    [House Hearing, 109 Congress]
    [From the U.S. Government Publishing Office]

       ONE YEAR LATER: EVALUATING THE EFFECTIVENESS OF PROJECT BIOSHIELD

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

                                    HEARING

                                   before the

                                  COMMITTEE ON
                               GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED NINTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 14, 2005

                                   __________

                               Serial No. 109-59

                                   __________

           Printed for the use of the Committee on Government Reform

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

                                     ______

                        U.S. GOVERNMENT PRINTING OFFICE
    23-143                      WASHINGTON : 2005
    _____________________________________________________________________________
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                         COMMITTEE ON GOVERNMENT REFORM

                         TOM DAVIS, Virginia, Chairman
    CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
    DAN BURTON, Indiana                  TOM LANTOS, California
    ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
    JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
    JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
    GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
    MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
    STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
    TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
    CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
    JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
    CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
    MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
    DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
    GINNY BROWN-WAITE, Florida           C.A. DUTCH RUPPERSBERGER, Maryland
    JON C. PORTER, Nevada                BRIAN HIGGINS, New York
    KENNY MARCHANT, Texas                ELEANOR HOLMES NORTON, District of
    LYNN A. WESTMORELAND, Georgia            Columbia
    PATRICK T. McHENRY, North Carolina               ------
    CHARLES W. DENT, Pennsylvania        BERNARD SANDERS, Vermont
    VIRGINIA FOXX, North Carolina            (Independent)
    ------ ------

                        Melissa Wojciak, Staff Director
           David Marin, Deputy Staff Director/Communications Director
                          Rob Borden, Parliamentarian
                           Teresa Austin, Chief Clerk
              Phil Barnett, Minority Chief of Staff/Chief Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on July 14, 2005....................................     1
    Statement of:
        Kramer, Robert G., president and chief executive officer,
          BioPort Corp.; Richard B. Hollis, chairman and chief
          executive officer, Hollis-Eden Pharmaceuticals; and Gerald
          L. Epstein, senior fellow for science and security,
          Homeland Security Program, Center for Strategic and
          International Studies......................................    73
            Epstein, Gerald L........................................    96
            Hollis, Richard B........................................    84
            Kramer, Robert G.........................................    73
        Simonson, Stewart, Assistant Secretary, Office of Public
          Health Emergency Preparedness, U.S. Department of Health
          and Human Services; Anthony S. Fauci, M.D., Director,
          National Institute of Allergy and Infectious Diseases,
          National Institutes of Health; and John Vitko, Jr., M.D.,
          Director, Biological Countermeasures Portfolio, Science and
          Technology Directorate, Department of Homeland Security....    12
            Fauci, Anthony S.........................................    30
            Simonson, Stewart........................................    12
            Vitko, John Jr...........................................    50
    Letters, statements, etc., submitted for the record by:
        Cummings, Hon. Elijah E., a Representative in Congress from
          the State of Maryland, prepared statement of...............   128
        Davis, Chairman Tom, a Representative in Congress from the
          State of Virginia, prepared statement of...................     4
        Epstein, Gerald L., senior fellow for science and security,
          Homeland Security Program, Center for Strategic and
          International Studies, prepared statement of...............    99
        Fauci, Anthony S., M.D., Director, National Institute of
          Allergy and Infectious Diseases, National Institutes of ,
          prepared statement of......................................    32
        Hollis, Richard B., chairman and chief executive officer,
          Hollis-Eden Pharmaceuticals, prepared statement of.........    86
        Issa, Hon. Darrell E., a Representative in Congress from the
          State of California, prepared statement of.................   122
        Kramer, Robert G., president and chief executive officer,
          BioPort Corp., prepared statement of.......................    76
        Maloney, Hon. Carolyn B., a Representative in Congress from
          the State of New York, prepared statement of...............   125
        Porter, Hon. Jon C., a Representative in Congress from the
          State of Nevada, prepared statement of.....................   124
        Ruppersberger, Hon. C.A. Dutch, a Representative in Congress
          from the State of Maryland, prepared statement of..........   132
        Shays, Hon. Christopher, a Representative in Congress from
          the State of Connecticut, prepared statement of............   120
        Simonson, Stewart, Assistant Secretary, Office of Public
          Health Emergency Preparedness, U.S. Department of Health
          and Human Services, prepared statement of..................    15
        Vitko, John Jr., M.D., Director, Biological Countermeasures
          Portfolio, Science and Technology Directorate, Department
          of Homeland Security, prepared statement of................    53
        Waxman, Hon. Henry A., a Representative in Congress from the
          State of California, prepared statement of.................     8

       ONE YEAR LATER: EVALUATING THE EFFECTIVENESS OF PROJECT BIOSHIELD

                                  ----------

                            THURSDAY, JULY 14, 2005

                              House of Representatives,
                                Committee on Government Reform,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 11:30 a.m., in
    room 2154, Rayburn House Office Building, Hon. Tom Davis
    (chairman of the committee) presiding.
        Present: Representatives Davis of Virginia, Shays, Waxman,
    Issa, Foxx, Maloney, Cummings, Kucinich, Davis of Illinois,
    Clay, Watson, Van Hollen, Ruppersberger, and Norton.
        Staff present: Melissa Wojciak, staff director; David
    Marin, deputy staff director/communications director; Keith
    Ausbrook, chief counsel; Rob White, press secretary; Drew
    Crockett, deputy director of communications; Edward Kidd and
    Susie Schulte, professional staff members; John Brosnan, GAO
    detailee; Teresa Austin, chief clerk; Sarah D'Orsie, deputy
    clerk; Kristina Sherry, legislative assistant; Leneal Scott,
    computer systems manager; Josh Sharfstein, minority health
    policy advisor; Robin Appleberry, minority counsel; Earley
    Green, minority chief clerk; and Jean Gosa, minority assistant
    clerk.
        Chairman Tom Davis. The committee will come to order. I
    want to welcome everybody to today's oversight hearing to
    assess the implementation of Project BioShield thus far. The
    purpose of this hearing is to consider whether the Project
    BioShield program is being adequately implemented to accelerate
    the research, development and purchase of effective
    countermeasures against agents of bioterrorism.
        Now that the Department of Health and Human Services has
    begun to utilize its special authorities granted by Congress
    through the Project BioShield Act of 2004, the committee feels
    it is time to review how these authorities are being executed.
    Specifically, the committee will consider whether adequate
    medical countermeasures to protect our population against a
    biological attack are being procured.
        As we tragically learned during the fall of 2001, our
    Nation is vulnerable to biological terrorism. Letters laced
    with anthrax caused the deaths of five individuals. Thousands
    more had to be treated. The death toll could have been higher
    if there had not been effective countermeasures to treat that
    particular form of anthrax.
        The Project BioShield Act of 2004 gave the Federal
    Government better tools to develop and purchase vaccines and
    other drugs to protect Americans in the event of bioterrorist
    attacks. If the United States were to be attacked with these
    deadly pathogens, the need for the corresponding vaccines,
    tests and treatments would be widespread and immediate.
        The Government has made some progress over the past year in
    implementing the BioShield program and improving preparedness
    efforts against bioterrorism. To date, DHS and HHS have
    determined that anthrax, botulinum toxins, smallpox and
    radiological and nuclear agents pose a significant material
    threat to Americans and to U.S. national security. Health and
    Human Services has solicited and awarded contracts for medical
    countermeasures against these threats.
        In November 2004, HHS awarded a contract to VaxGen for up
    to 75 million doses of a new generation anthrax rPA vaccine,
    and in May awarded a contract for 5 million doses of the
    existing FDA-licensed anthrax vaccine produced by BioPort Corp.
    Additionally, HHS awarded a contract for pediatric potassium
    iodide in March of this year for inclusion within the Strategic
    National Stockpile.
        But in spite of these efforts, there remains some concern
    as to HHS's moving too slowly to award contracts. Among the
    questions we are going to ask today: How do we prepare against
    the threat of bioterrorism while waiting for new
    countermeasures to be researched and developed? Are we
    adequately linking threat assessments to the procurement of
    appropriate countermeasures? And most importantly, are we safer
    now than we were before BioShield was enacted?
        Witnesses on our second panel are going to express their
    concerns over the transparency of the solicitation process and
    whether companies are fully aware of how they are being
    evaluated and what certain terms and criteria are considered
    when HHS responds to a solicitation. We will also hear concerns
    about whether the implementation of BioShield is working to
    erase barriers to entry to the bio-defense market and if more
    incentives are needed.
        I look forward to a robust discussion on whether the
    procurement of medical countermeasures to date has been
    sufficient and how best do we work toward improvements
    necessary for even greater preparedness.
        Project BioShield needs to work. It was crafted so that the
    United States could better harness the power of the commercial
    marketplace to protect our citizens against threats, whether
    they be nuclear, biological or radiological, or whatever.
        Just 1 week after terrorists detonated four bombs in the
    heart of London, taking the lives of more than 50 people, no
    one should need a reminder of how real these threats are.
    Anyone who has read the 9/11 Commission report or who has been
    listening to the experts who have studied these issues in depth
    can't help but understand this.
        I want to show a short video that is illustrative.
        [Video shown.]
        Chairman Tom Davis. The only drug we have right now is
    potassium iodide in case of a nuclear attack. But we need the
    development of better, next generation treatment of drugs and
    where are we?
        This is not an academic exercise. Project BioShield was
    conceived to help us face the most pressing threats facing our
    Nation today, and we need it to live up to that promise. There
    was a consensus in the Presidential race that this is an area
    we need to proceed in. And yet to date we have not seen the
    kind of progress, I think, that the act wanted and that
    Congress demands and the American people need.
        We have a great selection of witnesses today and I look
    forward to their testimony. But before that, I would like to
    recognize our distinguished ranking member, Mr. Waxman, for his
    opening statement.
        [The prepared statement of Chairman Tom Davis follows:]

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        [GRAPHIC] [TIFF OMITTED] T3143.002

        Mr. Waxman. Thank you very much, Mr. Chairman.
        I think we owe it to our audience to explain that we were
    late in coming to the hearing today partly due to the
    chairman's efforts because there was a vote on the House floor
    where almost all of the Members had voted aye, the chairman was
    among a few that voted no. When people looked and saw his
    ``no'' vote, little by little they changed their aye to no, and
    the matter that was on the floor ready to pass was defeated. So
    the chairman is clearly a very strong leader, both on the House
    floor and in this committee.
        Chairman Tom Davis. You can have as much time as you want
    today, Mr. Waxman. [Laughter.]
        Mr. Waxman. One year ago, Congress passed legislation to
    establish Project BioShield. This important program seeks to
    encourage private companies to develop innovative drugs,
    vaccines and other measures to address bioterrorist threats.
    The plan is for these products to be delivered to the American
    people in an emergency by a fully functional public health
    system. Today's hearing is an opportunity to assess how Project
    BioShield is working. It is also an opportunity to ask whether
    the rest of our public health system is prepared to do its part
    of the job.
        The answer is not encouraging. While Congress has provided
    guaranteed funding for BioShield, the administration has
    repeatedly shortchanged core public health services. This
    failure threatens our ability to respond to serious biological
    threats, whether natural or man-made.
        Two weeks ago, our committee learned that the United States
    is unprepared for a flu pandemic which could claim as many as
    500,000 American lives. Unlike other nations, our plan to
    respond to a flu pandemic is not finalized. We have not
    purchased the anti-viral medication we need. We do not have
    adequate supplies of vaccine. And yet the administration has
    refused to admit the obvious: extra funding is needed to do the
    right job.
        There are also large gaps in our state of preparedness for
    a bioterrorist attack. Only a handful of States have the
    capacity to deliver essential medications and vaccines
    contained in the Strategic National Stockpile to their
    citizens. There is no point in having a new anthrax vaccine or
    nerve gas antidote if the people whose lives are at risk cannot
    obtain treatment in time.
        But rather than shore up the system to deliver these
    products, the administration has proposed cutting $130 million
    from State and local health departments. While BioShield offers
    promise for the future, the administration's chronic under-
    funding of public health is risking our ability to respond to a
    crisis in the meantime. The only maker of the current smallpox
    vaccine in the United States may close its production facility
    because the administration is failing to invest in ongoing
    production capacity. Similarly, the only maker of a licensed
    anthrax vaccine has said it may be forced to close its doors
    without a Government contract to keep its machines running.
        Until new and improved products are actually available, it
    makes no sense to lose access to current products that are
    protecting the American people.
        The weaknesses in the public health system are even
    undermining the ability of Project BioShield to succeed in
    developing new, cutting edge products. In announcing the
    President's proposal, the White House stated that Project
    BioShield would ``ensure resources to develop next generation
    countermeasures.'' The proposal was billed as a measure to
    speed research and develop medical countermeasures based on the
    most promising recent scientific discoveries. But the latest
    BioShield contract uses more than $120 million for the
    procurement of an anthrax vaccine that was licensed in 1970, 35
    years ago.
        Now, let me be clear. I am not against, in fact I do
    support the purchase of existing anthrax vaccine. But such a
    purchase should be made with public health funds, not with the
    special pool of resources set aside by Congress to encourage
    research into ground-breaking new products.
        BioShield was supposed to be a shot in the arm for public
    health readiness, but it is being used as a crutch. Today we
    will discuss some of the nuts and bolts of BioShield. There are
    important questions about how the program is working to
    encourage new products, balancing the needs of business with
    responsibility to the taxpayer.
        We shouldn't lose sight of what BioShield is all about: a
    safer America. We need not only a better BioShield but also a
    system that can support and deliver the best possible response
    to public health emergencies. We must demand that the
    administration and Congress put all the resources that are
    necessary into this effort.
        I am pleased that some of our Nation's leaders in public
    health preparedness are here today. I want to thank them for
    their efforts on behalf of the American people. I look forward
    to all of the testimony from today's witnesses.
        [The prepared statement of Hon. Henry A. Waxman follows:]

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        [GRAPHIC] [TIFF OMITTED] T3143.006

        Chairman Tom Davis. Thank you.
        I want to again thank everybody for your patience in being
    with us today. We had some votes right after 10 a.m., and as
    Mr. Waxman alluded, one vote took a little longer than normal.
    I am not sure that it was my stellar ``no'' vote up there that
    switched everybody else, but about 100 Members came in, I think
    they read the amendment after they voted and decided to switch.
        Members will have 7 days to submit written statements. Is
    there anyone else who wants to make an opening statement?
    Without objection, they will all be in the record.
        We have today the Honorable Stewart Simonson, the Assistant
    Secretary for Public Health Emergency Preparedness, Department
    of Health and Human Services; Dr. Anthony Fauci, the Director
    of the National Institute of Allergy and Infectious Diseases,
    National Institutes of Health; and Dr. John Vitko, the Director
    of Biological Countermeasure Portfolio, Science and Technology
    Directorate, Department of Homeland Security.
        It is our policy, as you know, we swear you in before you
    testify. So if you would just rise and raise your right hands.
        [Witnesses sworn.]
        Chairman Tom Davis. Mr. Simonson, we will start with you
    and we will move straight down. Your entire statement is a part
    of the record, and our questions are based on your entire
    written testimony. Thanks for your patience.

    STATEMENTS OF STEWART SIMONSON, ASSISTANT SECRETARY, OFFICE OF
    PUBLIC HEALTH EMERGENCY PREPAREDNESS, U.S. DEPARTMENT OF HEALTH
    AND HUMAN SERVICES; ANTHONY S. FAUCI, M.D., DIRECTOR, NATIONAL
        INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES, NATIONAL
      INSTITUTES OF HEALTH; AND JOHN VITKO, JR., M.D., DIRECTOR,
     BIOLOGICAL COUNTERMEASURES PORTFOLIO, SCIENCE AND TECHNOLOGY
              DIRECTORATE, DEPARTMENT OF HOMELAND SECURITY

                     STATEMENT OF STEWART SIMONSON

        Mr. Simonson. Good morning, Chairman Davis, Representative
    Waxman, and members of the committee. I am Stewart Simonson,
    Assistant HHS Secretary for Public Health Emergency
    Preparedness. I appreciate the opportunity to share with you
    information on the Department's progress in implementing the
    Project BioShield Act of 2004 and our coordination with our
    colleagues at the Department of Homeland Security.
        The events of September and October 2001 made it very clear
    that terrorism is a serious threat to our Nation and the world.
    The Bush administration and Congress responded forcefully to
    this threat by strengthening our medical and public health
    capacities to protect our citizens from future attacks. To
    encourage the development of new medical countermeasures
    against threat agents and to speed their delivery, President
    Bush in his 2003 State of the Union Address proposed, and
    Congress subsequently enacted, Project BioShield.
        The $5.6 billion, 10 year special reserve fund was created
    to assure developers of medical countermeasures that funds
    would be available for the Government to purchase critical
    products. Since enactment, my office has moved aggressively to
    fill immediate gaps in our countermeasure armamentarium. A
    genuine sense of urgency informs all of our homeland security
    work at HHS.
        But it is important to note that successful development and
    the manufacturing of safe and effective countermeasures
    requires an investment of both money and time. No matter how
    hard we try, some steps in the process cannot be rushed.
        There is a complex spectrum of efforts needed along the
    research and development pipeline to produce a usable medical
    product. Defining specifications for needed countermeasures
    often reveals few if any candidates in the pipeline. Today, we
    have been fortunate that some of our highest priority needs for
    medical countermeasures could be addressed using the available
    advanced development products already in the pipeline.
        However, research and development efforts, even when
    robustly funded, often take years before the concept is mature
    enough for advanced development. It is only when a product has
    reached the advanced development stage that Project BioShield
    provides a meaningful incentive for manufacturers to take the
    product the rest of the way.
        In determining the requirements and evaluating options for
    medical countermeasure acquisitions, the focal point for the
    U.S. Government interagency effort is the Weapons of Mass
    Destruction Countermeasure Subcommittee. HHS, along with
    representatives from the Department of Homeland Security, the
    Department of Defense, chair of the WMD Subcommittee, and
    stakeholders from throughout the U.S. Government are
    represented on its working groups.
        In setting priorities for medical countermeasure
    acquisition under Project BioShield, the WMD Subcommittee
    considers a number of factors: the credibility and immediacy of
    specific threats are driving factors and are informed by
    material threat assessments conducted by DHS. My colleague, Dr.
    John Vitko, here today, representing DHS, can provide insight
    into the assessment process.
        We also consider the current and projected availability of
    appropriate medical countermeasures, as well as the target
    population for which the countermeasure would be used. In
    addition, logistical issues are considered, such as the
    feasibility of deployment in a public health emergency, shelf
    life and storage, and maintenance requirements.
        Project BioShield requires a number of findings by the
    Secretaries of Homeland Security and HHS prior to an
    acquisition commencing. These findings include three
    determinations: first, that there is a material threat against
    the U.S. population sufficient to affect national security;
    second, that medical countermeasures are necessary to protect
    the public health from that material threat; and third, that
    acquiring a specific quantity of a particular medical
    countermeasure using the special reserve fund as appropriate.
        These determinations are followed by a joint recommendation
    for an acquisition that is presented to the White House by the
    two Secretaries. If approved, Congress is notified, HHS
    executes the acquisition program. The process that I have
    outlined for you has been successfully implemented three times
    since the enactment of Project BioShield nearly a year ago.
        HHS has completed contract awards for acquisitions of the
    next generation recombinant protective antigen anthrax vaccine,
    the current generation licensed anthrax vaccine and the
    pediatric formulation of potassium iodide. Additionally, the
    acquisition process is in the final stages for several other
    needed medical countermeasures, including anthrax therapeutics,
    botulinum antitoxin and a next generation smallpox vaccine.
        This robust interagency process mines the expertise of
    subject matter experts in the scientific and intelligence
    community to define requirements for medical countermeasures
    and enables policymakers to identify and evaluate acquisition
    options to address immediate and future needs.
        In closing, let me say that HHS has a clear mandate from
    President Bush and Congress to lead the charge in
    countermeasure development. We have already made important
    strides to address the public health needs of the Nation, but
    more needs to be done.
        Chairman Davis, I look forward to working with you and
    Congressman Waxman and the rest of the committee to address the
    challenges of CBRN preparedness and its impact on public
    health. I would be glad to answer any questions.
        [The prepared statement of Mr. Simonson follows:]

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        Chairman Tom Davis. Thank you, Mr. Simonson.
        Dr. Fauci, thanks for being with us.

                    STATEMENT OF ANTHONY FAUCI, M.D.

        Dr. Fauci. Mr. Chairman, members of the committee, thank
    you for giving me the opportunity to discuss with you this
    morning the role of the NIH research enterprise in providing
    the basic and applied research for the development of
    countermeasures, some of which may ultimately go into the
    procurement process of BioShield; in addition, to mention to
    you some of the advantages that we have now for the ability to
    expedite our research through some of the BioShield provisions.
        As shown on this first visual, you can see the covers of
    some of the printouts of the web-available strategic plan for
    biodefense research at the NIH, as well as the research agendas
    for the Category A and B agents. We drew this up when I
    testified before several committees as to the importance of
    having a well thought out strategic plan in the research arena,
    and since then, we have progress reports for the Category A as
    well as for the Category B and C agents.
        Next slide, please. Importantly, and as mentioned in the
    video you showed, and in your own opening statements, we also
    have an important responsibility for developing countermeasures
    for radiological and nuclear threats. We have a strategic plan
    and research agenda that has just recently, within the past few
    weeks, been published. By the end of the year, we will have a
    similar plan for medical countermeasures against chemical
    threats.
        Next visual, please. This slide summarizes some of the key
    achievements in the development of biodefense countermeasures,
    some of which are already in the procurement process, as
    mentioned by Mr. Simonson, some of which are in the queue for
    that, and others may become eligible should the material threat
    assessment indicate that this is the case. Importantly, with
    regard to smallpox, we now have, as mentioned, 300 million
    doses in our Strategic National Stockpile, and research is now
    on one of the components which is much less toxic, in the sense
    of less adverse events. That is modified vaccinia Ankara, in
    addition to anti-viral drugs.
        With regard to anthrax, there is the recombinant protective
    antigen as well as research on antitoxins, botulism vaccine,
    research and development, as well as a variety of monoclonal
    antibodies and polyclonal antibodies against a variety of the
    subtypes of botulism toxin. And finally Ebola, we have
    conducted the first human vaccine trial for the development of
    an Ebola vaccine.
        Next slide, please. With regard to the authorities that we
    now have to expedite research, we have been able to hire
    several high level members of our team now, particularly those
    who have experience in advanced development, which was one of
    the gaps we had, since we generally do not push products all
    the way through to advanced development. We expected the hiring
    of these through the BioShield provisions.
        In addition, we have been able to expedite the awarding of
    grants and contracts, such as listed on this slide, by
    truncating the time from generally about 18 months to now
    between 6 and 8 months, shown here for therapeutics, antibodies
    protecting against botulism, as well as vaccine candidates
    against one type of botulism toxin.
        Next slide, please. In the future, we will continue to use
    these BioShield authorities, some of which relate to the points
    you made in your statement, such as protecting the immune
    system against radiation by a number of protectants, as well as
    chelating agents, as shown in bullet No. 2, in addition to
    developing a variety of assays for other therapeutics.
        On this final slide, it is a busy slide, and I know it is
    difficult to read. But the effect I want to bring up to you is
    that there are a number of candidates for biodefense
    countermeasures that are in the pipeline. What I have shown
    here is that if you look at the left of the slide, which is the
    purple bars indicating the research that we do, and if you go
    to the right, the orange boxes are what I would call BioShield
    eligible, not necessarily that it will be procured for
    BioShield, but that it would be advanced enough that there
    could be a procurement contract.
        So what we generally do is the research and usually the
    NIH's role is to not push so far to the right in advance
    development.
        Chairman Tom Davis. I hate to interrupt. Are any of these
    applicable to a nuclear attack?
        Dr. Fauci. Right now, the ones that we have there on this
    particular one are not, because we have, the nuclear component
    of it is still very much in what is already in the stockpile
    and the research is to get those licensed for the use for the
    civilian population. So we have a number of things in the
    stockpile.
        The critical issue is that we are much more on the research
    side of new countermeasures for radio protectants, as well as
    for stem cell and other immune reconstitution. The reason they
    are not up there, Mr. Chairman, is that they haven't yet gotten
    to the research level to get there. We have dealings now,
    interactions with industry and we are trying to partner in the
    development of some products that have already been developed
    that could go into there. But there is none right there on that
    slide that show for nuclear.
        But importantly, what we need to do is the greater
    partnership that you alluded to in your statement with industry
    to push these products through the advanced development. There
    has been referral to this in the situation where there are some
    gaps there. These are gaps that we are aware of and that we
    really need to fill. The basic research we do, and we can do
    well. The critical issue is how we get the push that we give
    from the research side to meet the pull that we can get from
    the BioShield side in order to get those products to be in our
    national stockpile ultimately for the protection of our Nation.
        Thank you, Mr. Chairman. I would be happy to answer
    questions during the question period.
        [The prepared statement of Dr. Fauci follows:]

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        Chairman Tom Davis. Thank you.
        Dr. Vitko.

                      STATEMENT OF JOHN VITKO, JR.

        Dr. Vitko. Good afternoon, Congressman Davis, Congressman
    Waxman and distinguished members of the committee. I am pleased
    to appear before you today to discuss the Department of
    Homeland Security's efforts in Project BioShield
    implementation, including the development of threat and risk
    assessments that help inform and priorities BioShield research,
    development and procurement, as well as our close coordination
    with the Department of Health and Human Services throughout the
    process.
        I will begin with a description of coordination between DHS
    and HHS on near-term implementation of BioShield and then move
    on to three major activities to support and guide future
    BioShield acquisitions: risk assessments across a broad set of
    biological agents, a strategy for addressing the engineered
    threat, and scientific research to reduce key uncertainties in
    these risk assessments.
        The Project BioShield Act of 2004 charges the Secretary of
    Homeland Security with the responsibility to determine which
    biological, chemical, radiological and nuclear threats
    constitute a material threat to our Nation's security. To
    fulfill this responsibility, the DHS Science and Technology
    Directorate, in partnership with our Information Analysis and
    Infrastructure Protection Directorate, has been conducting
    formal threat assessments of the agents of greatest concern to
    establish plausible high consequence scenarios.
        These assessments combine intelligence information with
    technical assessments of the feasibility of a terrorist to
    produce and disseminate the agent, to provide an indication of
    the number of exposed individuals, the geographical extent of
    the exposure and other collateral effects. If these
    consequences are of such a magnitude to be of significant
    concern to our national security or public health, the
    Secretary of DHS then issues a formal material threat
    determination to the Secretary of HHS, which initiates the
    BioShield process.
        HHS, assisted by the Interagency Weapons of Mass
    Destruction Medical Countermeasures Subcommittee, then
    determines the need for and requirements of any new medical
    countermeasures. Any recommendations issued for the acquisition
    of a specific countermeasure are evaluated through an
    interagency process and form the basis of the U.S. Government
    requirements.
        After approval of these requirements by the Office of
    Management and Budget, HHS issues a request for proposals and
    implements and manages the subsequent acquisition process
    through the delivery of the countermeasures to the Strategic
    National Stockpile. As described above, the normal process is
    to have an in-depth threat and risk assessment precede the
    material threat determinations.
        However, four threats were recognized to be of such urgency
    that the Secretary of DHS issued material threat determinations
    for them soon after the enactment of BioShield legislation and
    concurrently initiated in-depth assessments of plausible high
    consequence scenarios to better inform procurement
    requirements. These four threats are anthrax, smallpox,
    botulinum toxin and radiological and nuclear devices.
        Subsequently, full assessments have been performed on
    anthrax and botulinum toxin and radiological devices and a
    special study conducted on fissile materials, i.e., nuclear
    weapons. HHS has moved out promptly in addressing these threats
    with contracts in place for first and second generation anthrax
    vaccines and a pediatric formulation of potassium iodide. HHS
    is also in the acquisition process for botulinum toxin, anthrax
    therapeutics and the next generation of smallpox vaccines and
    has issued a number of requests for information for other
    medical countermeasures.
        We at DHS are currently addressing the next tier of
    threats. Assessments are nearly complete for plague, tularemia
    and chemical nerve agents. An assessment of viral hemorrhagic
    fevers will be completed this fiscal year. Based on the
    outcomes of these assessments, the Secretary of DHS may issue
    additional material threat determinations.
        The threat assessments and procurement actions discussed
    above focus on those CBRN agents widely agreed to be of
    greatest concern since the near-term BioShield processes. We
    are also conducting three key activities to guide future rounds
    of BioShield acquisitions. As part of our responsibilities
    under the President's strategy for biodefense for the 21st
    century, we are conducting a formal risk assessment across a
    broad range of biological threats, including all Category A and
    B agents from the Centers for Disease Control and Prevention
    threat list, some Category C agents and a number of potential
    engineered threats.
        These risk assessments factor in technical feasibility
    producing and disseminating the threat, the vulnerability of
    different portions of our society to those threats, and the
    resulting consequences of any such attack. Looking still
    further into the future, we have partnered with HHS and others
    in formulating and implementing a strategy for anticipating and
    responding to engineered threats. Together, we have developed
    an informed estimate of the types of emerging threats that
    might be within the ability of a terrorist organization to
    develop over the near, mid and longer terms, and have laid out
    a strategy for addressing them.
        Realizing that there are still large uncertainties,
    sometimes factors of 10 to 100, in some of the key parameters
    underlying these threat and risk assessments, we have
    established a National Biodefense Analysis and Countermeasures
    Center [NBACC], to conduct the laboratory experiments needed to
    reduce these uncertainties. Pending the completion of
    construction of the associated facility on the Fort Detrick
    campus in 2008, interim capabilities have been established with
    other Government and private laboratories to begin this vital
    work.
        In summary, DHS science and technology threat and risk
    assessments play a critical role in prioritizing BioShield
    acquisitions. Throughout the process, we have worked closely
    with our colleagues at HHS to most effectively couple DHS
    expertise on the threat and risk with HHS expertise on human
    health to better protect the Nation.
        This concludes my prepared statement. Mr. Chairman,
    Congressman Waxman, and members of the committee, I thank you
    for the opportunity to appear before you. I will be happy to
    answer any questions that you may have.
        [The prepared statement of Dr. Vitko follows:]

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        Chairman Tom Davis. Thank you very much.
        Mr. Simonson, I am going to start with you. One of the
    chief purposes of the Project BioShield Act was to enable the
    Government to more rapidly acquire countermeasures against
    biological, chemical, radiological or nuclear agents that might
    be used in terrorist attacks. The administration has identified
    the following agents for which countermeasures are needed to
    protect the public health: anthrax, smallpox, botulism toxin,
    plague and Ebola.
        Has the Department of Health and Human Services used any of
    the special acquisition flexibilities contained in the act,
    such as the enhanced simplified acquisition authority and
    expanded sole source authority for BioShield procurement
    conducted to date?
        Mr. Simonson. No. Our view has been that we wanted to,
    where possible, compete in full and open competition to keep
    the price down for these drugs. So to date, we have not had a
    need to use those authorities.
        Chairman Tom Davis. I understand that you have issued a
    request for information for drugs that might prove effective in
    treating acute radiation exposure and radiation sickness and
    that you have announced the intention to issue a draft RFP for
    this purpose by the end of the month, is that correct?
        Mr. Simonson. Yes.
        Chairman Tom Davis. I think there remains a concern that
    this process of reviewing, procurement and stockpiling
    effective radiological and nuclear countermeasures will drag on
    for several more months. Can you explain why you have chosen a
    draft RFP instead of an RFP?
        Mr. Simonson. It is a way to ensure that the ultimate
    acquisition is done properly. We issue the draft RFP to give
    industry an opportunity to comment on it. I think we have seen
    in the past that sometimes when RFPs go out, we are asking for
    things that we simply can't get from industry or we are asking
    for them in a format that doesn't work. We have found that the
    draft RFP mechanism helps us from having to duplicate efforts
    subsequently, for example, to recall----
        Chairman Tom Davis. But a regular RFP has to follow that,
    right?
        Mr. Simonson. Oh, yes. But oftentimes the time lines are
    compressed, leveraging some of the draft RFP time, knowing that
    the----
        Chairman Tom Davis. It reminds me of a friend of mine who
    was engaged to be engaged. It was one of those things. I guess
    it moves the process down a little bit, but you still have
    some----
        Mr. Simonson. Right.
        Chairman Tom Davis. Well, let me ask you this. Nothing
    currently exists in the Strategic National Stockpile for
    radiation protection that addresses acute radiation syndrome.
        Mr. Simonson. There are things in the Stockpile that do. We
    have a number of things in the Stockpile. You mentioned
    potassium iodide. Our only BioShield acquisition for radiation
    sickness is suspension potassium iodide for children.
        But in the Stockpile we have and have been building up
    products that are used to treat internal radiation exposure,
    they are called chelating agents.
        Chairman Tom Davis. Dr. Fauci, if you want to join in on
    this, because we need to know this.
        Mr. Simonson. Yes. This is called zinc and calcium DTPA. We
    have a drug called Prussian Blue. We have a drug called
    Nupogen, which is used to treat acute neutropenia, which is
    what follows radiation exposure. So we do have Stockpile
    elements that are responsive to radiation exposure.
        We also have a fair amount of what are called burn and
    blast provisions to be used.
        Chairman Tom Davis. But you concede it is not where you
    want to be?
        Mr. Simonson. No, no, absolutely not.
        Chairman Tom Davis. When do you anticipate actually getting
    this new drug developed and stockpiling that? Do you see a time
    line? You have this draft RFP that is coming, and you will have
    an RFP, and you will get the responses. Do you have any idea
    what the time line might be?
        Mr. Simonson. I can't give you the exact time line.
        Chairman Tom Davis. I understand.
        Mr. Simonson. I will tell you that we want it sooner rather
    than later, as fast as possible. But I have to be very careful
    about entering into an acquisition, I think this committee can
    be sensitive to this, where we have a malfunction of the
    Federal acquisition regulations or something like that, we do
    it in a very deliberate and cautious way. I do not think it is
    overly cautious, however.
        Chairman Tom Davis. How prepared would we be today if the
    recent anthrax incident at the D.C. Postal Service and DOD
    facilities had been even more widespread, or if an airborne
    anthrax attack from a small plane were to occur in Metropolitan
    Washington, requiring drugs and vaccinations for those exposed
    and for first responders?
        Mr. Simonson. We are substantially better prepared than we
    were in October 2001. We have enormous quantities of
    antibiotics in the Strategic National Stockpile to treat tens
    of millions of people for full courses of treatment, full 60
    day courses of treatment. We have, under the operation of DHS,
    a very reliable system for monitoring exposure, the so-called
    Biowatch system.
        We have 5 million, as you noted, 5 million doses of the
    currently licensed anthrax vaccine in the Stockpile. We have an
    RFP, well, not an RFP, we are seeking to negotiate an option
    for an additional 5 million doses of that material. Then we
    have the contract for 75 million doses of the next generation
    material, recombinant protective antigen.
        Chairman Tom Davis. Thank you.
        Mr. Waxman.
        Mr. Waxman. Thank you, Mr. Chairman.
        Mr. Simonson, to prepare for pandemic influenza, the
    administration has purchased 5.3 million courses of the anti-
    viral drug Tamiflu for the National Stockpile. Is that enough?
        Mr. Simonson. No.
        Mr. Waxman. The administration has purchased 2 million
    doses of a vaccine against avian flu to have on hand to
    vaccinate health care workers while a pandemic vaccine is
    manufactured. Is this enough?
        Mr. Simonson. It is enough for the beginning, yes. This was
    never meant to be a discrete and final action. This is the
    beginning of a program to purchase sufficient quantities of
    vaccine to enable us to respond to a pandemic.
        I might add that we were the first to do this. Dr. Fauci
    can comment on this.
        Mr. Waxman. In terms of making it available to all of our
    health care workers, do we have enough?
        Mr. Simonson. No, but we don't know enough about the
    vaccine to say even how it would be used at this point. There
    are clinical studies going on in Dr. Fauci's lab which will
    inform that. Again, we were the first in the world to do that.
        Mr. Waxman. Only a handful of States have the full capacity
    to deploy and distribute the Strategic National Stockpile. Is
    that enough?
        Mr. Simonson. No.
        Mr. Waxman. The company says it will close the only
    smallpox vaccine production facility in the United States if it
    does not get a Government contract to maintain its ability to
    produce the vaccine. Should this facility close down?
        Mr. Simonson. It is news to me that they are suggesting
    that. We are in discussion with them now about the proper way
    to maintain a warm base at that facility.
        Mr. Waxman. The company BioPort says it may be forced to
    close the only anthrax vaccine production facility in the
    United States if it does not get a Government contract to
    maintain its ability to produce the vaccine. Should this
    facility close down?
        Mr. Simonson. Should it close down? We are not advocating
    for it to be closed down, obviously, and we----
        Mr. Waxman. Would you be concerned if it did, because of
    the argument that they don't have a Government contract to get
    enough money to produce the vaccine?
        Mr. Simonson. As I said, we have made an acquisition of
    what we believe our requirement is at this point, 5 million
    doses of AVA. We are seeking an option for an additional 5
    million doses.
        But as you can imagine, in our world, we hear this often:
    if the Government doesn't do this, if the Government doesn't do
    that, we will close down. Frankly, we have to be responsive to
    what it is that we need for the Stockpile.
        Mr. Waxman. Two weeks ago, this committee heard testimony
    from Dr. Fauci and Dr. Bruce Gellin that the United States
    needed to purchase more courses of the anti-viral drug Tamiflu.
    So far the United States has purchased enough for only about 2
    percent of the population, about 5 million courses of
    treatment.
        I have learned that from the company Roche that 7 million
    courses of treatment are available for sale from next year's
    production. If we need more and more is for sale, why haven't
    we ordered more?
        Mr. Simonson. Well, I should say that we are in discussion
    with Roche about their production capability and what they can
    provide us. They are aware of our preliminary plans.
        However, it is worth pointing out that much like with the
    vaccine, we were well ahead of others in buying anti-virals.
    Other countries are often cited as having these enormous anti-
    viral stockpiles. Few have more than we have right now. We
    were----
        Mr. Waxman. But if we have only for 2 percent of the
    population, that doesn't sound right. Would you support the
    United States purchasing all 7 million available courses of the
    treatment?
        Mr. Simonson. We are interested in more Tamiflu.
        Mr. Waxman. OK. Has the availability of funds in any way
    hindered your ability to contract for doses of Tamiflu that you
    believe are important to protect the American people?
        Mr. Simonson. I am not aware of a funding constraint at
    this point, but I am not a budgetary person.
        Mr. Waxman. If you have to purchase more Tamiflu and they
    want a certain amount of money and you don't have it, isn't
    that a problem?
        Mr. Simonson. It is not clear to me that we don't have it.
        Mr. Waxman. Oh. OK. Well, we will be interested in hearing
    more about that.
        The purpose of BioShield is to encourage the development of
    new and innovative countermeasures against serious public
    health threats. The White House, for example, has said that the
    program is intended to create and procure countermeasures that
    are modern, new and next generation. Yet as I mentioned in my
    opening statement, HHS recently took $120 million in BioShield
    funds to purchase 5 million doses of anthrax vaccine that was
    licensed in 1970. Do you think that was a good idea, or should
    we be using it for future innovation?
        Mr. Simonson. I think it was a very good idea. And it was
    contemplated in the statute. The statute says, a security
    countermeasure without a commercial market, other than as a
    security countermeasure. That describes the BioPort vaccine.
    And as we have, I think agreed, it is an important vaccine to
    have in the Stockpile.
        Mr. Waxman. Thank you. Thank you, Mr. Chairman.
        Chairman Tom Davis. Thank you.
        Mr. Issa.
        Mr. Issa. Thank you, Mr. Chairman.
        I would like to continue right along that same line, but
    switch for a moment to the nuclear threat. I heard that, for
    what little information it has given me, I some 30 years ago
    was in bomb disposal, went through nuclear-biological-chemical
    training, just enough to understand that everything you are
    mentioning pretty much was the cold war solution.
        So to say that we have something to deal with hundreds of
    thousands of people that might be affected, even by a rather
    low technology dirty bomb, is not to say anything terribly new.
    I saw your head shaking. So I don't think we have to go further
    into that.
        After September 11th, and particularly after October when
    we began realizing that there would be followon threats, and
    certainly after July 7th, we are all aware that al Qaeda has
    not gone out of business, and if they can attack greater
    London, which is far more fortified than the United States,
    they will be back here. Why is it we have nothing that can deal
    with, even a small amount for the first responders, and for the
    hospital personnel who would also be suffering, why is it we
    have nothing that is going to dramatically reduce the effects
    of low-level--let me rephrase that--of radiation sufficient to
    give radiation sickness or death today? Iodide doesn't get you
    there.
        Mr. Simonson. I agree with that. This has been,
    Congressman, one of my great frustrations since----
        Mr. Issa. We are here to relieve your frustrations.
        Mr. Simonson. Good. [Laughter.]
        Since beginning work in this area, a lot was done in the
    civil defense movement, in the 1950's, the 1960's, that was
    disassembled in the 1970's and 1980's. There has not been an
    enormous amount of work, basic and applied research, on
    countermeasures against radiation. Funding for the Government's
    agencies that do that sort of work, like the Armed Forces
    Radiobiology Research Institute, are pretty much level.
        We sought to add to that. We infused funds, Dr. Fauci's
    institute did, into AFRRI to begin work there to try and
    develop more of these things. But it takes some time. Like you,
    I don't think this is a satisfactory state of affairs. We are
    moving, I think, cautiously but with deliberate speed to
    remediate it.
        Mr. Issa. OK. Just following up one more on that, yesterday
    we had a rather lengthy hearing chaired by the chairman here on
    entrepreneurs and the Government and how to make it more
    entrepreneurial. We even had the former Speaker of the House
    sitting in your seat. One of the all agreed on by everybody on
    the panel was that when you put out a request for
    entrepreneurial behavior, which to me is risk taking, with the
    hopes of a return but no guarantee, that the one thing
    Government has to do is follow through on that promise,
    meaning, if you say develop radiation or biological vaccines,
    antidotes, treatments that are effective and reach a standard,
    we will buy from one of you. Not from all of you. It is a
    contest. First man to the moon wins, all the others just get
    leftover capsules sitting in space.
        We have already done that, companies have made these
    investments. One of the next panels, or the entire next panel,
    is going to be all about people who made those. And now we are
    sitting here saying--what was it you said, chairman, engaged to
    be engaged? We are in this position of engaged to be engaged.
    When will we say, we are going to buy at least enough doses of
    radiation sickness for the nuclear power plants we expect to be
    building in the years to come? At least for things which
    domestically might happen, which we are going to need to be
    ready for, that we have never been ready for. And then by the
    way, more doses if we believe that there is a threat and
    positioning them where they do good.
        When is that engagement to be engaged going to become an
    engagement date?
        Mr. Simonson. Once the draft request for proposal is
    published, that will lay out a time line which I think will be
    responsive to your question. I can't give it to you right now,
    because it hasn't been published. But once it is, it will be
    clear in that document.
        All I can tell you is, I have certain limitations on me,
    what I can say about Federal acquisitions, when we are
    contemplating one. But I can leave you with the assurance that
    no one is more concerned about this than I am. This is
    something that we focus on every day at our place. I know it
    does not always seem satisfactory to the industry.
        Mr. Issa. And at the risk of seeming like Sam Donaldson, a
    very quick followup. We live in a 2-year world here in
    Congress. We can only provide you money for 2 years, and after
    that it is a promise to promise money, and we deal around that.
        Can you give us a range outside of your RFP of when
    effectively, you expect to have delivery of drugs, if they
    exist, to deal with each of these areas, in the case of
    radiation, in the case of this draft RFP? Can you just give us
    a date? Is it greater than this Congress? Is it beyond the next
    Congress? Will it be after Senator Hillary Clinton leaves
    office? I just need to know a range. I know that is open to so
    much questioning.
        Mr. Simonson. I would say within the life of this Congress,
    there will be progress, as there has been progress. That is as
    far as I can go on that.
        Mr. Issa. Yes, Doctor.
        Dr. Fauci. Again, as I mentioned, myself and my agency are
    responsible for the research that goes into that. But the
    question you asked, Mr. Issa, of Mr. Simonson really does
    relate to the success or failure of the research to prove in a
    pivotal study that this is FDA licensable. That is an issue
    that is sometimes not fully understood. Because there is more
    than just having the money. Do you have a product that is going
    to, in a clinical trial, show to be effective in what you want
    it to be effective with, so that it would pass the criteria of
    something that would be FDA licensable to go into the
    Stockpile.
        Now, that is not an excuse for any slowness or fastness.
    But that is something that really is not understood, that just
    because there is a product out there doesn't necessarily mean
    it could be bought to put into the stockpile. There has to be
    at least the pathway toward what will be FDA approval.
        Having said that, if I might just take an extra minute to
    point something out in response to the question that the
    chairman asked when I showed that last slide, he asked a very
    relevant question: is there anything on there for radiation?
    The reason that there isn't is that we are very far advanced,
    when you think in terms of microbial and toxin threats. The
    reason for that is that for decades, we have been preparing for
    naturally emerging microbes.
        So we have the apparatus in place, we have the scientists
    there, we have the people interested in it. And we do it every
    day. Infections emerge every day that might be a worse threat
    than a deliberately released microbe. That is not the case with
    some other areas of defense countermeasures.
        And Mr. Simonson mentioned the issue of the gaps that have
    been left following the cold war about radiation. We have to
    almost start from square one. We have to look at what we have,
    we have to get the indication for licensure, and then we have
    to go and do the research, research on issues that were never
    considered when we had nuclear holocaust threats, because there
    really wasn't much concern about the after-effects of it. It
    was either you blow up a city or not. It is a totally different
    picture now, which is the reason why the research is taking
    time.
        So I hope that at least partially answers your question
    about predicting a timeframe.
        Mr. Issa. It does partially answer it. Thank you, Mr.
    Chairman.
        Chairman Tom Davis. Thank you very much.
        Mr. Davis.
        Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
        Dr. Vitko, one of the jobs of the Department of Homeland
    Security is to identify a material threat to the American
    people from bioterrorism. You have testified that one of the
    challenges of the task is that the list of potential threats is
    quite long. The Department has responded to this challenge by
    focusing its list on the specific agents deemed to be the most
    dangerous and credible threats; and of course to me, that makes
    a lot of sense.
        Another way to address the multitude of potential threats
    is to shore up the basic public health infrastructure and
    respond to all threats. Core public health functions include
    communication, surveillance and emergency response. The problem
    is that the basic public health system is not fully functional.
    For example, only a handful of States have the capacity to
    deliver and distribute products from the Strategic National
    Stockpile. There are also major gaps in laboratory capacity and
    personnel.
        My question is, do you agree that a strong public health
    system is critical to responding to many of the different
    agents of bioterrorism?
        Dr. Vitko. Absolutely. A strong public health system is the
    key to any biodefense that we have.
        Mr. Davis of Illinois. What would you say that the
    Department of Homeland Security has done, or what is the
    Department doing to explain the need for public health
    investment to the public and of course to the administration?
        Dr. Vitko. The Department of Homeland Security's
    responsibility here, as you know, is an overall coordination
    and response to terrorist events with the National Response
    Plan.
        Mr. Davis of Illinois. I am sorry, I am having a little
    difficulty hearing.
        Dr. Vitko. I am sorry, Mr. Davis. I was saying that the
    Department has responsibilities at multiple levels. One is to
    coordinate the overall response through the National Response
    Plan. In there, there are specific annexes that deal with, in
    fact, biological response, in which HHS has a lead under ESF 8
    in those activities, emergency support function 8.
        We also work very closely with HHS and with the other
    members of an interagency team in a policy coordinating
    committee on the Homeland Security Council on Biodefense, in
    which we look at the integrated aspects of a defense and
    address key issues, such as mass casualty response, the need
    and ways to improve that. And we are part of a team of working
    with them to help identify the key areas to emphasize and
    develop.
        Mr. Davis of Illinois. Does the Department have a position
    on $130 million in proposed cuts to State and local health
    departments for bioterrorism preparedness?
        Dr. Vitko. I don't know if the Department has an official
    position. I have not been asked that. I believe we would say
    that we support HHS fully on what they are doing.
        Mr. Davis of Illinois. Does the Department then have an
    advocacy responsibility to point out that which it understands
    to be need?
        Dr. Vitko. Yes, the Department does have such an advocacy
    responsibility. And one of the ways that we exercise that is
    through large scale exercises, barring actual events. As you
    know, we have just conducted Top Off III as an exercise. In
    there, the influence of mass casualty response clearly comes
    up. We work then through the various interagency committees to
    identify what those needs are, to look for innovative ways to
    address those and to tackle those and lay out a road map for
    getting there.
        Mr. Davis of Illinois. Would you have any way, would you
    venture to suggest any assessment of how the American public is
    responding to threats of bioterrorism?
        Dr. Vitko. I have no formal insight in that, in the sense
    of being able to gauge the full American public. Clearly, it is
    a concern that is held by many. At the same time, barring an
    actual event, one tries to balance that in executing their
    daily lives. It is something they are counting on us as a
    country to have something there for them, if something bad
    should happen. But I do not think they are dwelling on it on a
    daily basis.
        Mr. Davis of Illinois. Thank you very much, Mr. Chairman. I
    have no further questions.
        Chairman Tom Davis. Thank you very much.
        Mr. Shays.
        Mr. Shays. Thank you, Mr. Chairman, for holding this
    hearing on a very important subject.
        I am going to make a statement to which I then want to
    respond to questions, Mr. Secretary, that goes to you,
    basically. During the House debate on the BioShield bill, I
    expressed concern over the provision that allowed for the use
    of unapproved vaccines and treatments by military personnel.
    Testimony before the National Security Subcommittee by the Gulf
    war veterans confirmed the Department of Defense [DOD], had
    consistently failed to meet basic requirements to inform
    recipients about investigational drugs or keep adequate medical
    records.
        Now, the mandatory DOD anthrax program only built on that
    sorry record, relying on a dated vaccine formulation tested and
    approved only for protection against cutaneous exposure, not
    against weaponized or aerosolized anthrax. A Federal court has
    enjoined the use of the vaccine in a mandatory program due to
    flaws in the Food and Drug Administration approval process.
        And this is my key point, rather than rely on the BioShield
    to develop a modern anthrax vaccine, the Pentagon chose to rely
    on another provision of the law permitting the Department of
    Health and Human Services to grant ``emergency use
    authorization'' for continued use of the now ``unapproved''
    anthrax vaccine, albeit in a voluntary program.
        So these are my questions. First, did the Department of
    Health and Human Services have access to the classified
    November 2004 intelligence community assessment of the anthrax
    threat?
        Mr. Simonson. Yes.
        Mr. Shays. Second, did HHS agree with the Pentagon's
    conclusion about the nature of the threat our troops faced from
    anthrax attacks?
        Mr. Simonson. We did not undertake our own review of their
    conclusions.
        Mr. Shays. Did you agree with them?
        Mr. Simonson. We accepted the Department of Defense's
    conclusions.
        Mr. Shays. So you agreed with them?
        Mr. Simonson. We accepted them.
        Mr. Shays. Has the authorization for anthrax and the
    congressional concern changed any HHS policies regarding future
    requests for emergency use authorization?
        Mr. Simonson. No.
        Mr. Shays. So there is no change in policy at all?
        Mr. Simonson. No, other than that, as I mentioned in the
    past----
        Mr. Shays. Why was it necessary? Why did they need to come
    to you if they had simply made it voluntary? Why did they need
    to come to you for an emergency program, since you have the
    authority to do it? They have the authority--do they not have
    the authority if it is for a voluntary program?
        Mr. Simonson. It is not clear to me how they would do it as
    a voluntary program but as an EUA. I suppose they could do it
    as a treatment IND, but the mechanism for doing that is
    extremely cumbersome. We wanted to make very sure that the
    program that we were authorizing allowed members of the Armed
    Services to decline to take the vaccine. It has been very
    clear, and as far as I can tell, that part of the program has
    been very effective.
        Mr. Shays. Right.
        Mr. Simonson. Our concern was to make the vaccine available
    to members who voluntarily wanted to take it. The Department of
    Defense represented to us that while in the field, it was very
    common for senior officials, including Dr. Winkenwerter, to
    hear, when are you going to make this vaccine available to us?
        And as I think I mentioned to you before, our view was,
    Secretary Thompson's view and my view was, if we were in that
    battlefield, we would want the option to take this vaccine. So
    we accepted the Department of Defense's determination, but we
    issued the EUA in a way that was consistent, we think, with the
    spirit of the request.
        Mr. Shays. And what kind of requirements, and I would agree
    that the voluntary nature of it is its saving grace. I do agree
    that if people want to use it, they should have that
    capability.
        But tell me, what demands and oversight do you have over
    the Department's explanation to its servicemen and women about
    the voluntary nature of it?
        Mr. Simonson. There is an agreed-upon document that states
    all of the conditions, in very clear language, to the
    servicemen, to the potential vaccinee. That was approved by the
    Food and Drug Administration before it could be used by DOD.
        Mr. Shays. Thank you very much. Thank you, Mr. Chairman.
        Chairman Tom Davis. Thank you.
        Mrs. Maloney.
        Mrs. Maloney. Thank you for having this hearing. I would
    like to ask Stewart Simonson or Dr. Fauci, the general question
    on the BioShield progress, the material threat assessment was
    done in four areas, yet only two RFPs have been issued on the
    material threat assessments, and why have the other two RFPs
    not been issued.
        But I would like to go back to the questioning also that
    Ranking Member Waxman had on the BioShield anthrax vaccine
    purchase program. This is an issue that is very important to
    me. We have suffered anthrax attacks in the district that I
    represent in New York. Apparently, you signed an $877 million
    contract with one company, VaxGen, to procure the 75 million
    doses of anthrax vaccine, but you do not expect to get that
    until 2006.
        I understand it is a company that has never done this type
    of research before, and what is this vaccine that is so much
    better than the stop-gap purchase of 5 million doses of an
    older, less effective vaccine for $125 million from a second
    company, I believe it was BioPort? Mr. Waxman mentioned that
    possibly we should not have used BioShield funding for the
    stop-gap purchase.
        But I find it, I would like to know, why are we going to a
    company that has never done anthrax or have a track record in
    producing it? And then you go to another company that can do it
    at a lesser degree or whatever. Could you explain that contract
    to me? Why are we going to a company, why did we need the stop-
    gap, why couldn't the first company--you understand what I'm
    saying.
        Mr. Simonson. Yes, sure.
        First, VaxGen has done work with this particular type of
    product. They have an R&D contract with Dr. Fauci's institute,
    so they are not novices in the field of recombinant protective
    antigens. The idea is to develop a next generation vaccine. We
    have been advised by a number of scientific entities, including
    the Institute of Medicine, that there is a need for a new
    anthrax vaccine, using 21st century technologies.
        So this is what we are doing. We are trying----
        Mrs. Maloney. And VaxGen has produced other anthrax
    vaccines?
        Mr. Simonson. No, they have work underway to produce
    anthrax vaccine. They have a research and development contract
    with Dr. Fauci's institute.
        It is a small biotech firm. But I think you will see,
    ma'am, that this is going to be the story of Project BioShield.
    We will be working with the smaller biotech----
        Mrs. Maloney. What other vaccines have they developed in
    the past?
        Mr. Simonson. There is no vaccine that they have developed
    for anthrax that has been licensed. This is a small----
        Mrs. Maloney. Have they developed any vaccines?
        Mr. Simonson. Not that have been licensed, no.
        Mrs. Maloney. No.
        Mr. Simonson. But I have to tell you, this will be a fairly
    commonplace thing with BioShield. The large pharmaceutical and
    biotech firms are not interested in this work. Dr. Fauci can
    tell you a little about the market realities of these vaccine
    and countermeasure production programs. We are going to be
    working consistently with these smaller firms, and it is going
    to require an enormous amount of Government effort to get this
    product licensed.
        But there will be good that comes from that. We will build
    infrastructure and expertise----
        Mrs. Maloney. So no other company wanted to bid on it?
        Mr. Simonson. There were other bids, yes.
        Mrs. Maloney. And did they have a track record in
    producing----
        Mr. Simonson. They were similar types of companies.
        Mrs. Maloney. They had never produced anthrax before, the
    other companies that bid on it, anthrax vaccine?
        Mr. Simonson. I am restricted a little in what I can say
    under the procurement rules, but they were similar types of
    companies. These were not big pharma companies.
        Mrs. Maloney. I would just be interested in why this
    company, you believe, can come up with it when they have no
    track record.
        Mr. Simonson. This was subject to a very extensive
    technical review within the Department of Health and Human
    Services, experts both within and without Government. We work
    with what we have. We send out RFPs, we get proposals back and
    we review them and do the best we can with it.
        Mrs. Maloney. OK. I would like to see the proposals and
    look at them.
        Mr. Simonson. OK.
        Mrs. Maloney. Also, there was a report that came out about
    2 weeks ago from some research group in San Francisco. They
    were talking about the RFP for botulinum antitoxin, which
    apparently is very deadly, it could go into the milk supply and
    hurt many people. What are we doing on that? This report, I
    don't know if it is correct or not, said we had not done an RFP
    or reacted to this particular threat.
        Mr. Simonson. We have a number of botulinum antitoxin
    programs underway. I assume you are referring to the article
    that came out of Stanford.
        Mrs. Maloney. Yes, that is the one.
        Mr. Simonson. We have a program that has just been
    completed which took plasma that was created during the early
    1990's and finished that into botulinum antitoxin, and we have
    a second botulinum antitoxin program that is underway right
    now. An RFP, in fact, I think goes out later today or tomorrow.
        Mrs. Maloney. Oh, really, today?
        Mr. Simonson. Yes, later today or tomorrow.
        Mrs. Maloney. Then my first question on the material threat
    assessment, I am glad you have done them. But I read that only
    two RFPs have gone out, when we need to have four going out. I
    just would like your response to that.
        Mr. Simonson. Well, I am not sure that is accurate. As I
    said, I think the botulinum one went out or will be going out
    in the next couple of days.
        There is a period of time that occurs between when the
    material threat assessment is given and when the RFP is done.
    The RFPs are very complicated instruments. It is the nature of
    the document.
        Mrs. Maloney. But actually two have gone out, one is going
    out today and there is a fourth that needs to go out, right?
        Mr. Simonson. Right.
        Mrs. Maloney. My time is up. Thank you.
        Chairman Tom Davis. Thank you very much. Ms. Watson.
        Ms. Watson. I too want to add my thanks, Mr. Chairman, to
    you for having this hearing.
        We have been talking about the chemical and radiological
    and biological threats and protecting the general public
    against an attack. We have experienced the anthrax attack when
    it reared its ugly head in the Hart Building and in the
    Longworth Building.
        So I want to focus on the responsibility that we have to
    the general public. I think legislators must be held
    accountable for the organizational structure that we create and
    the procurement processes that we devise. As we move forward
    with our BioShield programs, it is imperative that we as
    lawmakers take all bias and politics out of the funding and
    jurisdiction. We must also be cautious and informed on the
    proper levels of preparedness.
        In terms of public health, too little is far greater a risk
    than too much. The difficult job that Congress approaches is
    making decisions based on well-constructed calculations, not on
    the emotional or political agendas that can arise when a threat
    or an implied threat is aimed at our country.
        So I too would want to know about this company that we are
    going after and I have learned from Roche, the pharmaceutical
    company, that 7 million courses of treatment, and I guess this
    treatment has to do with Tamiflu, we had a hearing last week on
    it, are available for sale from next year's production. I see
    the flu as being a threat to the public's health.
        So I really feel, Mr. Chairman, that oversight needs to be
    periodical and continuous. We need to know and you can comment,
    let me be sure I am addressing this to the right person, I
    guess it is the Honorable Stewart Simonson, you can comment as
    to the level of preparedness that we are positioned at at this
    particular time.
        I want to be sure that as you analyze, as you review these
    various proposals that you are getting, I just heard it said
    that not a whole lot of companies responded, so we are going
    with the one that has. I want to make sure that what they are
    presenting us with is the best and that it will guarantee that
    we can have a BioShield stand in the way of attacks that would
    be made on our general public.
        So with that said, I am listening very closely to hear
    evidence that we are prepared, or we are getting there. Thank
    you very much, and thank you very much, Mr. Chairman.
        Chairman Tom Davis. Thank you very much.
        Any other questions? Mr. Van Hollen.
        Mr. Van Hollen. Mr. Chairman, I just want to first
    apologize to the witnesses for being late. I am on two other
    committees that have markups this morning, Judiciary and
    Education and Workforce. I look forward to reading your
    testimony and listening to the next panel as much as I can.
        Thank you, Mr. Chairman, for the hearing.
        Chairman Tom Davis. Thank you.
        Ms. Norton, any questions?
        Ms. Norton. None, thank you, Mr. Chairman.
        Chairman Tom Davis. OK, thank you all for bearing with us.
    We will dismiss this panel at this point, take a 2-minute
    recess as we convene the next panel. That panel will have Mr.
    Robert Kramer, the CEO of BioPort Corp.; Mr. Richard Hollis,
    the CEO of Hollis-Eden Pharmaceuticals; and Mr. Gerald Epstein,
    the senior fellow for science and security, Homeland Security
    Program, Center for Strategic and International Studies.
        [Recess.]
        Chairman Tom Davis. We are going to our second panel.
    Again, we have Mr. Robert Kramer, the CEO of BioPort Corp.;
    Richard Hollis, the CEO of Hollis-Eden Pharmaceuticals; and Dr.
    Gerald Epstein, the senior fellow for science and security,
    Homeland Security Programs, Center for Strategic and
    International Studies.
        I know Mr. Issa wanted to be here to introduce you, Mr.
    Hollis, but I am going to go ahead and swear you in. I am going
    to have to run upstairs for a couple of minutes in between and
    will have one of the other Members take the chair. Please rise
    and raise your right hands.
        [Witnesses sworn.]
        Chairman Tom Davis. Thank you very much.
        Dr. Kramer, we will start with you and then we will go to
    Mr. Hollis and then to Dr. Epstein. Thanks for being with us
    and thanks for your patience.

     STATEMENTS OF ROBERT G. KRAMER, PRESIDENT AND CHIEF EXECUTIVE
     OFFICER, BIOPORT CORP.; RICHARD B. HOLLIS, CHAIRMAN AND CHIEF
     EXECUTIVE OFFICER, HOLLIS-EDEN PHARMACEUTICALS; AND GERALD L.
       EPSTEIN, SENIOR FELLOW FOR SCIENCE AND SECURITY, HOMELAND
       SECURITY PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL
                                STUDIES

                     STATEMENT OF ROBERT G. KRAMER

        Mr. Kramer. Chairman Davis, thank you, as well as the other
    members of the committee, for the opportunity to share some
    comments with you this afternoon. You have a copy of my written
    testimony and I am not going to read it, but rather just make a
    few general comments and summary observations.
        These comments are going to be focused on the recent
    decisions by the Government related to the procurement of
    vaccines to protect Americans from the threat of anthrax and
    botulinum. But I believe they have application to all other
    threats that are being considered. BioPort Corp. manufactures
    BioThrax, the only FDA-licensed product for the prevention of
    anthrax. Our company has a more than 70 year history of
    development, testing, licensure and commercialization of
    biologic products.
        Since privatizing the company in 1998, we have upheld our
    long-term commitment to the Federal Government to be a reliable
    partner for anthrax vaccine as a critically needed biodefense
    countermeasure. Since 1998, BioThrax has been used to protect
    over 1.3 million military members serving our country
    throughout the world. To be clear, this means over 5 million
    doses of BioThrax have been administered to these military
    personnel.
        The product itself has been licensed since 1970. It has
    been the subject of numerous safety and efficacy studies, as
    has been well documented, one of the most thoroughly reviewed
    vaccines. The most recent review was done by the National
    Academy of Sciences Institute of Medicine panel, which
    published this finding in March 2002, which sought to answer
    two questions: is the vaccine safe and is it effective? Very
    clearly, the answer to both those questions was yes.
        As a company, we have submitted more than four proposals
    since 2001, detailing our commitment, our capability and
    willingness to provide an unlimited number of licensed anthrax
    vaccine doses to the Strategic National Stockpile. Rather than
    take us up on any of those proposals, the Department of Health
    and Human Services has recently awarded a nearly $1 billion
    contract for an experimental vaccine that has been used in
    fewer than 1,000 recipients. I will repeat: our vaccine has
    been used in over 1.3 million patients. The experimental
    product they have invested over $1 billion in has been used in
    less than 1,000.
        This policy decision by HHS raises serious concerns about
    the Government's commitment to the underlying goals of Project
    BioShield. Let me be real specific in that regard. One of the
    important goals of BioShield is to increase the number of
    biodefense companies in the United States. By prohibiting
    proven companies with proven products from participating in
    contracts like the 75 million dose contract for anthrax
    vaccine, the Government will eliminate biodefense companies,
    not increase them, and will not encourage them to participate
    in taking the risks that we have all talked about this morning
    and this afternoon necessary to bring products to the market.
        A related goal of BioShield was to create a strong
    manufacturing base to further avoid a similar crisis to what
    occurred in October 2004 with regard to the flu vaccine supply.
    The Government excluded from the outset and by design the only
    licensed anthrax vaccine from participating or competing for
    the 75 million dose order.
        Unfortunately, this experience is not only occurring with
    respect to anthrax vaccine, but also for vaccines to protect
    against botulinum. The U.S. Government, in announcing its
    intention to purchase an early stage experimental botulinum
    vaccine from a sole source eliminated several competing
    manufacturers and technologies and reduced the potential for
    ultimately acquiring a safe and effective vaccine targeted at
    this threat.
        A third Project BioShield goal was to increase the uses for
    licensed products. Yet with respect to anthrax vaccine, the
    purchase of an experimental product does nothing to accomplish
    this.
        The last goal that I will mention has to do with the
    Government's commitment to buy best in class medical
    countermeasures at competitive prices. Again, HHS intends to
    procure a vaccine for nearly all of the future stockpile needs
    for anthrax from a single supplier at a cost higher than it was
    proposed for the existing FDA-licensed anthrax vaccine.
        Further, phase 1 studies provide no evidence that the
    experimental product provides any improvement in terms of
    safety or efficacy over the currently licensed product,
    BioThrax. In fact, the published data illustrate that it took
    an additional dose plus an additional 30 days for the
    experimental product to provide a comparable protection to that
    with BioThrax.
        Despite these results, HHS distributed a news release in
    March 2004 touting the experimental vaccine as being proven to
    be safer and more effective than BioThrax. HHS subsequently
    withdrew this news release from its Web site when they were
    under inquiry from Senator Grassley.
        I will add that had a company such as ours or anyone on
    this panel made such remarks, you can be assured that the FDA
    would have demanded an immediate retraction and withdrawal and
    correction of such statements.
        HHS has staked the Nation's protection against the No. 1
    biologic threat on an experimental product. It is clear to me
    and many of my colleagues in this industry the shortcomings
    that I have discussed and articulated. One way to help prevent
    these shortcomings from reoccurring is to provide some early
    oversight into the BioShield procurement process. The
    evaluation and eventual procurement of products such as anthrax
    vaccine is extremely complex and requires expertise from an
    open, independent, multi-disciplinary review. The risks of
    failure for products such as these are too great and the costs
    of these failures are simply too large to continue to do
    otherwise.
        When you add to that the importance of these products,
    namely, they protect and save lives, in my opinion there is no
    Government procurement challenge greater than what is at stake
    today with Project BioShield. It therefore requires a sound,
    discipline approach that includes expert representation from
    medical, scientific, regulatory and compliance personnel to
    assist with these key decisions.
        In closing, it is essential to recognize that our industry
    is very young, very fragile and very much dependent upon a
    unique customer, the U.S. Government, for a strong partnership
    to bring these kinds of products to market. Unless we do so,
    the industry will be characterized by companies that have a
    lack of proven record, they will be in it for the short run and
    they will not be a viable long-term partner for the U.S.
    Government.
        Thank you again for allowing me to share with you my
    comments and I look forward to answering any questions you
    have.
        [The prepared statement of Mr. Kramer follows:]

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        Mr. Shays [presiding]. Thank you, Mr. Kramer.
        Mr. Hollis.

                     STATEMENT OF RICHARD B. HOLLIS

        Mr. Hollis. Mr. Vice Chairman, members of the committee, my
    name is Richard Hollis. I am chairman and CEO of Hollis-Eden
    Pharmaceuticals, the manufacturer of NEUMUNE, the first medical
    countermeasure being developed to address acute radiation
    syndrome or radiation sickness as a result of nuclear terrorism
    and exposure to radiation. I ask that my entire statement be
    entered into the record.
        This morning, the chairman opened up the meeting with some
    chilling videos about the nuclear threat and also in
    yesterday's press release from Michael Chertoff describing the
    reorganization of the Department of Homeland Security, he
    stated: ``Of all the catastrophic threats we face, a nuclear
    attack on our soil would be uniquely threatening to our
    society.'' All of the Nation's leaders from the President on
    down have concluded that the greatest threat to our Nation is
    nuclear proliferation and nuclear material in the hands of a
    terrorist.
        Recently, during a televised interview, the chairman and
    vice chairman of the 9/11 Commission both stated that not only
    is nuclear detonation in one or more of our major cities
    possible, but it is probable. The death toll from the
    detonation of a relatively small nuclear device in one or more
    of our major cities would be devastating.
        Medical reports indicate the vast majority of those who are
    killed, hundreds of thousands would die from acute radiation
    syndrome. The sad thing about this is the overwhelming majority
    of these people could be saved if our Government was better
    prepared to respond to a nuclear scenario.
        Now, imagine if you could rapidly distribute a drug to
    people to give themselves an injection, much like the soldiers
    do following a chemical attack, and most importantly, imagine
    up to 90 percent of the people who receive this treatment could
    survive exposure to radiation. We have a drug in development
    with the potential to treat acute radiation syndrome that could
    be in the Strategic National Stockpile as early as next year.
        In primate tests done under the Department of Defense
    oversight using lethal doses of radiation, NEUMUNE has been
    shown to increase survival rates up to 90 percent. To date, it
    has no significant side effects. It is inexpensive to
    manufacture. It can be self-administered in the field without
    hospitalization. We have opened up an IND with the FDA to
    initiate our human clinical studies, and we anticipate NEUMUNE
    could potentially be commercialized with an NDA toward the end
    of 2006.
        There is currently no drug in the stockpile to deal with
    the acute effects of a nuclear detonation or acute radiation
    syndrome. Despite this phenomenal progress with NEUMUNE, and
    the suitability for BioShield contract, we have heard very
    little from the Federal Government in regard to the procurement
    of this drug. Without having this commitment, we do not know
    how to scale our batch sizes, what drug delivery configuration
    is preferred or how many manufacturers we should validate. All
    of these activities cost tens of millions of dollars and we
    have reached the point where decision have to be made or the
    project risks meaningful delays.
        Over 10 months ago, HHS issued a request for information
    for therapeutics to treat acute radiation syndrome. We were
    informed that a draft RFP would be issued by July 2005, and to
    date, we have still heard nothing. More to the point, we don't
    even understand why the agency is even going through a draft
    RFP, given the results of the prior RFP process that has
    already taken over 10 months. During this 10 months, we have
    incurred tens of millions of dollars in development. It is just
    more delays and mixed market signals to our investors.
        To the best of our knowledge, we are the only company that
    is close to delivering a drug that meets the requirements for
    this specific request for proposal. For this reason, earlier
    this week, Hollis-Eden submitted an unsolicited proposal to
    allow HHS to immediately procure NEUMUNE for the Strategic
    National Stockpile. This proposal meets each and every legal
    requirement for the acceptance under existing law and
    regulation.
        In an environment where BioShield was supposed to stimulate
    capital investment in companies like ours, delays by HHS have
    caused Hollis-Eden to lose approximately $600 million in market
    capitalization. This is just the opposite effect of the
    intention of what BioShield was supposed to do.
        In summary, BioShield, to work effectively, HHS and DHS
    must define the markets by issuing the threats and what
    countermeasures are needed to address those threats and how
    many doses of the drug will be procured. They need to put out
    RFIs and RFPs for what countermeasures are needed and they need
    to have an independent scientific review board assess the
    respondents to the RFIs as to whether the science is feasible
    and whether the company can deliver in a reasonable period of
    time and award advance purchase contracts early.
        So I would submit to this committee, this is a very
    important question for me to ask the committee and members,
    given that the nuclear threat is the greatest threat we face,
    given that more than a million lives per detonation may be on
    the line, given that a promising, effective medical
    countermeasure to acute radiation syndrome is close to fruition
    and it is now 4 years after September 11th, why is this drug
    not a top priority to be deployed to protect the American
    public?
        Finally, how will you, our country's leaders, try to
    explain why so many people unnecessarily, from a nuclear
    September 11th, when experts are predicting this nightmarish
    scenario, and we fail to prepare our Nation by providing and
    forward deploying a drug that could save millions of lives?
        Mr. Chairman and Mr. Vice Chairman, it is an honor to be
    here today. Thank you for the opportunity to be of service to
    our Nation and homeland security and to protect and safeguard
    the citizens of our free country. Thank you very much.
        [The prepared statement of Mr. Hollis follows:]

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        Mr. Shays. Thank you, Mr. Hollis. It is an honor to have
    you here.
        Dr. Epstein.

                     STATEMENT OF GERALD L. EPSTEIN

        Dr. Epstein. Thank you, Mr. Vice Chairman and members of
    the committee.
        I do not have a company. I would like to step back a little
    bit here and discuss some overall aspects of the bioterrorism
    threat, what those characteristics imply for our ability to
    counter that threat. I would like to point out that although
    essential, the programs we have in place are going to be
    insufficient as time passes on in the long run to deal with
    threat, particularly emerging threats. And finally, offer some
    cautions for you to consider.
        The bioterrorism threat is real, but it is uncertain in
    detail. It is getting increasingly more uncertain. Fortunately,
    we have no historical record to draw from. Moreover, there is
    no reason to think the future will look anything like the past.
    We do not know exactly what we are going to be facing.
        For one, the technologies involved are what I call
    pervasively dual use. Essentially every skill, material, piece
    of equipment or agent one would need to develop a weapon is
    available and in use somewhere in the economy for a legitimate
    purpose; not all in one place, but available somewhere. Very
    little is uniquely malicious.
        Second, the technology is expanding both in market
    penetration and disseminating around the world in ways which
    will make these capabilities increasingly more accessible to
    greater numbers of people. Rather than asking the question,
    will a terrorist really turn to biology and learn something
    they are not familiar with, we have to recognize that in the
    world we are headed into there will be more and more people who
    already know the biology. There the question is, will these
    people become sympathetic with or turn to terrorism? Learning
    the technology will not be the problem for them.
        Finally, science is continually advancing, realizing more
    things that we need for beneficial purposes, but opening the
    possibility of additional ways to attack.
        What this means for our ability to counter these threats is
    that intelligence is going to be able to provide less and less
    guidance for us to base our planning on. As I mentioned, the
    dual use nature of the technologies involved means it is going
    to be very hard to look at something taking place and determine
    whether or not there is malicious intent behind that.
        The expansion into the marketplace and around the world of
    the relevant capabilities means not only are we looking for a
    very ambiguous and maybe unknown signal for a weapons program,
    but we are trying to pull that signal out of a very rapidly
    growing base of fully legitimate activity. Small signal, large
    increasing background will make it very hard to use
    intelligence mechanisms to find out what the problem is.
        And as science continues to advance, we may be faced with
    threats we do not even know today, because we are learning more
    about how to keep people healthy and unfortunately, how to
    possibly make them ill.
        But the problem is even worse than that. Even if we knew
    precisely everything about everyone on the planet today that
    was pursuing malicious applications of biology, the time scales
    of our defensive preparations versus the time scale of what an
    attacker would need to go through are quite mismatched. Offense
    is much more flexible and much more rapid than a defender.
        The countermeasures that we need to develop in BioShield
    and whatever other mechanisms and research approaches we have
    in place do not need to be focused against the threat today,
    even if we had a perfect picture of that, but at the threat
    years down the road when our countermeasures will be deployed.
    Given the difference in time scales between what it takes to
    develop a weapon versus what it takes to develop a
    countermeasure, the threat 5 or 10 years from now may not exist
    until 4 or 9 years from now. The groups may not be formed, the
    technologies may not be around.
        So in principle, even perfect intelligence about the world
    today will not be good enough to help guide where we need to go
    with our defensive efforts.
        The BioShield program and the R&D programs at NIH and
    elsewhere in the Government are essential for countering this
    threat. But we are going to need a new approach as we look
    ahead, not a different approach, but additional approaches, as
    we proceed. For one, we can't just write a list of threat
    agents and start checking the boxes and going down a list. The
    vaccine, the countermeasure development programs, are quite
    expensive. Even $5.5 billion runs out pretty quickly when you
    spend a half billion a pop.
        So some agents are certainly worthwhile focusing on,
    anthrax and smallpox are so serious and qualitatively enough
    above other possible threats that it is worth spending a lot of
    money to deal with those problems. But you can't go very much
    farther down the list of agents before you recognize that there
    is not enough money and there are always going to be things you
    are not going to get to. It is not clear that the ones you have
    not paid for are less dangerous than the ones you have.
        What we need in the future is a broad, flexible and
    adaptive response capability. This is going to require some new
    science. We don't really know how to do that now. But it is
    also going to require some new organizational approaches.
        Traditional vaccines, I think, although they are important
    for the threats we know today, are going to have less and less
    utility as time goes on. They are too specific. It is too long
    for them to take effect once they have been administered. And
    the development process takes too long. We need things like
    broad spectrum therapeutics and antivirals that can handle
    several different threat agents that don't have to be designed
    for a single one.
        And then we need a whole set of research tools. We need to
    improve the productivity and speed of our research and
    countermeasure development enterprise, assays, screens,
    computational tools, animal models, ability to predict both,
    damage mechanism an agent can do, and the ability to predict
    what a countermeasure may be able to help you with. As we
    proceed in an era where specific threats will be less and less
    identifiable, we need that kind of broad capability.
        And finally, the caution I would like to hold is, there is
    certainly and understandably a great reluctance to take
    Government money and spend it in ways which realizes a private
    benefit. So there is some interest in saying these are
    biodefense missions which we need to pursue versus these are
    commercial interests which we will let the market take place
    and we don't want to apply Government funds.
        As we proceed in the future, it will be harder and harder
    to tell the difference between a biodefense threat, a
    biological threat, an emerging infectious disease or another
    type of natural occurrence. If we design our countermeasures to
    only handle what we consider to be biodefense but do not
    address these other areas, we will not be doing the right
    things.
        So rather than avoiding the possibility that we may be
    actually helping a commercial firm, we actually have to embrace
    that, I think. I would be glad to answer questions.
        [The prepared statement of Dr. Epstein follows:]

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        Mr. Shays. Thank you very much. Thank you, all three of
    you, for your testimony.
        Let me just say that we start with Mr. Issa. We have Danny
    Davis, Ms. Watson, Mr. Van Hollen and Ms. Norton and then I
    will ask questions. We will go in that order, unless the
    chairman comes, and then obviously he will jump in.
        Mr. Issa. It is good to be king, or chairman.
        Thank you, Mr. Chairman.
        Dr. Epstein, you really made the case for me in your
    testimony. I was thrilled to hear it. All the problems, all the
    challenges, all the hurdles and all that we could spend today
    and it won't fix what is attacking us tomorrow is all true.
    Conversely, though, once we take the bio out of BioShield, what
    is left is radiological. I would like you to comment, if you
    feel I am missing the point here.
        But Mr. Hollis, as I see it, if someone goes to an
    abandoned Russian lighthouse using cesium, that is going to be
    the same antidote as if they get yellowcake, as if they do a
    conventional nuclear bomb, as if they do any other kind of
    dirty bomb. Is that correct?
        Mr. Hollis. That is correct.
        Mr. Issa. And if another Chernobyl or Three Mile Island
    were to occur, perhaps because of a terrorist attack, that
    would be the same antidote, wouldn't it?
        Mr. Hollis. That is correct. Those isotopes all have major
    impact on the bone marrow's ability to produce cells that are
    necessary for health.
        Mr. Issa. And the U.S.S. Ronald Reagan, home ported in San
    Diego, where I know your company is located, and where I fly
    back and forth every week, were to have a reactor breach, that
    would be the same antidote?
        Mr. Hollis. That is correct. I think what you are getting
    to is, this is one area we don't have to worry about a
    different strain or pathogen. We can address this area because
    of radiation.
        Mr. Issa. So this need has been around and known for non-
    terrorist activities, but certainly heightened because of
    terrorist activities since the dawn of the nuclear age?
        Mr. Hollis. Ever since we split the atom and it was
    weaponized, yes, sir.
        Mr. Issa. Back to you again, because this really is pivotal
    to try to look at how much we can do with bio and for how much
    versus the terrorist and non-terrorist threat that something
    could happen with radiation. And I might add, somebody
    mishandling radioactive materials for cancer treatment would be
    the same, wouldn't it?
        Mr. Hollis. That is correct.
        Mr. Issa. How far away are you from having a treatment in
    which somebody will die if they don't get a treatment, how far
    are you away from having a treatment that could be shown to be
    effective?
        Mr. Hollis. We got clearance through the FDA and we are
    scheduled to perform our pivotal efficacy trial the second half
    of this year. We are in the current process right now of
    setting that trial up. Concomitantly, we are also setting up
    our human safety trial, so we could actually have an NDA
    through the FDA by 2006.
        Mr. Issa. And the standard that the FDA normally uses, as I
    understand it from my time at Energy and Commerce, is two-fold.
    One, you have to have minimal adverse side effects and two, you
    have to work, you have to be better than nothing at all. Is
    that also applied to your potential treatment through the FDA?
        Mr. Hollis. With weapons of mass destruction in June of
    last year, the FDA passed the animal efficacy rule, where it is
    unethical to expose human beings to, for instance in this case,
    lethal doses of radiation. You can get approved using the
    animal efficacy rule in relevant animal species, in this case,
    non-human primates. You have to establish safety in human
    beings. That is the regulatory process that we are going
    through.
        We have been developing this product exclusively for the
    past 3 years and the Armed Forces Research Radiobiology
    Institute started researching this product back in 1997. So
    this product has been in the process of being developed for the
    past several years. We believe if we stay on course, because of
    the major investment our corporation put into it, that we can
    have a licensable product by the end of next year.
        Mr. Issa. So the end of 2006?
        Mr. Hollis. Yes, sir.
        Mr. Issa. And yesterday we had former speaker Newt Gingrich
    and others in to talk about entrepreneurship and people, the
    Government having a process in which it did not take the risk
    but rather transferred the risk to the private sector, to
    entrepreneurs who would take that risk in return for a return.
        As I understand, there have been no Government dollars to
    do this development. This has been on the back of your public
    company stockholders, is that right?
        Mr. Hollis. That is absolutely correct. Maybe this is an
    opportunity I can say that, what I have been hearing today with
    the first panel is not what I am experiencing in reality. I am
    starting to wonder, sir, if they have read the same BioShield
    legislation that Members of this Congress passed. Because it is
    not being implemented the way it has been written. Companies
    like ours were supposed to get advanced purchase contracts and
    paid on delivery.
        Mr. Issa. I ask unanimous consent for 2 more minutes.
        Mr. Hollis. So it is not being implemented, nor are
    entrepreneurs being rewarded for the risks they are taking. We
    are a role model for BioShield. We are executing it according
    to the way it was written, and that is, private investment
    capital pursuing these markets that were supposed to be
    guaranteed markets. And after 3 years of development, we don't
    even know what our market is yet.
        Mr. Shays. I am going to allow the gentleman to go 2 more
    minutes and allow 7 minutes for everybody.
        Mr. Issa. Thank you, Mr. Chairman.
        You are a public company, is that right?
        Mr. Hollis. That is correct.
        Mr. Issa. So the money, I appreciate it is private sector,
    but the money that you have used, how much has it been
    approximately, just roughly?
        Mr. Hollis. Approximately in this technology, in the
    product, about $150 million.
        Mr. Issa. And that came from public stock?
        Mr. Hollis. All investors, yes.
        Mr. Issa. So would it be fair to say that your fiduciary
    obligation to the market, and for that matter, Bill Arak and
    others who sue people when they foolishly abuse the public
    stock market, depends on a good faith belief that if you make
    this product, the Government has committed to purchase it, if
    it works, if it is the most effective, there was a commitment
    for that in BioShield.
        Mr. Hollis. That is absolutely correct, and we are
    developing the drug according to the way the legislation was
    drafted and passed. It is just not being implemented that way.
    So if there are shareholders that end up getting concerned
    about it, I think these things will start to come into
    question.
        Mr. Issa. My time has nearly expired. I am sure that there
    will be followup along this line.
        Dr. Epstein, I appreciate your being used, in a sense, to
    prove the point. But I would also reiterate that with the
    complexity, with the number of needs that are going to happen
    on the bio side, I think it is important that we take this one
    item and say, are we, and this is what government reform is all
    about, are we meeting our commitment so that hundreds of
    potential products, people are going to spend billions of
    dollars developing them, when we are the most likely customer,
    based on a good faith that if we need them, and if we say we
    want them, that we will then make a good faith purchase if they
    are developed and if you are the winner of that process,
    recognizing not everyone will win.
        And with that, I yield back, Mr. Chairman.
        Mr. Shays. Thank you very much. Thank you, Mr. Davis, for
    your patience. You have the floor for 7 minutes.
        Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
        Mr. Hollis, I guess I could probably glean from your
    testimony that there have been some rather frustrating and
    costly delays, that it is costing perhaps not only your company
    but others frustration, but also uncertainty, relative to the
    development of product that could be moved to the point of
    procurement that we greatly need. Would that be an accurate
    assessment of the description of what I have heard?
        Mr. Hollis. Yes, sir, that is absolutely correct.
        Mr. Davis of Illinois. If that is the case, and given that
    as the case, is there a way that these developments can be
    structured so that of course, any time one ventures into
    something that is new and perhaps different, there is a certain
    amount of risk. And there is a certain amount of risk taken. I
    guess there is also a certain amount of risk sharing.
        Is there a way to make sure or to try and make sure that
    the risk is such that the American public, that is the
    Government, and those who are willing to, on the other hand,
    invest their resources, can have the assurances that both are
    being protected and that is a win-win situation or a model that
    is going to produce a win-win situation for both parties?
        Mr. Hollis. Yes, sir, there absolutely is. No. 1, industry
    would ask that the Project BioShield legislation be implemented
    as it was drafted and passed by Congress. I truly believe that
    the individuals who are implementing it have made up the rules
    as we go along. Because if you read the legislation, it is
    about stimulating capital formation and biotech and
    pharmaceutical companies to produce this Nation's next
    generation medical countermeasures to mitigate the medical
    consequences of weapons of mass destruction.
        And to unleash the ingenuity of the entire pharmaceutical
    industry, it means it has to put the market incentives in
    place, and it needs to execute the legislation as it was
    written.
        What is happening here is most of the medical
    countermeasures that are being produced are NIH or AID funded.
    Those are the products that seem to be getting the attention.
        So if that is the case, why would the pharmaceutical
    industry engage? The pharmaceutical industry just needs to know
    what the rules are and have them implemented. When BioShield
    was initially passed, many people in this industry were excited
    to produce the next generation medical countermeasures. The
    fact that it has been implemented with a lack of leadership and
    a lack of implementation and sense of urgency and a huge sense
    of bureaucracy has basically killed the capital markets and the
    ability to raise money to develop these drugs.
        So if the capital markets and the companies that want to
    participate in this area are not incentivized, all the medical
    countermeasures are going to be dependent upon the NIH and
    taxpayer dollars. So to answer your question, BioShield II
    would be great. But I think most importantly, BioShield II
    needs to be implemented the way it was crafted.
        Mr. Davis of Illinois. It could be that there might be
    opportunity for a different level of consultation with the
    industry or with the pharmaceutical industry as the rules are
    being shaped, realizing that again, both sides have to be
    comfortable as well as protected, and of course, the American
    public is always afraid that somebody is going to get a
    windfall out of something. So you don't want that to happen,
    either.
        Would a different level of consultation perhaps be helpful
    in the process?
        Mr. Hollis. Possibly more open dialog, clear transparency
    and guidelines, so that the people implementing the bill are
    directly interfacing with industry representatives, so the
    process is transparent and everyone knows what is expected of
    one another. If we are expected to be partners with the
    Government to develop these medical countermeasures, then we
    need to be treated as partners. There needs to be that dialog.
        Also, sir, I don't believe there is windfall. I believe
    that if you are developing a medical countermeasure and
    spending your investor dollars and taking those risks, and if
    your technology is good enough to get FDA approval, and it can
    safeguard and protect the American people and provide these
    medical countermeasures, those companies should win.
        Mr. Davis of Illinois. Thank you very much, Mr. Chairman. I
    have no further questions.
        Mr. Shays. I thank the gentleman.
        Ambassador, thank you for your patience.
        Ms. Watson. Thank you, Mr. Chairman.
        I think this goes right to the heart of the comment I made
    about our responsibility here to have the oversight to address
    the issues that you are raising, Mr. Hollis. Are we providing
    the opportunity or are we going along with the provisions in
    the BioShield Act to be sure it is implemented?
        I think Dr. Epstein raises our vision on this whole thing.
    Are we preparing for the moment? Are we laying an
    infrastructure for the future? Every day something new occurs
    around this globe. I am sure the threats are turning inward
    now. I have no doubt in my mind that we will not witness some
    kind of biochemical attack.
        I had an interesting experience coming in from Cuba. After
    I got through Customs, the Customs agent ran behind me and
    said, were you recently in the hospital? Yes, I had some
    nuclear exams, and they picked up the radiation as I came
    through. Blew my mind. I saw little red and amber and green
    buttons flickering, but I did not know what it meant.
        So I think it makes the case that we have to expand our
    vision and we have to do oversight to see that we are getting
    what we ask for. So I would like first, Dr. Epstein, to comment
    on what Mr. Hollis has presented to us in terms of what their
    company has been doing, thinking that Government would keep its
    word and allow the marketplace to compete and do the research.
    Dr. Epstein.
        Dr. Epstein. I am not familiar with the details of Mr.
    Hollis' case.
        Ms. Watson. You don't have to be, but you hear the issue he
    is raising.
        Dr. Epstein. Certainly the intent of the legislation was to
    stimulate our private enterprise, recognizing that the biotech
    and the pharmaceutical industry had not worked very closely
    with the national security community. And it by and large did
    not like Government money very much.
        So this mechanism was trying to stimulate a market which
    would provide incentives closer to what they already operate on
    and I think it is a very important question to investigate how
    well the intent and the wording of that legislation is actually
    being implemented.
        I am also struck by Dr. Fauci's remarks earlier. Mr. Hollis
    has a product, so the development work has been done. If we are
    starting with a need, I wish I had something to cure such and
    such, and then you are starting out doing the science, we are a
    very long way away.
        As Dr. Fauci pointed out, even doing the research may not
    get you to the range where you can use the BioShield mechanism,
    because we have to have an expectation within 8 years we will
    have a useful product. And there may be some development work
    between the research that tells you, here is a possibility, and
    the certainty that lets you know that within 8 years, we think
    we can invest our funds, or a company can invest our funds and
    get there.
        I have heard some attention paid to this gap between that.
    And I think that bears looking. There may be a need for
    something besides NIH funding, besides BioShield to try and
    bridge things.
        The last thing I would like to add if I may is, on the
    question of how general versus how specific countermeasures
    are, and I just want to get back to the question Mr. Issa asked
    on radiation countermeasures, it is true that one possible
    source of radiation is a source outside, other than x-rays or
    gamma rays will irradiate people. In that case, an x-ray is an
    x-ray, so a countermeasure that protects against that will be
    helpful against anything.
        Another type of radiation exposure is when there is
    contamination that you breathe or you eat. That makes a
    tremendous difference in what it is, because if it is
    radioactive iodine, it will go to the thyroid, if it is
    radioactive strontium, it will go to your bones. There the
    countermeasure makes a great deal of difference.
        So the fact that we have potassium iodide to protect
    against some isotopes in nuclear power plants will do
    essentially nothing for a radioactive dispersal device. And one
    has to worry about both of those. So you need the general case,
    but also recognizing that there are specifics.
        Mr. Hollis. If I may answer part of that question.
        Ms. Watson. Please, Mr. Hollis.
        Mr. Hollis. Dr. Epstein brings up a very interesting point
    that is unrelated to radiological countermeasures. However, it
    is a point worth noting, because our company was founded on the
    premise that there are hormones that are signaling agents in
    the body that can stimulate innate and adaptive immunity. We
    actually started out in infectious diseases, we have conducted
    multiple phase two clinical trials in HIV/AIDS, tuberculosis
    and malaria. We have established the fact that the product is
    active in all three areas. It is the one drug for many bugs.
        We were looking at a broad spectrum approach to infectious
    diseases over a decade ago. I have spent 30 years in this
    industry, and I realized that we were running into problems
    with resistance to antibiotics and resistance to infectious
    diseases. Our whole core technology platform was based on
    stimulating innate and adaptive immunity.
        We have not even brought this technology to BioShield. It
    is actually a true bioshield. It is not going to be a cure for
    everything, but it is certainly a very active drug that can be
    used to probably defend against multiple pathogens.
        But why isn't that product being targeted for BioShield?
    Because they have not identified a market for a broad spectrum
    drug that would work against many pathogens or developed the
    models that we can put our drug in to see if they work. There
    needs to be better vision in regards to where we are taking
    BioShield in the future. So I absolutely agree with Dr. Epstein
    and his broader vision, because we share it.
        Ms. Watson. Thank you so much. I would like to address a
    comment and question to you, Mr. Kramer. You testified that the
    Department of Health and Human Services has contracted to
    purchase 5 million doses of BioThrax, the licensed anthrax
    vaccine manufactured by your company. You also stated that
    without a firm commitment from the Department to purchase
    additional quantities, it may be difficult for you to keep
    BioThrax production facilities up and running.
        Obviously the Government faces a difficult task in deciding
    which biodefense products to purchase for the National
    Stockpile, and in what quantities. As we have already heard
    today, a bioterrorist attack could come in the form of a number
    of different agents, including ones that we cannot foresee
    today.
        Yet we must be ready now with access to sufficient
    quantities of best measures currently available. This is the
    tension that the Department must manage on a day to day basis.
    I would ask you about your ability to keep manufacturing the
    BioThrax without further commitment from the Department to
    purchase additional quantities. I think that is where Mr.
    Hollis was going with his testimony as well.
        Mr. Kramer. Certainly. Let me try to touch on all those,
    starting with your question in terms of how do we establish the
    sense of accountability for how BioShield is being implemented.
    I think you really need to separate questions of science, as
    you heard some of the earlier panel members talk about, versus
    policy. And it is not my position necessarily to second guess
    the scientific decisions that are being made by Dr. Fauci's
    group or other people in a place of authority or responsibility
    for that.
        But I would question the policy that is being implemented.
    I think this is where my suggestion that the scientific
    advisory committee or some group can certainly help you all
    with that. On the policy side, it is pretty easy to get your
    arms around what is being done strategically in terms of how we
    are addressing these threats.
        We have signed a contract with HHS for 5 million doses of
    our product. We are partially through the delivery of that
    order, probably a couple million doses into that. We have not
    supplied all of those 5 million doses. But I think it is
    important to understand that it has taken HHS almost 3\1/2\
    years to pull the trigger on putting the first dose of licensed
    product into the stockpile, and that did not occur until 2
    months ago.
        So my concern is from a policy perspective, given the
    challenges of operating biologic facilities in this
    increasingly compliant world. Your question about how long are
    we willing to continue to do this without a firm commitment
    from the Government, that is a very touchy issue. We have been
    at this for almost 7 years now since acquiring the facility in
    1998. We have always put the U.S. Government's requirement or
    potential requirement for BioThrax front and center in terms of
    all the customers. We have looked at selling the product
    commercially, both to foreign governments as well as to other
    domestic customers. But we have always placed the U.S.
    Government need for the vaccine first.
        So obviously, we want to make sure that we are responsive
    to that need. We also need to look at the commercial markets
    for the product and beyond that we will have to make a very
    simple business decision whether it pays for our shareholders
    to continue to operate a facility at significant cost on an
    ongoing basis when there is not a commensurate commitment by
    the Government to order vaccine.
        The other issue that I will say is----
        Mr. Shays. I need you to kind of shorten up your answer.
        Mr. Kramer. OK, just one last point. There is very clearly
    an acknowledged threat regarding anthrax. HHS and other folks
    have determined that they need 75 million doses of vaccine in
    the stockpile today to protect Americans. Why are they not
    buying as much of our product as possible while the
    experimental products and new technologies, which are years
    away, have a chance to even prove that they are going to be
    successful? That is my issue.
        Ms. Watson. I know my time is up, Mr. Chairman.
        Mr. Shays. If you have another question, go for it.
        Ms. Watson. I want to go through the Chair to Dr. Epstein.
    I was very intrigued by your testimony, because you had the
    broader vision. And I was hoping that we as a committee,
    subcommittee, would request you to do a paper specifically on
    what we need to do to meet the intent of the BioShield Act that
    you feel is needed. Apparently the policies are not being
    implemented according to our intent.
        And I would like to see, Mr. Chair, if we could ask Dr.
    Epstein to submit to us a paper--now, I tried to read through
    his testimony, but there is so much there. Maybe you can
    specifically give us some guidance and direction.
        Mr. Shays. That is a fair request. I don't know how much
    time it would take you to do it, but the pay is good.
    [Laughter.]
        Dr. Epstein. I will certainly try and be responsive. It is
    a tremendously broad question. But if there are a few insights
    I can offer you, I will be happy to submit that.
        Mr. Shays. Yes, maybe you can narrow it down a bit.
        Dr. Epstein. Mr. Chairman, on this point, I put this in my
    written statement, I refrained from saying it orally, but I
    cannot resist this opportunity. The experience I have worked on
    in biological weapons and biological proliferation I did as a
    member of an agency which worked for you, which worked for the
    U.S. Congress. I was at the Office of Technology Assessment,
    working on biological weapons issues.
        That office was closed 10 years ago this fall, and I think
    for precisely the reason you brought that question up, you
    don't just need an individual behind a desk giving you
    individual views. I think you need an institution, you need a
    group of people that work for you and answer precisely that
    kind of question without any allegations of working for anybody
    else. I think that is something you could very much use.
        Mr. Shays. Thank you very much.
        I am going to yield my time to Mr. Issa and let him ask
    some more questions.
        Mr. Issa. Thank you, Mr. Chairman. I will be brief. I would
    like to follow on what my colleague from California, Ms.
    Watson, had started on. This is the, no surprise to you, this
    is the committee on Government Reform. We are an interesting
    committee, because we are mostly about oversight, unless it
    comes to where Government is not doing what we have already
    asked them to do. Then suddenly we are a relatively, if not a
    very powerful, committee.
        I think that we have hit on something here, I think Ms.
    Watson even made it clearer, it appears as though we have some
    specific problems in implementation of the law and for what
    reason is the question that I am going to leave you with. You
    will have time to answer, don't worry about those bells or the
    man behind the curtain.
        It appears to me, and I would like your comments and you
    are free to disagree with me, it appears as though if you work
    with NIH, if you are an organization in-house or out of house,
    but you are already being funded by us, that you have the
    inside track on follow-on solutions. If you are completely an
    outsider, meaning truly entrepreneurial and not entrepreneurial
    with Government assistance already, that you are on the outside
    and at a disadvantage.
        Now, that seems to be Mr. Hollis' statement, that this is
    part of this, now we are going out fishing for something when a
    product has already gone through part of the FDA process, and
    it probably should be more about, is there any other product
    that is this far along, because we need something sooner, not
    later, as we were told by the earlier panel.
        Is this your observation? I guess to each of you, but Dr.
    Epstein? And you don't have to be bad-mouthing the Government,
    but is there an advantage inherent that is part of the problem?
        Dr. Epstein. I think part of what makes working for the
    Government difficult is that those who have done it before
    always know that system better. Part of what BioShield wanted
    to do was to open that up more broadly.
        But I think again, taking a bigger view, many of the things
    we are going to need to do nobody does. So it won't be a matter
    of whether there is an existing contract or a new startup. It
    is going to be all new. So it is an interesting question, do
    the big pharmaceutical firms who have not been terribly
    interested to date, are there additional incentives one can
    offer them to bring them in, or is that a group which is not
    really nimble and flexible enough to do what we need, and we
    have to go to a different strata?
        So I think we have to recognize that track records are
    important. But we also have to recognize that there may be
    things for which there is no track record.
        Mr. Issa. Mr. Hollis.
        Mr. Hollis. I think there are degrees to what I testified
    to and to what your comments are about possibly some conflicts.
    Because if you do receive a grant you are in and there is a lot
    of communication and dialog. If you don't have a grant, you are
    depending on the legislation to be implemented, because that is
    why a company like ours participates in it.
        So the oversight is extremely important, because I think
    the committee would do themselves well to re-read the
    legislation and ask yourselves, if you were industry, how do
    you interpret this. Because obviously, there is a
    misinterpretation in regard to how it is written, how it is
    being implemented. And if the pharmaceutical industry is going
    to participate in this, and that is what the legislation is
    drafted and passed and designed to do, then it really needs to
    examine how it is being implemented.
        Mr. Issa. Mr. Kramer.
        Mr. Kramer. I think certainly there is a clearer risk that
    happens. One can only look at how HHS announced the first
    contract under BioShield to VaxGen when they very
    systematically laid out how the award of an $877 million
    contract to this company was the prototype of how BioShield
    should work, meaning you had intellectual property which was
    developed at USAMERID early on, it was transferred to NIAID for
    mid-stage development and then it was procured under BioShield.
    They trumpeted that loud and clear, that was the poster child
    for how BioShield moneys were to be spent.
        And while that may work in some instances, it should not be
    the only way that BioShield works, which I think is what my
    colleague Mr. Hollis and I are both saying, is that's not the
    only way it could work. Because industry is looking at the
    Government very closely to see how they are acting in relation
    to BioShield. And when they smell that there is something
    untoward going on, they will be very cautious about investing
    their shareholders' capital in areas of risk where there is not
    commensurate return.
        Mr. Issa. Mr. Chairman, I think that gives us a pretty full
    picture. Our work is cut out for us. I would yield back.
        Mr. Shays. Thank you, all three of you, for your testimony.
    I just would say, if you have a 30 second ending that you just
    want to put on the record, we will be glad to hear it.
    Otherwise, we will adjourn. Is there any closing comment that
    any of you would like to make?
        Mr. Hollis. Maybe I can start. I would just please ask the
    committee to really use your authority in looking at the
    oversight of the implementation of this. We would really like
    to see BioShield work. It is important for this country's
    safety and security. I think it is the best way to produce
    medical countermeasures, and that is unleashing the industry
    and innovative entrepreneurs and new approaches to diseases,
    with the full realization that unless we get FDA approval and
    we deliver, the Government is not obligated to pay us anything.
        Mr. Shays. I think we got your message. And I think you can
    be pretty sure there will be good followup.
        Mr. Hollis. Thank you.
        Mr. Shays. Dr. Epstein.
        Dr. Epstein. I'm not taking my shot, Mr. Chairman.
        Mr. Shays. OK, thank you. Mr. Kramer.
        Mr. Kramer. Just one last comment, and that is, I think it
    is critically important for there to be a higher degree of
    oversight and accountability by the Government agencies in
    terms of following through with BioShield. They need some help
    in terms of early and mid-stage review of these critically
    important products. Otherwise you are not going to get that
    well-rounded, mature, biodefense industry that is going to be a
    partner to the Government in the long term.
        Mr. Shays. Thank you, that is a nice way to end. We will
    conclude this hearing. Thank you, gentlemen.
        [Whereupon, at 1:50 p.m., the committee was adjourned.]
        [The prepared statements of Hon. Christopher Shays, Hon.
    Darrell E. Issa, Hon. Jon C. Porter, Hon. Carolyn B. Maloney,
    Hon. Elijah E. Cummings, Hon. C.A. Dutch Ruppersberger, and
    additional information submitted for the hearing record
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