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




                               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/


23-143                      WASHINGTON : 2005
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                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
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
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
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

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



                        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 
    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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    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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    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.



    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.


    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 
    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 
    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 
    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 
    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 
    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 
    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, 
    Mr. Simonson. Oh, yes. But oftentimes the time lines are 
compressed, leveraging some of the draft RFP time, knowing that 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 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 
    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 
    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 
    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 
    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 
    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 
    Mr. Shays. Did you agree with them?
    Mr. Simonson. We accepted the Department of Defense's 
    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 
    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 
    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 
    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 
    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 
    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.
    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.



    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 
    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 
    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 
    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. 
    Thank you again for allowing me to share with you my 
comments and I look forward to answering any questions you 
    [The prepared statement of Mr. Kramer follows:]

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


    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 
    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 
    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 
    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 
    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 
    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, 
    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 
    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. 
    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