[Senate Hearing 108-826]
[From the U.S. Government Publishing Office]
S. Hrg. 108-826
BIOSHIELD II: RESPONDING TO AN EVER-CHANGING THREAT
=======================================================================
JOINT HEARING
before the
COMMITTEE ON THE JUDICIARY
and
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
OCTOBER 6, 2004
__________
Serial No. J-108-99
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
ORRIN G. HATCH, Utah, Chairman
CHARLES E. GRASSLEY, Iowa PATRICK J. LEAHY, Vermont
ARLEN SPECTER, Pennsylvania EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina RUSSELL D. FEINGOLD, Wisconsin
LARRY E. CRAIG, Idaho CHARLES E. SCHUMER, New York
SAXBY CHAMBLISS, Georgia RICHARD J. DURBIN, Illinois
JOHN CORNYN, Texas JOHN EDWARDS, North Carolina
Bruce Artim, Chief Counsel and Staff Director
Bruce A. Cohen, Democratic Chief Counsel and Staff Director
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
JUDD GREGG, New Hampshire, Chairman
BILL FRIST, Tennessee EDWARD M. KENNEDY, Massachusetts
MICHAEL B. ENZI, Wyoming CHRISTOPHER J. DODD, Connecticut
LAMAR ALEXANDER, Tennessee TOM HARKIN, Iowa
CHRISTOPHER S. BOND, Missouri BARBARA A. MIKULSKI, Maryland
MIKE DeWINE, Ohio JAMES M. JEFFORDS (I), Vermont
PAT ROBERTS, Kansas JEFF BINGAMAN, New Mexico
JEFF SESSIONS, Alabama PATTY MURRAY, Washington
JOHN ENSIGN, Nevada JACK REED, Rhode Island
LINDSEY O. GRAHAM, South Carolina JOHN EDWARDS, North Carolina
JOHN W. WARNER, Virginia HILLARY RODHAM CLINTON, New York
Sharon R. Soderstrom, Staff Director
J. Michael Myers, Minority Staff Director and Chief Counsel
C O N T E N T S
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STATEMENTS OF MEMBERS OF THE COMMITTEES
Page
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming.. 6
prepared statement........................................... 114
Gregg, Hon. Judd, a U.S. Senator from the State of New Hampshire. 1
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah...... 2
Kennedy, Hon. Edward M., a U.S. Senator from the State of
Massachusetts, prepared statement.............................. 138
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 21
prepared statement........................................... 157
Reed, Hon. Jack, a U.S. Senator from the State of Rhode Island... 9
Schumer, Hon. Charles E., a U.S. Senator from the State of New
York........................................................... 22
WITNESSES
Angulo, Carlos, Partner, Zuckerman Spaeder LLP, on behalf of the
Coalition for a Competitive Pharmaceutical Market.............. 14
Bartlett, John G., M.D., Chief, Division of Infectious Diseases,
Johns Hopkins University School of Medicine, on behalf of the
Infectious Disease Society of America.......................... 17
Clerici, John M., Partner, McKenna, Long & Aldridge, LLP,
Washington, D.C................................................ 28
Grant, Christine, Vice President, Public Policy and Government
Relations, Aventis Pasteur..................................... 7
Greenberg, Patricia B., R.N., on behalf of the Service Employees
International Union, AFL-CIO................................... 30
Jaeger, Kathleen D., President and Chief Executive Officer,
Generic Pharmaceutical Association, Arlington, Virginia........ 12
Kushan, Jeffrey P., Partner, Sidley, Austin, Brown and Wood, LLP,
Washington, D.C................................................ 26
Timmins, Alan P., President and Chief Operating Officer, AVI
BioPharma, Inc., Portland, Oregon.............................. 10
QUESTIONS AND ANSWERS
Responses of Carlos Angulo to questions submitted by Senators
Kennedy and Schumer............................................ 33
Responses of Kathleen Jaeger to questions submitted by Senators
Kennedy and Schumer............................................ 38
Responses of John Clerici to questions submitted by Senators
Hatch and Kennedy.............................................. 48
Responses of Christine Grant to questions submitted by Senators
Kennedy and Schumer............................................ 56
Responses of Jeffrey Kushan to questions submitted by Senator
Kennedy........................................................ 62
Responses of Alan Timmins to questions submitted by Senators
Kennedy and Schumer............................................ 67
SUBMISSIONS FOR THE RECORD
Aetna, Inc., Mark Rubino, RPh., MHA, Chief Pharmacy Officer,
Hartford, Connecticut, statement............................... 68
Angulo, Carlos, Partner, Zuckerman Spaeder LLP, on behalf of the
Coalition for a Competitive Pharmaceutical Market, prepared
statement...................................................... 69
Bartlett, John G., M.D., Chief, Division of Infectious Diseases,
Johns Hopkins University School of Medicine, on behalf of the
Infectious Disease Society of America, prepared statement and
attachments.................................................... 73
Biotechnology Industry Organization, Washington, D.C., prepared
statement...................................................... 86
Clerici, John M., Partner, McKenna, Long & Aldridge, LLP,
Washington, D.C., prepared statement........................... 90
Grant, Christine, Vice President, Public Policy and Government
Relations, Aventis Pasteur, prepared statement................. 115
Greenberg, Patricia B., R.N., on behalf of the Service Employees
International Union, AFL-CIO, prepared statement............... 122
Jaeger, Kathleen D., President and Chief Executive Officer,
Generic Pharmaceutical Association, Arlington, Virginia,
prepared statement............................................. 127
Kushan, Jeffrey P., Partner, Sidley, Austin, Brown and Wood, LLP,
Washington, D.C., prepared statement and attachment............ 143
Lieberman, Hon. Joseph, a U.S. Senator from the State of
Connecticut, statement and attachments......................... 160
Rafferty, James G., Harkins Cunningham LLP, Washington, D.C.,
statement...................................................... 221
Teva Pharmaceuticals USA, George S. Barrett, President and Chief
Executive Officer, North Wales, Pennsylvania, letter........... 233
Timmins, Alan P., President and Chief Operating Officer, AVI
BioPharma, Inc., Portland, Oregon, prepared statement.......... 236
BIOSHIELD II: RESPONDING TO AN EVER-CHANGING THREAT
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WEDNESDAY, OCTOBER 6, 2004
United States Senate,
Committee on the Judiciary,
Committee on Health, Education, Labor, and Pensions,
Washington, D.C.
The committees met jointly, pursuant to notice, at 10:00
a.m., in Room 216, Hart Senate Office Building, Hon. Judd
Gregg, Chairman of the Committee on Health, Education, Labor,
and Pensions, presiding.
Present: Senators Gregg, Hatch, Enzi, Reed, Leahy, and
Schumer.
OPENING STATEMENT OF HON. JUDD GREGG, A U.S. SENATOR FROM THE
STATE OF NEW HAMPSHIRE
Chairman Gregg. I know we are going to be joined by a
number of other colleagues. Unfortunately, at this time, there
is a conference going on relatively to significant tax
legislation which I suspect Senator Hatch is involved in. I am
also involved in it relative to a number of issues, one of
which is going to be taken up this morning, so I may have to
leave to attend that conference, unfortunately.
But we did want to have this hearing today, this joint
hearing today with the Judiciary Committee and the HELP
Committee to address the issue of BioShield and how we are
proceeding relative to the issue of bioterrorism and protecting
our nation and our people against a bioterrorist attack.
Throughout the 1990s and the 1980s and certainly the 1970s
and the 1950s and 1960s, when you discussed national defense
and infrastructure for national defense, you always talked
about whether or not we had the industrial complex to be able
to maintain our capacity to defend ourselves as a nation.
People talked about whether we could build planes or whether we
could build tanks or whether we could build artillery and there
was always a concern that our defense industrial complex might
be eroding or was being shipped overseas.
Today, the defense industrial complex is entirely different
because we are fighting a different war. The defense industrial
complex, in other words, the industries which are going to
defend us as a nation, are our technology industries and
especially biologic industries. Our concern is that those
industries which produce the medicines which will allow us to
defend ourselves from an attack, a biological or chemical
attack, those industries be vibrant, strong, and robust in
their ability to produce first the research, and then produce
the anti-toxins and the vaccines necessary to protect our
people.
That is why we passed BioShield. The whole concept behind
BioShield was to create within the research community and those
folks who produced biological agents which fight biological
agents, vaccines specifically, produce an atmosphere where
those companies, those individuals would have an incentive to
go out and create the vaccines necessary to protect our people
from attacks by biological agents, whether they be smallpox,
anthrax, plague, botulism.
We recognize as a Congress that there isn't a consumer
group out there that is going to use these types of vaccines
other than the government, and therefore the government had to
set up a system to try to create an incentive to produce these
types of cures and vaccines.
The concern we have, I have, anyway, is that since
BioShield has passed, we still have a very anemic response
within the research communities and within the production
communities to producing these types of vaccines and anti-
toxins which would protect us in the case of an attack. Less
than 100 companies have actually come forward and said that
they have an interest in pursuing biologics.
So that creates a question. What else do we need to do?
What else do we need to do to make sure that there is an
incentive out there amongst our creative and innovative people
to produce the necessary vaccines to protect us as a nation
from these types of biological attacks, because we recognize
that in today's world, it is a biological or chemical attack,
along with a potential dirty bomb, that is the most significant
threat to us as a nation.
So that is what this hearing is about, to get an update on
how people think BioShield I is working and to get some ideas
as to what we should do should we pursue a BioShield II
proposal.
I certainly appreciate Senator Hatch taking the lead in
this effort with the Judiciary Committee and the HELP Committee
working together. That is the type of cooperation that I think
reflects well on us as a Congress, and certainly Senator Hatch
has been a leader in all sorts of areas dealing with
pharmaceuticals especially, having written the Hatch-Waxman
Act, and was chairman of this, or ranking member on this
committee for a number of years, the HELP Committee, and now,
of course, runs the Judiciary Committee. So his knowledge on
this issue is instrumental to our capacity to be successful as
a Congress. So I will yield to my fellow chairman, Senator
Hatch.
STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE
OF UTAH
Chairman Hatch. Thank you, Mr. Chairman. I am grateful to
be able to participate with you in this hearing because this is
a very, very important hearing. We are both pulled all over
Capitol Hill right now, so I am going to make my opening
statement and then I am going to have to leave because I am in
the middle of the conference on the Medicare, and you are
also--on the FSC-ETI bill, excuse me, and that has been a very
intense conference. But I understand Senator Enzi is going to
be here, too.
Chairman Gregg. Senator Enzi is going to be here.
Chairman Hatch. That is great. You couldn't have anybody
better. Let me just make these comments.
More than three years ago--now, I want to welcome our
witnesses. They are great witnesses, great people to have here
on both panels and I just want to tell you how impressed and
how proud I am to have all of you here.
But let me just say, more than three years ago, our nation
suffered the most deadly attack on its soil. We woke up on the
morning of September 11, 2001, to a new reality. A month later,
we again realized the magnitude of the ever-changing threat
that we were facing when this building, this very building, was
contaminated with anthrax and ended up being shut down for
about three months. Most Americans were shaken out of their
sense of complacency in 2001.
After the events of 9/11, Congress took action to secure
our borders, our ports, and our airlines and bolster our public
health infrastructure. However, the essential steps necessary
to secure our nation against the ongoing threat of bioterrorism
are still being carefully evaluated, and while these steps are
being evaluated, time is running out.
We took an important first step when the Project BioShield
Act of 2004, better known as BioShield, was signed into law in
July. However, there is so much more that needs to be done.
That is why the Judiciary Committee and the Senate HELP
Committee are holding this hearing today, to raise awareness on
what else needs to be done in order to combat bioterrorism.
I couldn't be more happy to work with a fellow chairman
than with Senator Gregg. He has done a terrific job on the HELP
Committee. It is a committee I have always taken a great
interest in. I just admire him greatly. He is a very, very
intelligent man who has done an awful lot of good in this body.
So it is a privilege to be here with him.
It is common knowledge that terrorists are specifically
interested in biological weapons. Many of these weapons were
produced by Soviet scientists before the collapse of the Soviet
Union and some experts believe that Soviet scientists concocted
strains of smallpox that were 100 percent lethal. They
developed a strain of yersenia pestis, the bacterium that
causes the plague, which was resistant to ten types of
antibiotics.
Today, it is unclear where many of these former Soviet
scientists are working, and even more disturbing, it is not
clear if these bioterror agents are still being kept in the
former Soviet Union. As new varieties of bioterror weapons are
developed, the threat of another attack becomes very real.
For this reason, I believe that the time for Congress to
act on the Lieberman-Hatch-Gregg BioShield II legislation is
now and I think it is important that we move ahead.
Even if we continue investing resources to build up a
prepared public health infrastructure, if we do not have the
medicines to treat those who are exposed or infected, the only
other option is quarantining these individuals, and my
colleagues, quarantining individuals, hundreds, maybe even
thousands of people, will be extremely difficult to manage. So
this is important stuff.
As I have said earlier, BioShield is only the first step to
ensure readiness against this threat, and I am proud to say
that the new law is based on legislation that my good friend
and colleague, Senator Joe Lieberman, and I introduced this
Congress, S. 666, the Biological, Chemical, and Radiological
Weapons Countermeasures Research Act.
Today's hearing will focus on the next steps, essentially,
what is needed in a BioShield II package and what we should do
about it. BioShield II is the next step in the legislative
process toward accomplishing this important and time-sensitive
goal of bioterror readiness, and Senator Lieberman and I intend
to reintroduce BioShield II legislation in the 109th Congress.
We simply cannot wait. Considering the anthrax attacks of
2001 and the ricin attack on our nation's capitol in February
of this year, we already have ample reason to believe that the
July law, while an important first step, is not sufficient and
we need to move or to enact a more comprehensive legislative
strategy.
Given the growing risk of further attacks on our nation and
potentially devastating consequences of bioterrorism, we must
abandon business as usual and take the vigorous steps that will
be advocated through our BioShield II legislation.
The purpose of today's hearing is to expose and explore an
array of intellectual property, liability, and other incentives
to ensure the creation of a robust biodefense industry that
needs to be included in the BioShield II legislation. Direct
government funding for this research is not the most effective
strategy. To be effective, we must also enact incentives so
that potential investors will want to fund the research
associated with building a defense against potential attacks.
We must have the biopharma industry working with us on these
solutions.
BioShield II will encourage biopharma companies to take the
lead in the development of vaccines, therapeutics, and
diagnostics to combat terrorism. The goal of our legislation is
to have a safer and better prepared America, but in order to be
prepared, we need to provide researchers with the proper
incentives. These companies are worried about partnering with
our government, and I believe Congress needs to engage the
industry so that we can reap the benefits of their research.
But forming partnerships with these companies is the key.
Otherwise, this partnership will never work.
I look forward to hearing from our witnesses regarding this
matter and what their thoughts are on what incentives should be
offered to these researchers and companies.
Another critical question that will be explored today is
whether these same incentives will apply to infectious diseases
generally. In my opinion, all research on infectious diseases
is interrelated, so we might strengthen bioterror research if
the research focus is broader than just bioterror pathogens.
Furthermore, by conducting this research, we may also discover
cures for diseases that afflict the world's poorest nations.
I would like to acknowledge the terrific work of the HELP
Committee, especially Chairman Judd Gregg and Senator Ted
Kennedy, the HELP Committee's Ranking Minority Member, Senator
Enzi, as well, but every member of that committee. I
particularly appreciate you folks on that committee recognizing
the importance of this issue by agreeing to hold this joint
hearing at such a busy time in the legislative session.
Majority Leader Frist has also been a leader in this area,
and I want to thank the Judiciary Committee's Ranking Minority
Member, Senator Pat Leahy, for his cooperation on holding
today's hearing. Bioterrorism is an extremely personal issue
for him. His office was one of the offices that received a
letter containing anthrax.
Finally, I would like to recognize the work of our good
friend, Senator Joe Lieberman, whose leadership on this issue
has made the legislation possible and he deserves a lot of
credit. I might add, he deserves credit for bringing this
matter before our committees and the full Senate.
I also want to recognize the indefatigable efforts of Chuck
Ludlam of Senator Lieberman's staff for his considerable
efforts in developing this legislation.
Senator Lieberman is, of course, one of the managers of the
intelligence reform bill which is pending on the floor this
morning, and unfortunately, it is simply impossible for him to
appear to present his testimony today. I ask unanimous consent
that Senator Lieberman's testimony be included in the hearing
record, and without objection, it will.
Senator Lieberman has asked me to send his apologizes to
the committee and to all witnesses. We are all under a lot of
pressure right now because it is the end of the session. I know
Senator Gregg has a thousand things to do, and I am pulled all
over Capitol Hill right now. I just have to say that, again, I
appreciate all the witnesses that are going to be here today.
This is very important stuff, and I promise you that I am
going to know everything that you say and I am going to pay
very strict attention to it. I know all of your schedules are
busy, too, and to join us today for this very important
discussion is very important. So I look forward to hearing your
thoughts and reading your thoughts on what should be included
in our BioShield II legislation.
I ask unanimous consent that the following statements be
submitted for the record. First, the statement of James
Rafferty from Harkins Cunningham on tax incentives.
Second is the statement of George Barrett, President and
CEO of Teva Pharmaceuticals.
And, of course, the statement of the Biotechnology Industry
Organization. Without objection, we will put those in the
record.
With that, I know Senator Leahy when he comes will have a
statement, so maybe we could interrupt for Senator Leahy, or
whoever is talking, when they finish, we can turn to Senator
Leahy.
Chairman Gregg. You and I are probably going to have to
leave in a few minutes to go to the FSC conference, and so I
have asked Senator Enzi to chair the hearing and introduce the
witnesses.
Chairman Hatch. That would be great.
Chairman Gregg. I will stay as long as I can.
Senator Enzi. Thank you, Mr. Chairman
Chairman Hatch. Thank you for doing this, Senator Enzi.
STATEMENT OF HON. MIKE ENZI, A U.S. SENATOR FROM THE STATE OF
WYOMING
Senator Enzi. [Presiding.] I will also make some brief
comments. I want to thank the chairmen, both chairmen, for this
effort. This is very unusual for the United States Senate, to
combine two committees, but it demonstrates the importance of
this particular issue and the way that the two committees have
worked together to handle the pieces of it that come under
their jurisdiction.
The purpose of the hearing, of course, is to build a
record. I think we have particularly capable witnesses today
who will be building that record that the Senate can look at.
We are doing this right now, even though it is the busiest time
of the year for the United States Senate, so that we can have
the jump on things when we get here next year, because that is
when the action will be taken and this bill will have an
opportunity to be one of the first in line.
Protecting America from bioterrorism will require the best
efforts of both government and the private sector. This hearing
today will demonstrate that. It will help us to see what more
needs to be done to make America as safe as possible from this
threat.
The legislation to enact President Bush's Project
BioShield, which Congress passed into law in July, is an
important first step towards securing our homeland and our
citizens from a bioterror attack and its aftermath. I am proud
to have cosponsored that legislation and I am committed to
seeing the law improves our biodefense capabilities. My only
regret is that it took more than a year for the full Senate to
approve the bill after the HELP Committee reported it to the
floor with unanimous support.
Now, looking forward, it is critical for these two
committees to work together to build upon Project BioShield.
Project BioShield was never intended to address all of the
obstacles to the development of bioterror countermeasures. It
was intended simply to establish a stable and guaranteed source
of Federal financing for the purchase of countermeasures
developed by private industry, since most of these products
don't even have other significant commercial applications.
Now that we have established this financing mechanism, it
is time that we address the other roadblocks that impede our
progress on bioterrorism countermeasures. Chairman Hatch and
Senator Lieberman have developed a bill that aims to address a
wide variety of outstanding concerns that must be addressed,
from liability protections to intellectual property incentives.
I was looking forward to hearing Senator Lieberman. I am
very impressed with the testimony. I was anxious to see how he
was going to condense that into just a few minutes. It is one
of the most extensive testimonies that I have seen presented,
and, of course, that becomes a part of the record today, as
well.
I wholeheartedly agree with Senator Lieberman that we will
not be able to address fully this threat without tapping the
ingenuity that resides in these innovative industries. We need
their input and involvement as we take the next steps toward
protecting America from bioterrorism.
Again, I thank the chairmen and ranking members of both the
committees, as well, for coming together to refocus these
committees on our biodefense capabilities and I look forward to
working with the HELP Committee and the Judiciary Committee as
we build this national biodefense.
[The prepared statement of Senator Enzi appears as a
submission for the record.]
Senator Enzi. The panel that is before us, we have
Christine Grant, who is Vice President of Government Relations
with Aventis. It is the third-largest pharmaceutical company
and one of the largest manufacturers of vaccines in the world.
Aventis will provide their perspective on the remaining
barriers to biodefense research and development.
We have Alan Timmins, who is the CEO of AVI BioPharma,
which is developing treatments for a wide variety of infectious
diseases and potential bioterror agents, including hepatitis C,
West Nile, SARS, dengue fever, and ebola, to provide a smaller
company's perspective on BioShield.
We have Kathleen Jaeger, the President and CEO of Generic
Pharmaceutical Association. She will present the views of the
generic pharmaceutical industry, and although generally
supportive of including additional measures under BioShield,
the Generic Pharmaceutical Association is concerned about some
of the proposed patent and intellectual property provisions.
We have Carlos Angulo, who is with Zuckerman Spaeder. He
represents the Coalition for a Competitive Pharmaceutical
Market. It is made up of large employers, such as General
Motors, Caterpillar, and of health insurers, such as Blue
Cross-Blue Shield. The Coalition seeks to ensure the timely
availability of lower-cost generic drugs.
We have Dr. John Bartlett, who is the Chief of the Division
of Infectious Diseases at Johns Hopkins University School of
Medicine. He is appearing on behalf of the Infectious Disease
Society of America, IDSA. He will discuss why BioShield should
be expanded to cover products intended to combat infectious
disease generally.
We thank you for being here. Ms. Grant?
STATEMENT OF CHRISTINE GRANT, VICE PRESIDENT, PUBLIC POLICY AND
GOVERNMENT RELATIONS, AVENTIS PASTEUR
Ms. Grant. Good morning. Mr. Chairman, members of the
committee, it is an honor for me to testify before you today
about Project BioShield. I am here to represent one company,
Aventis Pasteur. We are the largest company in the world
devoted entirely to vaccine research, development, and
manufacture. We produce more than a billion and a half doses of
vaccine each year, protecting more than a half-a-billion people
against 20 different diseases. We manufacture influenza vaccine
and several other vaccines at our Swiftwater, Pennsylvania,
plant here in the United States. We have had a variety of
successes throughout the years.
And we have also been partnering with the Federal
Government in times of peace as well as conflict. We provided
support of tetanus and diphtheria vaccine after the attack on
the World Trade Center. We donated 85 million doses of smallpox
vaccine to the Federal Government. We have always supplied the
U.S. military, including military needs today in the war in
Iraq. And we have responded already to more than one Federal
request for biodefense measures, and therefore, we have some
current experience on the subject. We have worked on global
polio eradication and are actively involved in trying to
develop a SARS and avian influenza vaccines.
We have testified in support of a number of the principles
in BioShield I and we are pleased that you recognized in that
bill that the development of medical and biological products
requires a number of years under the most favorable
circumstances to bring a product to market. That is why the
multi-year contracting provisions were so important in
BioShield I. We now ask and hope that HHS and the staff will
implement those multi-year provisions enthusiastically as we
now begin to see the fruits of BioShield I.
We also want to talk about the issue of having what are
known as other transaction authority. Other transaction
authority allows the HHS Secretary to contract with our
biodefense companies for research, development, and
manufacturing under one contract, under one roof. While the
reports in BioShield I seem to indicate that other transaction
authority was being provided, we would certainly encourage that
that become explicitly considered in BioShield II. The reason
is that, realistically, an established company like Aventis
Pasteur not only does research and development, but we also
emphasize the ongoing reliable manufacture of millions of doses
of vaccine, so that when we have a satisfactory result at the
research and development phase, we are in this business to
continue to manufacture with HHS for HHS and the United States.
Similarly, Project BioShield I provided HHS the streamlined
procurement authorities to ensure that contracting process is
familiar, is consistent with commercial business practices, and
that was a very important element. We now hope that HHS and its
staff will have the energy, the enthusiasm, and the empowerment
to ensure that it is not business as usual, but rather
BioShield will be implemented in a way that is familiar to
large established commercial companies.
Now, what remains to be done? Well, first, the issue of
potential liability protection for entities such as us and
other companies to get involved in this area is very, very
important. For example, in our case, the absence of liability
protection frankly was a major obstacle in our response to
recent procurement by NIH for development of a next generation
of anthrax vaccine. The absence of such liability protection
continues to be a major hurdle for our company. We always try
to obtain commercial insurance, but the practical reality today
is that it is very unlikely to be able to obtain commercial
insurance for projects of the nature contemplated by Project
BioShield, and BioShield I was silent with respect to
addressing liability.
Now, it is true that the passage of the Homeland Security
Act of 2002 radically altered the way in which the U.S. can go
about promoting the development of technologies. The Safety Act
also provided some protections. But as you will hear in more
detail from other witnesses, the Safety Act has not yet been
applied essentially after the fact or for products such as
vaccines, which are designed to protect against the eventuality
of a terrorism attack, but rather it seems to be limited in
practice to only actual terrorism attacks, and my written
testimony suggests ways that we feel that one could argue that
the Safety Act extends to vaccine.
Now, it is also worth noting that both the Secretary of HHS
and DHS have already the authority to provide Federal indemnity
to private contractors under Public Law 85-804. However, in our
experience, use of such authority remains very, very rare. In
March of 2003, President Bush revised Executive Order 10,789
governing the use of this authority to provide indemnity under
Public Law 85-804 in the context of anti-terrorism
technologies.
However, while HHS is currently using its authority in very
limited circumstances, our problem in talking with HHS has been
that the best understanding is that the agency is not providing
such indemnification or other liability protection until, at
best, a contract is awarded, and even then has not to date
guaranteed that such protection will be forthcoming, even after
an award is made. This, we are advised, has not been the same
practice in other agencies and we would encourage working with
you on that.
It puts us, as an established company, in the untenable
position of having to perform a contract bare of liability
protection and assume what are really very unusually high legal
risks for these kind of projects. Once a contract is awarded,
frankly, the leverage has changed. It is very difficult for us.
We must rely on the agency to follow through and decide whether
to provide liability protections.
So in summary, we would like to suggest that certainly
going forward in BioShield II, that the authority for other
transactions be offered and that we work together on liability
protections, and I will be happy to answer any questions.
Senator Enzi. Thank you.
[The prepared statement of Ms. Grant appears as a
submission for the record.]
Senator Enzi. My apologies to Senator Reed. I didn't notice
that he was here until I had already introduced the first
witness. I will interrupt so that he can do an opening
statement. Senator Reed?
STATEMENT OF HON. JACK REED, A U.S. SENATOR FROM THE STATE OF
RHODE ISLAND
Senator Reed. Thank you very much, Mr. Chairman. We have a
simultaneous hearing in the Armed Services Committee, so I will
have to depart after my statement, but thank you.
Let me join my colleagues in commending the chairman and
the ranking member of both the Judiciary Committee and the HELP
Committee for holding this hearing and thank the panelists for
their expert testimony.
This is a vitally important topic and I commend Senator
Lieberman and Senator Hatch for their initiative in proposing
their BioShield legislation. Since 9/11, we have taken dramatic
steps in many different arenas, creating the Department of
Homeland Security, conducting operations across the globe, in
Afghanistan and Iraq, but I think we all agree we have to do
much more when it comes to the threat of bioterror, chemical,
and radiological countermeasures. The proposed legislation, I
believe, is a step forward, following on BioShield I.
One of the concerns I have, however, with the proposed
legislation is that it doesn't recognize the critical role that
the government can play in directing, encouraging and
generating some of the research necessary for this approach. We
are all familiar with commercial products that began through
government research initiatives. The most famous is obviously
the Internet, but satellites, explosive detection equipment,
all these things started with government research and, frankly,
government direction.
The private sector has to play a critical role here, but I
would like to work with the sponsors of the bill to ensure that
we take full advantage of the capacities of the Federal
Government in this process.
One particular point that is critical when it comes to
biotechnology and defenses against biological threats is that
so much of this information is classified. So much of it is
within the purview of the government because of its secrecy,
because of the danger it poses if it gets out. So that, I
think, is another element to consider.
Certainly, we have to be able to incentivize the private
sector to produce these materials in a manner that is
appropriate and have them in supply in case of a threat.
I look forward again to reading thoroughly all the
testimony. Like Senator Enzi, I was hoping that Senator
Lieberman would provide Cliff's Notes today for his extensive
testimony--
[Laughter.]
Senator Reed. --but I will read the testimony. I thank the
panel and I thank the chairman for this time.
Senator Enzi. Thank you. I will mention to the panel that
if you can condense your remarks to keep them within five
minutes, as Senator Reed did, that it would be extremely
helpful.
I will mention also that the record will be left open so
that if you want to make some additions to your testimony, that
will be possible, and also so that members of the committees
can submit questions in writing, which we hope you will also
answer to add to the record.
We will be kind of pressed for time today, because at
11:30, we start doing stacked votes, which will continue until
the intelligence reform bill is finished, which could be very
late tonight without any break. Normally, we would recess for a
vote and come back, but that is not going to be a possibility
today.
So with that, Mr. Timmins?
STATEMENT OF ALAN P. TIMMINS, PRESIDENT AND CHIEF OPERATING
OFFICER, AVI BIOPHARMA, INC., PORTLAND, OREGON
Mr. Timmins. Thank you, Senator. Thank you for inviting me
to testify today. I am Alan Timmins, the President and Chief
Operating Officer of AVI BioPharma. AVI is an Oregon-based
company that was founded in 1980 under the premise that the
gene is the target for drug intervention. We have developed our
own proprietary technology, distinct from that of other
companies, and we have run 11 clinical trials serving over 300
patients without a single adverse event.
We have also found, though, that our technology is
particularly germane in the area of infectious disease and
specifically to bioterror threats. Particularly, it is
available in a rapid-response format, and that is perhaps best
illustrated by an incident that took place last February at the
U.S. Army Medical Research Institute of Infectious Disease,
USAMRIID, at Fort Detrick, Maryland, where a post-doctorate
researcher suffered a needle stick with a syringe that was
filled with ebola. Now, Senator, as you know, ebola is a very
lethal virus, and in fact, it is fatal in over 80 percent of
the cases of people that contract it.
The researchers at USAMRIID called my company and asked if
we were able to offer some sort of help. We looked at publicly
available databases, found a couple of relevant genes, put
together, synthesized a drug, helped USAMRIID get an emergency
IMD from the FDA, and delivered the drug to USAMRIID all within
five days of receiving that request. That gives you an idea of
the power of the technology.
We also work in other infectious diseases, which we believe
leads us to the ability to respond on a rapid response
therapeutic basis to perhaps an engineered agent of bioterror,
and that is important heading forward into the future. We also
believe that we can address over 75 percent of the bioterror
agents currently listed by the CDC.
But the issue here isn't the capability of my company or
any other company, large or small. The issue here is whether or
not we will be able to enact the principles laid down by
Senators Lieberman and Hatch in BioShield II. I would like to
comment very briefly on those particular premises.
In the area of tax incentives, a company like mine, a small
company, we rely in a great degree on favorable capital markets
to provide the funding to support our product development and
to support the clinical trials necessary to get those products
into the marketplace. The tax incentives sketched out by
Senator Hatch and Senator Lieberman would be considered
favorable by the capital markets, including the R&D
partnership, which would allow usage of tax credits and
business deductions on a timely basis, and also the capital
gains incentive, which would encourage investment in smaller
companies that are focused on biodefense.
Also important are the patent incentives, particularly the
``wild card'' patent incentive, which would allow for an
extension of time for a relevant patent for a successful
invention that is used in biodefense. That, along with a period
of market exclusivity, is important also to investors in
smaller companies that are developing biodefense mechanisms.
More important, though, than these two incentives are the
liability protection that is spelled out by Senator Lieberman
and Senator Hatch.
It is important that government gets back to being seen as
a reliable, respectful, and responsible partner with industry
and not in opposition to industry. The way that would happen is
guarantees that intellectual property for companies, small
companies, large companies, including patent protection,
wouldn't be marched on or threatened by the government in the
event of emergency. Rather, the government would work together
in concert with the pharmaceutical industry and the
biotechnological industry to bring the best biodefense
mechanisms forward.
Without that sort of protection, I would submit to you,
though, Senator, that you won't find the best companies, the
best and the brightest, working toward biodefense. You will
find them staying away from that because they will perceive
that the threat to their intellectual property is too great to
take the risk to work with the government. That is
unacceptable, in my opinion.
In conclusion, to address the threat of bioterror, to take
a major step forward, there are four things that need to be
done. First, we need to effectively enact the provisions of
BioShield I.
Second, we need to provide appropriate tax incentives to
foster investment in those companies that are going forward in
biodefense.
Third, we need to look for patent incentives that help
companies such as ours that are developing mechanisms to fight
bioterrorism.
And fourth and most important, again, commit to liability
protection. Commit to the government being a responsible and
strong partner.
Senator I believe that those measures taken together would
pay for themselves over a number of years. But most
importantly, they will foster the innovative spirit of both the
pharmaceutical industry and the biotech industry, and I would
submit to you that that innovative spirit, when all is said and
done, is going to be our most potent weapon in the war against
bioterror.
I am willing to take your questions at any point. Thank
you.
Senator Enzi. Thank you very much. Excellent job.
[The prepared statement of Mr. Timmins appears as a
submission for the record.]
Senator Enzi. Ms. Jaeger?
STATEMENT OF KATHLEEN D. JAEGER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, GENERIC PHARMACEUTICAL ASSOCIATION, ARLINGTON,
VIRGINIA
Ms. Jaeger. Thank you. Chairman Gregg, Chairman Hatch, and
Senator Enzi, I am Kathleen Jaeger, President and CEO of
Generic Pharmaceutical Association. On behalf of GPhA and its
members, thank you for this opportunity to testify on the ways
to strengthen BioShield I.
GPhA and its member companies strongly support the stated
policy goal of both BioShield I and S. 666, to ensure that
America has the adequate supply of drugs and other products
that would serve as countermeasures to bioterrorism attacks.
Indeed, many of our members are already making substantial
contributions to this end. However, new policies in this area
must be balanced against the very real costs.
Mr. Chairman Congress took a significant step toward
national preparedness with the passage of BioShield I this
summer. We believe that the new law represents a sound
foundation from which to build. As you know, BioShield I
provided many of the tools needed to stimulate research and
development of countermeasures. In many ways, Project I
exemplifies what can result when the Federal legislative
process works best by producing bipartisan legislation that
utilizes a private-public partnership and research procurement
and contracting to meet as major challenge head on. And
already, we are seeing representatives of the pharmaceutical
industry, the Federal Government, academia responding to the
new laws, incentives, and call for action.
Nevertheless, even prior to enacting BioShield I, questions
arose about the possible shortcomings, especially with respect
to inadequate product liability protections. S. 666 is designed
to address these concerns. Four notable provisions look
particularly promising in this regard.
First, the limitation of product liability exposure to
manufacturers of desired countermeasures.
Two, the provision of additional tax incentives to
encourage investment in novel counter-bioterrorism products.
And third, the provision of FDA fast track review to
expedite approval and availability of new countermeasures.
And fourth, additional Federal financial support for these
initiatives.
However, we are alarmed that S. 666 includes provisions
that reach into every medicine cabinet in America by
effectively eliminating consumers' access to affordable generic
products of everyday medicines. More specifically, the
definition of what drug products would be eligible to receive
an array of excessive and expensive incentives is
extraordinarily, and we hope inadvertently, broad.
For example, the definitions could cover such ubiquitous
pathogens as staph, E. coli, and other causes of common,
everyday infections. While this may seem ridiculous, it could
be shown that drugs widely used, such as Zoloft for depression,
Plavix for heart attacks, Effexor XR for anxiety, Imitrex for
migraines, could play a role in treating the symptoms of a
bioterrorism attack and these would be eligible for additional
protection under S. 666.
In addition, four provisions of S. 666, if allowed to
stand, would unnecessarily and excessively penalize consumers
to the tune of tens of billions of dollars in lost
pharmaceutical savings. They would institute new loopholes that
would extend additional and expensive market exclusivity
provisions for brand products already on the market. Mr.
Chairman these financial benefits would be on top of the other
generous incentives already available.
As more fully detailed in our written testimony, these
provisions, individually and collectively, will create
devastating effects on the current health care system and
undermine the balance of Hatch-Waxman amendments by, one,
penalizing generic drug applicants with an additional five
years of market exclusivity for merely filing applications as
required by Federal law, and another five years if an applicant
fails to successfully challenge a patent even though another
generic company has prevailed and can bring their product to
market.
Two, providing open-ended and unlimited patent extensions
for all countermeasure drug products.
And three, needlessly extending current market
exclusivities to ten years for something as simple as a
conversion from a tablet to an extended release dosage form.
And four, granting a two-year wild card patent extension
that can be applied to patents and products that are wholly
unrelated to any countermeasure and which can be stacked one
upon the other to indefinitely delay generic entry.
For example, under S. 666, a company like Pfizer could
merely perform a small animal study on one of their
commercially available antibiotics and that company could
receive a windfall to extend the exclusivity of one of their
blockbuster products for two years. Suppose Pfizer used its
wild card on America's most recommended cholesterol-reducing
drug, Lipitor. Pfizer's return would be a minimum of a $14
billion windfall.
Now, suppose that Pfizer performed a second animal study,
either on the same antibiotic or on a different agent. They
could claim that a $3 billion product, Zoloft, could get an
additional two years of market exclusivity. And to that, again,
there would be an additional $6 billion windfall, clearly to
the detriment of patients and their families suffering from
mental illness.
Mr. Chairman, as you can see, these four provisions taken
to their logical conclusion could affect consumer access to and
the affordability of most everyday medicines. All four of these
provisions would inflate drug prices, impose major obstacles to
the entry of generic drugs into the market, and worsen the
crisis faced by every American who must pay for all or a
substantial portion of his or her prescription drugs, including
the millions of uninsured and older Americans. They serve
little sound purpose, and unlike the other four positive
provisions I earlier outlined, certainly would not strengthen
BioShield I and better achieve its goals.
In conclusion, Mr. Chairman, the broad eligibility
definitions and the excessive and unnecessary market
protections of S. 666 give a blank check to PHRMA payable
against the financial and health care interests of America,
America's workers, businesses, and taxpayers. We think these
provisions would be extraordinarily expensive and would do
little to accelerate research and production of truly
innovative products. Congress was right to reject, at least not
include, such counterproductive policies when you passed
BioShield I earlier this summer.
And lastly, GPhA and our members stand ready to provide
whatever support we can to respond to your challenge to
research, produce, and stock, and be ready to distribute new
and effective bioterrorism countermeasures.
Thank you for the opportunity to testify. I would be happy
to answer any questions.
Senator Enzi. Thank you.
[The prepared statement of Ms. Jaeger appears as a
submission for the record.]
Senator Enzi. Mr. Angulo?
STATEMENT OF CARLOS ANGULO, PARTNER, ZUCKERMAN SPAEDER LLP, ON
BEHALF OF THE COALITION FOR A COMPETITIVE PHARMACEUTICAL MARKET
Mr. Angulo. Good morning, Senator Enzi. My name is Carlos
Angulo and I am here to testify on behalf of CCPM, the
Coalition for a Competitive Pharmaceutical Market, on S. 666,
the BioShield II bill. Thank you for the opportunity to appear
before you today.
CCPM is an organization of employers, insurers, generic
drug manufacturers, and others committed to improving consumer
access to affordable pharmaceuticals and promoting a vigorous,
competitive prescription drug market. CCPM supports public
policies that facilitate timely access to affordable
pharmaceuticals. The Coalition, of course, is also absolutely
committed to assisting Federal, State, and local governments
and the American people in their efforts to develop quick,
effective, and accessible responses to bioterrorism.
The Coalition's membership is broad, including numerous
prominent purchasers of pharmaceuticals, such as General Motors
Corporation, Caterpillar, Inc., and Eastman Kodak Company. On
behalf of the Coalition, I would like to share with the
committees today our experience regarding prescription drug
cost increases and to underscore our belief that in its current
form, S. 666 would dramatically delay generic drugs from coming
to market and cause a crippling increase in prescription costs
for America's employers, health plans, and consumers.
By way of background, large and small businesses,
consumers, unions, governors, the Federal Government, and
health plans throughout the nation are aggressively attempting
to manage soaring prescription drug costs. These expenditures
are growing at annual rates of up to 20 percent and are
unsustainable. Current pharmaceutical cost trends are
increasing premiums, raising copayments, pressuring reductions
in benefits, and undermining the ability of businesses to
compete. CCPM members seeking to continue to provide
prescription drug coverage to employees and subscribers face a
tremendous challenge in light of these skyrocketing
pharmaceutical costs.
For example, General Motors, the largest private provider
of health care coverage in the nation, insuring over 1.1
million workers, retirees, and their families, spent over $1.3
billion last year on prescription drugs. Despite GM's use of
state-of-the-art management techniques that assure the most
appropriate and cost-effective use of prescription drugs, its
pharmaceutical bill continues to grow at a rate of 12 percent
to 16 percent a year, more than quadrupling the general
inflation rate.
Similarly, Eastman Kodak Company, which insures 150,000
covered lives, spends 31 percent of its health care dollars on
prescription drugs. Kodak spent roughly $99 million on drugs in
2003 and its costs are growing each year.
The experience of insurers is no different. The 41 Blue
Cross and Blue Shield plans that collectively provide health
care coverage for 91 million Americans, represented in the
Coalition by the Blue Cross and Blue Shield Association, are
continuing to experience increases in prescription drug costs.
The BCBS Federal Employee Program, for example, had drug
increases over the last year of 9.67 percent. BCBSA expects
these costs to continue to impact the affordability of
premiums.
Such drug cost increases are driven by multiple factors,
including higher utilization, direct-to-consumer
advertisements, drug price increases, and especially delayed
generic competition. If S. 666 passes in its current form,
these costs will escalate dramatically and America will have a
health care bill it cannot afford to pay.
The Coalition strongly supports legislation aimed at
improving our ability to respond to terrorist uses of chemical
or biological weapons. There can be no denying that the events
of September 11 forever changed the way in which we work and we
live. Today, we recognize that in order to protect our
families, our friends, and our employees, we must be prepared
for every type of situation.
For this reason, we wholly support the goals of the Project
BioShield Act of 2004, or BioShield I, which went into effect
just this summer. We also recognize that the effort to prepare
our nation against terrorist threats should include incentives
to stimulate the development and production of drugs and other
countermeasures, and therefore we support certain provision of
S. 666, such as the provisions for tax credits, fast track Food
and Drug Administration review of applications for
countermeasures, protection against product liability suits,
and the creation of a terror weapon countermeasures purchase
fund.
It is also clear, however, that the goal of encouraging a
response to bioterrorism must be balanced against the overall
costs to American consumers and an already overburdened health
care system. Unfortunately, as currently drafted, S. 666 has
many unnecessary provisions that will increase costs without
significantly benefitting the anti-terrorism effort.
Specifically, there are four provisions in the legislation that
would seriously hinder employers' ability to provide affordable
health care to their employees and that would, in fact, deny
public access to affordable versions of the countermeasure
products that the bill seeks to make available to the American
public.
First, S. 666's wild card exclusivity provision would give
brand pharmaceutical companies a broad mandate to extend a
patent for two years on virtually any drug they choose, even if
it is completely unrelated to terrorism. This extension of
brand company monopolies would force consumers and employers to
pay billions of dollars in prescription drug costs beyond what
they would pay if generic drugs were permitted to enter the
market as provided under current law without significantly
advancing any anti-terrorism goals.
Second, Section 5(f) of S. 666 expands by up to seven years
the non-patent statutory exclusivity period for
countermeasures. This change dramatically alters the careful
policy balance struck by Congress under the 1984 Hatch-Waxman
Act and last year's amendments to that legislation. S. 666
alters this balance by extending broadly, in certain cases by
over 200 percent, brand company monopolies at the expense of
consumer access to generic drugs.
Third, Section 5(c) of S. 666 would provide patent
extensions for the full period taken to complete regulatory
review for countermeasures. In certain cases, this provision
would go so far as to reinstate patents on drugs that have been
off-patent, forcing generic alternatives off the market. This
bill would only exacerbate the problems of unsustainable health
care costs and the growing number of uninsured Americans.
Fourth, Section 5(f) of S. 666 penalizes the generic
industry for merely following the law in submitting generic
applications with required patent certifications by providing
that a generic company that submits such an application for a
generic version must wait an additional five years for FDA
approval beyond what is required under current law. This again
contradicts the very intent of the Hatch-Waxman Act.
In short, and I will conclude, Senator, each of these four
provisions of S. 666 standing alone could cost America's
employers, insurers, and consumers billions of dollars without
substantially assisting in the anti-terrorism cost. Each of
these provisions has been rejected before by the Senate and by
Congress. As innovators, patent holders and competitors in the
world market, the Coalition members respect the integrity and
value of intellectual property protection, but not at the
expense of consumer protections and lower drug prices for
consumers and for our employees and retirees.
Thank you. I will be happy to answer any questions.
Senator Enzi. Thank you.
[The prepared statement of Mr. Angulo appears as a
submission for the record.]
Senator Enzi. Dr. Bartlett?
STATEMENT OF JOHN G. BARTLETT, M.D., CHIEF, DIVISION OF
INFECTIOUS DISEASES, JOHNS HOPKINS UNIVERSITY SCHOOL OF
MEDICINE, ON BEHALF OF THE INFECTIOUS DISEASE SOCIETY OF
AMERICA
Dr. Bartlett. Thank you for the opportunity. I represent
the Infectious Disease Society of America. It is an
organization of about 7,000 or 8,000 physicians, most of whom
do what I do, which is take care of patients with infectious
disease.
I am here on behalf of the Society representing patients.
We don't really have a commercial interest in anything. We are
mostly worried about the availability of drugs in the event of
a crisis, and we see an evolving crisis and that is the reason
that we are particularly pleased to be invited.
The Institute of Medicine described the current era as a
period in which there is a great probability of what they call
a perfect microbial storm, and actually, there have been a
bunch of them. SARS or avian flu or monkey pox or anthrax, any
of these would be called potentially devastating infectious,
especially if they hit the wrong place at the wrong time, and
some already have.
What we are particularly worried about at the moment is the
escalating problem of increasing resistance of the bacteria
that we deal with every day, which is pretty predictable and it
is shown on this visual here. The increase in some of the most
common bacteria that we deal with every day in the hospital, we
know that is happening because that has been an act of nature
that we have dealt with ever since penicillin was brought on
board in 1950.
But that is accompanied by a very distressing decrease in
the number of antibiotics that we have available. So the number
of antibiotics that we have is going down, down, down. In fact,
in 2003, we had no new antibacterial agents introduced into the
marketplace, which is really extraordinary.
Now, our Society has gone around and talked to ten of the
major pharmaceutical manufacturers and we have done a lot of
research in this area in terms of the pipeline and what we
found is that many of the companies are either going out of
business, and the rest of them that aren't going out of the
antibiotic business are downsizing that operation. So when we
look at the pipeline, for example, there are something like 503
new molecular entities in the pipeline, new drugs, and out of
those, five are new antibacterial agents.
So when we look down the line, we see that miracles of the
last 50 years, which have increased longevity by 30 years, is
simply going to go away. So we are very worried about that
problem of the dearth of antibiotics, new antibiotics, to deal
with emerging crisis.
I did want to dispel a couple of what I think are common
misperceptions. One misperception is that the NIH or other
government agencies plays an important role in drug discovery.
That is really not true. I expect everybody in this room has
taken an antibiotic in the last ten years, took one that was
discovered by a pharmaceutical company, developed by a
pharmaceutical company, and brought to market by a
pharmaceutical company. They have the history of having done it
and certainly have the skill to do it.
Another misconception that is common is that we are
actually not so bad right now, because if I have sinusitis, I
can get a drug for it and it will take care of it. The fact is,
we deal in an environment where we deal with serious infections
that are very resistant. We are pulling drugs off the shelves
that we haven't used in 20 years. Some of them are for this
methicillin-resistant staph aureus that we are encountering
very much more frequently and some of it is for this bug called
acinetobacter, which is common in Iraq and now very common in
the United States hospitals.
So we are worried about our ability to be able to keep up
with the bugs at a time when the amount of available
antibiotics is decreasing. And when you talk to the drug
companies, it is very clear why they are going in this
direction. You take an antibiotic for a week and you take
Lipitor for the rest of your life. I mean, the economics are
simple. It is not hard to figure out why they are doing what
they are doing.
So I think what I would like to urge is in the framework of
BioShield II, there be the possibility of responding to a
microbial storm with the understanding that we don't know how
that is going to appear. It might be a brand new bug, like
SARS. It might be a really bad resistant bug, like
acinetobacter. It might be a manufactured resistant organism,
like anthrax. I am saying we don't know where it is going to
come from, but we are pretty sure it is going to happen.
The other thing I would mention is that we now have to plan
five to eight years down the line because that is the average
time it takes to develop a new drug. So we are not talking
about 2005, which is pretty bad in itself. We are talking about
2010. Thank you.
Senator Enzi. Thank you very much.
[The prepared statement of Dr. Bartlett appears as a
submission for the record.]
Senator Enzi. This is a very impressive panel. One of the
great perks of being in the United States Senate is the
opportunity to learn about all these things that we probably
wouldn't even have cared about before and some of the things
that we never wanted to know about. It is a tremendous
education. I think we probably pick up about a college course a
month around here.
Again, we are under a little bit of a time constraint, so I
do have a few questions that I want to ask right now.
Hopefully, you will give me rather brief answers and expand on
them later as you get other questions from us, as well. I know
that several members of the panel wanted to ask questions based
on the testimony that they received already and some that was
presented today, so I will start with a few questions here.
Ms. Grant, BioShield provides no protection against the
risk of litigation stemming from possible adverse events. How
much of a risk does this present in the case of a biodefense
product that is not required to undergo Phase 3 clinical
trials, and in the event of emergency may not even be FDA
approved?
Ms. Grant. This is a very, very big risk, and in a sense,
it is almost a non-starter because the realities of the
commercial markets today here and around the world are that we
just can't get commercial liability protection anywhere
approaching reasonable prices. So it is a very, very serious
problem. It has a chilling effect and our companies are
watching very closely how liability protection will be
addressed.
Senator Enzi. Again, on all of these questions, any of you
that want to answer them, we will accept answers in writing on
them, due to our limited amount of time.
Mr. Timmins, you run a small company based on the other
side of the country. I am from Wyoming, and every business in
Wyoming that is headquartered in Wyoming is a small business. I
know that the Federal Government sometimes needs to be reminded
that small companies don't know how to navigate Washington in
the same way that big companies do. From your perspective, what
does HHS need to do to ensure that small companies like yours
understand how to work with the government on Project
BioShield?
Mr. Timmins. Senator, that is a terrific question and
probably one that should be the subject of a hearing in and of
itself, because I can tell you, it is a hard running river and
it is going in the wrong direction. You work your hardest. You
try your best. But really, the key is to have terrific
representation, as we are fortunate to in the State of Oregon
and the people of the great State of Wyoming are, as well,
great representation in the Senate offices so that the
legislative assistants can help you navigate those waters. That
has been our best help going forward.
And then we find, like Senator Gregg's staff, very helpful,
just finding friends on, as we call it, a friendship tour, when
we come back and talk to the various Senators and ask for their
help, their assistance, what is the next step in the way as we
are trying to get the message out.
Senator Enzi. Thank you. It sounds like a good topic for
the Small Business Committee that I am also on, so we will
pursue that.
Ms. Jaeger, you had that chart that was over there that I
don't think is part of the record here. It was almost too small
for me to be able to read from here. So if you would provide us
with copies of that, I would really appreciate it.
For both you and Mr. Angulo, if you could provide us with
some more detail on how those provisions might be revised that
you mentioned that would place an extra constraint particularly
on generic drugs, that would be helpful.
Ms. Jaeger. We would be pleased to.
Senator Enzi. Wording is always a difficulty around here,
particularly if we don't have expertise in the area that we are
working in--which does not stop us from working on something,
but--
[Laughter.]
Mr. Angulo. We would be glad to.
Ms. Jaeger. We would be happy to, Senator.
Senator Enzi. Again, we will have some additional questions
for you, particularly concerning those specific points that you
raised.
Dr. Bartlett, you called for a BioShield-like set of
incentives to spur the development of new antibiotics. You
specifically suggest that we need a guaranteed pool of money.
However, you note in your testimony that there is a major
civilian market for antibiotics. We don't have such a market
for--although you made the distinction between Lipitor and
antibiotics, as well, and then there is an even more limited
market for bioterror countermeasures, which is why we created
Project BioShield in the first place. Why would we need a
guaranteed pool if we have a civilian market for antibiotics?
Dr. Bartlett. Well, first of all, I think there are a
couple parts of that. One is that if we have a major problem
with a microbe such as the one I mentioned, acinetobacter,
there is a big problem for us trying to take care of patients
in the hospital. There is not enough of a market for any
pharmaceutical company to ever develop a drug for
acinetobacter. It will never happen.
The antibiotic market is between here and here. It is
sinusitis and bronchitis and so forth. The other markets in
medicine are much more profitable than the antibiotic market.
So the civilian part of this is simply not going to go forward
on the basis of what we perceive to be the biggest problems.
Senator Enzi. Thank you. I want to thank the entire panel
and again encourage you to answer the questions that you will
be receiving. Those answers will be a part of the record and
will be shared with all of our colleagues.
While we are changing panels, the ranking member of the
Judiciary Committee, Senator Leahy, can provide any statement
that he wishes.
Senator Leahy. My questions will be submitted for the
record. I thank that all the panelists who have come here. Of
course, we are in major debates on the Senate floor. This is
probably the last week we will be in session until the lame
duck. As the leaders, both Republican and Democratic, pointed
out to all committee chairmen, this will be not a good week to
hold hearings because nobody could be here. We are all, as I
said, on the floor. So I just wanted you to know that it is not
that we are not interested in what you have to say.
I also want to remark on how much has been left undone by
the Senate. Some things, we don't get done. However, by law, we
are required to pass a budget by April 30 and now, in October,
there is no sign of it. By law, we are supposed to pass the 13
appropriations bills by September 30. We passed one. I guess
somebody just pulled out a calendar and suddenly realized where
we were.
So the empty chairs up here are not a sign of disrespect to
you. I appreciate all of you being here, and I think you are
going to have a lot of questions submitted. I am just going to
give a short opening statement, Mr. Chairman.
Senator Enzi. We will have them stay there for a moment
while you do your statement. Senator Schumer may be on his way
down, too.
STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE
STATE OF VERMONT
Senator Leahy. The focus of today's joint hearing is an
important one. That is why I wish it had been done during
normal Senate time because it is an important one. I think in
an increasingly uncertain world, the American people deserve
assurance that government and industry are doing all they can
to protect their health and well-being.
But this morning, that question is far from clear. As we
meet here to discuss how to prepare our nation for the dire
possibility of a catastrophic bioterrorist attack, the likes of
which I hope we will never see, we learn that we are really not
prepared to meet the biological threat that is here every year
since I was born, and long before that. Of course, that is flu
season.
I had hoped that the Bush administration would have learned
their lesson from last year's experience, when we saw a major
flu vaccine shortage. Now, we see health officials across the
country, including in my home State of Vermont, asking healthy
people just to forego their flu shot. I think the American
people are right to challenge this vaccine rationing. They
deserve an answer from the administration, why it didn't plan
and prepare better. If they can't be prepared for the seasonal
flu, which happens every single year, what does that say about
the ability to prepare for biological terrorist attacks?
I will admit there is some interest in this. Like most
people, I at one time or another in my life had a case of the
flu. But unlike most people in this country, I have been the
subject of a biological attack. There are two members of
Congress, only two, that actually were threatened with a
biological attack, Senator Daschle and myself. People who
touched--touched--the envelope addressed to me, died. I think
about the families of people who were crippled and stay
crippled from that. I think of the people who died, simply
because they were doing their job trying to deliver a letter to
me. And, of course, my family and I think about what might have
happened if I opened that letter. That was two of us up here.
It could have been a whole lot more people. I am speaking, of
course, of the anthrax attack.
But back to the flu, one of the primary problems with the
flu vaccine that is highlighted by the administration's
inability to deliver sufficient flu vaccines appears to be the
concentration of producers. Market concentration is something
the government can speak to. I believe the brand pharmaceutical
industry is too concentrated. They fiercely lobby to extend
their patents to prevent generic pharmaceuticals from giving
consumers more affordable medicine. A huge amount of money is
spent in this town for that.
Our constituents and, I think, members on both sides of the
aisle need to ask why this country is so dependent on just two
suppliers for this important vaccine. With all the
pharmaceutical suppliers in this country, why is our government
relying on a foreign supplier, which has now just been put out
of business by the British government?
And so I would hope the big brand pharmaceutical companies
would demonstrate their capability to respond to this crisis by
answering the call of this flu vaccine problem rather than
pushing for patent extensions and windfall profits. It is
probably too late this year, but they ought to be thinking
about next year. I hope we can guarantee that neither I nor any
other person in the government or in private industry will
receive an anthrax attack like the deadly one I had, but we
have to assume that 280 million Americans will be subject to
getting the flu next year.
So I would hope we could address the potential crisis, make
agreements to license and produce the vaccine the world needs.
I would hope we would not find ourselves in this position
again.
I will put into the record the rest of my statement. I am,
among other things, pleased that the Congress took action to
enact the Project BioShield Act of 2004. I applaud
appropriately Senators on both sides of the aisle on that, and
I will put that statement in the record. I know they will be
eager to read it, Mr. Chairman as always, and I thank you for
being here.
Senator Enzi. Thank you very much, and thank you for making
your statement a part of the record since we are under the
voting time constraint today where we have to start the series
of votes at 11:30 and we have one more panel to go.
[The prepared statement of Senator Leahy appears as a
submission for the record.]
Senator Enzi. With that, I will turn it over to Senator
Schumer for a statement or questions.
STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR FROM THE
STATE OF NEW YORK
Senator Schumer. Thank you, Mr. Chairman. I first want to
thank both Senators Hatch and Gregg for calling this joint
hearing about a very important homeland security issue.
There is no doubt that Project BioShield is an important
piece of legislation and it provided a reasonable and needed
incentive to encourage research and development of life-saving
countermeasures to be used in the event of or to protect us
from biological, chemical, nuclear attack, God forbid them all.
We may need, though, to look at a few tweaks to make those
incentives work like they were meant to work.
I understand that some of my colleagues may be drafting new
bills. I look forward to seeing them. But I am deeply disturbed
by the approach taken in a bill that is already out there which
is identified as BioShield II. That is S. 666, and I am going
to focus on that here today.
The bill contains patent provisions which undo almost every
one of the important pro-consumer Hatch-Waxman reforms that my
colleague, Chairman Gregg, and I fought so hard to have
included in the Medicare bill. Its approach could indefinitely
delay access to generic versions of all major blockbuster drugs
and cost consumers billions--not millions, not hundreds of
millions, billions of dollars.
To me, this amendment is, and I will restrain my language
uncharacteristically, but it is awful, and it is taking a noble
purpose and then sneaking in the wishes of the pharmaceutical
industry that have nothing to do with protecting us from
biological, chemical, or nuclear, and I will do everything to
stop the entire bill if this provision stays in.
Let me describe it. The most egregious part of these patent
windfalls is the so-called wild card patent extension. This
provision says that if a company does research on a potential
countermeasure, they would be rewarded with a two-year patent
extension that they could slap on any drug they wanted. Do $20
million of research on one thing and get a $3 billion benefit
on another. Who are we kidding? This is not intended to help
biological research, which we desperately need. It is intended
to give the drug companies even more.
I would hope that the people who put this in have learned
their lesson. They tried to come up with a pharmaceutical bill,
adding it into Medicare to help people. Do you hear President
Bush talking about that bill in his election? Nope. Do you hear
my Republican colleagues talking about that bill in their
election? Nope. Why? Because they gave everything away to the
big pharmaceutical industry. The idea that Medicare couldn't
negotiate with the drug companies ruined the bill and it became
a political albatross, and yet nobody seems to learn and we are
doing the same thing right here.
Now, the bill says, you will say, the reward should only go
to smaller drug companies, but it is the Secretary of Homeland
Security's authority to waive this requirement, at least at the
moment--maybe it will change--from the same administration that
won't do anything--anything--that the pharmaceutical industry
doesn't want.
One might think that in order for a company to get this
reward, they would actually have to discover and produce a new
life-saving, epidemic-stopping countermeasure, but that is far
from the case. The company doesn't have to discover a new drug.
They can do a test on one they are already marketing. They
don't have to produce the drug for the government's stockpile.
They don't even have to get the drug approved as a
countermeasure and they can still get the multi-billion-dollar
reward.
So the incentives in this bill make the American public pay
billions of dollars to drug companies for no guaranteed return.
No businessman would make that investment. Why are we?
Let me give you a sense of what this could mean for
blockbuster drugs. Two extra years on Zocor, the popular
cholesterol medicine, would mean a $9 billion windfall for
Merck. Two extra years on Zyprexa, a drug used for
schizophrenia, $6 billion for Lilly. Two extra years on
Prevacid, blockbuster ulcer medicine, $8 billion for TAP
Pharmaceuticals.
If we add up the value of just a one-year patent extension
on the nine top drugs, just one year, nine top drugs, $31.5
billion, all to the pharmaceutical industry. That is more than
the entire NIH budget, all of it completely allowed in S. 666,
all of it with no return, no guaranteed return for the
consumer.
The way I understand this provision, at least as it is
drafted now, a company could get multiple wild card extensions
and put them all on the same blockbuster drug, one after the
other after the other. You could have these drugs or others,
Lipitor or whatever, extended for years. This is Washington at
its worst.
That is all I can say. I am infuriated by this. Let me ask
the American people, do you think the only way that we can
secure our homeland is to pay tens of billions of dollars to
the pharmaceutical industry? It is like ransom. We are not
going to do it.
I would urge the people of this noble bill, and I certainly
understand the need to give people incentives to invest in
these things. I felt the same way when it comes to vaccinations
and other things, you know, all the lawsuits and everything
else that go too far, but this is not the way to do it.
With that, I would like to ask Mr. Angulo a question. Now,
your Coalition represents some of the largest payers for health
care in America, major employers, Kodak in my State, General
Motors, which has a lot of employees in my State. What would be
the impact of enacting the type of patent extensions described
here today on the ability of these companies to provide quality
health care for their employees at an affordable price?
Mr. Angulo. The impact would be enormous and it would be
enormously negative. Already, it is difficult enough under the
current situation, the current landscape, to provide affordable
health care to our employees, the Coalition's employees, the
retirees, all the individuals that they are responsible for. To
add this on top of it would, I think, create, as I said in my
testimony, an unsustainable situation.
Senator Schumer. Thank you. My next question is for Ms.
Jaeger. All of us agree that it is vital to enhance our medical
defenses against deadly weapons of mass destruction, but we
have to be careful to use our efforts wisely, our resources
wisely. Aren't there more cost-effective ways to enhance the
production of new vaccines and medication than providing wild
card patent extensions that could cost billions of dollars
every year? Isn't driving up the cost of prescriptions the last
thing we should be doing right now?
Ms. Jaeger. Yes, Senator. We would agree that putting the
burden on Americans who need medicine the most is not the right
way of going and that really what should happen is that
taxpayers should actually have to bear this burden equally
among all.
And so, therefore, we would suggest that people consider
full funding of these programs, perhaps providing more funding
over to NIH and also doing very aggressive partnerships with
private entities. We also think, again, another piece that
would actually accelerate some development in this area is a
product liability exemption for manufacturers.
So we think that the current environment, all the wonderful
incentives that we provide to the pharmaceutical industry
today, which include tax credits, market exclusivity, patent
extensions, along with BioShield I and along with perhaps some
other added concepts like product liability and additional tax
credits, really would be the best way of going, and so that we
can make sure that this nation is actually very secure and at
the same time, we don't destroy our current health care
environment, which is also in a crisis right now.
Senator Schumer. Thank you. Now, I have spoken strong
language. If anybody would like, any of the other panelists
would like to put in a counterword, I would like to hear what
they have to say in defense of this specific provision. Does
anyone want to defend it? No? Then my time has expired, Mr.
Chairman. Thank you. Let the record show no one wanted to
defend it, at least on this panel.
Senator Enzi. Before the record shows that, while this
panel is moving, I will make a comment on that.
Senator Schumer. Go ahead.
Senator Enzi. I do want the Senator from New York to
realize that this is a bipartisan bill, and while all of the
accusations went toward the Republicans on it, that one of the
two drafters of this is from your side of the aisle. I think
that there was a good bipartisan effort in coming up with this.
Nobody said that it was a perfect bill at this point and there
is a chance to work on it. I would provide a lot more rebuttal
if we had more time, but we have another panel that we need to
have and we are going to start voting at 11:30. Three people at
five minutes doesn't get us done by 11:30.
Senator Schumer. I would just say, Mr. Chairman, my goal is
to get this provision out of the bill, and whatever side of the
aisle that comes from and whoever's side of the aisle put it
in, it ought to be taken out right away. As I understand it, my
colleague, Senator Kennedy, agrees with my thoughts on these
issues.
Senator Enzi. And I did ask Ms. Jaeger and Mr. Angulo to
provide us with some wording that would make that a more fair
provision, but to keep in mind that we are trying to come up
with some incentives for them to do these very short-term
products. Dr. Bartlett gave an excellent explanation of the
difference between Lipitor, which is for life, and antibiotics,
which are for a week--
Senator Schumer. Mr. Chairman?
Senator Enzi. --and could have added this as being for the
moment.
Senator Schumer. Right. Let me make the record clear. I am
all for incentives to do this and I think you need them. I
think no one in their right mind would want to give an
incentive of $2 billion for a $10 million or $20 million--for
an incentive that warranted a $10 or $20 million investment.
Senator Enzi. I understand that. I would also like to
mention that the flu vaccine was mentioned, and I want to
mention that Chiron was shut down by British regulators. I will
be interested to see what that was. But the shortage does point
out the need for new incentives and liability reform so that we
aren't surprised by companies and so that we can have more
companies in the United States who are involved in this
process.
Our next panel is Mr. Jeff Kushan, who is a partner with
the firm of Sidley, Austin, Brown and Wood, representing
clients on a wide range of intellectual property matters,
licensing, policy, and litigation.
Mr. John Clerici, who is a partner with the firm of
McKenna, Long and Aldridge, with a focus on homeland security,
particularly in the policy and legislative areas of how the
government procures anti-terrorism technology from the private
sector.
And Ms. Patricia Greenberg, a registered nurse who is the
coordinator of the Nurse Alliance of New York State, which was
established in September 2002. Ms. Greenberg has been a nurse
since 1991 and has been a Service Employees International Union
activist for over ten years.
Mr. Kushan?
STATEMENT OF JEFFREY P. KUSHAN, PARTNER, SIDLEY, AUSTIN, BROWN
AND WOOD, LLP
Mr. Kushan. Thank you, Mr. Chairman, and thank you to all
the other members of the committee for giving me this
opportunity to testify before you today on the issue of market
incentives to encourage development of countermeasures to
respond to bioterrorism pathogens and threats. I am appearing
today in response to an invitation to share my views on certain
market exclusivity proposals contained in the Lieberman-Hatch
bill. More importantly, I am testifying today in my personal
capacity and the testimony that I am offering is my own.
During the deliberations that led to BioShield I, Congress
appreciated the significant challenges in inducing the private
sector to invent and bring to market new countermeasures to
treat counterterror pathogens. The most significant of these
challenges is there is no assured or consistent market for new
products that might be developed. A company could thus spend
millions of dollars, assume huge risks, only to find there is
no market for its product or that that market is extremely
limited.
Congress has partially addressed this challenge or this
problem through its assured procurement opportunities and also
by expediting the approval procedure for new products, but
these measures are only going to go so far. Government
procurement of products is both limited in its scale and
subject to a number of risks that make this type of market
opportunity less attractive than many other market
opportunities that the biotech and pharmaceutical industry
faces.
The true challenge of any legislative package is to
convince the capital markets that the market opportunities
associated with developing countermeasures are comparable to
those for other types of drug development. A truly viable
biodefense industry is one that will engage in new product
discovery and development that is motivated by the opportunity
for market success rather than by only through government
subsidies.
As I note in my written testimony, the biotech and
pharmaceutical industry markets are extremely market savvy. The
industries are very market savvy, and more importantly, the
markets are very savvy about the biotech industry. I tend to
focus on the biotech industry because there is where you see
most of the capacity for really high-risk innovative activity.
Everybody is contributing to the environment, but those are the
companies you really have to focus on inducing to shift their
resources.
The formula that the market sees as necessary for success
for a new venture is not only that a company has come up with a
new product, but that it is going to have assured market
exclusivity and meaningful market exclusivity once it finally
reaches a market with that product. Meaningful market
exclusivity in these industries means that the innovator will
only face technology competition and not price competition for
a reasonable period after it launches its product.
By technology competition, I mean you will see other
products entering the market to treat that type of disease or
disorder, but that you won't have intense intermediate price
competition in other parties selling the same product. The
inducement to technology competition is what we are aiming for
with incentive. We want more products, more approaches, more
interventions, and that is what we have to figure out how to
create.
Investors that participate in the biotech industry accept
higher risks of failure because of the higher possible return
on their investment, and that risk that they all tolerate is
the risk of product failure. But they can't tolerate--and I
deal with venture capital companies who evaluate opportunities
and I deal with companies who have intellectual property that
they are trying to get venture capital folks to give them money
to support--they all focus on market exclusivity. They all want
certainty. And they all want to have a finite number of risks
that they face. What they can't face as a risk is the political
uncertainty and other types of uncertainty that might destroy a
market once they finally reach it with a new product.
The Lieberman-Hatch proposals that have been discussed
before have some innovative approaches to tackling the
challenge and creating significant and effective new incentives
for developing countermeasures. I am going to talk about three
of these briefly.
The first is the question of patent term restoration. There
is currently an authority in the Hatch-Waxman Act for companies
to obtain credit for the time they spend developing and getting
their drugs through the FDA process. Under that equation, there
is a partial credit system. You don't get the entire credit.
This is something which should be solved or addressed in the
system. Small companies that develop these products should be
able to get the full period of exclusivity corresponding to the
regulatory period.
The second issue is this patent bonus that has already been
the subject of some discussion today, and I think this is a
creative approach that Congress is grappling with. Certainly,
there are a lot of variables in how you express it and pin it
down, but fundamentally, it is an interesting concept that is
similar to the pediatric exclusivity concept. Pediatric
exclusivity is an option that if a company does pediatric
clinical investigations, it can get six months of additional
exclusivity. That mechanism has addressed a problem that the
market hasn't been able to solve. The market is not going to
encourage people to do clinical investigations in pediatric
populations, so they had to come up with a broader incentive
that addressed that market shortfall. The patent incentive that
is being discussed here might do that by giving an alternate
funding opportunity or an opportunity for return investment
that is not there by the potential of the drug itself.
And finally, in the Lieberman-Hatch bill, there are a
number of ideas for market exclusivity, data exclusivity,
following approval of a new countermeasure. That would extend
those periods out.
One point, and I will end on this. The one challenge for
this entire class of products is that these products may never
be used and the window of time following approval is fairly
short, as was mentioned earlier, in some cases only three years
after a product is approved for marketing. We might not have a
need for using that product three years after a product is
approved. And so some measure that will encompass out into the
future and assure market exclusivity is warranted and I invite
the members of Congress to come up with the best type of
package to induce this type of innovation. Thank you, Mr.
Chairman.
Senator Enzi. Thank you.
[The prepared statement of Mr. Kushan appears as a
submission for the record.]
Senator Enzi. Mr. Clerici?
STATEMENT OF JOHN M. CLERICI, PARTNER, McKENNA, LONG &
ALDRIDGE, LLP, WASHINGTON, D.C.
Mr. Clerici. Yes. Thank you, Senator Enzi. I want to thank
Chairman Gregg, Chairman Hatch, Senator Kennedy, and Senator
Leahy for taking on this issue, and most significantly, Senator
Lieberman with Senator Hatch, who had the foresight to address
this issue soon after the attacks of 2001 and bring the
legislation to the forefront.
I also want to thank Secretary Thompson and Secretary
Ridge. They have been on the forefront of implementing this
legislation. Their offices have been open. Assistant Secretary
Stu Simonson has been willing to work with industry to
understand how this process should be implemented and he
deserves credit for that openness.
Finally, I would like to applaud the passage of BioShield
in this regard as a positive step in the right direction. The
country is significantly safer because of the passage of
BioShield and Congress and the administration deserve the
credit for that.
The goal now is to build upon that success and address the
major issues that are preventing biomedical countermeasures
from coming to market.
Make no mistake, liability concerns are preventing
biomedical countermeasures from entering the government's
stockpile. We have worked in my capacity at the law firm with
clients on the issue of product liability related to sales to
the Federal Government. I helped with my firm and others on the
passage of the SAFETY Act and its implementation, so I
understand the provisions of that Act and how they apply to
this market.
We also recognize that working on contracts for our
clients, for SARS vaccine, for avian flu vaccine, for smallpox
vaccine, for next-generation anthrax vaccine, for anthrax
therapeutics, smallpox antivirals, botulism vaccines, and
antidotes for ricin and cyanide, that these companies that are
undertaking these efforts will get to a point where they will
not sell to the Federal Government unless their shareholders
are adequately protected on the liability issue. We have to
recognize that this environment is in the post-Sarbanes-Oxley
world and there are obligations that public companies have to
mitigate these risks.
Currently, the threat derived from products in the
countermeasures produced under BioShield are fundamentally
different than the risks encountered by a typical drug company.
They are meant to stop, to interdict, to prevent an unknowable
criminal act of terrorism. The terrorists could engineer the
toxin around the vaccine or around the countermeasure. The
terrorist could use it in an entirely different way than we
ever imagined. We have seen their creativity obviously three
years ago to take no steps in that way.
We recognize that these products, by their very nature, can
only be implemented and tested using an animal role. We can't
expose healthy humans to these toxins. We have to rely on a lot
of predictive models, on Phase 3 clinical trials, and a great
deal of luck, and that is important to recognize that that
threat is different.
As my co-panelist has already pointed out, these
pharmaceutical drugs and biomedical countermeasures will be
likely stockpiled for years. We are not sure where they are
going to be deployed, or when they are going to be deployed,
and we pray to God that they never are deployed. But they are
sitting on the shelf to be administered by someone other than
the pharmaceutical, other than the public health system maybe
in the event of an emergency, and that risk is too great for
companies to bear.
Currently, there are only two options to deal with this
liability protection for the broad scope of biodefense
countermeasures, Public Law 85-804, which was already touched
upon by a prior witness, and the SAFETY Act. Public Law 85-804
has been used in the donation of smallpox vaccine by a couple
of companies, and HHS has been willing to reach out and use
that authority when it is necessary. But recognize that that
authority still creates a litigation model. The government, if
you will, acts as a super-insurer. It could be years before
judgments are rendered and payments are made to compensated
unintended victims of this act of terrorism.
And most importantly, as already has been pointed out, HHS
will not negotiate these provisions in advance of award.
Companies are faced to allocate scarce resources and use
shareholder money for a contract that, if they win, they might
not be able to accept because of the liability concerns, and
that has happened, absolutely, since the year 2001.
The SAFETY Act, which again is a very powerful piece of
legislation, is not a compensation act. It removes the
liability as a matter of law and creates a presumption of
dismissal from a lawsuit. It does apply to countermeasures that
stop or prevent a terrorist attack, but it doesn't apply to the
liability in its current form in the way it has been
implemented for those dangers prior to the terrorist attack,
such as those created by a vaccine with animal model testing
and limited research and development.
And most importantly, HHS has not linked the SAFETY Act
effectively to procurement. It is a two-step process. You get
the award, you apply for the SAFETY Act. The uncertainty that
these companies face cannot be passed to their shareholders as
responsible corporate citizens.
The way to address this issue is to clarify the SAFETY Act
to make clear that it does and can apply to liability that
occurs prior to an act of terrorism, and I would urge you to
also consider coupling the SAFETY Act with a compensation
scheme. There is an effective compensation scheme already in
law for smallpox vaccine under the Homeland Security Act of
2002 and the Smallpox Act of 2003 that Senator Gregg and
Congressman Burr worked on. That measure could be easily
extended to biomedical countermeasures and coupled with the
SAFETY Act, the questions involving the concerns of the
liability and whether or not that is adequate protection,
coupled with the SAFETY Act, would certainly be an improvement
over the status quo.
Finally, Mr. Chairman, I do comment in my testimony on
antitrust provisions, as well. There are provisions in existing
law that do not require Congressional action that Congress
should urge the administration to use to discuss how this
market can be better developed in the incentives that industry
needs without fear of antitrust violations.
I am open to your questions. Thank you.
Senator Enzi. Thank you.
[The prepared statement of Mr. Clerici appears as a
submission for the record.]
Senator Enzi. Ms. Greenberg?
STATEMENT OF PATRICIA B. GREENBERG, R.N., ON BEHALF OF THE
SERVICE EMPLOYEES INTERNATIONAL UNION, AFL-CIO
Ms. Greenberg. Good morning, Senator Enzi. My name is
Patricia Greenberg and I have been a registered nurse since
1980, though I thank you for taking ten years off my age.
[Laughter.]
Ms. Greenberg. I have worked in critical care, coronary
care, intensive care, operating room, and neonatal intensive
care. Currently, I am the Executive Director of the New York
State Nurse Alliance of 1199 SEIU. On behalf of the Service
Employees International Union, I thank you for this opportunity
to testify.
I also want to thank the sponsors of S. 666 for honoring
Kathy Nguyen. Kathy was a member of my local union who died
from her exposure to anthrax.
SEIU is the nation's largest organization representing
health care workers, with over half of our 1.7 million members
made up of nurses, doctors, EMTs, and other occupations within
the health care sector. Many of these employees work in
occupations that would be defined as first responders in the
event of a terrorist attack.
As nurses, we want to do everything in our power to respond
to, treat, and care for any patient who may be a victim of a
terrorist event. We have reviewed S. 666 and are supportive of
the broad principles of the legislation, to encourage the
development of new countermeasures to protect all of us from
such threats.
In particular, we have noticed how S. 666 is quite
comprehensive in protecting the drug and other biotech
companies who produce countermeasures from liability. In sharp
contrast, we are alarmed that there is no mention of providing
protections for the front-line volunteers working to protect
our national security if they suffer as a direct result of the
implementation of any of these countermeasures.
Frankly, we have been down this road before. The Homeland
Security Act of 2002 provided blanket liability protections for
smallpox vaccine manufacturers, but no protections for front-
line health care workers, their patients, or the public. S. 666
sadly mimics many of the same serious flaws contained in the
Bush administration's failed smallpox vaccine program.
This bill is of even more concern when you consider that it
is premised on the expectation that there will not be adequate
time to do full safety testing on these newly developed
measures. As a result, we fear that, once again, nurses and
other first responders will be quite hesitant to roll up their
sleeves to volunteer when they learn of the bill's
deficiencies.
It is not right or even logical to go to great lengths to
protect the manufacturers that create the countermeasures from
liability and then ignore the safety needs of the first
responders and their patients in the event of adverse
reactions. I can assure you that the best countermeasures in
the world will not be effective if health care workers and
their patients do not have confidence in the safety of these
countermeasures and if those injured can expect no more than a
``get well'' card from their elected leaders.
You may recall that in December of 2002, President Bush
unveiled a smallpox vaccination plan to inoculate 500,000
health care workers within 30 days and ten million more public
safety workers in six months. Six months prior to this
announcement, a wide range of organizations told the CDC that
the program would likely fail if serious gaps in patient and
worker production were not addressed. We all know the result of
that initiative. Today, less than one-half of one percent of
the ultimate goal of ten million workers have been vaccinated
in the program later called a fiasco in a Washington Post
editorial.
I now that we can and must do better with S. 666. The
example of the recent past points the way. Specifically, SEIU
believes that the following nine elements must be included.
A requirement that first responders be educated about the
risks and benefits of any new countermeasure before
implementation.
A requirement that workers are free to decline newly
produced vaccines or other countermeasures not sufficiently
tested without fear of workplace discrimination.
Free and confidential medical screening for volunteering
will be provided in any vaccine or drug trial to screen out
those with preexisting medical conditions.
That patients be informed of the risks of any
countermeasures that could impact their safety.
That the Federal Government will oversee the monitoring of
any adverse effects in volunteers who receive countermeasures.
That any first responder volunteer who becomes ill due to
any countermeasure does not face loss of income.
That free medical care be provided to those who volunteer
if they become ill from any countermeasure.
That first responders be provided with an explanation of
any new job duties resulting from the implementation of the
countermeasures.
And, finally, contrary to how smallpox vaccine was
administered, require that any new vaccines or other
medications that utilize needles be administered with safe
needles as required under the Needlestick Safety and Prevention
Act of 2000.
I want to recognize and thank you, Senator Enzi, for
sponsoring the Needlestick Safety Act. Thanks to this visionary
action, there is no need for any tainted needlestick to ever
threaten any health care worker again.
Thank you, and I would be glad to respond to any questions.
[The prepared statement of Ms. Greenberg appears as a
submission for the record.]
Senator Enzi. Again, I want to thank this panel for some
very detailed and useful information and critique of the bill.
I wish we had some time for some extensive questions on it. We
will be submitting questions to you in writing to get your
response to make a part of the record, although the detailed
comments that you gave are extremely useful.
I want to thank in their absence Senator Hatch and Senator
Gregg and Senator Leahy and Senator Kennedy for holding this
hearing. There was a lot of misgiving about what would happen
with it when it was just prior to an election, particularly a
Presidential election. I think, for the most part, we have
avoided that kind of thing, because this is to get information
for something that will begin after the first of the year but
give our staff now something to really dig their teeth into and
to get additional answers in response to your concerns and the
concerns of the panelists.
One of the things that I have discovered around here is
that we pretty much agree on about 80 percent of any bill.
Unfortunately for America, it is the 20 percent that we don't
agree on that we go to the floor and fight about, and that is
one of the things that I have learned from working with Senator
Kennedy on some of the things like the Needlestick bill, that
when we work together, we can get some amazing things done. We
will be watching out for the safety. That is why it is a joint
committee on this.
We will be looking to see what incentives will work while
best preserving competitiveness. I think that the testimony
today shows the immense need for liability protection and
worker protection.
With that, I will leave the record open and we will be
getting questions to you to complete the record.
I would also like to include in the record the prepared
statement of Senator Kennedy.
I thank everybody for their participation today. The
hearing is adjourned.
[Whereupon, at 11:40 a.m., the committees were adjourned.]
[Questions and answers and submissions for the record
follow.]
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