallpox hold out hope of reducing adverse reactions while maintaining 
effective protection. Extensive studies must be performed to assure 
that these products are both safe and effective. Showing effectiveness 
when diseases do not occur naturally can be challenging and requires 
the use of appropriate animal models and careful studies of the 
critical immune response to a vaccine. These studies are best planned 
with close interaction between government scientists and the 
countermeasure sponsors. Such early product development planning has 
been going on in partnership with FDA, NIH, CDC, and others (e.g. the 
development and evaluation of new smallpox and anthrax vaccines). Other 
examples where older vaccines or other technologies have been employed 
(often effectively) include vaccines for plague and anthrax and 
immunoglobulins for treating smallpox vaccine complications and 
botulism. Also, the promise of rapid productions of large amounts of 
monoclonal antibodies that could be targeted for use to protect against 
a variety of bioterrorist pathogens or vaccine adverse events is 
becoming a reality.
    This must be a public and private partnership. The pathway from 
idea to final product is complex. The best scientific approach to 
identifying the best drug and vaccine candidates must be based on 
laboratory studies. Testing must be performed in appropriate animal 
models to document safety and appropriate protective or treatment 
response, and to help determine dosing. Human studies must be carefully 
initiated to assure the basic safety of the product, and then 
appropriate dosing and response must be determined based on 
measurements of levels of drug or antibody predicted to have a 
protective effect. Steps must be taken to assure that the materials 
used to make the product and the final product itself can be 
manufactured safely, free of contaminants, and with reproducible and 
predictable purity, potency, and composition. Careful trials in humans, 
or where not possible, animal models, must be performed to show that 
the product is safe and effective for the types of populations who 
might receive it and against the methods of infection or exposure that 
could be encountered. All of these steps require careful planning, 
experience, and ongoing management and scientific evaluation. Costs to 
develop and manufacture high quality biological products and perform 
and evaluate the needed animal and human studies are high . Grants and 
contract mechanisms may not always be sufficient or attract the most 
experienced manufacturers. Manufacturing capacity for biological 
products, particularly for vaccines, is not substantial. For all these 
reasons, the best possible support and public-private partnerships and 
teamwork are essential.
    The President announced BioShield in his State of the Union 
Address. This is a key legislative priority for this Administration. 
The BioShield bill is designed to speed the development and 
availability of medical countermeasures in response to the current 
threats our Nation faces. The goals of Project BioShield are: 1) to 
accelerate and streamline government research on countermeasures; 2) to 
create incentives for private companies to develop countermeasures for 
inclusion in the stockpile; and, 3) to give the government the ability 
to make these products widely available quickly in a public health 
emergency in order to protect our citizens from an attack using a 
select agent. This legislation is a critical component of our Nation's 
homeland security strategy.
    The bill has three main provisions.
               expediting research and development at nih
    First, the Department, working through the National Institute of 
Allergy and Infectious Diseases at NIH, would be given new authorities 
to speed research and development in promising areas of medical 
countermeasures against potential bioterrorism agents. The increased 
authority will provide additional flexibility in awarding contracts, 
cooperative agreements, and grants for research and development of 
medical countermeasures including vaccines, drugs, biologics, and 
diagnostics, and streamlined authority to hire necessary technical 
experts. Funding awards would remain subject to rigorous scientific 
peer review, but expedited peer review procedures could be used when 
appropriate.
    NIH is leading the Federal government's campaign to improve the 
Nation's public health through biomedical research. The major reason 
that NIH has been entrusted with this vital leadership role is its 
proven record in combating naturally occurring emerging and re-emerging 
diseases, which is fortified by its rigorous system for ensuring that 
only the best science is supported by Federal dollars. Underpinning 
NIH's research is a rigorous peer review system, which brings together 
top experts from the public and private sectors of scientific research, 
as well as patient representatives and other members of the public, to 
evaluate research grant applications. NIH applies stringent management 
controls over contracts, personnel, leasing, and construction to ensure 
careful and responsible use of taxpayer dollars. These safeguards have 
served the country well. Right now NIH is leading us through the 
greatest era of discovery in the history of medical research.
    One of the three major objectives of the President's Project 
BioShield initiative is to speed up NIH research and advanced 
development in targeted areas by providing more flexible authorities 
for NIH including procurement and personnel recruitment for critical 
biodefense work. Our BioShield proposal would authorize the Secretary 
of Health and Human Services, acting through NIH, to simplify and 
expedite acquisition requirements for material and services through 
such mechanisms as raising the dollar threshold for simplified 
acquisitions and using noncompetitive procedures when necessary. The 
Act would also allow the Secretary to expedite scientific peer review 
requirements in urgent circumstances, but still require a process of 
quality review.
    Project BioShield is intended to strike a balance, during times of 
crisis, between the Federal government's need to guarantee that the 
best research is conducted effectively and efficiently and the national 
need to have a quick turnaround in responding to biological, chemical, 
and nuclear weapons of terror. With the authorities contained in the 
Act, we can improve our ability to respond to chemical, biological, 
radiological or nuclear attacks against American citizens and soldiers.
    It often takes many months to issue research grants, engage 
pharmaceutical companies to manufacture vaccines and other drug 
therapies, hire personnel and consultants, or acquire material and 
services. In times of emergency, we cannot afford the time it currently 
takes to accomplish these goals and events. We need vaccines and drugs 
to fight bioweapons right now. We need expertise right now. We need to 
build biocontainment facilities to conduct research right now. Project 
BioShield gives us the tools to cut through red tape and accomplish our 
mission.
                     procurement of countermeasures
    Second, the Administration's bill creates a new permanent, 
indefinite funding authority within the Department of Homeland Security 
(DHS) to procure medical countermeasures for inclusion in the DHS 
Strategic National Stockpile. This Department will play a major role 
along with DHS in identifying and evaluating critical biomedical 
countermeasures. A great deal of work has been done to identify 
vaccines and antitoxins that would be needed to protect the U.S. 
population from dangerous pathogens, e.g. anthrax, smallpox, botulinum 
toxin, tularemia, ebola, and plague. In the interest of national 
security and public health, it is essential that the Administration 
engage in the process as early as possible with sponsors and 
organizations that are developing the therapeutics, vaccines, and 
countermeasures. This Department will maintain a proactive role to help 
ensure that the products are developed as efficiently as possible.
    The Administration has already identified several products that 
would likely qualify as countermeasures and is meeting with sponsors to 
help foster the successful development of these products. Such products 
include new generation smallpox and anthrax vaccines and 
countermeasures to treat botulism, plague, ebola and other hemorrhagic 
diseases.
    The bill requires the HHS and DHS Secretaries to identify specific 
countermeasures that would be appropriate for procurement and, in 
coordination with the OMB Director, make recommendations to the 
President. The following determinations must be made in order for the 
DHS and HHS Secretaries to make a procurement recommendation: 1. 
determination that the product is a qualified countermeasure (the bill 
defines a qualified countermeasure as a drug or biologic product that 
is approved or licensed by FDA or one that is likely to be FDA approved 
or licensed within five years); 2. determination of quantities needed 
and feasibility of production and distribution; and 3. determination of 
no significant commercial market for the product other than as a 
homeland security threat countermeasure. This authority will enable the 
government to purchase vaccines and therapies for which no other 
significant commercial market exists, as soon as experts believe that 
the countermeasures can be made safe and effective.
    The Administration has carefully constructed this system of 
technical determinations and processes leading to a recommendation to 
the President because of the extraordinary nature of the proposal for 
permanent, indefinite funding authority. The Administration is 
committed to ensuring that recommendations to use this new authority 
are carefully considered with input from all experts within the 
Executive Branch, and that the final determination to exercise this 
spending authority is made by the President. Any countermeasures that 
do not meet the criteria laid out in our bill, or that are otherwise 
determined not to be appropriate for procurement through this 
authority, may still be purchased through the existing DHS 
discretionary stockpile authority.
    The Administration recognizes that no other significant commercial 
market exists for many of these products that will be needed to protect 
our military and civilian population. This authority will enable the 
government to purchase vaccines and other therapies provided experts 
believe that the countermeasures can be made safe and effective. The 
Secretary of Health and Human Services and the Secretary of Homeland 
Security will collaborate in identifying these critical medical 
countermeasures, by evaluating likely threats, new opportunities in 
biomedical research and development, and other public health 
considerations.
                      emergency use authorization
    The FDA approval process for drugs, devices, and biological 
products is the gold standard for the world. Sixty percent of the 
world's drugs are introduced first in the United States. Research and 
development pipelines hold the promise of dramatically advanced 
treatments, thanks to breakthroughs in genomics, proteomics, 
nanotechnologies, and other biomedical sciences. In the years ahead, we 
can look forward to more sophisticated, individualized, and effective 
treatments. Our policies and regulations help ensure that products that 
get to market are safe and effective. In addition to animal studies, 
sponsors of new drugs and vaccines typically conduct three phases of 
clinical trials in humans to demonstrate the safety and efficacy of a 
product. This process can take years, and is procedurally cumbersome. 
Only a small percentage of all products tested are found to be safe and 
effective and allowed to come to market.
    In preparing for the challenges we face today, we may not always 
have sufficient time when addressing the threat presented by agents of 
bioterrorism. The current FDA approval process is too long to be used 
during emergency situations. We have some mechanisms in place to get 
products to market faster, e.g. the accelerated approval mechanism, and 
expedited review. The animal efficacy rule provides a new avenue for 
approval for products whose efficacy cannot be tested in human clinical 
trials. The single patient IND process and the treatment IND process 
permit access to unapproved products. However, these mechanisms alone 
are not sufficient in an emergency.
    This bill will permit the Government to make new and promising 
treatments still under development available quickly if needed for use 
in emergency situations where no effective approved or licensed 
products are available--potentially saving many lives. This 
authorization will only be used when a national emergency has been 
declared. In the absence of FDA approval of a product for a specific 
countermeasure use, the BioShield bill permits the HHS Secretary to 
issue an emergency authorization that would provide Americans with 
access to certain unlicensed countermeasures. The Secretary has 
discretion to facilitate the availability of these important products. 
Before issuing an emergency authorization, the HHS Secretary must make 
the following conclusions:

 the agent specified in the determination can cause serious or 
        life-threatening disease;
 the product may reasonably be believed to be effective in 
        detecting, diagnosing, treating, or preventing the disease;
 the benefits of the product may reasonably be believed to 
        outweigh its risks;
 there is no adequate alternative to the product that is 
        approved and available; and
 any other criteria prescribed in regulation are met.
    This bill would allow use of the best technology available at the 
time of a declared emergency. The emergency use authorization would 
remain in effect no more than one year, unless the specific terrorist 
threat justifies extension of the authorization.
    FDA regulations are stringent when it comes to informed consent for 
investigational products. Because urgent situations may require mass 
inoculations and/or drug treatments, such informed consent requirements 
may prove impossible to implement within the necessary time frame when 
trying to achieve the public health goal of protecting Americans from 
the imminent danger. The legislation would provide for the Secretary to 
impose conditions on the authorization, either by regulation or on a 
case-by-case basis, where appropriate to protect public health. 
Specifically, the bill provides that such conditions shall include 
labeling and other requirements to ensure that health care 
professionals are informed of the special emergency nature of the 
authorization; of the benefits and risks (and the extent to which such 
benefits and risks are unknown); and of the alternatives to the 
product, and their benefits and risks. In addition, the conditions of 
authorization may include the following:

 labeling and other requirements to ensure that patients are 
        informed of the special emergency nature of the authorization; 
        of the benefits and risks (and the extent to which such 
        benefits and risks are unknown); of any option to refuse the 
        product; and of the alternatives to the product, and their 
        benefits and risks;
 limitations on who may distribute the product and how 
        distribution should be performed;
 limitations on who may administer the product, to whom it may 
        be administered, and when it may be administered;
 requirements to perform further studies or clinical trials;
 recordkeeping and reporting requirements;
 requirements, or waiver of otherwise-applicable requirements, 
        regarding good manufacturing practice; and
 
    requirements for monitoring and reporting adverse events.
    The language of this bill is narrowly tailored to address the 
essential components for use of an emergency authorization. It provides 
specific conditions and criteria for issuance of such an authorization. 
It requires a declaration of emergency and provides for a limited 
duration of use. It gives the Secretary authority to require 
recordkeeping and access to records. Finally, it provides civil 
monetary penalties for violations.
                               conclusion
    The Department of Health and Human Services is committed to 
ensuring the health and medical care of our citizens. Project BioShield 
is another step towards enhancing our Nation's ability to respond to 
biological or chemical threats.
    In summary, our BioShield proposal would:

 Ensure that sufficient resources are available to procure the 
        next generation of countermeasures;
 Accelerate NIH research and development by providing more 
        flexibility in the contracting process, procurement 
        authorities, and grant making for critical biodefense work; 
        and,
 Make promising treatments available more quickly for use in 
        emergencies by establishing new emergency use authorization 
        procedures at the FDA.
    Mr. Chairman and members of the Committee, we applaud the Senate's 
bipartisan effort to move this issue forward and we likewise hope for 
your bipartisan support of this bill. We look forward to working with 
you to get this needed legislation enacted into law.

    Mr. Bilirakis. Thank you, Mr. Secretary.
    Mr. Shadegg. I will start with a brief round of questions.
    As I think you gathered from the opening statements, there 
is a great deal of consensus on the need for this legislation 
and its importance. However, there are measures within it that 
are rather controversial. I think one of them clearly was 
addressed by the ranking member of the Commerce Committee, the 
question of mandatory versus discretionary spending.
    Now I would like to give you an opportunity at this point 
to kind of make your case for why you and the administration 
believe that mandatory spending is essential for the success of 
this particular proposal.
    Secretary Thompson. Thank you very much, Mr. Chairman. The 
reason for the mandatory is basically to create the market. 
What we are going to do is we are going to use NIH to be able 
to push the research. Research gets to a point, either 
intramurally or extramurally, from NIH. Then once it gets to 
that point, you got to establish the market. You got to be able 
to manufacture it.
    Unless there is mandatory funding, there is less likelihood 
that a company will want to go through that unless they know 
they are assured of the money, they are assured of the 
possibility of having that valid contract. That is why the 
mandatory versus the discretion.
    Second, we had discretionary money put in this past year 
for $250 million for developing new anthrax. Congress in the 
budget appropriation bill this year took away that $250 million 
for anthrax. That was a discretionary thing in Congress. I am 
not going to complain, but I am just pointing that out. That 
was a discretion. We were trying to work out a market to create 
that, but that was a discretion that was taken away from us in 
regards to creating that anthrax.
    That is why we think the mandatory is much more important. 
If we are going to go to Company A and say to you, we are--and 
Company A says why do I want to put in $100 million to 
manufacture plague vaccine and it may take my company 3 to 5 
years to do so. Is there going to be money available? Do I want 
to spend $100 million betting on Congress to authorize 5 years 
out a contract that is going to require $500 million?
    I don't know any company that will do that. They won't know 
what is going on. So there is the up-front money that they are 
going to have to put in, in order to get the manufacturing of 
that vaccine or that antiviral or whatever the case may be, and 
they know that the Federal Government is the only place--the 
only customer they've got.
    So it is important for them to be assured that they are 
going to have it. That is why it has got to be mandatory, sir.
    Mr. Shadegg. I've got a number of other questions, but our 
time is limited, and I know there are other members that would 
like to question. So I am going to yield at this point and call 
on Mr. Brown.
    Mr. Brown. Thank you, Mr. Chairman. Thank you again, 
Secretary Thompson. You spoke articulately about the production 
of plague vaccine and other both preventive and curative drugs, 
if you will, and you talked about incentivizing the private 
sector, finding ways to encourage them and then we would 
purchase those drugs from them.
    Our Nation, our military, has done it a different way or 
has had some alternatives that have worked over the years, too. 
As you know, Walter Reed has some amazing accomplishments under 
its belt. They have conducted clinical trials in antidiarrheal, 
hepatitis E vaccines as well as vaccines to protect against 
multiple infectious diseases.
    They have done the antimalarial both vaccines and drugs 
better than any public or private organization in the world 
over the last 100 years, almost certainly. Their budget, 
however, is only about $20 million. The drug industry says a 
new drug costs them to develop about--factoring failures into 
that, about $800 million. Many of us question that number, but 
it is certainly multiples of the budget of Walter Reed.
    Has the administration thought of putting more resources 
into Walter Reed? I mean, certainly NIH does an awful lot of 
research that has been very, very productive. But is there any 
thought of putting more money into Walter Reed and charging 
them, as they were charged with malarial--antiparasitics and 
malaria and vaccines? Is that something you are entertaining?
    Secretary Thompson. We certainly would look at that, 
Congressman. We have the responsibility in the Department of 
Health and Human Services for bioterrorism, and Dr. Fauci's 
institute has been doing just a wonderful job.
    This Congress appropriated last year $788 million for new 
research on bioterrorism agents, and they are doing the basic 
research right now for these bioterrorism agents. Therefore, we 
think it is the logical place where they have already done this 
to put it there instead of trying to create another program in 
Walter Reed.
    We certainly would look at that. We certainly understand 
Walter Reed is doing some wonderful things. We just think in 
bioterrorism the experts are under the leadership of Dr. Fauci.
    Mr. Brown. Dr. Fauci, would you like to respond?
    Mr. Fauci. Mr. Brown, also it should be pointed out that in 
the arena of biodefense countermeasures, we have years ago, and 
now have intensified, our collaborative interactions, 
particularly with U.S. AMBRD up at Ft. Detrick.
    So there is a lot of synergy going on that wasn't formerly 
appreciated, taking advantage of the very best of what they 
have to offer, as well as what we have to offer is not only the 
kinds of things that they have been doing but a broader scope 
addressing a much larger and much more complex civilian 
population.
    I think that is something that the general public doesn't 
really fully appreciate, that the excellent job that the 
Department of Defense has done has been directed at 
countermeasures that are for a population that, almost by their 
very definition, are a rather restricted, by definition, 
healthy population.
    The kinds of problems we need to deal with go from infants 
to the elderly, people who are sick, people who are on 
medications. So that the problem is really much more complex in 
scope.
    Having said that, getting back to my first comment which is 
important, that we are collaborating very nicely with them now.
    Mr. Brown. That is helpful. Thank you. Second question, 
last question: Talk to me, if you would, about what we are 
doing on antimicrobial, the whole issue of antibiotic 
resistance. I mean, certainly, we need to deal with 
nontherapeutic use of antibiotics, but are we finding a way in 
this Bioshield legislation to encourage the development of more 
antibiotics?
    Scientists will say there just aren't the number of 
antibiotics in the pipeline. So we really need to do two 
things. We have to figure out ways to slow down the building of 
the antibiotic resistance. We also have to find ways to 
encourage the pipeline to be filled and move more quickly for 
new antibiotics. Give us your thoughts on that, Dr. Fauci.
    Mr. Fauci. Thank you for that important question, Mr. 
Brown. At the NIH we, in fact, have now as part of our broad, 
as the Secretary described, the push toward the development of 
countermeasures, have a program on the development of novel 
antimicrobials.
    I must say right from the beginning that that absolutely 
needs to be joined in a collaborative way with industry, 
because no one is going to be able to do that without industry, 
as I am sure you are going to hear from our industrial partners 
in the next panel.
    The other thing is that you have antibiotics in the classic 
sense, but we are also looking at innovative ways to block 
microbes that are not necessarily the common pathway of a 
synthetic type of an antimicrobial. A typical example is some 
of the work that is going on now of using biological ways, like 
monoclonal antibodies, to block some of the toxins as well as 
to block some of the microbes themselves.
    So we have a very robust program that is going to get even 
better now that we will have, were this passed, the capability 
of pushing it along a little bit more rapidly at the same time 
that industry can come in with the pull of getting it to happen 
in reality.
    Mr. Shadegg. The time of the gentleman has expired. 
Chairman Bilirakis.
    Mr. Bilirakis. Thank you, Mr. Chairman. Mr. Thompson, 
Secretary Thompson, let's see, flexibility is an important part 
of this process. Emergency use authority is in the proposed 
legislation. I would ask a question. What would happen if the 
government entered into a contract with a manufacturer to 
develop a vaccine for the plague, but 2 years into the contract 
another manufacturer developed a clearly superior vaccine?
    If the government wanted to then purchase the clearly 
superior vaccine, which I trust they would want to do, would 
the government still have to pay for the inferior vaccine? Now 
we go into vaccine. We go into contract law here, and I 
appreciate all that. But maybe you can respond to that. And if 
you think that there should be some changes made to allow you 
to do that without--well, go ahead, respond to it.
    Secretary Thompson. The perfect is not an enemy of the 
good. In regard to that, if we have entered into a contract, 
the Federal Government is going to have to comply with the 
specificities of those particular contracts. You also have to 
realize that the perfect, the more perfect vaccine that 
subsequently comes, more than likely has been built upon the 
research which was in the good vaccine which we have a contract 
for.
    We will have to purchase that, and we will have to live up 
to the contract, but that does not mean that we should not go 
out and purchase the better plague vaccine. We certainly have 
that opportunity to do so, but we are also going to have to 
comply with our contract, because we doubt very much if that 
perfect vaccine or that better vaccine that you are talking 
about, Congressman Bilirakis, would have been made without the 
original contract or the original research done by NIH.
    Mr. Bilirakis. All right. Well, in the interest again of 
flexibility, yes, what you have said is certainly contract law. 
No question about that. But should there be in that definition 
of flexibility the government to have the right or the 
flexibility to not have to pay maybe for the full--under the 
full contract terms of the first vaccine developer? Should you 
have that kind of flexibility and, if you did have that kind of 
flexibility, would it discourage people from reaching out and 
doing this, knowing darn well that they might end up losing in 
the final product?
    Secretary Thompson. Congressman, we set milestones. We set 
goals in our contracts, and we would pay for the work and the 
goals up to a particular point. If we saw a superior package 
coming, we certainly would figure out a way on how we could 
terminate the contract at that particular point. We would pay 
for all the expenses. We would probably have to pay for a 
profit to the company, but if we had a superior product, we 
certainly would look at ways in which to purchase that.
    So the contract is set up so that we would ensure 
ourselves, but we would ensure the company, because we've got 
to make sure these companies will go along to get this far.
    Mr. Bilirakis. Sure.
    Secretary Thompson. So we put goals into our contracts and, 
once the goals have been accomplished, we pay for it, and then 
we would look at going to a subsequent contract with a superior 
project.
    Mr. Bilirakis. All right. Thank you, sir. I would like to 
give you an opportunity to maybe expand upon your prior 
comments regarding liability, the necessity for liability 
protections in order to incentivize contractors to develop 
countermeasures.
    Do you feel that that is such a critical part of any piece 
of legislation, and why do you feel that way? I think it is 
important that we know that.
    Secretary Thompson. It is important. I can't think of an 
incident in which it wouldn't be. So I would say all companies 
that deal with vaccines want to be exonerated for their 
liability, and we do that, and there is a section in the 
statute that gives me the authority to give exculpatory 
exemptions to companies, exonerate them from their liability.
    I think it is Section 8408.4. I'm not exactly sure of that, 
but I think that is the one it is. We have done that when we 
encourage the companies. Acambis--we had a contract for the 
Acambis1000. We also had a contract with Acambis-Baxter2000 for 
the production of smallpox, and we also, of course, as you 
know, purchased 75 million dose--82 million what it finally 
ended at--doses of smallpox from Aventis Pasteur, and we are 
going to be using that, and we had to give them immunity for 
liability in order to use that smallpox vaccine.
    We have a general thing. We did not include it in the 
Bioshield legislation, but we have it in a general portion of 
the Federal code, and we would use that, if need be.
    Mr. Bilirakis. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    Mr. Shadegg. The time of the gentleman has expired. It is 
now my privilege to recognize the ranking member of the 
Subcommittee on Emergency Preparedness and Response of the 
Select Committee on Homeland Security Committee, Mr. Thompson. 
Welcome.
    Mr. Thompson of Mississippi. Thank you very much. Welcome 
again, Mr. Secretary. Taking off from the earlier question 
raised by my colleague, if a company feels that for some reason 
they have not been treated fairly in the procurement process, 
what options do they have under this proposed legislation?
    Secretary Thompson. Usually they have appeal rights, 
Congressman Thompson, but in this case there is such a dearth 
of markets and such a paucity of companies that would even get 
into this business, we don't think that that is a serious 
problem. We have to use the ability for speed in order to get 
this particular product to market, and we are the only market.
    So when we go out and we enter into a contract, we are 
going to have to go out and find a company, because there 
aren't any companies that are producing vaccines for 
hemorrhagic fever viruses, the plague, botulism or anyplace. So 
we have to create the market. So there's going to be so few 
companies that would even be interested in it. We have to go 
out and actually negotiate with them to go into it.
    The basic research is going to be done under the 
supervision of NIH and under supervision of Dr. Fauci. They 
will get the research to a certain point, and then we are going 
to have to take that research. We are going to have to go out 
and get a company. There aren't going to be many companies 
standing in line that want to do this.
    So I don't think there is going to be a reason for appeal, 
plus we have to use our ability to get this thing done, because 
if there is a bioterrorist agent that is going to hit America, 
we cannot afford appeal process to go on and on and prevent us 
to get to our ultimate objective, and that is to defend the 
American citizens.
    Mr. Thompson of Mississippi. Well, thank you. So in other 
words, we will make the market. We will grow the market.
    Secretary Thompson. We are going to create the market, 
Congressman.
    Mr. Thompson of Mississippi. Fine. Now in terms of defining 
the market, have you at this point created in your mind how 
definitive you will be in identifying the market or will it be 
a moving target, more or less?
    Secretary Thompson. It is going to have to be a moving 
target, because we don't know--we will not have the 
intelligence at this particular point in time to determine what 
bioterrorist agent that we may get hit with or we may not have 
the basic research.
    We are doing research right now at NIH on ebola, and we 
feel somewhat good about the basic research that is being done. 
So we may take that research and get to a company to produce, 
manufacture the ebola vaccine or some other vaccine. So at this 
point in time, we don't know.
    We don't know if smallpox is the one that we are going to 
be the most concerned about--it is right now--or is it going to 
be botulinum toxin or is it going to be the plague? Botulinum 
toxin, we still use it the old fashioned way. You have to go 
out and create the serum in a horse and bleed the horse to get 
the serum to develop the antidote. So that is a very arcane 
procedure.
    We are looking at ways to come up with new procedures, new 
manufacturing, and a new way to create a vaccine for a 
botulinum toxin. Therefore, we are going to do the research, 
but we are going to have to go out and find a company to do the 
manufacturing, and there's no company--There is no company in 
the world even considering doing anything in botulinum toxin at 
this point.
    Mr. Thompson of Mississippi. Thank you.
    Mr. Shadegg. It is now my privilege to call on the chairman 
of the full House Select Committee on Homeland Security, Mr. 
Cox.
    Mr. Cox. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary. Thank you both for being here today.
    As you know, the Committee on Homeland Security and the 
Energy and Commerce Committee both are anxious to move this 
legislation because of the urgent national need, and we intend 
to do that for you. We are having this hearing on a joint basis 
to make sure that we expedite the process and that we don't 
make you come up here multiple times to give the same testimony 
before different House committees.
    We had a chance to talk about this earlier down at the 
White House, and since that time I have been very focused on 
doing everything that we can on the Homeland Security Committee 
to make sure that we enact this into law for you.
    Let me ask a couple of questions that remain cloudy for me. 
First, with respect to the taxpayer investment for the 
development, for example, of a serum. I believe, having read 
the draft statute, that you would have authority in letting 
these contracts to negotiate an ownership piece for the 
government of any commercial application for the serum or toxin 
antidote, or whatever it is that you are seeking to have 
developed, in your discretion, and presumably also that you 
would have the opportunity to negotiate that for any research 
by-products that were funded with taxpayer dollars.
    Is my legal understanding correct, No. 1? No. 2, is that 
likely to be your intention?
    Secretary Thompson. To answer the first one, yes. The 
answer to the second one, I haven't even decided. I haven't 
even discussed it with our lawyers or anything. We would have 
to discuss that with you and other members of the 
administration, other members of this committee and Congress, 
but at this point in time we haven't even given any thought to 
that, Congressman. We probably should have, but we haven't.
    Mr. Cox. The second: With respect to the funding mechanism 
of a permanent indefinite appropriation, in response to 
questions from the panel here today concerning why this should 
be mandatory--in fact, I think it was Chairman Shadegg that put 
the question to you--what I understand is that first we are 
going to have to create this market from essential nothingness. 
Second, we want to make sure that the vendors are themselves 
assured of monies down the line. These contracts are up to 5 
years and can be extended through a valid contract. Third, that 
because the Federal Government is the only customer, there can 
be no question about our reliability, and it should not be 
subject to political reversals down the road.
    If the legislation meets all of those criteria, will that 
satisfy the objective?
    Secretary Thompson. I certainly believe so.
    Mr. Cox. So if we can find a way that is essentially 
tantamount to a permanent indefinite appropriation but does not 
technically create the first national security entitlement 
program in the history of the country, but meet all of these 
objectives, that is the main object. Is that correct?
    Secretary Thompson. That is. We have looked at so many 
different examples. We felt that this was the best way to 
accomplish all of the objectives, Congressman. But we want to 
work with you, and we know the importance of Congress having 
the ability for oversight, and we want to work with you in 
developing the best bill possible. But we think the permanent 
mandatory kind of an appropriation accomplishes the best and 
the most flexible and the most expedited way to do that, and 
that is why we went that route.
    Mr. Cox. Let me explain just a portion of my concern. I 
have every confidence in you as Secretary. I have every 
confidence in the Department. I have every confidence in 
Secretary Ridge. I have every confidence in the President, and 
I have every confidence in subsequent secretaries and 
presidents to make correct decisions when it comes to 
protecting our country from terrorist attacks of this type.
    A permanent indefinite appropriation creates a program with 
eternal life, and down the road, even if it is the discretion 
of the president or the secretary or someone else to move on to 
some other priorities, this program is going to gain, if it 
were structured that way, a life of its own. I want to make 
sure that we don't tie the hands of future secretaries and 
future presidents by crowding out what may be the national 
security priorities of the future.
    That is one of the reasons, one of several reasons that I 
am concerned about that particular structure, but I have a 
complete understanding of the need to convince not you or me 
but third parties in the private sector that they want to put 
their money and resources into this, and that the United States 
can be counted on to fulfill its side of the bargain.
    So if we are going to give you this legislation, I think we 
have to meet all of these objectives.
    Secretary Thompson. My only rejoinder is that we definitely 
have to have that appropriation mandatory, because that is what 
the companies are going to look at. They are going to want to 
make sure that, if they spend the money--and as Congressman 
Brown says, which is the rule of thumb, it costs $800 million 
to produce a new drug and get it to market. Vaccines where 
there is no customer at the end except the Federal Government, 
then you are going to have to have some sort of mandatory 
payment, mandatory funding source, that that company will look 
at it and say, yes, I am going to put the up front dollars in 
here to create this vaccine, knowing full well that my only 
customer is the Federal Government and knowing that the 
government has got the money there to pay me when I get the 
vaccine or the medicine ready to be used.
    Mr. Cox. Mr. Chairman, if I might, just one last question. 
It was my understanding from the presentation at the White 
House that, if we go this route and if it is structured as a 
permanent indefinite appropriation, that it is also unlimited 
in amount in any fiscal year. That is to say, the amounts that 
the administration could commit are infinite in each year.
    Secretary Thompson. That is correct, since we don't know.
    Mr. Cox. Thank you, Mr. Chairman.
    Mr. Shadegg. The time of the gentleman has expired. let me 
call now on the ranking member of the Select Committee on 
Homeland Security, Mr. Turner.
    Mr. Turner. Thank you, Mr. Chairman. Secretary Thompson, 
first of all, I think it is important for us, as I have heard 
the discussion--we are many members, and you have referred to 
this as mandatory spending as compared to discretionary. I 
think it is important to understand that what you have proposed 
is very far from the common understanding of mandatory 
spending, which is programs like Medicare where we are 
basically providing a benefit to whoever shows up and is 
eligible for that.
    I would say that, to my knowledge, the Congress has never 
granted the authority that you are requesting in any 
circumstance, other than a very limited amount that is under 
jurisdiction of the Intelligence Committee, which your proposal 
in terms of cost would dwarf what I even understand to exist 
there.
    I think there is--and I would hope you would be able to 
provide the committee with an analysis of how you arrived at 
the approach that you are advocating today, because in my view, 
there are two ways to accomplish the objective. One is what you 
have suggested.
    The other is to provide government funded research dollars 
either to the private sector or to do the research internally, 
and then once the successful vaccine is discovered to then 
procure that through government purchases from the private 
sector or, in fact, to do it through government labs with 
private contractors in those labs, as we do in some instances 
now in the military.
    If we are truly concerned about getting this job done 
quickly, it seems to me that a Manhattan Project type approach 
to it that would utilize government funded research and 
government funded production would be perhaps the superior 
alternative, because if you advance contract to a given private 
company to develop and then produce by guarantying them a 
market, you may in fact stifle the innovation that, as some 
member--I believe it was Mr. Thompson--suggested, that if you 
grant a contract to one company and perhaps another comes up 
with a better vaccine, then you have already committed to spend 
the money on the inferior vaccine and we have wasted a lot of 
money.
    In truth, it may be that that second company may have 
absolutely no incentive, once they learn that you have made the 
contract with the one company for the long term production of 
that vaccine you hope they will be able to produce.
    So I think that the only advantage that I see to the 
proposal you have put on the table is that it avoids the 
somewhat painful problem that we all have around here, and that 
is the other alternative would require us to spend some money 
now. So it is perhaps attractive to say we will give somebody 
an advance contract that we won't have to pay for, for 3 or 4 
or 5 years, so we don't spend any money now. But I think we 
may, in fact, discourage alternative research. We may in many 
ways lessen the standard of care that will be used to develop 
the vaccine because of the limitations of liability and the 
fact that the source you contract with will know they are the 
sole source.
    I think it may be improper to base this proposal on what 
is, in fact, a false assumption, and that is that privately 
funded research and production is superior to government funded 
research and production.
    So I would like to see the analysis that led you to the 
conclusion that the proposal you made is superior to the other 
alternative I suggest, and I would hope this committee would 
also conduct an independent study along those lines before we 
pass this legislation.
    Secretary Thompson. Congressman, I am going to respond as 
Secretary. Then I am going to ask Dr. Fauci to respond as the 
scientist.
    I have been there now 2 years, and running the Department 
of Health and Human Services, and 9/11 came and we started 
working before 9/11 on bioterrorism preparation in the 
department, but we were very ill prepared. We are much better 
today. We can respond to just about anything.
    Anthrax came a couple of months later after 9/11, and we 
still have only one company, BioShield, that is making the 
anthrax vaccine. We know that there are some terrorists out 
there that are working on botulinum toxin, which is very 
lethal, could cause tremendous problems if it got in the food 
supply in America. There is no anti-toxin except an old 
procedure of developing serum from bleeding horses, and it is 
very time consuming. Nobody is doing it. We have no market for 
it.
    We have really no market for smallpox except for the market 
that we created when we went out into the market and requested 
proposal and got some companies to do it, and it came up with 
Acambis-Baxter2000. We have no research being done, or very 
little research being done on the plague, and the hemorrhagic 
fever viruses--the only one that is really being done is ebola, 
but there are several other--There's 3 other hemorrhagic fever 
viruses that need it.
    There is no market out there. So what you have to do is you 
have to create it. I don't see a company spending money doing 
private research on things that there will be no in customers 
except the Federal Government, and that is why we decided. It 
was quick. It was reliable. We could direct it. It is 
necessary, and that is the reason we came up with Bioshield.
    I understand the Manhattan Project. I understand the 
private research, because I am a big believer in that, and we 
primed the pump with private research using NIH dollars, but in 
this case we haven't been able to prime the pump because there 
is no in market. That is why it is important to go to a concept 
like Bioshield in order to get it done.
    Mr. Fauci. Congressman, just to amplify on that a little, 
we have some very real life experiences over the last couple of 
years in the arena that you are suggesting. There is no doubt 
that, when a pharmaceutical company wants to and sets their 
sight on something, the resources and capabilities from the 
creative research right up to their unparalleled capability of 
driving something to a product, is something that everyone 
recognizes.
    The difficulty that we find is that you made the comment 
about squelching creativity. The creativity is there. They are 
just not going to apply that creativity to the direction that 
the country needs, because they have so many other competing 
interests that are essentially guaranteed profit margins for 
them.
    We will continue to intensify the push part of the 
creativity, not to say that is going to replace at all the 
extraordinary creativity on the part of the companies, but we 
have had situations that I think can fall into two broad 
categories.
    The first category would be if a company is going to go 
this direction anyway, and we have examples of that, and they 
say, you know, we have a great idea, we put our own money in it 
and we are actually going along pretty well. We are getting 
ready to go to the next step of advanced development, but we 
need to convince our stockholders, we need to convince our 
board that, if they are going to put another $100-some-odd 
million to give us a new plant or what have you, we've got to 
come to them and say we have some assurances that at the end of 
that process somebody is going to buy it.
    Now if they come to us now, which they have, and say this 
is what we have, the only answer that we can give them is that, 
if the product is going to be ready by the year 2006 or 2007, 
we would like to tell you that we are going to be able to buy 
it, but it is going to be totally dependent on the vicissitudes 
of the discretionary appropriations process. That is what 
happened with the $250 million with the anthrax now.
    Mr. Shadegg. Doctor, excuse me. The time of the gentleman 
has long since expired. So you can wrap up.
    Mr. Fauci. I'm sorry. That's it.
    Mr. Shadegg. The gentleman from Connecticut.
    Mr. Shays. I will yield my time to Mr. Norwood.
    Mr. Shadegg. Mr. Norwood then.
    Mr. Norwood. Thank you, Mr. Shays. That is very nice of 
you. Mr. Secretary, I really do appreciate you being here. 
Chairman, I appreciate the hearing, and basically I am thankful 
to you and the President for Project Bioshield. I think we are 
going in the right direction. It appears to me we will give you 
the legislative language you need in a bipartisan fashion. It 
is just a matter of time.
    Because of that, I am going to ask a little bit of a 
tangent question here. I didn't get the answers I wanted to 
hear when it was probed just a little bit earlier. I am very 
concerned about what can be done to produce new products to 
fight naturally occurring infectious diseases.
    The reason I am a little concerned is I know how focused we 
all are on bioterrorism, and that is precisely right. That is 
what we should be, but naturally occurring infectious diseases, 
as you know, are the third leading causing of death in America 
and, in fact, the second leading cause of death worldwide.
    New antimicrobials, vaccines, and diagnostics are urgently 
needed to fight a very long list and often life threatening 
microbes, including those that cause meningitis, pneumonia, 
skin and bone infections, tuberculosis, malaria, hepatitis. You 
know the list. It goes on and on.
    Of greatest concern, research into and development of new 
antibacterial drugs appear to be, from what I am hearing, at a 
standstill as companies withdraw from this market due to low 
return on investments. Now I understanding the primary 
research, the basic science, often is applicable across several 
areas. We can do both things, in other words. But I am 
concerned that, as we focus on developing new products to right 
bioterrorism, and we should, we may--underline may--be missing 
a public health crisis that already is occurring in United 
States hospitals and communities, particularly as antimicrobial 
drug resistance is sort of exploding out there.
    For example, the FDA didn't approve one drug last year for 
antimicrobials. I would like just to get on the record and get 
your feeling about what we are doing in parallel with 
bioterrorism in terms of antibacterial.
    Secretary Thompson. Thank you very much, Congressman 
Norwood. We have a huge program at NIAID which is run by Dr. 
Fauci for naturally occurring emergency infections, and I would 
ask Dr. Fauci to give you the exact dollars. We are not in any 
way giving up our public health initiatives at NIH. We are 
spending a lot of money, more money than ever, and I want you 
to know that, and we've got a great program developing.
    Mr. Norwood. You are saying to me you do recognize that 
this is a problem as well as bioterrorism?
    Secretary Thompson. Absolutely.
    Mr. Norwood. Dr. Fauci, you want to comment?
    Mr. Fauci. Yes. Mr. Norwood, in fact, the way we look at 
the scientific component of it is that we have a big program, 
what we call emerging and reemerging diseases. From the 
scientific standpoint, a deliberately released microbe is just 
another form of an emerging and reemerging disease.
    So a lot of the expertise that we have now been building up 
for biodefense is naturally the brain power that could be 
applied clearly at something like SARS, which we are dealing 
with right now, the possibility of pandemic flu or a variety of 
other issues. So that is very, very high on our radar screen, 
naturally occurring emerging and reemerging diseases.
    Mr. Norwood. Well, is there any stimulus of the private 
sector to do a little better job perhaps in working in this 
area and searching for new antibacterial drugs? Are you talking 
to them in the sense that, hey, there is a problem brewing out 
here? I don't know for sure how big it is, but I know it is 
getting bigger.
    Mr. Fauci. Indeed. In fact, as I mentioned just a little 
while ago, earlier, that the whole question of developing 
better antibiotics for emerging antibiotic resistant or 
antiviral resistant microbes is something that, by definition, 
has to have high industry involvement, and our program clearly 
is aimed at synergizing with industry in that.
    Mr. Norwood. So you feel you as an agency are doing a good 
job in this area, and things should get better?
    Mr. Fauci. I believe we are doing a good job, Mr. Norwood, 
and I believe we can do better, and will.
    Mr. Norwood. Please do. Thank you, Mr. Secretary. Mr. 
Chairman, I yield back my time.
    Secretary Thompson. Thank you, Congressman Norwood.
    Mr. Shadegg. The Chair calls on Ms. Harman for 5 minutes.
    Ms. Harman. Thank you, Mr. Chairman. In the interest of 
letting others ask questions, I am only going to ask one to 
Secretary Thompson.
    I know you agree with me that the threat of a bioterrorism 
attack is real and now. Passing this legislation, perhaps in an 
improved form, will give us more tools for later, but now is 
when we face a very active threat. There is another article in 
today's Wall Street Journal about aid to Iraq from Russia, and 
there were reports earlier in the week about al Qaeda's 
capabilities of which we were not fully aware, all of which 
support my view, with which I think you agree, that the threat 
is now.
    So my question is about your current capabilities to deal 
with the threat. I specifically would like you to address three 
of them.
    First, how far along are you with syndromic surveillance, 
this ability that you have or are developing to learn about 
what is going on in any hospital, in any public health facility 
in the country, and be able to coalesce that information in 
real time so that you can see, for example, if a smallpox virus 
has been introduced in three different locations in the 
country? That is one.
    Number 2, how well are you doing with WMD simulations? My 
understanding is that Walter Reed has a facility for WMD 
simulation that is state-of-the-art but that health responders, 
first responders, have not been given access to it. I think 
that simulations are a very helpful learning tool, and I am 
just wondering about that.
    Finally, how well are you doing with public education? I 
mentioned that in my opening remarks. I just want to commend 
something I just saw, which is a pamphlet prepared by AdvaMed. 
I gather Johnson & Johnson will talk about it in the second 
panel, but this is a pamphlet that is intended to be a guide 
for local emergency response planners on how to get medical 
supplies. This is the kind of thing I hope we are beginning to 
see, so that in our hometowns people have better information 
about what specifically they are supposed to do. Thank you.
    Secretary Thompson. Thank you very much. Let me go from 
third, second, first, and probably ask----
    Mr. Shays. It was just one question.
    Ms. Harman. It is one question with three parts, and I am 
finished. Thank you very much, Mr. Shays.
    Secretary Thompson. Information: We are doing a great job. 
Our health alert network is hooked up right now with 85 to 88 
percent of the State and local health departments in the 
country. It will be at 90 percent by the end of the year. We 
are up to over 200 laboratories through our laboratory network 
system, and we have put out weekly notices.
    I have frequent calls with all the State health directors 
telling them what is going on in regards to that. Julie 
Gerbadine is doing a wonderful job at CDC getting information 
out. MMWRs go out every Friday with new diseases, new 
information, new technology.
    If a disease would show up dealing with smallpox in any 
particular hospital and people don't know how to diagnose it or 
what, they would send a lab specimen into the State lab and at 
the same time send a corresponding specimen to the lab at CDC. 
We would immediately fly some of our epidemiologists to that 
hospital to work in conjunction with the emergency workers and 
emergency doctors treating that particular disease.
    We would have the State health department. We would make a 
confirmation by CDC. We would also be able to strategically 
send and deploy extra medical personnel. We got the country 
divided into 10 regions. We could send up to 8,000 medical 
personnel to any particular region, but they are divided up 
into regions. We got the DMATs-1, -2 and -3. Our most 
sophisticated teams are 28 DMAT-1 teams. We have 2800 
individuals in that.
    Second, in regard to exercises, we happen right now to be 
having an exercise going on at the Humphrey Building as we 
speak dealing with food poisonings and food pathogens. We do a 
lot of exercises, and I would ask you to come down and take a 
look at our command headquarters.
    In regards to our GIS system, which goes to your first 
question, we are the only computer base, I believe, 
Congresswoman, that has every hospital, every street, every 
railroad, every fire station, every police station, every first 
responder in a computer base. We can call up any city in 
America, determine a plume on any chemical or any bioterrorism 
agent, and determine what portion of the people should be 
evacuated.
    We have every hospital listed. We know every single day the 
occupancy in any hospital in America, what the frequency is, 
and what the bed vacancy is. So that capacity is already built 
into our GIS system. I would love to have you come over and 
explain it to you. I think you would walk away from it saying, 
wow, they really have their act together.
    Ms. Harman. I appreciate that answer. Thank you, Mr. 
Chairman.
    Mr. Shadegg. The time of the gentle lady has expired. The 
gentleman, Mr. Shays, for 1 question with as many subparts as 
he wants in 8 minutes.
    Mr. Shays. Let me first say I am delighted the gentle lady 
asked her question. She truly is an expert on this issue, and 
it is a very important series of questions. I also want to say 
that I am grateful to be in a room with so many other people 
who have such expertise like Curt Weldon and others who have 
been on this issue well before you were ever Secretary.
    First, Mr. Secretary, thank you for what you are doing. 
Your information and control center is truly impressive, and I 
think it will prove to be very helpful in the years to come.
    I have this concern that we are straining out gnats and 
swallowing camels, frankly. I think that, when I wonder how we 
utilize our resources, I happen to believe that putting more 
resources into WHO and to analyze how we can improve them would 
be better in some cases than the fortune that we will be 
spending potentially in this area.
    Let me say to you I also feel like picking the right 
vaccine is a huge gamble. I feel it is like a multi-billion 
dollar crap shoot. It is something like Russian roulette. It 
strikes me that the terrorists are just going to do what we 
didn't do, and I am concerned with the altered biological 
agents that we will have no antidote for.
    How do you set R&D priorities when you know the terrorists 
will just shift their attention to the agents you don't fund?
    Secretary Thompson. First, let me thank you for coming over 
and seeing the command center. I was very impressed by your 
knowledge and always have been, Congressman, and thank you very 
much for your dedication.
    I would ask Dr. Fauci to answer that question, because Dr. 
Fauci is the one that really determines the research.
    Mr. Fauci. Thank you for the question, Mr. Shays. 
Obviously, we will never be sure that we have covered all the 
bases when it comes to the research priorities, but what we try 
to do is match what intelligence we have, ranging from things 
that we know have been made and have been identified such as 
materials from the Soviet Union and materials that were found 
in Iraq in the first Gulf War. That is how we came up with the 
category A agents, but there are others involved there.
    Mr. Shays. You have 57 potential.
    Mr. Fauci. Yes.
    Mr. Shays. You have done anthrax and smallpox, but you've 
got a ways to go.
    Mr. Fauci. Yes. Well, yes, we do have a ways to go, and we 
are trying as best as we can to rapidly fill in the gaps of 
those what we consider probability plus impact. There are a 
number of agents, for example, that are on our B and C lists 
that are important agents that would not necessarily have a 
devastating public health impact but are things that would be 
disruptive. We wouldn't be able to develop a vaccine or 
necessarily a therapy, although we have many therapies against 
many of them, against each and every one of them.
    What we try to do as best as we can, a balance between the 
threat assessment, the scientific opportunity----
    Mr. Shays. I get the gist. Let me ask you this. Are we 
moving in the direction that DoD seemed to be moving in, and 
that was, instead of an all hazards protection--in other words, 
the protective gear--they began to say let's inject an anthrax 
vaccine, and let's take each one, and by the time we are done 
we have a human being who has 10 or 15 or 20 or 30 different 
shots in them. Are we moving in that direction or is our hope 
just to have these vaccines available and to contain them and 
only do those who need them?
    Mr. Fauci. The latter.
    Mr. Shays. Okay. Let me ask you this. Didn't the DoD try 
the non-market vaccine development with the joint vaccine 
acquisition program where they spent $300 million?
    Mr. Fauci. I am not sure I can answer that adequately, sir. 
I don't know the answer to that.
    Mr. Shays. My sense is that they did. They spent $300 
million, and this strikes me as somewhat of a duplication. I'm 
not sure that we have gotten anything back on the $300 million 
we spent. Is there anyone in your department that could respond 
to that?
    Secretary Thompson. It is my understanding they are working 
and may have developed a tularemia vaccine, but I can get that 
information.
    Mr. Shays. All right. Let me just ask this last question. 
Will Bioshield have any greater success in actually finishing 
development of a vaccine than what is tried at the joint 
vaccine acquisition? I gather this is something you have not 
focused in on. I would just suggest that we do.
    The DoD sometimes does things. They don't let a lot of 
people know about it or they do, but nobody pays attention. But 
a lot of failures over there. At the very least, we could learn 
from those failures. Thank you.
    Secretary Thompson. Thank you, Congressman.
    Mr. Shadegg. Thank the gentleman, and the Chair calls on 
Dr. Christensen.
    Ms. Christensen. Thank you, Mr. Chairman. I, too, want to 
welcome the Secretary and Dr. Fauci. By way of an abbreviated 
opening statement, I want to say for the record that, you know, 
while we are looking at Project Bioshield and while research 
and development of these countermeasures is of vital 
importance, I think that early in this process we really need 
to focus on the broader issues of furthering public health 
security, which is my primary concern.
    I think we have deficiencies in our public health system 
that are still unaddressed, with the impact of rising health 
care costs due to our lack of focus on prevention, and ensuring 
that everyone has equal access to quality health care, with the 
system's continued deterioration and with closing safety net 
hospitals all around the country. I think that the public 
health infrastructure is really in need of a lot of attention.
    Therefore, even if we had all of the wonderful vaccines, 
medicines and different devices that are considered, that we 
are talking about today, I am not sure that we wouldn't be 
stymied by the lack of the system's ability to really get out 
there and delivery these, despite what you have said about the 
systems that you have.
    So I hope that we will also, Mr. Chairman, spend an 
appropriate amount of time on the nuts and bolts of public 
health security, because it takes upwards--5 years if what we 
are talking about, but some experts estimate 10 to 15 years to 
develop new vaccines and therapies, and we can't wait that 
long. We have to protect our population now. So I'm hoping that 
we will be able to do that.
    On this particular bill, though, I have some of the same 
concerns about the open-ended funding, the chasing after 
vaccines when our adversaries are continuing to develop new and 
perhaps undetectable and other agents that we would not be 
prepared to have vaccines for. But I wanted to ask the first 
question relating to the territories.
    You mentioned, I think you said it was a GIS system that is 
in place that could look at any city and what is happening 
there and begin to respond. Does that extend to the territories 
as well?
    Secretary Thompson. We haven't got to the territories yet.
    Ms. Christensen. Okay, because we have some issues there. I 
hope that in very short order----
    Secretary Thompson. But I would like to say in regard to 
the territories, Dr. Christensen, because when I was Governor I 
worked very closely with all the territorial Governors. When I 
came in, we have sent out $1.1 billion last year to the States 
and to the territories for building the infrastructure, the 
local State public health systems.
    My only concern is that they haven't drawn down all of 
their money last year, and we have an additional $1.5 billion 
to send out, and we are in the process of sending that out now. 
WE will be sending 20 percent of that money out very quickly, 
and then we will be asking them to show what they have done 
with the past installments and what they are going to do with 
the other.
    I would encourage you to----
    Ms. Christensen. I sure will make sure that they spend 
their money, not only in my territory but the other 
territories. But the same is true for the Native American 
reservations?
    Secretary Thompson. That is correct.
    Ms. Christensen. That you are able to detect what is 
happening there at any given time and----
    Secretary Thompson. Yes, in America. But we haven't got the 
GIS system--we are working on it for the territories, and I 
would encourage you to come over and see what the potential is.
    Ms. Christensen. Okay. I will. Thank you for the 
invitation.
    Secretary Thompson. In regards to prevention, you couldn't 
find a stronger advocate than me. I could speak all day on 
prevention and why we have to go that way.
    Ms. Christensen. Thank you. Bioshield allows--I want to ask 
about the approval process. Bioshield allows the government to 
take possession and pay for an unapproved product. Once the 
government has done this, there is no real incentive for the 
product vendor to follow through and get FDA approval, as I 
understand it, especially since this is something that would be 
used based on an emergency authorization under Bioshield.
    In the interest of protecting the public, wouldn't it be 
best for us in this bill to require a contract for the 
procurement of a countermeasure to include a term that the 
product vendors seek FDA approval even after that emergency 
approval, and that the licensing or clearance for the product 
and a timetable for development of that approval be included in 
the contract?
    Secretary Thompson. There is no reason why not, Doctor. The 
truth of the matter is we would only use it when there has been 
a declared national emergency, there is no other approved 
effective countermeasure, and the threat is serious and life 
threatening disease, and I determine that the benefits used in 
the product outweigh the associated risks. It's got to be 
immediate.
    We have to--I mean, if we have a bioterrorist attack and we 
have something in the pipeline that may be able to prevent 
deaths, I got to make that determination. But after that, 
subsequent to that, there is no reason why they can't go ahead 
and go through the procedures and develop the efficacy as well 
as the safety.
    Ms. Christensen. Don't you have the authority to extend 
that emergency, just on your own, to extend that emergency 
beyond that time?
    Secretary Thompson. Once the emergency is over, it goes 
away.
    Ms. Christensen. Well, I think that it would be best to 
include those protections.
    A follow-up question on FDA. I recently became aware that 
FDA isn't really required to test on minorities, people of 
color. Is there anything in this, since these vaccines, devices 
and therapies are going to be used on people across the 
country, that requires that they be tested in minorities?
    Secretary Thompson. This emergency would not allow that. We 
would have to move so quickly that we wouldn't allow for the 
testing, Doctor.
    Ms. Christensen. Okay, something else to look at. I have 
heard----
    Secretary Thompson. If I could just respond. I mean, the 
emergency is immediate, and----
    Ms. Christensen. I understand, and you have to weigh the 
risks versus the benefits, but to the extent--I still feel 
that, because there is a possibility of extending that 
emergency period, that there still should be--Even though you 
have approved it----
    Secretary Thompson. That period is 1 year, and we would be 
doing a lot of--If the immediate emergency is over, we would do 
a lot more testing.
    Ms. Christensen. Okay. Well, basically, that's what I am 
getting at, that there still should be some safeguards in 
place.
    Is there any role for universities in terms of the 
research?
    Secretary Thompson. Oh, absolutely.
    Ms. Christensen. Because I didn't read that.
    Secretary Thompson. Well, that is going to be the push part 
of it. That is what Dr. Fauci can talk more elegantly about 
than I can.
    Mr. Fauci. Over about 90 percent or 89 percent of all of 
the research that occurs out of the funding from that initial 
part of the push is actually executed in the academic setting 
and some in the industrial setting. So the universities are a 
major part of this.
    Ms. Christensen. Thank you. Just one last question, if I 
can sneak this one in. As I understand it, the Secretaries of 
the Department of Homeland Security and Health and Human 
Services collaborate in identifying the critical medical 
countermeasures. How do you envision both Secretaries 
collaborating in determining the specific threats that require 
the countermeasures?
    Secretary Thompson. Homeland Security's Secretary would 
have to declare that there is an emergency, and he would 
declare that there is a threat and determines which agents 
present a material threat to the United States. I would have to 
assess the consequences of that threat, determine the agents 
for which a countermeasure is necessary.
    Then I would have to determine the countermeasures 
necessary for agent, and also I would assess the availability 
and appropriateness of specific countermeasures to address it, 
and then we would have to--Then I would have to determine a 
specific countermeasure. Then we would take that information to 
the President of the United States collectively.
    Mr. Shadegg. The time of the gentle lady has expired. The 
chairman now calls on the vice chairman of the Subcommittee on 
Emergency Preparedness and Response, Mr. Weldon.
    Mr. Weldon. I thank the chairman. Mr. Secretary, thank you 
for being here and, Doctor, thank you for joining us. I 
appreciate your leadership. I am here as a member of the 
Homeland Security Committee, but these have been issues that 
have been important to me my entire life, as it has with my 
colleagues here.
    My first question builds on what Jane Harman said. That is: 
The bill that you proposed before us, I think, is a good 
beginning and a discussion point. I think there are some 
questions we have to deal with on the financing issue, but I 
think it is a good foundation, but there are some areas that I 
think we have to address which are not covered by the bill, and 
perhaps won't be covered by the bill, but they are equal 
challenges relative to security for the Nation from the threats 
of weapons of mass destruction.
    The first is proliferation. The reason why we have a threat 
today is because of the technology that proliferated out of a 
destabilized Soviet Union. In 1998, 1999 and 2000, I brought 
Dr. Alexi Yabelkov to this Congress, and he testified that, in 
fact, the Soviet Union developed over 50,000 metric tons of 
chemical weapons, and he warned us back then we weren't taking 
the threat seriously enough.
    In 1999 I brought Dr. Kanalbegov who wrote the book 
``Biohazard.'' He testified as the former deputy director of 
the Soviet agency Biopropat that we were not taking the threat 
of biological weapons seriously enough.
    The bulk of the weapons and threats that we are dealing 
with now came out of the Soviet Union. Iraq did not have 
indigenous capability to develop chemical and biological 
agents. In fact, during the 1990's I documented 19 times--18 
times we had evidence of illegal technology flowing out of 
Russia to Iran, Iraq, Syria, Libya and North Korea. Of those 18 
times, at least 6 of them involved chemical precursors and 
biological technology.
    We imposed the required sanctions 6 times out of 18. That 
is totally unacceptable. Just recently, we have learned that 
again Russian entities are illegally assisting Iraq with their 
weapons of mass destruction program. So I would say to the 
administration, not to you in particular, an equal part of this 
battle has got to be reinvigorate the regimes associated with 
controlling proliferation.
    It is good to deal with the antidotes and vaccines, but 
let's eliminate the threat in the first place, the development 
and transfer of those very dangerous technologies from Russia 
and the former Soviet states.
    A second issue involves detection. I went down to the 
Centers for Disease Control in the fall of 2000, and thank 
goodness you have changed the mindset there; because when I was 
there and I asked the question about how we know if a chemical 
or biological attack was occurring, they said it will be done 
manually. Thank goodness, we now have an integrated data base 
that allows us in a moment's notice to understand the kinds of 
patterns that are occurring around the country relative to the 
threats that may, in fact, be happening. But I am still not 
satisfied that we have done all that we need to do.
    One of the things that I think should happen is that we 
have to focus on the first responder. I would not be in this 
Congress were it not for the first responder community. I was a 
fire chief in my hometown, became the mayor, and for the past 
17 years I have worked with the fire and EMS providers in every 
state.
    I have been to all of our major disasters from the 
wildlands fires in California, Oregon, Wyoming and Washington 
State to the midwestern floods, to hurricane Andrew and Hugo, 
the Murrow building bombing, the World Trade Center in 1993, 
and the World Trade Center in 2001, interacting with first 
responders and people from your agency.
    Let me say, as good as we are, we are not there yet. My key 
focus are the first responders in the 32,000 fire and EMS 
departments, 85 percent of whom are volunteers, who are going 
to be first in on the scene when an incident occurs.
    We can have the best antidotes, the best detection through 
our hospitals, the best systems of relaying information, but if 
that first-in responding officer on a police car, a paramedic 
unit or a fire truck doesn't understand the potential of the 
threat they are facing, the decisions they make in the first 
few minutes will determine the breadth and the scope of the 
impact of casualties on innocent people.
    We saw that in the subway in Japan when sarin gas was used 
a few short years ago. The first responders in Japan weren't 
properly prepared. They were wiped out, because they couldn't 
make initial basic decisions about what it was they were 
facing.
    Now we have begun to address this. The Congress, not the 
administration--The Congress in 2000 accepted a proposal by a 
bipartisan group of Members of Congress to establish the first 
assistant grant program to fire and emergency response 
departments. That is now up to a $750 million funding level.
    We need to continue to give them the resources to buy the 
handheld detection units to make basic assessments when they 
arrive on the scene of a disaster, because if they can't 
determine, not to the degree of whether they have one strain of 
anthrax or another but they have to be able to say we've got 
something unusual here--You know we've got it for the military.
    I chaired the Defense Research Committee for 6 years. So I 
worked on the funding for all these technologies, both at Fort 
Detrick and with our labs. We have the technology, but these 
portable, handheld units are not yet in the hands of the first 
responder community, and there is not an integrated 
communication network for our first responder community in the 
country.
    So as good as our efforts are in terms of what you are 
doing, and I again will commend you--I think you are doing a 
fantastic job--we are not there yet.
    I have another actual question for you before I end my 
statement. I would like to know what, if any, involvement you 
have with Dr. Alabek, or Dr. Alabekov, his real name. Now he is 
at George Mason University. I have met with him many times. I 
had him testify before my committee 3 years ago.
    He offers a wealth of information. Now he was the vice 
chairman of the agency who developed these strains. Doesn't it 
make sense to bring him in? And since we give the Russians a 
billion a year in external assistance, my initiative has been 
for the past 3 years to establish an interdisciplinary dialog 
and process with the appropriate Soviet or Russian scientists 
and laboratories to assist us in reverse engineering what they 
built so that we can better understand the kind of antidotes 
that our pharmaceutical industry has to produce. So that is a 
question I would ask you to deal with in the response to my 
comments here.
    Let me just--As you all know, we don't know where the next 
threat is going to occur. We all saw Dark Winter, the war game 
that was held in June of 2001 where the deliberate outbreak of 
smallpox in 3 States within 2 weeks caused 2 million people to 
be affected with that disease.
    We all know that is the kind of potential. But again, I get 
back to, and I am going to continue to focus on this in every 
hearing where I am involved from the Office of Homeland 
Security, it is the first responder. It is not the Marine Corps 
CBR team. It is not the Army and Air National Guard. It is not 
FEMA bureaucrats. It is not the State health care net, although 
they are all important. The first responder has got to make 
critical decisions in the first few minutes about the extent of 
what the threat is.
    They are not today prepared, and so while this 
legislation--and I commend you for it--moves us in a good 
direction in terms of getting the pharmaceutical industry 
involved, from the standpoint of the threat of bio and chemical 
challenges we have to do better.
    Let me just say, in the end this is what I fear. I would 
like to do a demonstration, Mr. Chairman. We saw the sarin gas 
attack in a subway in Japan. This is my concern for the 1.2 
million fire and EMS providers in America.
    They take off a covering mechanism for the outlet, and they 
hit a button, and there you have a chemical or biological agent 
being dispersed. If this were placed in a subway, the suction 
of the subway trains going--this is water, so don't worry. The 
suction of the subway trains would carry this agent through the 
entire complex, such as in DC.
    The Office of Technology Assessment did a study in 1993, 
and based on their calculations the amount of material inside 
of a suitcase could kill between 45,000 and 135,000 people. The 
first ones affected are the first responders.
    So I applaud you for your work. We've got to do a lot more, 
and I ask your help in making sure that we don't forget those 
men and women who are out there every day responding to every 
disaster. Thank you.
    Secretary Thompson. Let me just thank you for your passion, 
and I can't disagree with anything you have said, Congressman 
Weldon. Let me just try and quickly expand on a few things you 
said.
    We have had Dr. Alabek in my office on different occasions. 
It is quite revealing. He is very innovative. He is very 
knowledgeable, especially on anthrax. I've had him in during 
the anthrax thing and had him in since then, and some people in 
my department meet with him. I don't know how regularly. I 
could find that out for you. I haven't met with him recently, 
but I know that he is available, and we have been, and Dr. 
Fauci meets with him, as I understand it, on a regular basis as 
well.
    We have--I will never be satisfied, and I am sure you will 
not be as well. We have made tremendous progress. We've got a 
long ways to go, but I don't think we will ever be able to say, 
you know, we are fully prepared, because every one of these 
bioterrorist agents can be genetically modified.
    There's going to be different ways to aerosol or disperse 
these particular things. As you have indicated, a very 
effective way was the suitcase model, but there's going to be 
more technologically advanced ways to do that in the future. So 
we are always going to have to do it.
    In regards to first responders, they have got to be 
included. They are an integral part. They are the first 
responders. That's why their name is given to them. They are 
the first on the scene, and we are putting out tremendous 
amounts of dollars in order for the local State health systems 
to work in concert with the first responders to develop a more 
effective system.
    We put out $1.1 billion from our department last year. We 
are going to put out $1.5 billion this year. Most of it goes to 
education and communications and also purchase of equipment, 
not only for first responders but mainly for health care 
workers. But we are doing a lot of things in concert with the 
Department of Homeland Security.
    We've got to do more, but I do want to tell you that we 
have made tremendous progress in the past, and we are going to 
continue to do so. I would ask, like you, to come over and see 
our command center and see how far we have progressed. I think 
once you go through it, you will say that I didn't expect this, 
and I am very impressed.
    Mr. Shadegg. The Chair thanks the gentleman for his passion 
as well. I would point out that his time expired before he 
finished talking. So the Chair would call on Ms. Lowey for 8 
minutes.
    Ms. Lowey. Thank you, Mr. Chairman. Secretary Thompson, Dr. 
Fauci, I want to welcome you and tell you how fortunate I 
personally feel to have two outstanding public servants head up 
this project, and I want to express my gratitude.
    I promised my good colleague, Lois Capps, 1 minute at the 
end. So I am going to ask these two questions, and you will 
respond as best you can in the time, and then I hope we can 
continue the discussions.
    First of all, I believe it was Secretary Thompson who said, 
``We are going to ask the NIH to push the research, then 
establish the market.'' There won't be many companies standing 
in line to do this. I find this really upsetting, and 
especially that the large pharmaceutical companies won't have 
any interest, because there won't be enough profit.
    It seems to me that we may want to look into other ways to 
manufacture the product similar to the way the Department of 
Defense does. So that is the first question, because it seems 
unacceptable that the large companies that really can handle 
this won't be interested in it, and we have to dig around for 
some smaller companies who may not have the experience and, as 
you said, don't have the experience to produce this kind of 
product in the large quantities we need.
    Second, I would like to present a specific case and follow 
up on my colleague Jane Harman's comments, because this is in 
the future. We are planning for the future. We have a problem 
right now, and I appreciate several of my colleagues, my 
colleague Mr. Weldon and others' comments.
    I am aware of a company in Connecticut that has developed a 
drug called Prussian Blue. The drug would remove radioisotopes 
in a human body that has been exposed to nuclear contamination. 
The drug would help protect the public from a radiologic 
release from a dirty bomb or nuclear power plant.
    The FDA has already determined that Prussian Blue provides 
safe or effective treatment for patients with know or suspected 
internal concentrations of radioactive thallium, nonradioactive 
thallium or radioactive cesium, but they have not approved any 
company's proposals to mass produce the drug due to interagency 
bureaucratic delays.
    A potential manufacturer of Prussian Blue has had direct 
conversations with the Department of Energy which asked that 
the company expedite production of the drug. However, now the 
drug Prussian Blue sits, of no use to anyone, because the FDA 
hasn't gotten the message from the Department of Energy that 
this drug is critically important.
    I present this to you, because it was brought to my 
attention. I would be interested to know how can you guaranty 
the American people that Project Bioshield won't experience 
these same frustrating gaps in coordination and communication?
    I happen to have Indian Point Power Plant in my district. 
Many of us have nuclear power plants in our districts. All they 
are offering to us is potassium iodide, which affects the 
thyroid, but we all know and we won't go into--Dr. Fauci would 
have to do it--a scientific explanation if, God forbid, any 
kind of an incident occurs. It goes right to your bones, and 
you need more than the potassium iodide protecting the thyroid.
    So my question is: Right now, even though we have this 
great proposal before us, how do we really deal with the 
immediate threats and move the process? FDA has probably one of 
the most respected processes in place. How do we make it more 
efficient, expedite the process so we can get some progress 
now? Thank you.
    Secretary Thompson. Thank you very much, Congresswoman 
Lowey. I am going to allow or have Dr. Fauci answer the second 
part of the question. I just would like to say of the first 
part, I didn't say the pharmaceutical companies were not 
interested. I just said that there is not a market and, 
therefore----
    Ms. Lowey. Because there is not enough profit.
    Secretary Thompson. Well, there is not a market. There is 
nobody to purchase it. So there is no reason to----
    Ms. Lowey. You are going to purchase it.
    Secretary Thompson. Well, if we get Bioshield, we will. So 
I'm not saying that they will not be interested. I hope that 
they will be. I hope that a lot of companies will become very 
interested if we establish Bioshield. That is one of the 
reasons for us establishing Bioshield, is not only to push the 
research but to create the market so we do have individuals 
that want to come in and do things innovatively, pharmaceutical 
companies, biological companies, whatever the case may be, 
large and small.
    In regard to the FDA thing, I will look into it and push it 
along very quickly, but I would like to have Tony----
    Ms. Lowey. Thank you.
    Mr. Fauci. I can't speak to that specific issue that you 
mentioned, Ms. Lowey, but you know the part of Bioshield, the 
third part that is the emergency use. If in fact there was the 
need to get something out rapidly on the emergency use 
authorization and it was deemed something that was safe and 
effective with the appropriate risk, etcetera, etcetera, and no 
other alternatives, you would in fact be able to get that out 
through the Bioshield emergency use mechanism.
    That is part of the answer. The issue of speeding things 
along with the FDA before an attack, I think, is something that 
you will see the FDA--and Mark McClelland is very aware of the 
need of expediting issues within the framework of making sure 
we protect the American public from safety issues vis a vis not 
putting something out there that would not be safe.
    So it is the balance that the FDA continually deals with, 
but they are very aware of the need of expediting the issues 
that you brought up.
    Ms. Lowey. Dr. Fauci, since I have 1 minute left, could you 
address the first question. NIH in concert, you said, with 
universities is doing spectacular research, and Secretary 
Thompson and yourself have concerns about the manufacturer, 
because people aren't interested. Couldn't we operate on a 
procedure similar to DoD where we might be able to produce 
this, because it is in the public interest, and we can't worry 
about tremendous profits that have to be made out there.
    Mr. Fauci. Yes, Ms. Lowey, not to comment in any way 
negative or whatever on the DoD process, which in many respects 
has worked for them, the companies, the big PhRMA as well as 
the biotech companies, are so good, they are so unparalleled in 
their capability that I personally feel as a scientist that we 
must embrace them in the process. They will do it quicker and 
better than anyone in the world.
    Ms. Lowey. Well, let me conclude and turn my time over to 
Lois Capps.
    Secretary Thompson. Congresswoman Lowey, I would just was 
told by my lawyer behind us that we are meeting this afternoon 
in regards to purchasing some Prussian Blue for the stockpile. 
So you asked the question. That is how fast we deliver at the 
Department of Health and Human Services.
    Ms. Lowey. Well, I know you are efficient, and I appreciate 
your attention to this. Thank you. My colleague, my 1 minute 
remainder.
    Ms. Capps. Oh, I really appreciate my colleague yielding me 
time, Mr. Secretary. There is one aspect of the Bioshield 
effort that is being implemented by the administration, in 
addition to all of our military receiving smallpox 
immunizations, about a half a million of our first responders 
have been asked to voluntarily become immunized as well to 
create that shield. And yet, whereas on page 19 of the 
administration's bill--we have discussed this--there is a 
permanent indefinite funding mechanism put in place, in its 
essence the first responders--many of these are nurses--are 
being asked to voluntarily risk themselves, because there is a 
risk associated for a small number of them, with not anywhere 
near the same guarantees of protection.
    In the administration's proposal and also the bill that is 
right now before us in this committee and on the floor of the--
actually, not in this committee. It has been proposed for the 
House, there is no guaranty of compensation that would satisfy 
and give first responders the confidence to step up and take 
this vaccination.
    Don't you believe, and why is it--Don't you believe that 
these first responders need the same kind of protection, and 
why is there this disparity between the administration's bill 
for the Bioshield and the actual implementation of this aspect 
for our first responders?
    Secretary Thompson. I don't think----
    Ms. Capps. No mandatory spending has been associated at all 
with the first responders.
    Secretary Thompson. You are talking about the mandatory. 
First, let me tell you. Mandatory is because it is going to be 
long lasting. We have to be able to create the market, 
Congresswoman Capps, in order to have a company go into this 
business and, once the research is done, that is the pull to 
get them to manufacturer it.
    In regards to the smallpox vaccination compensation fund, 
we know that this is a group of individuals, and we have a 
discretionary amount. We know that this could be appropriated 
on an annual basis, if we ran out. Congress could come back and 
appropriate it.
    It is right now, and it is immediate, and that is why we 
thought the discretion was a much better way to go.
    Mr. Shadegg. The time of the gentle lady, indeed the time 
of both gentle ladies, has expired. The Chair would call on Mr. 
Burr, and in doing so would remind all members of the panel 
that the Secretary has a firm deadline of 11:45 by which he has 
to depart the committee.
    Mr. Burr. I thank the Chair. I welcome the Secretary and 
Dr. Fauci. I have three questions. I will try to buzz through 
them very quickly.
    The first is: I would take for granted from the answers 
that I have heard that, Dr. Fauci, you envision that a majority 
of the research dollars would be extramural. Is that correct?
    Mr. Fauci. Correct.
    Mr. Burr. Given that we would enter into some type of 
binding contractual agreement with companies, who would, in 
your vision, hold the patent? Would it be a shared patent or 
would it be, in fact, the company that we contracted with?
    Mr. Fauci. It would really vary according to the situation. 
For example, one example that I gave just a moment ago of a 
company saying we have this, we want to proceed but we need 
some guaranty you will buy it--That is a no-brainer. They have 
the patent.
    In a situation when we ask for applications to come in on a 
product that no one is working on, that is negotiated back and 
forth the way it general does in collaborative relationships.
    Mr. Burr. Secretary Thompson made a very valid point 
earlier. He said today there is no market for it, and I think 
we all understand the need to create the market. Anthrax is a 
threat here in the United States today, and next year it may be 
a threat throughout Europe.
    When all of a sudden there is a market for that product 
that extends outside of the purchase agreement with the U.S. 
Government, do you envision that contractually there is any way 
for us to receive any proceeds off of the additional sales of 
that product through co-ownership of the patent or some 
reduction based upon markets that are created in the future for 
those companies?
    Secretary Thompson. Congressman Burr, it certainly is 
possible. I mean there is no reason why we couldn't. We 
certainly would have an exclusive license, and after the 
product is developed and we put the money in for the contract, 
we would have an exclusive license. I don't know if we would 
hold the patent. We probably would not.
    Mr. Burr. Well, certainly, today with NIH research there 
are some that criticize the fact that we spend a tremendous 
amount of money and a private sector company then has the 
patents and makes the proceeds, and I think it is important 
that we at least look at it, that----
    Secretary Thompson. I think we should. I'm a big believer 
in that, and I certainly want to work with you in that regard. 
I think it is a good suggestion that we could take a hard look 
at.
    Mr. Burr. Right. As we look at the contract itself, is it 
safe to say that it is impossible--Before we have even found 
the company that does the research, that comes up with 
potentially the vaccine, it is impossible for us to determine 
what the cost would be of the vaccine for us to purchase?
    Secretary Thompson. I think it would be difficult, if not 
impossible, because----
    Mr. Burr. Given that you went through that process and we 
got to the end, how does one then determine what the correct 
purchase price of that vaccine would be?
    Secretary Thompson. It is negotiated between the Department 
and our procurement agents and the company, just like we 
negotiated the contract with Acambis-Baxter2000 on smallpox, 
the same way we negotiated the contract on Cipro, the same way 
we negotiated the contract with Aventis Pasteur to purchase 
their stockpile of smallpox vaccines.
    Mr. Burr. But this is slightly different from the fact that 
we have financed their research. We probably have not paid for 
the machinery to manufacture, but we have paid for a number of 
the steps. In the traditional pharmaceutical market, one would 
take the research and development costs and try to recover that 
over the patent life of the product that was left after a very 
lengthy period.
    Secretary Thompson. I sincerely think that we should try 
and do the same thing, as the government is to be able to get 
our research and development, what we have done to go into the 
product in order to keep the price down for the American 
public, because we are paying for it. But that is going to be 
all negotiated out.
    Mr. Burr. I appreciate the fact that it is going to be part 
of that negotiating process, that we do have an investment in 
it.
    Secretary Thompson. Well, as long as I am there, as you 
probably know, the contracts that I personally have negotiated, 
they have been very tough, and they will continue to be as long 
as I am Secretary.
    Mr. Burr. I thank you for that commitment.
    Mr. Waxman. Would the gentleman yield to me on this point, 
because it is an interesting point you have raised.
    Mr. Burr. I would be happy to yield.
    Mr. Waxman. Mr. Secretary, Congressman Burr raises an 
interesting point. We see this all the time. The government 
invests public funds in basic biomedical research. Drug 
companies take advantage of that, then develop a product for 
which they get a patent, and then have a monopoly price that 
they charge the public for their product.
    Now many of us have felt that the government ought to be 
able to get some recoupment, if in no other way, by requiring 
lower prices when the government buys that drug. I gather what 
you said to Mr. Burr is that you think, if we are going to help 
subsidize the development of these counterterrorist measures, 
whether they be vaccines or otherwise, you think the government 
ought to get a break on the price we pay for it, if we are 
subsidizing the development.
    Secretary Thompson. Yes, with the full extents of 
disclosure of you got to get the company to do it. I mean, you 
got to realize, Congressman Waxman, that there is no market out 
there. We are the end customer. We are the only customer that 
that company has. So that's all got to go into the 
negotiations, but we got to make sure the company is willing to 
manufacture it as well.
    So that is all part of the negotiations that are going to 
take place, Congressman.
    Mr. Waxman. If the gentleman from North Carolina would 
permit, I would like to ask you this question. Ordinarily, when 
we go out and ask for--there is a procurement issue, we go out 
and get an appropriation to back it up. That is certainly the 
case when we ask development of even drugs by the Department of 
Defense.
    You want, however, in this bill to have a mandatory 
spending, an entitlement for the companies to pay for their--
subsidizing their efforts to develop these products. I am 
curious to know why the distinction here where we have 
mandatory spending, first of all, and second of all, I find it 
hard to understand the contrast, this issue with what Ms. Capps 
asked you.
    If we are going to have mandatory spending for the drug 
companies to develop vaccines, why wouldn't we have mandatory 
spending to make sure we compensate the first responders, the 
nurses, the firemen and women, the police department, if we are 
asking them to take the smallpox vaccine? Why wouldn't we want 
to treat them the same?
    Secretary Thompson. It's two different concepts, 
Congressman Waxman. First off, you are going to have--You don't 
have a market for this particular vaccine except for the 
Federal Government. You are going to have the push by the NIH, 
putting the dollars in to getting the research done, more than 
likely extramural and some university. Then once the research 
is done, you are going to have to get a company that is going 
to do it.
    A company, more than likely, is going to have to put in a 
couple hundred million dollars in order to build a new plant or 
a new procedure in order to produce the vaccine. Could I 
finish?
    Mr. Waxman. See, I'm not arguing with you on that point. I 
understand that point. But if we are having mandatory spending 
to do that, why not have mandatory spending to help a nurse who 
may be permanently disabled, to assure her that she can be made 
whole.
    Secretary Thompson. I'm trying to explain it, Congressman 
Waxman. Because it is going to probably take 5 years, 3 or 4 or 
5 years to get that product to the end result in which we would 
pay it. The company is not going to spend the $200-$300 million 
for the plant or the modernization of the line while waiting 
for us to--waiting for you and the rest of the Members of 
Congress to appropriate the money. They won't do it. They want 
to make sure that at the end of that 3 or 4 or 5 years there is 
going to be money available. That is why it is mandatory.
    In regards to the smallpox, it is right now. We know that 
we have to appropriate the money, and that is discretionary 
with the Congress as to how much they are going to appropriate, 
but it is immediate. That is what we are asking for in the 
smallpox compensation, is to appropriate the money so that we 
can compensate a nurse or a first responder that has an adverse 
impact.
    It is not 5 years. It is immediate. That is the----
    Mr. Waxman. Well, is a nurse going to take the risk that 
they may not----
    Mr. Burr. Recouping my time that has already expired, I 
would yield back to the Chair.
    Mr. Shadegg. The gentleman's time has expired, and indeed I 
want to thank the Secretary and Dr. Fauci. We made a commitment 
to get you out of here at quarter of, and that was per your 
schedule. You have been very generous with your time.
    For any members of the committee who didn't get a chance to 
ask questions, I would encourage you to submit written 
questions, which I am certain will be responded to. With that, 
we will excuse this panel and invite the next panel to take 
their seats, and I will turn the Chair back over to Mr. 
Bilirakis.
    Secretary Thompson. Thank you very much, all of you.
    Mr. Shadegg. Thank you.
    Mr. Bilirakis. Our next panel is Dr. James Baker, Jr., Ruth 
Dow Doan Professor, Director of the Center for Biological 
Nanotechnology from Ann Arbor, Michigan, I assume associated 
with the University of Michigan; Dr. J. Leighton Read, General 
Partner of Biotechnology Industry Organization; Dr. Michael 
Friedman, Chief Medical Officer for Biomedical Preparedness 
with PhRMA; and Dr. Gary Noble, Vice President of Medical and 
Public Affairs, Johnson & Johnson, on behalf of AdvaMed.
    Gentlemen, your written statement is a part of the record. 
We would hope that you would supplement it and complement it 
orally. We will set the clock at 5 minutes and do the best we 
can. Dr. Baker, I understand that there has been a family 
emergency. You are awfully courageous to hang on here. We will 
start with you, sir. Please present your opening statement.

   STATEMENTS OF JAMES BAKER, JR., RUTH DOW DOAN PROFESSOR, 
  DIRECTOR, CENTER FOR BIOLOGICAL NANOTECHNOLOGY; J. LEIGHTON 
READ, BIOTECHNOLOGY INDUSTRY ORGANIZATION; MICHAEL A. FRIEDMAN, 
 CHIEF MEDICAL OFFICER FOR BIOMEDICAL PREPAREDNESS, PhRMA; AND 
                 GARY NOBLE, JOHNSON & JOHNSON

    Mr. Baker. Thank you. I am Dr. James Baker. I am a 14-year 
veteran of military medicine, much of that spent at Walter 
Reed. So I was happy to hear those kind words about it. I have 
also served as a reviewer of the ChemBio Terror in the DoD and 
as a reviewer at NIH of research that is conducted there. I 
have chaired several panels on bioterrorism work. So I have a 
broad background in this. I am also, besides being an academic, 
the CSO of a company that is commercializing a new non-
antibiotic therapy for bioterrorism. So that gives you my 
background.
    My presence here today is to reinforce the fact that 
Bioshield is going to have a number of difficulties. Many of 
them are technical, and that is because the concept of a bio-
threat attack as an emerging infectious disease is not quite 
correct, I don't believe.
    I think that the dose that people receive and the way that 
an agent is disseminated will be very different in these, and 
the countermeasures would have to be very different. To give an 
example, you know, in the military, if you are using the 
smallpox vaccine, it is somewhat acceptable, given the unique 
population. On the other hand, in the civilian population it is 
not, and the dissemination would be significantly different 
there.
    So that the countermeasures that would have to be developed 
are inherently different. In addition, I believe that the 
financial issues related to return and market are much more 
severe than have been presented so far. I don't believe that 
even a government market would induce a manufacturer who has 
high value products and high profit margins from other 
applications into this field.
    I believe that the work that has already been done on many 
of the issues related to bioterrorism and many of the research 
grants have attracted not big PhRMA but, in fact, have 
attracted small startup companies. The reason for that is that 
they have one focus, and their focus is developing new 
products.
    That can work very well in your favor, because essentially 
there is a process at hand right now, how new products are 
developed. There is research that is leveraged from 
universities that is transferred into companies as startups 
that then goes through approval process, and this can be very 
effective in developing new technology, and the type of 
technology that we need under Bioshield.
    So that, to give you my own example, we are funded by DARPA 
in my university lab, was then transferred into a commercial 
entity which then, within 2 years, has entered clinical trials, 
and this is a non-antibiotic countermeasure for anthrax.
    To be quite honest, even after 9/11 there was no commercial 
partner that was willing to support that work, because there is 
no market for that and, even if they stockpiled this, was 
bought for a single bioterror attack, it doesn't provide the 
type of revenue that would interest a company with other types 
of revenue streams.
    Therefore, I believe that the most important way that 
Bioshield can enhance the country's defenses is by supporting 
this type of ongoing process, by leveraging the research that 
they are already paying for in the universities, and by 
enhancing tech transfer and startup endeavors for this type of 
work.
    I think there are many examples how this will work, but I 
think most importantly I don't think, even with the types of 
incentives that are being written into Bioshield, it will prove 
enough of a lure to get large companies involved in this type 
of endeavor, even if an artificial market is created. Thank 
you.
    [The prepared statement of James Baker, Jr. follows:]
Prepared Statement of James Baker, Jr., Ruth Dow Doan Professor, Center 
                     for Biological Nanotechnology
    I am Dr. James Baker, a physician who is the Ruth Dow Doan 
Professor of Internal Medicine and Director of the Center for Biologic 
Nanotechnology at the University of Michigan. I am Director of Research 
at our institution's Bioterrorism Initiative, and Division Chief of 
Allergy and Clinical Immunology in the Medical School. I am a 14-year 
veteran of service in the U.S. Army, 12 of it on active duty, including 
service during Desert Storm. I have participated in and chaired 
committees in NIAID reviewing research into defense against biologic 
weapons. With support from the Defense Advance Research Projects 
Agency, the National Institutes of Health and NASA, my center is 
applying these technologies to a number of problems in biology 
including infectious disease therapy and microbial decontamination. I 
am also the CSO of two startup companies, one of which, NanoBio 
Corporation, is dedicated to commercializing new technologies for 
antimicrobial applications and decontamination. I have extensively 
studied the problems involved in preventing illness as a result of bio-
terrorism or bio-warfare, and I am pleased to have been invited to 
testify before the committee this morning.
The Purpose of Project Bioshield
    Project Bioshield aims to rapidly transfer technology into products 
that can be used to protect individuals against biologic and chemical 
agents used as weapons of terrorism or mass destruction. The emphasis 
is on rapid introduction of new countermeasures into actual use, as 
many technologies currently under development need to be transitioned 
through regulatory approval or commercial development cycles. 
Unfortunately, Project Bioshield faces many challenges in attaining 
this goal. Some of these challenges are technical. The technologies 
that are currently available for commercialization are not adequate to 
meet the needs of our population. An excellent example is the current 
smallpox vaccine which is being produced in larger quantities but has 
medical issues that make it unacceptable for use by the current U.S. 
population. While new smallpox vaccines are in development, the time 
lag for approval of these is considerable and beyond the timeframe 
desired for Project Bioshield.
    Other problems for Project Bioshield involve economic issues. 
Producing technologies solely for bioterrorism prevention is not 
economically viable for most companies. Since most products 
specifically targeted for defense against bioterrorism will hopefully 
never be used, small sales of these products would have to support 
massive development costs, even when aided by the government. Also, it 
is unlikely that established manufacturers will bid to produce products 
only for these applications since there would be no consistent, ongoing 
markets available to sustain product development and marketing costs. 
Finally, the cost of product liability may be an inherent issue in this 
process. Unlike products developed for the military, products directed 
towards civilian applications expose manufacturers to liability claims. 
A product, be it a detector, vaccine or therapeutic, will not be 
infallible and the risk of failure during a bioterrorism event would 
create liability issues great enough to prevent any established company 
from entering this market. This is apparent in many of the bioterror 
initiatives the government has already launched.
    The result of these many problems requires that most work supported 
by Project Bioshield will involve new technology developed by start-up 
companies who are willing to support the high-risk, high-reward nature 
of bioterrorism applications. In addition, this approach will also 
ensure that the American people get the best available technology, and 
leverage the investment in government-sponsored research from NIH, NSF 
and the EPA.
The Nation's Best, Largest Technology Incubator
    The nation's best and largest technology incubators are its' 
research universities. Most of the breakthrough technologies that have 
been incorporated into medical research and therapeutics have come from 
the nation's research university laboratories. These research advances 
cover the gamut of Project Bioshield needs from medical counter-
measures, such as vaccines and therapeutics, through issues related to 
the psychological and economical impact of bioterrorism. The nation's 
universities produce new technologies very efficiently, given that they 
have a pre-installed technical base. The universities are also highly 
effective in technology transfer, being the source of much of the 
technology used by the nation's start-up biotechnology and 
pharmaceutical research companies. These start-up companies are most 
likely to respond to Project Bioshield given the fact they are willing 
to accept the risks involved in developing new technology for 
bioterrorism. This system is remarkably efficient; yielding new 
companies and new technologies rapidly and often without support from 
established companies. The focus also is on technology improvement to 
do a better job of protecting our citizens, rather than re-packaging 
current technologies.
My Personal Experiences Emblematic Of This System
    As a physician scientist I received funding from DARPA to develop 
new counter-measures for bioterrorism. This research quickly resulted 
in technology that was commercialized. NanoBio, a start-up company 
where I am Chief Scientific Officer, began work in March of 2001 and 
quickly responded to a request for decontamination materials during 
October 2001. Given our technology's unique application to skin 
decontamination, we have now moved towards FDA approval to use our 
material to decontaminate human beings and are initiating Phase I 
clinical trials this spring. This was accomplished despite the 
regulatory approach for bioterrorism approval being defined only 6 
months ago. Thus, the head start given to our technology by university 
research and development was leveraged into a commercial product that 
will enter clinical trials less then two years after the company was 
created! It is this type of success that could be duplicated many times 
with academic support through Project Bioshield.
Proposal for Inclusion of Research University Components in Bioshield
    I would strongly urge you to include research university components 
in the Bioshield bill in order to support the transition and 
commercialization of university research. This will support and 
leverage funding to develop new technologies these universities have 
received from the NIH, NSF and EPA. It will also ensure that the newest 
and most effective forms of protection are made available to our 
population. Finally, given the economic and liability issues involved, 
it is likely that only start-up and small companies would accept the 
high-risk, high-reward endeavors entailed in Bioshield. By leveraging 
the government's investment in university research, the likelihood that 
these companies will be successful is increased for the betterment of 
all.

    Mr. Bilirakis. Thank you, Dr. Baker.
    Dr. Read.

                  STATEMENT OF J. LEIGHTON READ

    Mr. Read. Thank you, Mr. Chairman and members. I appreciate 
the chance to comment here today, and I just have to say how 
impressed I am with the sophistication of the comments of 
yourself and the members on this very complicated important 
issue.
    My comments are based on my experience as a physician and 
as an entrepreneur who started and built a number of successful 
biotech companies, and now as a venture capitalist investing in 
entrepreneurs working on astonishing technology in biotech and 
information technology. I am honored to represent the 
Biotechnology Industry Association today and its 1100 members, 
which include companies, research institutions, State 
associations in all 50 States.
    Bioshield is a huge step forward, and it deserves the 
urgent consideration of this committee. Some of its important 
features that are extremely welcome include this essential 
delineation of responsibilities between the Secretaries of 
Health and Human Services and Homeland Security.
    Some of the streamlining of the ability of NIAID to sponsor 
both intramural and extramural research, the emergency powers 
for the Secretary are to help accelerate the ability to make 
good decisions under what will then be very difficult 
circumstances and, of course, the serious effort to deal with 
market creation and the role of the private sector.
    I have adapted my remarks in light of some of these 
wonderfully incisive questions today. What is the role of the 
private sector? What is the case for the private sector's 
engagement in creating these countermeasures?
    One, our system is based on this kind of pluralism. Most 
of--The second thing that I think is raised very heavily here 
is the track record. It is true that most of the vaccines and 
antimicrobial agents produced and introduced into actual 
clinical use in the last 30 years--you can trace the roots to a 
very important NIH and often NIAID contribution to the basic 
science and sometimes far beyond that, but in every single case 
of a product that is available to American doctors and their 
patients today, there has been a gigantic investment by the 
private sector.
    The third reason is that there are vast resources in the 
private sector. It would be wildly failing to take advantage of 
these resources if we were not to recognize that there are very 
specialized skills and simply large numbers of capable people 
and experience in the biotechnology and pharmaceutical sector.
    So the question--many of the points have already been made 
today--how do we get the private sector fully, effectively, 
appropriately engaged and have the appropriate safeguards? I do 
think this idea of push and pull mechanisms is important as a 
way to think about this. The way I would use the terms, a push 
mechanism is something that lowers the cost of getting the job 
done, of developing and--of discovering and developing 
countermeasures, and so support for R&D is a good example of a 
push mechanism, and there is a place for that.
    I would describe pull mechanisms as mechanisms which 
increase the reward rather than lowering the cost. So increase 
the reward for success. It is really important that these pull 
mechanisms not be degraded by then taking away some of that 
reward for success. I will have a couple of examples.
    Push deals with process. If we fund push mechanisms 
generously, what we tend to get is more process. We create a 
dependency, both in all of our institutions, public and private 
sector, when we fund that. We create a group that exists and 
will be productive in that mode. If we focus some or a large 
portion of our resources on pull mechanisms, what we are 
rewarding is the end result we care about.
    One of the reasons that really clear examples and models 
for pull mechanisms are challenging for countermeasures in this 
setting is that we are still in the early days of delineating 
our threat list. We have this list of agents, but we know that 
the creativity of our opponents is tremendous. The tools are 
available. They are already disseminated. The preparation is 
already there.
    So we need to have a constructive, flexible, incisive and 
centralized point of setting these priorities so that we can 
then design our pull mechanisms around these targets. by the 
way, I think there is an important role for both vaccines and 
drugs and diagnostics, some of which will be very specific to 
known pathogens where we know that tons of these things were 
produced somewhere and might be in the hands of our opponents.
    In other cases, we really need to create the incentives, 
the pull mechanisms, supplemented with push to create more 
broad or general purpose medicines and approaches that don't 
even exist today. We need to work on the priority list, and 
having it centralized is going to be important.
    I want to say a word about a couple of things that could 
take away from the value of the pull mechanisms that are 
embodied in the current legislation.
    Mr. Bilirakis. Can you do it in a summary, in a summarized 
fashion?
    Mr. Read. Okay, thank you, sir. In summary, I think the 5-
year limit and the penalty for success with dual use, the fact 
that this procurement is only limited to a setting where only 
the government work, means that we are penalizing the 
innovators for their success and, of course, it is going to be 
important to provide some form of protection from crippling 
lawsuits when that is appropriate. Thank you, Mr. Chairman.
    [The prepared statement of J. Leighton Read follows:]
Prepared Statement of J. Leighton Read, General Partner, Alloy Ventures 
          on Behalf of the Biotechnology Industry Organization
    Mr. Chairman and Members of the Committee, it is an honor for me to 
testify before you today regarding Project BioShield and its likely 
impact in bringing private sector talent and investment into our 
nation's biodefense effort. I would also like to recognize Secretary 
Thompson and Dr. Anthony Fauci for their testimony here today and their 
continued leadership on issues relating to the health of the American 
public. BIO applauds your immediate consideration of the proposed 
BioShield initiative, which is designed in part to stimulate research 
and development of biomedical countermeasures through collaboration 
with the biotechnology industry.
    These comments are based on fifteen years of experience building 
and financing biotechnology companies in Silicon Valley. I am co-
founder of Affymax, a company that transformed the way the 
pharmaceutical industry thinks about screening for new drugs and a co-
inventor of the technology underlying the Affymetrix GeneChip 
TM, the leading technology for acquiring, analyzing, and 
managing complex genetic information for use in biomedical research. I 
was founder and CEO of Aviron, a vaccine discovery and development 
company with extensive and successful experience partnering with the 
National Institute of Allergy and Infectious Disease. When Aviron 
merged with MedImmune, a fine company near here in Gaithersburg, I 
joined Alloy Ventures, a venture capital fund investing in 
entrepreneurs building early-stage companies in the life sciences and 
in information and communication technology. Previously, I held faculty 
appointments at Harvard Medical School and School of Public Health, 
where I practiced internal medicine and conducted research on the 
costs, risks and benefits of new medicines. For a number of years, I 
served as a member of the Executive Committee of the Biotechnology 
Industry Organization (BIO), who I am also representing today. BIO 
represents over 1,100 companies, universities, research institutions, 
state biotechnology associations and affiliates in all 50 states.
               project bioshield is a major step forward
    By focusing energy and resources on the creation of new biomedical 
countermeasures, this legislation will certainly contribute to our 
national preparedness. Its delineation of responsibilities among the 
Departments of Health and Human Services (HHS) and the Department of 
Homeland Security (DHS) provides essential clarification to minimize 
gaps and duplication of effort. The legislation contains many 
provisions that will help the National Institute of Allergy and 
Infectious Diseases (NIAID) streamline work on its essential mission of 
creating new knowledge about infectious disease and countermeasures. 
New authorization for procurement of medical products to be used in 
emergencies is highly welcome because it will facilitate good decision-
making under the very difficult circumstances that must be part of our 
planning horizon.
    And--very importantly--BioShield contains provisions that recognize 
some of the unique challenges in producing biomedical countermeasures 
and the importance of engaging the private sector in this vital effort. 
The procurement provisions of BioShield begins to address the need for 
``pull'' mechanisms of market creation that are essential to complement 
``push'' mechanisms, such as sponsored R&D programs already enacted.
    Our country will only be successful in placing needed 
countermeasures on the shelf if the Government is able to engage the 
enthusiastic participation of leading companies in the biotechnology 
and pharmaceutical industry. The conditions are not yet in place to 
accomplish that goal. BioShield is a step in the right direction, 
particularly with respect to procurement of near-term products. In the 
long term, in addition to BioShield, there are a range of ``push'' and 
``pull'' incentive mechanisms that the Committee and the Administration 
should evaluate, such as those included in the proposal by Senators 
Lieberman and Hatch.
              we are at the beginning of a very long road
    I am concerned that several of the provisions in BioShield miss an 
important chance to address our country's long-term needs. America's 
role in the world positions us as a uniquely attractive and vulnerable 
target for asymmetrical warfare tactics embodied in today's terrorism. 
While public recognition of this threat may be a recent phenomenon, we 
can plan on facing this challenge as long as our prosperity and 
influence set us apart from other nations.
we must create a new biodefense industry to partner with the government
    The scale of the investment required is many-fold larger than 
implied by the current BioShield proposal. Only two, the anthrax and 
smallpox vaccines, of 57 diagnostics, vaccines and therapeutic products 
prioritized by the Defense Science Board (DSB) are available today. BIO 
and our member companies had met on numerous occasions with various 
agencies engaged in homeland security prior to the establishment of the 
separate department. BioShield will provide much needed centralization 
of these efforts, as well as a clear list of R & D priorities that can 
focus private sector investment if coupled with the right market 
signals. At the current investment levels, some new countermeasures 
will be available within five years, however larger investments will 
undoubtedly be required. Over the long-term this challenge and the 
necessary investment may be compared with the nuclear threat of the 
late 20th century.
    Fortunately, we can ensure that government investments are well 
rewarded by basing our policies on models of successful biomedical 
investment. It is important to seize this opportunity because 
infectious diseases represent some of our greatest triumphs in 
discovering, preventing and treating disease. When the public and 
private sector biomedical research assets of the United States are 
focused on high priority infectious disease targets, the result has 
ranged from complete conquest--as in the case of polio--to medicines 
that significantly reduce mortality and improve quality of life. Young 
doctors today have never seen the childhood infections that accounted 
for most infant mortality 50 years ago. Even the HIV virus, which has 
so far eluded attempts to find an effective vaccine, can be controlled 
with a growing number of drugs discovered and launched in only 15 
years.
    Public-private partnerships are working to control infectious 
disease. Antibiotics, anti-virals, vaccines and other ``wonder drugs'' 
against infectious disease come to be available to patients and their 
doctors via a complex web of interactions among public and private 
sector entities. In the past 30 years, almost every important 
antimicrobial drug and vaccine discovery effort has benefited in some 
way from the research conducted under the sponsorship of the US 
National Institutes of Health (NIH). Through its intramural and 
extramural programs, the NIH is responsible for an explosion in the 
basic science of how infectious agents spread and cause disease and how 
the human body fights back. The NIH has also made substantial progress 
by moving discoveries out of the laboratory and into clinical trials 
where safety and efficacy can be evaluated. For example, results from 
Vaccine Trial and Evaluation Units (VTEUs) in academic institutions 
supported by NIAID demonstrate how successful public-private 
partnerships can be. Other Federal programs at the Centers for Disease 
Control and Prevention (CDC) and elsewhere in HHS, as well as in the 
Department of Defense (DOD) and the Veterans Administration (VA), have 
made important contributions.
    Government supported facilities for research on biothreat agents 
will play a critical part in the research and development efforts of 
both public and private contributors. It is not feasible for the 
private sector to build or operate all of the biocontainment facilities 
needed, and it is essential that countermeasure candidates developed in 
the private sector can be tested for pre-clinical efficacy in the 
public funded facilities, especially where physical control of 
dangerous biothreat agents must be assured.
    The government plays a further vital role by setting minimum 
standards for product safety and efficacy via the FDA. This gate-
keeping role also extends to regulation of manufacturing processes. The 
large extent to which regulation of manufacturing drives the cost and 
development time of vaccines and related products is an important 
consideration for biodefense procurement policy.
    Finally, the government has successfully created large and enticing 
markets for bio-innovations by serving directly as a purchaser, via the 
Medicare, Medicaid and Veterans' healthcare programs, and via the 
regulatory and tax environment that supports our large private health 
insurance industry. By creating conditions for a market that is 
reasonably predictable and consistent over time, the government should 
set the stage for the private sector to optimize its use of resources 
to develop appropriate products. The same concepts of consistency and 
sustainability, while not perfect in these and other purchasing 
environments, will be needed for the development of countermeasures to 
biothreats. Particularly when you consider that the market for 
countermeasures cannot, by any definition, be considered a traditional 
market.
    As important as the government's role is, it can also be said that 
all of the important drugs and vaccines for infectious disease in the 
US have come to be available only after substantial effort and 
investment by private sector companies in the pharmaceutical and 
biotechnology industries. Some of these programs began as early-stage 
discovery programs in industrial laboratories. Often, these benefited 
from technology licensed from our great research universities, where 
discoveries were typically funded by government grants. Still others 
were the result of technology transferred by the NIH or other agencies 
to a committed industrial partner under licenses and Cooperative 
Research and Development Agreements (CRADAs). Regardless of where 
industry stepped in, every successful product has required private 
investment ranging from tens to hundreds of millions of dollars.
                  the crada for flumist tm
    My company, Aviron, held one of the first CRADAs with NIAID 
beginning in 1995. This work involved a promising influenza vaccine 
invented at the University of Michigan in the 1960s under US Army 
sponsorship. This vaccine had been the subject of NIH-sponsored 
clinical trials in VTEUs thru the 70s and 80s. Despite the lack of a 
committed industrial sponsor, NIAID had built an impressive base of 
scientific knowledge around this flu vaccine and its novel form of 
administration via the nose. There were major contributions from the 
NIAID intramural program as well as its network of vaccine trial and 
evaluation units. Under our 5-year CRADA, Aviron developed a 
manufacturing process and supply chain and conducted Phase II and Phase 
III clinical trials for FDA registration of the candidate vaccine now 
known as FluMist tm. The partnership between Aviron and 
NIAID was as successful as it was collegial, with each side performing 
its roles in bringing the vaccine forward. What neither party 
anticipated at the outset was the staggering cost of late-stage vaccine 
development and manufacturing to FDA standards. More than $300 million 
has been spent over the past 8 years to bring FluMist TM to 
the point of final FDA evaluation. This is for a vaccine technology 
that had been the subject of over 20 years of NIH clinical trials!
    The money to support this work was supplied by venture capital 
firms and public market investors in our IPO and numerous follow-on 
financings. The incentive for the private sector to make these huge 
investments is premised on the size of the market for successful 
innovations, which can reach many hundreds of millions of dollars in 
annual sales. While American companies can be counted on to respond to 
a crisis, efforts to attract the best people and companies to work for 
many years on high-risk countermeasure projects will fail if the reward 
structure is not aligned with the prevailing incentives in their 
industry.
    Venture capitalists do not, as a rule, invest in companies with 
business models such as professional services firms or companies aiming 
to build a business based on contract R&D at industry averages. We aim 
for our companies to produce products based on defensible intellectual 
property which have the kinds of margins seen in truly innovative 
software, pharmaceuticals, and electronic devices. Year in and year 
out, through the natural cycles of technology, this is a proven recipe 
for creating value for consumers, patients and investors. That is why I 
am so concerned that we are not giving full attention to the actual 
products we need to build in the end and the market forces that will 
get them finished, deployed and sustained.
                          extending bioshield
    BioShield should be extended to cover the time frame and scale of 
the problem. The Secretary needs the flexibility to choose the 
appropriate mechanisms to develop countermeasures, sole-source or 
through competitive means, and mechanisms for obtaining advice as to 
what is likely to be most effective for different technologies. Through 
the use of an appropriate advisory board, which would include industry 
participation, with the necessary anti-trust waivers the Secretary will 
more likely be able to obtain state of art expertise from the private 
sector in addition to others.
    We must signal to private sector enterprises, and the vast capital 
markets that are available to support them, that there will be a 
meaningful reward for successful new technology addressing our highest 
priority needs. The most important enhancement for BioShield is to 
create more certainty that there will be a market when the private 
sector innovator succeeds in creating a product with previously defined 
specifications. The current proposal only authorizes--and does not 
guarantee--that the Government will purchase. This guarantee is 
especially important in order to spur investment in countermeasures 
that are earlier in development and thus years away from commercial 
success. To be effective, this will require some creative new 
approaches to overcome industry skepticism regarding government holding 
to its promises. One such mechanism is a guaranteed purchase fund, as 
has been proposed to stimulate R&D for new malaria, tuberculosis and 
HIV vaccines.
    The restriction on BioShield procurement to countermeasures 
reasonably expected to be available in 5 years is highly limiting, in 
light of the actual development time for new drugs and vaccines. This 
will be abundantly clear as soon as HHS, DHS and DOD have harmonized 
the various threat agent and countermeasure priority lists. If the hope 
is that ``push'' mechanisms such as government sponsored research will 
bring a whole generation of products far enough along so that they can 
be commercialized within the 5-year restriction, we are setting a 
policy that fails to take advantage of the private sector's abundant 
willingness to take on early risk when there are clear market rewards 
for success. A more reasonable calculation of development time is 
between 7 and 15 years (indeed the products that are most difficult to 
develop maybe the most important ones). We thus recommend that the 
proposal's limitation on ``qualified countermeasures'' eligible for 
procurement to those expected to be produced and delivered within 5 
years be deleted.
    Why should we take the beneficial procurement provisions of 
BioShield off of the table for technology having borderline civilian 
prospects? The surest way to shut off investment is to raise the 
specter that success will be punished! The no-significant-commercial-
market provision will ensure that the private sector will under invest 
in countermeasures that are a close call because of the risk that the 
government will decide some future dual use is too successful. Further, 
this uncertainty creates a system that may exclude products with 
potential application as countermeasures, possibly be those closest to 
the market for other purposes.
product-liability concerns could defeat our best efforts to engage the 
                             private sector
    In addition to the need to create a market for countermeasures, the 
Government must assure private sector partners that they will be not be 
exposed to a risk of litigation out of proportion to the rewards for 
success. Companies make judgments about product liability risk all the 
time in the normal course of business, but biomedical countermeasures 
pose particular challenges. In the absence of improved market 
incentives for successful innovation, many will find that potential 
litigation weighs heavily against proceeding. Even with strengthened 
market incentives, the unfamiliarity of the exposure magnifies 
perceived risk, especially when the private sector company may have 
little control over how the government deploys the countermeasure.
    As this committee knows, on several occasions, Congress has 
protected companies from liability when the public health and the 
national defense so required. The Price-Anderson Act--of 1957 
encouraged the development of a civilian--nuclear energy industry--by 
limiting the liability of companies that support the nation's nuclear 
weapons program as well as those who design and operate civilian 
nuclear power reactors. The Swine Flu Law, enacted in 1976, brought 
manufacturers of that vaccine under provisions of the Federal Tort 
Claims Act in order to allow mass immunizations. The National Childhood 
Vaccine Injury Act of 1986 responded to the threat that the pertussis 
vaccine and other vaccines would be withdrawn from the market due to 
the significant costs of defending lawsuits--by providing both a no-
fault compensation system and Federal standards applicable to lawsuits 
if no-fault claims were unsuccessful or rejected by the claimant. And, 
of course, last year's Homeland Security Act (P.L. 107-296) provided 
protections for the manufacturers of the smallpox vaccine and--
government contractors who provide ``qualified anti-terrorism 
technologies.'' In addition, the BioShield proposal drafted by the 
Administration includes protection under the Federal Tort Claims Act 
for contractors who participate in personal services contracts under 
the new research and development program established under Section 2 of 
the Administration's proposal.
    Legislation implementing the BioShield initiative should extend a 
liability protection program that is applicable to the proposal's three 
features: research and development activities under Section 2, the 
procurement program under Section 3, as well as to the products 
approved under the proposed ``emergency use'' revisions to food and 
drug law under Section 4.
    BIO recommends extending the protections offered under Section 304 
of the Homeland Security Act to biomedical countermeasures and medical 
products other than those used to combat smallpox. Following this 
approach, the Federal Tort Claims Act would clearly be extended to 
cover manufacturers and developers of biomedical countermeasures, as 
well as manufacturers of medical products granted an authorization for 
use in an emergency situation. By creating a system under which 
manufacturers are protected from enterprise threatening liability 
mentioned, the Government will establish a true partnership with 
industry that will facilitate the development and production of the 
most advanced tools possible to counter possible bioterrorism attacks.
                    authorization for emergency use
    BIO supports the concept of waiving FDA approval requirements for a 
product intended solely for emergency use, such as that found in 
Section 4 of the Administration's proposal. Our major concerns involve 
the lack of assurance that a company is consulted on the terms and 
conditions of approval. We also believe that the proposed inclusion of 
civil monetary penalties to the emergency use provision is much too 
broad, and we recommend deletion of this provision.
                               conclusion
    In sum, Mr. Chairman, the proposed BioShield initiative is an 
important step towards mounting an effective effort by the federal 
government, to spur research and development of biothreat 
countermeasures through public and private sector partnering with the 
biomedical research community and the biotechnology industry. 
Undoubtedly, this effort can be made much more effective through 
legislative language that guarantees procurement when the research and 
development has been successful, and provides rational protection 
against crippling lawsuits. Finally, it is critical to recognize that, 
realistically speaking, development of vaccines, therapeutics and 
diagnostics typically takes more than 5 years, so it is paramount that 
some form of guaranteed ``pull'' incentives are included in a final 
bill because of the non-traditional market that will exist for 
potential biothreat countermeasures.
    Mr. Chairman, thank you for the opportunity to testify on this 
tremendously important issue. The biotechnology industry is committed 
to contributing to our nation's common defense and achieving the goals 
articulated by the President in his Project BioShield initiative. I 
will be pleased to respond to any questions from members of the 
Committee.

    Mr. Bilirakis. Thank you very much, Dr. Read.
    Dr. Friedman.

                STATEMENT OF MICHAEL A. FRIEDMAN

    Mr. Friedman. Thank you, Mr. Chairman and members of the 
subcommittees. On behalf of the Pharmaceutical Research and 
Manufacturers of America, I am pleased to be here today to 
share with you the views of the research based pharmaceutical 
industry on the President's Project Bioshield initiative.
    Biological weapons represent an increasingly serious danger 
to people around the world. The dynamic complexity of the 
problem is demonstrated by science's difficulties in dealing 
with both naturally occurring infectious disease as well as 
intentional bioterrorist attacks.
    While PhRMA companies are the process of developing more 
than 200 new medicines to treat or prevent various infectious 
diseases, reports by the National Academy of Sciences, the NIH 
blue ribbon panel on biodefense research, and the U.S. Defense 
Science Board make it clear that an even larger number of more 
diverse types of countermeasures must also be developed, and 
they must be developed promptly.
    Although the basic science research required for 
countermeasure development is currently being supported by 
Federal agencies, it is widely recognized that more sponsored 
research is necessary. There also needs to be more flexible 
authority and more resources for regulatory agencies. In short, 
those things which will advance the development and production 
of the countermeasures.
    PhRMA member companies have been active in moving forward 
on countermeasure research and development, as I have outlined 
in my written testimony. There are numerous examples of how we 
have worked with CDC, DoD, NIH, FDA and academia to support a 
whole range of activities, and I won't try to repeat those now. 
A cooperative and collaborative research and development effort 
which engages industry, government and academia will, however, 
be essential to this successful effort.
    PhRMA believes that Project Bioshield is an important step 
toward this, and we support the three main components of the 
President's proposal. The President's proposal speaks primarily 
to the early and to the later steps in the lengthy, high risk 
and costly process of bringing new medicines to the market. It 
does not, however, speak to the time consuming and resource 
intensive middle part of that process which we see is largely 
our responsibility.
    Further research into bio-threat countermeasures represents 
challenges beyond those ordinarily encountered in non-
biodefense R&D. These include scientific, economic, and legal 
challenges, and let me enumerate just a couple of examples, if 
I may.
    Some products will be distributed without the typical 
battery of clinical trials that are required for FDA approval. 
All medicines present an inherent and unavoidable risk of 
adverse events. As a result, manufacturers may be exposed to 
devastating product liability suits, and it has been pointed 
out here today that not only the companies but also those 
patients who receive it and those people who administer these 
treatments also may be affected by those suits. Private 
insurance may simply be unavailable.
    The need for rapid development of countermeasures may 
require the sharing of scientific information and cooperation 
amongst many different companies, for example, the sharing of 
data by researchers working in different areas. Collaboration 
and cooperation in this research might create exposure under 
current anti-trust laws.
    A third point is diverting resources from research and 
development of other medicines will affect the future 
availability of treatments and cures for patients with serious 
health conditions, especially since only a tiny percent of all 
the drugs that enter testing ever demonstrate sufficient human 
safety and acceptable efficacy. The allocation of resources can 
be particularly difficult for companies with few products in 
the pipeline.
    In order to meet the public health needs of our citizens, 
PhRMA looks forward to working in a transparent manner with 
Congress and the administration to enact measures that will 
provide appropriate and equitable product liability protection 
in this very special context, as well as narrowly tailored 
measures to address anti-trust constraints, where appropriate, 
in order to allow the needed collaboration and the consortia 
with industry.
    Cooperation and strong commitment from all parties will be 
necessary in the years to come as our Nation seeks to protect 
itself against the real threats of bio-warfare and bio-
terrorism. America's pharmaceutical companies look forward to 
doing our part. I thank you for this opportunity to address 
you.
    [The prepared statement of Michael A. Friedman follows:]
      Prepared Statement of Michael A. Friedman on Behalf of the 
          Pharmaceutical Research and Manufacturers of America
    The Pharmaceutical Research and Manufacturers of America (PhRMA) 
appreciates the opportunity to share with this Subcommittee the views 
of the research-based pharmaceutical industry on the President's 
Project Bioshield Initiative. PhRMA represents the country's leading 
research-based pharmaceutical and biotechnology companies, which 
invested an estimated $32 billion in 2002 in developing new medicines 
to help and heal patients.
    PhRMA member companies join others who are convinced that 
biological weapons present a serious and increasing danger to people 
around the world. The pharmaceutical industry is dedicated to the 
development of innovative therapies and vaccines to counter unmet 
medical needs. Because a substantial proportion of the unmet medical 
need in the United States and worldwide is both directly and indirectly 
related to infectious diseases, we understand only too well the 
seriousness of the threat of biological agents if used as weapons of 
war.
    The complexity of the problem of biological weapons is best 
demonstrated by humanity's ongoing difficulty in dealing with 
infectious agents as the cause of natural disease, let alone their 
potential use for intentional concentrated exposure of selected 
populations. The threat represented by infectious diseases--such as 
HIV, malaria, and tuberculosis--is real and all too well demonstrated 
by the deaths of over 5 million people annually from these three 
diseases alone. All together, infectious diseases claim more than 
100,000 American lives each year, and cost more than $30 billion 
annually in direct treatment expenses alone. At last count, PhRMA 
member companies were developing 256 new medicines to treat or prevent 
infectious diseases; medicines which include brand new classes of 
antibiotics, new vaccines (including edible vaccines), antifungals, 
antivirals, and immune enhancers.
    Reports from the National Academy of Sciences, the NIH Blue Ribbon 
Panel for Biodefense Research, and the US Defense Science Board, make 
clear that a large number of countermeasures to biothreats must also be 
developed. These countermeasures include vaccines, therapeutics, and 
diagnostics. The basic science research required for countermeasure 
development has already been stimulated by funds appropriated to 
various federal agencies including the Department of Health and Human 
Services and the Department of Defense. However it is widely recognized 
that more is needed with respect to funding of basic research, to 
increased authority for funding and regulatory agencies, and to the 
advanced development and production of the countermeasures.
    A cooperative and collaborative research and development effort, 
which engages industry, government, and academia, will be essential to 
that effort. Existing medicines are not sufficient to combat the 
biological weapons already developed. Research and development into new 
medicines is a lengthy, risky, and expensive endeavor. Research into 
biothreat countermeasures involves several challenges above and beyond 
those encountered in non-biodefense R&D. For example, biodefense R&D 
requires working with dangerous pathogens in highly specialized 
facilities, and developing countermeasures without a full picture of 
the risk of disease (because we cannot see into the mind of the 
terrorist) or the benefit of the treatment (because there are often no 
patients with the disease, which prevents clinical testing for 
efficacy).
    PhRMA and its member companies are already working closely with 
federal agencies and academia to move forward with this research. For 
example, PhRMA is working with CDC, DoD, NIH, FDA, and academia to 
support in vitro studies of five pathogens (B. anthracis, Y. pestis, 
Brucella spp., F. tularensis, and Burkholderia spp.) for testing of 
existing antibiotics. Several companies are working with the National 
Institute of Allergy and Infectious Diseases (NIAID), the Department of 
Defense, and the FDA to test existing antibiotics against plague, and 
PhRMA will cosponsor a workshop with interested parties to determine 
how best to expand labeling of other existing antibiotics that may be 
effective against the top biothreat agents. PhRMA committees continue 
to work with FDA to clarify and improve existing regulations that 
pertain to biothreat countermeasure research, such as Part 600 (the 
Spore Formers Rule, which imposes requirements on use of facilities or 
equipment that have been used with spore forming organisms), and the 
Animal Rule (which allows efficacy testing in animals where testing in 
humans would be impossible or unethical). We have prepared educational 
materials for the public on anthrax, smallpox, and vaccinia, and we are 
working on materials addressing tularemia and plague. Dr. Gail Cassell, 
PhRMA's Chief Scientific Officer for Emergency Preparedness and Vice 
President, Scientific Affairs at Eli Lilly & Co., sits on Secretary 
Thompson's Advisory Council on Public Health Preparedness. A 
Biosurveillance workgroup involving PhRMA and other private sector 
companies (TIGR, IBM, and Roche Diagnostics) along with federal 
agencies (CDC, DoD, NIH) and the World Health Organization to establish 
a global infectious disease electronic surveillance network.
    PhRMA believes that Project Bioshield, announced by President Bush 
in his 2003 State of the Union address, is an important step forward in 
the effort to ensure the development of modern, effective medicines and 
vaccines against biothreats and to ensure that these medicines are made 
available in a timely and efficient manner. PhRMA generally supports 
the three main components of the President's proposal: first, the 
creation of a permanent indefinite funding authority to spur the 
development of medicines and vaccines by the private sector; second, 
new authority for NIH to speed promising R&D through streamlined hiring 
and procurement mechanisms and increased flexibility to award contracts 
and grants; and third, new FDA emergency use authorization for 
promising treatments still under development.
    At the same time, however, it is necessary to recognize scientific, 
legal, and economic impediments to the research and development of 
biodefense products. Manufacturers may be exposed to devastating 
product-liability suits. Some of these would arise out of adverse 
events that are unavoidable given the nature of the products, and some 
could arise simply because the products were made available without the 
usual battery of clinical trials required for FDA-approved products. 
Private insurance can be unavailable or prohibitively expensive for 
such products. The decision to divert resources from the research and 
development of medicines for serious illnesses like heart disease can 
be financially risky, especially when a countermeasure may never be 
purchased or used, and especially for companies with few products in 
the pipeline. (Diverting resources from research and development of 
these other medicines will also affect the future availability of 
treatments and cures for patients with other serious health 
conditions--especially since less than ten percent of all drugs that 
enter testing ever demonstrate sufficient safety and acceptable 
efficacy.) The need for urgent development of medicines may require the 
sharing of information and cooperation among companies, which can raise 
antitrust concerns. The scientific challenges inherent in research into 
bioterrorism countermeasures, for example, may require cooperation and 
collaboration among scientific experts in different companies. (For 
example, there have been only two new classes of antibiotics developed 
in the last 40 years.) PhRMA looks forward to working closely with 
Congress and the Administration to enact measures that will provide 
appropriate product liability protection and address these antitrust 
constraints.
    Cooperation and strong commitment from all parties will be 
necessary in the months and years to come, as our nation seeks to 
protect itself against the terrible threats of biowarfare and 
bioterrorism. America's pharmaceutical companies look forward to doing 
our part.
    We thank you for your time and look forward to answering your 
questions.
                                 ______
                                 
                                                     March 25, 2003
the need for an antitrust exemption to enable pharmaceutical companies 
   to respond to government requests for help to combat bioterrorism
    In the aftermath of the attacks of September 11 and the use of 
anthrax as a terror weapon, the pharmaceutical industry has been asked 
by various government officials, particularly the Secretary of Heath 
and Human Services, to help reduce our vulnerability to the threat of 
bioterrorism. The antitrust laws present a significant restraint on the 
pharmaceutical industry's ability to provide assistance. Accordingly, a 
limited antitrust exemption is warranted for joint efforts undertaken 
under government auspices to develop bioterrorism countermeasures. Such 
an exemption, for which there are several historical precedents, would 
further the government's program to ensure that the country is prepared 
to respond to an act of bioterrorism and would not undermine the 
important protections imposed by the antitrust laws.
   fighting bioterrorism will require a coordinated industry response
    As the country learns more about the potential threats posed by 
bioterrorism, the research and production expertise of the nation's 
pharmaceutical industry could be called into service in a variety of 
ways. Likely requests for assistance include:

 An exchange of information by pharmaceutical companies on 
        individual vaccine manufacturing capacity to develop an 
        industry aggregate assessment of capacity.
 An HHS sponsored agreement that one group of pharmaceutical 
        companies devote research and manufacturing capacity to one 
        area, such as a smallpox vaccine, and that another group of 
        companies focus on another area, such as anthrax treatments.
 An HHS request that the companies agree that, in the event of 
        a bioterrorism event, they will dedicate their research and 
        manufacturing resources on an emergency basis in a manner 
        directed by HHS.
 A procedure by which pharmaceutical companies share research 
        results and manufacturing best practices to allow for the rapid 
        production of needed bioterrorism countermeasures.
    While each of these steps would increase the nation's ability to 
respond to the bioterrorism threat, individual pharmaceutical companies 
may be unable to participate in these types of joint efforts without 
some assurance that its conduct will not be challenged as a violation 
of the antitrust laws.
the antitrust laws bar joint action by competitors regardless of social 
                                  need
    Section 1 of the Sherman Act--the provision of the antitrust laws 
most pertinent to this issue--prohibits agreements between competitors 
that unreasonably restrain trade. The pharmaceutical companies would be 
hampered in their ability to defend joint responses to government 
requests notwithstanding the existence of an overwhelming public health 
benefit for several reasons:

 Some agreements, including agreements among competitors to 
        allocate resources across a range of projects, can be per se 
        illegal notwithstanding compelling justifications.
 Even under the rule of reason, the Supreme Court has held that 
        agreements must be justified under the Sherman Act as promoting 
        competition and may not be justified by public policy 
        considerations, such as safety and health.
 Absent specific statutory authorization, government officials 
        lack authority to grant immunity from antitrust challenge.
    Furthermore, antitrust claims frequently are expensive to defend 
and inherently difficult to predict in their outcome. As a matter of 
prudent business practice, pharmaceutical companies, pursuant to 
written antitrust guidelines, routinely avoid any discussions with 
competitors that could give rise to a challenge under the antitrust 
laws. Thus, even some limited discussions that may not themselves 
constitute antitrust violations may be hindered due to the risk that 
such discussions will be taken out of context by an antitrust 
plaintiff.
    Each of the agreements described above could potentially be 
challenged by a private plaintiff or a government entity as antitrust 
violations. The fact that they were undertaken at the request of the 
federal government to bolster the country's defenses to a bioterrorist 
attack or as part of an emergency response to a bioterrorism event does 
not remove them from the reach of the antitrust laws. Courts have 
squarely rejected as being ``without merit'' a claim by an antitrust 
defendant that ``in the emergency of war, the war power of the Federal 
Government and military authorities takes precedence over the civil law 
and nullified the Sherman Act during the emergency.'' 1
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    \1\ United States v. General Inst. Corp., 87 F.Supp. 157, 163-4 
(D.N.J. 1949).
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  the necessary cooperation cannot occur without a specific exemption
    Opponents of a limited antitrust exemption for bioterrorism 
preparations typically question whether (i) the assistance requested by 
the government actually places the responding companies at risk of 
violating the antitrust laws or (ii) whether existing provisions for 
facilitating industry cooperative efforts may provide the necessary 
assurance. The answer to those questions are yes, an antitrust risk 
does exist, and no, existing procedures are not sufficient to remove 
that risk.
    The first potential request for assistance described above relates 
to a government initiated survey of productive capacity. In theory, 
such information could be collected on a strictly bilateral basis by 
HHS and then only shared with industry, if at all, in an aggregated 
form. Trade associations routinely collect data in a similar fashion 
without violating the antitrust laws. The utility of such data, 
however, is limited because of the difficulty of comparing productive 
assets. HHS needs more than a series of historical production data from 
each company. To understand fully the industry's productive capacity, 
HHS needs to be able to compare each company's assets and assess how 
they might be used either alone or in conjunction with assets held by 
other companies in the fight against bioterrorism. Further, HHS needs 
to understand how existing assets dedicated to producing certain 
products could be expanded and/or converted to new uses. HHS cannot 
conduct such evaluations on its own. Rather, the companies may need to 
sit down together, under the auspices of HHS, to explore how they can 
each best contribute to the national defense.
    Another area of potential cooperation that would raise antitrust 
issues includes discussions of which research areas should take 
priority for a given company. The antitrust laws expect that each 
company will assess the likely profitability of a given line of 
research and individually plan its research focus accordingly. In the 
past, Congress has recognized that such an approach may not always 
result in the socially optimal result. For example, the legislation 
providing special incentives for the pharmaceutical industry to engage 
in research on ``orphan drugs'' for diseases that affect small numbers 
of people demonstrates that market incentives may not produce the drugs 
America needs. A similar situation exists here, although the problem is 
not the size of the potential market; a bioterrorism event could affect 
millions. Rather the problem is the, hopefully small, likelihood that 
such a market will ever develop and the possibility that companies may 
not pursue research on some of the threats. The pharmaceutical industry 
is willing to do the work to prepare for each threat identified by HHS, 
but it makes no sense for each company to attempt to pursue every area 
in which the government might request research. The antitrust laws 
would at least call into question, and likely prohibit, an agreement 
among the pharmaceutical manufacturers to allocate research efforts 
among potential threats or to suspend non-bioterrorism research 
projects if requested by HHS.
    A third area of potential concern is the sharing of research 
results or production techniques to enable all participating 
manufacturers to take advantage of the latest technology. Such 
cooperation also may allow companies to avoid duplicating, possibly at 
government expense, unproductive efforts undertaken by other companies. 
In the normal commercial context, such process improvements are treated 
as competitively sensitive information and their sharing would raise a 
question as to whether impermissible collaboration is occurring. To 
obtain the most effective bioterrorism countermeasures possible, 
however, exactly that type of sharing may be required.
 existing antitrust procedures regarding joint ventures are inadequate
    The existing procedures designed to facilitate cooperative conduct 
under the antitrust laws would not provide adequate protection for the 
activities described in the preceding paragraphs. The National 
Cooperative Research & Production Act of 1993 (``NCRPA'') 2 
provides some protection for joint research projects, but does not 
provide actual immunity from the antitrust laws.3 Thus, 
companies may still be dragged into litigation by competitors or 
consumer groups seeking to second guess the government decision to draw 
on the industry's expertise.
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    \2\ 15 U.S.C. Sec. Sec. 4301-05.
    \3\ A NCRPA filing limits the liability of the joint venture 
participants to actual (rather than treble) damages in certain 
circumstances and allows for the recovery of attorney fees by any 
defendants that prevail in actions found to be ``frivolous, 
unreasonable, without foundation, or bad faith.''
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    Similar problems exist with a business review letter from the 
Antitrust Division of the Justice Department or an advisory opinion 
from the FTC. These procedures allow businesses to request a statement 
of the government's current enforcement intentions with respect to a 
proposed course of conduct. One notable shortcoming of this procedure 
is that it has no effect on the ability of private plaintiffs to bring 
suit. Furthermore, the Antitrust Division will only provide a business 
review letter for proposed, not on-going, conduct. The nation's anti-
bioterrorism preparations could be held up while the Justice Department 
bureaucracy ruminates over the industry request. Finally, even if a 
favorable letter is issued, it constitutes no more than a statement of 
present intent; no immunity is conferred. The FTC advisory opinion 
process presents the same problems. The limited comfort offered by a 
business review letter or an advisory letter is simply not sufficient 
for companies to suspend their normal antitrust guidelines and 
participate in activities that could entangle them in costly 
investigations or litigation.
  history offers numerous precedents for a limited antitrust exemption
    The Supreme Court has repeatedly said that ``[t]he Sherman Act 
reflects a legislative judgment that ultimately competition will 
produce not only lower prices, but also better goods and services.'' 
4 In a time of national emergency, there may not be the time 
to allow for the competitive process to produce the mix of goods and 
services society needs. Accordingly, there is a long history of 
providing legislative exemptions from the antitrust laws in specific 
areas. For example, during World War II, the War Production Board, the 
entity that was responsible for coordinating the mobilization of the 
U.S. economy for war production, had authority to
---------------------------------------------------------------------------
    \4\ National Society of Professional Engineers v. United States, 
435 U.S. 679, 695 (1978) (emphasis added).
---------------------------------------------------------------------------
        certify to the Attorney General in writing that the doing of 
        any act or thing, or the omission to do any act or thing, by 
        one or more persons . . . is requisite to the prosecution of 
        the war, [and] such act, thing or omission shall be deemed in 
        the public interest and no prosecution or civil action shall be 
        commenced with reference thereto under the antitrust laws of 
        the United States or the Federal Trade Commission Act. 
        5
---------------------------------------------------------------------------
    \5\ 56 Stat. 351 Sec. 12. The Attorney General was required to give 
public notice when a certificate was issued and report to Congress 
periodically on exemptions granted by the WPB under this provision, but 
the WPB procedure for initially invoking the exemption was designed for 
flexible and speedy implementation.
---------------------------------------------------------------------------
During World War II, this provision was invoked in a number of areas, 
including the efficient production of railroad freight cars, 
conservation programs in the dairy industry, and the pooling of 
information regarding the manufacture of Lucite, a newly developed 
plastic important to the war effort.6
---------------------------------------------------------------------------
    \6\ See Harold L. Schilz, Voluntary Industry Agreements and Their 
Exemption From the Antitrust Laws, 40 Virginia L. Rev. 1, 4 (1954).
---------------------------------------------------------------------------
    The War Production Board's power to grant exemptions from the 
antitrust laws was designed to alleviate industry concerns that they 
would incur antitrust liability from responding to government requests 
for assistance. In the 1930s, the major oil companies had become 
ensnared in antitrust litigation arising from their participation in 
cooperative ventures established by the National Industrial Recovery 
Act as a means of stabilizing the industry.7 Faced with a 
recent example of how participating in government sponsored programs 
could result in antitrust problems, both industry and government 
leaders sought a way to ensure full and effective participation by 
industry.
---------------------------------------------------------------------------
    \7\ See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 170-
77 (1940); Schilz, supra, at 2-3.
---------------------------------------------------------------------------
    Perhaps the most pertinent example of an antitrust exemption 
granted for wartime needs concerns the development of penicillin. 
Penicillin had been discovered in 1928 by Alexander Fleming, but had 
not been put into widespread clinical use. One major problem was 
devising an appropriate manufacturing process for large-scale 
production. The War Production Board invoked the antitrust immunity 
provision quoted above to allow for the exchange of technical 
information regarding penicillin production among the various 
pharmaceutical firms participating in the program. A history of the 
penicillin program written by a scientist involved in the effort notes 
that ``the free exchange of information made possible by the lifting of 
the U.S. antitrust law controls undoubtedly sped mass production during 
1944-45'' and that it may have even ``led to increased competition 
among firms that might not otherwise have undertaken to manufacture the 
drug commercially.'' 8
---------------------------------------------------------------------------
    \8\ Gladys Hoby, Penicillin: Meeting the Challenge (Yale Univ. 
Press, 1985) at 213.
---------------------------------------------------------------------------
    Congress has also granted antitrust immunity in areas not involving 
national security where there was a perceived need for joint industry 
action. The Television Program Improvement Act of 1990 created a three-
year exemption from the antitrust laws for the purpose of ``developing 
and disseminating voluntary guidelines designed to alleviate the 
negative impact of violence in telecast material.'' 9 
Specific legislative exemptions also exist for associations formed 
solely to engage in export trade (Webb-Pomerene Act, 15 U.S.C. 
Sec. Sec. 61-66), agricultural cooperatives (Capper-Volstead Act, 7 
U.S.C. Sec. Sec. 291-292), and negotiations between sports leagues and 
television broadcasters (Sports Broadcasting Act, 15 U.S.C. 
Sec. Sec. 1291-1295).
---------------------------------------------------------------------------
    \9\ Pub. L. No. 101-650 Sec. 501, 104 Stat. 5127 (1990)
---------------------------------------------------------------------------
    One further existing statutory immunity provision merits mention. 
The Defense Production Act of 1950 allows the President, or his 
designee, to ``consult with representatives of industry . . . and other 
interests in order to provide for the making by such persons, with the 
approval of the President, of voluntary agreements and plans of action 
to help provide for the defense of the United States . . .'' 50 U.S.C. 
App. Sec. 2158(c)(1). Voluntary agreements formed under the aegis of 
the Defense Production Act are exempt from the antitrust laws assuming 
certain procedural provisions are followed. The Defense Production Act 
has typically been used for the production of military equipment, such 
as ammunition and armored vehicles.
    While a useful example of the need for antitrust exemptions in this 
general area, the Defense Production Act does not adequately address 
the government's likely needs in the bioterrorism context. With respect 
to manufacturing efforts, the scope of the Act appears to be limited to 
``the expansion of productive capacity and supply beyond levels needed 
to meet essential civilian demand.'' Many of the bioterrorism 
countermeasures contemplated would be for civilian, not exclusively 
military, use. The Defense Production Act includes extensive disclosure 
provisions that may deter companies from sharing confidential 
information and that may not adequately protect national security 
interests. The Defense Production Act also contains detailed procedural 
provisions, including preapproval requirements even for consultations, 
that may prove too burdensome and that may cause intolerable delays in 
the bioterrorism context.
the proposed exemption is narrowly focused and provides for appropriate 
                               oversight
    Under the proposed exemption, entities may engage in joint action 
related to anti-bioterrorism activities ``for the purpose of, and 
limited to, assuring or expediting the development, production, 
distribution, or sale of [bioterrorism] countermeasures'' without 
incurring any liability under the federal or state antitrust laws. The 
antitrust exemption extends no further than the specific cooperation 
necessary to respond to the threat of bioterrorism and specifically 
excludes ``exchanging information among competitors relating to costs, 
sales, profitability, prices, marketing, or distribution'' where such 
information ``is not reasonably necessary to carry out the purposes of 
covered bio-terrorism activities.''
    The exemption requires the participating parties to file 
notifications of their joint activity with the Antitrust Division of 
the Department of Justice, the Federal Trade Commission, and the 
Secretary of HHS. The Attorney General, after taking into consideration 
the views of the FTC and HHS, can nullify the antitrust exemption in a 
specific instance by determining that exempting the joint action 
described in the notification would not further the public interest. 
The Attorney General must also provide public notice of the identity of 
the participants to an agreement exempted under this provision and the 
agreement's area of planned activity. This provision provides a second 
check on any possible anticompetitive activities growing out of 
cooperative ventures authorized by the Act.

    Mr. Bilirakis. Thank you very much, Dr. Friedman.
    Dr. Noble.

                     STATEMENT OF GARY NOBLE

    Mr. Noble. Good morning, Chairman and members of the 
committee. I am Gary Noble, Vice President for Medical and 
Public Health Affairs at Johnson & Johnson where I sit on the 
Emergency Preparedness and Business Continuity Task Force. 
Prior to that, I spent 29 years at the Centers for Disease 
Control and Prevention working on infectious diseases policy 
issues and legislative affairs.
    I am pleased to testify today on behalf of the Advanced 
Medical Technology Association or AdvaMed to express support of 
the President's Bioshield initiative and urge inclusion of 
medical technologies in the Bioshield legislation.
    AdvaMed represents more than 1,100 innovators and 
manufacturers of medical technologies. Many of the technologies 
our companies manufacture or are developing are integral to 
rapid and effective responses to potential terrorist threats. 
As I said, AdvaMed supports Project Bioshield initiative, 
because it can focus attention on the critical needs and 
provide economic incentives for the public-private interaction 
to protect our Nation from bioterrorist threats.
    We also strongly believe that Bioshield legislation should 
include all medical technologies, including devices, 
diagnostics, and health information systems, as qualified 
countermeasures and medical products for use in emergencies. 
Legislation should not limit, in our view, support for medical 
technology research and development activities alone.
    The proposal submitted to the Congress by the 
administration provides discretionary authority for the 
Secretaries of HHS and Defense to identify specific 
countermeasures that would be appropriate for inclusion in the 
national stockpile. We believe the Secretaries should have the 
clear authority to consider all medical technologies in these 
determinations.
    Technologies represented by our industry add critically 
needed prevention, detection and treatment capabilities. Let me 
just enumerate some of those. Diagnostic tests to determine who 
has been exposed or infected decide the most effective course 
of treatment and limit the number of additional cases. As the 
director of CDC once said, we can't fight the enemy if we don't 
know where it is; we have to have the diagnostic capabilities.
    Specialized drug delivery devices that may extend vaccine 
supplies; drug safety technologies to protect the blood supply, 
a critical need in emergencies; health information systems 
which we have heard about this morning to track vaccine 
delivery and document adverse events and to help detect and 
track biological outbreaks; and decontamination and 
sterilization technologies to restore facilities to a 
contamination free state, which we here in Washington witnessed 
recently, or 2 years ago. That is why we strongly recommend 
that in drafting Bioshield legislation, the committee extend to 
the Secretaries the authority to consider all medical 
technologies for inclusion in the national stockpile.
    The proposal submitted to Congress by the administration 
would also allow for the use of drugs or devices currently in 
development, if the Secretaries of HHS or Defense determined 
that they may be effective in detecting, diagnosing, treating 
or preventing a serious or life threatening condition in 
emergency situations. The Secretaries have the ability to 
consider all medical devices. They should have the ability, 
including, for example, 510(k) products for use in such 
emergencies.
    Most diagnostic tests are reviewed through 510(k) process. 
A test approved to detect a specific bacterium or viral agent 
may be modified, for example, to detect a related bacterium or 
virus. Such a product could have a countermeasure application 
and, therefore, should be covered by this legislation.
    In addition, as the committee works on Project Bioshield, 
we can also recommend that the committee be mindful of the 
problems that can arise during a crisis in getting medical 
technologies to patients. In the wake of a significant attack 
or disaster, it will be necessary to ensure that local 
providers have adequate medical supplies to care for their 
casualties.
    AdvaMed has worked closely with other industry groups to 
develop a planning guide for State and local emergency planners 
concerning medical supply chains and logistics. A prototype of 
this has been distributed and was mentioned earlier this 
morning.
    AdvaMed is also concerned about business continuity and the 
potential vulnerability of facilities that may be the sole 
manufacturer of certain critical medical supplies. If these 
sites were to be incapacitated for whatever reason, supplies 
essential to quality health care may not be available when and 
where they are needed. We would, therefore, recommend that in 
the legislation the Secretaries of HHS and Defense be asked to 
consider the need to stockpile additional inventory of these 
critical supplies that may be manufactured by only one or two 
manufacturers.
    Mr. Chairman, thank you for holding this hearing today. 
AdvaMed strongly supports the public-private partnership that 
Project Bioshield creates. We believe that harnessing the 
creative abilities of both the public and private sectors will 
be necessary to effectively address the bio-terrorist threats 
that we may face.
    We believe Project Bioshield will allow the public to 
benefit from the prevention, detection, and treatment 
capabilities our industry can provide. AdvaMed stands ready to 
work with your committee to ensure the enactment of Bioshield 
legislation consistent with our testimony. I am happy to answer 
any questions.
    [The prepared statement of Gary Noble follows:]
Prepared Statement of Gary Noble, Vice President of Medical and Public 
  Health Affairs, Johnson & Johnson on Behalf of The Advanced Medical 
                         Technology Association
    On behalf of AdvaMed's (the Advanced Medical Technology 
Association) Medical Technology Preparedness Council, I am pleased to 
provide testimony in support of Project BioShield. My name is Dr. Gary 
Noble and I am Vice President for Medical and Public Health Affairs at 
Johnson & Johnson, where I serve on the company's Emergency 
Preparedness and Business Continuity Task Force. I also spent 29 years 
at the Centers for Disease Control and Prevention working in the areas 
of infectious disease, public policy and legislative affairs.
    Johnson & Johnson develops a wide range of health care products, 
including devices, such as surgical supplies, diagnostic instruments 
and assays, and products used to ensure the safety of the blood supply.
    AdvaMed represents more than 1,100 innovators and manufacturers of 
medical devices, diagnostic products and medical information systems. 
Our members produce nearly 90 percent of the $75 billion in health care 
technology products consumed annually in the United States and nearly 
70 percent of $170 billion purchased around the world annually. Many of 
these technologies--such as rapid tests to diagnose diseases caused by 
bioterrorism, gels and foams that can rapidly close wounds, 
bioengineered skin products for burn victims, and information systems 
to communicate critical public health information--form an important 
part of a timely, effective response to terrorist attacks.
           advamed's medical technology preparedness council
    In response to the events of September 11, 2001, AdvaMed 
established the Medical Technology Preparedness Council to assist 
federal agencies in ensuring that the health care delivery system is 
fully prepared. The Council, established in October 2001, meets 
regularly to discuss issues and concerns, and has begun to work with 
key government preparedness entities including the Office of Emergency 
Preparedness (OEP), the Secretary's Command Center, the Food and Drug 
Administration (FDA), the Metropolitan Medical Response System (MMRS), 
and with individuals at the Centers for Disease Control and Prevention 
(CDC) who were administering the Strategic National Stockpile, among 
others.
    We strongly support the principle of a public-private partnership 
in the area of preparedness. AdvaMed sponsored a sold-out conference on 
February 6, entitled ``Innovation for Preparedness: the Public-Private 
Partnership,'' to strengthen the partnership between the government and 
the private sector on preparedness and to connect medical technology 
innovators with appropriate federal preparedness entities. 
Representatives from key preparedness entities within the federal 
government, including OEP, CDC, FDA, the Department of Defense, the 
National Institute of Allergy and Infectious Diseases (NIAID), the 
Department of Defense, the U.S. Army Medical Research Institute of 
Infectious Disease (USAMRIID) and the Environmental Protection Agency 
participated in the conference.
        medical technology: key to rapid and effective response
    Many of the technologies our companies manufacture or are 
developing are integral to a rapid and effective response to any 
potential terrorist attack, including among others:

 Diagnostic Tests: In November 2001, Roche Diagnostics and the 
        Mayo Clinic announced the development of a new rapid anthrax 
        test that can detect anthrax in humans in an hour and quickly 
        made the test available to public health agencies and hospital 
        and reference laboratories. Companies are working to develop 
        diagnostic tests for other bioterrorist infectious agents, 
        including smallpox. AdvaMed and its companies are also working 
        cooperatively with FDA and the CDC to speed development of a 
        diagnostic test for West Nile virus.
 Vaccine and Drug Delivery Devices: ``Microdelivery'' devices 
        in development by BD will deliver vaccines more efficiently and 
        effectively, allowing better absorption by the body and at the 
        same time extending vaccine supply. For example, in 
        collaboration with USAMRIID, researchers have shown that use of 
        these skin-based microdelivery technologies can significantly 
        improve the performance of next-generation recombinant protein 
        vaccines against anthrax and the organism that causes toxic 
        shock.
 Biochemical Decontamination Technologies: We saw the 
        importance of technologies to decontaminate large contained 
        areas and their contents, sensitive electronic equipment, mail 
        and other items after the anthrax attacks of 2001. STERIS 
        Corporation and the U.S. Army Edgewood Chemical Biological 
        Center have entered into a collaborative research and 
        development project to evaluate, optimize and modify STERIS's 
        Vaporized Hydrogen Peroxide (VHP ') technology and 
        to demonstrate its effectiveness against biological and 
        chemical warfare agents.
 Blood Safety Technologies: Companies continue to work on 
        technologies to protect our blood supply through inactivation 
        or pathogen removal technology to inactivate or eliminate 
        blood-borne viruses, parasites, lymphocytes and bacteria from 
        blood products.
 Advanced Burn and Wound Care Technologies: Companies have 
        developed gels and foams that can rapidly close wounds and 
        bioengineered skin for the treatment of second and third degree 
        burns. On September 11th 2001, Smith and Nephew, Inc. employees 
        personally drove bioengineered skin products to New York City 
        and Washington, D.C. to ensure patient access to these critical 
        technologies despite the disruption to the distribution and 
        supply chains because of U.S. airspace closures.
 Health Information Systems: Coordination of information by 
        local, state and national public health authorities is key for 
        managing efficient immunization activities and detecting 
        biological outbreaks. Specialized vaccination tracking systems 
        being developed by BD and others can help document and manage 
        adverse events to vaccines while assuring rapid, safe vaccine 
        deployment. As a measure of the critical role health 
        information systems can play, last Friday, the Department of 
        Health and Human Services (HHS) announced that it will begin 
        testing a system using handheld personal digital assistants 
        (PDAs) for transmitting urgent information about biological 
        agents to clinicians. The three-month pilot test is designed to 
        gauge the best ways for federal officials to communicate 
        effectively with front-line clinicians in the event of a 
        bioterrorist attack.
 Basic Medical Technologies: Basic medical technologies are 
        also essential during times of crisis including ventilators, 
        imaging technologies and infusion and monitoring equipment 
        among others as well as gowns, gloves, masks and respirators to 
        protect health care workers. A November 2001 JAMA article co-
        authored by Anthony S. Fauci, M.D. attributes the reduction in 
        mortality in the inhalation anthrax cases to technological 
        advances in diagnostics, imaging, microbiology, antibiotics and 
        critical care.
                   advamed supports project bioshield
    AdvaMed strongly supports the Project BioShield initiative. Recent 
media reports confirm that some terrorist groups have the willingness 
to use bioterror agents and have been trying to develop the capability 
to launch infectious agents. Additionally, the rapidity of the global 
spread of severe acute respiratory syndrome (SARS) highlights the 
vulnerabilities we face.
    Specifically, AdvaMed's Council supports provisions in Project 
BioShield that will:

 Speed research and development on biomedical countermeasures 
        by streamlining current NIH processes and providing funding for 
        the construction and improvement of facilities needed to safely 
        support research and development of countermeasures;
 Provide necessary funding to purchase biomedical 
        countermeasures for the stockpile particularly those 
        countermeasures determined not to have commercial markets; and
 Allow the Secretary to make promising treatments available in 
        an emergency, even for those products that do not yet have full 
        FDA approval.
       project bioshield should include all medical technologies
    Qualified Countermeasures. It is critical that all medical 
technologies--including devices, diagnostics and health information 
systems--be eligible for inclusion in all aspects of Project BioShield. 
The proposal submitted to Congress by the Administration provides 
significant discretionary authority for the Secretary of HHS to 
identify specific countermeasures to threats that would be appropriate 
for procurement and for inclusion in the national stockpile. The 
Secretary must annually determine whether such countermeasures have a 
significant commercial market other than as homeland security 
countermeasures. The Secretary should have the clear authority to 
include all medical technologies in these determinations.
    While many focus on vaccines as the sole countermeasures needed to 
counteract bioterror agents, as we saw with the inhalation anthrax 
cases and are seeing again with SARS, the ability to diagnose 
individuals to determine who has been exposed is essential to treatment 
and to limiting the contagious spread of infection. Additionally, in 
the case of the anthrax attacks in the Senate Hart Building, the 
Brentwood Postal facility and others, as manufacturers continue to 
develop rapid tests like the Roche-Mayo Clinic anthrax test, they hold 
the promise that many individuals will be able to forego prophylactic 
antibiotic or other treatment. And as diagnostic tests advance, we will 
be able to detect those who have been exposed and are infectious yet 
are not exhibiting any signs of illness--as some are speculating is the 
possibility with SARS.
    In the event of a bioterrorist attack, it will be critically 
important to ensure that all of the elements essential to treatment--
diagnostic tests, specialized syringes and needles to deliver vaccines, 
information systems to assure safe and rapid vaccine deployment, and 
more--are delivered along with the vaccines. We strongly recommend that 
in drafting BioShield legislation, the Committee extend to the 
Secretary the authority to consider all medical technologies, including 
devices, in determining what technologies are needed to protect our 
nation from potential bioterrorist events.
    Medical Products for Use in Emergencie. The proposal submitted to 
Congress by the Administration would extend authority to the 
Secretaries of HHS and Defense to declare a national, public health or 
military emergency justifying the authorization of a drug or device if 
they determine that it may be effective in detecting, diagnosing, 
treating or preventing a serious or life-threatening condition. They 
must also determine that the known and potential benefits of the 
product outweigh the known and potential risks of the product and that 
there is no adequate, approved and available alternative.
    The Secretaries should have the ability to consider all medical 
technologies for use in emergencies. For example, most diagnostic tests 
are reviewed through FDA's 510(k) process. A test approved to detect a 
specific bacterium or viral agent may be modified to detect another 
bacterium or virus of the same family. FDA's 510(k) process recognizes 
that diagnostic test development is an iterative process that builds on 
the knowledge gained from the previous infectious agent to develop 
tests for similar agents. Thus, it is conceivable that a previously 
approved diagnostic test may also prove to be useful in screening some 
bioterrorist agents. The value of this process is not limited to 
diagnostic tests but is the mainstay of all 510(k) products.
    We strongly recommend that the Committee draft legislation that is 
broadly inclusive of all medical technologies, including 510(k) 
products. In the event that a product might have a needed 
countermeasure application, it should not be excluded because of a 
technicality.
                 need for strong liability protections
    AdvaMed encourages the inclusion of strong liability protections 
for all aspects of Project BioShield, including medical devices. 
Presumably, those products that are declared qualified countermeasures 
under Project BioShield would also be declared qualified anti-terrorism 
technologies under Section 861 of the Homeland Security Act and would 
thus be eligible for the liability protections of that Act. However, it 
is not clear that companies whose products are declared for use in 
national, public health or military emergency situations would be 
eligible for the Section 861 protections. Such products, by definition, 
have not yet been reviewed or approved for use by FDA. Liability 
concerns will be a key consideration for companies manufacturing both 
qualified countermeasures and emergency-use products and the 
legislation should make clear that the liability protections of Sec. 
861 of the Homeland Security Act apply to such products.
importance of assuring adequate supplies in the event of a significant 
                                 attack
    As the Committee works on Project BioShield and assuring the 
availability of medical technologies to protect and treat patients, we 
also recommend that the Committee be mindful of the problems that can 
arise during a crisis in getting these technologies to patients. In the 
wake of a significant attack or disaster, it will be necessary to 
ensure that local providers are adequately supplied with appropriate 
medical equipment to care for casualties. As part of the AdavMed's 
preparedness efforts, we have invested significant time and resources 
in working with the appropriate federal authorities to ensure that the 
needed medical materials and supplies will be available.
    There is a critical initial period of 12-24 hours during which most 
supplies will come from local stocks in hospitals, other health care 
facilities, and local distributors. However, after that initial period, 
there will be a need to resupply these facilities. Local planners in 
particular seem to take the approach that ``if it is needed, it will 
appear.'' AdvaMed has worked with Office of Emergency Preparedness and 
MMRS regarding the logistics of moving medical supplies to the scene of 
a major attack. Our objective has been to make planners at all levels 
aware of the issues around resupply and to provide advice about who to 
contact for resupply.
    AdvaMed has worked closely with related trade associations, the 
Health Industry Distributors Association (HIDA) and the Association for 
Healthcare Resources and Materials Management (AHRMM) to develop a 
planning guide for state and local emergency planners that explains 
medical supply chains and logistics. The guide is currently being 
printed and details are being worked out for the physical distribution 
to members of the National Emergency Management Association (NEMA), the 
Association of State and Territorial Health Officials (ASTHO), and the 
National Association of City and County Health Officials (NACCHO). A 
prototype of this booklet is attached for your information.
    AdvaMed has also supported the efforts of the AHRMM, HIDA and the 
Health Industry Group Purchasing Association (HIGPA) in the development 
of supply formularies. The formularies, which vary depending on whether 
the incident is chemical, biological, radiological, explosive, etc., 
are intended to act as a benchmark for emergency supply preparedness. 
They can be customized to meet the individual needs of hospitals and 
the communities they serve.
    AdvaMed is also concerned about ``business continuity'' and the 
potential vulnerability of certain sites that monitor manufacture 
critical medical supplies. These sites may be the sole source for 
certain supplies. If these sites are incapacitated for whatever reason, 
critical supplies essential to quality health care may not be 
available. Ways to address this dilemma include establishment of 
alternative site manufacturing capacity as well as stockpiling 
additional inventory. We recommend that the Committees consider this 
issue and that the Department of Homeland Security's Office of 
Information Analysis and Infrastructure Protection be charged with 
examining solutions that would provide incentives for industry to 
create back-up capacity or such other solutions as may be appropriate, 
including use of the Strategic National Stockpile.
                               conclusion
    We thank the Chairman for holding this hearing today and we 
appreciate the opportunity to provide testimony. During this time of 
national crisis, the Medical Technology Preparedness Council stands 
ready to work with the federal government to achieve our mutual goals 
of defending the homeland from terrorist attacks and providing the best 
medical care possible for our citizens. We also look forward to working 
with the Committee to assure the enactment of BioShield legislation 
consistent with our testimony. I would be happy to answer any questions 
that the Committee may have.

    Mr. Bilirakis. Thank you very much, Dr. Noble.
    Thanks to all of you. The Chair yields to Mr. Cox, the 
chairman of the full select committee, to inquire.
    Mr. Cox. Thank you, Mr. Chairman, and thanks to members of 
our panel for your illuminating testimony. I am going to 
address just a few questions to the entire panel, and leave it 
to your discretion who wants to jump in and answer.
    Does anyone have a concern with the adequacy of the 
liability protections in the legislation as drafted? Dr. Read?
    Mr. Read. The issue of product liability is very important 
for companies that are analyzing the risk and reward of getting 
involved in a long term research program for countermeasures. 
So both investors in those companies and their managements are 
going to be looking at this issue.
    In some sense, it is just a cost of doing business. There 
are some sectors in our economy where we don't expect any 
special help or treatment, but in the case where the market is 
uncertain, and Bioshield is going to take some important steps 
to improve that, and in cases where there is not--where the 
products are unknown and may be used in a setting that is 
really quite outside the usual posture toward balancing risk 
and benefit, as we do in our civilian lives, and finally in a 
setting where the sponsors of a company may actually have very 
little control over how the thing they produce is actually 
used, because it may be in a government stockpile and used 
under emergency powers and so on as envisioned here, these are 
all situations which raise the importance.
    So as I understand the way this legislation is drafted 
today, it could use extension to products that would be 
procured under this, and in the R&D phase we have some 
coverage, but I think the emergency use and actually following 
procurement and then in use, I think this needs to be extended.
    Mr. Cox. Dr. Noble.
    Mr. Noble. I would simply add that I think that the 
liability needs to be inclusive of the broad range of medical 
technologies, particularly those that have been mentioned that 
are not yet approved. Companies are going to be very reluctant 
to enter into the marketplace or even into an emergency 
situation without some knowledge that there is a ceiling, some 
protection for not only the pharmaceuticals and vaccines but 
for the broad range of products that may be developed just for 
an emergency situation.
    Mr. Cox. In the paradigm situation, assuming that this 
Bioshield proposal becomes law, can you tell me whether or not 
firms would be interested chiefly in having the government 
finance the R&D or rather whether the firms would be interested 
in being paid at the completion of the R&D successfully and the 
delivery of a vaccine, serum or what have you?
    Mr. Friedman. If I may respond, Congressman, I don't think 
there is a single model that I am prepared today to say is the 
preferred model. The factors to recognize are the ones that you 
are dealing with, which is recognizing that the vast majority 
of good ideas that begin testing ultimately fail, not because 
people are not well intentioned, not because the scientists are 
not devoted or the equipment is the best. It is because of our 
imperfect understanding of biology and medicine that these 
things fail. Either they are not effective enough or they are 
unacceptably toxic.
    We know those are the risks inherent in developing any 
medicine, and they are certainly true for these bio-terrorist 
or infectious disease risks as well. There are costs associated 
with those research activities, how one defrays those costs. Is 
it done as the research continues? Is it reserved at the end in 
terms of recouping that?
    There are a variety of different ways of doing it. The 
sensitivity is just that--we along with others are interested 
in engaging with you and the administration in thinking about 
the best way to deal with these very substantial problems that 
are not going to change within the foreseeable future. Our 
knowledge isn't going to suddenly get better, unfortunately.
    Mr. Cox. Dr. Read.
    Mr. Read. I think that is a very important question, but I 
would consider rephrasing it. It is really not what the 
companies want. It is what we want, and what is the best way to 
get what we want as a society.
    Mr. Cox. If I may stick with my original question, the 
reason I put it that way is that we are moving this legislation 
because there are certain things that we want that the industry 
isn't in a position to provide without the bill.
    Let me just disclose the premise for the question, which is 
my understanding of the biotech industry which is heavily 
represented in my district. In fact, in southern California and 
in Orange County, in particular, we have the preponderance of 
this activity in the country. I did a lot of work in the 
venture capital area for about a decade before I came to 
government.
    My understanding of this industry is that it operates on 
long lead times and that it burns a lot of cash, and that there 
is a lot of unrequited investment, and that once in a while you 
are fortunate and you can pay back all of the other stuff. That 
being the case, it doesn't seem to me that a paradigm built 
into any legislation that we would write that has you paying 
for all the R&D and hoping to get lucky 5 or 10 years from now 
is what we should expect, really, to see, and we want to make 
sure the legislation works in the other paradigm, which is pay 
as you go, as it were.
    That is my premise, and I need to be corrected if I am 
mistaken.
    Mr. Bilirakis. Well, but very brief responses to that, 
please.
    Mr. Cox. Dr. Read and Dr. Baker. Mr. Chairman, I am 
finished asking questions. So I will just----
    Mr. Bilirakis. All right. Very brief responses. Dr. Read, 
Dr. Baker.
    Mr. Read. Just briefly, if we focus a lot of money on the 
R&D support, we will get companies gyrating toward being R&D 
producing companies, and if we focus more on the end result, we 
will get companies focusing on delivering products on the shelf 
ready to be used.
    It is true that the middle stage of these biotech companies 
is the hardest part to fund. It is easy to fund the beginning, 
because it is cheap. It is easy to fund the end, because the 
goal is in sight. But if we make that goal clear and valuable 
and the market is working, then investors will fund the middle. 
We need a mix.
    Mr. Bilirakis. Dr. Baker.
    Mr. Baker. Very briefly, the FDA approval process is 
different for bio-threat agents. You have to do human toxicity 
testing in parallel with animal efficacy testing. Clearly, if 
you have a dual use drug, most companies will take on the human 
use applications anyway. That is part of their process.
    I think where you need to move in is when you have testing 
that goes specifically for an application or development that 
goes for a specific application where there is no benefit to a 
company. There I would agree with some of the people that 
suggest that maybe the government could take that testing 
internally and use the drug and provide some type of royalty 
back to the company for developing it for these applications, 
along with alleviating the company of liability concerns.
    Mr. Bilirakis. The gentleman from Ohio, Mr. Brown, to 
inquire.
    Mr. Brown. Thank you, Mr. Chairman. Dr. Friedman, nice to 
see you again. Thank you for joining us.
    Do you have any concerns regarding BIDOL, the Act which 
promotes technology transfer and returns the government--and 
retains for the government the right to use technologies 
developed with government funds? Do you think changes to BIDOL 
should be part of this proposal?
    Mr. Friedman. I am certainly not prepared to answer an 
important question like that today. I think the issue that you 
are raising is an extremely valid one, which is science today, 
more than ever before, is a collaborative activity and, in 
order for us as citizens to get the most of that, how do we 
promote the best exchange between Federal agencies, academia, 
and industry.
    The precise dimensions, the characteristics of that, I 
think, deserve careful thinking, but today I am certainly not 
representing a position from PhRMA that can address that.
    Mr. Brown. Okay, thank you. I have heard from both sides of 
the aisle and both committees, Commerce and Homeland Security, 
a real concern, as I said, bipartisan concern about the 
government retaining some of those options because of the 
ultimate cost of all this, and much of the research done by 
NIH, much of the research done in some cases even by smaller 
entities like Walter Reed, that the taxpayer's share and not 
just the wondrous new drugs that can protect us from not just 
bioterrorism but other infectious disease, but that the 
taxpayers also get something for their dollars beyond the new 
drug, gets some savings in either the cost of some royalties 
going back to the government for a drug benefit or whatever it 
might be.
    Dr. Baker, thank you for joining us. How do we improve 
Bioshield to better encourage university involvement?
    Mr. Baker. Well, I think there are a number of issues. One 
is to enhance the research transfer over to universities. I 
think one of the issues is it is not defined whether or not 
this would be in addition to the funding that is already 
provided through NIAID. It is also clear from the NIAID's 
current $1.7 billion budget how much of that goes to 
universities and to the external program.
    So having some perspective on what is going to be involved 
with this and how it can be used for infrastructure to enhance 
basically your research base in the universities is important.
    The second thing, I think, is there are liability concerns 
for universities. Universities, I think, in many ways under 
BIDOL would be happy to provide the government back all the 
rights for their applications in this. They don't view these as 
commercial development that they can benefit from in the long 
term, and they are very hard to tech transfer. But there have 
been liability issues raised where universities have been sued 
with technology they have provided to companies or to other 
entities. So that is another issue that needs to be resolved 
for the universities.
    So those are two major issues I think would help encourage 
universities to participate in this.
    Mr. Bilirakis. Would the gentleman yield?
    Mr. Cox. Certainly.
    Mr. Bilirakis. Certainly, on the liability--well, let's put 
it this way. I support the concept of what we are trying to do 
here. People have said some improvements have to be made. I 
think they have been acknowledged. Mr. Cox, others, have 
acknowledge that.
    You know, gentlemen, we are at war, and an awful lot of 
people are sacrificing, certainly those who have men and women 
in harm's way right now. But we are at war, and I would hope 
that whatever we do here is--well, let's just put it this way. 
I would expect pharmaceutical companies to be cooperative in 
terms of what is needed in order to fight this war, 
particularly on the home front.
    What we can do to help toward that end, fine, but if we 
don't do the job perfectly, I still would hope and expect and 
have confidence in our pharmaceutical companies, biotech 
people, what-not, to do the job. Do you have any comment in 
that regard? Dr. Friedman, you are sort of chomping at the bit.
    Mr. Friedman. I'm sorry to--That is why I don't play poker, 
I guess. I think your point is exceptionally well made. I have 
spoken directly with the CEOs of many of the PhRMA member 
companies, their scientific directors, and many of their staff. 
The passion that they feel--It's a sort of a scientific 
patriotism, especially stimulated by the events of 9-11, 
especially stimulated by anthrax.
    The irony is that we as a Nation have been challenged in 
the one area where arguably we have the greatest national 
strength, our biomedical science. Because of NIH, because of 
academia, because of industry, this is one of our national 
treasures, and the people who are involved in day to day 
working in this area feel so committed to wanting to make 
contributions in this. We share that concern.
    So please don't misunderstand any of the suggestions, any 
of the issues that are raised, any of the constructive 
criticisms that are being offered as any reluctance to support 
in a general patriotic way what the Nation needs. What we are 
talking about is getting the biomedical defense that we as a 
Nation deserve, and we are trying to optimize that.
    There are many different ways of doing that. I wouldn't 
presume to say that we have all the areas understood or 
covered, but there is enormous goodwill and interest.
    Mr. Bilirakis. Thank you, Doctor. I'm on my own time now. 
Dr. Read, please, proceed.
    Mr. Read. I would just like to echo those comments from Dr. 
Friedman. Many, many biotechnology executives and their 
investors, I know, are asking themselves today, you know, how 
can we help. Part of what motivates me is that this problem is 
both very urgent and very long term.
    As long as our Nation is distinguished by its wealth and 
its influence from others, we are going to be a particular 
target, and part of what we are doing today is confronting the 
challenge of laying the ground work, the economic policy ground 
work for an industry that doesn't exist today, a biodefense 
industry.
    We need to start thinking about some of the drivers that 
will build a healthy, properly supervised, properly overseen 
and productive industry, focused on the goals, not focused on 
the process. So we can depend on the patriotism of America's 
scientists and pharmaceutical and biotechnology researchers in 
the short run, but we should also be laying the ground work for 
a long term response to this important event.
    Mr. Bilirakis. Yes. This is, of course, what we are trying 
to do. I appreciate those comments, and I know they come from 
the heart, and I trust that they reflect the views of the many 
institutions that you represent.
    Mr. Thompson.
    Mr. Thompson of Mississippi. Thank you very much. We have 
talked and heard today about the government driving the market 
for some of the solutions. You gentlemen represent various 
aspects of the industry. Are you comfortable that, with the 
exclusive authority that Bioshield puts in the hands of the 
government, that they will in fact treat the selection of the 
companies to do the research fairly?
    Mr. Read. If I could start on that, I think that a great 
deal of thought has gone into the bill and the intention about 
how to implement it, but we are in the early days of creating a 
policy and economic infrastructure, and there's bound to be 
some exploration as we go.
    In the improvement and enhancements of Bioshield, I think 
we ought to look at some other mechanisms that have also been 
proposed, as in the bipartisan Lieberman-Hatch legislation that 
has been introduced. I think that there are things that we must 
explore, and I don't think that the Secretary or Dr. Fauci have 
had a chance. It is impossible for them to have fully thought 
through all the issues of how to deal with a fast follower.
    Often the better product is the second product. There are 
intelligent mechanisms that could be put in place, and both the 
original innovator who has to pony up the money to be the 
pioneer and run the risk of getting all the arrows in his or 
her back, and somebody who might be motivated based on their 
research and their labs--you know, they think they've got a 
better way than the guy or whoever is in the lead.
    These are tough issues, but they are issues that can be 
addressed by people of goodwill. This will should allow for a 
continued dialog between the administration and industry as we 
refine and explore some of these mechanisms.
    Mr. Baker. If I could also address another component of 
that question and also the chairman's question, I am a veteran 
of what, unfortunately, is now the first Gulf War. You know, 
being exposed at that point to agents that did not go through 
regular regulatory approval, and also administering them as a 
physician in the military, it raises concerns.
    One of the things I would hope that doesn't happen in 
Project Bioshield--we see this 1 to 2-month timeframe that is 
laid up on the chart. I am not sure how that would achieve a 
product that I would feel comfortable putting into people in 
many cases.
    It is not just choosing the companies that I think is 
important, but it is how you go about the process and how you 
make sure that, even though we are short circuiting some of the 
bureaucratic means of the regulatory process, we don't short 
circuit the safety means to a point where we cause more harm 
than good.
    I think that is a big issue with this project, and I think 
it has been an issue already with the smallpox vaccine. So I 
have a concern in that regard.
    Mr. Thompson of Mississippi. Any of the other people care 
to comment?
    Mr. Friedman. I think the tension that exists is trying to 
create a system that makes sure there is at least one company 
or one group of scientists pursue an important need and at the 
same time fostering competition, competition for the best 
ideas, for the best products, for the best price and so forth, 
and the two systems don't naturally link to one another.
    You can design a system that will optimize one or optimize 
the other. What we are trying to do today collectively is to 
think about a system which will encourage for this large number 
of products, more than 50, I believe you and others have 
pointed out, that we will need in the relatively short time, 
how we at least have one good candidate in each of those areas 
while still trying to foster the sort of scientific competition 
that should exist to bring us the second and third and 
subsequent generation of even better products.
    Mr. Noble. I would just say that I am sure that the 
government is interested in having as many suppliers as 
possible. So that if there is one that comes forward and the 
threat continues long term and there is a need to create a 
longer term stockpile, I am sure that the government--and based 
on some past experience, I know that they are not happy with a 
single vendor. So they will look for the opportunity to have 
competition or second suppliers.
    Mr. Bilirakis. Thank you, sir. Mr. Shadegg, chairman of the 
Select Subcommittee.
    Mr. Shadegg. Thank you, Mr. Chairman. I want to thank all 
the witnesses for their thoughtful testimony. It seems to me, 
we are dealing with a very challenging problem here, and I 
think we have gotten some thoughtful testimony to that point.
    I think it is fair to say that everybody agrees what we 
ought to try to achieve, but there are serious questions about 
how we get there. I want to focus on one in particular, not the 
issue of we get one good drug and then we might have a better 
one later. I hope we get to the one good drug or the one good 
vaccine.
    What I am worried about is the need to pass this 
legislation very, very quickly, contrasted with what I think is 
the biggest problem in the legislation, and maybe there are 
two. The biggest problem that I see is, I think, a genuine 
concern on the part of the Congress with what is completely 
open-ended in terms of its design, and unprecedented, and there 
has been discussion of that.
    This funding is, in fact, mandatory and, if you heard 
Secretary Thompson in response to Chairman Cox's question who 
said, not only does the structure provide for unlimited funding 
over a scope of years, it was absolutely totally unlimited 
funding in a single year.
    While I have a huge desire to get vaccines very, very 
quickly, I have a great deal of concern with that structure. 
Mr. Reed, or Dr. Reed, let me start with you. At page 3 of your 
testimony it says, ``The scale of investment required is 
manyfold larger than implied by the current Bioshield 
proposal.'' I guess my question would be: I grant you that the 
scale of investment required is manyfold larger than we may be 
thinking about, but it seems to me it can't be larger than the 
funding contemplated by the bill, which is rather open-ended. I 
guess I want to give you an opportunity to clarify that point 
in your testimony.
    Mr. Reed. Well, I was reacting to the $6 billion that has 
been described. That does seem to be enough, to me, over the 
time scale that I think is relevant. Again, we are laying the 
ground work for an industry that is going to make decisions and 
produce products that are going to protect our children and 
grandchildren. This threat is for the foreseeable future. I see 
it as, more or less, on the scale of strategic nuclear defense.
    Mr. Shadegg. I certainly agree.
    Mr. Reed. In terms of timing, sir. I don't want to comment 
on the specific legislative appropriation language that was 
used here. The key message for me as a venture capitalist, what 
am I going to be attuned to, is when this list of priorities 
has been set and an innovator out of a university has a great 
idea that may address that priority, will the customer be 
there? Can I count on the market?
    The standard really: Is it, more or less, as predictable as 
civilian medicines are paid for today? It is not a perfect 
system. There are surprises, but the system we have is driven 
by data. There is a certain amount of predictability in how we 
get reimbursed. There is a certain amount of predictability 
about product liability and the regulatory environment, very 
important here.
    If we could reproduce a semblance of that with respect--It 
is not a market failure. The market is just signaling to us 
that we haven't put these things in place in order for the 
market to operate.
    Mr. Shadegg. I would certainly agree with you that the $6 
billion may be way short of the mark. We in Congress have to 
look, however, at the overall structure of the legislation.
    Let me ask a slightly different question. Your testimony is 
rather eloquent on focusing private sector investment and 
sending the right market signals to not only the companies that 
Dr. Baker represents but to the investors that you represent at 
least here today. One of the things--I think Congress is going 
to look at a different funding structure than is currently 
proposed by the administration. I applaud the administration 
for trying, but I'm not certain that Congress is going to be 
comfortable with what is proposed.
    Let me ask you a different point. It seems to me, at a 
minimum we have to fix the liability issue, because when you 
couple the question of are there appropriate market incentives 
with the issue of liability, that is a disincentive that we 
can, in fact, take out of the law. I guess I would like any of 
you to comment on that particular point.
    Mr. Friedman. I think it is obvious that every intervention 
has side effects, and there wills never be a perfect one that 
is uniformly effective and uniformly safe. So once we recognize 
that, then the question is how much information, how much 
confidence will the medical providers have when they offer an 
emergency innovation to a population under some bioterrorist 
threat?
    The answer is it will never be enough. There won't be a 
large enough number of clinical trials done because of the 
nature of the products. The animal models that are used are 
going to be imperfect. So we are starting off with so many 
questions and so many unknowns that that is going to make it 
very difficult.
    The second issue is it is going to be a very dynamic and 
confused environment when these products are likely used, and 
associating a side effect with an intervention is going to be 
particularly hard. So there are a lot of reasons to understand 
why that is going to be complicated, and I think the need, not 
only for companies but, as I implied before, for people who are 
providing the medications and the question of how to deal with 
those who are receiving the medications--there has to be some 
sort of umbrella structure which recognizes that we will be 
operating in an environment where we have much too little 
information, but the medical need is so great that we can't 
wait for more information.
    Mr. Shadegg. My time has expired. Anybody else who wants to 
could perhaps comment on that. But I want to make--Before I 
conclude, I want to make the point that, if you have thoughts 
on how this committee can create the proper incentives for 
industry to do what needs to be done and for investors to 
invest in any model different than what we are talking about in 
this legislation, an open-ended mandatory expenditure under 
which the Congress has no control whatsoever and which could 
open the door to what Congressman Cox talked about before, a 
future Secretary saying, gosh, I'd like to change this but it 
is law, I think that would help; because I think that would 
help us move this legislation forward quickly, which I think, 
clearly, the full panel wants to do.
    Mr. Bilirakis. Yes. Dr. Read, and then we will go to Dr. 
Christensen.
    Mr. Read. I think that there is room for a plurality of 
mechanisms, and I know it is hard for the government to work 
this way sometimes, but we may simply have to explore some 
different mechanisms in terms of their ability to get industry 
and our best people working on the right things at the pace we 
want and with the oversight and the sense of fairness that we 
need to feel comfortable. We just may have to explore some 
things.
    One mechanism I think we ought to explore has been proposed 
and is gaining some serious interest with respect to global 
health in terms of producing vaccines for AIDS, malaria and 
tuberculosis, a purchase fund. If you could imagine a fund 
where people actually believe that the fund was there and it 
would stick to its promises and that, if you could hit a 
certain list of specifications of efficacy and safety and shelf 
life and pragmatism in terms of delivery in the field and so 
on, that was the target you're aiming for, you knew the 
customer meant it and was bound by it, I am sure that we could 
come up with a mechanism for those important diseases and 
probably countermeasures as well that would get the private 
sector probably far beyond--with the resources really beyond 
the government to invest against those goals, and there are all 
sorts of ways to deal with the fast follower and sharing the 
market that have been proposed.
    I'd love to see some of that explored as part of this.
    Mr. Bilirakis. Thank you very much. Dr. Christensen.
    Ms. Christensen. Thank you, Mr. Chairman. In the 
procurement of the countermeasures, it is somewhat dependent on 
the production and delivery of needed quantities within 5 
years. Dr. Read, I thought I heard--you voiced some concern 
about the 5 years? If you could just elaborate on your concern, 
and I would like to know from you or from anyone what types of 
research might be excluded if we use that 5-year limit?
    Mr. Read. I would say the 5-year limit excludes any 
vaccines where we don't have a good research lead, and many 
drugs. There are some things that could be done within the 5 
years. Some very important devices, for example, and 
diagnostics are achievable, and there are some things in the 
pipeline now that could be done in that 5 years.
    If we took away the exclusion of innovations that could be 
used in the private sector and have a private sector market, 
that expands the number of things that could be done in 5 
years, because they wouldn't exist today if they weren't moving 
forward under some private sector, civilian use.
    So we certainly don't want to penalize innovators who are 
heading forward with that. You might have a very good candidate 
for procurement under Bioshield simply because they might also 
have a smaller or even not so small dual use. We want to 
encourage that, not discourage it.
    My experience with FluMist might be useful. In the 1960's a 
wonderful scientists at the University of Michigan, Dr. John 
Masab, invented a flu vaccine under Army sponsorship. It began 
clinical trials in the mid-1970's under NIH sponsorship. NIH 
courageously persevered. Tony Fauci was a great champion for 
this vaccine, and his team that worked on intramural-
extramural, 20 years of clinical trials, and there was not a 
committed commercial sponsor until we decided that there was an 
opportunity for a commercial flu vaccine given by a nasal spray 
instead of a short.
    Perhaps you have heard about FluMist. This product is now 
at the FDA. We are hoping that it will be approved sometime 
soon. It is a company called MedImmune that we merged with that 
is carrying it forward, but this is now 36 years after its 
invention, 27 years after the first clinical trial, and 8 years 
after we first began a committed commercial effort to bring it 
forward. So I think it gives you a sense that these timelines 
can be pretty long.
    Mr. Baker. You know, one of the big issues is you are right 
now making a research investment of $1.7 billion at NIAID. I am 
sorry to inform you that it is highly unlikely that any of that 
will reach the stage that it will be Bioshield-able within 5 
years. So you have to really look beyond that to recoup that 
research investment.
    In fact, you need to help encourage that and transfer the 
technology over to the commercial sector effectively to recoup 
the research investment you are making.
    Ms. Christensen. That raises the other concern that I had, 
because I thought I understood from the Secretary's testimony 
and from my understanding of the bill that once those 
countermeasures are approved, they are exclusively to be used 
for bioterrorism.
    A lot of us have voiced concern about the large output of 
funds that the Federal Government would have to expend in an 
open-ended fashion. How do you propose that we would change 
this legislation to accommodate a private sector use or other 
use for these measures after the Federal Government has spent 
so much money in developing them and procuring them?
    Mr. Read. A couple of suggestions. One is I think we ought 
to delete the exclusion related to commercial use. In essence, 
what we are doing is we are punishing the innovator for being 
successful in finding a dual use. The government benefits when 
the technology finds a civilian use, because it means that 
production and all of these costs can be spread over both the 
civilian use and the bioterrorism defense use.
    Some of our most important opportunities are broad spectrum 
antibiotics that could be used for serious hospital acquired 
infections for agents that produce--that are resistant, that 
may be very good agents against bio-threat agents. So I think 
that it would be important to leave that out.
    I also think the 5-year restriction is also worrisome and 
that we should find a way to also make sure that these 
incentives are there for longer term projects.
    Ms. Christensen. Just a brief question that relates to the 
question I asked the Secretary. There are some possible 
amendments that might include requiring the product vendor to 
follow through to get FDA approval, which is one question I 
asked, or imposing requirements that specifically state who can 
distribute, who can administer the product, etcetera. Would 
that adversely affect--what is it called?--the push mechanism 
for these drugs? Anyone can answer.
    Mr. Read. Well, maybe some others, but the more you 
decorate these requirements and the procurement with extra 
provisions, it just figures into the cost of doing business. I 
think the idea of having products get full FDA vetting is a 
very good idea. We just need to find the right way to build 
that in and still have the flexibility for the emergencies.
    If we are looking for private sector investment, they will 
look at the whole picture, and they will look at the things 
that make it easier and more attractive and the things that 
make it harder and less attractive, and balance that. We are 
going to have to have some flexibility here. We are not going 
to solve it all at this first bill.
    Ms. Christensen. I agree.
    Mr. Shadegg. [presiding.] The time of the gentle lady has 
expired. First, I need to encourage the witnesses to be short 
in their answers to further questions, because we are going to 
have to go to a vote. I call on the gentleman from Connecticut, 
Mr. Shays.
    Mr. Shays. Thank you very much, Mr. Chairman. I would like 
to ask the witnesses first: Given that there can be altered--
First, do you believe there can be altered biological agents?
    Mr. Read. Absolutely. I think it is important to understand 
that all infectious agents are naturally altering all the time. 
So we have human manipulation, and naturally they are going to 
be modified.
    Mr. Shays. Thank you.
    Mr. Baker. I would like to add, though, that the natural 
evolution can be remarkably short circuited by simple 
biotechnology techniques. There are in the literature 
techniques where over a week you can increase resistance to 
antibiotics by 64,000-fold, whereas it would take you billions 
of years to do that naturally. So this is a different event.
    Mr. Shays. All right. Thank you. Do you believe that the 
concern of one of the witnesses before my National Security 
Subcommittee is a valid concern, and his concern was expressed 
by the fact that he said--He is a noted doctor of a major 
medical magazine. He said his biggest concern is that a small 
group of dedicated scientists could alter a biological agent 
that would have no antidote and could wipe out humanity as we 
know it.
    Mr. Baker. I do believe--and I serve on a DoD committee 
that reviews this--that altered organisms can present a 
remarkable threat, and not just physically altering or 
biotechnology altering a single organism, but releasing more 
than one organism at a time in a synergistic manner could have 
effects that are totally unpredicted by single or natural 
infections.
    Mr. Shays. Do you think that this legislation addresses 
this issue?
    Mr. Baker. Well, this was the one point I tried to make. I 
think that, when you look at bio-threats as emerging infectious 
diseases, you miss the nuances that could be engineered into 
them or result from alterations in the amount of organism 
release or how it is propagated to individuals.
    So, yes, I think they need to think of it more in the text 
of bio-threats agents and not as an emerging infectious 
disease.
    Mr. Shays. Let me ask you this. Thank you. What is the 
private sector putting on the table for Project Bioshield? You 
all want R&D money, a guaranteed purchase price, and liability 
protection. What do you bring to the table?
    Mr. Friedman. I can only represent the considerable 
activity that----
    Mr. Shays. I wish you wouldn't sound so sincere. Sound a 
little more sinister or something. I can only--You have 
appeared before me too many times, Dr. Friedman. I'm sorry.
    Mr. Friedman. You leave me speechless.
    Mr. Baker. While Dr. Friedman collects himself, it is the 
opportunity cost. I hear willingness among my colleagues in the 
biotech industry to seriously sit down and put a thumb on the 
scale in favor of working on a serious countermeasure when they 
still have opportunities, important opportunities for----
    Mr. Shays. That's a fair response.
    Mr. Friedman. And let me just add that people are doing it 
now. You know, talk is cheap. I know of companies that are 
committing resources, scientists, laboratories, their best 
thinking now on some of these problems, without any of these 
guarantees. But the question is can we optimize that system?
    The fact that we've got a few things moving forward, I 
think, is terrific, but we as citizens really want more.
    Mr. Shays. Yes. I guess one of my concerns is that we are 
not throwing money at something where money might have already 
been spent, and that would be, you know, obviously, a concern.
    Thank you, Mr. Chairman. I'll yield back. Thank you, 
gentlemen. Appreciate the answers.
    Mr. Shadegg. The time of the gentleman has expired. For the 
last set of questions, Mr. Green.
    Mr. Green. I will be very quick.
    Mr. Shadegg. Just to give you a caution, we have exactly 9 
minutes left.
    Mr. Green. Okay. I have a number of questions, but I will 
submit them and appreciate the opportunity to do that. I would 
like to touch on one. Dr. Read or Dr. Baker, I know that I work 
with Baylor College of Medicine in Houston, and a lot of the 
research is being done by a lot of our great institutions, and 
I am aware of what is being done locally, and I am glad for 
this hearing to know what is being done elsewhere.
    Let me ask one question, Mr. Chairman, and I will submit 
the rest. PhRMA's website states that the 2002 survey of 
medicines in development for infectious diseases found that the 
pharmaceutical and biological companies were working on 256 
medicines for these diseases, including medicines for smallpox, 
anthrax, and the plague.
    To follow up my colleague from Connecticut, if the industry 
is already taking steps to develop countermeasures for these 
products, is there really a need for this type of legislation?
    Mr. Friedman. If I may respond, sir.
    Mr. Green. Sure.
    Mr. Friedman. If you look at the characteristics of those 
large number of medicines, many of them are for diseases that 
aren't seen as bio-terrorist threats. They are important 
diseases, hepatitis, childhood illnesses, and so forth.
    The number of needs is vastly greater than 250, and the 
goal here is not to try and have protection in hand for every 
conceivable risk, because that won't be possible, but to try in 
a thoughtful, effective way to identify the highest risks and 
then to marshall the right science to address that.
    Some of the things are being--Some of the threat agents are 
being addressed, but as was pointed out by committee members 
earlier, there is really an urgent need for new antibiotic 
classes and new immunologic modifications and new techniques 
for diagnosis and so forth. These are not being adequately 
addressed in the current environment.
    Mr. Green. Thank you, Mr. Chairman. And I know we probably 
have only 7 minutes to vote now.
    Mr. Shadegg. We have about 7 minutes left, and we probably 
have to leave here at 5. So, okay.
    Mr. Noble. I just wanted to add that there are many 
potential products in the diagnostic arena or other 
technologies, for example, agents that we haven't yet 
recognized. We now have SARS, and it probably occurs in a 
virus.
    There are lots of things that are known, but there are a 
lot of things that aren't yet known, and we have to protect, 
diagnose and be able to take care of those threats as well, 
protect our blood supply if they are blood borne, for example.
    Mr. Green. And I agree, and I understand the concern. In 
fact, I'm glad the Secretary mentioned about SARS because of 
the concern, because that is something that we need to address, 
particularly since the People's Republic of China--seems like 
they have drawn a wall there not to allow some information to 
be shared. Thank you, Mr. Chairman.
    Mr. Shadegg. I thank the gentleman for yielding back. I 
want to especially thank this panel for their superb testimony, 
but also for what you do on behalf of both my subcommittee of 
the Homeland Security Committee and also on behalf of Mr. 
Bilirakis's subcommittee. Mr. Bilirakis?
    Mr. Bilirakis. Well, Mr. Chairman, thank you. Gentlemen, I 
know Dr. Friedman has been here before at least. We will have 
written questions to you. We would appreciate your responding 
to those when you receive them. Thank you so very much. 
Appreciate your patience.
    Mr. Shadegg. With that, we will conclude the hearing.
    [Whereupon, at 12:50 p.m., the subcommittee adjourned.]
    [Additional material submitted for the record follows:]
Prepared Statement of Katherine Bowdish, President and Founder, Alexion 
                      Antibody Technologies, Inc.
    Chairman Bilirakis, ranking member Brown, Chairman Shadegg, 
distinguished members of the Subcommittees, I am honored to present 
this testimony on the application of the very latest biotech solutions 
for defense against the very real threat of bioterrorism facing our 
nation today.
    As we saw in the attacks against our nation in 2001, Inhalation 
anthrax is a highly fatal disease if not identified early enough for 
antibiotics to be of use. Death usually occurs within a few days of the 
onset of acute symptoms. The causative agent is Bacillus anthracis, and 
the lethality and short time course leading to death are due primarily 
to the effects of the toxin produced by the bacteria. Blocking the 
activity of anthrax toxin could provide time for appropriate 
antibacterial agents or the immune system to clear the infection. 
Anthrax toxins could be blocked at several stages in the process of 
toxin entry into the infected host cells. Such anthrax toxin antidotes 
might inhibit binding to the cellular receptor, processing of the 
toxin, or assembly of the toxin components on the cell surface prior to 
translocation of these molecules into the cell.
    Antibodies are among the most logical and natural anti-toxins that 
could be developed for treatment of anthrax. There are two types of 
antibodies, monoclonal antibodies and polyclonal antibodies. Monoclonal 
antibodies are extremely effective, there is no risk of transmission of 
infectious agents, and the supply of antibody is unlimited as the cells 
can be continuously grown in culture. Polyclonal antibodies, on the 
other hand, are collected from a large pool of donors increasing the 
risk of transmission of infectious agents, and furthermore, the supply 
is limited by the number of donors available at any given time. Human 
or humanized antibodies have been proven to be safe and well tolerated 
for therapeutic purposes. Mouse monoclonal antibodies have been shown 
to neutralize (block) the anthrax toxin in rats, and guinea pigs have 
been passively protected against anthrax infection using polyclonal 
guinea pig antibodies. Potently neutralizing human monoclonal 
antibodies to anthrax should therefore have therapeutic value in human 
anthrax infections.
    Alexion Antibody Technologies, a wholly-owned subsidiary of Alexion 
Pharmaceuticals, has successfully isolated fully human monoclonal 
antibodies with therapeutic potential for biodefense. Using our 
proprietary technology, we have isolated fully human high affinity 
anti-anthrax toxin antibodies that show complete protection in animals 
against anthrax toxin challenge, as well as antibodies to other 
biodefense agents that we hope to test soon. We would be delighted to 
coordinate with government officials to see that our antibodies and our 
expertise are utilized for emergency stockpile generation to protect 
both civilian and military populations.
    Specifically, we have used our proprietary technology to isolate 
fully human high affinity, potently neutralizing antibodies against 
anthrax toxin proteins. To do this, we cloned the genes encoding human 
antibodies from blood and bone marrow of vaccinated military personnel 
to create human antibody display libraries. Human antibody fragments 
that specifically bind to anthrax toxins were isolated from the library 
through a process termed ``panning''. A panel of human antibodies that 
bind anthrax proteins was generated. Antibody fragments were assayed 
for their ability to neutralize anthrax toxin activity in cell based 
assays.
    Over 140 individual antibody fragments with strong binding activity 
were further characterized. Laboratory neutralization assays using the 
purified antibody fragments were performed, demonstrating that 17 of 
the first 21 anti-toxin antibody fragments in the first screens were 
able to block the effects of the anthrax toxin with greater than 80% 
protection from cell death. Five antibody fragments protect fully 
(100%) at this concentration.
    Because two of the antibody fragments protect to 100% in cell based 
assays, they were chosen for testing in animals against recombinant 
anthrax toxin challenge. In these studies, the two antibody fragments 
protected fully allowing complete survival of the animals following 
anthrax toxin exposure.
    To our knowledge, this work demonstrates for the first time that 
human anti-anthrax toxin antibodies that are potently neutralizing can 
be isolated from immunized donors. These antibodies, either alone or in 
combination, may be useful as immunotherapeutics at the onset or during 
the course of an infection and for the passive protection of 
unvaccinated personnel that might need to enter an area of suspected 
anthrax release.
    The work described above has been discussed with and presented to a 
large number of scientific experts in anthrax, on other agents of 
bioterror, as well as experts in antibody therapeutics, and passive 
immunotherapy. In order to carry out the work initially, we described 
our approach to some of the worlds leading experts in anthrax at the 
United States Army Research Institute of Infectious Disease (USAMRIID). 
The willingness of the USAMRIID researchers to work with us by 
transferring needed materials, as well as having further discussions in 
person and by phone throughout the work lends support to our approach. 
On completion of the work, we drafted a manuscript describing our 
success in anti-toxin therapy and sent it to two of the worlds leading 
experts in antibodies and passive immunotherapy at The Scripps Research 
Institute, a world renowned institute for immunology research. These 
experts approved of the research and suggested submission of our work 
to a world class journal read by scientific leaders throughout the 
world.
    In addition, in discussions of our approach to a leading botulinum 
expert at UCSF, the comments we received were how important the work 
was, how important it was that the researchers carrying out the work 
have the necessary capability and expertise, and how comforted he was 
that our company with it's significant expertise was willing and able 
to take on the work. Furthermore, in discussions with the CDC, where we 
already have a program ongoing in biodefense against a different threat 
of bioterror, the lead CDC participant in that program reviewed the 
anthrax research and commented that is was clear Alexion knows what it 
is doing. Experts at each of the above agencies have either offered 
their assistance to further the work, or have agreed to participate 
with us whereby each offers their expertise toward a different agent of 
bioterror in the form of an NIH program project grant, or both.
    Finally, when this work was presented at a large, open peer 
reviewed scientific meeting, the members of the audience of experts 
were excited by the developments, and encouraged that we would obtain 
appropriate federal government support to complete development through 
the next phases leading to emergency stockpile generation.
    Alexion's biodefense program has been entirely internally-supported 
to date. We saw a need and recognized that we had the ability to offer 
our technology and expertise. And most importantly, we have 
demonstrated success of our approach. It is our hope that Congress can 
help us ensure that the appropriate decision-makers in our federal 
government are aware of our critical and highly relevant work for 
consideration for civilian and military defense.
    Building the necessary emergency stockpiles for civilian and 
military defense is certainly something that no one company can or 
should accomplish solely with private funding. Therefore, we are 
looking for assistance from the Federal Government through NIH for the 
final phase for development of these therapies. Our next goals are to 
test the current panel of anthrax antidote antibodies against live 
anthrax spore challenge in relevant animal models, manufacture the 
antibodies according to FDA guidelines, and do a Phase I safety study 
in humans. Importantly, Alexion has significant monoclonal antibody 
clinical development and manufacturing expertise. Alexion can build and 
run a government-supported manufacturing facility, or Alexion and a 
contract manufacturer can provide the needed material.
    Our very successful and highly relevant work on anti-toxin therapy 
for anthrax exposure could quickly lead to the emergency stockpile 
needed for biodefense against anthrax. Further, we are currently 
applying the same technology to additional agents of bioterror in our 
research laboratories. Preliminary results suggest we will have similar 
successes with other bioterrorism agents, such as smallpox and plague, 
allowing us to proceed with desperately needed emergency stockpiles of 
antidotes to a wide range of bioterror agents. At the minimum, we hope 
our research will deter any would be terrorist, and alleviate public 
anxiety.
    I thank the committee for this opportunity to present this 
testimony and welcome any written questions.
                                 ______
                                 
    Responses for the Record of Dr. Leighton Read, Representing the 
                  Biotechnology Industry Organization
    Question: Can you explain for the Committee the primary concern of 
the biotechnology industry regarding liability? And, what are your 
recommendations for providing liability protections that ensure the 
biotech industry will maintain a long-term commitment to this effort?
    Response: BIO sees liability as a profound concern for private 
companies who may want to contribute to biodefense via R&D and 
production of countermeasures such as drugs and vaccines. There are 
striking differences between bioterrorism countermeasures and civilian 
biotechnology products that stem from:

A. the nature of the target biology and medical need,
B. the nature of the information that can be collected prior to use of 
        a promising countermeasure,
C. the likely role of government in recommending, distributing and 
        administering countermeasures, and
D. the unusual circumstances in which countermeasures may be 
        administered.
    A. While drugs and vaccines against infectious agents represent 
            many of the enduring successes in pharmaceutical and 
            biotechnology product development, biodefense is different. 
            Agents that must be countered in biodefense range from 
            natural pathogens delivered intentionally by surprising 
            means (as in the case of mail delivery of anthrax) to 
            microorganisms genetically engineered by our opponents to 
            accomplish specific, but yet unknown pathology. The 
            challenge is a man-made contest of offense and defense that 
            does not have a clear parallel in drug and vaccine 
            development for natural pathogens. For example, it is 
            possible for agents to be designed with harmful features 
            that are activated by the obvious countermeasures. 
            Furthermore, for some potentially important countermeasures 
            it may be difficult to distinguish the severe end of the 
            drug side effect profile from the mild end of the biothreat 
            pathology. These examples illustrate the kind of surprises 
            that greatly raises the risk that an innovator might be 
            held unfairly accountable for unexpected consequences to 
            recipients.
    B. Preclinical and clinical testing data obtainable for candidate 
            countermeasures will typically be less complete than for 
            drugs and vaccines targeting most human diseases. As 
            acknowledged by the FDA's recently formalized animal 
            testing rule, human efficacy data cannot ordinarily be 
            obtained in advance of an attack with a dangerous 
            bioweapon. This means that the key data supporting use is 
            from animal studies of safety and efficacy and human safety 
            studies. However, animal efficacy and safety work will 
            often be constrained by the daunting logistics of 
            conducting animal experiments under very high levels of 
            biosafety containment. For some very serious threats, we 
            must be prepared to stockpile countermeasures with 
            significant known side effects until a better 
            countermeasure is developed. Because of the risk we will be 
            asking experimental subjects to take, the number enrolled 
            in such trials will certainly be smaller than in civilian 
            drug or vaccine development. The inherent limitations of 
            the data package supporting use of many countermeasures, 
            particularly when the Secretary of HHS determines that an 
            ``investigational'' agent should be deployed, raises the 
            risk that an innovator might be held unfairly accountable 
            for unexpected consequences to recipients.
    C. Under many of the scenarios in which a biodefense countermeasure 
            is actually used in people, the government is taking a 
            larger role than is typically the case for drugs and 
            vaccines. Normally, a private company can initiate 
            important decisions regarding changes in labeling and 
            product recalls if it believes this is in the best 
            interests of patients or the company. In the event of a 
            biodefense emergency, it is reasonable to assume that 
            private companies will have ceded control over the physical 
            product and the distribution pipeline to government 
            entities.
    D. Companies will have much less ability to correct or adjust the 
            messages to caregivers in the midst of an emergency. In 
            case of a serious crisis, details of indications and 
            contra-indications will almost surely be missed and the 
            government may have to make last-minute changes in usage 
            recommendations, possibly including mandatory 
            administration to account for rapidly changing 
            circumstances. This greatly increases the risk that an 
            innovator might be held unfairly accountable for unexpected 
            consequences to recipients.
    At the same time that the risk of potentially enterprise-
threatening litigation is increasing, the availability of adequate 
insurance to cover these risks is decreasing.
    In enacting the Homeland Security Act, Congress recognized that the 
fear of facing extraordinary liabilities from third party suits could 
jeopardize the development of smallpox vaccines and therefore included 
provisions to protect companies involved in that effort. Similar 
protections are necessary for development of other countermeasures. 
Therefore, we have provided to the Committee staff proposed amendments 
to the Administration's draft legislation which would extend to 
manufacturers of other types of biomedical countermeasures protections 
provided by the Homeland Security Act to manufacturers of smallpox 
countermeasures.
    Question In your testimony Dr. Read, you call for greater attention 
on market incentives or ``pull'' mechanisms. Since this is, 
undoubtedly, an atypical market, can you provide recommendations on how 
a guaranteed market can be created through BioShield and explain what 
is necessary for us to reach our objective of being successful in this 
arena?
    Response: BIO has recommended that the Administration's proposal be 
amended to include provisions that require the Department of Health and 
Human Services to enter into an ``Agreement to Purchase'' biomedical 
countermeasures. The agreement would be contingent on a determination 
that the countermeasure is appropriate for procurement and would 
address, among other terms, the price, quantity and available market.
    BIO's proposed amendments would provide more certainty that there 
will be a market when the private sector innovator succeeds in creating 
a product that meets public health needs. In the absence of an assured 
market as provided for in BIO's proposal, biotechnology companies will 
be extremely reluctant to undertake the expensive, lengthy and 
challenging process to develop new countermeasures.
    Other ``pull'' mechanisms should also be explored under the 
BioShield authorizations. These policies are the first steps in 
creating a biodefense industry for the United States and some 
experimentation with procurement and incentives will be necessary. The 
Secretary of HHS should be given authority to use multiple contracting 
mechanisms appropriate to countermeasures having differing R&D 
challenges and product life cycles, as illustrated by vaccines, drugs, 
and diagnostics. BioShield clearly provides for contracting with 
specific companies to provide specific countermeasures. ``Innovation 
prizes'' are another ``pull'' mechanism that have been proven to 
stimulate vigorous private sector innovation in the past and should be 
available under BioShield.
    The legislation should provide for a dialogue among government and 
private companies to develop contractual terms dealing with product 
specifications and market sharing in the event a fast-follower provides 
a better solution than the first to succeed. Internet reverse auctions 
where the customer names his or her ``own price'' for travel purchases 
suggest a mechanism by which the government can ensure that it is not 
paying more than necessary to attract willing innovators to the 
challenge, and--even more important--not paying enough to get a 
critical problem on the table.
    The Secretary should be accountable to Congress for reporting on 
the success of different ``pull'' mechanisms so that these can be 
refined over time.
    Question: As a physician and former biotech CEO experienced with 
vaccine development, can you outline for the Committee just how 
vaccines are made and what difficulties, if any, you envision regarding 
the development and production of countermeasure vaccines?
    Response: Of the many pharmaceutical and biotechnology approaches 
that can be expected to yield bioterrorism countermeasures, vaccines 
have a spectacular track record of controlling infectious diseases, but 
vaccines often take more time to develop. Drugs for infectious agents 
typically exploit a specific biochemical weakness in the microorganism 
that is not found in humans. Vaccines intervene in the complex 
interplay between the pathogen and the human immune system where most 
of the detailed biology has yet to be worked out. While there are often 
good clues about how to begin and many potential vaccine technologies 
that may be exploited, the process still involves a great deal of trial 
and error. In many vaccine development efforts, researchers must deal 
with poor correlation among laboratory assays, animal testing, and 
actual protection in humans.
    Vaccines are typically biological products, composed of complex 
protein mixtures or killed or weakened forms of the pathogenic 
microorganism. Manufacturing of these types of products are much more 
complex and expensive. The FDA regulates these products based largely 
on every little detail in the manufacturing process, because it is 
impossible to quantify every ingredient in the final product.
    Development of biodefense countermeasure vaccines will share all of 
these challenges complicated, in many cases, by a lack of experience 
with the target agent and by the difficulty in performing experiments 
with such a potentially dangerous pathogen. Manufacturing of vaccines 
based on some successful technologies will also be uniquely expensive 
and complicated. Today's vaccines for tetanus and diphtheria are 
carefully extracted from large stocks of pathogenic bacteria and the 
flu shot is made by growing large stocks of virulent influenza, which 
is then inactivated in a rigorous manufacturing process.
                    Questions from Hon. John Shadegg
    Question: The Defense Science Board in its May 2002 Study on 
Defense Science and Technology has issued a challenge to DoD that by 
2005, the pathogen to drug hit process should be reduced from years to 
months, by 2010 from months to weeks, and by 2020, it should have the 
ability to go from bug to drug within 24 hours. It has recommended 
spending $200 million per year over the next twenty years to achieve 
this.
    What is your opinion of the Defense Science Board's challenge on 
going from bug to drug within 24 hours by 2020?
    Response: I haven't reviewed the DSB challenge in detail, but am 
impressed with the importance of its vision. Great scientific progress 
has often followed such a clear and quantitative statement of what 
needs to be done, as in the case of the prizes announced for early 
aviation pioneers and physicist Richard Feynman's challenge regarding 
ultraminiaturization that has spurred the imagination of many 
nanotechnology innovators.
    These are extremely aggressive objectives that depend very much on 
how ``drug hits'' are defined. It is NOT out of the question that for 
certain types of pathogens and certain types of ``drugs hits'' that 
this might be achieved. For example, DNA sequencing and synthesis 
technology now on the horizon could conceivably permit the design and 
production of antibody-like molecules that could be turned around in 
these time frames.
    Part of the value of this challenge is not just technical, but 
implies that we must be innovators in the way we regulate the balance 
of risk and benefit in the application of our technology. Posting a 
reward, in the form of a suitably specified commitment to purchase such 
a countermeasure technology would be the most effective spur to such 
innovation. The magnitude of the need for such a system would justify 
very attractive rewards.
                     Questions from Hon. Dave Camp
    Question: Two major issues in countermeasure technology development 
are economic incentives and liability concerns. In Secretary Thompson's 
testimony, he mentioned that grants and contracts might not be 
sufficient for developing the public/private partnership. How will 
Project BioShield address these issues in order to expedite the 
development of the next generation of countermeasures?
    Response: Grants, contracts and other ``push'' mechanisms have a 
vitally important role to play in ensuring that effort gets underway in 
key technology areas for our biodefense. These are not the mechanisms 
that will ensure that products are produced for stockpile or use. An 
adequate market opportunity (``pull'') will be required to draw in the 
large amounts of private capital and expertise necessary to complete 
the later stages of drug and vaccine production. There is not a 
convincing track record that the government or any other entity has 
been able to deliver finished products such as these. The inclusion of 
``pull'' mechanisms in the Administration's BioShield proposal signal 
the importance of creating workable incentives for the industries 
capable of developing and producing countermeasures.
                   Questions from Hon. Edolphus Towns
    Question 1) Given that devices, biologics and drugs usually have 
different standards on what makes a product commercially viable to make 
a commitment to R&D, does the BioShield proposal offer enough incentive 
for your individual industries? If I could get comments from each of 
the panelists on this issue.
    Response: To the extent that the Administration's BioShield 
proposal includes liability protections and guaranteed market 
provisions, BIO believes that the environment to develop commercially 
viable biotechnology products will be significantly improved. BIO sees 
liability as a profound concern for private companies who may want to 
contribute to biodefense via R&D and production of countermeasures such 
as drugs and vaccines. In enacting the Homeland Security Act, Congress 
recognized that the fear of facing extraordinary liabilities from third 
party suits could jeopardize the development of smallpox vaccines and 
therefore included provisions to protect companies involved in that 
effort. Similar protections are necessary for development of other 
countermeasures.
    BIO recommends that the Administration's proposal be amended to 
include provisions that require the Department of Health and Human 
Services to enter into an ``Agreement to Purchase'' biomedical 
countermeasures. The agreement would be contingent on a determination 
that the countermeasure is appropriate for procurement and would 
address, among other terms, the price, quantity and available market. 
In the absence of an assured market biotechnology companies will be 
extremely reluctant to undertake the expensive, lengthy and challenging 
process to develop new countermeasures.
    Question 2) Do we need to add anything to this proposal to make it 
easier for academic research institutions and commercial companies to 
work together on developing these countermeasure products?
    Response: It is important that the intellectual property 
environment provided by the Bayh-Dole Act be preserved in order to keep 
the door open for academic-industry collaboration. The Bayh-Dole 
provisions haven enabled countless technologies to move from the 
research stage into development, and commercialization.
    Question 3) If each of you had a product already approved to treat 
a given, what incentives exist in this proposal or what would you like 
to see to encourage research for a new countermeasure?
    Response: With respect to existing products that have already been 
approved for use, BIO's primary concern is the exposure to liability 
associated with the inherently risky nature of extending product use to 
conditions for which FDA approval was not granted. Again, such uses 
apparently would be conditionally approved by FDA based on less than 
the generally required amount of data. And, again, presumably consumers 
would either be required or strongly urged to use the medication for 
such purposes. Concerns about liability do not, therefore, differ 
substantially for new uses of products approved for other conditions 
than for countermeasures still under development. BIO recommends the 
inclusion of appropriate liability protections for companies engaged in 
this hazardous arena. Specifically, BIO has provided to the Committee 
staff proposed amendments to the Administration's draft legislation 
which would extend the protection already provided by the Homeland 
Security Act to manufacturers of smallpox countermeasure to the 
manufacturers of other types of biomedical countermeasures. BIO 
believes that such protection is essential to encourage 
commercialization of existing technologies and research in new 
countermeasures.
    Question 4) If a better product is developed after you have signed 
a contract with the government, should the government be forced to 
stockpile your product--because you already have a contract--or does 
the government need the flexibility to go with the better product, 
which many mean canceling your contract?
    Response: One of the most important features of BioShield is the 
attempt to create a credible and reasonably predictable market for 
countermeasures so that innovators will take risks in this area. No 
market is perfectly predicable and successful innovators are accustomed 
to taking competitive pricing risks, based on their experience in 
established markets. In the market for biodefense countermeasures, 
there is very little history and much of it is not encouraging. The 
government must be prepared to introduce some predictability in the 
reward structure. For example, it is not necessary (or even a good 
idea) to stockpile a countermeasure found to be obsolete, but a 
successful innovator who took great risks in good faith and was the 
first to meet the government's a priori specifications should be able 
to count on a specific financial reward sufficient to justify the risk 
and opportunity cost of diverting effort to this problem.
    Question 5) This bill appropriates unlimited sums of money. 
However, our Orphan Drug Program also gives incentives to work on R&D 
for diseases that are not that prevalent. And, many illnesses still 
have not cure. Is BioShield a research problem that money alone can 
solve?
    Response: NO: LEADERSHIP is absolutely essential.
    Money alone does not solve the potential problem of no supply, or 
short supply of biological countermeasures. However, these policies are 
the first steps in creating a biodefense industry for the United States 
and some experimentation with procurement and incentives will be 
necessary. The Secretary of HHS should be given authority to use 
multiple contracting mechanisms appropriate to countermeasures having 
differing R&D challenges and product life cycles, as illustrated by 
vaccines, drugs, and diagnostics. BioShield clearly provides for 
contracting with specific companies to provide specific 
countermeasures. ``Innovation prizes'' are another ``pull'' mechanism 
that have been proven to stimulate vigorous private sector innovation 
in the past and should be available under BioShield.
    The challenge of discovering a cure for a number of orphan 
illnesses does not call for us to retreat solely because the cure has 
not yet been found. On the contrary, we must press forward even more to 
find the breakthrough. The biotechnology industry is at the forefront 
of pursuing therapeutics and vaccines to combat a number of illnesses 
that affect a smaller group of patients. Similarly, the threat of a 
biological attack that relies on a seldom used, but extremely 
dangerous, pathogen requires that we must be vigilant in our biodefense 
appropriations. That challenge implies that we must be innovators in 
the way we regulate the balance of risk and benefit in the application 
of our technology. Posting a reward, in the form of a suitably 
specified commitment to purchase such a countermeasure technology would 
be the most effective spur to such innovation. The magnitude of the 
need for such a system would justify very attractive rewards.
                                 ______
                                 
    Responses for the Record from Dr. Gary Noble, Johnson & Johnson
    Question 1. Dr. Noble, you mention in your written testimony that 
people tend to overlook the contributions of medical devices when 
considering the countermeasures needed to combat bioterrorism. Why?
    Response: While many focus on vaccines as the sole countermeasures 
needed to counteract bioterror agents, as we saw with the inhalation 
anthrax cases and are seeing again with SARS, the ability to diagnose 
individuals to determine who has been exposed is essential to treatment 
and to limiting the contagious spread of infection. There are numerous 
technologies that assist in or play a significant role in combating 
bioterrorism, including diagnostic tests. The ability to quickly 
diagnose individuals to determine who has been exposed is essential to 
treatment and to limiting the contagious spread of infection. 
Additionally, in the case of the anthrax attacks in the Senate Hart 
Building, the Brentwood Postal facility and others, as manufacturers 
continue to develop rapid tests like the Roche-Mayo Clinic anthrax 
test, they hold the promise that many individuals will be able to 
forego prophylactic antibiotic or other treatment. And, as diagnostic 
tests advance, we will be able to detect those who have been exposed 
and are infectious yet are not exhibiting any signs of illness.
    Question 2. In your opinion, would medical devices qualify for 
funding under Project BioShield? If not, should they?
    Response: The Administration proposal includes devices in portions 
of its BioShield proposal but excludes devices from key aspects of the 
proposal. Devices are clearly included in the Biomedical Countermeasure 
Research and Development section of the legislation. Devices are 
explicitly listed in the definition of that section. However, devices 
are excluded from the qualified countermeasures procurement section. 
The definition for that section lists only drugs and biologics.
    The proposal, at least as initially drafted, creates the 
paradoxical situation in which a device company that cooperatively 
engages in research with the National Institute of Allergy and 
Infectious Diseases (NIAID) in the development of a product with no 
commercial market would be prevented from recouping its full investment 
because the Administration proposal prevents it from being purchased as 
a qualified countermeasure. Companies that did not develop a technology 
without the R&D assistance of NIAID would similarly be prevented from 
recouping their investment because such products could not be purchased 
as qualified countermeasures.
    The Administration proposal also prohibits devices that are 
reviewed through FDA's 510(k) review process from being considered for 
use in emergencies. Most diagnostic tests are reviewed through FDA's 
510(k) process. It is not unusual for diagnostic tests that have 
already been approved to detect a specific bacterium or viral agent to 
be modified to detect another bacterium or virus of the same family. 
Thus, it is conceivable that a previously approved diagnostic test may 
also prove to be useful in screening some bioterrorist agents. FDA's 
510(k) process recognizes that diagnostic test development is an 
iterative process that builds on the knowledge gained from the previous 
infectious agent to develop tests for similar agents.
    AdvaMed strongly recommends that the legislation be drafted broadly 
to include medical devices, including 510(k) products, in all aspects 
of the BioShield program. The Secretaries of Health and Human Services 
(HHS) and of Homeland Security should have the discretionary authority 
to consider all medical technologies, including devices, in determining 
what may be needed or most useful in protecting our nation from 
potential bioterrorist events. Devices (including devices approved 
through the 510(k) process) that have needed countermeasure 
applications, should not be excluded from consideration due to a 
technicality.
    Question 3. What types of devices are needed by the government to 
respond to a bioterrorist attack?
    Response: There are numerous medical technologies that are integral 
to a rapid and effective response to any potential terrorist attack, 
including among others:

 Diagnostic Tests: In November 2001, Roche Diagnostics and the 
        Mayo Clinic announced the development of a new rapid anthrax 
        test that can detect anthrax in humans in an hour and quickly 
        made the test available to public health agencies and hospital 
        and reference laboratories. Companies are working to develop 
        diagnostic tests for other bioterrorist infectious agents, 
        including smallpox. In a related development, AdvaMed and its 
        companies are also working cooperatively with FDA and the CDC 
        to speed development of a diagnostic test for West Nile virus.
 Vaccine and Drug Delivery Devices: ``Microdelivery'' devices 
        in development by BD will deliver vaccines more efficiently and 
        effectively, allowing better absorption by the body and at the 
        same time extending vaccine supply. For example, in 
        collaboration with USAMRIID, researchers have shown that use of 
        these skin-based microdelivery technologies can significantly 
        improve the performance of next-generation recombinant protein 
        vaccines against anthrax and the organism that causes toxic 
        shock.
 Biochemical Decontamination Technologies: We saw the 
        importance of technologies to decontaminate large contained 
        areas and their contents, sensitive electronic equipment, mail 
        and other items after the anthrax attacks of 2001. STERIS 
        Corporation and the U.S. Army Edgewood Chemical Biological 
        Center have entered into a collaborative research and 
        development project to evaluate, optimize and modify STERIS's 
        Vaporized Hydrogen Peroxide (VHP ') technology and 
        to demonstrate its effectiveness against biological and 
        chemical warfare agents.
 Blood Safety Technologies: Companies continue to work on 
        technologies to protect our blood supply through inactivation 
        or pathogen removal technology to inactivate or eliminate 
        blood-borne viruses, parasites, lymphocytes and bacteria from 
        blood products.
 Advanced Burn and Wound Care Technologies: Companies have 
        developed gels and foams that can rapidly close wounds and 
        bioengineered skin for the treatment of second and third degree 
        burns. On September 11th 2001, Smith and Nephew, Inc. employees 
        personally drove bioengineered skin products to New York City 
        and Washington, D.C. to ensure patient access to these critical 
        technologies despite the disruption to the distribution and 
        supply chains because of U.S. airspace closures.
 Health Information Systems: Coordination of information by 
        local, state and national public health authorities is key for 
        managing efficient immunization activities and detecting 
        biological outbreaks. Specialized vaccination tracking systems 
        being developed by BD and others can help document and manage 
        adverse events to vaccines while assuring rapid, safe vaccine 
        deployment. As a measure of the critical role health 
        information systems can play, HHS announced that it will begin 
        testing a system using handheld personal digital assistants 
        (PDAs) for transmitting urgent information about biological 
        agents to clinicians. The three-month pilot test is designed to 
        gauge the best ways for federal officials to communicate 
        effectively with front-line clinicians in the event of a 
        bioterrorist attack.
 Basic Medical Technologies: Basic medical technologies are 
        also essential during times of crisis including ventilators, 
        imaging technologies and infusion and monitoring equipment 
        among others as well as gowns, gloves, masks and respirators to 
        protect health care workers. A November 2001 JAMA article co-
        authored by Anthony S. Fauci, M.D. attributes the reduction in 
        mortality in the inhalation anthrax cases to technological 
        advances in diagnostics, imaging, microbiology, antibiotics and 
        critical care.
    Question 4. In the ``emergency use'' portion of BioShield, 
unapproved devices subject to premarket approval could be used to 
respond to bioterrorist attack, when the benefits of the device 
outweigh its risks. Should this new ``emergency use'' authority also 
apply to devices subject to premarket clearance?
    Response: As mentioned above, the Administration proposal prohibits 
devices that are reviewed through FDA's 510(k) review process from 
being considered for use in emergencies. Most diagnostic tests are 
reviewed through FDA's 510(k) process. It is not unusual for diagnostic 
tests that have already been approved to detect a specific bacterium or 
viral agent to be modified to detect another bacterium or virus of the 
same family. Thus, it is conceivable that a previously approved 
diagnostic test may also prove to be useful in screening some 
bioterrorist agents. FDA's 510(k) process recognizes that diagnostic 
test development is an iterative process that builds on the knowledge 
gained from the previous infectious agent to develop tests for similar 
agents.
    AdvaMed strongly recommends that the legislation be drafted broadly 
to include medical devices, including 510(k) products, in all aspects 
of the BioShield program. The Secretaries of HHS and of Homeland 
Security should have the discretionary authority to consider all 
medical technologies, including devices, in determining what may be 
needed or most useful in protecting our nation from potential 
bioterrorist events. Devices (including devices approved through the 
510(k) process) that have needed countermeasure applications, should 
not be excluded from consideration due to a technicality.
    Question 5. Do you believe that liability protection for 
manufacturers is necessary in order for Project BioShield to work?
    Response: It is important to understand that the countermeasure to 
a severe bioterrorist threat may have some severe side effects. As a 
result, companies that provide countermeasures to the government could 
be exceedingly vulnerable to liability claims. Device companies are 
extremely interested in partnering with the federal government but not 
if the potential for liability threatens the financial viability of the 
company itself.
    Presumably, those products that are declared qualified 
countermeasures under Project BioShield would also be declared 
qualified anti-terrorism technologies under Section 861 of the Homeland 
Security Act and would thus be eligible for the liability protections 
of that Act. However, it is not clear that companies whose products are 
declared for use in national, public health or military emergency 
situations would be eligible for the Section 861 protections. Such 
products, by definition, have not yet been reviewed or approved for use 
by FDA.
    Liability concerns will be a key consideration for companies 
manufacturing both qualified countermeasures and emergency-use products 
and the legislation should make clear that the liability protections of 
Sec. 861 of the Homeland Security Act apply to such products. For these 
reasons, AdvaMed urges the inclusion of strong liability protections 
for all aspects of Project BioShield, including medical devices.
                    Questions from Congressman Camp
    Question 1. Two major issues in countermeasure technology 
development are economic incentives and liability concerns. In 
Secretary Thompson's testimony, he mentioned that grants and contracts 
might not be sufficient for developing the public/private partnership. 
How will Project BioShield address these issues in order to expedite 
the development of the next generation of countermeasures?
    Response: The Administration's BioShield proposal does not appear 
to provide any liability protection at all to companies who are willing 
to partner with the federal government in developing countermeasures. 
As mentioned previously, a countermeasure to a severe bioterrorist 
threat may have some sever side effects. As a result, companies that 
provide countermeasures to the government could be exceedingly 
vulnerable to liability claims. Device companies are extremely 
interested in partnering with the federal government but not if the 
potential for liability threatens the financial viability of the 
company itself.
    AdvaMed believes that liability concerns will be a key 
consideration for companies manufacturing both qualified 
countermeasures and emergency-use products. For these reasons, the 
legislation should make clear that the liability protections of Sec. 
861 of the Homeland Security Act apply to all medical technologies, 
including medical devices.
    With respect to incentives designed to encourage companies to 
research, develop and manufacture potential countermeasures, the 
greatest challenges will occur for those countermeasure technologies 
that have no commercial market. It can take substantial sums of money 
to research and develop a technology, develop supporting clinical data, 
conduct any needed clinical trials, construct manufacturing facilities, 
apply for FDA review and approval and have all the necessary 
infrastructure in place to comply with regulatory requirements. Before 
making such investments, companies do careful analysis to ensure that 
they will not suffer significant financial losses.
    Because of the suspected nature of bioterrorism events--rare, one-
time events that will likely affect only a small portion of the 
population at any one time--it is hard to imagine that a company would 
be able to fully recoup its investment, unless the product also has a 
commercial market. The BioShield proposal is designed to meet this 
challenge by allowing the Secretaries of HHS and Homeland Security, 
with approval from the President, to negotiate contracts with companies 
that will presumably enable companies to appropriately recoup their 
research, development and manufacturing investments.
    Unfortunately, the Administration proposal explicitly excludes 
devices from being considered as qualified countermeasures for 
procurement. The proposal, as initially drafted, creates the 
paradoxical situation in which a device company is eligible to procure 
research and development funding from the NIAID to develop 
countermeasures with no potential commercial market. However, these 
same companies would be prevented from recouping their full research 
and development investment because the Administration proposal prevents 
medical devices from being purchased as a qualified countermeasure.
    AdvaMed strongly recommends that the legislation be drafted broadly 
to include medical devices, including 510(k) products, in all aspects 
of the BioShield program. The Secretaries of HHS and of Homeland 
Security should have the discretionary authority to consider all 
medical technologies, including devices, in determining what may be 
needed or most useful in protecting our nation from potential 
bioterrorist events. Devices (including devices approved through the 
510(k) process) that have needed countermeasure applications, should 
not be excluded from consideration due to a technicality.
                Questions from Congressman Bob Etheridge
    Question 1. Will private sector companies still need to raise 
capital to fund their initial research and development efforts?
    Response: Yes. While some technologies exist that can be used or 
adapted for use as potential countermeasures, new technologies will 
also need to be developed to address situations and threats that did 
not appear as urgent and eminent before September 11th.
    Unfortunately, it can take substantial sums of money to research 
and develop a technology, develop supporting clinical data, conduct any 
needed clinical trials, construct manufacturing facilities, apply for 
FDA review and approval and have all the necessary infrastructure in 
place to comply with regulatory requirements.
    Developing a technology to prepare our nation against terrorist 
threats, however, has added complications because there is frequently 
no viable commercial market for the technology. Bioterrorist threats 
are expected to be one-time event that will affect only a small portion 
of the population at any one time. Without a viable market, it would be 
difficult to find investors to support the research, development, 
trials and production of the technology.
    Question 2. If small companies have difficulty in raising capital 
to fund new research, how do we deal with this challenge?
    Response: Due to the significant costs mentioned above in regards 
to researching, developing, and getting the technology approved for 
patient care, all companies do careful analysis to ensure that they 
will not suffer significant financial losses before investing in any 
product development. The difficulty in securing investors to support 
the research, development, trials and production of the technology is 
even more acute for small companies that cannot support the new 
development efforts through revenues raised from other products.
    The BioShield proposal is designed to meet this challenge by 
allowing the Secretaries of HHS and Homeland Security, with approval 
from the President, to negotiate contracts with companies--essentially 
securing a market for the product that will allow the company to recoup 
their research, development and manufacturing investments.
    The Administration proposal explicitly excludes devices from being 
considered as qualified countermeasures for procurement. Unfortunately, 
this exclusion would create the paradoxical situation in which a device 
company is eligible to procure research and development funding from 
the NIAID to develop countermeasures with no potential commercial 
market. However, these same companies would be prevented from recouping 
their full research and development investment because the 
Administration proposal prevents medical devices from being purchased 
as a qualified countermeasure.
    AdvaMed strongly recommends that the legislation be drafted broadly 
to include medical devices, including 510(k) products, in all aspects 
of the BioShield program. The Secretaries of HHS and of Homeland 
Security should have the discretionary authority to consider all 
medical technologies, including devices, in determining what may be 
needed or most useful in protecting our nation from potential 
bioterrorist events. Devices (including devices approved through the 
510(k) process) that have needed countermeasure applications, should 
not be excluded from consideration due to a technicality.
    Question 3. Does the private sector believe that Project BioShield 
will work? Specifically, does the private sector think that the 
Administration's proposal addresses its needs to develop a mature 
market for the production of biomedical defenses? If not, why not?
    Response: AdvaMed strongly supports the Project BioShield 
initiative. Specifically, AdvaMed's Council supports provisions in 
Project BioShield that will:

 Speed research and development on biomedical countermeasures 
        by streamlining current NIH processes and providing funding for 
        the construction and improvement of facilities needed to safely 
        support research and development of countermeasures;
 Provide necessary funding to purchase biomedical 
        countermeasures for the stockpile, particularly those 
        countermeasures determined not to have commercial markets; and
 Allow the Secretary to make promising treatments available in 
        an emergency, even for those products that do not yet have full 
        FDA approval.
    AdvaMed has concerns, however, that the Administration proposal 
explicitly excludes devices from being considered as qualified 
countermeasures for procurement and excludes devices approved through 
the 510(k) review process from being considered for emergency uses. 
Unfortunately, this exclusion would create the paradoxical situation in 
which a device company is eligible for research and development funding 
from the NIAID to develop countermeasures with no potential commercial 
market. However, these same companies would be prevented from recouping 
their full research and development investment because the 
Administration proposal prevents medical devices from being purchased 
as a qualified countermeasure.
    AdvaMed strongly recommends that the legislation be drafted broadly 
to include medical devices, including 510(k) products, in all aspects 
of the BioShield program. The Secretaries of HHS and of Homeland 
Security should have the discretionary authority to consider all 
medical technologies, including devices, in determining what may be 
needed or most useful in protecting our nation from potential 
bioterrorist events. Devices (including devices approved through the 
510(k) process) that have needed countermeasure applications, should 
not be excluded from consideration due to a technicality.
                    Questions from Congressman Towns
    Question 1. Given that devices, biologics and drugs usually have 
different standards on what makes a product commercially viable to make 
a commitment to R&D, does the BioShield proposal offer enough incentive 
for your individual industries?
    Response: AdvaMed is committed to the public-private partnership 
for preparedness as are our member companies. AdvaMed sponsored a 
February 6 preparedness conference entitled ``Innovation for 
Preparedness: the Public-Private Partnership,'' to strengthen the 
partnership between the government and the private sector on 
preparedness and to connect medical technology innovators with 
appropriate federal preparedness entities. The conference was sold out 
which we believe speaks volumes about the interest of the device 
industry in working with the government to achieve our mutual goal of 
defending the homeland and providing the best medical care possible.
    The greatest challenges will occur for those countermeasure 
technologies that have no commercial market. It can take substantial 
sums of money to research and develop a technology, develop supporting 
clinical data, conduct any needed clinical trials, construct 
manufacturing facilities, apply for FDA review and approval and have 
all the necessary infrastructure in place to comply with regulatory 
requirements. Before making such investments, companies do careful 
analysis to ensure that they will not suffer significant financial 
losses.
    Because of the suspected nature of bioterrorism events--rare, one-
time events that will likely affect only a small portion of the 
population at any one time--it is hard to imagine that a company would 
be able to fully recoup its investment, unless the product also has a 
commercial market. The BioShield proposal is designed to meet this 
challenge by allowing the Secretaries of HHS and Homeland Security, 
with approval from the President, to negotiate contracts with companies 
that will presumably enable companies to appropriately recoup their 
research, development and manufacturing investments.
    Unfortunately, the Administration proposal explicitly excludes 
devices from being considered as qualified countermeasures for 
procurement and excludes devices approved through the 510(k) review 
process from being considered for emergency uses. AdvaMed strongly 
recommends that the legislation be drafted broadly to include medical 
devices, including 510(k) products, in all aspects of the BioShield 
program. The Secretaries of HHS and of Homeland Security should have 
the discretionary authority to consider all medical technologies, 
including devices, in determining what may be needed or most useful in 
protecting our nation from potential bioterrorist events. Devices 
(including devices approved through the 510(k) process) that have 
needed countermeasure applications, should not be excluded from 
consideration due to a technicality.
    Question 2. Do we need to add anything to this proposal to make it 
easier for academic research institutions and companies to work 
together on developing these countermeasure products?
    Response: AdvaMed and its member companies have a rich history of 
working with academic research institutions and medical colleges in the 
research, development and clinical trials for many medical 
technologies. In November 2001, Roche Diagnostics and the Mayo Clinic 
announced the development of a new rapid anthrax test that can detect 
anthrax in humans in an hour and quickly made the test available to 
public health agencies and hospital and reference laboratories. AdvaMed 
and its companies are also working cooperatively with FDA and the CDC 
to speed development of a diagnostic test for West Nile virus.
    The major concern for companies, whether they collaborate with 
academic research institutions or the government or not, is whether the 
resulting technology will be allowed for consideration as a qualified 
countermeasure for procurement. The Administration proposal explicitly 
excludes devices from this consideration, creating the paradoxical 
situation in which a device company is eligible to procure research and 
development funding from the NIAID to develop countermeasures with no 
potential commercial market. Without being considered for inclusion, 
the companies and institutions would be prevented from recouping their 
full research and development investment because the Administration the 
device could not be purchased as a qualified countermeasure.
    AdvaMed strongly recommends that the legislation be drafted broadly 
to include medical devices, including 510(k) products, in all aspects 
of the BioShield program. The Secretaries of HHS and of Homeland 
Security should have the discretionary authority to consider all 
medical technologies, including devices, in determining what may be 
needed or most useful in protecting our nation from potential 
bioterrorist events. Devices (including devices approved through the 
510(k) process) that have needed countermeasure applications, should 
not be excluded from consideration due to a technicality.
    Question 3. If each of you had a product already approved to treat 
a given condition, what incentives exist in this proposal or what would 
you like to see to encourage research for a new countermeasure?
    Response: AdvaMed strongly supports the Project BioShield 
initiative. Specifically, AdvaMed's Council supports provisions in 
Project BioShield that will:

 Speed research and development on biomedical countermeasures 
        by streamlining current NIH processes and providing funding for 
        the construction and improvement of facilities needed to safely 
        support research and development of countermeasures;
 Provide necessary funding to purchase biomedical 
        countermeasures for the stockpile particularly those 
        countermeasures determined not to have commercial markets; and
 Allow the Secretary to make promising treatments available in 
        an emergency, even for those products that do not yet have full 
        FDA approval.
    AdvaMed has concerns, however, that the Administration proposal 
explicitly excludes devices from being considered as qualified 
countermeasures for procurement and excludes devices approved through 
the 510(k) review process from being considered for emergency uses. 
Unfortunately, this exclusion would create the paradoxical situation in 
which a device company is eligible to procure research and development 
funding from the NIAID to develop countermeasures with no potential 
commercial market. However, these same companies would be prevented 
from recouping their full research and development investment because 
the Administration proposal prevents medical devices from being 
purchased as a qualified countermeasure.
    AdvaMed strongly recommends that the legislation be drafted broadly 
to include medical devices, including 510(k) products, in all aspects 
of the BioShield program. The Secretaries of HHS and of Homeland 
Security should have the discretionary authority to consider all 
medical technologies, including devices, in determining what may be 
needed or most useful in protecting our nation from potential 
bioterrorist events. Devices (including devices approved through the 
510(k) process) that have needed countermeasure applications, should 
not be excluded from consideration due to a technicality.
    Question 4. If a better product is developed after you have signed 
a contract with the government, should the government be forced to 
stockpile your product--because you already have a contract--or does 
the government need the flexibility to go with the better product, 
which may mean canceling your contract?
    Response: While some technologies exist that can be used or adapted 
for use as potential countermeasures, brand new technologies will also 
need to be developed to address situations and threats that did not 
appear as urgent and eminent before September 11th.
    Unfortunately, it can take substantial sums of money to research 
and develop a technology, develop supporting clinical data, conduct any 
needed clinical trials, construct manufacturing facilities, apply for 
FDA review and approval and have all the necessary infrastructure in 
place to comply with regulatory requirements.
    Developing a technology to prepare our nation against terrorist 
threats has added complications because there is no viable commercial 
market for the technology. Bioterrorist threats are expected to be one-
time events that will affect only a small portion of the population at 
any one time. Without a viable market, it would be difficult to find 
investors and raise capital to support the research, development, 
trials and production of the technology.
    The BioShield proposal is designed to meet this challenge by 
allowing the Secretaries of HHS and Homeland Security, with approval 
from the President, to negotiate contracts with companies--essentially 
securing a market for the product that will allow the company to recoup 
their research, development and manufacturing investments.
    If the Government, however, is not required to honor the contract 
it negotiates for the development of a product or technology needed to 
prepare our nation against bioterrorist threats, the intent of the 
proposal is completely undermined. Companies will continue to face 
significant problems in funding research, development, approval and 
manufacturing for the technology if there is not a guaranteed market 
for sale.
                                 ______
                                 
               University of Michigan Health System
                         Center for Biologic Nanotechnology
                                                     April 25, 2003
The Honorable Michael Bilirakis, Chairman
Subcommittee on Health
Committee on Energy and Commerce
Rayburn House Office Building
Washington, D.C. 20515

The Honorable John B. Shadegg, Chairman
Subcommittee on Emergency Preparedness & Response
Select Committee on Homeland Security
c/o Rayburn House Office Building
Washington, D.C. 20515

RE: March 27, 2003 Congressional Testimony--Project Bioshield Dear

    Chairman Bilirakis and Shadegg: Attached are my answers to the 
questions submitted by members of your respective subcommittees related 
to testimonies given at the March 27 hearing ``Furthering Public Health 
Security: Project Bioshield.''
    Thank you for the opportunity to address these timely and important 
questions. If I may be of further service, please do not hesitate to 
contact me at 734-647-2777 or by email at [email protected].
            Sincerely,
                            James R. Baker, Jr., MD        
                                    Ruth Dow Doan Professor        
               Chief, Division of Allergy & Clinical Immunology    
                       Director, Center for Biologic Nanotechnology
cc: Marvin Pames, Executive Director, DRDA, U-M
   Mark Burnham, Director of Fed. Relations for Research, U-M
 The Committee on Energy and Commerce's Subcommittee on Health and the 
   Select Committee on Homeland Security's Subcommittee on Emergency 
                       Preparedness and Response.
    Question 1. What things should we do to assure Technology Transfer 
our from NIH research, so that countermeasures can be rapidly produced?
    Answer: It is important to begin with the premise that the 
Bioshield proposal should augment existing NIH programs. It is critical 
that these efforts do not undermine the existing NIH structure, which 
would slow research and ``clog'' the pipeline for Bioshield. With this 
in mind, it is appropriate to then target resources and efforts at 
specific needs for technology transfer rather than research, 
particularly related to biological weapons. To the extent that 
treatment options are present within research laboratories, then the 
market incentive, as created by the Bioshield proposal, could make it 
financially possible for companies to develop this research into viable 
treatments. However, as I mentioned in my written testimony, it is not 
clear that the specific proposals included in Bioshield will actually 
encourage companies to develop these treatments. This is especially 
true if the economic and liability issues are not resolved, and there 
remain unresolved impediments to dual use, commercial applications of a 
technology or therapeutic.
    Regardless of the industry incentives to develop technologies or 
drugs, the creation of new bioterrorism deterrents will require 
substantial basic research at universities. While universities are 
supportive of this type of research, the present proposal does not 
clarify that fundamental, university-based research is an integral part 
of the program. Much of the proposal is focused on near-term solutions, 
which although vital, will likely not be the optimal outcome to protect 
our population. To achieve the degree of protection envisioned in 
Bioshield, substantial and on-going basic research will be necessary. 
Universities are nimble and can devote significant resources to this 
effort. However, while these efforts can be accelerated with additional 
funding, it is not clear that the 2 to 4 month grants proposed by the 
Administration could generate relevant and significant science. 
Instead, I would suggest that significant efforts are made to 
accelerate the pace of current research, through additional funding and 
by teaming academic, intramural governmental and industry researchers 
similar to successful endeavors in CREDA and SBIR mechanisms.
    In short, Bioshield must specifically enhance university-based 
research programs regardless of industry incentives. The university-
based research must focus on both short-term technology solutions and 
accelerated basic research. Finally, NIH should survey its existing 
intramural and extramural research programs to identify research 
proposals that offer rapid avenues for commercialization.
    Question 2. What is your view of the Administration's research 
proposal?
    Answer: The Bioshield proposal is an innovative attempt to remedy 
the reasons industry does not develop countermeasures for biological 
weapons. However, it is not clear that the timeframe and focus of the 
research component of the legislation will achieve its stated goal. As 
mentioned in my prior answer, the current legislation envisions 
research grants having short time frames that appear incompatible with 
the type of fundamental changes necessary to facility protection 
against bio-threats, particularly engineered agents. These short time 
frames will not even be technically viable for a range of needed 
treatments against current threats, such as a new smallpox vaccine. 
While Bioshield can and should support short-term goals where needs are 
critical, there also must be a commitment to accelerating fundamental 
research for longer time intervals. At the present time, much of the 
academic community does not understand how our institutions fit into 
this proposal or whether there is a commitment to a basic understanding 
of the problems involved in responding to bio-threat agents.
    Question 3. [Camp Question] Two major issues in countermeasure 
technology development are economic incentives and liability concerns. 
In Sec. Thompson's testimony, he mentioned that grants and contracts 
might not be sufficient for developing the public/private partnership. 
How will Project Bioshield address these issues in order to expedite 
the development of the next generation of countermeasures?
    Answer: From an academic perspective, Bioshield could help foster 
partnerships between academic and commercial entities by providing the 
business sector a reason to engage in research that would otherwise 
have little commercial value. This would be enhanced if all entities 
had defined liability limitations, especially if non-approved or 
emergency use of a technology is envisioned. However, without an 
explicit role for fundamental research and a specific means for 
industry partnering to support this work, it is unlikely that new 
interest and ideas will be generated and transitioned to solve current 
and future needs. The key point is that while a few treatments may be 
possible in an extremely short time frames, most countermeasures will 
require substantially longer time frames for testing. In particular, it 
is likely that the short intervals for testing currently envisioned by 
the Bioshield proposal would raise substantial liability concerns since 
they are simply not compatible with human testing. Bioshield therefore 
needs to include a long-term research component to accelerate research 
in those areas of greatest need.
    Question 4. [Townes 1] Given that devices, biologics and drugs 
usually have different standards on what makes a product commercially 
viable to make a commitment to R&D, does the Bioshield proposal offer 
enough incentive for your individual industries?
    Answer: This is a complex issue. Devices, biologics and drugs all 
have difficult and somewhat unique approval processes. However, the 
problems tend to be individualized to a particular countermeasure as 
much as they are common to a particular group. For example, a killed 
virus vaccine for a particular infection might have substantial, dual 
use commercial value while a live virus vaccine for the same infection 
might never be acceptable for routine use in civilian populations 
regardless of its utility in military applications or for emergent 
care. Thus, the Bioshield legislation needs to provide specific 
incentives for those applications that are necessary but have little 
commercial value. However, the legislation needs to carefully address 
several problems related to the dual use of a technology or treatment. 
First of all, it should not limit Bioshield research to work that does 
not have any commercial use, nor should it prohibit the 
commercialization for another use of a countermeasure developed under 
Bioshield. This would lead to greater economic opportunity costs for 
industry than any incentive they could possibly obtain from Bioshield. 
It would also risk the potential public health benefits by forgoing the 
widest possible use of new medical options. If the government decides 
it needs a return on its investment for dual use applications, it can 
most readily accomplish this through contract or licensing 
negotiations.
    Question 5. [Townes 2] Do we need to add anything to this proposal 
to make it easier for academic research institutions and commercial 
companies to work together on developing these countermeasure products?
    Answer: The academic research community is not convinced that this 
version of the legislation really includes them. The focus is on 
treatments and devices extraordinarily close to commercialization--a 
type of work that is not usually performed in universities. While much 
of basic university research has potential to be commercialized, there 
are no incentives to assure that this happens. It is imperative that 
the legislation includes accelerated fundamental research, as well as 
specific financial incentives for companies to partner and 
commercialize university research. Otherwise, the government's 
tremendous investment in basic research will not be leveraged and may 
exclude the university programs, which have been the most active 
research component in the development of bioweapon countermeasures.
    Question 6 [Townes 3] If each of you had a product already approved 
to treat a given condition. What incentives exist in this proposal or 
what would you like to see to encourage research for a new 
countermeasure?
    Answer: Academic institutions continuously look for additional 
applications of our research results, and we do not generally have 
``products'' as envisioned in this question. I would suggest that it be 
clear in the legislation both that we can look at existing products for 
potential use as a countermeasure, and that the countermeasures we 
develop can be developed for commercial use. From a public health 
standpoint, this ensures we are obtaining the greatest utility of our 
medical capabilities. In order to facilitate this public good, industry 
should be allowed to retain its intellectual property to both the 
existing commercial products and the commercial uses of developed 
countermeasures. The impact of such a commercial use on the cost of the 
program can and should be dealt with in the terms of the individual 
contract since the commercialization potential will vary widely across 
the possible countermeasures.
    Question 7 [Townes 4] If a better product is developed after you 
have signed a contract with the government, should the government be 
forced to stockpile your product--because you have a contract--or does 
the government need the flexibility to go with the better product, 
which may mean canceling your contract?
    Answer: The committee might consider structuring these contracts in 
a manner similar to NASA performance-based contracts for the 
development of spacecraft. There, industry is generally paid for the 
actual costs of research and construction, often these payments are 
made at specific milestones. Upon completion, the contractor is then 
paid a performance fee which includes incentive payments and profit. If 
such a contract were structured, there would be no reason that the 
parties could not agree in the contract to allow the government to 
cancel the contract, paying through the next milestone (thus covering 
the contractor's actual costs) and then the performance payment (thus 
guaranteeing the company a profit without completing the production of 
the drug).
    Question 8 [Townes 5] This bill appropriates unlimited sums of 
money. However, our orphan drug program also gives incentives to work 
on R&D for diseases that are not that prevalent, and many illnesses 
still have no cure. Is Bioshield a research problem that money alone 
can solve?
    Answer: Bioshield cannot solve the problem of bioterrorism by money 
alone. However, a comparison to the orphan drug program is not entirely 
appropriate, because the urgency and scale of these issues are 
completely different. Money is one necessary ingredient, although no 
more important than collaboration among researchers of various 
disciplines, cooperation between academic, government and industry 
partners, and having adequate time to perform the work. This last 
requirement may be the most vexing. In order to achieve the goals of 
the proposal, we will need time to develop new medical responses to 
biological weapons. The current legislation may induce industry to 
develop a few treatments that may have languished in regulatory limbo, 
but the vast majority of treatments are simply not waiting for 
commercialization. Fundamental research remains to be conducted to 
answer many of the primary questions of how these countermeasures might 
function, and to provide proof of concept that a countermeasure is 
effective. In fact, even for those situations where there appears to be 
a viable treatment alternative, there are often adverse effects that 
provide a need for continuing research to develop better treatments. 
Examples of this abound, be it approaches with fewer complications 
(e.g. the smallpox vaccine) or to new countermeasures necessary should 
the potential pathogen be able to defeat our defense, (e.g. antibiotic 
resistant anthrax). That is why most diseases, whether covered by the 
orphan drug act or the Bioshield proposal, require substantial money 
and time for basic research to find an effective cure.
                                 ______
                                 
               University of Michigan Health System
                         Center for Biologic Nanotechnology
                                                     April 25, 2003
The Honorable John D. Dingell
Subcommittee on Health
Committee on Energy and Commerce
Rayburn House Office Building
Washington, D.C. 20515

The Honorable Sherrod Brown
Subcommittee on Health
Committee on Energy and Commerce
Rayburn House Office Building
Washington, D.C. 20515

RE: March 27, 2003 Congressional Testimony--Project Bioshield

    Dear Congressman Dingell and Brown: Attached are my answers to the 
questions submitted by members of the subcommittees related to the 
March 27 hearing ``Furthering Public Health Security: Project 
Bioshield.''
    Thank you for the opportunity to address these timely and important 
questions. If I may be of further service, please do not hesitate to 
contact me at 734-647-2777 or by email at [email protected].
            Sincerely,
                            James R. Baker, Jr., MD        
                                    Ruth Dow Doan Professor        
               Chief, Division of Allergy & Clinical Immunology    
                       Director, Center for Biologic Nanotechnology
cc: Marvin Pames, Executive Director, DRDA, U-M
   Mark Burnham, Director of Fed. Relations for Research, U-M
   Eugenia Edwards, Committee on Energy and Commerce
   Candace Butler, Committee on Energy and Commerce
 The Committee on Energy and Commerce's Subcommittee on Health and the 
   Select Committee on Homeland Security's Subcommittee on Emergency 
                       Preparedness and Response.
    Question 1. There were some questions raised during the hearing 
regarding the Bayh-Dole Act and its effectiveness. Please explain how 
Bayh-Dole is working on your campus and throughout academia. Is it 
successful? How should success be measured? Is it encouraging or 
impeding partnership with private industry? Does it make a difference 
in getting research discoveries and technologies into the market?
    Response. The Economist, in its December 12, 2002 article entitled, 
``Innovation's Golden Goose,'' said that The Bayh-Dole Act of 1980 is, 
``perhaps the most inspired piece of legislation to be enacted in 
America over the past half-century.''
    Giving American universities both the right and the responsibility 
to commercialize technologies developed with taxpayers' money, Bayh-
Dole ushered in an era in which universities began to have an 
unprecedented impact, both technologically and economically. In the 
eyes of many, this landmark legislation is responsible for today's 
knowledge economy.
    According the article in The Economist, the original Bayh-Dole 
legislation, together with its 1984 amendments and its augmentation in 
1986, ``unlocked'' the inventions and discoveries that had been made in 
university laboratories and, ``helped to reverse America's precipitous 
slide into industrial irrelevance.''
    Our experience at the University of Michigan would tend to 
corroborate these findings. In just the past five years, as a 
consequence of the intellectual property rights granted by Bayh-Dole, 
the University of Michigan has spawned 34 start-up companies and 
granted 267 technology licenses to existing companies. At the 
University of Michigan, we have filed 590 patent applications over that 
same period.
    Nationwide, there has been an increase in patents originating from 
universities. According to the Association of University Technology 
Managers (AUTM), ``Prior to Bayh-Dole, fewer than 250 U.S. patents were 
issued to universities each year. Since 1993, U.S. universities 
participating in the Survey have averaged more than 1,600 U.S. patents 
annually. In recent years, patents issued to U.S. universities have 
exceeded 2,000.''
    The effect of this increase in patenting on public health should 
not be underestimated. These patents have lead to the development and 
commercialization of innumerable advances in medical diagnostics, 
devices and care. Why is patenting important? It provides researchers 
economic incentives to continue working with industry to develop 
laboratory research into a useable product. This is important because 
researchers typically would move on to the next research project 
without this incentive, and researcher involvement is often critical in 
developing a technology beyond the lab. Similarly, the intellectual 
property rights ensure industry that their investment in this research 
will inure a benefit back to the company.
    Without the incentives and obligations inherent in Bayh-Dole, 
universities might not have stepped up to develop the technology 
transfer programs which made these great achievements possible, and 
they might not have invested in the development of a professional cadre 
skilled in moving ideas from academia to the marketplace. This growth 
is reflected in the growth of AUTM which now counts over 200 
universities actively engaged in technology transfer activities, an 
eightfold increase in less than twenty years.
    A variety of relationships with industry have continued to be an 
important element of university-based research and technology transfer. 
At the University of Michigan, our large research centers generate 
patents which are licensed non-exclusively to all industry affiliates 
within the consortium; we license some patents exclusively to large and 
small companies; in joint research endeavors we recognize joint 
inventorship and joint ownership of intellectual property. Thus, as do 
nearly all research universities, we have found that all kinds of 
arrangements can be forged with industry, whether in biotechnology, 
engineering, or information technology. In 2000, industry sponsored 
$317 million in research at U.S. universities, hospitals and research 
institutes, the overwhelming portion of which was for biomedical 
research.
    In addition to being the Ruth Dow Doan Professor at the School of 
Medicine; Chief, Division of Allergy; and Director, Center for Biologic 
Nanotechnology at the University of Michigan, I am also the Chief 
Science Officer of a university spinout company by the name of NanoBio 
Corporation. It is doubtful that NanoBio, a biopharmaceutical company 
that has licensed biologic nanotechnology delivery systems from the 
University would be in existence if not for the Bayh-Dole Act. 
Furthermore, it is doubtful that we could be considered for venture 
capital backing if not for the provision in Bayh-Dole that allows for 
the exclusive licensing of federally funded research.
    Question 2. It was suggested during the hearing that Bayh-Dole is 
enabling the drug companies, and others, to make an inordinate amount 
of profit based on federally-funded research without providing the 
government an adequate return on that investment. Is this an accurate 
depiction of the effect of Bayh-Dole? Should Bayh-Dole be amended to 
change this situation?
    Response. Given the strong concern with the cost of pharmaceuticals 
it is entirely understandable that attention would be directed at how 
research universities contribute to the products manufactured and 
marketed by large corporations. However, these questions are premised 
on the false assumptions that the federally sponsored research provides 
the pharmaceutical industry a free ride on the costs of research, and 
that we could lower the costs of drugs if only the federal government 
didn't allow universities to retain intellectual property rights under 
Bayh-Dole. In truth, many drugs would not be developed at all if not 
for the technology transfer incentives established by Bayh-Dole, and 
the pharmaceutical industry is not getting a free ride. It costs $600 
million and takes on average 11.2 years from the time a new drug is 
discovered until it is approved by the Food and Drug Administration. 
Licenses to the pharmaceutical industry are but a small part of the 
drug discovery and approval process, and the vast majority of licenses 
yield little income to universities.
    To properly understand this issue, it is imperative that we 
understand why Bayh-Dole even exists. In the late 1970s and 1980s, 
approximately 80% of basic research was funded by the federal 
government, which then retained title to the intellectual property 
generated by that research. During this time, there were few, if any 
new drugs commercialized based upon federally funded basic research. 
Recognizing that universities were not in a position to work with 
industry to commercialize the results of their research, absent some 
ownership of the intellectual property, and realizing that the vast 
majority of federally owned intellectual property was sitting on the 
shelf unused, Congress decided to create an incentive for federally 
funded researchers to take the portion of their research which lends 
itself to commercialization--and commercialize it. By enabling the 
university to retain title to the intellectual property, and then 
mandating that the university disclose the invention and attempt to 
commercialize it, Congress unleashed one of the most significant 
technology development and economic engines in our economy.
    I must also note that universities do not generally make a profit 
on this activity. Technology transfer is time consuming and costly; 
most universities are doing well if the revenue from their intellectual 
property pays for the technology transfer operations. Also, to the 
extent that a university does make any money from its licenses, Bayh-
Dole mandates that those funds be spent on education and scientific 
research. Technology transfer is therefore consistent with our mission 
of gathering knowledge and diffusing it for the benefit of society. It 
is not about making money; if we generate returns, we use those funds 
to further our missions of education and research.
    So is it worth it, does it work? Absolutely, the economic and 
social impact of Bayh-Dole has been very significant. Industry and 
academia are teaming up more than ever before, and the results are new 
companies, new products, improved public health and a higher quality of 
health care and life. Universities play a key role in the discovery of 
some new medical treatments, devices and other countermeasures critical 
to homeland security.
    Is the government getting a return on its investment? Absolutely. 
Thousands of jobs are created, generating salaries and corporate income 
that are then taxed by federal and state government. Technology 
developed through federal assistance is being transferred, to the 
benefit of society. Returning to government ownership, or some sort of 
public domain ownership of university intellectual property would not 
only hinder our nation's capabilities to bring the results of research 
into the marketplace, it could result in fewer new products, less 
industry research and poorer public health.
    Although I appreciate that the high cost of drugs is a significant 
concern, dismantling the Bayh-Dole system will not only fail to 
accomplish the goal of lower drug prices, but will effectively 
undermine much of our economy. As both the NIH and PCAST have said in 
recent studies of Bayh-Dole, Bayh-Dole is working well, and should be 
left alone.
    To try and ``tax'' Bayh-Dole would seriously limit its 
effectiveness. Less than 1 in 100 licensees ever make a substantial 
profit from their work. An up-front fee or obligation would provide a 
serious disincentive to commercialization that would likely limit the 
academic commercial incentives that the current legislation is 
attempting to foster. If there are concerns about profits on the few 
drugs that make commercial success, it would make much more sense to 
tax the profits of these companies. This would provide the most 
significant recoup on the research investment of Bayh-Dole and would 
not directly hamper commercial development.
    As it relates to Bioshield, the ultimate cost of the research, 
development and production of new countermeasures will necessarily be a 
critical issue for how the contracts will be structured. Since Bayh-
Dole already provides the federal government with both no cost, non-
exclusive licenses and ``march in'' rights for every patent generated 
under Bayh-Dole, repealing or modifying Bayh-Dole will not improve the 
government's negotiating position on these contracts and will have no 
bearing on the ultimate cost of these countermeasures. Considering the 
important role Bayh-Dole plays in the development of new technologies, 
any attempt to repeal or amend it should be opposed.
                                 ______
                                 
                                                        May 5, 2003
The Honorable Michael Bilirakis, Chairman
Subcommittee on Health
U.S. House of Representatives
Committee on Energy and Commerce
Rayburn House Office Building
Room 2125
Washington, DC 20515-6115

The Honorable John B. Shadegg, Chairman
Subcommittee on Emergency Preparedness and Response
Select Committee on Homeland Security
2402 Rayburn House Office Building
Washington, DC 20515

Re: Response to Questions for the Record of the Hearing on ``Furthering 
Public Health Security: Project Bioshield'' (March 27, 2003)

    Dear Chairman Bilirakis and Chairman Shadegg: I have enclosed my 
responses to the follow-up questions enclosed in your letter to me 
dated April 9, 2003.
    Best regards.
            Sincerely,
                                                Michael A. Friedman
              responses to the honorable michael bilirakis
    Question 1. What are the main scientific challenges facing 
companies involved in bioterrorism countermeasure research?
    Response: Bringing a drug from concept to market takes 10 to 15 
years, which reflects the greater complexity of target diseases, the 
longer and larger clinical trials now required by FDA, and the medical 
system's demand for more complex data about new drugs. As a result, the 
average cost to develop a new drug has grown from $138 million in 1975 
to $802 million in 2000. The risks involved in the new drug development 
and approval processes are also substantial. For every 5000 compounds 
screened, 250 drugs enter preclinical testing, and of every 250 drugs 
that enter preclinical testing, only 1 is approved by FDA. Research and 
development of bioterrorism countermeasures presents significant 
additional scientific challenges. First, handling highly dangerous 
pathogens is expensive and time-intensive. Second, a limited number of 
experts and facilities are available for research and development 
involving biothreat agents. To work on most biothreat agents, a 
laboratory must be constructed at the highest bio-safety level (bio-
level 4 or ``BL4''). There are only four BL4 labs in the United States, 
and three are owned by the U.S. Government. Third, because so few 
scientists have worked with biothreat agents, the development and 
production of a countermeasure could require tapping into scientific 
expertise from a broad spectrum of the individuals in the 
pharmaceutical and biotechnology industry, government, and the 
academia. Fourth, traditional clinical effectiveness trials using human 
subjects are neither ethical nor lawful. For each countermeasure agent, 
a relevant animal model must be developed, a process which can be time-
consuming and expensive.
    Question 2. In discussing the need for more bioterrorism 
countermeasures, much of the focus has been on vaccines. What types of 
countermeasures can be pursued by traditional ``large molecule'' drug 
companies?
    Response: The companies with experience researching, developing, 
securing approval for, and marketing drug products and biological 
products--whether vaccines or therapeutics, whether small-molecule or 
large-molecule--are essential to the effort to build an effective U.S. 
armamentarium against biological weapons. Some important 
countermeasures--including antibacterials (antibiotics), antifungals, 
antivirals, and immune enhancers--will be large molecule products. 
Also, as the Director of NIH pointed out at the hearing on March 27, 
research into emerging and re-emerging infectious diseases will inform 
and benefit biodefense research.
    Question 3. What type of countermeasure work is being done by PhRMA 
companies in conjunction with NIH and other Federal agencies?
    Response: As indicated in my written statement, PhRMA and its 
member companies are working closely with the NIH and other federal 
agencies to move forward with countermeasure research. For example, 
PhRMA is working with NIH, CDC, DoD, FDA, and academia to support in 
vitro studies of five pathogens (B. anthracis, Y. pestis, Brucella 
spp., F. tularensis, and Burkholderia spp.) for testing of existing 
antibiotics. Several companies are working with NIAID, DoD, and FDA to 
test existing antibiotics against plague. Several have offered to have 
existing drugs tested against additional biothreats.
    Question 4. Should liability protections be included in any 
BioShield proposal considered by Congress?
    Response: Any Bioshield legislation should include liability 
protection for companies that enter into contracts for the research and 
development or the procurement of countermeasures and for all parties 
involved in the manufacture, distribution, and administration of 
products under the special emergency authorization provisions. PhRMA 
hopes to work with the Administration and Congress to ensure the 
legislation includes appropriate product liability protection along the 
lines of the swine flu model or Section 304 of the Homeland Security 
Act. Neither indemnification under Public Law 85-804 (which would cover 
only products subject to procurement contracts) nor the narrow 
``government contractor defense'' available in some situations under 
Subchapter G of the Homeland Security Act would be adequate to assure 
pharmaceutical companies that the risks inherent in the research, 
development, and manufacture of countermeasures can be adequately 
managed.
    Question 5. Under Project BioShield, before the Secretary can 
decide to purchase a countermeasure, he must first determine that there 
is otherwise ``no significant commercial market.'' What types of 
factors should guide the Secretary in making this determination?
    Question 6. Should the BioShield procurement authorities apply only 
to new drugs? That is, isn't the fact that a drug is currently on the 
market evidence that a ``significant commercial market'' for the drug 
exists?
    Response: PhRMA opposes the inclusion of a ``no significant 
commercial market'' requirement. This would apparently preclude 
procurement of antibiotics and broad-spectrum antivirals. It might also 
discourage companies from further testing of antibiotics and antivirals 
currently on the market. Further, it might discourage companies from 
including countermeasure research in existing anti-infective research 
and development programs. Research into emerging and re-emerging 
diseases could provide vital information for biodefense research. For 
example, at a recent medical conference in Prague, it was reported that 
very preliminary research has shown that a derivative of the HIV anti-
viral drug cidofovir might help combat smallpox. Any legislation passed 
should ensure that BioShield funds may be used to purchase antibiotics 
and anti-virals with dual-use potential.
    Question 7. Project BioShield also allows the Secretary to use 
unapproved drugs during emergencies, but only if the benefits of the 
drug outweigh the risks, and there is no available alternative. In an 
emergency, should the Secretary be able to authorize the use of an 
unapproved drug, when there might be an alternative, but the 
alternative is more dangerous?
    Response: The Senate Bill provides that the Secretary may issue an 
authorization if he concludes: (1) the agent specified in the 
determination can cause a serious or life-threatening disease or 
condition; (2) based on the totality of scientific evidence available 
to the Secretary (including data from adequate and well-controlled 
clinical trials, if available), it is reasonable to believe that the 
product may be effective in detecting, diagnosing, treating, or 
preventing the disease or condition (or a serious or life-threatening 
condition caused by a product authorized under section 564 or approved 
for detecting, diagnosing, treating, or preventing that disease or 
condition); (3) the known and potential benefits of the product, when 
used for this purpose, outweigh its known and potential risks; (4) 
there is no adequate alternative to the product that is approved and 
available; and (5) any other criteria prescribed in regulation are met. 
Patient safety remains the research-based industry's highest priority. 
We believe the hypothetical presented in the question can be addressed 
with the current language, provided the Secretary has the discretion to 
determine whether an approved alternative is ``adequate.''
    Question 8. Do you believe that the Secretary should have the 
ability to limit off-label uses of drugs authorized for emergency use?
    Response: A legislative prohibition of off-label use would be 
unprecedented. It would effectively require FDA to regulate the 
practice of medicine, something that it has stated for decades it does 
not do.
                responses to the honorable bob etheridge
    Question 9. Will private sector companies still need to raise 
capital to fund their initial research and development efforts?
    Question 10. If small companies have difficulty in raising capital 
to fund new research, how do we deal with this challenge?
    Response: In order to undertake research and development into 
countermeasures, a company will need to reallocate resources and 
personnel from research relating to other diseases and conditions, 
raise new funds to be earmarked specifically for countermeasure 
research and development, or both. The decision to divert resources and 
personnel from the research and development of medicines for serious 
illnesses like heart disease can be financially risky, especially for a 
company with few products on the market or in the pipeline. (This 
diversion of resources and personnel will also affect the future 
availability of treatments and cures for patients with other serious 
health conditions--especially since fewer than ten percent of all drugs 
that enter testing ever demonstrate sufficient safety and acceptable 
efficacy.) Raising new capital is likewise a difficult and potentially 
risky undertaking. In light of the legal, economic, and scientific 
challenges inherent in this undertaking, any legislation implementing 
Project BioShield should include appropriate liability protection and a 
contracting and procurement process tailored to this special context.
    Question 11. What patent rights will companies enjoy under Project 
Bioshield? If companies are concerned that their patents might be 
challenged, how do we deal with this fear?
    Response: We do not understand Project Bioshield to make any 
changes to intellectual property protection currently available under 
U.S. law. Granting patents is one of the primary ways in which 
governments create incentives for making the investment in new 
innovations. A patent gives an inventor the right to prevent others 
from making, using, and selling an invention for a limited period of 
time. Patents provide the opportunity to recoup the time and money 
invested in innovation. They are critical to research-intensive 
industries such as the pharmaceutical industry, for which R&D 
represents the major cost of bringing a product to market.
    Question 12. Does the private sector believe that Project Bioshield 
will work? Specifically, does the private sector think that the 
Administration's proposal addresses its needs to develop a mature 
market for the production of biomedical defenses? If not, why not?
    Response: Project Bioshield is an important first step towards 
development of a complete armamentarium of vaccines, diagnostics, and 
therapeutics to counter biological and chemical weapons. There are, 
however, many scientific, legal, and economic challenges inherent in 
the research and development of these countermeasures. These challenges 
can be addressed, in part, with the inclusion of adequate liability 
protection and with provisions that tailor the contracting and 
procurement process to better fit the R&D model of the pharmaceutical 
and biotechnology industry. We look forward to working with the 
Administration and Congress to ensure that legislation adequately 
addresses these issues.
                  response to the honorable dave camp
    Question 13. Two major issues in countermeasure technology 
development are economic incentives and liability concerns. In 
Secretary Thompson's testimony, he mentioned that grants and contracts 
might not be sufficient for developing the public/private partnership. 
How will Project Bioshield address these issues in order to expedite 
development of the next generations of countermeasures?
    Response: Any Bioshield legislation should include liability 
protection for companies that enter into contracts for the research and 
development or procurement of countermeasures and for all parties 
involved in the manufacture, distribution, and administration of 
products under the special emergency authorization provisions. PhRMA 
hopes to work with the Administration and Congress to ensure the 
legislation includes appropriate product liability protection along the 
lines of the swine flu model or Section 304 of the Homeland Security 
Act. Neither indemnification under Public Law 85-804 (which would cover 
only products subject to procurement contracts) nor the narrow 
``government contractor defense'' available in some situations under 
Subchapter G of the Homeland Security Act would be adequate to assure 
pharmaceutical companies that the risks inherent in the research, 
development, and manufacture of countermeasures can be adequately 
managed.
    The Department of Defense (DoD) and the Defense Advanced Research 
Projects Agency (DARPA) have the power to enter into research and 
development or prototyping arrangements under what is known as ``Other 
Transactions Authority.'' This authority can provide much more 
flexibility than is typically the case under federal acquisition 
regulations and can be used to develop agreements that more closely 
resemble commercial transactions. It also has been used to encourage 
and provide for the establishment of industry teams in federal 
contracting. In any legislation implementing Project Bioshield, the 
Secretary of Health and Human Services should be granted OTA for the 
purpose of securing both R&D and actual countermeasures.
                 responses to the honorable gene green
    Question 14. Dr. Baker alleges that the incentives in the Bioshield 
initiative are not large enough to attract the bigger companies, and we 
will have to rely more on smaller start up companies who are more 
willing to take risks. Do you agree with his assessment on this issue? 
What work is currently being done at some of your member companies to 
combat bioterrorism?
    Response: PhRMA does not have a complete list of the relevant 
research currently underway at its member companies. As indicated on 
PhRMA's website, however, a 2002 survey of medicines in development for 
infectious diseases found that pharmaceutical and biotechnology 
companies were working on 256 medicines for infectious diseases, 
including medicines for smallpox, anthrax and plague. A cooperative and 
collaborative research and development effort, which engages both the 
smaller and larger biotechnology and pharmaceutical companies, as well 
as government and academia, will be essential to ensuring the timely 
research, development, and production of bioterrorism countermeasures. 
In order to foster this effort, any legislation implementing Project 
BioShield should include effective liability protection; modifications 
to the ordinary government contracting and procurement process in order 
to better fit the research and development model of the pharmaceutical 
and biotechnology industry; and narrow provisions granting relief from 
antitrust constraints in order to permit certain types of meetings 
under certain circumstances.
    Question 15. Some of us have been grilling PhRMA witnesses for some 
time to try to get a better sense of exactly how much it costs to 
develop a drug, and while we've never gotten a straight answer, but it 
is safe to assume that it costs millions of dollars and takes many 
years. Is the timeframe in this legislation realistic? I just wonder 
whether throwing a lot of money at the industry will yield results any 
faster?
    Response: The average cost to develop a new drug has grown from 
$138 million in 1975 to $802 million in 2000. Bringing a drug from 
concept to market takes 10 to 15 years. Under the President's Project 
Bioshield legislation, in order to enter into a procurement contract 
for a countermeasure, the Secretary of HHS must determine that 
production and delivery of the product within five years is reasonably 
expected to be feasible. The five-year condition may operate to 
preclude the Secretary from entering into contracts for promising 
research, in light of the length of the new drug research and 
development process. We recommend deletion of this requirement.
    Question 16. The PhRMA website states that ``a 2002 survey of 
medicines in development for infectious diseases found that 
pharmaceutical and biotechnology companies were working on 256 
medicines for these diseases, including medicines for smallpox, anthrax 
and plague.'' If the industry is already taking steps to develop 
countermeasures for these products, is there a need for this type of 
legislation?
    Response: PhRMA companies are engaged in research and development 
relating to a large number of infectious diseases. Some research is 
being done on medicines for smallpox, anthrax, and plague. It is 
generally recognized, however, that the U.S. needs a full arsenal of 
vaccines, diagnostics, and therapeutic products for a much wider range 
of biothreat agents. For many companies, however, there are significant 
disincentives to the research and development of bioterrorism 
countermeasures. These disincentives include the expense and time 
involved in developing a new product that, even if successfully 
developed by the company and then approved by FDA, may never be sold, 
or--if sold--may be sold only to one purchaser (e.g., DoD) that makes 
no commitment to long-term purchase. Liability exposure can be 
significant and unavoidable, and private insurance can be prohibitively 
expensive or unavailable. Opportunity costs, when resources are 
diverted from the research and development of other medicines, can be 
prohibitive, particularly for companies with pipeline products only in 
very early stages of development. The need for rapid development of 
countermeasures also may require a level of collaboration among 
companies and with the government that raises antitrust concerns. 
Project Bioshield is an important first step towards creating an 
infrastructure that fosters the research needed. For the reasons 
outlined in this paragraph, however, any legislation implementing 
Project BioShield should include liability protection, modifications to 
the ordinary government contracting and procurement process in order to 
better fit the research and development model of the pharmaceutical and 
biotechnology industry, and narrow provisions granting relief from 
antitrust constraints in order to permit certain types of meetings 
under certain circumstances.
               responses to the honorable edolphus towns
    Question 17. Given that devices, biologics, and drugs usually have 
different standards on what makes a product commercially viable to make 
a commitment to R&D, does the Bioshield proposal offer enough incentive 
for your individual industries?
    Response: Project Bioshield is an important first step towards 
creation of complete armamentarium of vaccines, diagnostics, and 
therapeutics to counter biological and chemical weapons. There are, 
however, many scientific, legal, and economic challenges inherent in 
the research and development of these countermeasures, all of which 
function as disincentives. These challenges can be addressed, in part, 
with the inclusion of adequate liability protection and provisions that 
tailor the contracting and procurement process to better fit the 
research and development model of the pharmaceutical and biotechnology 
industry. We look forward to working with the Administration and 
Congress to ensure that the legislation adequately addresses these 
issues.
    Question 18. Do we need to add anything to this proposal to make it 
easier for academic research institutions and commercial companies to 
work together on developing these countermeasure products?
    Response: A cooperative and collaborative research and development 
effort, which engages both the smaller and larger biotechnology and 
pharmaceutical companies, as well as government and academia, is 
essential to ensuring the timely research, development, and production 
of bioterrorism countermeasures. The President's Bioshield legislation 
is an important step in this process. My written testimony described 
ways in which PhRMA member companies are already collaborating with 
academia and government to begin this research. There are, however, 
many scientific, legal, and economic challenges inherent in the 
research and development of these countermeasures. These challenges can 
be addressed, in part, with the inclusion of adequate liability 
protection, provisions that tailor the contracting and procurement 
process to better fit the R&D model of the pharmaceutical and 
biotechnology industry, and narrow relief from antitrust constraints 
for certain meetings provided safeguards are in place.
    Question 19. If each of you had a product already approved to treat 
a given condition, what incentives exist in this proposal or what would 
you like to see to encourage research for a new countermeasure?
    Response: While Project Bioshield is an important first step 
towards development of a comprehensive arsenal of vaccines, 
diagnostics, and therapeutics to combat bioterrorism, there are many 
scientific, legal, and economic challenges inherent in the research and 
development of these countermeasures. These challenges can be 
addressed, in part, with the inclusion of adequate liability 
protection, provisions that tailor the contracting and procurement 
process to better fit the R&D model of the pharmaceutical and 
biotechnology industry, and narrow relief from antitrust constraints 
for certain meetings provided safeguards are in place. These can be 
more accurately characterized as removing disincentives to research, 
rather than incentives. Of course, PhRMA itself does not conduct 
product research or development. While Project Bioshield does not 
contemplate incentives, any individual company contemplating 
countermeasure research and development may find a particular incentive 
or other provision especially important in view of its own research 
capabilities, portfolio, and pipeline.
    Question 20. If a better product is developed after you have signed 
a contract with the government, should the government be forced to 
stockpile your product--because you already have a contract--or does 
the government need the flexibility to go with the better product, 
which may mean canceling your contract?
    Response: The pharmaceutical research and development model is not 
like the research and development model of ordinary government 
contractors. It is uniquely time consuming, costly, and risky. Other 
factors in this special context--including high liability exposure and 
the challenge of reallocating resources (i.e., diverting funds and 
scientists from research into other diseases and conditions)--will 
amplify the risks and serve as significant disincentives to 
countermeasure R&D by private industry. Legislation intended to 
encourage research and development into countermeasures should not 
allow the government to terminate its contracts when additional 
products are developed. The uncertainty associated with this 
termination authority would operate as a significant disincentive to 
research and development of countermeasures. At the same time, 
competition is essential to innovation, and any legislation passed 
should encourage pharmaceutical and biotechnology companies to compete 
by developing and manufacturing newer and better versions of already-
procured products. The pharmaceutical industry looks forward to working 
with the Administration and the Congress to develop a contracting and 
procurement model that would mimic the ``real market'' and encourage 
private sector competition.
    Question 21. This bill appropriates unlimited sums of money. 
However, our Orphan Drug program also gives incentives to work on R&D 
for diseases that are not that prevalent, and many illnesses still have 
no cure. Is BioShield a research problem that money alone can solve?
    Response: Project Bioshield is an important first step. As I 
indicated in my testimony on March 27, the President's proposal speaks 
primarily to the early and the late steps in the lengthy, high-risk, 
and costly process of bringing new medicines to the market. It does not 
speak to the time consuming and resource intensive middle part of that 
process, which is largely our responsibility. There are many 
scientific, legal, and economic challenges inherent in this part of the 
process. These challenges can be addressed, in part, with the inclusion 
of adequate liability protection, provisions that tailor the 
contracting and procurement process to better fit the R&D model of the 
pharmaceutical and biotechnology industries, and narrow relief from 
antitrust constraints to permit certain types of meetings, with 
government officials present and appropriate safeguards in place.
                                 ______
                                 
       Responses for the Record Submitted by Hon. Tommy Thompson
    Questions are numbered sequentially 1-38. Questions were submitted 
as follows: Chairman Tauzin, questions 1-6; Chairman Shadegg; #7; Mr. 
Turner #8; Mr. Weldon #9; Ms. Wilson #10; #11 [unspecified]; Ms. Lowey 
#12-17; Mr. Green #18-22; Mr. Lincoln Diaz-Balart #23-24; Mr. DeFazio 
#25-28; Mr. Camp #29; Chairman Bilirakis #30-31; Mr. Etheridge #32; Mr. 
Bennie Thompson #33-38.
                         questions and answers:
    Question 1: To qualify for procurement under Project BioShield, the 
government must first determine that there is ``no significant 
commercial market'' for the countermeasure. Who would make this 
decision? What criteria would guide the decision maker?
    Response: The bill states that the HHS Secretary shall make this 
determination. See sec. 121(c)(3)(B)(iii), as added by section 3 of the 
bill.
    The Secretary would likely be guided in making this determination 
by the Federal Acquisition Regulations (FAR). The FAR sets forth 
guidance for determining whether a particular product or service is a 
``commercial'' product or service. Specifically, FAR 2.101 supplies an 
in-depth definition of the term ``Commercial item.'' Factors which 
would result in classifying a product as commercial include: (1) if the 
item is customarily used by the general public or by non-governmental 
entities for purposes other than governmental purposes, (2) if the item 
is sold or leased to the general public, and (3) if the item has been 
offered for sale, lease, or license to the general public. Contracting 
officers are accustomed to using market research and market surveys to 
determine whether these factors exist, and the Department would be able 
to use these methods to make the ``no significant commercial market'' 
determination under the bill.
    Question 2: Is the fact that a product has already been approved 
conclusive evidence that there is a ``significant commercial market'' 
for the product? In other words, will Project BioShield only apply to 
new drugs and vaccines?
    Response: No, approval for a product is not conclusive evidence 
that there is such a commercial market. In fact, the definition of 
``qualified countermeasure'' in the Countermeasures Procurement section 
of the bill is drafted to explicitly preserve the possibility of using 
this authority to procure products that have been approved or licensed.
    Question 3:  Are medical devices eligible for purchase by the 
government under Project BioShield? If not, why not?
    Response: Under the Administration's bill, the Countermeasures 
Procurement section would provide authority for procuring drugs and 
biological products, but not devices. This section would provide 
extraordinary spending authority to spur the private sector to invest 
in next-generation countermeasures against biological, chemical, 
radiological, and nuclear weapons. The Administration plans to continue 
to develop and acquire new devices to diagnose and respond to threats 
under current funding authorities. The Government could purchase 
devices for the Strategic National Stockpile, but it would do so using 
existing authority and annual appropriations rather than the special 
fund to be created by the Project BioShield bill.
    Question 4: Regarding the ``emergency use'' authority in Project 
BioShield, could the government authorize the use of a clearly 
superior, yet unapproved countermeasure if another inferior (in terms 
of risk profile or efficiency, for example) countermeasure was approved 
and available?
    Response: Yes. Under the bill, one of the conditions for granting 
emergency use authorization is that ``there is no adequate, approved, 
and available alternative'' to the product. If another product was 
approved and available, an unapproved product could still be given 
emergency use authorization if it was determined that the approved 
product was not adequate for that indication.
    Question 5: Can you outline what the Administration has done, and 
will continue to do, regarding securing private sector advice in the 
creation of a countermeasure's development effort, and what has private 
industry told the Administration regarding its requirements 
particularly related to guaranteed procurement?
    Response: Dr. Fauci and other HHS officials consulted with the 
private sector as the Project BioShield proposal was being developed 
and continue this dialogue. The industry has indicated that the absence 
of a secure and predictable funding source discourages them from 
investing in the technology and infrastructure needed to develop 
cutting edge biomedical products where the Government is the only 
market. When the private sector considers developing a new product, the 
first thing it does is assess the potential market for the product. 
Biomedical countermeasures, like vaccines against Anthrax or Ebola, 
have only one market: the Government. If there is not a secure funding 
source behind this market, there is little reason for a biotech or 
pharmaceutical firm to invest in products responsive to this market. 
From their point of view, it makes more sense to invest in a next 
generation cholesterol lowering therapy or some other blockbuster drug. 
The current state of the country's countermeasure armamentarium 
confirms this assessment. Very little in the way of innovation has 
occurred over the last few decades for countermeasures against the 
Category A. agents (smallpox, anthrax, tularemia, plague, botulinum 
toxin and the viral hemorrhagic fevers). While Dr. Fauci and his 
colleagues at NIH have made substantial progress on a vaccine against 
Ebola, the smallpox vaccine has changed only modestly over the last 100 
years and the current generation anthrax vaccine was developed in the 
1960s. Luckily, anthrax, plague, and tularemia respond to antibiotics 
that were developed for other conditions. It seems clear the 
uncertainty inherent in the annual appropriations process has played a 
large role in discouraging innovation in countermeasures against 
Category A agents and for other countermeasures where the Government is 
the only likely purchaser.
    Question 6: The Administration's BioShield proposal includes the 
concept of ``emergency use'' authorization that would allow for 
``contingent FDA approval'' of countermeasures. Can you explain how 
this would be done, how long would the ``contingent approval'' last, 
and under what circumstances would this ``contingent approval'' be 
revoked? How would a revocation impact the liability of a private 
company product given an ``emergency use'' authorization?
    Response: Emergency use authorization would not be a contingent FDA 
approval. It would be an emergency authorization to use an unapproved 
product or to use an approved product for an unauthorized use in an 
emergency to respond to a serious public health threat. To invoke this 
authority:

 The Secretary of Homeland Security, the Secretary of Defense, 
        or the Secretary of HHS, as appropriate, would have to 
        determine that there is an emergency involving a particular 
        biological, chemical, radiological, or nuclear agent, or a 
        specific disease.
 In response to such a determination, the Secretary of HHS may 
        authorize the use of a drug, biological product, or device in 
        an actual or potential emergency.
 The Secretary may impose conditions on the use of products 
        authorized in this manner. These conditions may relate to 
        product labeling, distribution, who may administer the product 
        and under what circumstances it may be administered, the 
        performance of studies, trials or research related to the 
        product, recordkeeping, good manufacturing practices, and the 
        monitoring and reporting of adverse events.
    The authorization would last until the termination of the emergency 
declared by the Secretary (at most one year, unless renewed), or until 
the Secretary revoked the authorization.
    The Secretary may revoke an authorization if, in the Secretary's 
judgment, the conditions for the authorization are no longer met or 
other circumstances make revocation appropriate.
    A manufacturer's liability (e.g., for alleged product defects) 
should not be directly affected either by the granting of an 
authorization or by the revoking of one.
    Question 7: Mr. Secretary, the Defense Science Board in its May 
2002 Study on Defense Science and Technology has issued a challenge to 
DoD that by 2005, the pathogen to drug hit process should be reduced 
from years to months, by 2010 from months to weeks, and by 2020, it 
should have the ability to go from bug to drug within 24 hours. It has 
recommended spending $200 million per year over the next twenty years 
to achieve this. What do you think of the likelihood of their success? 
Are they on target in terms of the financial commitments? What sort of 
communication/collaboration do you have with the Department of Defense 
in terms of R&D of countermeasures? What is your opinion of the Defense 
Science Board's challenge on going from bug to drug within 24 hours by 
2020?
    Response: The Defense Science Board's (DSB's) challenge and 
recommendations are at once inspiring and formidable. There is cause 
for optimism, however. For example, HHS is seeing a steady stream of 
scientific and medical progress flowing from the revolution in genomics 
and proteomics. In this regard, an ongoing, concerted, multi-agency 
federal program to sequence the genomes of Categories A, B, and C 
pathogens is crucial. It has been possible to greatly accelerate this 
effort with recent increases in biodefense funding at the NIH. 
Furthermore, evidence of the realism of the Board's time frame is 
suggested by the incredibly rapid identification and molecular 
dissection of the causative agent of SARS, and the program, almost 
completed, to screen currently available antiviral drugs for anti-SARS 
activity. However, one should not underestimate the challenge posed by 
the DSB, and it remains to be seen whether it can be met within the 
specified timeframe. It is clear, however, that HHS efforts in 
biodefense research are compatible and in alignment with the DSB's 
aspirations, and HHS certainly shares the goal of reducing the time 
from pathogen identification to therapeutic ``hit.''
    NIH has developed numerous collaborations involving various 
components of DOD. Illustrative examples include the following:

 Development and testing of therapeutics for smallpox, with the 
        U.S. Army Medical Research Institute of Infectious Diseases 
        (USAMRIID) and the Centers for Disease Control and Prevention 
        (CDC)
 Development and testing of a candidate Ebola vaccine, with 
        USAMRIID
 Development of antivirals for Ebola, with USAMRIID
 Development of a candidate West Nile virus vaccine, using a 
        dengue virus ``backbone,'' with Walter Reed Army Institute of 
        Research
 Testing of next-generation anthrax vaccine, with the 
        Department of Defense
 Support of the Orthopoxvirus Genomics and Bioinformatics 
        Resource Center, with CDC, USAMRIID, and the DoD Defense 
        Advanced Research Projects Agency (DARPA)
 Genomic sequencing of Categories A, B, and C pathogens, with 
        DARPA, DoD, USDA, DoE, NSF, CDC, CIA, and others
 Evaluation of antibiotics, licensed as therapies for other 
        diseases, to treat anthrax and plague, with USAMRIID and the 
        FDA
    Question 8: A key feature of the Administration's proposal involves 
a grant of permanent, indefinite funding authority to spur development 
of medical countermeasures by private sector firms.
    How do you envision such permanent indefinite funding authority to 
function?
    Who will administer such authority?
    Was an analysis done to determine what funding mechanism would best 
meet the need of developing medical countermeasures to a terrorist 
threat?
    Would such a procedure bypass the annual authorization and 
appropriations process? If so, why should Operation BioShield be 
exempted from the usual Congressional oversight function?
    To what extent is the Department going to leverage the resources of 
government funded labs and academia in meeting the goals of Project 
BioShield?
    Response: The goal of BioShield is to ensure that needed 
countermeasures are developed and procured as quickly as possible, with 
procurements being driven by threat assessments and scientific/
manufacturing feasibility. This legislation is designed to provide 
industry the assurance that, if it makes the investments necessary to 
manufacture and bring specifically identified countermeasures to 
market, the finances will be in place for the Government to procure 
them quickly. It also enables the Government to respond quickly to 
unanticipated changes in threats that cannot be addressed with 
commercially available products. Those that are available 
commercially--such as ciprofloxacin--or existing vaccines would be 
purchased through discretionary appropriations. Similarly, if a 
significant commercial, non-homeland security, market subsequently 
developed for a BioShield countermeasure, any additional contractual 
undertakings would have to be funded with discretionary appropriations.
    The proposal includes a deliberate governmental process that must 
be followed for funds to be used. Funds would be available to DHS for 
obligation only after the President approved a procurement 
recommendation made jointly by DHS and HHS, in coordination with the 
Director of OMB. The Congress would be notified of such Presidential 
approval. Prior to making such a joint recommendation, DHS must, in 
consultation with other agencies, determine which agents pose a 
material risk of use against the United States. HHS must assess the 
public health consequences of such potential use, and determine that a 
countermeasure is needed but is not commercially available. HHS must 
also determine there is sufficient scientific basis to conclude the 
product will ultimately be determined safe and effective, and that 
production of adequate quantities within five years is feasible. For a 
procurement contract to be finalized and funds obligated, HHS and the 
manufacturer must also be confident that the manufacturer can provide 
those quantities of safe and effective product--no Federal funds could 
be drawn down against the contracts until a substantial quantity of the 
product had been delivered. Further discussion of Congressional 
oversight is in the response to Question 12.
    We expect a substantial leveraging of NIH research efforts. Proof 
of scientific concept must be established before funds would be 
available for procurement. This proof of concept would often 
accomplished through NIH-funded research. BioShield includes added 
research authorities for NIH to accelerate this type of work.
    Question 9: What future efforts (if any) are planned for the 
Department of Health and Human Services and the Department of Homeland 
Security to utilize the knowledge within the Russian scientific 
community to identify existing and potential biological threats, learn 
how such technical expertise was used in the creation of these agents 
and cooperate with these persons to aid countermeasure policy making?
    The former Russian chief scientist in the bioengineering labs--Dr. 
Ken Alibek--tells the story of how biological and chemical weapons were 
created and leaked out of the country. This book titled ``Biohazard'' 
and Dr. Alibek may provide crucial insight into how these weapons were 
made and how America can best guard against them. I would be more than 
happy to facilitate this effort and provide any assistance you desire.
    Response: NIH is an active participant in several important 
interagency initiatives already underway that address the points you 
raise.
    The U.S. Civilian Research and Development Foundation (CRDF) small 
grants program is designed to provide catalytic funds to stimulate 
collaborative research of high scientific merit between U.S. and Former 
Soviet Union (FSU) scientists. The CRDF is a nonprofit charitable 
organization created by the United States Government in 1995. This 
unique public-private partnership promotes scientific and technical 
collaboration between the United States and the countries of the former 
Soviet Union (FSU). The CRDF's goals are to:

 Support exceptional peer reviewed research projects that offer 
        scientists and engineers alternatives to emigration and help 
        prevent the dissolution of the scientific and technological 
        infrastructure of the countries of the FSU;
 Advance the transition of weapons scientists to civilian work 
        by funding collaborative non-weapons research and development 
        projects; and
 Help move applied research to the marketplace and bring 
        economic benefits both to the countries of the FSU and to the 
        United States.
    In FY 2003, NIAID will fund at least seven CRDF collaborative 
research projects in various areas of civilian biodefense.
    NIH also participates in the DHHS-State Department Biotechnology 
Engagement Program (BTEP), which provides larger grant support to FSU 
bioweapons scientists now engaged in civilian research. For example, 
NIAID currently participates in seven BTEP projects: in HIV/AIDS (3), 
Tuberculosis (2), Amebiasis (1), and Antimicrobial Drug Resistance (1). 
These projects are in Russia (5) and Georgia (2).
    Since the collapse of the FSU, Russian scientists are the most 
rapidly growing national group seeking research training in the NIH 
Visiting Scientists Program. Russian scientists are also eligible to 
partner with US scientists applying for regular NIH research awards 
and, under special circumstances, to receive NIH foreign awards. One 
example is the NIAID Comprehensive International Program for Research 
on AIDS (CIPRA) award to the University of St. Petersburg. HHS expects 
that scientifically peer reviewed collaborative research and directly 
funded research will continue and increase in the future, particularly 
as NIH-trained biomedical researchers return to Russia and begin 
competing for research support.
    Question 10: Mr. Secretary, there was a project underway jointly 
with the Armed forces Radiobiology Research Institute (AFRRI) and the 
Uniformed Services University of the Health Sciences (USUHS) to develop 
a radioprotectant. There was a hitch due to appropriations, but their 
product, HE2100 has already shown remarkable results in animal models. 
During questions at the hearing, you mentioned negotiations for 
Prussian Blue. Have you also considered a product such as this, which 
actually protects against more complications of radiological exposure 
than potassium iodide or Prussian Blue?
    Response: The Department is currently exploring the possibility of 
adding Prussian Blue, along with additional quantities of other 
countermeasures for radiation sickness, to the stockpile.
    Question 11: What steps have you taken since October 2001 anthrax 
attacks to have sufficient doses of licensed anthrax vaccine to 
vaccinate civilian responders?
    Do you feel you have a significant CDC stockpile of FDA-licensed 
vaccine available in the event of a wide-spread attack in the U.S.?
    Do you have a short term anthrax preparedness policy that includes 
expansion of production capacity and a short term stockpile of the 
current FDA licensed vaccine?
    In a letter sent to Bioport on March 6, 2003, you indicated you 
wanted to focus efforts on developing a new vaccine Why?
    Response: An initial amount of $11,000,000 carried over from the FY 
02 budget plus an additional $22,110,000 in the FY03 budget are 
allocated to purchase anthrax vaccine. The Strategic National Stockpile 
(SNS) Program is working with the Department of Defense (DoD) to 
develop a Memorandum of Understanding (MOU) that will enable the SNS 
Program to purchase up to 3.0 million doses of this vaccine. Between 
now and March 2004, approximately 420,000-500,000 doses will be 
available for purchase. The remainder of the 3.0 million doses may be 
requested for purchase after March 2004.
    The current on-hand availability of FDA-licensed vaccine is 381 
vials with 10 doses per vial. This is enough capability to vaccinate 
1270 people (3 doses/person). The SNS also contains 20,878 vials of IND 
product, enough to vaccinate 69,593 people.
    The SNS Program is currently finalizing an MOU with DoD for 
purchase of the licensed product only. DoD holds the contract for 
production with the company. The SNS Program cannot request increased 
production capacity; this would have to be done through DoD.
    With respect to the question concerning the letter to Bioport, what 
is needed is a new vaccine that, by comparison with the current 
licensed vaccine manufactured by Bioport, (1) is less reactogenic, (2) 
is easier to manufacture, (3) is more uniform, (4) has higher 
immunogenicity, (5) requires fewer doses before an acceptable immunity 
is established, and (6) has a reliable supply.
    Question 12: This proposal provides permanent and indefinite 
funding authority under the guise that it is necessary to spur the 
development of medical countermeasures in the private sector. Will this 
authority bypass the annual authorization and appropriations process? 
If so, why shouldn't BioShield be subject to regular Congressional 
oversight?
    Congress wants to develop needed vaccines and drugs to fight 
bioterrorism. If the Administration requests funds for this, I am 
confident that Congress will meet these requests. Wouldn't it be a 
feasible option to use the regular order for crafting the spending 
authority under this measure? Or, is the Administration merely 
requesting this funding outside of the normal appropriations process 
because it did not want to reduce funding for domestic programs already 
shortchanged in the fiscal 2004 request?
    Response: We have carefully developed this legislation to ensure 
fiscal responsibility while providing the flexibility needed to respond 
to changing threat scenarios and the financial assurances industry 
needs to develop/manufacture essential countermeasures that do not have 
a commercial market. The requirements for the use of these funds are 
stringent, and limited to products for which there is not a significant 
commercial market. The Administration anticipates on-going 
Congressional oversight. Each procurement must be approved by the 
President, with the Congress notified of each such approval. HHS would 
expect activities--and results--under BioShield to be a regular topic 
of discussion in hearings in a wide range of hearings for both DHS and 
HHS, including authorizing, oversight, and appropriations committees.
    Question 13: As you know, the normal peer review procedure in the 
case of grants, contracts, and cooperative agreements for biomedical 
countermeasure research and development (R&D) is an initial study 
section review and an advisory council review. The two-stage peer 
review process is the most well-regarded in the world. Yet, this bill 
would waive these procedures.
    Can you please tell the Committee what safeguards will be put in 
place to ensure the new, expedited process is as sound and safe as the 
current process provides for?
    Can you also address concerns that because this process will be 
done behind closed doors and that competitive procedures can be waived 
that the process will not either be fair or produce the best results? 
What safeguards will be put in place to ensure the companies with the 
best proposals, not those in good standing with the Administration, 
will be awarded contracts?
    Response: The NIH system of peer review is, indeed, admired and 
emulated around the world. The expedited peer review provision in the 
BioShield bill is aimed at shortening the peer review process (which 
often can take 9 months or more), but not diminishing its quality. 
Expedited peer review, carried out in consultation with appropriate 
scientific experts, would determine scientific and technical merit of 
proposals and assess the likely contribution to the field of research. 
Furthermore, under the proposed provision, the authority to expedite 
peer review may be exercised only in the case of pressing research and 
development of countermeasures urgently needed to combat a biological 
agent that may cause a public health emergency and affect national 
security.
    As provided elsewhere in the Administration's bill, some contracts 
may be awarded through a noncompetitive process when it is known that 
only a limited number of companies are available to submit proposals. 
(See response to Question 24). However, peer review procedures (either 
regular or expedited) would be employed to review proposals submitted 
through the noncompetitive process, as well as all contract proposals 
that are submitted through any normal competitive processes.
    Question 14: The proposal allows for the use of unapproved drugs or 
devices in an actual or potential national public health emergency. 
What compensation protections will be provided the general public if 
the government distributes a drug that causes severe or disabling side 
effects?
    Response: Section 4 of the bill authorizes use of medical products 
in emergencies if the Secretary concludes that it is reasonable to 
believe, based on the totality of available scientific evidence, 
including available data from adequate and well-controlled clinical 
trials, that the product may be effective against a serious or life-
threatening disease or condition; that the benefits of the product 
outweigh the risks; and that there is no adequate, approved, and 
available alternative to the product for such purpose. Thus, the risk 
that a distributed drug will cause severe or disabling effects should 
be reduced as much as possible prior to any distribution.
    If, nevertheless, there is an injury, there are several potential 
sources for compensation, depending on the circumstances. Compensation 
may be available from an individual's insurer. If the individual 
received the product in connection with his/her employment, 
compensation may be available under a workmen's compensation program 
(including, for Federal employees, the Federal Employee Compensation 
Act). If the injury results from negligence or wrongdoing in the 
manufacture or administration of the product, compensation may be 
available through the tort law system (including, for negligence or 
wrongdoing by Government employees, the Federal Tort Claims Act, where 
the requirements of that statute are met). If the countermeasure is 
part of the Strategic National Stockpile, the manufacturer may have 
been indemnified by HHS pursuant to Public Law 85-804. If the 
countermeasure is related to smallpox, special provisions may apply--
Section 304 of the Homeland Security Act creates a Federal Tort Claims 
Act remedy in certain circumstances, and Public Law 108-20, the 
Smallpox Emergency Personnel Act of 2003, provides compensation to 
individuals receiving smallpox vaccine under HHS recommendations.
    Question 15: Can you more clearly define under what circumstances 
you have the authority to declare an emergency and distribute 
unapproved, unlicensed drugs?
    Response: In order for the Secretary of HHS to issue an emergency 
use authorization for a product, there must be a determination--

(A) by the Secretary of Homeland Security, that there is a domestic 
        emergency (or a significant potential of a domestic emergency) 
        involving a heightened risk of attack with a specified 
        biological, chemical, radiological, or nuclear agent;
(B) by the Secretary of Defense, that there is a military emergency (or 
        a significant potential of a military emergency) involving a 
        heightened risk to United States military forces of attack with 
        a biological, chemical, radiological, or nuclear agent; or
(C) by the Secretary of a public health emergency under section 319 of 
        the Public Health Service Act, affecting national security and 
        involving a specified biological, chemical, radiological, or 
        nuclear agent or a specified disease or condition that may be 
        attributable to such agent.
    With respect to distribution of unapproved, unlicensed drugs, 
pursuant to the BioShield legislation, such products could be 
introduced into interstate commerce if the Secretary issues an 
authorization for emergency use of the product. Prior to issuing such 
an authorization, certain criteria have to be met under the proposed 
legislation including a conclusion by the Secretary--

(1) that an agent specified in a declaration under subsection (b) can 
    cause a serious or life threatening disease or condition;
(2) that, based on the totality of scientific evidence available to the 
    Secretary, including data from adequate and well-controlled 
    clinical trials, if available, it is reasonable to believe that--
  (A) the product may be effective in detecting, diagnosing, treating, 
        or preventing--
    (i) such disease or condition; or
    (ii) a serious or life-threatening disease or condition caused by a 
            product authorized under this section or approved under 
            this Act or the Public Health Service Act, for detecting, 
            diagnosing, treating, or preventing such a disease or 
            condition caused by such an agent; and
  (B) the known and potential benefits of the product, when used to 
        detect, diagnose, prevent, or treat such disease or condition, 
        outweigh the known and potential risks of the product;
(3) that there is no adequate, approved, and available alternative to 
        the product for detecting, diagnosing, preventing, or treating 
        such disease or condition; and
(4) that such other criteria as the Secretary may by regulation 
        prescribe are satisfied.
    Question 16: The measure states that the Administration has the 
authority to procure medical countermeasures for the inclusion in the 
DHS strategic national stockpile. Is there any instance where the 
Administration will be procuring a countermeasure for outside the 
stockpile or ``emergency use''?
    Response: The Government may purchase limited quantities of a 
countermeasure for research, either under the research and development 
section of the Project BioShield bill or for other research. It may 
procure countermeasures for use in Government health care facilities 
(IHS hospitals, DoD and VA hospitals). (These situations would entail 
using regular annual appropriations rather than the special fund 
created by the countermeasure procurement section of the bill.) The 
Government may also procure countermeasures for the Strategic National 
Stockpile other than through the mechanism supplied by the Project 
BioShield bill--for example, if there is a commercial market for a 
particular countermeasure, the Government may procure it for the 
Stockpile using ordinary annual appropriations. Countermeasures 
purchased for the Strategic National Stockpile, either under Project 
BioShield or the annual stockpile discretionary appropriation, can be 
transferred to DoD or other federal agencies on a reimbursable basis.
    Question 17: Can drugs already on the market for other uses be 
entered into BioShield if it's shown that the drug can be developed 
into a countermeasure?
    Response: It is unclear what is intended by the phrase ``entered 
into BioShield'' in this question. If that phrase is intended to refer 
to whether a product can receive an emergency use authorization in 
response to a declared emergency relating to chemical, biological, 
radiological or nuclear attack, the proposed legislation would 
authorize the Secretary to provide an emergency authorization for such 
a product, even it it is currently licensed for another use.
    Question 18: Mr. Secretary, in his written testimony, Dr. Baker 
underscores the importance of including academic research institutions, 
as well as private innovator companies, in our efforts to develop 
countermeasures to bioterrorism.
    In my opening statement, I referenced the work being done at Baylor 
College of Medicine and other universities. Can you tell us how Project 
BioShield would further the work being done at our nation's 
universities?
    Response: The Department is in complete agreement about the 
importance of including academic research institutions in its efforts 
to develop countermeasures for bioterrorism. To that end, NIAID has 
markedly intensified, expanded, and accelerated its ongoing basic and 
applied research programs relating to biodefense, and has developed a 
total of 52 biodefense initiatives to stimulate basic research and 
development of countermeasures in 2002 and 2003. Most of these 
initiatives are specifically addressed to, or entail collaborations 
involving academic research centers. (Additional detailed information 
is contained in the response to question 22 below.)
    BioShield will build on these investments and help ensure that HHS 
scientists, working with industry, can actually develop the tools of 
diagnosis, treatment and prevention that will allow HHS to respond 
effectively to and deter future bioterrorist attacks on American 
citizens. Project BioShield will provide an additional and extremely 
important stimulus to the basic research engine of academia by greatly 
facilitating translation of advances in fundamental research into 
countermeasures to defend civilians. It will also create many 
opportunities for industry-funded applied research in academic research 
centers as industry carries out the studies required for advanced 
development, production, and licensure of new interventions so that 
they can be added to the Strategic National Stockpile.
    Question 19: The emergency use component of this bill would allow 
the Secretary to make certain unapproved products available to the 
public in an expedited fashion in the event of a bioterrorist attack. 
Because these products would likely not be fully tested at this point, 
there is a possibility that harmful side effects might be discovered 
after widespread use by the public.
    We already are trying to address such a situation with legislation 
to compensate persons who are harmed as the result of a smallpox 
vaccination. Many Members of this Committee have been locked in these 
difficult negotiations.
    Has the Administration given any thought to how it would compensate 
individuals who could be harmed as a result of taking an untested 
product? Some of our witnesses on the next panel will testify that this 
liability issue could discourage larger manufacturers from really 
engaging in new product development. Does this legislation address the 
liability concerns?
    Response: As noted in the response to Question 14, the emergency 
use authorization section includes several provisions that should 
reduce the risk of harm, and, in the event of harm, there are several 
possible sources for compensation, including insurance, workmen's 
compensation programs, the tort law system, and certain special 
statutory provisions concerning smallpox countermeasures and the 
Strategic National Stockpile.
    There are existing legal provisions that address manufacturers' 
concerns about potential liability resulting from product liability 
tort actions. (1) If the product in question is designated by the 
Secretary of Homeland Security as a ``qualified anti-terrorism 
technology,'' as defined in the SAFETY Act (sections 861-865 of the 
Homeland Security Act of 2002), the seller of the product receives 
certain protections from liability in cases based on acts of terrorism. 
The statute gives federal courts exclusive jurisdiction over such 
claims, and it limits damages in such cases (precluding punitive 
damages, limiting non-economic damages, and limiting total damages to 
the amount of liability insurance coverage that the seller can obtain 
without unreasonably distorting the sales price of the technology). The 
statute also allows the seller to assert the ``government contractor'' 
defense (which applies the Government's sovereign immunity to 
Government contractors), absent a showing that the seller committed 
fraud or willful misconduct in giving the Government the information 
used to approve the product as a ``qualified anti-terrorism 
technology.''
    (2) The government contractor defense also protects a manufacturer 
of a product that is not designated as a ``qualified anti-terrorism 
technology,'' if the product is produced pursuant to a Government 
contract; the Government has prepared or approved reasonably precise 
specifications; the product conforms to such specifications; and the 
manufacturer warned the Government of any dangers known to the 
contractor, but not known to the Government.
    (3) Finally, the Department may, under certain circumstances, 
indemnify countermeasure manufacturers or sellers under P.L. 85-804.
    Question 20: Mr. Secretary, many on this panel have already 
expressed their concern, and general surprise at the Administration's 
decision to provide unspecified, permanent funding for this program. 
This provision certainly flies in the face of the Administration's 
previous positions on many issues. Many of us are uncomfortable with 
writing a blank check of this nature, especially since the Congress 
controls the purse strings. How do you justify this change of policy?
    Response: Pharmaceutical manufacturers have expressed concerns 
about investing substantial resources to develop a countermeasure, only 
to find out down the line that the Government cannot make available 
sufficient funds to purchase the product. Permanent funding will help 
to provide assurance to the industry that, in the event an effective 
countermeasure is available, there will be a market for such a 
countermeasure and the Government will have sufficient funding 
available for purchase.
    Question 21: Similarly, based on my read of this legislation, it 
looks like the Secretary would have the blanket authority to expedite 
scientific peer review requirements under ``urgent circumstances.'' 
Would the Secretary act unilaterally to determine what products could 
bypass FDA approval? Does the legislation require consultation with the 
NIH, the Congress or consumer groups? I appreciate the need to cut the 
red tape in some of these situations but I have concerns that this 
provision could be broadened to include products that might not be 
directly related to bioterrorism.
    Response: The legislation would authorize the Secretary to issue an 
emergency use authorization if specific criteria are met for the 
duration of the declared emergency. It is not HHS's intention to permit 
emergency use authorizations except for products that could be used in 
response to a domestic emergency involving biological, chemical, 
radiological or nuclear agents, a military emergency involving those 
agents, or a public health emergency. The legislation does not preclude 
the Secretary from consulting with relevant government and non-
governmental public health experts.
    Question 22: Mr. Secretary, can you paint a picture of some of the 
work that is currently being done within NIH to help develop 
countermeasures? We have heard a lot about how the proposal would 
incentivize research at private companies, but is there a desire to 
expand the work being done at our public institutes?
    Response: The National Institute of Allergy and Infectious Diseases 
(NIAID) is the principal institute within the National Institutes of 
Health that supports biodefense research. The explicit goal of NIAID's 
biodefense research is to develop the tools and countermeasures that 
are necessary to protect civilians from potential agents of 
bioterrorism. The NIAID's biodefense strategic plan includes 
significant investments in internal and extramural basic research, 
including studies of microbial biology and host responses to those 
microbes. This basic research provides the substrate of new knowledge 
from which new vaccines, therapies, and diagnostic tools will emerge. 
One goal of Project BioShield is to encourage industry to invest in the 
process of translating these basic scientific discoveries into 
deliverable products. NIAID is also making substantial investments in 
national research resources such as laboratory facilities, centers of 
excellence, and a national reagent repository. To implement these 
plans, NIAID has launched a total of 52 biodefense initiatives in 2002 
and 2003. The majority of these are either directed toward academic 
research centers or will entail collaborations that involve academic 
centers. Examples include the following:
    Biodefense and Emerging Infectious Disease Research Opportunities: 
Intended to encourage the submission of investigator-initiated research 
grant applications in biodefense and select emerging infectious 
diseases. The goal is to expedite research leading to the diagnosis, 
prevention and treatment of diseases caused by potential bioterrorism 
agents.
    Rapid Response Grant Program on Bioterrorism-related Research: 
Funded more than sixty projects in FY02 to support innovative research 
targeted at the design and development of specific diagnostics, 
therapies, and prevention strategies for Category A biological 
diseases.
    Partnerships for Novel Therapeutic, Diagnostic, and Vector Control 
Strategies in Infectious Diseases: Awarded six Partnership Grants in 
FY02 to support collaborative partnerships between government, 
academia, and the private sector to develop novel biodefense products.
    Biodefense Partnerships: Vaccines, Adjuvants, Therapeutics, 
Diagnostics, and Resources: Facilitates collaborative partnerships 
between government, academia, and the private sector to develop novel 
biodefense products.
    Cooperative Research for the Development of Vaccines, Adjuvants, 
Therapeutics, Immunotherapeutics, and Diagnostics for Biodefense 
Program: Facilitates the design and development of vaccines, 
therapeutics, adjuvants, and diagnostics for NIAID Category A-C 
priority pathogens and their toxins to help translate basic research 
knowledge into new biodefense products.
    Regional Centers of Excellence for Biodefense and Emerging 
Infectious Diseases Research: Establishes 7 to 8 academic research 
centers of excellence that will not only provide state-of-the-science 
research capacity, but will also link to the Centers for Disease 
Control and Prevention and to state and local health departments to 
provide permanent, regional expertise on agents of bioterror and other 
emerging and re-emerging diseases.
    Construction and Renovation of Biosafety Laboratory Facilities: 
Funding, mainly to academic research centers, to design, build, 
renovate, and certify biocontainment laboratories, addressing a 
critical national shortage of facilities in which to safely carry out 
some essential biodefense research and development.
    Division of Intramural Research: Intramural program has expanded 
research efforts for many Categories A, B, and C agents and initiated 
plans to construct Biosafety level 3 and 4 facilities to enable safe 
research on medical countermeasures against bioterrorism.
    Question 23: What procedures will HHS employ to study the 
effectiveness of a countermeasure after it's been employed in an 
emergency, and will it have to then go through a more elaborate FDA 
approval process in a non-crisis situation?
    Response: The legislation provides the Secretary with authority to 
establish conditions for use relating to an emergency authorization, 
including limitations on distribution, on who may administer the 
product, and on the performance of studies and clinical trials. In 
addition, the legislation authorizes the Secretary to impose 
requirements for adverse event reporting, to impose additional 
recordkeeping and records access requirements and to impose good 
manufacturing practices. In a non-crisis situation, a countermeasure 
would have to go through FDA's statutorily required pre-market approval 
process.
    Question 24: Would you expound on the use of the noncompetitive 
process mechanism you propose in the bill?
    Response: Current Federal procurement regulations permit 
noncompetitive contracting when it is known with certainty that only 
one source is available. The provision for a noncompetitive process 
proposed in the Administration's BioShield bill would permit HHS to 
award contracts without competition when the number of available 
sources is greater than one, but highly limited. This authority would 
be used to bypass a number of time-consuming steps, but the Department 
would continue to undertake necessary steps, including effective 
acquisition planning, to ensure contracts are awarded at fair and 
reasonable prices and include terms and conditions that are in the best 
interest of the government. In biomedical research and development, 
especially for vaccines and other complex biological materials, it is 
frequently the case that only a few companies possess a viable 
candidate product or technology. Without these authorities, HHS would 
be obligated to follow the complete process of solicitation and 
competitive contracting, even when it knows that only a very limited 
number of companies could submit proposals.
    Question 25: With single source procurement contracts for 
countermeasures, are the profit margin and rate of return pre-
established in the contract?
    Response: Under the Federal Acquisition Regulation, single source 
procurement contracts do not contain a profit margin or rate of return. 
If the contract is a firm-fixed price contract, the Government is 
always charged the negotiated unit price in the contract. If the 
contract is a cost reimbursement, the contract is priced on the basis 
of negotiated allowable costs plus a fixed fee, or such costs plus cost 
containment or performance incentives.
    Question 26: As is customary in conventional government 
procurement, couldn't HHS simply expedite the RAP and awarding process 
for developing countermeasures? Wouldn't a competitive bidding process 
serve the public interest and public goals better?
    Response: The Department's intent is not to forego competition, but 
rather to use highly streamlined forms of competition (including 
application of simplified acquisition techniques) whenever possible and 
to use noncompetitive processes, only if necessary and justified. While 
current laws and regulations provide agencies with considerable 
flexibility, including the ability to conduct efficient source 
selections when there are many potential contractors, the current 
framework does not fully address the environment which the Department 
routinely anticipates for the types of needs, addressed by its 
BioShield legislation--namely, very limited numbers of companies (but 
perhaps more than one) that possess a viable candidate product or 
technology to meet pressing demands for effective countermeasures. HHS 
fully appreciates the benefits that competition provides and intends to 
engage in good planning and market research in all acquisitions so that 
it can take advantage of competition whenever possible and ensure well 
structured contracts with appropriate incentives for successful results 
in all contracts in furtherance of Project BioShield.
    Question 27: Better still, why shouldn't DHS start contracting 
immediately to develop countermeasures for a National Institute of 
Allergy and Infectious Disease High Threat List (``A List'') Toxins?
    Response: HHS, through the NIAID/NIH, has the mandate from both the 
Congress and the Administration to develop countermeasures for 
biodefense because HHS, NIH, and NIAID have extensive resources of 
scientific talent and expertise, and a long and proven track record of 
success in developing drugs and vaccines for infectious diseases. DHS 
cannot, in any reasonable timeframe, replicate this experience and 
expertise. Providing HHS with the special (and targeted) authorities of 
Project BioShield for the scientific experts at the NIH who are already 
in place and know how to use them would enable NIH to immediately 
accelerate research and development of countermeasures for agents that 
may cause a public health emergency affecting national security. HHS 
will continue to work collaboratively with DHS to coordinate research 
and development priorities and activities between the departments.
    Question 28: Much of the debate on preparedness revolves around 
biological toxins. Is there anything specifically that's being done to 
develop countermeasures for chemical agents?
    Response: The NIH is actively assessing its opportunities to assist 
the national effort in this regard. Several steps have already been 
taken. For example, NIAID initiated a meeting with the leadership of 
the National Academy of Sciences to explore potential areas of 
collaboration and cooperation, following the NAS Report ``Making the 
Nation Safer: The Role of Science and Technology in Countering 
Terrorism.'' NIAID also convened an expert panel to help frame the 
``landscape'' of biomedical research and development needs in this 
area. Within this framework, several NIH Institutes and Centers are 
exploring opportunities to address needs in this area. Across the NIH, 
these efforts will be coordinated through the NIH Biodefense Research 
Coordinating Committee with the NAS and other relevant organizations 
and federal agencies.
    Question 29: Two major issues in countermeasure technology 
development are economic incentives and liability concerns. In your 
testimony, you mentioned that grants and contracts might not be 
sufficient for developing the public/private partnership. How will 
Project BioShield address these issues in order to expedite the 
development of the next generation of countermeasures?
    Response: Section 3 of the bill, the biomedical countermeasures 
procurement section, facilitates the creation of markets for certain 
biodefense products that, absent new incentives, would likely be 
inadequate to attract sufficient investment by the private sector to 
meet emerging needs for development of countermeasures. This proposal 
complements existing statutes that support technology transfer and 
public/private partnerships, including the Bayh-Dole Act and the 
Federal Technology Transfer Act. Moreover, the bill would enable the 
Department to award grants, contracts, and cooperative agreements for 
research and development of medical countermeasures through expedited 
and more flexible procedures to enhance the Department's ability to 
accelerate research on and development of innovations applicable to 
biodefense.
    In general, grantees and contractors are expected to carry 
insurance to cover research and development activities. There is some 
concern that insurance coverage will not be sufficient, or available 
for countermeasure research and development, but existing mechanisms, 
as discussed in the Department's responses to questions 14 and 19, 
would address such concerns.
    Question 30: Mr. Secretary, it is my understanding that the U.S. 
Armed Forces Radiobiology Research Institute (AFRRI) is currently in 
partnership with a private drug company to conduct Phase III trials of 
a compound, HE-2100, that has shown early promise in counteracting the 
immuno-depleting effects of nuclear radiation. Considering the 
promising nature of this and possibly other radioprotectant drug 
candidates, can you elaborate on how Project BioShield or other 
initiatives would specifically enhance the ability to aid in the 
development and procurement of these drugs?
    Response: The U.S. Armed Forces Radiobiology Research Institute has 
published several articles on the drug HE-2100. The compound appears to 
be well-tolerated in high doses in mice and is reported to have modest 
radioprotectant activity when administered prior to radiation exposure. 
HE-2100 is the subject of a Cooperative Research and Development 
Agreement between the Armed Forces Radiobiology Research Institute, the 
Uniformed Services University of the Health Sciences, and Hollis Eden 
Pharmaceuticals Inc. At this point in its development, further 
preclinical and animal model work is necessary to determine if the 
compound provides radioprotectant activity when it is administered 
FOLLOWING radiation exposure. The absence of such post-exposure 
radioprotectant activity would significantly limit the role for HE-2100 
in civilian biodefense. In addition, research is also needed to 
establish that the compound is safe and efficacious for civilian 
biodefense use. Thus, it is not a candidate for Project BioShield at 
this time.
    Question 31: Mr. Secretary, it is also my understanding that the 
current fiscal year budget for AFRRI is in some degree of doubt, and 
that the agency currently does not and may not in the future have the 
resources to aggressively develop promising radioprotectant drug 
candidates like HE-2100. Do you see a role for HHS in directly aiding 
in the development of this compound, considering it is AFRRI's leading 
radioprotectant candidate?
    Response: HHS, through NIH, has recently initiated discussions with 
AFRRI and a number of other organizations, including the National 
Academy of Sciences, to explore how it might contribute to research and 
development on countermeasures for nuclear/radiological and chemical 
terrorism. While HE-2100 appears to have some promise as a 
radioprotectant from a DoD perspective, its interest to and priority 
for civilian indications remain to be determined, but are dependent on 
the development of evidence of radioprotectant activity when 
administered AFTER radiation exposure. This would be a minimal 
requirement for a radioprotectant destined for civilian biodefense use.
    It is also important to note that there are other possible 
opportunities to research and develop potential radioprotectant 
countermeasures for civilian biodefense, too. As with HE-2100, HHS is 
also in the process of assessing their merit, interest, and possible 
priority for support.
    Question 32: How much do you estimate Project BioShield will cost? 
What costs are likely to be incurred for fiscal years 2003 and 2004? 
Over the next ten year period? What is the basis for the 
Administration's cost estimates?
    Response: We estimate costs of $5.6 billion over 10 years, 
including $890 million in FY 2004. No FY 2003 spending is assumed. 
These estimates are based on a combination of assessments of threats, a 
determination of which threats cannot be addressed by commercially 
available products, and current scientific judgements of what 
countermeasures can be produced during this time frame. FY 2004 
estimates reflect research NIH believes is nearing proof of scientific 
concept, with funds expected to be used for a new anthrax vaccine, a 
smallpox vaccine that is safe for those with medical conditions that 
contraindicate use of current vaccines, and protection against 
botulism.
    Question 33: To what extent has the Administration worked closely 
with the industry in developing its program to develop these 
countermeasures?
    Response: See the answer to question #5
    Question 34: In what ways does BioShield focus on procuring 
countermeasures that become available?
    Response: The countermeasure procurement section of the Project 
BioShield bill requires the Secretaries of Homeland Security and of HHS 
to make ongoing assessments of which chemical, biological, 
radiological, and nuclear agents pose material risks of use against the 
United States population and of the effect on public health of possible 
use of such agents. It also requires ongoing determinations of agents 
for which countermeasures are necessary to protect public health, and 
ongoing assessments by the two Secretaries of the availability and 
appropriateness of specific countermeasures to address particular 
threats. It requires the Secretary of HHS to identify countermeasures 
that are appropriate for procurement with the special fund.
    Question 35: In what ways does it serve as an incentive for long-
term research projects?
    Response: Project BioShield provides a critically important 
incentive for long-term research and development of drugs and vaccines 
(countermeasures) for bioterrorism preparedness. Many such 
countermeasures have essentially no market other than the U.S. 
government. In the absence of a market, there is no incentive for 
private sector interest or involvement in development of these 
countermeasures because fiduciary responsibilities to shareholders 
channel priorities toward other, more lucrative opportunities. This is 
particularly the case with vaccines, where production is complex and 
costs can be extremely high. BioShield creates the missing ``market'' 
for these countermeasures in two ways. The Government may contract to 
purchase a specified quantity of the product if there are data 
supporting a reasonable conclusion that the product can be approved or 
licensed within five years. For products that are further away from 
approval or licensure, the availability of the permanent indefinite 
appropriation will assure companies that, if their research and 
development do yield an appropriate product, the Government will be 
able to purchase it even if there is no commercial market. Under these 
circumstances, it is more likely that companies will be willing to 
assume the risks inherent in research and development.
    Question 36: Will BioShield define a market for a countermeasure in 
advance so that a company can evaluate it BEFORE it begins a major 
long-term research project to develop it? How specific will this 
definition be? Does the government, in effect, guarantee that this is 
the market that will exist if the company successfully develops the 
countermeasures?
    Response: Project BioShield is designed to achieve results, and the 
countermeasure procurement section of the bill envisions the Government 
entering into firm purchase obligations. If the product does not yet 
have approval or licensure, the Government may enter into a procurement 
contract under the bill as long as there is clinical experience or 
research data supporting a reasonable conclusion that the product can 
be approved or licensed within five years. For products that are 
further away from approval or licensure, the procurement section will 
still enhance the incentives for a company to enter into the research 
project--the availability of the permanent indefinite appropriation 
will assure companies that, if their research yields an appropriate 
product, the Government will have the ability to purchase it even if 
there is no commercial market.
    Finally, it should be kept in mind that the research and 
development section of the bill provides flexible mechanisms for 
procurement of research on countermeasures.
    Question 37: If a company believes it has successfully developed a 
countermeasure and it is not, in fact, awarded the procurement, what 
recourse does it have?
    Response: The first recourse for a disappointed bidder would be to 
protest to the agency and cite section 33.103 of the Federal 
Acquisition Regulation. Beyond this there are two other avenues for 
disappointed bidders to challenge Government contract award decisions. 
First, under the Tucker Act (28 U.S.C. 1491(a)(1)), contractors may 
file bid protests challenging award decisions in the U.S. Court of 
Federal Claims. Second, pursuant to provisions within the Competition 
in Contracting Act (31 U.S.C. Sec. Sec. 3551-3556), contractors may 
also file bid protests at the General Accounting Office (GAO).
    Question 38: The legislation only applies to procurement where 
``production and delivery within five years of sufficient quantities of 
the product . . . is reasonably expected to be feasible''. Why did you 
limit the focus to this time period? What types of research is likely 
to be covered by this time frame and what types is likely to be 
excluded? What types of research is likely to be covered by this time 
frame and what types is likely to be excluded?
    Response: Drug and vaccine development is fraught with 
unpredictability. A very high percentage of candidate drugs and 
vaccines fail development. The five year window was chosen because it 
is virtually impossible to make reasonable predictions of the 
feasibility of ``production and delivery . . . of sufficient quantities 
of the product'' in longer time horizons.
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