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



 
                             PROJECT BIOSHIELD 
                          REAUTHORIZATION ISSUES


                                 HEARING

                               BEFORE THE

                          SUBCOMMITTEE ON HEALTH

                                 OF THE 

                         COMMITTEE ON ENERGY AND 
                                 COMMERCE

                         HOUSE OF REPRESENTATIVES


                        ONE HUNDRED NINTH CONGRESS

                              SECOND SESSION

                                 -------

                              APRIL 6, 2006

                                 -------

                            Serial No. 109-97

                                 -------

       Printed for the use of the Committee on Energy and Commerce


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


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                  COMMITTEE ON ENERGY AND COMMERCE
                    JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas                      JOHN D. DINGELL, Michigan                 
MICHAEL BILIRAKIS, Florida                  Ranking Member
  Vice Chairman                           HENRY A. WAXMAN, California
FRED UPTON, Michigan                      EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida                    RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                     EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                      FRANK PALLONE, JR., New Jersey
ED WHITFIELD, Kentucky                    SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia                  BART GORDON, Tennessee
BARBARA CUBIN, Wyoming                    BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois                    ANNA G. ESHOO, California
HEATHER WILSON, New Mexico                BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona                  ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,  Mississippi ALBERT R. WYNN, Maryland
  Vice Chairman                           GENE GREEN, Texas
VITO FOSSELLA, New York                   TED STRICKLAND, Ohio
ROY BLUNT, Missouri                       DIANA DEGETTE, Colorado
STEVE BUYER, Indiana                      LOIS CAPPS, California
GEORGE RADANOVICH, California             MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire            TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania             JIM DAVIS, Florida
MARY BONO, California                     JAN SCHAKOWSKY, IllinoisEE TERRY, Nebraska                                  HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey                 CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan                     JAY INSLEE, Washington
C.L. ``BUTCH'' OTTER, Idaho                 TAMMY BALDWIN, Wisconsin
SUE MYRICK, North Carolina                MIKE ROSS, Arkansas                       
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee               


                     BUD ALBRIGHT, Staff Director
                    DAVID CAVICKE, General Counsel
      REID P. F. STUNTZ, Minority Staff Director and Chief Counsel

                               -------
                       SUBCOMMITTEE ON HEALTH
                   NATHAN DEAL, Georgia, Chairman
RALPH M. HALL, Texas                      SHERROD BROWN, Ohio
MICHAEL BILIRAKIS, Florida                  Ranking Member
FRED UPTON, Michigan                      HENRY A. WAXMAN, California
PAUL E. GILLMOR, Ohio                     EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia                  FRANK PALLONE, JR., New Jersey
BARBARA CUBIN, Wyoming                    BART GORDON, Tennessee
JOHN SHIMKUS, Illinois                    BOBBY L. RUSH, Illinois
JOHN B. SHADEGG, Arizona                  ANNA G. ESHOO, California
CHARLES W. ``CHIP'' PICKERING,  Mississippi GENE GREEN, Texas
STEVE BUYER, Indiana                      TED STRICKLAND, Ohio
JOSEPH R. PITTS, Pennsylvania             DIANA DEGETTE, Colorado
MARY BONO, California                     LOIS CAPPS, California
MIKE FERGUSON, New Jersey                 TOM ALLEN, Maine
MIKE ROGERS, Michigan                     JIM DAVIS, Florida
SUE MYRICK, North Carolina                TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas                 JOHN D. DINGELL, Michigan
JOE BARTON, Texas                           (EX OFFICIO)                            
  (EX OFFICIO)                            


                                CONTENTS


                                                                        Page
Testimony of:
  Azar, Hon. Alex M., Deputy Secretary, U.S. Department of Health and 
    Human Services	                                                 8
  O'Toole, Dr. Tara, CEO and Director, Center for Biosecurity, The 
    University of Pittsburgh Medical Center	                        33
  Young, Peter F., President and CEO, AlphaVax, Inc., on behalf of 
    Biotechnology Industry Organization	                                41
  Cohen, Bruce, President and CEO, Cellerant Therapeutics, Inc.	        48
  Wright, Dr. David P., President and CEO, PharmAthene, on behalf 
    of Alliance for Biosecurity	                                        53
  Blaser, Dr. Martin, President, Infectious Diseases Society of America	59
Additional material submitted for the record:
  Azar, Hon. Alex M., Deputy Secretary, U.S. Department of Health and 
    Human Services, response for the record	                        78


                         PROJECT BIOSHIELD 
                      REAUTHORIZATION ISSUES


                     THURSDAY, APRIL 6, 2006

                    HOUSE OF REPRESENTATIVES,
                COMMITTEE ON ENERGY AND COMMERCE,
                     SUBCOMMITTEE ON HEALTH,
                                                        Washington, DC.


        The subcommittee met, pursuant to notice, at 1:02 p.m., in Room 2123 
of the Rayburn House Office Building, Hon. Nathan Deal (chairman) presiding.
	Members present: Representatives Deal, Cubin, Shimkus, Rogers, Myrick, 
Burgess, Pallone, Eshoo, and Green.
	Staff present: David Rosenfeld, Acting Chief Health Counsel; Ryan 
Long, Counsel; Nandan Kenkeremath, Counsel; Bill O'Brien, Legislative Analyst; 
Brandon Clark, Policy Coordinator; Chad Grant, Legislative Clerk; John Ford, 
Minority Counsel; and Jessica McNiece, Minority Research Assistant.
        MR. DEAL.  We are pleased to have a very special group of individuals 
to testify 
before the committee today on two separate panels.  Today, we are going to be 
reviewing one of the critical pieces of our biodefense structure.  This 
committee has important responsibilities in this area and has passed a number 
of pieces of legislation to deal with chemical, biological, radiological, and 
nuclear threats.  I want to commend the leadership of the President in leading 
the way on pandemic flu preparedness and biodefense preparedness.  I know 
activities are underway at multiple Departments, including HHS, the Department 
of Homeland Security, and the Department of Defense, dealing with these issues.  
        A great deal has been done with respect to the first round of material 
threats 
as defined by the Department of Homeland Security.  There are many continuing 
questions about how to access threats, whether these should include naturally 
occurring threats, and how to develop an appropriate response.
	We want to make sure that the various Departments and offices are 
properly 
coordinating and have the right expertise.  We know that biodefense is an area 
where the Federal government must take a strong role.  There is no business 
model that will support the investments we need without a clear path from the 
Federal government.  We also know that the expertise is in the private sector, 
so we must make sure that we have a working partnership there as well.  We 
want 
to work closely with HHS and other agencies to improve Project BioShield and our 
overall pandemic and bioterrorism preparedness.  I thank our witnesses for their 
attendance today and we will look forward to hearing their testimony, beginning 
with the first panel as soon as we complete the opening statements.
	MR. DEAL.  I will now recognize my friend, Mr. Pallone from New 
Jersey, for his opening statement.
	MR. PALLONE.  Thank you, Mr. Chairman, and thanks also to the 
witnesses 
for participating in today's hearing and I know the subcommittee is eager to 
hear your testimony.  Nearly two years ago Congress passed the Project 
BioShield 
Act with tremendous bipartisan support.  Democrats and Republicans worked 
together to establish a process that would help our Nation respond to 
bioterrorism threats and attacks.  Today's hearing will give us an opportunity 
to assess how well the program is working to meet this important goal.
	Since going into effect, a number of criticisms have been make against 
the 
program and much of that criticism has come from the biotech industry and has 
been leveled against the Department of Homeland Security and the Department of 
Health and Human Services.  The complaint I hear most often is that the 
Federal 
government has been too slow to assess bioterrorism threats and award 
contracts 
to the acquisition of effective countermeasures.  Now the Homeland Security 
Department has been accused of taking too long to issue material threat 
determinations, which is needed before Health and Human Services can acquire 
necessary countermeasures.  And while this may be a legitimate criticism, as I 
understand it, even if DHS were to provide these assessments in a more timely 
manner, HHS currently lacks the necessary resources to take appropriate action.  
Indeed, it is not clear to me that the current organizational structure or 
staffing levels at HHS are adequate to provide for the timely acquisition of 
effective countermeasures, and I would certainly be interested to hear from 
Mr. Azar.  I think I heard them name Mr. Azar on this subject.
	Furthermore, I am not certain that those at HHS charged with 
administering 
the program have the proper background or expertise to successfully carry out 
its mission.  For example, Mr. Chairman, I don't think it is in the best 
interests of the country to have an Assistant Secretary of Public Health 
Emergency Preparedness who has no background in public health or emergency 
preparedness, and I would hope that the Administration keeps that in mind as 
they seek to replace Mr. Simonson.
	There has also been a number of complaints about Administration 
officials 
being vague and allusive in their discussions about the types of products they 
might want to purchase, what quantity, and at what price.  Industry 
representatives have said that this type of uncertainty is a detriment to the 
process and has discouraged many companies from participating in the program.  
The biotech industry would prefer a system more akin to the Department of 
Defense's countermeasure program, where government purchasing is much more 
reliable.  And I would be interested to hear recommendations from the 
witnesses 
about how we can bridge the difference between these two models, even though 
the populations they are designed to protect vary greatly.
	The obvious concern and another complaint is that the program simply 
does not provide enough incentives for biotech firms to research and develop 
countermeasures.  Industry has said that they need significantly more 
incentives 
in order to play in the game.  One such proposal, commonly referred to as a 
wild 
card extension, would extend the life of a patent for any drug of a company 
that 
develops new defenses against biological weapons.  This would allow drug 
makers 
to extend its patent on its most profitable drugs, even though it may be 
completely unrelated to a bioterrorism threat.  The drug industry claims that 
extending the patent on blockbuster drugs is needed to encourage firms to make 
up for the loss they incur by developing less profitable countermeasures, but 
I could not disagree more with that.  Such a proposal simply is another way to 
provide windfall profits for the pharmaceutical industry and would keep 
prescription drug prices unnecessarily high, in my opinion.
	Furthermore, I would think that enough incentives currently exist for 
drug 
manufacturers and biotech companies to enter the market, after my Republican 
friends provided them with sweeping new liability protections as part of the 
Defense Authorization Bill for 2006.  In fact, last year, in the dead of 
night, 
Republicans included a provision that would allow lawsuits against vaccine 
manufacturers only in the case of willful misconduct, and this is a much 
higher 
standard than negligence, which is more commonly used in product liability 
cases.  Furthermore, the Secretary can apply this liability shield to any 
product used to treat an epidemic or a pandemic, which is left to be defined 
by 
the Secretary.  If that isn't enough incentive for the drug industry to enter 
the market, I don't know what is.
	And finally, Mr. Chairman, as we examine the success of Project 
BioShield, 
I think it is important for us to consider whether or not the funding level we 
authorized two years ago is adequate to accomplish the goals that we laid out.  
Congress authorized only $5.6 billion over ten years for Project BioShield and 
established specific timeframes in which that money could be spent.  
Incidentally, more than $1 billion of that money has already been obligated to 
the four contracts currently approved under the program.  Accordingly, as we 
move forward, we may want to consider adding additional funds, especially for 
greater government investment in research and development.
	But again, thank you for calling today's hearing, Mr. Chairman.  
Clearly, 
there are some areas of Project BioShield that may need to be fixed for the 
program to work properly and to that end, I look forward to working with you 
and 
the rest of my colleagues on the committee in a bipartisan fashion to meet 
these 
goals, the same way we did two years ago, and the health and safety of our 
citizens deserve, certainly, no less than that.  Thank you.
	MR. DEAL.  I thank the gentleman.  Ms. Myrick, do you have an opening 
statement?  All right.  Well, we will proceed to our panel, then.  
	[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY AND 
COMMERCE

Thank you, Mr. Chairman.
	I want to commend you for holding this important hearing. The known 
threats of the 20th Century have given way to new unforeseen threats we cannot 
ignore. While there has been no successful attack on our homeland since 9-11, 
the Committee must diligently oversee and strengthen the components of the 
U.S. biodefense structure that we helped launch.  
        The legislative pieces of this biodefense structure include:
             * The Public Health and Bioterrorism Preparedness and Response 
                Act; 
             * The public health provisions of the Homeland Security Act;
             * The Small Pox Emergency Personnel Protection Act;
             * The Project Bioshield Act;
             * Provisions in the Faster and Smarter Funding for First 
                Responders Act; and  
             * The Public Readiness and Emergency Preparedness Act.
        These authorization efforts have been matched by substantial increases 
in spending by the Department of Health and Human Services, the National 
Institutes 
of Health, the Department of Homeland Security, and the Department of Defense.  
The money goes for research, development and acquisition of medical 
countermeasures against chemical, biological, radiological and nuclear 
threats.  
In fact, Congress recently appropriated billions of dollars to take 
countermeasures against pandemic flu.
	The Energy and Commerce Committee has a strong record of 
accomplishment in 
homeland security, including on biodefense. We must continue to develop 
policies 
which improve biodefense capabilities. Real risks must be matched with useful 
and effective countermeasures.  We need to ensure these programs are working 
well together.  I look forward to hearing from today's witnesses on the status 
of Project Bioshield and on  ideas for its improvement.

PREPARED STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING

        Thank you Mr. Chairman.
        I have always been a national security hawk, something that has taken 
on new 
meanings as the American people face emerging threats to their safety and 
well-being.
        By passing the Project Bioshield Act of 2004, Congress recognized the 
need for 
countermeasures to chemical, biological, radiological and nuclear threats.  
While there is no question Project Bioshield has proven useful, questions 
remain 
as to how to improve both the law itself, as well as how to facilitate a more 
cohesive implementation of the law by the various Executive Branch agencies 
involved.
        I hope today's testimony will also call more attention to the threat 
posed by 
naturally-occurring infectious diseases.  An influenza pandemic, for example, 
is certainly on par with the threat of bioterrorism in terms of its national 
security implications.  And yet the U.S. currently lacks the vaccine supply 
and production capacity to mitigate such a pandemic.
        That's why myself and Rep. Brian Baird have introduced H.R. 3154, the 
Infectious 
Diseases Research and Development Act of 2005.  This bipartisan bill would 
provide the market incentives needed to spur private research and development 
into infectious disease products, which are simply not as lucrative as the 
drugs you might see advertised on television.
        The threat of bioterrorism is very real, and very dangerous, but we 
cannot let 
it overshadow other public health threats that hold the potential for equally 
devastating consequences.
        We will hear calls for more funding today in order to produce a more 
comprehensive approach under Project Bioshield, though we must face the 
reality 
that it would be impossible to stockpile an adequate supply of drugs for each 
and every bio-threat.  I hope our panelists will have suggestions for how we 
can 
streamline countermeasure development so we can make them quickly when we need 
them. 
 	Amidst calls for funding, I would also encourage my colleagues to also 
consider potential market-based solutions to our drug development problems, 
such as the ones included in H.R. 3154.

	MR. DEAL.  I am pleased to introduce the first panel.  First is the 
Honorable Alex M. Azar, Deputy Secretary, U.S. Department of Health and Human 
Services.  Next, Mr. Jean D. Reed, and I am going to have to take a deep 
breath 
to read this one, Special Assistant, Chemical and Biological Defense and 
Chemical Demilitarization Programs, Office of the Assistant to the Secretary 
of 
Defense for Nuclear and Chemical and Biological Defense.  I don't know what 
that acronym is, but it has got to be one doozy.
	MR. REED.  It is unpronounceable, sir.
	MR. DEAL.  Gentleman, we are pleased to have you here today.  Your 
written 
statements have been made a part of the record, and we would welcome your oral 
testimony and hopefully summarize the written portion that you have submitted. 
We will begin with you, Mr. Azar.

STATEMENTS OF THE ALEX M. AZAR, DEPUTY SECRETARY, U.S. DEPARTMENT OF HEALTH 
AND HUMAN SERVICES; AND JEAN D. REED, SPECIAL ASSISTANT, CHEMICAL AND 
BIOLOGICAL DEFENSE AND CHEMICAL DEMILITARIZATION PROGRAMS, OFFICE OF THE 
ASSISTANT TO THE SECRETARY OF DEFENSE, U.S. DEPARTMENT OF DEFENSE

        MR. AZAR.  Good afternoon, Mr. Chairman and members of the 
subcommittee.  Thank 
you very much.  I am pleased to be here today to update you on the steps that 
HHS has been taking to implement the Project BioShield Act.
	Many countermeasures for potential agents of terrorism realistically 
have 
no market other than the Government and thus have not generated a great deal 
of manufacturers.  Because the market for developing countermeasures is 
speculative, without government interest private, companies have not invested 
and engaged in developing the countermeasures that the current situation 
warrants.  Project BioShield was intended to provide such an assurance of a 
market.  I want to acknowledge the important role of this committee in 
enactment 
of Project BioShield and thank you for your continued support of this critical 
program.
	The Office of Research Development Coordination within the Office of 
Public Health and Emergency Preparedness at HHS exercises and coordinates the 
procurement authorities utilizing the Special Reserve Fund authorized under 
Project BioShield.  Prioritization and development of requirements for medical 
countermeasures and medical countermeasure acquisition programs is coordinated 
by the expert interagency Weapons of Mass Destruction Medical Countermeasures 
Subcommittee, another long name.  In setting priorities for medical 
countermeasure acquisition under Project BioShield, this interagency 
subcommittee considers a number of factors.  The credibility and immediacy of 
the specific threats are driving factors and are informed by material threat 
assessments that are conducted by the Department of Homeland Security.  Other 
factors include an evaluation of the availability of appropriate 
countermeasures, both current and projected, and the target population for 
which medical countermeasures would be used.
	To date, HHS has implemented acquisition programs addressing each of 
the 
four threat agents determined to be material threats to the U.S. population by 
the Department of Homeland Security: anthrax, smallpox, botulinum toxins, and 
radiological/nuclear agents.  HHS has used the special reserved fund to award 
two contracts for vaccines against anthrax, one contract for a liquid 
formulation of a drug to protect children from radioactive iodine exposure 
following nuclear events, and one contract for agents countering the effects 
of internal exposure to transuranic radioisotopes.
	In addition, negotiations are underway currently for the acquisition 
of anthrax therapeutic antitoxins, and countermeasures to address the 
blood-related 
deficiencies associated with acute radiation syndrome.  With respect to 
smallpox 
vaccines, an award will be made for the manufacture and delivery of up to 20 
million doses of a next generation attenuated smallpox vaccine called modified 
vaccinia Ankara.  Additionally, negotiations are underway for procuring 
200,000 doses of botulinum antitoxin.
	The experience implementing BioShield has highlighted challenges.  The 
potential payoff for a breakthrough in medical countermeasures against 
chemical, 
biological, and nuclear/radiological, CBRN threats, is modest when compared 
with 
other drugs.  For example, the global market for just one cholesterol-lowering 
agent exceeds the global market for all vaccines together, not just those that 
comprise a security countermeasure.  Additionally, it is estimated that the 
cost 
of developing and bringing to market a new drug is between $800 million and 
$1.7 
billion per drug.  In addition, for a countermeasure to be eligible for 
Project 
BioShield, solid clinical experience and/or research data must support ``a 
reasonable conclusion that the countermeasure will qualify for FDA approval or 
licensure within eight years after the date of a determination.''  Only then is 
the countermeasure eligible for funding from the $5.6 billion Special Reserve 
Fund.  Late stage research and development funds that can support advanced 
product development of potential BioShield candidates before they are 
BioShield 
eligible are therefore critical to ensuring a robust pipeline.  To address 
this, 
HHS has proposed $160 million for advanced research and development in the 
fiscal year 2007 budget to support promising candidates while shifting risk 
away from Project BioShield acquisition programs.
	We recognize that more can and must be done to aggressively and 
efficiently implement Project BioShield.  Secretary Leavitt has already 
announced his intention to establish a dedicated strategic planning function 
in 
HHS that more efficiently integrates biodefense requirements across the full 
range of threat agents, with the execution of advanced development and 
procurement of medical countermeasures.  He will assign and empower the Office 
of Public Health Emergency Preparedness as the responsible office to develop 
and 
implement a strategic plan for this purpose, and will ensure that HHS 
component 
programs and functions are properly aligned and that their respect strengths 
are 
leveraged to support the Office of Public Health Emergency Preparedness' 
efforts.  We will also work to streamline and make more effective the current 
BioShield interagency governance process.  We will make this process more 
transparent and work to educate the public and industry about our priorities 
and 
opportunities.  As part of this, HHS will convene an outreach meeting with 
external stakeholders later this year.
	During the first 20 months of Project BioShield, HHS has used this 
legislation to initiate major acquisition programs for medical countermeasures 
to biological and radiological/nuclear threats, to expedite the award of 
grants 
and contracts for research to identify and develop medical countermeasures to 
protect the U.S. population from chemical, biological, radiological, and 
nuclear 
threat agents, and to provide access to the best available medical 
countermeasures in emergency situations.
	Mr. Chairman, thank you once again for inviting me to testify on our 
efforts and to update you on the Department's plans for the future, and at the 
appropriate time, I would be happy to take any questions.
	[The prepared statement of the Hon. Alex M. Azar follows:]

PREPARED STATEMENT OF THE HONORABLE ALEX M. AZAR, DEPUTY SECRETARY, U.S. 
DEPARTMENT OF HEALTH AND HUMANS SERVICES

        Good afternoon Chairman Deal and Members of the Subcommittee.  I am 
pleased to 
be here today to update you on the steps the Department of Health and Human 
Services (HHS) has taken to implement the Project BioShield Act of 2004 
(P.L.108-276).  Project Bioshield, as announced by President Bush in his State 
of the Union address on January 28, 2003, was proposed to accelerate the 
process 
of research, development, purchase, and availability of effective 
countermeasures against agents of bioterror.  Then HHS Secretary Tommy 
Thompson 
and Department of Homeland Security (DHS) Secretary Tom Ridge jointly 
transmitted the ``Project BioShield Act of 2003'' to Congress on February 26, 
2003 
and it was signed into law by President Bush on July 21, 2004.  
        Project BioShield enables the Government to develop, procure, and make available 
countermeasures to chemical, biological, radiological, and nuclear agents for 
use in a public health emergency that affects national security.  
Pharmaceutical 
research and development historically has focused on development of products 
likely to attract significant commercial interest.  Many countermeasures for 
potential agents of terrorism realistically have no market other than the 
government and thus have not generated a great deal of manufacturer interest.  
Because the market for developing countermeasures is speculative, without 
government interest, private companies have not invested and engaged in 
developing the countermeasures that the current situation warrants.  Project 
BioShield was intended to provide such an assurance of a market.  I want to 
acknowledge the important role of this Committee in enactment of Project 
BioShield and thank you for your continued support of the program.  
        Project BioShield is a critical part of a broader strategy to defend 
America 
against the threat of weapons of mass destruction.  It provides HHS with 
several 
new authorities to speed the research, development, acquisition, and 
availability of medical countermeasures to defend against chemical, 
biological, 
radiological and nuclear (CBRN) threats.  Defending against such threats is a 
top priority for the Bush Administration and having an appropriate 
armamentarium 
of medical countermeasures is a critical element of the response and recovery 
component of the President's ``21st Century Strategy for Biodefense.''   HHS 
acts 
to accomplish this mission through integrated efforts of several components, 
including: research and development at the National Institutes of Health 
(NIH); 
regulatory activities related to medical countermeasure development and 
availability at the Food and Drug Administration (FDA); acquisition of medical 
countermeasures through the Office of Public Health Emergency Preparedness 
(OPHEP); and storage and deployment in an emergency by the Centers for Disease 
Control and Prevention.  


NIH BioShield Authorities
        HHS's National Institutes of Health (NIH) is assigned the lead role in 
the 
research and early development of medical countermeasures to prepare for and 
respond to CBRN agents and in the conduct of research to expand our 
understanding of the human health impact of these agents. The National 
Institute 
of Allergy and Infectious Diseases (NIAID) is the NIH institute with primary 
responsibility for carrying out this assignment.  Thus far, NIAID has used 
Project BioShield authorities to award $35.6 million in grants and contracts.  
These awards will promote development of countermeasures toward possible 
future 
procurement with Project BioShield funds.   Twelve grants and two contracts 
have 
been awarded to support research directed against the Category A agents that 
cause anthrax, smallpox, tularemia, plague, botulism, and viral hemorrhagic 
fevers.  NIAID has awarded 4 grants and 3 contracts to support research on 
medical countermeasures against radiological or nuclear terrorist attacks, 
including countermeasures to protect the immune system against radiation and 
improved treatments for the elimination of internal radionuclide contamination 
that can be given by mouth rather than intravenously.  

Medical Countermeasure Acquisition
        The Office of Research and Development Coordination (ORDC) within 
OPHEP 
exercises and coordinates the procurement authorities utilizing the Special 
Reserve Fund authorized under Project BioShield.  ORDC works with NIH, CDC, 
and 
FDA to coordinate the transitions between medical countermeasures development 
at 
NIH, procurement by ORDC, storage and development by CDC, and 
approval/licensure/clearance by FDA.   Prioritization and development of 
requirements for medical countermeasures acquisition programs is coordinated 
by 
the Weapons of Mass Destruction Medical Countermeasures (WMD MCM) 
Subcommittee.  
By defining requirements for medical countermeasures the Subcommittee enables 
policy makers to identify and evaluate acquisition options to address 
immediate 
and future needs.
        In setting priorities for medical countermeasure acquisition under 
Project 
BioShield, The second principle activity of the WMDMC subcommittee is the 
evaluation of acquisition options to address the requirement.  the WMD MCM 
Subcommittee considers a number of factors.   The credibility and immediacy of 
the specific threats are driving factors and are informed by Material Threat 
Assessments (MTAs) conducted by the DHS.  Other factors include an evaluation 
of 
the availability of appropriate countermeasures, both current and projected, 
and 
the target population for which the medical countermeasure would be used.  In 
addition, logistical issues are considered such as the feasibility of 
deployment 
in a public health emergency, shelf life, and the storage and maintenance 
requirements.
        To date the WMD MCM Subcommittee has defined USG requirements and 
acquisition 
options for eight medical countermeasures.  These HHS acquisition programs 
address each of the four threat agents determined to be Material Threats to 
the 
U.S. population by DHS [Bacillus anthracis (anthrax), smallpox virus, 
botulinum 
toxins, and radiological/nuclear agents].  Such agents are determined to 
present 
a material threat to the U.S. sufficient to affect national security.  HHS has 
used the Special Reserve Fund (SRF) to award two contracts for vaccines 
against 
anthrax, one contract for a liquid formulation of a drug to protect children 
from radioactive iodine exposure following nuclear events, and one contract 
for 
chelating agents for countering the effects of internal exposure to 
transuranic radioisotopes.  
        In addition, negotiations are underway for the acquisition of anthrax 
therapeutics, and countermeasures to address the blood-related deficiencies 
associated with acute radiation syndrome.  With respect to smallpox vaccines, 
an 
award will be made for the manufacture and delivery of up to 20 million doses 
of 
a next generation attenuated smallpox vaccine, modified vaccinia Ankara (MVA). 

Additionally, negotiations are underway for procuring 200,000 doses of 
botulinum 
antitoxin.  
        These countermeasures are being added to the Strategic National 
Stockpile (SNS) 
that currently includes vaccines, antibiotics to counter infections caused by 
anthrax and plague, antitoxins, chemical antidotes and radiation emergency 
medical countermeasures.

Emergency Use Authorization
        Project BioShield thus provides an important tool for the acquisition 
of safe 
and effective medical countermeasures, licensed or approved by the FDA for 
addressing CBRN threat agents.  BioShield also recognized however that, should 
CBRN agents threaten the U.S. before these countermeasures are procured, the 
American people should be provided access to the best available alternatives.  
These could include products that are FDA-approved for a different use or those 
that have not yet obtained FDA-approval, but for which sufficient safety and 
efficacy data is available to support their emergency use.   
        The HHS Secretary delegated the authority to issue ``Emergency Use 
Authorizations'' (EUAs) to the FDA Commissioner and to date FDA has issued one 
EUA.   The Deputy Secretary of Defense determined in December 2004 that there 
was a significant potential for a military emergency involving a heightened 
risk 
to U.S. military forces of attack with anthrax.  Based on this determination, 
then-Secretary Thompson declared an emergency justifying the authorization of 
the emergency use of anthrax vaccine and in January 2005, the FDA authorized 
the 
emergency use of the licensed Anthrax Vaccine Adsorbed (AVA) for the 
prevention 
of inhalation anthrax for individuals between 18 and 65 years of age who are 
deemed by the DOD to be at heightened risk of exposure due to attack with 
anthrax.  As conditions of this authorization, each potential AVA recipient 
was 
informed of the benefits and risks of this emergency use of AVA and of their 
option to refuse or accept AVA administration.  The authorization for this 
emergency use of AVA ended one year from the declaration of the emergency in 
January 2006.  

Strategic National Stockpile 
        Medical countermeasure availability also requires well-planned  
stockpile and 
deployment strategies, and all acquisitions made under Project BioShield 
include 
close consultations with the CDC to ensure these medicines will be rapidly 
available if needed.  CDC operates HHS's Strategic National Stockpile (SNS), 
which contains large quantities of medicine and medical supplies to protect 
the 
American public if there is a public health emergency severe enough to cause 
local supplies to be inadequate.  Once Federal and local authorities agree 
that 
the SNS is needed, medicines and medical supplies can be delivered to any 
State 
in the U.S. within 12 hours.  Consequently, each State is now required to 
develop plans to receive and distribute SNS medicine and medical supplies to 
local communities as quickly as possible in the event of a deployment.  

Challenges to Implementation
        The experience implementing BioShield over the past 21 months has 
highlighted a 
number of issues that make acquisitions under Project BioShield challenging
and unique. 
        For example, while liability issues have not prevented the completion 
of any 
countermeasure acquisitions to date, liability protection remains a major 
source 
of concern to industry, and a recurring theme in the Project BioShield 
acquisition process.  Therefore, we are pleased that Congress last year passed 
the ``Public Readiness and Emergency Preparedness (PREP) Act'' as part of the 
2006 Defense Appropriations Act (P.L. 109-148).  This legislation included 
liability 
protections for manufacturers of security and pandemic countermeasures.   We 
believe this will further create industry interest and progress in this area.    
        Project BioShield acquisitions have also not drawn the attention of 
large pharmaceutical or biotechnology firms.   The potential payoff for a 
breakthrough 
in medical countermeasures against CBRN threats is modest when compared with 
other drugs.   For example, the global market for just one 
cholesterol-lowering 
agent exceeds the global market for all vaccines together, not just those that 
comprise a security countermeasure.  Additionally, it is estimated that the 
cost 
of developing and bringing to market a new drug is between $800 million and 
$1.7 billion.  
        Smaller companies have been attracted to participate in Project 
BioShield, which 
results in an expansion of pharmaceutical manufacturing capacity and 
expertise.  
A cost to building this capacity among smaller, less experienced companies, 
however, requires more intensive technical assistance.  Unlike the larger, 
more 
experienced pharmaceutical firms, these smaller companies require increased 
levels of federal government assistance and oversight to meet the requirements 
of Project BioShield procurement contracts and mitigate the risk of failure. 
HHS 
has demonstrated a successful track record of enhancing the infrastructure of 
smaller, less established biotechnology firms, as evidenced by the HHS 
acquisition programs completed before Project BioShield.   Continued successes 
will require a sustained commitment of federal resources to ensure proper 
contract oversight and administration, and to ensure that such 
less-established 
contractors meet their regulatory and production milestones as may be 
contractually required.   
        Notwithstanding limited Secretarial authority to make payments up to 
10 percent 
of the contract cost, the Project BioShield Act of 2004 provides ``that no 
payment shall be made until delivery has been made of a portion, acceptable to 
the Secretary, of the total number of units contracted for.''  This requirement 
constitutes a significant risk for small biotechnology firms, in particular, 
that may not have the necessary financial resources available to support final 
advanced product development prior to receipt of payment.  
        Finally, for a countermeasure to be eligible for Project BioShield, 
solid 
clinical experience and/or research data must support ``a reasonable conclusion 
that the countermeasure will qualify for [FDA] approval or licensure within 
eight years after the date of a determination.''  Only then is the 
countermeasure 
eligible for funding from the $5.6 billion Special Reserve Fund.   Late stage 
research and development funds that can support advanced product development 
of 
potential BioShield candidates before they are BioShield eligible are 
therefore 
critical to ensuring a robust pipeline.  To address this, HHS has proposed 
$160 
M for advanced development in the FY07 budget to support promising candidates 
while shifting risk away from Project BioShield acquisition programs.

Future Plans
        We recognize that more can and must be done to aggressively and 
efficiently 
implement Project BioShield.  Secretary Leavitt has announced his intention to 
establish a dedicated strategic planning function in HHS that more efficiently 
integrates biodefense requirements, across the full range of threat agents, 
with 
the execution of advanced development and procurement of medical 
countermeasures.  HHS will assign and empower the Office of Public Health 
Emergency Preparedness (OPHEP) as the responsible office to develop and 
implement a strategic plan for this purpose, and will ensure that HHS 
component 
programs and functions are properly aligned, and that their respective 
strengths 
are leveraged, to support OPHEP's efforts.  We will also work closely with 
other 
departments and agencies to streamline and make more effective the current 
BioShield interagency governance process.  We will make this process more 
transparent and work to educate the public and industry about our priorities 
and 
opportunities.  As part of this, HHS will convene an outreach meeting with 
these external stakeholders later this year.  
        As we move forward, we would also like to thank Members of Congress 
for their 
interest in improving the BioShield program, and we look forward to continuing 
to work with you.

Conclusions
        During the first 21 months of Project BioShield, HHS has used the 
provisions of 
this legislation to initiate major acquisition programs for medical 
countermeasures to biological and radiological/nuclear threats, to expedite 
the 
award of grants and contracts for research to identify and develop medical 
countermeasures to protect the U.S. population from chemical, biological, 
radiological, and nuclear threat agents, and to provide access to the best 
available medical countermeasures in emergency situations.  
        Thank you once again for inviting me to testify on our efforts and 
update you on the Department's plans for the future.  
 I would be happy to take any questions.

	MR. DEAL.  Thank you.  Mr. Reed?
        MR. REED.  Mr. Chairman, thank you very much for inviting me to 
appear before 
the committee today.  I am, as you have already indicated, the Special 
Assistant 
for Chemical and Biological Defense and Chemical Demilitarization Programs.  
No, 
it is not pronounceable as an acronym.  The office is essentially that of the 
Deputy Assistant to the Secretary of Defense for Nuclear and Chemical and 
Biological programs.  In that area, I support Dr. Dale Klein, who is the 
Assistant to the Secretary of Defense for Nuclear and Chemical and Biological, 
and the office was established in the early 1990s by Congress to centralize 
and 
provide a focal point for the Chemical and Biological Defense Program within 
the 
Department of Defense.  I have been on the job for about three months.  I came 
to that job from 15 years as a professional staffer for the House Armed 
Services 
Committee.  In that role, I had the enjoyable task of working with your staff 
in 
the development of the Defense BioShield Act of 2003 and then working in 
concert 
with them on BioShield Act of 2004, and I found that an exceedingly rewarding 
experience.  You have a very dedicated staff on that, and sir, I give my 
compliments.  It has been delightful to work with them, although we, at times, 
had differing views on certain issues.
	Nevertheless, I find myself today in this position on the other side 
of 
the table, faced with a very challenging position as we prepare U.S. forces 
for 
both action on the battlefield and being prepared to operate in a potentially 
contaminated environment, contaminated by chemical and biological agents, and 
also from the standpoint from the ability of that force to operate in support 
of homeland defense and homeland security.
	The Assistant to the Secretary of Defense for NCB programs, as I 
indicated, serves as the focal point for overseeing the Department's chemical 
and biological defense research, development, and acquisition.  In preparation 
of the fiscal year 2007 President's budget submission of approximately $1.5 
billion for this program, a process was used which ensures that the 
Department's 
efforts in CBRN, chemical, biological, radiological, and nuclear defense, are 
closely aligned with strategic guidance and are driven by operational 
requirements rather than being driven specifically by technological 
approaches.  
A major aspect of the planning phase, following from the National Military 
Strategy and the National Security Strategy, is a joint capabilities 
development 
process.  That approach to planning serves to focus attention on the 
requirement 
capabilities, while providing guidance to fit programs within the resources 
available, and to meet defense goals.  A top priority is given to dissuading, 
deterring, and defeating those who seek to harm the United States directly, 
including those extremist individuals or organizations that may possess and 
employ weapons of mass destruction.
	The current strategy emphasizes a capabilities-based approach rather 
than 
the approach in the past, which provided greater emphasis on prioritizing 
threat 
agents and targeting budgetary resources based on validated intelligence.  You 
may remember that the law was changed a couple of years ago to get away from 
the 
fact that we could only focus the Chemical and Biological Defense Program 
against validated threat agents.  Because of the developments in medical 
technology, the potential threat posed by bioengineered threats, that law was 
widened to permit the program to concentrate on almost anything that could be 
out there, but to do it in a very measured manner.
	Key capabilities within the Chemical and Biological Defense Program 
are 
structured within the operational elements of sense.  That is, remote sensing 
standoff detection and identification systems; shape, battle space management, 
including modeling and simulation and the communication and decision systems 
that enable the commander to make appropriate responses and plans; shield, 
collective, and individual protection and preventative medicines, such as 
vaccine; and sustain capabilities for decontamination and medical diagnostics 
and therapeutics.  As a supplement to this joint capabilities development 
process, the Secretary of Defense has provided direction to enhance the 
overall 
chemical and biological defense posture.  A major element coming out of the 
Quadrennial Defense Review is the establishment of a program called Green 
Line, 
nickname, or Transformational Medical Technology Initiative, that is aimed 
specifically at attacking the threat of bioengineered diseases, bioengineered 
agents.  Approximately $1.5 billion over the future years defense plan has 
been 
allocated to that.  That program is in source selection at this point and is 
being closely coordinated with what is going on within Health and Human 
Services 
and Homeland Security, and we will be able to say more about that in detail 
after the source selection process is completed in about another month or so.
	It is a challenging program that faces us.  It is closely coordinated 
with 
the efforts of the Departments of Health and Human Services and with the 
Department of Homeland Security, and it also does address what is going on in 
the BioShield Program.  One of the features of the defense BioShield 
legislation, when we did that in 2003, was to emphasize to the Secretary of 
Defense the necessity of coordinating closely with Health and Human Services 
and 
with Homeland Security in the development of the overall research and 
development programs and acquisition programs so in fact the Department of 
Defense would be able to leverage their efforts and vice versa.  That work is 
ongoing.  We can get into that in the question and answer period, if you so 
desire.  And it is again a pleasure to be here and I look forward to your 
questions.
	MR. DEAL.  I thank you.  We will start the questioning at this time.  
Mr. 
Azar, I understand that under Project BioShield, the Department of Homeland 
Security has a role in determining material threats and the Department of 
Defense has its own program, that has just been outlined by Mr. Reed, to 
address 
chemical, biological, radiological and nuclear threats.  But it seems to me 
that 
HHS has the most expertise with respect to medical and health issues and 
emerging threats, the Department of Homeland Security has expertise on 
terrorism 
as a threat.  Would you explain to us how these responsibilities have been 
working?  And would it make more sense if HHS was allowed to determine the 
medical aspects of what constitutes a material threat, and how does DOD threat 
assessment process work in relation to the material threat process?
	MR. AZAR.  Thank you, Mr. Chairman.  In terms of the Department of 
Homeland Security's material threat assessment and determination process, they 
play a very critical role in this process.  We at HHS, we know health, but we 
don't know the threats that our Nation faces.  We aren't an intelligence 
agency, 
and what DHS has the ability to do is to pull together all the strands of 
information in the intelligence community and assess across the broad spectrum 
the threats and help prioritize them for making those material threat 
assessments and determinations.  We certainly assist them in that process by 
providing our health expertise.  They have their own, but we also provide 
that, 
as do the health experts within the intelligence community.  So I am quite 
satisfied that the health expertise input happens and gets into that process.  
But it is important for an agency like DHS, that has the ability to pull all 
of 
the different strands of intelligence into it and compare threats, to make those 
material threat determinations.  And then we, of course, under the Project 
BioShield statute, Secretary Leavitt have to also make a determination that 
the 
acquisition is necessary for the public health.  And so this gets coordinated 
also through these interagency weapons of mass destruction subcommittee.  That 
is where really a highly technical qualified expert body of individuals drives 
the engine of this process.
	MR. DEAL.  Mr. Reed, do you agree and would you comment further on 
that coordination?
	MR. REED.  If I may.  As it happens, and it wasn't done with a 
forethought 
with respect to today's hearing, but coming out of the meetings of the Weapons 
of Mass Destruction Medical Countermeasures Subcommittee last week, was a 
meeting at the action officer level of Department of Defense Health Affairs, 
my 
office, the Department of Health and Human Services, and the Department of 
Homeland Security, to address specifically this area.  You know, coming back 
into the Department, even though I watched the program very closely from my 
vantage point on the House Armed Services Committee, to look afresh at the 
overall threat to our military forces.
	But now, in the broader context of homeland security as well, we met 
with 
the Defense Intelligence Agency, began to discuss the sorts of issues that 
needed to be looked at in terms of near-term threats and a near-term 
assessment 
of that, extending on perhaps to something as long term, a year, perhaps a 
year-
plus, of development of a new national intelligence estimate on the part of 
the 
DIA.  Now that will need to be something that represents the entire 
intelligence 
community as it comes forward, and we are just making, really, the first steps 
in that, to begin to update what is there right now.  The threat is changing, 
there is no question about that, and we need to have our eyes open as we 
approach that.
	MR. DEAL.  Mr. Azar, under Project BioShield, the Secretary of the 
Department of Homeland Security, in consultation with the Secretary of HHS, is 
charged with assessing current and emerging threats of chemical, biological, 
radiological, and nuclear agents, and determines which of these agents present 
a 
material threat against the United States population sufficient to affect 
national security.  What I would like to know, because we have had a lot of 
testimony on this issue, is if the H5N1 virus, or pandemic flu in general, 
fits 
under this definition, and if it doesn't, would you explain why it doesn't?
	MR. AZAR.  Mr. Chairman, as you know, $5.6 billion is in the Special 
Reserve Fund for Project BioShield, and that is a lot of money.  But in the 
scheme of developing medical countermeasures and drugs and devices that would 
be 
used for chemical, biological, radiological, and nuclear incidents, it is not 
an 
infinite supply of money.  That is why this threat analysis that has to occur 
by 
DHS becomes so important that it is intentional, that if we expand beyond 
intentional threats, those harms, we could rapidly dissipate that limited 
amount 
of money that we need for the very real intentional threats against our 
country 
out of that.  Now, when it has come to issues like pandemic influenza, we 
thank 
you and other Members of Congress for the strong support you have given when 
we 
have had naturally occurring threats.  Coming to Congress and working with you 
to get the first year of the President's requested funding on pandemic avian 
influenza to respond to that threat, as you know, that only, pandemic 
influenza 
preparedness alone would have evacuated the Special Reserve Fund here, just as 
one example.  So I think both are critical, but I do think it is important to 
keep, in this context of BioShield acquisition, those two separate.  Now, if 
we 
talk advanced research and development, certainly there is an important role 
that we ought to be playing, and I think we ought to be doing a better job of 
supporting advanced R and D for both the intentional threats and the naturally 
occurring threats.
	MR. DEAL.  I take it that the policy answer is that it does not fit 
the 
definition.  Could I ask you, if you would, to have legal counsel within HHS 
to 
answer the question as to whether it meets the legal definition or not?
	MR. AZAR.  Yes, sir, absolutely.  We will get back to you on that.
	MR. DEAL.  Okay.  And my time is expired.  Mr. Pallone.
	MR. PALLONE.  Thank you, Mr. Chairman.  Mr. Azar, I wanted to ask you 
some 
questions about this liability language and then also about the wild card 
patent 
extension.  As you know, the fiscal year 2006 DOD appropriations conference 
report contained liability language that was not part of either the House or 
Senate-passed appropriation bills.  But first, I would like to know if you or 
anyone in your department was involved in drafting or reviewing or providing 
technical assistance, policy advice, or in any other way was involved in the 
development of the language that found itself in that DOD appropriations 
conference report.
	MR. AZAR.  Congressman, yes, we were involved in providing technical 
assistance on the drafting of that and trying to provide the best advice.  
This 
is a process driven by Congress, but it was something the President had asked 
for, and said that as part of pandemic influenza preparedness, a critical 
element of being able to get manufacturers to produce the products that we 
need 
was removing the liability barrier.  So this was very much a centerpiece, a 
sine qua non of moving towards pandemic preparedness.
	MR. PALLONE.  All right.  Then, in the same line, I mean, obviously, 
you 
are familiar with the liability language.  Can you provide us with your views 
on 
the substantive merits of that language in the conference report and 
specifically, does it, in your view, take complete care of all legitimate 
liability concerns of the Administration, in terms of attracting private 
sector 
participation in BioShield, or do you think further changes are either 
necessary or desirable?
	MR. AZAR.  As we were working on developing the pandemic plan, the 
President's plan, he, the Secretary, and others met with those who we needed 
to 
work with on developing the type of countermeasures, the vaccines, the 
antivirals, in this area and the vaccine industry came to us and it was quite 
clear, in our own experience demonstrated this, that there were several 
barriers, one of which was liability.  And we believe that the language that 
was 
produced here should remove the hurdle of liability in terms of moving forward 
here.  Obviously, industry will end up providing its perspective, but we 
believe 
that this should resolve the liability concerns that we had heard about in the 
process, and plan to be moving forward on the pandemic acquisitions on that 
basis.
	MR. PALLONE.  Now, what about whether or not you think any further 
changes 
are necessary or desirable to attract private sector participation in 
BioShield, beyond the liability provision?
	MR. AZAR.  Well, on the separate issue of BioShield, we do believe 
that 
some of the proposals that are currently being put forward, Senator Burr has 
been very active on the Senate side with a package of legislation that really 
goes in the right direction in terms of focusing attention this period on 
advanced research and development.  There is the earlier stage of basis 
primary 
research that NIH does, and then there is Project BioShield, which is about 
acquiring products that are already ready to put into the stockpile.  But 
there 
is this hurdle between those two, of advanced research and development, where 
we 
do believe there needs to be this type of collaborative working with industry, 
incubating that along, providing funding in partnership with industry to 
remove 
some of the risk of the very risky development.  That is why we have requested 
the $160 million in the 2007 budget for that, and that is why part of the 
pandemic plan has significant advanced R and D funding on, for instance, 
agetent 
research, next generation antivirals, on advanced R and D to deal with that 
interim period.
	MR. PALLONE.  Well, let me just ask one other thing.  You know, the 
liability language only mentions compensation for persons who are injured by a 
covered countermeasure.  Do you have any intention to submit any kind of 
legislative language for a compensation program?  I mean, would you support 
some 
sort of compensation program for people who are injured?
	MR. AZAR.  The hurdle and the issue that we were trying to, and had 
to, 
overcome to be able to move forward and make the money that Congress 
appropriated useful was the liability concern, getting the manufacturers to 
actually be willing to produce the products, to test the products and allow us 
to acquire them.  Compensation is an issue that, as we move along, we would be 
happy to work with Congress on and talk about.  It is not the hurdle towards 
the development and--
	MR. PALLONE.  But you don't have a specific compensation program that 
you are thinking about or funding for at this point?
	MR. AZAR.  No, sir.
	MR. PALLONE.  Okay.  I wanted to ask about the wild card patent 
extension.  
I only have a couple of minutes here, Mr. Chairman.  You know, I am concerned, 
as I said before, about providing incentives at the expense of the American 
public and U.S. health care.  I mean, I think this is the type of thing that 
the 
pharmaceuticals industry could simply take advantage of.  So I guess my 
question 
really would be do you want to comment on that at all, on this wild-card 
patent 
extension?  I mean I am obviously critical of it.  I think that it has the 
potential to just provide, you know, some kind of windfall for the industry.
	MR. AZAR.  We do not have any views established on the issue of this 
wild 
card separately.  We do agree with you, as you said in your opening statement, 
that we do need to focus on the incentives for getting businesses into the 
Project BioShield CBRN countermeasures industry.  It is a very risky industry. 
We are the only purchaser for most of these products.  It is an uncertain 
market, and that is why a lot of what we want to do is make ourselves a better 
business partner as we move forward on implementing Project BioShield, in 
terms 
of transparency, in terms of predictability.  We really want to move that 
focus forward and so that is where the focus of--
	MR. PALLONE.  You don't have a position on that?
	MR. AZAR.  No, we don't.
	MR. PALLONE.  All right, thank you, Mr. Chairman, for the extra time.
	MR. DEAL.  You are welcome.  Ms. Myrick, you are recognized for 
questions.
	MS. MYRICK.  You asked the question I had.
	MR. DEAL.  All right.  Mr. Shimkus is next.
	MR. SHIMKUS.  Thank you, Mr. Chairman.  Secretary Azar, we seem to 
have 
two camps with separate priorities on how money should be spent on this issue. 
Some believe we should spend money procuring vaccines that are readily 
available, and the others believe we should spend money to develop future 
vaccines.  How do we bridge the gap on this conflict and what is the 
Administration's priority?
	MR. AZAR.  Congressman, thank you for that question.  It is a 
difficult 
issue and this is where this relying on the scientific experts and technical 
experts that are out there, whether it is the Institute of Medicine providing 
advice or the Interagency Subcommittee of Medical Countermeasures, that brings 
together the real technical experts from the Defense Department, from the 
Office 
of Science Technology Policy, from DHS, from HHS.  That is where, frankly, we 
need to rely on the scientists to decide and to provide us with the 
recommendations.  Is current technology good enough on a certain product, or 
are 
we at the time where we need to start pushing forward in developing that next 
generation technology?  And so these are not easy issues.  They are science-
based, they are technical issues, and that is why getting as much input as we 
can, I think, is very critical.
	MR. SHIMKUS.  From the public policy arena, and just following up, 
obviously, this is real appropriated dollars, real money.  And then, in the 
event of an attack, if we are not prepared, here is the dilemma: we either 
have 
the vaccines or we don't.  The public is not going to understand our decision 
not to have readily accessible vaccines, when we say, well, we were preparing 
for the next case down the line.  I am not sure if I should let you off the 
hook 
that easy.  I mean, we are looking for some help in reconciling this and, Mr. 
Chairman, I don't know what the answer is.
	MR. AZAR.  Congressman, sometimes, depending on the nature of the 
product, 
some vaccines are pre-event and it would depend on the nature of the threat 
assessment of an event occurring and the populations that would be hit by it 
in 
terms of what size, for instance, you might need to have in your stockpile.  
Other vaccines, perhaps, could be of assistance in a post-exposure context and 
it would depend on the product and whether there has been clinical evidence, 
scientific studies, and FDA approval of post-exposure administration of 
certain vaccines, whether they might be beneficial.
	MR. SHIMKUS.  And if I may, prior to shelf life, too?  Probably some 
of these might expire.  You buy a whole bunch and nothing happens and they you 
throw it out.
	MR. AZAR.  Right.  And as we mentioned earlier, $5.6 billion is a lot 
of money, but it is not indefinite amount of money and so it does require a 
balance 
between current acquisitions and new acquisitions.  And the core, at least my 
understanding of Project BioShield, is to not just acquire for the stockpile.  
We have the strategic national stockpile for buying products, generally, 
already 
on the market.  One of the core purposes of Project BioShield was really to 
incent, drive, and build the markets for those next generation 
countermeasures, 
and I do think it is important, as we implement that, to keep our eye on that 
ball of incenting and building those markets as the only purchaser or they 
will never develop.
	MR. SHIMKUS.  Well, let me move to Mr. Reed.  Mr. Reed, when you 
contract 
with private entities to develop products, how are issues of liability and 
ultimate purchase of those products usually handled?
	MR. REED.  Congressman, the DOD does provide indemnification for 
liability 
issues related to immunization of military personnel, and with respect to the 
relationship with industry, those are normally negotiated as a part of the 
contract.  I would like to provide, however, a reply for the record on that, 
because we are three months on board and about a half an inch deep in this 
area right now.
	MR. SHIMKUS.  I am sure the Chairman would appreciate seeing that, so 
we will readily accept it.
	MR. REED.  Yes, we will.
	MR. SHIMKUS.  And, Mr. Chairman, that is all I have right now.  I 
yield back.
	MR. DEAL.  I thank the gentleman.  Ms. Eshoo, you are recognized.
	MS. ESHOO.  Thank you, Mr. Chairman, first of all, for holding this 
important hearing on the process of reexamining bioterrorism and public health 
security, and a warm welcome to the panelists today and thank you for your 
public service.  I am sorry I wasn't here to make my opening statement which, 
of 
course, will be placed in the record.  I also want to recognize that a very 
distinguished constituent of mine is going to be testifying on the next panel, 
Bruce Cohen, and he is the CEO of Cellerant Therapeutics.  I am very pleased 
and 
grateful that he would come across the country to share with us his views 
today, and thank you, Mr. Chairman, for allowing him to testify.
	Let me ask this.  I want to echo some of the concerns that Congressman 
Shimkus just touched on in his time with you.  Now, it is my understanding 
that what the Congress appropriated in 2002, $5.6 billion, correct?
	MR. AZAR.  Yes, ma'am.
	MS. ESHOO.  Correct.  How much do we have left now of the 5.6.
	MR. AZAR.  We have obligated about $1.089 billion so far out of that 
fund.
	MS. ESHOO.  All right.  Well, I think the most important issue with 
BioShield, I mean, there are so many facets to this, so I don't want to give 
short shrift to anything or diminish in any way, shape or form, but I think 
the 
most important issue, relative to the criticisms of BioShield, is whether we 
are 
doing all we can to develop the countermeasures as quickly as we can.  And how 
do you step up to that, either, what is perceived or real in terms of the 
concern, and what can we do to improve it?  This is no doubt, no doubt in my 
mind, and I think in the entirety of the Congress and the American people 
would 
chime in, that the threat of a terrorist attack, whether it is biological or 
chemical or nuclear weapons, I mean, God help us all, and our top 
responsibility 
is to secure the American people.  So while $5.6 billion is something that I 
don't think any of us will ever have in our checking accounts, it was a good 
start in terms of a very serious commitment of the Congress to address this.  
So 
maybe you can both enlighten all of us about where we are right now.
	MR. AZAR.  Congresswoman, I think you are right.  We have made great 
progress so far in the first 20 months of implementing BioShield.  We have had 
four material threat assessment determinations; anthrax, smallpox, botulinum 
toxin, and radiological/nuclear agents, that we have been dealing with.  We 
have 
had eight procurement processes underway, but there is much more that we can 
do to make this process more efficient, faster and better for--
	MS. ESHOO.  So when you say that the procurements have been made, this 
is what is presently stockpiled?
	MR. AZAR.  There are four procurements that have been made.  Some are 
in process of delivery.  Some have been delivered into the stockpile.  Some 
are being made.  And then we have open procurements right now that are still 
pending decision.
	MS. ESHOO.  Of the procurements that have been made, what percentage 
is stockpiled?
	MR. AZAR.  If I could just go through the ones that have been made in 
terms of the stockpile, the anthrax vaccine absorbed, the first of the five 
million doses has been delivered to the stockpile.  The pediatric potassium 
iodide, the first 1.7 million one-ounce bottles, has been delivered to the 
stockpile.  And then on the--
	MS. ESHOO.  Is that the entire order?
	MR. AZAR.  There has been a contract option exercised in February of 
2006 
for additional pediatric liquid potassium iodide and that is still pending 
delivery.  And then we have the chelating agent DTPA, a radiological/nuclear 
product and that, to my understanding has been delivered.  That is correct, I 
am 
told.  But we need to speed up this process.  What we need to do in terms of 
our 
efforts is first, we have got to develop a broad strategic plan here on moving 
forward.  Instead of individual material threat assessments--
	MS. ESHOO.  So this is not part of our plan?
	MR. AZAR.  No, these are, in a sense, low hanging fruit assessments, in 
that we know these are threats, but what we need to do is an integrated 
strategic plan that pulls together the broad range of threats.  And we need to 
do this in as transparent a way as possible.  For that reason, later this 
year, 
we are going to convene all stakeholders in this, and as the process of 
developing an integrated strategic plan on using the rest of the money--
	MS. ESHOO.  Well, what I am a little disappointed in, with all due 
respect, is that these dollars were appropriated in 2004, as I understand it.
	MR. AZAR.  I believe 2004, ma'am.
	MS. ESHOO.  All right.  Well, you know, there is an important nexus, 
at 
least in my view, and I think others, probably yours, that scientific 
discoveries and the dollars that drive them are twins.  I mean, it is an 
explicable set of bookends.  And what I am concerned about is you have spoken 
to 
the low-hanging fruit, that is important, and there has to be an important 
timeframe around all of this when the dollars get out there in order to push 
the 
discoveries that are needed that will then find their way to the stockpile.  
And 
I think that that is something that we need to have more knowledge about.  Is 
this what your plan is being directed toward, and do you have in mind what 
percent of this budget you are going to dedicate to that?
	MR. AZAR.  The idea on doing a strategic plan like this that is public 
is 
that it will also streamline the procurement process.  If you can front load 
as 
much of the decision making about that we ought to procure certain products, 
that they fit into the strategic plan, and you make that public, it creates 
greater predictability for industry about the areas that we are going in and 
the 
types of quantities that we are looking at so that we can be a better business 
partner with them and then streamline this interagency process and decision 
making.  So I think this is all very important and constructive.
	MS. ESHOO.  But when do you anticipate this plan, not only to begin, 
but 
do you have a timeframe for it that you anticipate when the plan will be done?
	MR. AZAR.  We are beginning, obviously, it is not beginning now, but 
this 
has been getting worked on.  Later this year is when we will have the public 
engagement with it to make sure that we aren't missing things in the plan, 
that 
the stakeholders are bought into it, then sometime soon thereafter is when it 
would be finalized.
	MR. DEAL.  The gentlelady's time has expired.
	MS. ESHOO.  Thank you, Mr. Chairman.
	MR. DEAL.  Dr. Burgess, you are recognized for questions.
	MR. BURGESS.  Thank you, Mr. Chairman.  Secretary Azar, in response to 
one 
of Mr. Pallone's questions about liability, you spoke about the industry's 
response to liability protection.  Can you expound on that just a little bit?  
How has industry responded to the fact that some liability protection has been 
built into the legislative language?  Do we need to do more?  Are there areas 
in 
the rulemaking process that are going to need attention?  Where are we with 
that?  Is industry comfortable with what we have done?
	MR. AZAR.  My understanding from what I have been hearing from 
industry 
and from the process is that, yes, they are comfortable with what has been 
done.  
We have obviously not yet exercised the prep act liability protections in our 
procurements.  We will be moving forward clearly in the context of the 
pandemic 
implementation of doing that, but I have not personally heard any concerns 
that 
the liability protections that were implemented by Congress are not adequate.  
We are working forward on the regulatory development process.  Congress 
commissioned us to do some definitional work with the Justice Department and 
that process is moving forward on just laying out that architecture.
	MR. BURGESS.  Is that regarding things like potential antitrust 
violations if industry talks amongst itself?
	MR. AZAR.  If I remember correctly, that is about providing some 
definitions of the willful misconduct exception, laying out and fleshing out 
what that exception is.
	MR. BURGESS.  To follow up on what Ms. Eshoo was asking you, do you 
think 
we are doing a good job of providing that platform of predictability for 
industry from all areas, from a liability standpoint, from a regulatory 
standpoint?  Is private industry going to be our partner in this?
	MR. AZAR.  Well, that is our goal and I think that the liability 
protections were a major advance.  I believe the administrative changes that 
we 
are working towards in terms of a transparent strategic plan up front are a 
major, major move forward.  I believe that the effort of the Administration 
and 
of some of the work in Congress towards funding and pushing towards advanced 
research and development will really enhance that concept of us working in 
partnership on developing these products and helping to remove some of the 
scientific and business risk on developing these types of products, also.
	MR. BURGESS.  And when can we in Congress and we on this committee, 
expect 
to hear about some of the comfort with scientific and business risk so that we 
can be comforted and in turn project that feeling of confidence to our 
constituents?
	MR. AZAR.  Well, I think some of it is the $160 million that is in the 
President's fiscal year 2007 budget for this advanced research and development, 
getting that passed and start to implement.  That will be a critical step.  We 
have the money on pandemic influenza advanced research and development that we 
are moving forward on implementing.  And so I think, in the pandemic influenza 
context, we should very soon start to get the feedback on is this type of 
advanced research and development approach.  And so I think it is going to be 
an 
iterative process over the next several months of learning from the feedback, 
is this working, and is this providing the right incentives.
	MR. BURGESS.  Well, I would point that Mr. Shimkus correctly pointed 
out 
that the public doesn't have yet general confidence, and doesn't understand 
why 
we don't have protection from the pandemic flu.  And I would further submit 
that 
the public doesn't understand why they don't have protection from the regular 
seasonal flu every year, from which 15,000 to 30,000 people die.  So it is a 
real concern out there amongst the people we represent, and I will just tell 
you 
that it is a real concern of mine here in Congress.  I guess one of the other 
things, and I don't know whether this falls under your jurisdiction or not, 
but 
what about the distributive networks that are out there in the event of a 
pandemic.  How comfortable do you feel about where we are with developing 
those things?
	MR. AZAR.  We still have a long way to go on ensuring that State and 
local 
distribution plans really will line up.  The Secretary and I have been 
traveling 
around to all 50 States with the Governors hosting the pandemic flu summits.  
And one of the key messages there is, we can have everything in the stockpile, 
but it is not going to do any good if it can't effectively be distributed.  
This 
is an area where the Federal government has a role, but the dominant role on 
distributing pharmaceuticals or vaccines is going to be through the State and 
local arenas, and we are working with them on plans.  We have the Cities 
Readiness Initiative that this committee has been very involved in to enhance 
the capability in the larger cities of how do you get drugs and vaccines to 
people in the right period of time.  So this remains a major challenge, is the 
distribution.
	MR. BURGESS.  Sure, and Mr. Shimkus just pointed out to me that it 
would 
be a major concern if it were eliminated in, say, a devastating event such as 
a 
Katrina or an earthquake.  For that reason, I would just point out that north-
central Texas is very stable.  We have no hurricanes.  We have no earthquakes. 
Occasional dust storms.  I will yield back, Mr. Chairman.
	MR. DEAL.  I thank the gentleman.  Ms. Cubin, you are recognized for 
questions.
	MRS. CUBIN.  Thank you, Mr. Chairman.  I also want to thank you for 
calling this hearing today.  I would like to start by questioning Deputy 
Secretary Azar.  Does the Administration's BioShield portfolio include 
naturally 
occurring infectious diseases?  The reason I ask that is because given the 
threat that is posed by drug-resistant diseases and infections, it seems that 
those threats should qualify as threats to national security.
	MR. AZAR.  The threat from drug-resistant bacteria is real.  It is 
important, and we have to be very concerned about the antibiotic pipeline out 
there.  We have to work together with industry to try to make sure that the 
FDA 
regulatory process is--this is where the Critical Path Initiative at FDA 
becomes 
so important to try to help that pipeline along--streamline for approval to 
minimize as much as possible, consistent with safety and efficacy, that 
process.  
It is where the advanced research and development that we do, and the primary 
research at NIH, we have focus on this, and then this new effort towards 
advanced research and development, where we can lend a helping hand on these 
types of naturally occurring infectious agents.  The concern that we have is 
with Project BioShield itself, $5.6 billion dollars is a lot of money to 
anyone, 
but to a pharmaceutical company, and when thinking about developing these 
types  
of chemical, biological, radiological/nuclear threat countermeasures, spread 
around, it doesn't end up being an infinite amount of money.  So we have got 
to 
prioritize there on the intentional threats.  There is a marketplace for 
antibiotics out there.  We need to help encourage it along, and do what we can 
on primary research and advanced research and development.  But unlike the 
BioShield products, there is a marketplace out there for buying these, if we 
can just help push them along to help get them developed.
	MRS. CUBIN.  Right.  And do you think that should be part of the 
BioShield format, if you will?
	MR. AZAR.  I don't think--
	MRS. CUBIN.  The pushing along of pharmaceutical companies.
	MR. AZAR.  The BioShield element itself is limited to simply procuring 
into the strategic national stockpile.  It is about buying products that are 
ready for licensure.  The non-BioShield elements, the primary research at NIH, 
the advanced research and development that might be out of it, it is not 
really 
BioShield itself.  I do believe these are areas that, yes, we ought to be 
focused on naturally occurring areas.  For instance, with pandemic, I believe 
it 
is $350 million in the 2006 money that Congress appropriated, is precisely 
going 
to this type of naturally occurring advanced research and development for 
agivents that could help do dose structuring on the H5N1 vaccine, and also for 
that next generation of antiviral drugs, precisely the area you are talking 
about.
	MRS. CUBIN.  But if there is not help from the Government, the market 
is 
simply not good for antibiotics.  Antibiotics, as you know, are drugs that are 
taken for a very limited amount of time, and the bottom line for a 
pharmaceutical company simply isn't there to develop new antibiotics.  So 
while 
I am not saying that necessarily all the money for research should come from 
NIH, obviously, the pharmaceutical companies have to have a role in that, but 
I 
just think that it ought to be identified as a national security problem.  
Because, in fact, I think the next panel of witnesses will prove, if you will, 
that it is a national security problem.  And I also think that if we find a 
pathway to being able to deal with these naturally occurring infections and 
diseases that are getting ahead of us now, that that would be a good blueprint 
to use for any sort of biological attack that could occur to us, which would 
fit 
exactly into your area.  Could you describe what types of support HHS provides 
to smaller firms that do not have adequate funds to follow through in Phase 
III clinical trials?
	MR. AZAR.  Well, and that is an excellent question because that is 
exactly 
the type of support, that clinical trial support, advanced research and 
development support that we are asking for $160 million in the 2007, where we 
could really team with and seed that process along, because it is very 
expensive, there is often a very high failure rate there for small entities.  
In 
particular, it is difficult or impossible for them to absorb all of that cost, 
and we can share in that risk.  I think you have put your finger exactly on 
the 
construct of advanced research and development, an area we are getting 
increasing experience in through pandemic influenza preparedness with the 
money 
Congress already has given us and we are implementing, and then the $160 
million 
that we have asked for.  This would be the area in the CBRN context for doing 
precisely that.  I think it has been highlighted as a very important issue.  
Thank you.
	MRS. CUBIN.  To just go back to the antibiotic situation.  What we 
have 
been talking about so far is just one incentive for development of new 
antibiotics, but we need a series of incentives to develop new antibiotics.  
We 
need tax credits, patent extensions, FDA-expedited review, plus other things 
that maybe aren't even on the table yet.  And once again, I think that that 
should be included in HHS's overall plan for the country.  I just have one 
other 
questions, if you wouldn't mind, Mr. Chairman.  What consideration is given to 
rural areas in formulating countermeasure distribution plans in the event of a 
bioterror attack?  State and local healthcare systems vary from region to 
region, and in rural areas, in particular, there is a lack of providers.  Has 
any special attention been given to rural care areas?
	MR. AZAR.  As we have been working with the States on their 
distribution 
plans, especially in the pandemic context, we have been focusing the States' 
energy on developing distribution plans which, of course, for them is 
statewide.  
So it is really in their hands on developing those comprehensive plans.  What 
we 
have been providing through the Cities Readiness Initiative is a separate 
program to focus some of the extra energies on the complexities of major 
metropolitan area distribution challenges that we would have, where you have 
high concentration of individuals.  And hopefully, as we learn best practices 
through that focus and maybe even come up with new better ways of distributing 
medicines, a tremendous challenge, those will become broadly applicable 
lessons 
learned that we can help spread around throughout the country.  But I think 
you 
are right, we need to keep the focus, but distributing countermeasures is a 
nationwide issue.
	MRS. CUBIN.  Thank you and will you keep in mind that cities of 
population 
over 50,000, there are only two cities in the entire State of Wyoming, a 
hundred 
thousand square miles, so there are special needs out there in rural America.  
Thank you, Mr. Chairman.
	MR. DEAL.  Mr. Rogers is recognized for questions.
	MR. ROGERS.  Thank you, Mr. Chairman.  I just want to follow up on 
Mrs. 
Cubin's question for a minute.  That $160 million you talked about, Mr. 
Secretary, is that outside of BioShield for advancing drugs, getting them 
through trials in that?
	MR. AZAR.  Yes, sir, that is a new money request as part of the 2007 
budget, $160 million for advanced research and development.  Yes, sir.
	MR. ROGERS.  And for naturally occurring.  So it wouldn't have the 
same target set, maybe, as a BioShield--
	MR. AZAR.  No, that $160 million is actually focused on chemical, bio, 
and 
radiological/nuclear advanced research and development.  It is meant to be in 
league with the implementation of the BioShield purchasing.  It is part of the 
pulling effort there to get these products closer to the BioShield contracting 
point.
	MR. ROGERS.  And just for my own education, how much of the money have 
you spent that has been allocated for BioShield in 2004?
	MR. AZAR.  We have obligated, so far, $1.089 billion out of the $5.6 
billion Special Reserve Fund.  Now, of course, we do have, I believe, four 
open 
pending procurements going on right now that would, if they end up in awards, 
would result in additional obligations of amounts within that.
	MR. ROGERS.  Okay, so you are asking for $160 million more.  You 
haven't 
spent all the money since 2004, because I want to make sure I understand that.  
I won't get into that.  My time is short, but I just want to make sure I 
understand that.  You made a statement earlier, and I am confused, because I 
caught earlier testimony briefly, so please correct me if I am wrong here.  
But 
you said that BioShield, when you were answering Mrs. Cubin, was about 
procurement and stockpiling and buying product that is ready for licensure.  
If not a direct quote, that is pretty close.  Is that correct?
	MR. ROGERS.  Well, obviously, under BioShield, the products that we 
acquire, I believe, at the time that we accept them for delivery, they need to 
be on a track towards final approval by FDA within eight years.  So these are 
products that eventually would need to be on the pathway towards licensure 
under the BioShield Act.
	MR. ROGERS.  Okay.  Now, is single sourcing of vaccines a good idea?
	MR. AZAR.  By single sourcing, do you mean--
	MR. ROGERS.  Sole source, that is it.
	MR. AZAR.  Sole source contracting?
	MR. ROGERS.  Yes.
	MR. AZAR.  Sole source contracting, where there has been no fair and 
open competition, it would obviously depend on the nature of the market, and 
that is 
where we do a request for information to learn about are there even other 
players in the field.  Of the four procurements that we have done under 
Project 
BioShield, three of them have been what are called sole source or 
justification 
without full and open competition.  We have had one procurement, which has 
been 
the RPA anthrax vaccine procurement, which was done with full and open 
competition under the Federal acquisition regulations.
	MR. ROGERS.  Okay, my question is about, is it good policy to have 
sole 
source in vaccines when it comes to bioterrorism?  Let me back up.  I thought 
the President was almost visionary when he proposed BioShield.  He laid out a 
niche of a future threat, of which, over time and budget constraints, can get 
pulled a lot of different ways.  And he sat down and said, you know what, this 
is a real threat that is only going to get worse and we better do it today.  
And 
one of the things, as I understand your testimony, is you want to try to 
expand 
and we want to take advantage of innovation, and innovation solely happens in 
sole source contracts.  You can't point to too many places in history where 
sole 
sourcing of any particular item leads to innovation benefits.  As a matter of 
fact, I would argue that it degrades innovation in that particular area of 
research.  So my understanding of BioShield was to stockpile, which you said 
that is correct, procurement of something that is likely to be licensured, and 
according to this $160 million, is to try to find new sources, advancements, 
and innovation in the field, is that correct?
	MR. AZAR.  Of course the $160 million is not part of the BioShield.  
That is--
	MR. ROGERS.  But you just said a minute ago that it would target some 
of the vaccines.
	MR. AZAR.  Oh yes, it is targeting towards bridging the gap between 
primary research and actual acquisition.  I think--
	MR. ROGERS.  And bridging is a good idea, don't you think?
	MR. AZAR.  Absolutely.
	MR. ROGERS.  Good.  I want go through just a series of events here 
that 
have frustrated me beyond recognition, and I still can't figure out if this is 
bureaucratic bungling at its best, just lack of interest in what Congress 
intends, or mismanagement.  I can't tell.  On April 20 of 2005, myself, 
Congressman Dingell, Congressman Stupak and Congressman Upton contacted HHS 
and 
the Secretary.  We expressed concern over the delay of the Department of 
acquiring a national stockpile for post-exposure and pre-exposure use of FDA 
licensed anthrax vaccine.  Now, they responded back.  It took a little longer 
than we wanted, and said, no, we are going to go ahead and do that, because 
bridging is important.  I think multi-source, bridging, all important stuff, I 
think, in this.  That was April 20 of 2005.  On August 4, we contacted the 
Secretary's office again, Stewart Simonson, regarding a similar purchase of 
this 
vaccine, in correlation with the previous letter in conjunction with Mr. 
Dingell 
and Mr. Stupak and myself, and they again assured us that this was going to 
happen.  Fall 2005, I had a phone conversation with the Secretary on the 
progress on the order of those five million additional doses and the 
commitment 
was, at that time, he told me it was moving forward and would be done.  
January 
12, 2006, February 15, 2006.  March 8, the testimony, the Secretary himself 
said, let us see, ``buy the other five million doses and that we authorized it 
about a week-and-a-half ago.''  March 24, I won't get into that.
	But as of today, there has been no contracting movement at all, and my 
argument here is this, and I use this, obviously, because I have probably the 
most knowledge about this particular area of BioShield, but if this is the way 
we are operating, it makes complete sense to me that you don't have a 
strategic 
plan two years after you have almost $6 billion.  That is a fundamental 
failure 
to the American people, if you ask me.  You are talking about right now 
setting 
up a plan, and this is the kind of thing that can exactly happen.  Obviously, 
the concern was enough that you said we need 75 million doses to protect 
America; good idea.  And I am all for new technology.  This is recombinant, 
great.  That is fine.  That is a wonderful thing.  But how many do we have in 
our stockpile now?  Not even close and they have just again asked for an 
extension.  So my argument is it makes no sense to me that you say you are 
going 
to do it.  You don't do it almost a year later.  Either you guys don't know 
what 
you are doing--I mean, help me out here.  Help me understand why this is such 
a big issue and a big problem.
	MR. AZAR.  As you know, the issue here is between two types of anthrax 
vaccine.  There is the old anthrax vaccine absorbed, the AVA vaccine, which we 
acquired five million doses of and received delivery of it completed in 
February 
of 2006, and we have an additional five million option on that.  That is the 
old 
type of vaccine.  And the Institute of Medicine recommended, the interagency 
scientific body recommended that we move towards the second generation of the 
RPA, the engineered vaccine, because the hope for greater consistency and 
greater characterization of the vaccine.  As Secretary Leavitt said, 
exercising 
the additional five million there, we have stated our intention to exercise 
that 
additional five million, subject to the availability of appropriations.  As 
you 
know, Congress, in Project BioShield, required certain approvals beyond the 
Secretary of HHS in order to actually implement contracts.  We do agree that 
these procurement procedures need to be faster, more transparent, more 
effective, and we are working to try to streamline those interagency 
processes.  
That is where an upfront strategic plan that is adopted by everybody will 
allow 
the implementation of individual procurements to hopefully move much faster 
through that process.  So we share the frustration of the duration that 
individual procurements take, and we want to work to make that happen more 
efficiently, Congressman.
	MR. ROGERS.  With your indulgence, Mr. Chairman, and I understand 
that.  
So this is a little bit different answer than we received on April 20, August 
4, 
the fall of 2005, January 12, February: are you all making it up as you go 
along?  I know you can sense my frustration here.
	MR. AZAR.  And I--
	MR. ROGERS.  Because I have been told it is fixed, it is done, it is 
coming, don't worry, about and I wouldn't worry about it.  I would take the 
Secretary, I would take you at your word.  I am disappointed that the 
Secretary 
didn't show up today.  I can understand why.  This is an abysmal performance 
by 
any standard.  I wouldn't expect that I would tell you that I am going to do 
something that many times, and if I hadn't accomplished it, that you wouldn't 
be 
absolutely irate with me.  It is not just about me and the issue, it is a fact 
that we thought that there was a threat big enough in the United States that 
we 
are searching for new technology, great, 75 million doses to protect America.  
That continues to get extended.  Okay, we ought be flexible enough to 
understand 
that we have to have bridging technology.  We should have multiple source in 
case something like this happens.  That was my understanding of BioShield to 
begin with.  And if we are this far behind and this far off and this 
bureaucratically inept, I am very, very worried about this, and one of the 
reasons I have called for an investigation.  And I was an old FBI agent, and I 
wasn't the brightest one in the world, but this does not pass the smell test 
to me.
	MR. AZAR.  As you know, for anthrax, antibiotics are the front line of 
defense there and we have dramatically increased the stockpiles.  We have 
enough 
antibiotics now to treat, post-exposure, I believe it is 780,000 people, and 
prophalax, with a 60-day course of treatment on antibiotics, 40 million 
people.  
That is our frontline defense against an anthrax attack.  No vaccine is 
currently licensed for post-exposure use.  They are pre-exposure.  So we have 
five million in the stockpile now for pre-exposure.  That would be used for 
health care workers, other critical personnel, in terms of pre-event 
vaccination.  It is not yet we have an IND, investigational new drug 
application, at CDC for post-exposure use of the existing vaccine, but it is 
not 
an approved product for that and that is part of, in terms of building up this 
next generation vaccine, part of the requirement there.  And the contract, to 
my 
understanding, is that it actually be approved for post-exposure vaccination 
use.  And so--
	MR. ROGERS.  And which I understand the one current supplier, and this 
really isn't about that, but they in fact have used some therapeutic--the 
testing, to my understanding, was done through you folks.  I guess my whole 
point is you have made this commitment, which I thought was a good one.  You 
logically said why you want to spend the money for the bridge.  It made a lot 
of 
sense to me.  Why does it take so long?  Can you tell me today that this is 
going to be fixed fairly shortly, or is this number eight and we will be back 
again soon?  If you can help me out on that.
	MR. AZAR.  I cannot give you a date by which the decision making that 
is required with the joint secretarial letter of approval, and then the 
presidential determination of selection will be done.
	MR. ROGERS.  So when the Secretary authorizes it, and about a 
week-and-a-
half ago, by the way, after they told us that it had already been done, what 
does that mean?
	MR. AZAR.  He is one step in the process that the BioShield statute 
set up 
that requires several levels of approval on any type of exercise.
	MR. ROGERS.  And that is between DOD and HHS.
	MR. DEAL.  The gentleman's time is greatly expired here.
	MR. ROGERS.  Sure.  And, Mr. Chairman, I appreciate your indulgence.  
I think this is an important issue and I think it shows a huge shortcoming in 
our 
effort on BioShield and this ought to scare a lot of us.  It certainly scares 
me.  Thank you, Mr. Chairman.
	MR. DEAL.  Gentlemen, well, thank you for your attendance and your 
testimony today and we will excuse you at this time.  Thank you.
	MR. AZAR.  Thank you, Mr. Chairman.
	MR. DEAL.  I will ask Panel two if they will come to the table.  Thank 
you 
and welcome.  Let me introduce the second panel: Dr. Tara O'Toole, CEO and 
Director of the Center for Biosecurity of the University of Pittsburgh Medical 
Center; Mr. Peter F. Young, President and CEO of AlphaVax, Incorporated, on 
behalf of the Biotechnology Industry Organization, Mr. Bruce Cohen, President 
and CEO of Cellerant Therapeutics, Incorporated, who Ms. Eshoo alluded to 
earlier, I believe in her statements; Dr. David P. Wright, President and CEO 
of PharmAthene, and here on behalf of the Alliance for Biosecurity; and Dr. 
Martin 
Blaser, President of the Infectious Diseases Society of America.  Lady and 
gentlemen, we are pleased to have you here.  Once again, your written 
testimony 
is already in the record, and, Dr. O'Toole, I will start with you for your 
statement.

STATEMENTS OF DR. TARA O'TOOLE, CEO AND DIRECTOR, CENTER FOR BIOSECURITY OF 
THE 
UNIVERSITY OF PITTSBURGH MEDICAL CENTER; PETER F. YOUNG, PRESIDENT AND CEO, 
ALPHAVAX, INC., ON BEHALF OF BIOTECHNOLOGY INDUSTRY ORGANIZATION; BRUCE COHEN, 
PRESIDENT AND CEO, CELLERANT THERAPEUTICS, INC.; DR. DAVID P. WRIGHT, 
PRESIDENT 
AND CEO, PHARMATHENE, ON BEHALF OF ALLIANCE FOR BIOSECURITY; AND DR. MARTIN 
BLASER, PRESIDENT, INFECTIOUS DISEASES SOCIETY OF AMERICA.

	DR. O'TOOLE.  I appreciate the opportunity to speak on this important 
topic.  I represent the Center for Biosecurity at the University of Pittsburgh 
Medical Center.  We have been working since 1998 on the issues of biodefense, 
which I know all the members of this committee agree are of critical 
importance 
to national security.  The prior discussion, I think, was very interesting and 
illustrated both the essential importance of the BioShield legislation that 
was 
passed a few years ago, as well as the complexity of this issue.  At the core 
of 
the questions about what do we buy, when, and how much do we buy, and what 
should we invest in technologies versus which of the existing countermeasures 
should be put in the stockpile, is a question of cost.  It is my view that we 
are still, as a country, thinking about biodefense on the wrong scale.  We are 
thinking about it as another health problem as opposed to a major national 
security threat.
	BioShield was an important piece of legislation.  It is a very good 
start, 
but it is not nearly enough money for the purpose that has to be served.  We 
are 
off by about a magnitude of order right now.  And that cost is going to go up 
as 
the threat of bio-weapons emerges more clearly, and that will include the 
emergence of bioengineered weapons, which are probably viable today.  We need 
to 
recognize that the problem biopharma is having engaging in this process is 
partly about opportunity costs.  They simply make lots more money, not just 
two 
or three times more money, but ten or a hundred times more money investing in 
stuff that does not have to do with infectious disease.  This is true whether 
you are talking about drugs against biological weapons-induced diseases or 
drugs 
against naturally occurring infections.  And what we are seeing is the 
biopharma 
industry, as a whole, fleeing from investments in anti-infectives, in 
vaccines, 
antibiotics, and so forth.  We need to do something about this.  This is a 
strategic problem.  I think the most important part of it for national 
security's sake is no doubt bioterrorism.  But as the congresswoman noted, the 
rise of antibiotic-resistant bugs and so forth is also a real issue, and we 
are 
going to have to figure out a way to spend more money in the future on this 
critical problem.
	Now, I think HHS has done work in trying to step up and implement this 
new 
legislation, but the fact of the matter is, biodefense generally and the 
procurement of new drugs and vaccines and the investment in whole new areas of 
drugs and vaccines is a new mission for HHS.  They have lots of good people 
working their hearts out over there trying to administer BioShield, but they 
fall far short of what is needed.  We need more people at HHS, a lot more, I 
would say a hundred more just to administer BioShield appropriately, and they 
need to have the right expertise.  We need people at HHS who have experience 
in 
the biopharma field and who have managed complex, long-term acquisition 
contracts, such as DOD does all the time, but HHS has never done heretofore.
	And finally, I think we are going to rapidly run out of the strategy 
of 
trying to find a drug or a vaccine against each bug that might present a 
biological weapons threat.  We are going to be faced in the future with 
unanticipated threats, some of the bioengineered agents that come upon us and 
to 
which we have to respond very quickly.  Right now, it takes about ten years to 
create a new drug.  We need, as a matter of national security strategy, to 
start 
instituting research projects in partnership with the biopharma industry that 
can radically reduce how long it takes to develop a drug.  We need to go from 
ten years to about two weeks.  We can do this if we apply our know how across 
the spectrum of drug development, from improving R and D to helping us through 
this middle phase valley of death to improving clinical trial efficiencies to 
getting our regulatory apparatus even more efficient than it is now.  We need 
to 
take this project on as a matter of high national security priority and we can 
do it, but that is going to take some time.  In the meanwhile, we have to 
stockpile drugs, but this notion of having a cupboard full of drugs for all of 
the possible biological weapons agents, especially for the bioengineered 
agents 
that are upon us, is not going to be viable, even for the United States of 
America for very much longer.  It is a stopgap measure that we need to take, 
but 
we need to take the next step into this new strategic world of radically 
accelerating drug development.  Thank you, Mr. Chairman.
	[The prepared statement of Dr. Tara O'Toole follows:]

PREPARED STATEMENT OF DR. TARA O'TOOLE, CEO AND DIRECTOR, CENTER FOR 
BIOSECURITY OF THE UNIVERSITY OF PITTSBURGH MEDICAL CENTER

        Mr. Chairman, Congressman Dingell, and members of the committee, thank 
you for 
the opportunity to address the vital issue of biodefense and the difficult 
challenges surrounding the US government's efforts to procure medicines and 
vaccines against biological agents that could be used in terrorist attacks 
against US civilians. My name is Tara O'Toole. I am the Director and CEO of 
the 
Center for Biosecurity of the University of Pittsburgh Medical Center and a 
professor of medicine at the University of Pittsburgh Medical School. The 
Center 
for Biosecurity is a non-profit, non-partisan, multidisciplinary organization 
located in Baltimore which includes physicians, public health professionals, 
and 
biological and social scientists. The Center is dedicated to understanding the 
threat of large-scale, lethal epidemics due to bioterrorism and natural 
causes. 
My colleagues and I are committed to the development of policies and practices 
that would help prevent bioterrorist attacks or destabilizing natural 
epidemics, 
and, should prevention fail, would mitigate the destructive consequences of 
such events. 
        For several years now, the Center for Biosecurity has been working in 
collaboration with academia, industry, and government to stimulate development 
and procurement of new medicines and vaccine for biodefense.  In March 2005, 
we 
initiated the formation of the Alliance for Biosecurity, a collaboration 
between 
the Center and leading biotechnology and pharmaceutical companies with the 
intention of working together in the public interest to promote the creation 
of 
a robust and sustainable biomedical research and development infrastructure 
that 
we believe is needed to prevent and treat the infectious disease threats that 
present US and global security challenges in the 21st century. These threats 
include large-scale epidemics of natural disease as well as bioterrorist 
attacks using conventional or bioengineered weapons. 
        Biological weapons have been proven to work, are capable of causing 
massive 
lethality, are relatively cheap, and are increasingly easy to design, build 
and 
disseminate. We are in the midst of a bioscientific revolution that will make 
building and using biological weapons even more deadly and increasingly easy. 
Finally, the materials and technical know-how needed to make a bioweapon that 
could infect hundreds of thousands of people are already widely distributed 
around the planet, and the number of people who possess the expertise needed 
to 
create bioweapons is rapidly growing as biotechnology and pharmaceutical 
research and production expand into developing countries.
        Preventing either a natural epidemic or a bioterrorist attack is, 
unfortunately, 
unlikely.  Therefore, the nation's ability to rapidly and effectively respond 
in 
the face of a biosecurity crisis should be a central pillar in our biosecurity 
strategy. The nation's response to an outbreak must be designed to prevent 
potentially destabilizing social, economic, and political consequences, in 
addition to preventing illness and death on a large scale. Medicines and 
vaccines that can counter illnesses caused by exposure to bioweapons agents 
are 
obviously an essential component of biodefense and would be critical to 
controlling the spread of contagious disease. A recent report from the 
Institute 
of Medicine found that the array of biological agents that pose a significant 
threat to biosecurity is much larger and more diverse than any of today's 
"threat lists."1  Yet, since 2001, the US has acquired only a single 
countermeasure - smallpox vaccine. Why is this?

Funding for biodefense countermeasures is not comprehensive and is not 
commensurate with the threat of bioattacks.
        Thus far, the US government has focused efforts to acquire biodefense 
countermeasures on basic research investments and on Bioshield funding for 
acquisition of countermeasures that are sufficiently advanced that they are 
eligible for Investigative New Drug (IND) status. What's missing from the US 
government's biodefense funding strategy is support during the so-called 
"valley 
of death", the crucial middle phase of drug development between basic research 
and acquisition of final products (see figure).



        Drug and vaccine development is an expensive, high risk undertaking. 
Of 5000 
drug ``candidates'' identified by scientists, only 5 make it to clinical trials 
and only one of these, on average, will become a licensed product.2 The lack 
of 
support from the US government during the crucial intermediate stages of 
development results in premature failures of potential countermeasures as 
biopharma companies struggle to maintain operations through long periods of 
uncertainty without outside support.  The priorities of the private capital 
markets, instead of the priorities of government, are driving products through 
the ``valley of death.''  Unfortunately, countermeasure development is 
unattractive to private investors because there are no markets outside of 
governments for most of these products, and even in the most profitable 
scenarios, biodefense countermeasures - as with anti-infectives generally - 
cannot generate profits comparable to successful medicines for chronic disease 
that are taken for years by large populations.3 This is one of the prime 
reasons 
that there are only 5 major vaccine manufacturers left in the world.  One 
expert 
in drug development was quoted in a 2004 study performed by the Center for 
Biosecurity and the Sarnoff Corporation as saying:

        ``You make a new antibiotic and if it's really terrific you'll have 
peak sales of 
$300-500 million per year. If you make a drug for cancer that extends life by 
4 
months, you can charge $40,000 per dose. The difference is so staggering...."4

Without some form of government support for the ``valley of death,'' perhaps in 
the form of grants, contracts, or significant milestone payments such as the 
Department of Defense uses in the acquisition of complex weapons systems, few 
companies will be able to secure outside financing or invest their own capital 
in countermeasure development. 
        Government-funded basic research is an essential part of biodefense 
strategy, 
partly because research into infectious diseases has, in recent times, been 
less 
well funded by the private-sector than research for cancer and other types of 
illness (HIV/AIDS is the exception). As noted, the private sector has been 
systematically abandoning R&D investments in infectious disease generally 
because other investment opportunities are much more lucrative.5 As a result 
of 
industry's retreat from infectious disease research, there is less innovation. 
Since 1998, FDA has approved just 10 new antibiotics - only two of which had a 
novel mechanism of action.6 The strong support Congress has accorded basic 
biodefense research though the NIH should continue. Efforts to facilitate the 
transition from discoveries in the laboratory to the development of useful 
products by offering more support to innovators trying to traverse the ``valley 
of death'' could result in many more success stories and more ``bang for the 
buck'' from basic research investments.
        With the passage of the 2004 Bioshield legislation (P.L. 108-276), the 
nation 
undertook to pay for the acquisition of countermeasures. The Bioshield 
Purchase 
Fund of $5.6 billion sounds like a lot of money, particularly in the context 
of 
public health expenditures. But it is not much money when viewed as a 
necessary 
national security investment. A single Nimitz class aircraft carrier costs 
about 
$4 billion; ten such ships have been built for the US Navy. The size of the 
Bioshield procurement fund must also be examined in light of the actual costs 
of 
drug development: it is estimated that the average out-of-pocket cost of 
developing a new drug is $400 million; if opportunity costs are included, the 
cost is $800 million.7 A more recent study calculates the costs of drug 
development could be even higher.8 Indeed, the first Bioshield contract, for 
75 
million doses of recombinant anthrax vaccine, amounted to $877 million. The 
reality is that $5.6 billion will not go far, particularly when the entire 
threat spectrum is considered and the costs of actually acquiring (not just 
developing) medicines and vaccines are contemplated. 

Current HHS Structure and Staffing Levels Need to be Strengthened
        Biodefense is a relatively new and complex mission for the Department 
of Health 
and Human Services (HHS). Although many competent people within HHS are 
working 
hard to manage countermeasure development and acquisition, too few federal 
staff, many with little relevant experience, are trying to do too much under 
ferocious time pressures. It is imperative that HHS be granted the authority 
to 
hire about 100 new staff, many of them at the senior level, to manage these 
important programs. It is especially important that HHS hire people with 
experience in drug and vaccine development and production.
        The current processes associated with threat identification, 
countermeasure 
development and acquisition are poorly coordinated, slow moving, confusing and 
often contrary to routine business practices. This is due in part to the 
number 
of different agencies involved (OPHEP, ORD, FDA, NIH, DHS). But it is also the 
case that HHS lacks experience managing complicated, long-term acquisition 
projects such as DOD handles routinely. The Federal government has chosen to 
pursue biodefense countermeasures through partnerships with the biopharma 
industry.  Such an approach is a sensible way to make efficient use of the 
prodigious know-how and resources of the private sector. But for this approach 
to work, the Federal government must be a reliable partner. From biopharma's 
perspective - and the perspective of investors - it is critical that the 
government maintain a transparent, predictable process with clear timelines, 
explicit liability protection and fair compensation rights, and develop 
predictable rules for the protection of intellectual property rights. Failure 
to 
recognize these realities means that few companies will choose to pursue 
countermeasure development and production, and the country will not have the 
medicines it needs in times of crisis.
        After the terrorist attacks of 2001, HHS was tasked to take on a 
welter of new 
missions related to homeland security. The management structure and staffing 
of 
HHS has simply not kept pace with these assignments. HHS is larger in dollar 
terms than the Department of Defense - and yet HHS does not have a single 
undersecretary. Secretary Leavitt has noted that he has 27 direct reports - a 
situation he recognizes as ``not at all an ideal organizational structure.'' 
        Cabinet Secretaries should have broad discretion in how their agencies 
are 
organized, but I believe that Congress should consider authorizing HHS to 
establish at least one - or better, two or three - Undersecretary positions. 
This would provide the agency with more senior managers capable of 
coordinating 
HHS's vast programmatic span of control. In the realm of public health 
preparedness, an Undersecretary for Public Health (which could be combined 
with 
the present Assistant Secretary for Health or the position of Surgeon General) 
could better coordinate the varying HHS programs now spread among the 
Assistant 
Secretary for OPHEP, CDC, HRSA, NIH, AHRQ, and ONCHIT. In addition, an 
Undersecretary would be better able to represent HHS in the interagency 
process.

Focus on Accelerated Development of Countermeasures
        The US does not yet have a coherent biodefense strategy, nor do we 
have a 
strategy for countermeasure research, development, and production that takes 
account of the full spectrum of possible bioweapons agents, including 
engineered 
threats. It is clear that a handful of pathogens such as anthrax, smallpox, 
plague, etc. are at the top of most threat lists because of their 
availability, 
lethality, contagiousness, historic development as bioweapons, etc. Developing 
and stockpiling specific countermeasures against these high-priority threats 
is 
a rational and pressing national security need. 
        However, in the long term, the current approach of developing 
countermeasures 
against each potential bioweapon agent will prove futile. Natural outbreaks of 
novel infectious diseases (e.g. SARS) are commonplace, and there are dozens of 
naturally occurring pathogens which could serve as bioweapons agents today. 
Moreover, the ongoing revolution in bioscience will enable the creation of 
more 
and more bioweapons agents covering an enlarging spectrum of targets.9 As the 
"threat space'' expands, it will become increasingly difficult and costly to 
use 
a ``one-bug-one-drug'' strategy to define the appropriate armamentarium of 
countermeasures that must be developed and stockpiled - and perhaps never 
used. 
        In addition, the country will have to confront the specter of covert 
bioattacks 
using heretofore unanticipated bioengineered agents. Avoiding the destabilizing 
effects of a large-scale, lethal campaign of such attacks will require the 
ability to rapidly design, develop and produce new countermeasures from a 
standing start - in weeks, if not days. The need to anticipate and prepare for 
such bioengineered weapons is not in the far-off future. We are already living 
in the age of bioengineering. Scientists estimate that in five years it will be 
possible to synthesize any virus from non-living components. 
        A major strategic goal of US biosecurity strategy should be the 
radical 
acceleration of drug and vaccine development. The US government should embark on 
an ambitious program to incrementally reduce drug development and production 
time across the entire development spectrum. Important reductions in development 
time might be achieved across the timeline of drug and vaccine development with 
efforts such as:
        * technology improvements such as in silico modeling, genomics, and 
synthetic biology;
        * wider sharing of, and access to, improved research tools such as 
toxicological databases, test-tube and animal models of diseases, chemical 
libraries of possible medicines, and high throughput screening of potential 
drug candidates; 
        * more efficient clinical testing, such as might be accomplished with 
integrated electronic health records;
        * streamlined regulatory review such as might be achieved by adding 
staff and leadership in FDA and developing policies that account for the 
unique aspects of biodefense countermeasures;
        * the creation of public-private consortia to facilitate sharing of 
information between developers, to address predictive safety testing (i.e. 
to focus on scientific ways to predict toxicity), and to tackle other key 
countermeasure development challenges.
        This is not just about developing new technologies.  The US government 
will need 
to foster new systems to enable private sector developers - many of whom are 
direct competitors - to work together with the government and academia so that 
we can take advantage of the complete storehouse of knowledge and expertise 
available. 
        If the US were to undertake an ambitious long-term effort to focus on 
accelerated countermeasures development, it is likely to be successful. The US 
currently has the advantage in bioscience expertise and experience - 
invaluable 
assets that could be well leveraged in such an effort, although we are also 
rapidly outsourcing most drug and vaccine development overseas, mostly to 
India 
and China.
        Success in such a venture would bring many benefits in addition to 
forming the 
foundation of a coherent and sustainable biodefense strategy. In biopharma, 
time 
is money; the average drug now requires a decade to develop from concept to 
licensed product. Learning how to accelerate countermeasure development would 
necessarily mean that the costs of countermeasures would decrease, probably 
substantially. This effect would have direct implications for the costs of 
pharmaceuticals generally - even during ``peacetime'' - thereby reducing health 
care costs and placing the cost of vital drugs and vaccines within reach of 
developing countries.
        Such a program of accelerated drug development should proceed in 
partnership 
with biopharma companies in the private sector, much as the Department of 
Defense developed partnerships with major military contractors. If such a 
project was ambitious enough, and properly structured and financed, and if the 
Federal government made a long-term commitment to such a project, it is likely 
that the leaders of biopharma would agree to participate.
        It would not be easy to achieve radical acceleration of countermeasure 
production. But incremental progress is almost certain, and would over time 
have 
potentially significant impacts. I am convinced that such a project will be 
undertaken; the remaining question is whether the US will make such a 
commitment 
before we experience a large-scale bioevent, such as a terrorist attack or a 
naturally occurring pandemic, or after.
        The Biodefense and Pandemic Vaccine and Drug Development Act (S. 1873) 
being 
proposed by Senator Burr as a next step beyond Bioshield is not perfect. It is 
a 
modest bill that will not transform countermeasure R&D or dramatically reshape 
HHS. But it is an extremely useful piece of legislation and should be enacted 
into law. The bill makes important incremental improvements in the structure 
of 
HHS, allowing the agency to acquire competent staff and bring more clarity and 
transparency to its countermeasure procurement processes. It provides 
mechanisms 
for supporting companies in the ``valley of death", in a manner similar to the 
DOD acquisition process and appropriate to the development of complex products 
with limited markets. The related bill being proposed by Senator Kennedy (S. 
1880) also makes the point that improvements in the current approach to 
countermeasure development are needed. These bills send the message that the 
US 
government is concerned about biodefense and wants to improve countermeasure 
development. Should the Congress fail to pass meaningful Bioshield legislation 
this session, there is a real danger that the biopharma industry will read 
this as a clear message: Congress is not serious about biodefense.

	MR. DEAL.  Thank you.  Mr. Young?
MR. YOUNG.  Mr. Chairman, thank you for the opportunity to testify before the 
committee today.  AlphaVax is a small 70-person, privately held R and D stage 
biotechnology company based in North Carolina, and we are working to develop 
and 
commercialize a vaccine technology, a platform technology, and I am here today 
testifying on behalf of BIO.
	Since 2002, AlphaVax has received four NIH peer-reviewed biodefense 
vaccine early-development grants.  These grants represent about $38 million in 
total awards, and it is our long-term goal to use these grants, BioShield 
monies, and if commercially viable, private capital to develop bioterrorism 
countermeasures.  If it weren't for Project BioShield and the Government's 
grant 
funding in this arena, my company would not be working on biodefense vaccine 
targets at all.  We have no sales.  We have no profit.  The only money we have 
is money from people who believe we might be able to produce important new 
vaccines one day.  That is a long, costly, and inherently uncertain process.  
We 
have limited amounts of time, people, and money with which to deliver on these 
expectations.
	As we consider the pressing need to improve preparedness, we must 
recognize the enormous challenges intrinsic in that and the successes to date. 
The public/private sector partnership necessary to protect the Nation from 
bioterrorism and pandemic threats is unprecedented in the area of 
biopharmaceutical development, and it must have an entrepreneurial and 
innovative spirit.  Dedicated personnel, and we have heard today from many 
agencies who have already devoted countless hours to build the effort from the 
ground up, and these efforts and accomplishments ought to be recognized, and 
HHS 
has given examples of contracts that are already underway.  However, as 
important as these contributions are, more must be done.  Essential reforms to 
the BioShield partnership are necessary to better enable the successful 
development of biodefense and pandemic countermeasures.  Incremental change 
can 
increase capacity for existing products or achieve modest improvements on 
existing countermeasures, but to achieve dramatic success BioShield needs to 
adopt a culture and methodology consistent with innovation, the innovation it 
wants to stimulate.  This is an approach that is modeled in the private sector 
by a technology investment.
	I am going to emphasize just three areas.  First, Congress must reform 
Project BioShield to fill the important funding gap that has been alluded to 
between early development and the ultimate commercial marketing of a product, 
which companies like mine without self-funded R and D refer to as the valley 
of 
death, with good reason.  The development process for drugs and biologics is 
complex, time consuming, costly, and high risk.  There are added challenges to 
that in developing countermeasures, and these countermeasure opportunities 
compete for investment dollars with other markets.  The Government is usually 
the only purchaser for countermeasures and because of all of this, it is 
extremely difficult for small companies to raise private funding to cover the 
costs incurred after early stage NIH funding but before the Government begins 
paying for a final product.  So to address the funding gap, BioShield ought to 
reform to allow the sharing of risk between industry and the Government during 
the entire course of product development, and funding to bridge that advanced 
development valley of death is a key element to a successful and meaningful 
partnership.
	A second recommendation would improve the coordination and also the 
character of the staffing that animates the Government activity in this.  The 
partnership required for successful countermeasure development includes a 
number 
of different agencies, and each plays a role in the process.  The objectives 
and 
requirements of the various agencies must obviously be aligned and coordinated 
with contract solicitation terms and be part of an early dialogue.  The 
expectations of regulators for licensure and emergency use authorization ought 
to be coordinated with the contract terms.  Ambiguous, additional, and 
unforeseen requirements that arise outside of contract terms magnify 
companies' 
financial risk.  Clear and strong leadership, with a fundamental understanding 
of biotechnology development, is required to coordinate the many agencies and 
objectives and to ensure that development is not choked by bureaucracy or 
inexperience.  The challenges and complex nature of countermeasure 
development, 
coupled with the urgent need to prepare, require that critical staff level 
positions be adequately funded.  HHS needs not only sufficient resources to 
expedite the procurement processes, but flexible hiring authorities are needed 
to staff key positions with the expertise and understanding of the 
pharmaceutical industry, both small and large companies that animate it.
	The final point of emphasis is just the need to clearly and 
predictably 
identify future needs.  Countermeasures can't be developed in the absence of 
clear and reliable articulation of the needs and commitments.  Effective 
product 
development requires an understanding of the end goal, and to date there have 
been too few material threat assessments that have resulted in requests for 
proposals and acquisitions.  There have also been instances where expected 
needs 
were dramatically reduced upon solicitation of the contract.  Lack of clarity 
and predictability of technical requirements can further frustrate planning 
and 
execution.  To enable an effective public/private partnership, requirements 
ought to be developed through dialogue with industry and there must be a 
shared 
understanding of objectives, purchase solicitations, and the consideration of 
the complexities of the industry and the development process.
	In conclusion, BioShield has been an important first step.  Enactment 
of 
some of the more modest reforms I have alluded to will spur more bioterrorism 
and pandemic countermeasure participation by the private sector, but without 
reform and additional funding, that participation will still fall short.  Many 
companies like mine will have no choice but to avoid the biodefense valley of 
death and many promising countermeasures will never progress.  Our industry is 
based on a productive relationship and understanding of the link between risk 
and innovation, and to achieve similar productivity and countermeasures, 
BioShield needs an approach that cultivates innovation.  Thank you.
	[The prepared statement of Peter F. Young follows:]


PREPARED STATEMENT OF PETER F. YOUNG, PRESIDENT AND CEO, ALPHAVAX, INC., ON 
BEHALF OF BIOTECHNOLOGY INDUSTRY ORGANIZATION

        Good afternoon and thank you for the opportunity to testify before the 
Committee 
today on behalf of BIO, the Biotechnology Industry Organization.  My name is 
Peter Young, and I am the President & Chief Executive of AlphaVax, Inc.  
AlphaVax is a privately held pre-revenue biotechnology company based in North 
Carolina that is working to develop and commercialize a vaccine technology 
that 
was originally invented in part at the US Army Medical Research Institute for 
Infectious Diseases.  In addition to vaccine development funding we receive 
from 
the Division of AIDS in the National Institute of Allergy and Infectious 
Diseases (NIAID) at the National Institutes of Health (NIH), my company has 
since 2002 received four NIH peer-reviewed biodefense vaccine early 
development 
grants for the Marburg virus, botulinum toxin, viral encephalitis viruses, and 
small pox, as well as grants against SARS and pandemic influenza.  These six 
grants represent $38 million in total awards, not including clinical support 
funded separately by the NIH on some of the programs.  My company consists of 
70 people.
        BIO represents more than 1,100 biotechnology companies, academic 
institutions, 
state biotechnology centers and related organizations across the United States 
and 31 other nations.  BIO members are involved in the research and 
development 
of healthcare, agricultural, industrial and environmental biotechnology 
products
        I wish to preface my general remarks by noting that if it were not for 
Project 
Bioshield and the government's grant funding in this arena, my company would 
not 
be working on biodefense vaccine targets at all.  We have no sales and no 
profit:  the only money we have is money from people who believe we might be 
able to produce important new vaccines for diseases they are interested in.  
Biotechnology companies like mine have a limited amount of time, people, and 
money with which to show they can deliver on these expectations.  If they 
don't 
deliver, they can't attract investment capital, and they die.  If I were a big 
company with my own sales and profits, I would have a little more leeway, but I 
would still be critically answerable to the expectations of investors and the 
capital markets.
        The intrinsic risks and costs of developing biodefense vaccines are 
not 
different from other vaccines the private sector invests in.  However, to 
justify working on biodefense vaccines, the private sector - big company or 
small - must ask itself additional questions before pursuing countermeasures:	
        * Is the potential market big enough to be attractive?
        * Are the risks no greater?
        * Are the costs subsidized or covered?
        * Are there technical or financial leverages that advance the 
                technology?
If the answer to these questions are negative or absent compared to other 
opportunities, companies won't participate.
        As we consider the progress to date in medical countermeasure 
development and 
the actions needed to improve preparedness, we must recognize the enormous 
challenges and the successes to date.  The magnitude of the public-private 
partnership necessary to protect the nation from bioterrorist and pandemic 
threats is unprecedented in the area of biopharmaceutical development.  This 
is 
an enormous task for the Department of Homeland Security (DHS) and the 
Department of Health and Human Services (HHS) and its agencies, and much hard 
work by dedicated individuals was needed to build the initiative from the 
ground 
up several years ago.  These efforts and accomplishments must be recognized.  
HHS has contracts underway for vaccines for anthrax and countermeasures for 
acute radiation syndrome and other radiological indications.  Over 180 million 
doses of a smallpox vaccine have been delivered to the Strategic National 
Stockpile.  Additionally, NIH, through NIAID, has issued numerous grants for 
millions of dollars that have been essential to spur early stage research in 
biodefense products.  Grants have also been issued to foster the construction 
of 
biosafety containment facilities necessary for the research and development of 
countermeasures for harmful pathogens.  Dedicated personnel from many agencies 
have devoted countless hours to this effort in national security.  
        However, as important as these contributions have been, more must be 
done.  
Essential enhancements to the commitment of a public-private partnership are 
necessary to enable the successful development of biodefense and pandemic 
countermeasures.  The urgency of timing must be reinforced.  As a nation we 
have 
faced a heightened threat of terrorist attacks, and the threat of an influenza 
pandemic and news of the spread of avian influenza grows each day.  We must 
approach these reforms with a recognition that we currently do not have nearly 
enough vaccine and therapeutics to protect all Americans from a pandemic.  
With 
this in mind, I would like to offer perspectives on three key areas of need:
        * Clear and predictable identification of needs that are developed in 
a public/private partnership with dialogue.  
        * Strong leadership and coordination.
        * Strong and predictable funding that addresses both development and 
acquisition of critical medical countermeasures.
        In order to understand what changes are necessary to better engage 
industry in 
the development of medical countermeasures, an understanding of the factors 
that 
affect the drug development process is helpful.  The development process for 
drugs and biologics is complex, time-consuming, and costly.  It often involves 
many partners through different stages, and it includes a number of 
complicated 
intellectual property and licensing agreements.  The development of a 
biopharmaceutical product can cost tens or hundreds of millions of dollars and 
take years from initial research to commercialization.
Companies interested in drug development typically engage in sophisticated 
market analysis to assess what demands exist for products before engaging in 
costly and time-consuming research and development.  An understanding of the 
market is important not just at the time of manufacturing and sale - it is a 
critical component that drives risk assessments through the product 
development 
cycle.  Because the costs of drug development generally increase substantially 
as the product moves from one phase to the next, careful risk assessments are 
made during all phases of development.  It is a reality that the stability and 
robustness of the final market is a key determinant in these risk assessments 
and the viability of product development.  
        Understanding of the final market includes information on volume of 
demand and 
economic factors.  But important technical considerations are also 
incorporated 
into the development cycle.  For example, the mode of administration, dose and 
formulation requirements, and shelf-life requirements are important factors in 
product development.  Uncertainty in these specifications, or a change late in 
the development cycle, can have a profound impact on risk assessments, and 
ultimately the time and cost of development.  It is also important to 
recognize 
that even with clear market needs, few products move from early development to 
licensure without some technical changes.  This is expected, as a goal of 
advanced development is to optimize the product for the best effectiveness and 
safety.  
        While these considerations exist for all biopharmaceutical 
development, 
biodefense and pandemic products face heightened challenges.  The government 
will generally be the only or primary purchaser, and thus will set the market 
demands.   Lack of clarity and stability of government requirements translates 
directly to lack of clarity and stability in development goals.  This in turn 
has a direct impact on whether or not companies can step forward and 
contribute 
the expertise of the private sector.   
        Biodefense and pandemic products also face increased risks for 
liability claims, 
so liability protections and an injury compensation program are necessary to 
spur industry to participate in these challenging markets at the government's 
request.  These products will likely be administered in the face of an 
emergency 
to otherwise healthy individuals.  Companies must be assured that they will 
not 
face financial ruin due to unforeseen and unavoidable adverse reactions.  The 
Public Readiness and Emergency Preparations Act (PREP Act), passed as part of 
the 2006 Defense Appropriations Act, provides responsible liability 
protections, 
coupled with a compensation program for those injured by medical 
countermeasures.  It is important to note that liability protections are 
necessary to enable all stages of development - not just final sale of 
product.  
Small companies must attract investors and capital to move products through 
the 
development cycle.  The ability to attract such capital is severely 
constrained 
if strong, responsible, and stable liability protections are not in place.
        Bearing in mind these factors that influence biopharmaceutical investment 
decisions and the competition for investment dollars, there are a number of 
critical and inter-dependent areas that need to be addressed.  Incentives must 
be in place to both engage and sustain industry participation in this 
important partnership.   
        First, we need clear and predictable identification of needs that are 
developed 
in a public/private partnership with dialogue and coordination.  A predictable 
demand is needed to allow companies to consider and assess their ability to 
enter this market.  Without this, the ambiguity and uncertainty will cause 
investment dollars to be directed to other efforts.  As noted earlier, 
effective product development requires an understanding of the end goal.  
        To date, there have been only a handful of material threat assessments 
that have 
resulted in requests for proposals (RFPs) and acquisitions.  There have also 
been instances where expected needs were dramatically reduced upon 
solicitation 
of a contract.  Lack of clarity and predictability of technical requirements, 
such as expiry dating and filling and storage requirements, can further 
frustrate planning and execution.  This creates uncertainty in the market, and 
severely challenges business planning necessary for commercialization of 
countermeasures.  Demand drives the product development process, and realistic 
requirements, developed with dialogue with industry, need to be incorporated 
early into the drug development process.  Countermeasures cannot be developed 
in 
the absence of clear and reliable articulation of needs and commitments to 
purchase successfully developed products.  
        To enable an effective public/private partnership, requirements should 
be 
developed through dialogue with industry.  It is essential that industry and 
government have a shared understanding of objectives, and that purchase 
solicitations are developed in a framework that addresses the complexities of 
the biopharmaceutical industry and contain the appropriate level of 
specifications and delivery terms.  
        Second, strong leadership, coordination, and sufficient funding and 
flexibility 
in staffing are essential to success.  The public/private partnership required 
for successful countermeasure development includes numerous government 
departments and agencies, each playing a key role in the process.  The 
objectives and requirements of the various agencies must be aligned and 
coordinated with solicitation terms and must be part of the early dialogue.  
These activities include funding for early and late stage research and 
development, regulatory support, and contract management.  For example, 
production and delivery of products are inherently affected by regulatory 
requirements.  The expectations of regulators for licensure and emergency use 
authorization should be coordinated with the contract terms.  Ambiguous, 
additional and unforeseen requirements that arise outside of contract terms 
magnify companies' financial risk.  Strong and clear leadership is required to 
coordinate the many agencies and objectives.  
        Also, the challenges and complex nature of countermeasure development, 
coupled 
with the urgent need to prepare, require that critical staff level positions 
be 
adequately funded and staffed.  In order to sufficiently expedite the 
procurement processes, HHS needs sufficient resources.  Flexible hiring 
authorities can also help ensure that key positions are staffed with expertise 
and understanding of the biopharmaceutical industry and the functioning of 
both 
small and large companies.  In order for a true public/private partnership to 
succeed, both sides must be resourced to rapidly address the full array of 
development issues with experienced judgment to reach effective, expeditious 
outcomes.
        Third, the funding for biodefense and pandemic countermeasures must be 
strong 
and consistent, and should recognize the shared-risk of a public/private 
partnership.  A comprehensive preparedness strategy is needed that addresses 
the 
various threats for which we must prepare, and sufficient funding to achieve 
their commercialization.  Potentially life-saving products are at risk of 
dying 
in the gap between the ``push'' of early stage development and ``pull'' of 
commercialization - a gap referred to as the ``Valley of Death".
        Shared risk in advanced development should be incorporated into the 
funding 
plans, as it is another important element of a successful public/private 
partnership, and critical to bridging the ``Valley of Death".  
Biopharmaceutical 
development is inherently risky, and as noted earlier, costs go up 
significantly 
through each development phase.  Because of this, companies carefully evaluate 
investment decisions at each phase.  Important products for biodefense and 
pandemic preparedness may not survive these risk calculations without 
sufficient 
government partnering and transparency in interactions with government 
entities. 
        In non-biodefense/non-pandemic markets, in which there is a ``natural'' 
market for 
products without government participation, venture capitalists, partnering 
companies, and company equity are vehicles used to fuel the development of 
these 
expensive phases based on marketing and risk-assessment forecasts.  It is very 
difficult to attract and justify these vehicles for biodefense and pandemic 
products in the absence of a predictable and robust market.  Even with clear 
and 
predictable identification of government needs, the reality is that the 
overall 
market for many of these life-saving products that are essential to national 
security may be relatively small.
        Because of this, many promising technologies stall in early and 
mid-stage 
development, not due to technical failure, but because the market ``pull'' is 
not 
sufficient.  Again, it is important to recall that biodefense and pandemic 
countermeasures must compete for investment dollars that can be directed to 
other markets.  Funding of advanced development to bridge the ``Valley of 
Death'' 
is a key element in a successful and meaningful effort to produce 
countermeasures essential for our national security.
        The comprehensive strategy should include an appropriate array of 
diagnostics, 
preventatives, and therapies against threat agents.  Research tools that 
facilitate our understanding of targeted pathogens and facilitate product 
development are also an important component of a comprehensive strategy.  
The task before us is large.  Prior to the events of 9/11 and the subsequent 
anthrax attacks that fall, there was no significant demand for biodefense 
products for the civilian population.  Facing the growing threat of an 
influenza 
pandemic, based on our current vaccine technology and manufacturing 
capabilities, we are currently simply unable to produce enough vaccine for all 
Americans.  The good news is that with sufficient investment, promising 
biotechnologies in development offer potential advances in multiple 
dimensions.  
New recombinant and cell-culture vaccine technologies have the potential to 
greatly enhance capacity and production efficiencies.  New antivirals are 
being 
developed with the potential to treat multiple strains of influenza, and 
diagnostic tools are in development to rapidly detect bioterrorist agents and 
pandemic strains and allow for faster response and containment efforts.  
        When considering the cost of funding countermeasure development and 
purchase, 
full consideration must be given to the cost of not making this investment 
- in 
terms of lives, health, and economic costs.  For example, economists from the 
CDC have estimated that the impact of a pandemic in the United States could be 
90,000 to 200,000 deaths, hundreds of thousands of hospitalizations, and tens 
of 
millions of outpatient visits and illnesses.  They estimate the economic 
impact 
in our country could be between $71 billion to $166 billion - excluding 
disruptions to commerce and society.1  A World Bank leading economist 
estimated 
that the worldwide cost of an influenza pandemic could be $800 billion, with 
$550 billion of this affecting industrialized nations.2  The costs to life, 
health, and the economy could be overwhelming, and these staggering numbers 
don't express the societal challenge of recovery.  
        Additionally, the public health synergies of investing in robust 
anti-infective 
and diagnostic markets must be recognized.  If a pandemic does not arise or a 
bioterrorist event does not occur by a certain date, our investments should 
not 
be considered misguided.  These investments should be viewed as a pathway to 
securing our future and assuring that the United States will be poised to deal 
with future threats.  In addition to responsibly preparing for public health 
emergencies and national security, new technologies and manufacturing and 
infrastructure capacities fostered through these efforts will likely yield 
public health benefits in other infectious diseases that face market 
challenges. 
        Investments are also needed in animal models and other research tools.  
Pandemic 
and biodefense countermeasure development is characterized by constraints on 
human efficacy trials, tight controls of pathogen agents, and rapid changes in 
potentially pandemic strains.  Because of this, the development of knowledge 
and 
tools that will allow us to anticipate, approximate, and characterize the 
agents, and model the effects of the agents and their countermeasures in 
humans, 
is an essential part of pandemic and biodefense preparedness.  In addition to 
animal models, investments in assay development and standardization, 
correlates 
of protection, predictive toxicology, host response, and other tools are an 
important part of an effective countermeasures program.  As with the 
countermeasures themselves, the market for research and diagnostic tools in 
this 
area has generally been too uncertain and too small to warrant any significant 
investment by commercial firms. 
        In conclusion, enactment of the modest reforms outlined above will spur 
bioterrorism and pandemic countermeasure development more than is the case at 
this moment.  Because of Project BioShield, more companies like mine are now 
doing research into these countermeasures.  Without reform, however, clarity, 
coordination, and predictable commitment within the government will still be 
lacking.  Without reform, many companies will find themselves in the Valley of 
Death, unable to bring their ideas from the bench to the bed, and many others, 
both big and small, will stay on the sidelines. 
        Once again, thank-you for the opportunity to testify before the 
committee today 
on behalf of BIO.   BIO and its member companies are committed to addressing 
the 
public health needs of the Nation and look forward to working with this 
Committee to address these priorities as potential legislation moves forward.  

	MR. DEAL.  Thank you.  Mr. Cohen?
        MR. COHEN.  Thank you.  Mr. Chairman and members of the committee, I 
would like 
to thank you for giving me the opportunity to speak to you today.  I would 
also 
like to thank Congresswoman Eshoo for her long history in support of the 
biotechnology industries, commitment to innovation, job creation, and 
improvements to our Nation's health.  I am the CEO of Cellerant Therapeutics, 
an 
early stage biotechnology company based in California, and we are developing 
novel adult stem cell-based therapies for cancer and genetic blood disorders 
like sickle cell disease and autoimmune disease.  I am here today to talk to 
you 
because one of our programs in preclinical development is being developed also 
for acute radiation syndrome, the principal effect on humans that is likely to 
result after a nuclear terror attack.  We know from our experience at 
Chernobyl 
what happens to people who are exposed to lethal doses of radiation, and we 
are 
learning through our treatment of people who are being treated for 
chemotherapy 
and radiation how to deal with those consequences.
	At Cellerant, we are developing a program that is designed to be a 
bridge 
therapy for people to control the opportunistic infections and the bleeding 
implications of radiation exposure, and through support from NIH and our 
investors, we have developed a novel product that, through peer review 
research, 
seems to indicate that it will rescue a substantial number of civilians, that 
it 
is stable over a long term in a frozen state, that can be infused by trained 
medical technicians, and most importantly, that can be administered four to 
seven days after exposure.  If we learn nothing else from the experience with 
Hurricane Katrina, we know that we need a lot of time to get to people after a 
mass casualty situation.
	I would like to focus specifically on the valley of death, as my 
colleagues have described the gap between NIH and Project BioShield funding 
that 
affects our ability to do process development, commercial scale-up, and 
clinical 
trials.  The valley of death makes it difficult for us to raise capital and 
there are three instances of Catch 22 I would like to outline to you.  The 
first 
is that without human data, you cannot compete for BioShield contracts, but 
there are no funding mechanisms today to support clinical trials for these 
agents.  The second is many agents like ours have novel manufacturing problems 
because they are human cell derived, but there is no support for process 
development in the current legislation.  In the third, as is evidenced by the 
current HHS request proposals, is that you can't get paid until after you 
produce the drugs and no one in our state can afford to take that financial 
risk.  It makes the program a nonstarter.
	The irony of the situation is that many of the incentives in BioShield 
are 
for big pharma, but big pharma has little interest in these programs because 
the 
markets aren't large enough for them.  Small companies are different, and we 
have different needs.  Adding as few as ten people is an agonizing decision 
for 
a company of my size, and we can't afford to take the risk without government 
support.  Our investors place a huge premium on our ability to get modest 
grants 
from the Federal government that reduces the risk for other investors, it 
helps 
us manage our cash, and it provides scientific validation for other investors. 
For us, big supply contracts are unimpressive because it is not clear we will 
ever see that money.
	There are solutions to the current situation.  Specifically, we 
recommend 
that the Government find a way to fund the valley of death, the ability to 
process development, scale-up, and clinical trials that exist between NIH and 
HHS, and to reduce the risk of the uncertainty associated with some of these 
very large supply contracts.  We think the grant process can be streamlined, 
as 
it has in other parts of the Government, and that we can learn how to rely on 
peer-reviewed published data showing animal efficacy as a basis to fund 
clinical 
trials.  We can involve the FDA in that process, and they have been terrific 
in 
this regard thus far.  We can follow some of the examples from DARPA in its 
ability to provide a commitment to funding, provided milestones are met.  And 
I want to make a point about that.
	In our business, a lot of our funding is based on milestones.  We get 
commitments from investors subject to our ability to deliver, and we think the 
Government should follow that model rather than make us continuously compete 
for 
small grants.  If we could get up-front commitments subject to milestones, our 
scientists could focus on doing research instead of writing grant 
applications.  
It will allow us to leverage the money from the Government and go out and 
raise 
private capital, and it would align our interests with those interests of the 
country.  We are not asking for handouts.  There is plenty of capital 
available 
for products that have large commercial opportunities.  What we are asking for 
is very modest support to advance programs for the national stockpile.
	Business as usual isn't working.  The need is urgent, the time is 
short, 
and the capacity of our industry is there.  We have the resources and we have 
the talent.  What we need is the will to make the required changes to the 
current system so that we can make rapid progress in fulfilling the Nation's 
need.  Thank you very much.
	[The prepared statement of Bruce Cohen follows:]

PREPARED STATEMENT OF BRUCE COHEN, PRESIDENT AND CEO, CELLERANT THERAPEUTICS, 
INC.

                      Summary of Prepared Testimony:
        Cellerant Therapeutics, Inc. has a preclinical product, CLT-008, that 
is being 
developed for civilian applications for the treatment of infections and 
neutropenia due to radiation therapy and chemotherapy. It also possesses 
characteristics that make it suitable as a treatment for Acute Radiation 
Syndrome after a nuclear terror incident:
        * It is a safe, universal, off-the-shelf cell based medicine;
        * It can be stored frozen in the Strategic National Stockpile for at 
least 10 years;
        * It can be deployed to the site of disaster in high density cold 
storage;
        * It can be administered up to 7 days post-exposure and still be 
effective; and
        * It can be easily administered to patients by intravenous infusion.

        Cellerant has received some modest NIH grant funding to support the 
development 
of CLT-008 for biodefense, but has identified three major issues with the 
current implementation of Bioshield:
(1)	Project Bioshield (current law) does not provide specific funding 
mechanisms for scale up, process development and clinical trials.
(2)	The current system does not provide sufficient incentives for small, 
private companies and seems to favor large corporations.
(3)	Current law does not encourage innovation.

        Cellerant suggests the following solutions:
(1)	Authorize funding, through an existing or new agency, to address pre-
clinical scale up and cost reduction: the current ``Valley of Death'' for 
Bioshield product development.
(2)	Authorize a new or existing agency to fund human safety trials for 
countermeasures being developed for Bioshield.
(3)	Establish an improved formal mechanism, other than SBIR, for funding 
small 
companies engaged in biodefense research and product development.

        Good afternoon and thank you for the opportunity to testify before the 
Subcommittee today.  My name is Bruce Cohen, and I am the President and Chief 
Executive Officer of Cellerant Therapeutics, Inc., a clinical stage 
biotechnology company developing adult stem cell based therapies for cancer, 
genetic blood disorders and autoimmune disease.  I am presenting this 
testimony 
because one of our pre-clinical products is also being developed as a 
universal 
counter-measure to improve survival and treat Acute Radiation Syndrome 
resulting 
from a nuclear terror incident. While the devastation of such an attack is 
difficult to contemplate, it is incumbent upon us to develop strategies that 
can rescue as many victims as we possibly can.
        Radiation is an important therapy in the treatment of various cancers. 
Doses of 
chemotherapy and radiation that damage the blood-forming and gastrointestinal 
systems are frequently employed in the treatment of cancers or preparation for 
hematopoietic cell transplantation. Our product, CLT-008, is a cultured 
myeloid 
progenitor cell product that we have developed to address a pressing need in 
medicine - patients with compromised immune systems as a result of 
chemotherapy 
and radiation treatments. Despite advances in medical care, these patients are 
highly vulnerable to infections and internal bleeding with a significant risk 
of mortality. 
        From a medical perspective, these patients are very much like those we 
would 
encounter in the aftermath of a nuclear terror incident such as an attack on a 
nuclear power plant or the detonation of a nuclear weapon smuggled in a 
container vessel. Much of what we know about the impact of radiation on 
civilian 
populations is based on our experience at Chernobyl. Depending upon the dose 
of 
radiation to which a person is exposed, a variety of medical problems can 
ensue 
with serious organ involvement, described generally as Acute Radiation 
Syndrome, 
the precise manifestations of which will be highly variable and dependent on 
the 
nature of the exposure. The most therapeutically addressable manifestation of 
ARS is known as hematopoietic syndrome, in which the blood-forming and immune 
system is damaged.  Following a nuclear terror incident, civilians and first 
responders would receive doses of radiation that would profoundly damage their 
blood-forming and immune systems to the extent that they would not be able to 
resist common infections or recover from internal bleeding. Even temporary 
failure of the blood-forming and immune system without adequate medical 
support 
can be lethal, especially in a mass casualty setting.
        Our extensive studies in preclinical animal models of lethal
irradiation have 
been published in peer-reviewed scientific journals and predict that our 
product, CLT-008, will be capable of rescuing a significant number of victims 
of 
nuclear terror.  Our studies suggest that CLT-008 protects against lethal 
infections and can be administered 4-7 days after radiation exposure. Decades 
of 
clinical experience in cell cryopreservation and infusion predict that our 
product will be stable in frozen vials for as long as 10 years, making it 
suitable for inclusion in the Strategic National Stockpile. CLT-008 can be 
infused by any medical technician trained in the administration of intravenous 
infusions. Our product offers the potential for a bridging therapy, providing 
victims with temporary immune competence for 30-45 days, allowing them time to 
seek more durable treatments when the situation becomes more stable.
        No other pharmaceutical product, whether approved or in development, 
is able to 
permanently or temporarily reconstitute the immune system to the degree 
necessary to rescue large numbers of civilians, first responders, or 
warfighters.  Of the limited number of products proposed, most would have to 
be 
given before or immediately after exposure, something that is unlikely to be 
practical in the event of a catastrophic nuclear terror incident.  Most 
medical 
experts agree that orally-available drugs are unlikely to be effective in 
restoring an immune system which has suffered profound damage from radiation.  
Cell-based medicines, like the one we have under development, hold the promise 
of being able to rescue large numbers of otherwise lethally irradiated 
victims, 
in a timely manner and with the limited medical capabilities that are likely 
to be available in the aftermath of a nuclear terror event.
        Our experience with the U.S. Government in developing this product as 
a counter-
measure to nuclear terror has been mixed.  We have been awarded modestly 
sized, 
peer-reviewed research grants from the NIH.  However, we have been frustrated 
by 
the limitations of the current system in its ability to support the next stage 
of development - confirmation of safety and efficacy in humans.  I would like 
to 
outline the limitations of the current system and suggest some alternatives.

(1)	Project Bioshield (current law) does not provide specific funding 
mechanisms for scale up, process development and clinical trials.
        While it is technically possible under existing law for the NIH to 
fund projects 
related to commercial scale-up, process development aimed at cost-reduction, 
and 
the initiation of human clinical trials, grant mechanisms to support this 
activity for private companies do not exist or are extremely limited in scope.  
The NIH peer-review grant process has been an extraordinary contributor to the 
advancement of science and medicine in the U.S., but it has not focused on 
translating those discoveries toward commercial applications in the private 
sector.  For most medical products, this is appropriate, as the pharmaceutical 
industry, venture capital community and public investors have been able to 
make 
the necessary investments that have made the U.S. the world's leader in 
biotechnology.  However, those sources of capital are not available for the 
development of medical products whose primary customer is the U.S. Government 
through Project Bioshield acquisition.  Typical private investors will not 
assume the risk of doing business with the Government, specifically making a 
large investment in research without a firm commitment to make the contemplated 
purchase.
        Since the current Bioshield program does not allow the Government to 
enter into 
contracts with companies until they have shown human safety and have a 
defined, 
and cost-effective manufacturing process, companies like Cellerant find 
themselves in the Valley of Death.  That is, we do not have adequate financial 
resources to move our pre-clinical programs aggressively into human clinical 
trials, but without the results of those trials, we cannot compete for 
contracts 
under Project Bioshield.  In addition, to the extent we are developing novel 
agents that have not previously been manufactured, we are likely to have 
production economics that will make the purchase contract unattractive, either 
from the Government's perspective of total cost or the company's perspective 
of 
generating an adequate return on investor capital.
        This Valley of Death funding gap means that, in our case, we have had 
to slow 
development of our product in accordance with our ability to raise venture 
capital based on a non-Government application of our technology.  That funding 
is available, but it takes an enormous amount of time and effort, and our 
investors are not prepared to have us use their capital for a program whose 
financing is beyond the control of the commercial pharmaceutical market.

(2)	The current system does not provide sufficient incentives for small, 
private companies and seems to favor large corporations.
        The current Bioshield program is biased toward the purchase of 
products which 
have been developed and approved for other reasons and which are being re-
directed toward biodefense countermeasures.  For example, the currently 
pending 
Bioshield nuclear countermeasure acquisition offer from HHS requires that 
eligible contractors manufacture a minimum number of doses prior to being paid 
by the Government.  That is practical for a product which already has a 
defined 
commercial market, since the inventory could be used for other purposes in the 
event the Government decides not to complete the purchase.  For an innovative 
product like ours, which has higher manufacturing costs, the risk of producing 
a 
large lot with no guaranteed buyer is unacceptable.  That risk may well be 
borne 
by a larger company with greater capital resources, but it discourages small 
companies from competing.
        The irony of the current system that seems to favor large companies is this:  
for most large pharmaceutical companies, the economics and market potential 
associated with producing biodefense products do not justify the commitment of 
significant resources, because their investors are expecting the development 
of 
blockbuster products and do not value the financial impact of a Government 
contract. For emerging biotech companies, what appears to be a relatively 
small 
market to a larger company may well be considered a substantial business 
opportunity.  In addition, investors in biotech companies highly value the 
award 
of even a modestly sized contract because it is significant relative to the 
company's cash requirements and because it is seen as a form of scientific 
validation.  Small companies are also more efficient in developing innovative 
new medical therapies, particularly for specialty applications.


(3)	Current law does not encourage innovation.
        Innovation comes from taking a fresh look at a problem and leads to 
the 
development of novel entities.  The current process unfortunately encourages 
derivative development, i.e., finding new uses for old inventions.  Thus, it 
becomes quite practical for a company to identify a new indication for an 
established drug (e.g., Ciprofloxacin as a treatment for anthrax), but the 
current rules do not encourage small, innovative companies to challenge 
current 
thinking, create novel paradigms, and make therapeutic breakthroughs.
        In our domain, adult-derived cell therapies, we have a very different 
approach 
to the development of medicines.  Our products are based on human cells. The 
science behind our approach has been translated into clinical practice for 
more 
than 40 years with relatively low risk for toxicity.  However, cell-based 
therapies uniformly incur high manufacturing costs since they are derived from 
human source material and must be processed in controlled environments.  We do 
not enjoy conventional pharmaceutical economics where the cost of the product 
itself is relatively modest compared to the cost of research and development.  
Both (a) the inability of the Government to fund research related to cost-
reducing the manufacture of cellular medicines and (b) the procurement 
policies 
related to the need to produce numbers of doses prior to getting paid make it 
very difficult for innovative approaches to succeed.  Successful translation 
of 
scientific innovations to protect us from the medical consequences of nuclear 
attack requires innovation in the funding mechanisms.

We believe that there are a number of solutions to the problems that we and 
others have encountered.
(1)	The first solution would be to specifically authorize funding to 
address 
the Valley of Death.  The Government, either through a new agency, the NIH, or 
HHS/Bioshield, should be able to enter into non-competitive contracts for the 
achievement of very specific tasks, relating to the nation's priorities in 
national defense, for pre-clinical scale up for promising products that have 
demonstrated potential based on peer-reviewed animal experiments.  Competitive 
review is appropriate for early stage work, where it is not possible to 
determine the probability of success except with highly trained peer 
reviewers.  
However, the rigor of a well established academic and private sector 
peer-review 
process, as evidenced by publications in major journals or presentation at 
recognized national meetings, can be used to accelerate programs which have 
already demonstrated scientific and clinical merit.  There is no need to delay 
the award of contracts for the achievement of very specific purposes by 
insisting on a prolonged scientific competition.
(2)	The second solution would be to direct, not simply authorize, a new or 
existing agency to fund human safety trials for products being developed as 
priority biodefense countermeasures, particularly nuclear countermeasures.  
While such authority technically exists within current authorities throughout 
HHS and DOD, a Congressional mandate to address this key element of the Valley 
of Death would encourage innovation and ensure the participation of smaller 
companies.  The Government could easily put into place the necessary controls 
and require the concurrence of the FDA as to the readiness of the product for 
human trials, a rigorous process that has served the industry and our country 
quite well.  
(3)	The third solution would be to establish an improved formal mechanism 
for 
funding small companies engaged in biodefense research and product 
development. 
The limitations with the current SBIR program, including the relatively low 
level of funding provided in the first year and the modest levels provided in 
additional years, make this program an inefficient and time-consuming 
mechanism 
for funding research to address urgent and potentially catastrophic terror 
events.  One such option would be to provide promising technologies with 
multi-year commitments that would be subject to the completion of specific 
milestones, 
in much the same way as private investors commit capital contingent on 
technological achievements being met.  This would make the grant programs more 
attractive because the promise of milestone-driven funding would then justify 
the expense and time associated with grant preparation, provided, of course, 
that the technology proved to be valuable.

        Throughout the country, there are academic and commercial enterprises 
that have 
access to extraordinarily talented people and ideas.  A modest investment by 
the Government, coupled with the relaxation of a few counter-productive 
restrictions 
would unleash this capacity and provide the nation with the ability to respond 
to an event of unimaginable consequences.
        Thank you again for the opportunity to testify today. I would be 
pleased to answer any questions you may have.

	MR. DEAL.  Thank you.  And Dr. Wright?
DR. WRIGHT.  Thank you, Mr. Chairman.  For the record, it is Dr. Wright.  Mr. 
Chairman, members of the committee, I welcome the opportunity to testify on 
behalf of the Alliance for Biosecurity and commend this committee for its 
focus 
on the vital issues of biosecurity and the Project BioShield legislation.  I 
am 
David Wright, Co-Chair of the Alliance for Biosecurity, President and CEO of 
PharmAthene, a biotech company focusing totally on biodefense.  The Alliance 
for 
Biosecurity is a consortium of 12 biotechnology and pharmaceutical companies 
committed to promoting a new era in the prevention and treatment of severe 
infectious diseases, particularly those that present global security 
challenges, 
through innovative and accelerated research and development and through 
production of countermeasures.
	The majority of medicines and vaccines needed to protect our citizens 
during attack does not now exist, and creating a robust biodefense 
infrastructure and pipeline of countermeasures simply cannot be accomplished 
overnight.  The modest number of companies now working on biodefense projects 
are increasingly unlikely to continue to invest in this challenging area, 
absent 
strong new biodefense legislation that supports and facilitates countermeasure 
development and production for our strategic national stockpile.  For these 
reasons, we urge you to support passage of focused and strategic biodefense 
legislation this year.
	On behalf of the Alliance, I would like to discuss three key areas.  
First, clarity in establishing a central authority is necessary.  Currently, 
there is a littering away of agencies and overlapping conflicting authorities 
over biosecurity.  A biodefense structure that streamlines decision-making and 
identifies a clear point of accountability within the Government is urgently 
needed.  The Alliance supports a restructuring of the current process that 
creates a clearly identified centralized biodefense authority.  The 
centralized 
authority should coordinate with NIH to identify and prioritize early 
countermeasure development, fund advanced development of promising 
countermeasures, the period which has been referred to here as the valley of 
death, and oversee all strategic national stockpile procurement.
	Second, building a partnership between the Government and industry is 
a critical component to the success of Project BioShield.  The development of 
bioterror countermeasures is a very risky endeavor, even more risky, in fact, 
than traditional pharmaceutical development for several reasons.  There is 
only one customer, the U.S. Government.  Procurement funds are limited, and 
only one 
or a limited number of products per category will actually be purchased.  It 
is 
therefore crucial that DHHS outline publicly its priorities across all 
countermeasure targets and estimated timelines for procurement.  We urge DHHS 
to 
actively communicate with companies and to include industry thoroughly and 
often in the process.
	Finally, a real commitment to fund biosecurity is paramount.  The 
current 
reserve fund of $5.6 billion established under Project BioShield is 
insufficient 
to address all but a few of the pressing biological threats.  Industry is 
looking to Congress and the Administration to signal that biosecurity 
preparedness is a national security priority justifying a considerable 
commitment by industry.  In order to do this, a major paradigm shift is needed 
in how our Nation thinks about defense against emerging infectious diseases 
that 
have the potential to be significant and destabilizing.  We urge this 
committee 
to champion a level of funding for countermeasure development that is 
commensurate with the magnitude of the national security threat and 
corresponding requirements.  Sufficient, sustained funding is absolutely 
critical to the success of Project BioShield.
	In summary, developing a central authority for biosecurity, improving 
cooperation and communication between the Government and industry by forming a 
real partnership, and committing the necessary funding to make meaningful 
scientific and commercial progress are each practical recommendations for 
improvement.  On behalf of the Alliance for Biosecurity and its member 
companies, I respectfully submit these recommendations for your consideration. 
Thank you.
	[The prepared statement of Dr. David P. Wright follows:]

PREPARED STATEMENT OF DR. DAVID P. WRIGHT, PRESIDENT AND CEO, PHARMATHENE, ON 
BEHALF OF ALLIANCE FOR BIOSECURITY

        Mr. Chairman, Members of the Subcommittee: I welcome the opportunity 
to testify 
before you today on behalf of the Alliance for Biosecurity and commend this 
committee for its focus on the vital issue of biodefense and Project BioShield 
legislation.
        I am David Wright, Co-Chair of the Alliance for Biosecurity and 
President and 
Chief Executive Officer of PharmAthene, a biotechnology company specializing 
in 
the development and commercialization of biological and chemical defense 
countermeasures.  The Alliance for Biosecurity is a consortium that includes 
the 
Center for Biosecurity of the University of Pittsburgh Medical Center and 12 
biotechnology and pharmaceutical companies committed to promoting a new era in 
the prevention and treatment of severe infectious diseases -- particularly 
those 
that present global security challenges -- through innovative and accelerated 
research, development, and production of countermeasures.  The Alliance 
includes 
companies focused on infectious disease like GlaxoSmithKline, Chiron, and 
Pfizer.  Other member companies, such as Acambis, VaxGen, and BioPort have 
been 
successful in garnering contracts under Project BioShield and its precursor 
programs, while members like PharmAthene and other Alliance companies are 
poised 
to compete for new procurement contracts.  We believe that based on this 
considerable collective experience, the Alliance is well positioned to address 
lessons learned from current implementation of Project BioShield and assist in 
the development of solutions to improve the program going forward.  A list of 
our members appears at the conclusion of this testimony.
        Project BioShield was a critical first step in demonstrating the 
government's 
commitment to biodefense.  The Alliance applauds the commitment demonstrated 
by 
Congress towards this initiative as well as the hard work undertaken by 
government officials to implement a complex new program.  Now that the 
foundation has been laid, the Alliance believes that more targeted action, 
expanded public/private partnerships, and clear and accountable leadership is 
needed to provide the support and incentives necessary to develop the robust 
biodefense industry as envisioned in the original BioShield legislation.  The 
majority of medicines and vaccines needed to protect our citizens during an 
attack do not now exist, and creating a robust biodefense infrastructure and 
pipeline of countermeasures simply cannot be accomplished overnight.  The 
modest 
number of companies now working on biodefense projects are increasingly 
unlikely 
to continue to invest in this challenging area absent strong new biodefense 
legislation that supports and facilitates countermeasure development and 
production for our nation's Strategic National Stockpile.  For these reasons, 
in 
considering the reauthorization of certain provisions under the current 
Project 
BioShield Act, we urge you to support passage of focused and strategic 
improvements to this critical biodefense legislation this year. 
On behalf of the Alliance, I would like to discuss three key areas, which, if 
addressed, could significantly advance the biodefense market and the 
availability of critical countermeasures to protect the American people. 
  
* Clarity in Establishing a Central Authority 
        The first issue involves clarifying who is in charge and ensuring that 
the 
responsible Government agencies understand the intricacies and challenges of 
drug development.  Such a critical knowledge base should inform the 
Government's 
research, development and procurement decisions.  Currently, there is a 
bewildering array of agencies with overlapping and conflicting authority over 
biosecurity.  A biodefense structure that streamlines decision-making and 
identifies a clear point of accountability within the government is urgently 
needed.  The Alliance supports a restructuring of the current process that 
creates a clearly identified centralized biodefense authority.  The 
centralized 
authority should coordinate with NIH to identify and prioritize early 
countermeasure development, fund advanced development of promising 
countermeasures (the period sometimes referred to as the ``valley of death") 
and 
oversee all SNS procurement.  This central authority could also coordinate 
closely with DHS on the threat assessments.  It is absolutely critical that 
the 
new central authority be led and staffed by people who are knowledgeable about 
commercial drug development, including medicine and vaccine research and 
development, clinical testing, and manufacturing processes.  A major influx of 
personnel with expertise and experience in drug development would greatly 
improve the central authority's ability to work quickly and efficiently with 
industry to acquire needed countermeasures for our nation's stockpile.  
Ideally, 
such people would also have experience with biodefense drug development and 
some 
experience with non-clinical testing under the FDA's ``Animal Rule".
        These changes could be accomplished through, for instance, the 
establishment of 
the proposed Biomedical Advanced Research and Development Agency (BARDA) in 
Senate bill 1873 if it were explicitly given clear authority, or through other 
administrative mechanisms.  
In March, Secretary Leavitt indicated in testimony before the Senate his 
intention to restructure the Office of Public Health Emergency Preparedness to 
improve the efficiency of development and procurement of countermeasures.  He 
expressed a willingness to work with Congress on these changes and we strongly 
desire and hope he will reach out to industry as well.  I emphasize that we 
will 
only be successful in this endeavor if government and industry work together 
in 
partnership.  This brings me to my second recommendation:

* Building a Partnership Between Government and Industry 
        This is another critical component to revitalizing Project BioShield.  
The 
development of bioterror countermeasures is a very risky endeavor, more risky 
in 
fact than traditional pharmaceutical development for several reasons:  there 
is 
only one customer - the US government, procurement funds are limited and only 
one, or a limited number of products per category will actually be purchased.  
It is, therefore, crucial that DHHS work with industry to communicate in a 
transparent fashion its priorities across all countermeasure targets, 
estimated 
timelines for procurement, and expected procurement quantities.  We urge DHHS 
to 
actively communicate with companies and to include industry early and often in 
the process.  We wish to closely partner with government to accomplish our 
nation's biodefense goals.  The Alliance believes that improved information 
sharing and partnering between the US government and industry would result in 
more companies entering this market and better products that meet the 
government's specifications.  For example, the new centralized authority could 
improve communication with industry by:
* Instituting a consistent update mechanism (for example with a list serve or 
website) to alert industry to key activities - issuance of a new Material 
Threat 
Assessment or Determination, or an upcoming RFI, RFP or other notice.  
* Holding an annual or biannual Advance Planning Briefing to share information 
on current programs, identify new areas of interest, and seek industry 
partners.  DOD does this routinely.
* Allowing industry to present data on their technologies to inter-agency 
working groups.  The decision-making process for bioterror products is 
fragmented and involves many different agencies and departments.  DHHS should 
provide an opportunity for companies with promising technologies to regularly 
present products to the group and engage in a discussion with working group 
members.  These types of interactions would help industry to develop products 
that better meet the government's needs.
* Allowing industry access to data on relevant animal models.  Initiating 
research with the appropriate animal model(s) is a key factor in the success 
of 
drug development. It is also critical in the acceptance of company data by the 
FDA. Unfortunately, there is no direct mechanism to establish 
communication/relationships with US government scientists. Allowing 
communication between US government resources and companies developing 
products 
in this area will provide an opportunity for industry to more consistently 
design the animal studies, which are critical in determining efficacy. 
* Clearly identifying a lead/group/point of contact with specific 
responsibility 
for interfacing with industry on a daily basis.  Maintaining good relations 
and 
facilitating clear communications with an active and engaged industrial base 
is 
critical for the success of the BioShield program, now and in the future.  

* Commitment to Fund Biosecurity
        The final point I would like to address today focuses on the U.S. 
government's 
commitment to fund biosecurity.  The current reserve fund of $5.6 billion 
established under Project BioShield, to be used over a 10-year period, is 
insufficient to address all but a few of the most pressing biological threats. 
Potential public health disasters caused by exposure to known and emerging 
pathogens must be viewed as a pressing national security issue.  We know that 
the raw materials and scientific knowledge necessary to develop bioweapons are 
widely available.  The scale of social and economic disruption that would be 
caused by a bioterror attack could be unlike anything in recent US history - 
even the aftermath of Hurricane Katrina.  Yet, the current levels of funding 
for 
biosecurity do not match the threat.  Further, discussions among Alliance 
companies and DHHS officials indicate that after only two years into the 
BioShield program, the paucity of funding and limitations on how much can be 
spent annually is already adversely affecting the willingness or perceived 
ability of government staff to make procurement commitments and issue RFPs. 
        Industry is looking to Congress and the Administration to signal that 
biosecurity preparedness is a national security priority justifying a 
considerable commitment by the government. In order to do this, a major 
paradigm 
shift is needed in how our nation thinks about defense against bioterrorism 
and, 
at the same time, defense against emerging infectious diseases that have the 
potential to be significantly destabilizing.
        We urge this committee to champion a level of funding for 
countermeasure 
development that is commensurate with the magnitude of the national security 
threat and corresponding requirements.  Sufficient, sustained funding is 
absolutely critical to the success of Project BioShield.  Currently, the 
average 
chance for a drug that enters Phase I clinical trials to eventually be 
approved 
is about 8 percent; for cancer drugs, it is about 5 percent.  For companies to 
face similar odds in developing biodefense countermeasures, it is critical for 
them and their investors to feel confident that the government has defined and 
will support a reliable market for the procurement of the countermeasures.
        If additional direct funding cannot at this point be provided, we urge 
Congress 
to consider in biodefense legislation indirect incentives that could greatly 
increase the number of companies prepared to invest in countermeasure 
development.  Bioterrorism countermeasures are much like drugs intended for 
diseases that afflict very few people (so-called ``orphan'' drugs), in that 
neither class of medicine has a sufficient market to adequately encourage 
development.  Congress recognized that market-based incentives such as 
additional marketing exclusivity could provide an efficient means of 
encouraging 
drug development when it enacted the Orphan Drugs Act, and that Act has been 
successful in encouraging the development of new drugs for orphan diseases. 
In 
a similar way, other forms of incentives could be explored as a means of 
encouraging the development of bioterrorism countermeasures.  The Alliance is 
available to dialogue with the Subcommittee to explore such options.
        In summary, if we wish to create and maintain a biodefense industry 
that fosters 
innovation and investment by the private sector, then we must heed the lessons 
learned from current implementation and apply new solutions to the challenges 
posed by such a marketplace.  Developing a central authority for biosecurity, 
improving co-operation and communication between government and industry by 
forming a real partnership, and committing the necessary funding to make 
meaningful progress, are each practical recommendations for improvement.  On 
behalf of the Alliance for Biosecurity and its members, I respectfully submit 
these recommendations for your consideration.
Members of the Alliance for Biosecurity:
Acambis, Inc.
Caprion Pharmaceuticals, Inc.
Center for Biosecurity of the University of Pittsburgh Medical Center
Chiron Corporation
DOR BioPharma, Inc.
Dynport Vaccines Co., LLC, a CSC company
Emergent BioSolutions
GlaxoSmithKline
Human Genome Sciences, Inc.
Idenix Pharmaceuticals, Inc.
Pfizer Inc.
PharmAthene
VaxGen, Inc.

	MR. DEAL.  Thank you.  Dr. Blaser?
        DR. BLASER.  Mr. Chairman and committee members, thank you for 
inviting the 
Infectious Diseases Society of America to present our views.  I am Martin 
Blaser, President of the IDSA and Chair of Medicine and Professor of 
Microbiology at the New York University School of Medicine.
	IDSA is a national medical society representing 8,000 infectious 
disease 
physicians and scientists.  Today, we highlight the critical need for new 
drugs, 
vaccines, and diagnostics to detect, prevent, and treat naturally occurring 
infectious disease agents.  In particular, we highlight our patients' need for 
new antibiotics to treat resistant bacterial infections as this pipeline is 
rapidly drying up.  As this subcommittee considers reauthorization of the 
BioShield Act, IDSA urges you to strengthen the emphasis on products intended 
to 
be used against naturally occurring infectious diseases, including infections 
resistant to antibiotics.  We ask that you consider adding several new 
incentives to BioShield to spur the development of infectious disease 
products.  
BioShield guarantees a market, but to develop antibiotics for resistant 
organisms, we need broader incentives.
	In its 2003 report on the BioShield Act, the Energy and Commerce 
Committee 
linked natural conditions, including antimicrobial resistance in dangerous 
viruses, to natural security concerns.  The report stated, advancing the 
discovery of new antimicrobial agents to treat resistant organisms may well 
pay 
dividends for both national security and public health.  We agree.  In 2004, 
IDSA issued a report entitled ``Bad Bugs, No Drugs, As Antibiotic Discovery 
Stagnates, A Public Health Crisis Brews.''  Copies of that report are available 
here today.  Our report highlights that drug companies are withdrawing from 
antibiotic R and D.  As a result, the pharmaceutical pipeline simply is not 
keeping pace with drug-resistant bacterial infections.  Antibiotics have saved 
millions of lives for more than 60 years, however, without new R and D, we may 
soon be back in the dark ages of medicine.  Imagine a world without 
antibiotics; 
but that is where we are heading.  Companies have lost interest because 
antibiotics simply are not as profitable as drugs that treat chronic 
conditions.
	Most antibiotics are used for short durations and face restrictive uses to 
avoid the development of resistance.  Antibiotic-resistant infections have 
created a silent epidemic in communities and hospitals across the country.  
Methicillin staph aureus is crippling and killing a growing number of 
athletes, 
children, and military recruits.  Resistant bacteria can strike anyone; the 
young, the old, the healthy, and the infirm.  Resistant pathogens lead to 
higher 
healthcare costs in part because they require extended hospital stays.  The 
hospital care earlier this year for Bryce Smith, a 14-month-old toddler from 
San 
Diego, cost more than $800,000.  The total cost of antimicrobial resistance to 
the U.S. healthcare system was about $5 billion in 1998, according to the 
Institute of Medicine.  It is believed that true costs far exceed that amount 
today, since resistance is increasing.  Importantly, since 1998, FDA has 
approved only 13 new antibiotics, only two of which are truly novel.  In 2002, 
among 89 new medicines emerging on the market, none was an antibiotic.
	In addition to antibiotics, vaccines and diagnostics are needed across 
the 
spectrum of infectious disease medicines, including to address the growing 
threat of pandemic flu.  The impact of an influenza pandemic cannot be 
overstated.  The CDC estimates that between 100,000 and 250,000 U.S. deaths 
would result from a mild pandemic, and that 900,000 to two million Americans 
will die from a virus as bad as the 1918 virus.  Therefore, robust industry R 
and D programs are urgently needed across the spectrum of infectious disease 
medicine, but market forces alone are not sufficient.  This is why we need the 
Infectious Disease Research and Development Act, a bipartisan bill introduced 
by 
Representative Cubin last year.  IDSA strongly endorses this bill and is 
particularly grateful to Representative Cubin's leadership.  We encourage the 
committee to consider this bill as it moves forward to reauthorize Project 
BioShield.
	The Cubin Bill will establish a commission to identify the most 
dangerous 
infectious disease pathogens and their associated diseases.  Based on the 
commission's recommendations, several incentives would be used to spur 
development of new antibiotics, antivirals, diagnostic tests, and vaccines.  
Until the commission gets up and running, the incentives outlined would be 
available immediately to spur products to use against MRSA, acinetobacter, a 
bacteria that has caused wound infections and hospitalized patients, and 
wounds 
in U.S. soldiers in Iraq, and against influenza.  The Cubin Bill includes a 
number of incentives for qualified products, including full restoration of 
patent terms to account for the time lost during FDA review; and a tax credit 
for facilities used to manufacture, distribute and for R and D, allowing 
manufacturers to take a tax credit on research expenses.
	We also encourage the subcommittee to consider three other incentives: 
providing an FDA priority review voucher to companies that obtains an approval 
for a qualified product; extending the patent term on qualified products for 
two 
years or even six months.  We recommend strengthening CDC's Antimicrobial 
Program by doubling its budget in fiscal year 2007 to $50 million so it can 
better lead our Nation's response to antimicrobial resistance.
	In conclusion, we cannot take a business-as-usual approach.  The bad 
bugs are not waiting and neither should we.  The IDSA appreciates the 
opportunity to testify today and to work with your committee.  Thank you.
	[The prepared statement of Dr. Martin Blaser follows:]

PREPARED STATEMENT OF DR. MARTIN BLASER, PRESIDENT, INFECTIOUS DISEASES 
SOCIETY OF AMERICA

        Chairman Deal, Ranking Member Brown and Members of the Subcommittee, 
thank you 
for inviting the Infectious Diseases Society of America (IDSA) to present our 
views on how best to strengthen Project Bioshield as the Subcommittee 
considers 
its reauthorization.  I am Dr. Martin J. Blaser, President of IDSA and a 
Frederick H. King Professor and Chair of the Department of Medicine, and 
Professor of Microbiology at NYU School of Medicine.  
        IDSA represents 8,000 physicians and scientists devoted to patient 
care, 
education, research, prevention, and community health planning in infectious 
diseases.  Our members care for patients of all ages with serious infections, 
including antibiotic-resistant bacterial infections, meningitis, pneumonia, 
tuberculosis, food poisoning, HIV/AIDS, and those with cancer or transplants 
who 
have life-threatening infections caused by unusual microorganisms, as well as 
emerging infections like severe acute respiratory syndrome (SARS).  Housed 
within IDSA is the HIV Medicine Association (HIVMA), which represents more 
than 
3,200 physicians working on the frontline of the HIV/AIDS pandemic.  HIVMA 
members conduct research, implement prevention programs, and provide clinical 
services to individuals that are infected with HIV/AIDS.  Together, IDSA and 
HIVMA are the principal organizations representing infectious diseases and HIV 
physicians in the United States.  
        I am testifying today on behalf of IDSA to highlight the critical need 
for new 
drugs, vaccines and diagnostics to treat, prevent and detect infectious 
diseases 
agents.  As Members of the Subcommittee move forward to consider the 
reauthorization of the Project Bioshield Act, IDSA urges you to extend the 
statutes' scope beyond products intended to address bioterrorism-related 
pathogens and apply current incentives to products to be used against 
naturally 
occurring infectious diseases, including antimicrobial resistant infections. 
We 
also ask that you add several new provisions to Bioshield that will help to 
eliminate disincentives and to spur infectious diseases product development 
both 
related to naturally occurring infections and biodefense.  
        Members of the Energy and Commerce Committee have shown that they 
understand the 
connection between naturally occurring infections and bioterrorism and 
understand our nation's vulnerability.  In its 2003 Committee report on the 
Project Bioshield Act, the Committee linked natural conditions, including 
antimicrobial resistance and dangerous viruses, to national security concerns.  
The Report stated ``advancing the discovery of new antimicrobial drugs to treat 
resistant organisms ... may well pay dividends for both national security and 
public health."
        IDSA believes that there is an inextricably linked, synergistic 
relationship 
between the research and development (R&D) needed to protect against both 
natural occurring infections and bioterrorism agents.  Research in both areas 
seeks to understand how these organisms cause disease, the immune system 
response to these pathogens, the development of drug resistance, and how 
antibiodies and medicines protect against them.  Moreover, antibiotic 
resistant 
organisms that currently threaten Americans in hospitals and communities can 
have future national and global security implications.  Virtually all of the 
antibiotic-resistant pathogens that exist naturally today can be 
bio-engineered 
through forced mutation or cloning.  Expanding the government's product 
development priorities to include naturally occurring infections will enhance 
the research needed to develop bioterrorism countermeasures and vice versa.  

Background
        On July 21, 2004, the same day that President Bush signed ``The Project 
Bioshield 
Act", IDSA issued its landmark report entitled, Bad Bugs, No Drugs, As 
Antibiotic Discovery Stagnates, A Public Health Crisis Brews.  Copies of that 
report are available here today. Our report calls attention to a serious 
public 
health problem-at the same time that emerging infections and antibiotic 
resistance are increasing, drug companies are withdrawing from antiinfective 
R&D.  IDSA is particularly concerned about antibiotic R&D, an area in which 
many 
pharmaceutical and biotechnology companies have shown the least commitment in 
recent years, either withdrawing totally or seriously downsizing their 
dedicated resources and staff.  
        Let me be very clear from the start: IDSA is here today on behalf of 
patients.  
We are not here at the request of the pharmaceutical or biotechnology 
industries 
nor is our Bad Bugs, No Drugs advocacy campaign financed in any way by 
industry.  
Infectious diseases (ID) and HIV physicians on the frontline of patient care 
see 
patients every day who face lengthy and expensive hospitalizations, painful 
courses of treatment and even death because of drug-resistant and other 
infections.  We are here because our patients desperately need new weapons to 
protect them against these diseases. 

Why Policymakers Should be Concerned
        Policymakers have recognized the urgent need to spur biodefense R&D, 
which led 
to the establishment of Project Bioshield.  While concern about bioterrorism 
is 
appropriate, it is important to keep things in perspective.  Not one American 
has died from bioterrorism since President Bush first announced Project 
Bioshield in February of 2003, but drug-resistant bacterial and other 
infections 
have killed hundreds of thousands of Americans in hospitals and communities 
across the United States and millions of people across the world during that 
same short period of time.  

Here are some surprising facts about the impact of drug-resistant bacterial 
infections in the United States:
        * Antimicrobial resistant infections have created a ``silent epidemic'' 
in communities and hospitals across the country-methicillin-resistant 
staphylococcus aureus (MRSA), for example, is crippling and killing a growing 
number of athletes, children, military recruits, and prisoners.
        * Infections caused by resistant bacteria can strike anyone-the young 
and the 
old, the healthy and the chronically ill.  Theresa Drew recently shared the 
story of her son, Ricky Lannetti, with congressional staff.  Ricky, a healthy 
and strong 21-year old college football player from Philadelphia, Pennsylvania 
succumbed to an MRSA infection in December 2003.  Ricky's story is just the 
tip of the iceberg.
        * About 2 million people acquire bacterial infections in U.S. 
hospitals each 
year, and 90,000 die as a result.  About 70 percent of those infections are 
resistant to at least one drug.  Community-acquired resistant infections also 
are on the rise.  The trends toward increasing drug resistance in both 
hospitals and communities show no sign of abating.
        * Resistant pathogens lead to higher health care costs because they 
often 
require more expensive drugs and extended hospital stays.  The hospital care 
for 
Bryce Smith, a 14-month old toddler from San Diego, cost more than $800,000 in 
the beginning months of 2006.  The total cost of antimicrobial resistance to 
the 
U.S. health care system was nearly $5 billion in 1998, according to the 
Institute of Medicine (IOM).  It is believed true costs far exceed that amount 
today.

What policymakers should know about pandemic influenza: 
        * The impact of an influenza pandemic cannot be overstated.  The 
Centers for 
Disease Control and Prevention (CDC) estimates that between 100,000-250,000 
U.S. 
deaths would result from a ``mild'' pandemic and 900,000-2 million Americans 
will die from a virus as deadly as the 1918 virus.
        * The Congressional Budget Office estimated that a pandemic could cost 
$675 
billion and decrease the real gross domestic product (GDP) by five percent.
        * H5N1 avian influenza has spread rapidly in the past few months to 
more than 40 
countries in Asia, Africa, the Middle East and Europe.  Experts agree that it 
is 
only a matter of time before it appears among birds in North America.  
        * H5N1 virus is showing continued evolution, and has infected an 
increasing 
variety of mammals.  A moderate number of human cases continue with a high 
death 
rate.  Fortunately, the virus is not yet capable of easily spreading from 
person to person; should this happen, a dramatic pandemic will occur.  
        * Despite the increased attention and progress that has been made in 
preparing 
for an influenza pandemic, the Institute of Medicine and virtually all experts 
conclude that the United States is woefully unprepared to sufficiently respond 
to pandemic flu and many gaps and challenges remain.
        * Moreover, seasonal influenza accounts for 36,000 deaths and more 
than 200,000 
hospitalizations in the United States and 250,000 to 500,000 deaths globally 
each year.

Here are some important facts about other infectious diseases:
        * Three of the biggest killers-HIV, tuberculosis (TB) and 
malaria-account for 
nearly 40 percent of deaths caused by infectious diseases (5.6 million deaths 
in 2002). 
        * Diarrheal diseases and respiratory infections are equally as deadly, 
accounting for 5.7 million deaths in 2002.
        * More than three-dozen new infectious diseases have been identified 
since the 
1970s that have impacted the United States and more vulnerable countries, 
including HIV/AIDS, SARS, West Nile virus, Lyme disease, hepatitis C, a new 
form 
of cholera, waterborne disease due to Cryptosporidium, foodborne disease 
caused 
by E. coli 0157:H7, and a plethora of neglected diseases that primarily affect 
patients in the developing world.


The Product Pipeline is Drying Up
        Infectious diseases are the second leading cause of death in the world 
and, by 
far, the leading cause of premature death and disability.  Unfortunately, many 
of these diseases have no treatment except for supportive care.  New medicines 
and diagnostics are desperately needed across all areas of infectious diseases 
medicine.  
        Of particular concern, the pipeline of new antibiotics is drying up.  
Major 
pharmaceutical companies are losing interest in the antibiotics market because 
these drugs simply are not as profitable as drugs that treat chronic, 
life-long 
conditions and lifestyle issues.  The pharmaceutical pipeline is not keeping 
pace with drug-resistant bacterial infections, so-called ``superbugs.''  
Antibiotics, like other antimicrobial drugs, have saved millions of lives and 
eased patients' suffering.  The withdrawal of companies from antibiotic R&D is 
a 
frightening twist to the antibiotic resistance problem and, we believe, one 
that has not received adequate attention from federal policymakers. 
        A recent analysis published in the journal Clinical Infectious 
Diseases found 
only five new antibiotics in the R&D pipeline out of more than 506 drugs in 
development.  The authors evaluated the websites or 2002 annual reports of 15 
major pharmaceutical companies with a track record in antibiotic development 
and 
seven major biotechnology companies.  Their analysis revealed four new 
antibiotics being developed by pharmaceutical companies, and only one 
antibiotic 
being developed by a biotech company.  By comparison, the analysis found that 
the pharmaceutical companies were developing 67 new drugs for cancer, 33 for 
inflammation/pain, 34 for metabolic/endocrine disorders, and 32 for pulmonary 
disease.  The biotech companies were developing 24 drugs for 
inflammation/immunomodulators, 14 drugs for metabolic/endocrine disorders, and 
13 for cancer.
        The end result of the decline in antibiotic discovery research is that 
the Food 
and Drug Administration (FDA) is approving few new antibiotics.  Since 1998, 
only 13 new antibiotics have been approved, two of which are truly novel-i.e., 
defined as having a new target of action, with no cross-resistance with other 
antibiotics.  In 2002, among 89 new medicines emerging on the market, none was 
an antibiotic.
        The Institute of Medicine's (IOM) 2003 report on microbial threats 
reinforces 
the point, noting that although at first glance the situation with respect to 
antibiotics currently in clinical development looks encouraging, not one new 
class of antibiotics is in late-stage development.  ``Rather these 'new' 
antibiotics belong to existing classes, including macrolides and quinolones, 
that have been used to treat humans for years,'' IOM said.
        Unfortunately, both the public and private sectors appear to have been 
lulled 
into a false sense of security based on past successes.  The potential crisis 
at 
hand is the result of a marked decrease in industry R&D, government inaction, 
and the increasing prevalence of resistant bacteria.
        IDSA has investigated the decline in new antibiotic R&D for more than 
three 
years, interviewing stakeholders from all sectors.  We have met with officials 
from FDA, the National Institute of Allergy and Infectious Diseases (NIAID), 
CDC, congressional members and staff, executives from leading pharmaceutical 
and 
biotechnology companies, representatives from public-private partnerships that 
are focused on infectious diseases-related product development, patients, and 
other stakeholders.  
        Based on our investigation, IDSA is convinced that the pharmaceutical 
and 
biotechnology industries are clearly best situated to take the lead in 
developing new antibiotics needed to treat bacterial diseases.  They are the 
only player with a track record of success.  Consequently, industry action 
must 
become the central focus of an innovative federal public health effort 
designed to stimulate antibiotic R&D. 
        Some people have placed the blame for the decline in R&D on the 
pharmaceutical 
industry, saying that companies should act responsibly and ensure that new 
drugs 
and vaccines are available as needed.  The pharmaceutical industry supports 
many 
good works pro bono.  Some examples include Merck & Co.'s efforts related to 
River Blindness; efforts by Bristol-Myers Squibb, Pfizer, and other drug 
companies related to global AIDS; and GlaxoSmithKline's malaria and 
AstraZeneca's TB drug discovery initiatives.  Nevertheless, companies are 
responsible to their shareholders and cannot alter their fundamental business 
strategies in ways that would place their bottom lines at risk. 
        Drug and vaccine R&D is expensive, risky, and time-consuming.  As 
such, 
companies are most likely to invest in products for which a strong return on 
investment is likely, such as drugs that treat long-term, chronic illnesses, 
lifestyle issues, and products that benefit people in developed countries who 
can afford to pay for them.  Most antiinfectives, particularly antibiotics, 
which are used for short durations (7-14 days), face restricted use to avoid the 
development of resistance, resistance limits effectiveness and profitability, 
etc.; vaccines; and medicines desperately needed in the developing world are 
being left out. 

Spurring Infectious Diseases Product Research and Development 
        Policymakers and the public should have no illusions that future 
pharmaceutical 
charity will be sufficient to address the existing and emerging infectious 
pathogens that threaten U.S. and global health.  Instead, IDSA believes the 
burden is on the federal government to entice industry to antiinfective R&D as 
a means to protect U.S. public health and strengthen national security. 
        Robust R&D programs are needed to respond successfully to existing 
infectious 
diseases as well as new threats on the horizon.  Market forces alone will not 
solve the current crisis in infectious diseases drug, vaccine and diagnostic 
R&D-that's why we need innovative public policy changes such as those that 
have 
been contemplated in the ``Infectious Diseases Research and Development Act", a 
bipartisan bill introduced by Rep. Barbara Cubin last year.  IDSA has strongly 
endorsed this bill and is particularly grateful to Rep. Cubin's commitment in 
this area.  We encourage the Subcommittee to consider the bill as it moves 
forward to reauthorize Project Bioshield. 
        The ``Infectious Diseases Research and Development Act'' will provide 
incentives 
for pharmaceutical companies and biotechnology companies to invest in research 
and development with respect to antibiotic drugs, antivirals, diagnostic 
tests, 
and vaccines that may be used to identify, treat, or prevent a ``qualified 
infectious disease product."
        The bill defines a ``qualified infectious disease product'' as ``any 
antibiotic 
drug, antiviral, diagnostic test, or vaccine that is developed for the purpose 
of treating, detecting, preventing, or identifying...an infectious pathogen 
identified by the [new] Commission [on Infectious Diseases Product 
Development, discussed below.]"
        Prior to the establishment of the Commission and its initial report of 
infectious pathogens, the incentives outlined in the bill will be available in 
the interim to infectious diseases products addressing the following issues:
        * methicillin-resistant staphylococcus areus-can infect the heart, 
bones, lungs, and bloodstream.
        * life-threatening gram negative bacteria including, among others:
              Acinetobacter, a type of bacteria that has caused 
stubborn wound infections in at 100 U.S. solders and civilians stationed in 
Iraq, and is an increasing cause of pneumonia in U.S. hospitals.
              Escherichia coli and Klebsiella species, which are 
major causes of urinary tract, gastrointestinal tract, and wound infections.
        * influenza-of particular note, the bill would entice the manufacture 
of products to treat influenza within the United States borders-an urgent 
need. 
        * Additional infectious pathogens as may be identified by the 
Secretary of Health and Human Services (HHS), in concurrence with infectious 
diseases clinicians.
        As noted above, the bill establishes the Commission on Infectious 
Diseases Product Development.  The Commission is required to identify the most 
dangerous infectious disease pathogens and their associated diseases that are 
or are likely to become a danger to public health.  The Commission would 
provide an annual report to Congress, the President, and the Secretary of 
Health and Human 
Services (HHS) on its findings, conclusions, and recommendations, including an 
updated list of emerging infectious pathogens.
        Not later than 90 days after the date of enactment of the bill, the 
Commission 
also would be required to report recommendations on the actions the Secretary 
of HHS should take to ensure that a sufficient quantity of vaccines and 
anti-virals 
are available to treat the American population in the event of a pandemic 
influenza outbreak.
        The Commission would be comprised of 19 voting members appointed by 
the 
President; 12 members to be appointed from among the leading representatives 
of 
the infectious disease medical, research, pharmaceutical, and biological 
communities, 7 members from the general public; additional nonvoting members 
would be appointed from the leading federal health agencies.
        The Cubin bill also includes several incentives to spur R&D for 
qualified 
infectious diseases products that IDSA supports.  Pathogens/diseases 
identified 
by the Commission as priorities for action would be eligible for these 
incentives.  IDSA supports that following incentives: 
        o Full restoration of patent terms to account for the time lost 
during FDA review of a new drug application.
        o Fast-track FDA review of designated qualified infectious diseases 
products.
        o Intensified efforts to assist small businesses in conducting 
end-stage clinical trials through NIH small business awards.
        o Tax Credits for R&D:  Allows manufacturers of qualified infectious 
diseases products to take a tax credit equal to 35% of the qualified 
infectious diseases research expenses for the taxable year.
        o Manufacturing Facilities Investment Tax Credit:  Provides a tax 
credit of 20% 
for a facility that is used for manufacturing, distributing, or for research 
and 
development of a qualified infectious diseases product.
        o Clinical Trial Guidelines for Antibiotic Drugs:  Requires the FDA to 
issue 
guidelines, within one year, for the conduct of clinical trials with respect 
to 
antibiotic drugs, including antimicrobials to treat resistant pathogens, 
bacterial meningitis, acute bacterial sinusitis, acute bacterial otitis media, 
and acute exacerbation of chronic bronchitis.  
        To strengthen the bill further, IDSA would encourage the following 
incentives be considered:
        o FDA Priority Review Voucher-Under this concept, a voucher would be 
provided to 
a company that obtains an approval for a ``qualified product'' that treats a 
disease identified by the Commission.  The company could then apply the 
voucher 
to a separate product (i.e., a potential blockbuster) of its choosing or, 
alternatively, the company could auction the voucher to another company.  The 
voucher concept was raised in the March/April 2006 edition of Health Affairs. 
The authors say that this concept may reduce FDA's review time of a product 
by a 
year, which could be worth ``more than $300 million for a potential 
blockbuster".  
Even if the FDA review time was reduced only by 6 months, IDSA believes this 
concept would have merit.  A significant advantage of this approach is that it 
would not extend the length of the patent.  As such, it should not be a threat 
to the generics industry.  Instead, it would permit a company to market a 
product months in advance of when it otherwise would.  This also would be an 
advantage to patients as they would be able to enjoy the product's benefits 
sooner.  The Health Affairs articles authors report the cost of changing FDA's 
review from standard to priority review may be $1 million, which could be 
recovered through a user fee by the voucher user.  Of note, under the authors' 
approach, the company would have to forgo patent rights-this is an idea that 
IDSA does not support.
        o Extension of Patent Term for Qualified Infectious Diseases 
Products-Although 
fraught with politics, the extension of the patent term of critical needed 
qualified infectious diseases products for 2 years or even 6 months is one 
sure 
way to pique industry's interest.  There are so few solutions available to 
address the lackluster pharmaceutical pipeline for antibiotics and other 
antiinfectives.  It may be time for Congress to consider this idea.
        o Tax Credits for R&D-IDSA would suggest increasing the amount of the 
tax credit 
for R&D in the Cubin bill to 50% to mirror the amount provided to orphan drugs 
under the Orphan Drug Act.  IDSA also would suggest applying this tax credit 
to 
preclinical research as well as product clinical research and development.
        o Protocol Assistance-In addition to the development of clinical 
guidelines by 
FDA, we also would support the agency's provision of additional protocol 
assistance similar to what is provided with regard to orphan drugs.
        o Waiver of User Fees-We would support the waiver of all user fees 
related to FDA review of qualified infectious diseases products.  
        o Antitrust exemptions-additional flexibility for certain company 
communications is needed.
        o Guaranteed Market-While it can be loosely argued that Project 
Bioshield may be 
applied already to naturally occurring resistant organisms, it is not likely 
that the Administration will view such infections as priorities unless 
Congress strengthens its emphasis in this area.  
        o Funding for CDC's Antimicrobial Resistance Program-Although it may 
be outside 
the scope of the Subcommittee's reauthorization effort, we appeal to you to 
help 
strengthen CDC's resistance program so that the agency may better lead the 
nation to respond to the silent epidemic that antimicrobial resistance has 
created.  A multi-pronged approach is essential to limit the impact of 
antibiotic resistance on patients and public health.  For this reason IDSA 
supports a $25 million increase in this program to a total commitment of $50 
million in FY 2007. This will enable CDC to expand its surveillance of 
clinical 
and prescribing data that are associated with drug-resistant infections, to 
gather morbidity and mortality data due to resistance, to educate physicians 
and 
parents about the need to protect the long-term effectiveness of antibiotics, 
and to strengthen infection control activities across the United States.  
Broadening the number of CDC's extramural grants in applied research at 
academic-based centers also would harness the brainpower of our nation's 
researchers.

Conclusion
        The reauthorization of Project Bioshield provides a critical 
opportunity to spur 
the development of new tools to protect Americans and the global community 
against the scourge of infectious diseases, particularly antibiotic resistant 
organisms, and bioterrorism.  We urge congressional leaders to show bold 
leadership as it renews this legislation.
        Specific to antibiotics, the past two decades of antibiotic 
development clearly 
have demonstrated that we no longer can rely on existing market forces to keep 
companies engaged in this area of drug discovery and development.  Should 
additional companies' antibiotic R&D infrastructures be dismantled, it will 
take 
years to establish new programs-or this expertise could simply be lost 
forever.  
New antibiotics are desperately needed to treat serious as well as common 
infections. The bacteria that cause these infections are becoming increasingly 
resistant to the antibiotics that for years have been considered standard of 
care, and the list of resistant pathogens keeps growing.  It is not possible 
to 
predict when an epidemic of drug-resistant bacteria will occur-but we do know 
it will happen.
        Drugs, vaccines and diagnostics also are needed across the spectrum of 
infectious diseases medicine, including to address the growing threat of 
pandemic influenza.  Conquering AIDS, TB, malaria, the neglected diseases 
found 
primarily in developing countries, and the next emerging infection will 
require 
renewed vision, creative policymaking and righteous action.
        We appreciate the opportunity to testify.  We look forward to working 
with you 
in the coming months to develop federal legislation to spur the tools 
infectious 
diseases physicians need to treat our seriously ill patients.  Thank you.

	MR. DEAL.  Thank you.  Very interesting testimony.  Let me start with 
a few of the issues that each of you sort of touched on.  Mr. Wright, you said 
that the first principle that you would suggest to us is clarity in 
establishing 
a central authority, and in my earlier questions to the first panel, I sort of 
overviewed the relationship and the roles DOD, Homeland Security, and HHS each 
play in the current structure.  Are you suggesting by this recommendation that 
the current bifurcation of those functions is not appropriate and should be 
consolidated, is that what you are saying?
	DR. WRIGHT.  Yes, sir, the Alliance believes that the way it is 
currently 
being done, there are just too many players involved with too many different 
agendas, and there is not a clear person or place that Congress can go to and 
say, why don't we have this?  It goes from one to the other.  The DOD actually 
has a process that is much clearer and has worked for years in the procurement 
of products which there are no other markets for.
	MR. DEAL.  If you were to recommend where you think that consolidation 
should occur, do you have any recommendations?
	DR. WRIGHT.  Boy, that is a loaded question.  No, I really don't.  I 
actually think it probably belongs in the NIH as a separate committee.
	MR. DEAL.  Have any of the panel members had any opportunity to 
compare 
the different methods that are used, the DOD process versus the HHS process, 
with respect to countermeasure development?  And if you have had that 
opportunity to observe the two approaches, do you have any comments you would 
like to make about those?
	MR. COHEN.  Mr. Chairman, if you are speaking of through DOD, I could 
speak to the way DARPA does it, which is very different from the way HHS does 
it.  In a previous company, we were able to secure a multi-year commitment 
from 
DARPA for a countermeasure; it was an antibiotic.  It was a fast process that 
involved the submission a rather modestly sized white paper that they used to 
compare the applications to, and was followed by a very large grant 
application.  
But the key difference was that the money was committed for three years, 
subject 
to ability to meet certain milestones, and we took that award and turned 
essentially a $6 million grant into about $50 million of private equity 
capital.  
That was very helpful to us raising money to build a program.
	Within HHS and NIH in particular, you have to do very complicated 
grant 
applications that can be for as little as $200,000, and then a year later you 
get to apply for more money and each process takes a year.  It has uncertainty 
related to the peer review process and also the appropriations process, and so 
you can't take those awards to investors and say I am going to take part of 
the 
risk off your shoulders and put it on the Government's.  So that ability of 
the 
Defense Department, through DARPA at least, to give you a commitment subject 
to 
your meeting certain milestones makes a huge difference in our ability to 
raise what is substantial outside capital.
	MR. DEAL.  Which was the model that you suggested in your testimony?
	MR. COHEN.  Yes.
	MR. DEAL.  Mr. Young.
	MR. YOUNG.  This doesn't presume to make a structural or organizational 
recommendation and, to the little bit of familiarity I have with how DOD 
historically has approached vaccine development, I am not sure that that is 
the 
model I would recommend.  But I think what it does suggest, from an industry's 
perspective, you would approach this with three paramount criteria in mind.  You 
would want people involved who had an intimate understanding and experience 
level in the objective in question, which is actually practical development of 
products.  There are wonderful people, expert scientists, dedicated and 
experienced civil servants and public health officials that inhabit many of 
these agencies, but there aren't many people who have actually developed 
products successfully in an industry setting, and that is a time consuming, 
very 
sophisticated process that requires a lot of judgment and the ability to 
handle 
a constantly evolving landscape towards a reasonably certain and clear 
ultimate 
product target.
	On that point, I think what is clearly missing now is something to 
address 
the compartmentalization.  You can get early stage funding, you can get late 
stage procurement support, but there is no coherent integrated picture of the 
whole development process that is evident to an industry participant in the 
effort.  Thank you.
	MR. DEAL.  Thank you.  Mr. Wright, my time is up, so maybe someone 
else 
will pursue this further.  Ms. Eshoo, you are recognized for questions.
	MS. ESHOO.  Thank you, Mr. Chairman, and I want to thank all the 
panelists.  I think that you have done an excellent job and you have also set 
some of the seeds popping in my mind.  I think, first of all, and this is an 
observation, Mr. Chairman and my colleagues that are here today for this 
hearing, I think what is lacking in all of this is a real sense of urgency, 
and, 
Dr. O'Toole, you spoke so eloquently to that.  There is a rhetoric war, and we 
know it and we hear it, and there is urgency to it.  There isn't in this 
program.  If we were to parse out in the Department of Defense whether there 
should be tanks or munitions or whatever, there would be a great deal of 
dissention in the Congress and in the country over that, and yet we are doing 
that with a program that deserves the same kind of defense, so to speak.  We 
have now lived through and witnessed the disorganization within a Government 
agency, Homeland Security, in response to Katrina, and I can't help but think 
that we are not prepared.  We are not prepared if, God forbid, any of these 
catastrophes were to be visited upon the United States.  And so I think more 
than anything else, the way for the committee to approach this is with a great 
sense of urgency.  If, in fact, we do that, then it is not going to be--and I 
am 
paraphrasing Dr. O'Toole--a stockpile of medicines.  It is going to be larger 
than that.
	The second point I want to make here and what I have learned from the 
panelists is, is that whatever dollars are in the pot, the Federal pot, they 
are 
really not being used as the right kind of magnet for the private sector to 
develop what needs to be developed.  It is not working.  I mean, there is the 
valley of death, all the other things that have been described.  So the 
opportunity costs for the private sector are just too great in order for them 
to 
be attracted to do anything relative to this effort.  So I think in some ways 
we 
are kidding ourselves.  I think the program is aptly named, but it seems to 
kind 
of fall apart after that, and I am not saying that the people involved in it 
are 
not earnest.  They are solid public servants, they want to do the right job.  
I 
think this committee, Mr. Chairman, needs to begin to redirect this.  The 
whole 
notion that the Government is the only customer, we need to understand that, 
and 
that the companies are not going to engage in, as Bruce Cohen said, the 
companies are simply not going to be able to engage in it.  Especially small 
companies, biotech companies, are not going to be able to engage in this, 
because they don't have the capital to do it.  So if we don't capitalize on 
the 
issue that is before us with a great sense of urgency, then I think we are 
going 
to have a lot more hearings with reports that don't have the sense of urgency 
that they need to have.
	Now, anyone who wants to chime in, I mean I am putting the ball in 
your 
court, but I think your testimony has been outstanding, and I think that you 
have, for me at least, struck a match here and cast some light on it.  I think 
this needs to be revisited in a very serious way.  How much more funding do 
you 
think is appropriate in this program?  Anyone from the panel, Dr. O'Toole?
	DR. O'TOOLE.  I think we are off by about a magnitude of order, so ten 
times as much.  But you know, part of the problem, I think you are right, one 
does not perceive this sense of urgency when you are looking at the HHS 
program 
from the outside.  Part of the problem is that the urgency, the need to get 
something in the stockpile fast, is at war with the complexity--
	MS. ESHOO.  Yes.
	DR. O'TOOLE.  --of creating new drugs and figuring out what drugs we 
ought 
to be buying for the stockpile and what we ought to be investing in, in the 
future.  These are new problems for the Government and they are new problems 
for 
the world.  There isn't a prototype out there for how to do this.  So HHS is 
in 
the position of inventing new processes for high stakes decisions, you know--
	MS. ESHOO.  Is that what the plan was that was alluded to or mentioned 
earlier from the first panel?
	DR. O'TOOLE.  That was the first I have heard of the strategic plan.  It 
is a good idea to have a strategic plan.
	MS. ESHOO.  But it is the first you have heard of it?
	DR. O'TOOLE.  Yes.
	MS. ESHOO.  So you all are the modern day defense contractors.  I 
think 
that is the way we have to think of this.  I think that is the way we need to 
be thinking of this.  Yes.
	DR. BLASER.  I would like to mention, from the standpoint of the 
Infectious Diseases Society, we also believe it should not be business as 
usual.  We have to move things up a magnitude.
	MS. ESHOO.  Yes.
	DR. BLASER.  I am reminded of two analogies.  One is the Manhattan 
Project 
where $2 billion in 1940 dollars were given for a major problem in national 
security.  We were fighting a war then.  In today's dollars, that is probably 
$20 billion.  I think that is the scale we should think about.  The other 
analogy is Katrina.  We know that hurricanes occur, we don't know when, but we 
have to build up the infrastructure to protect us.  In most years, the levees 
don't do us any good, but when we need them, we need them, and antibiotic 
resistance is the level of the water rising and influenza is the big storm.  
So 
when we put those together, we need to have that infrastructure of research 
and 
development for bioterrorism, for flu, for antibiotic resistance.  They are 
all related.
	MS. ESHOO.  Bruce, did you want to say something?
	MR. YOUNG.  I would just add that there is another underlying 
difficulty 
here for the Government, is how does the Government bet on innovation?
	MS. ESHOO.  Yes.
	MR. YOUNG.  It is intrinsically risky.  The way the private sector 
does 
this, it expects, it knows that within a portfolio of effort, it is going to 
have failure.  I think it is very difficult in this climate to spend this kind 
of money and not say, what are we getting for the money, when you can predict 
that a significant percentage of what you are going to get is a dry well.  But 
if you don't do that, if you don't have a culture and an approach and a 
willingness to embrace the risk, you will get no change, no improvement, no 
innovation.
	MR. COHEN.  I would like to speak to Congresswoman Eshoo's point about 
the 
defense analogy.  Right now, we are stuck in a place where you can either get 
a 
very tiny and insignificant amount of money, or you have to bet on a $700 
million contract, and that isn't the way the defense industry basically built 
Silicon Valley.  At least those of us from California know that you make 
relatively modest sized grants and contracts, you take lots of bets, and we 
are 
not talking about tens of millions of dollars, but that enables people to go 
do 
interesting innovation.  But it also, as we have learned, draws private 
capital 
in, and the system right now is not drawing private capital because it is too 
unpredictable and the amounts of money are in the extreme, they are not in the 
middle.  And that can be changed.  It is not that hard to do that.  Some of us 
have products that have crossover applications and some don't, but regardless 
of 
the degree to which there is a so-called civilian application for what you are 
doing, the ability to get the private capital into the game is really 
essential and that can be fixed.
	MR. DEAL.  Thank you.  Very interesting question and comments.
	MS. ESHOO.  Thank you, Mr. Chairman.
	MR. DEAL.  Mr. Shimkus?
	MR. SHIMKUS.  Thank you, Mr. Chairman.  And if we have accomplished 
one 
thing, we have struck Anna Eshoo's match and as I know from past activities, 
when you do that, you really do get a response.  I will just go back to our E-
911 aspect.  She was complaining about the fact that you couldn't find people 
years before it became a d' jour item, and now we are almost getting to a 
point 
where with your cell phone, people now know where you are at.  And I don't 
want 
to harangue my colleagues, but you know, look at this committee hearing room.  
You know, you have interested Members, but we ought to have more here if it is 
that serious of an issue and we don't and so that is part of the dilemma.  I 
always talk about raising capital.  Really, most businesses borrow, go to the 
private equity markets, go to Wall Street, assume a risk, hoping to get a rate 
of return.  Well, you all are doing it for hopefully no consumers.  I mean, in 
a 
perfect world, we have the ability to respond, but we never have to use it, 
and 
so then that is the ultimate risk.  All this money poured out and no return, 
so 
that is far as I read it, that is this valley of death and how do you bridge 
that.  And you know, Mr. Cohen, I really appreciated your comments, because 
there has got to be a way if we addressed a couple things.
	By centralizing this whole operation, maybe we can target individual 
grants, which then would incur private capital and you leverage that, and we 
do 
that on water projects, in fact, you almost want that, because you want people 
empowered to it.  You just don't want the Federal government doing it.  You 
want 
to incentivize other folks.  And I think we have a problem with this monetary 
debate.  We need a magnitude of 10.  Well, a magnitude of ten of what, the $5 
billion that we have authorized but have only spent one, or $50 billion, $50 
billion or, as I have come to know, we have got $5 billion now, but we have 
got 
$2 billion in the NIH budget, we have got DOD dollars, so I think there is a 
lot 
of money out there.  But, because we are not centralized, we are not maybe 
effectively using it or at least we don't know where it is at.
	But you have brought up a lot of good debate for us to get our hands 
on 
this, because the public is just not going to accept our response that we had 
a 
hearing and the country is not prepared to respond.  Dr. Cohen, I don't want 
to 
get off on an issue, but I am also interested in knowing where do your adult 
stem cells come from?
	MR. COHEN.  In the case of the part that we are talking about for 
nuclear countermeasures, they come from donors.
	MR. SHIMKUS.  I mean, is it blood, is it teeth, is it adult fat, 
tissues, where?
	MR. COHEN.  It is called mobilized peripheral blood and we pay people 
to essentially donate blood and we extract stem cells from that.
	MR. SHIMKUS.  Now, in just using that as an example, one of the 
concerns 
is, as I mentioned before, how do you have an antidote or a drug for immediate 
application?  What is infectious time?  And then, is there a debate on how you 
can rapidly create it?  Do we have to have a stockpile of all this stuff or, 
through research and development, can we have dispersed sites that can rapidly 
deploy and make antidotes in a timely manner?  I mean, I don't know.  I am not 
a 
doctor.  So, in your field, which is radiology and the aspects, do you have to 
have stuff on hand?
	MR. COHEN.  Well, first of all, I am not a doctor, either, but in the 
treatment of radiological injury, because we treat those patients when they 
undergo chemotherapy or radiation therapy, we know a lot about the time 
between exposure and when you have to treat.
	MR. SHIMKUS.  And that is why you have a private application which 
people 
are willing to invest capital in?
	MR. COHEN.  That is right.  And so what it appears from the animal 
models 
that we have done, and I think clinical experience is you can imagine the 
national stockpile some place in a cave where it is safe, where you could 
store 
enough doses that you get to the affected area within, say, four to seven 
days.  
And if you use a cell-based medicine, which is a regenerative therapy, then 
you 
have the ability to wait that much more time before you treat the patients, so 
you don't have to have it deployed in their house, and that is only for 
radiological injury.  What would happen in practice is that they would be 
stored 
frozen, and it appears, based on perhaps 30 years of experience, that this, a 
cellular product, is safe for at least a decade in a frozen state.  Then you 
would have it transported to the site of the incident, and it would be 
administered by the kinds of people who work as emergency medical technicians 
in 
ambulances who can do simple infusions.  In animal models, this rescues a 
substantial number of animals, not everybody, because sometimes you get too 
much 
radiation and nothing works and there is some population, and the Government 
has 
this all sort of worked out, what the radiological dose would be.  Some people 
would survive with basic antibiotic therapy.  Some people wouldn't survive.  
We 
are focused on the middle of people who are rescuable but otherwise wouldn't, 
and I think the only real live experience of that is Chernobyl, and most of 
the 
people at Chernobyl died of what is called hematopoietic failure, too many of 
their stem cells died to populate their immune system, and we know pretty 
certainly you can replace that with a cell-based medicine and you should have 
enough time to get there.
	MR. SHIMKUS.  And I appreciate that.  It just highlights one other 
question I was going to ask and I am just going to throw it out there.  I 
still 
think that in the previous panel, Mr. Chairman, they talked about the local 
health providers being able to, then ramp up the thing in the local health 
providers.  Well, if you have a nuclear explosion in a major metropolitan 
area, 
that is similar to a Katrina, where you just overwhelm the local providers and 
that is where the national debate, and I know we have got this issue about the 
military intervening.  But I am an Army infantry airborne guy, so you 
parachute 
the 82nd in, they set up their field hospitals, they receive the drugs and 
then 
they try to do that in an expedited manner, which is more efficient than if 
you 
try to cobble together the first-line responders who, in a large geographical 
area, could be all gone and that still has got to be part of this debate.  And 
I 
do agree with, again, my colleague, Anna Eshoo, we should take the lead and 
even 
though it is not hip and not cool, but we ought to pursue this, Mr. Chairman, 
and I thank you for the hearing and I yield back.
	MR. DEAL.  I thank the gentleman.  Dr. Burgess.
	MR. BURGESS.  Thank you, Mr. Chairman.  And you know, the timeline 
that is 
before us with, say, avian flu is something none of us can know, but there is 
reasonable evidence that, because of the migratory flyways, this hemisphere 
could see its first outbreak in northern Canada midsummer, August, in the 
southern tier of Canadian provinces, and three weeks before Election Day in 
East 
Texas and Georgia.  So it is not just a theoretic application that we are 
talking about here, and we do need to be prepared.  And it is difficult to get 
Congress mobilized, but I appreciate your efforts in this hearing to do that.
	Dr. Wright, I will just say I sympathize with you when you told the 
Chairman that the whole process was too diffuse, and there was no 
jurisdiction.  
You can imagine my surprise of getting to here that there was no committee on 
health that I could join.  I looked around for it for a long time, but I 
finally 
found a home here on Energy and Commerce and I was grateful for it.  But even 
amongst our subcommittee, we have division of labor with some other committees 
and it does make inherently difficult to do at the congressional level.  And 
at 
the same time, the world is a menacing place and we do need to be able to move 
with a great deal more facility, and I do appreciate the comments of all of 
you 
today.  Ms. Eshoo spoke about the urgency.  Unfortunately, the urgency may be 
provided for us, and I hope that is not the case, but certainly there are 
scenarios that are being modeled out there right with computer simulation that 
dictate that there may be more urgency to the avian flu than any one of us 
would like to admit.
	Dr. Blaser, I was intrigued by one of the comments you made about the 
antibiotic-resistant bacteria and how, perhaps, one of the tools at your 
disposal might be to lengthen the time in patent for development of some 
antibiotics and I wondered if you had some additional thoughts for us about 
that.
	DR. BLASER.  The urgent need is to develop new antibiotics for 
resistant 
organisms.  That is where our great focus is and our recommendation, which is 
completely consistent with Representative Cubin's bill, is to develop a 
national 
commission that will recommend to HHS situations in which we need to develop 
qualified products.  And for those qualified products, for those targeted 
areas, 
then we would offer a package of incentives to bring our industrial, our 
biotech, and our small and big companies back into the marketplace so that it 
is 
economically viable.  We are interested in a variety of approaches, including 
tax credits, including expedited review, including patent extension for those 
qualified products.
	MR. BURGESS.  But those things wouldn't necessarily just be under the 
purview of Project BioShield, right?  Those are for any drug out there on the 
development horizon.
	DR. BLASER.  Well again, our interest is in what we would call these 
qualified products.  They could be for pandemic influenza as part of the 
pandemic flu preparedness, it could be for antibiotic resistance, it could be 
for bioterrorism.  Right now, under BioShield, there is an apparatus in terms 
of 
the Government being a single supplier, but listening to the testimony today, 
I 
am impressed by the need to have middle level kinds of support, not tiny ones 
and not the mammoth ones, but develop a very broad pipeline.  Now that is our 
strength in America and we can't predict exactly where the great innovation is 
coming from.  We need to seed it broadly.
	MR. BURGESS.  Well, Mr. Cohen, in your discussions of your product to 
protect people from radiation, from the hematopoietic syndrome, it sounds to 
me 
like you are talking about the Phase III trials that your company is finding 
difficult to getting funding.  Is that correct?
	MR. COHEN.  No, in our case, we can't get the Phase I trials funded, 
so--
	MR. BURGESS.  You are getting some help from NIH?
	MR. COHEN.  We have grants from NIH for preclinical research.  And 
while, 
technically, NIH can fund clinical trials, it doesn't, and BioShield doesn't, 
and those trials cost several million dollars which, for a company of my size, 
is a substantial amount of money.
	MR. BURGESS.  I thought it cost several hundred million dollars, in 
actuality.  Is that not correct?
	MR. COHEN.  Not necessarily.  So the Phase I trials are several 
million dollars and the Phase II trials can be perhaps ten times that.
	MR. BURGESS.  Right.
	MR. COHEN.  BioShield can, under the current law, you can get approved 
without a definitive Phase III trial, particularly if the application is to 
something you can't test for.
	MR. BURGESS.  I see, okay.
	MR. COHEN.  So we may not be needing to go to this sort of gigantic 
trial 
that people contemplate in our industry, typically, so I don't think we are 
talking about that.  And if we were going to do a trial that big, it would 
probably be because we had a private market, and then that would be something 
private investors would pay for.
	MR. BURGESS.  So they could absorb some of it.  Yes, Dr. Wright?
	DR. WRIGHT.  However, in a vaccine, even in BioShield, you are going 
to be 
looking at 2,000, 3,000, 5,000 patients in a Phase I safety trial.  We are 
developing a product for anthrax.  We are right now, we have finished our 
first 
Phase I trial.  We are in the process of having to go to scale-up.  There is 
no RFP.  There is no commitment to buy.  We don't know how much the Government 
will buy.  Our venture capital partners are backing out from funding us 
because there 
is no market, there is no active RFP, and the company needs to spend $12 
million 
to do a tech transfer in a scale-up to be ready to manufacture it so we can do 
our final proof of principal trials.  We are not alone in that.  This is a 
scenario of every company in this industry.  It runs from a scale of $20 
million 
to probably $300 million that is needed to fund this middle area.  But also 
what is needed is to know on the end that there is a market for your product.  There 
has got to be an RFP out there saying, hey, if you do this, we will buy your 
product, otherwise, venture, the street, and private capital will not come in. 
That is missing from the current BioShield legislation.
	MR. BURGESS.  Thank you, Mr. Chairman.  I will yield back.
	MR. DEAL.  Mrs. Cubin.
	MRS. CUBIN.  Thank you, Mr. Chairman.  I was taken by your testimony, 
Dr. O'Toole, when you said what I believe to have been that stockpiling isn't 
the only answer, and I certainly believe it isn't the only answer.  So I 
wonder, do 
you think that methodology--and I am speaking in reference to R and D done on 
antibiotic, new antibiotics like we have talked about a little bit and that 
Dr. 
Blaser talked about that my bill would help facilitate development of.  Do you 
think that methodology or a new research-type roadmap or something produced 
through the R and D on mutated microorganisms could be used to find 
countermeasure development treatments for bioengineered weapons?  In other 
words, you know, it seems to me that what we learned from treating these 
mutated 
microorganisms, if we found the gene in MRSA, for example, that caused it to 
mutate, could that information be translated and used to help develop 
potential treatments for bioweapons?
	DR. O'TOOLE.  Well, increasing the store of biological knowledge and 
knowing better how the parts and circuits of living organisms work is going to 
help us across the board.  In dealing with bioengineered organisms, we are 
going 
to have a number of strategies that we are going to have to choose between.  
It 
may be that some drugs that we never thought of using against, for example, 
antibiotic-resistant anthrax or a new kind of engineered virus, would work 
against this biological weapon, but we would have to be able to screen those 
drugs against the weapon very carefully.  We could set up a kind of consortium 
of rapid throughput screening and have library banks of current drugs that we 
could turn to in an emergency, if we wanted to do that.  That would require 
cooperation amongst the many drug companies who own those databanks.  We might 
be able to develop therapies that would boost immune response at least for an 
interim period of time, not necessarily like Mr. Cohen's product does, but 
along 
the same lines.  You could get a kind of generic boost to the immune system to 
help tide people over and get them through acute stages.  Or you might, in the 
future, if we were very successful and very ambitious, be able to come up with 
new drugs in very short periods of time, tailor made to fit the bioengineered 
drug.  My point is the Nation is going to have to undertake a strategy of 
radical acceleration of drug development to deal with this threat.  If you do 
that, you are going to decrease the cost of drug development generally, which 
is 
going to have enormous benefits for the cost of healthcare, et cetera.  I 
think 
the problem will be forced upon us either by a pandemic flu, maybe of a strain 
that we do not have a vaccine for, or by a bioattack.  I think it will come 
and 
we are going to have to take it on.  It would be better if we did it before 
such a calamity befell us.
	MRS. CUBIN.  Well, and it seems to me that there could be not a direct 
appropriation from the Government, but an influx of private investment, if the 
advantages that are in my bill that Dr. Blaser spoke about were made available 
to pharmaceutical companies.  Dr. Blaser, are naturally occurring 
drug-resistant diseases being overlooked by current biothreat preparedness 
today?
	DR. BLASER.  It is a little hard for me to answer that question, so 
I may 
answer it a little differently and say that we could think that there are 
three 
threats in front of us, bioterrorism, pandemic and regular influenza, and 
antibiotic resistance.  We can just take these as three major threats, and for 
each of these, we have to develop vaccinology, antivirals, antibiotics, and 
new 
diagnostics, and there is tremendous crossover between these fields.  As Dr. 
O'Toole said, what we do in bioterrorism vaccinology will help us in influenza 
and vice versa, and so, in many ways, we see these natural or manmade threats 
as 
a continuum.  And like Dr. O'Toole, we think, even though the country is 
scaling 
up, it is probably not scaling up enough, and we wouldn't necessarily propose 
to 
take away from bioterrorism to put into the other.  We think this pie has to 
be enlarged and if we don't do it, it is going to cost us much more later.
	MRS. CUBIN.  I certainly agree with that, and I certainly don't think 
my 
bill by any means is the only solution.  I think it is a piece to an enormous 
puzzle.  I would like the rest of you to respond, if you would, on how you 
think 
a bill like what you have heard described without holding you to it, since you 
haven't read the details.  But theoretically, do you think that that could 
fold 
into, help with BioShield, and do you think that this problem that we are 
addressing in that bill would actually fold into--even though I understand 
that 
is not what BioShield does, but should it, should we be considering these 
resistant drugs and the mutation of resistant microorganisms and other mutated 
microorganisms?
	DR. WRIGHT.  I think from the Alliance perspective, we have discussed 
this 
a lot; where does infectious disease and biodefense overlap.  And there is a 
tremendous overlap, and it is very hard to rule out one having an effect on 
the 
other.  We believe that the technology involved in infectious disease can do 
nothing but help with the biodefense products that are needed to be developed, 
especially in the area of engineered biodefense or bioterrorism products.  And 
so that is when someone takes anthrax and makes it antibiotic resistant.  That 
is when this type of bill and the technology could really help out events.
	MRS. CUBIN.  Mr. Young.
	MR. YOUNG.  Thank you.  I have an industry infectious disease 
background, 
it is a little stale, but I think what I would say on this is that it sounds 
to 
me like a bill that supports the effort to identify new technology targets is 
all to the good so you have a pipeline of new scientific insights coming to 
bear 
that can be used to develop practical applications.  My concern, however, is 
that I think the experience of BioShield so far to date is that the agencies 
involved have insufficient focus on the practical requirements of product 
development where there are some product opportunities a little further down 
the 
pipeline in the development pathway.  NIH has experience in early stage 
research.  They have migrated laterally into product development, but that 
expertise is still substantially undeveloped and we have talked a lot about 
the 
coordination to try and fill the gaps, the funding to support the gaps, to 
move 
the product opportunities along.  So I would agree with the perspective that 
says this is a big puzzle, it is woefully underfunded, and that what you are 
describing should be a piece of the puzzle.
	MRS. CUBIN.  Mr. Cohen, did I see you raise your hand?  Okay.  Dr. 
O'Toole.
	DR. O'TOOLE.  I would just say that a drug-resistant bacteria makes a 
great weapon.
	MRS. CUBIN.  Thank you.  Thank you, Mr. Chairman.
	MR. DEAL.  Thank you.  And thanks to the very distinguished panel. 
Your 
testimony, I think, has added greatly to our consideration of the 
reauthorization of this legislation.  We thank you, and with that, this 
hearing is adjourned.
	[Whereupon, at 3:25 p.m., the subcommittee was adjourned.]


RESPONSE FOR THE RECORD BY THE HON. ALEX M. AZAR, DEPUTY SECRETARY, U.S. 
DEPARTMENT OF HEALTH AND HUMAN SERVICES


The Honorable Tom Allen 
Questions for The Honorable Alex M. Azar. Deputy Secretary
U.S. Department of Health and Human Services
April 6, 2006
Subcommittee on Health
Hearing entitled: ``Project Bioshield Reauthorization Issues"

1. Take a hypothetical case where the Secretary determines that the most 
effective countermeasure to an emerging bio-threat is being developed overseas 
by a foreign-owned manufacturer.  What barriers, if any, are there to the 
procurement of such a countermeasure produced overseas?

As provided by the Project BioShield Act of 2004, security countermeasures are 
drugs, biological products, or devices (as defined under the FD&C Act) which 
are 
among other things, (1) approved or cleared, or (2) have sufficient and 
satisfactory clinical experience or research data to support a reasonable 
conclusion that the countermeasures will qualify for approval or licensing 
within 8 years, or (3) are authorized for emergency use under section 564 of 
the 
FD&C Act.  While the Federal Government would prefer to obtain medical 
countermeasures from domestic sources due to the inherent risks involved in 
product development, imported products manufactured in foreign FDA-inspected 
facilities that meet the criteria established by Project BioShield are 
eligible for BioShield procurement.

Generally speaking,  medical countermeasures produced by foreign manufacturers 
may be legally imported into the U.S. if they are FDA-approved, licensed, or 
cleared, if they are under an investigational new drug application (IND) or an 
investigational device exemption (IDE), or are authorized for emergency use, 
and 
if they are otherwise in compliance with the FD&C Act.  These legal standards 
also apply to domestically produced countermeasures.


2. The Project BioShield Act allows for the purchase of unapproved and 
unlicensed countermeasures if the Secretary determines there is a reasonable 
conclusion that the product would be approved and licensed.  The Act also 
allows 
the Secretary to authorize use of medical products that have not been approved 
by the FDA or HHS if emergency circumstances merit.

a.) Does the authority under this Act, or any other Act, also allow for the 
import of medical products to meet an emergency need if there is no domestic 
source?  

As provided by the Project BioShield Act of 2004, security countermeasures are 
drugs, biological products, or devices (as defined under the FD&C Act) which 
are 
among other things, (1) approved or cleared, or (2) have sufficient and 
satisfactory clinical experience or research data to support a reasonable 
conclusion that the countermeasures will qualify for approval or licensing 
within 8 years, or (3) are authorized for emergency use under section 564 of the 
FD&C Act.  While the Federal Government would prefer to obtain medical 
countermeasures from domestic sources due to the inherent risks involved in 
product development, imported products manufactured in foreign FDA-inspected 
facilities that meet the criteria established by Project BioShield are 
eligible for BioShield procurement.
Generally speaking,  medical countermeasures produced by foreign manufacturers 
may be legally imported into the U.S. if they are FDA-approved, licensed, or 
cleared, if they are under an investigational new drug application (IND) or an 
investigational device exemption (IDE), or are authorized for emergency use, 
and 
if they are otherwise in compliance with the FD&C Act.  These legal standards 
also apply to domestically produced countermeasures.

b.)  If so, does this authority supersede the requirement under the Medicine 
Equity and Drug Safety Act [MEDS] that the Secretary must certify that a 
reimportation of a pharmaceutical product will ``pose no additional risk to the 
public's health and safety? ``

The purpose of the Medicine Equity and Drug Safety Act (MEDS Act) is to 
provide 
a means for prescription drugs manufactured in the United States and exported 
to 
certain foreign countries to be reimported from those countries for sale to 
American consumers by any pharmacist or wholesaler.  BioShield countermeasures 
are developed and purchased through contracts with the Federal Government for 
the purpose of safeguarding the homeland and are not available for commercial 
sale.  Therefore, the provisions established in the MEDS Act are not relevant 
within the context of Project BioShield procurements.  The Project BioShield 
Act of 2004 is a unique statutory provision that addresses the need for 
countermeasures that address chemical, biological, nuclear, and radiological 
(CBERN) threats.  


3. What remedies does the U.S. government have if confronted with the case 
where 
the Secretary finds that the U.S. patent holder to a particular countermeasure 
has insufficient manufacturing capacity to produce a sufficient quantity of 
the product to meet a bio-threat?  

As part of the BioShield award process, prior to the contract award, qualified 
experts from industry, academia, and government perform technical evaluation 
of 
BioShield proposals to ensure that contractors have suitable manufacturing 
capacity to meet strict government requirements.  Prior to award, the 
government 
requests information from contractors concerning their current manufacturing 
capabilities, the proposed production plan, and the estimated manufacturing 
capacity available to expedite the manufacture of the specified doses of 
product 
in the event of a national emergency. A contract would not be awarded if it 
appeared that the applicant has insufficient capacity to deliver the needed 
product.  


4. Take the case where the Secretary determines that there is insufficient 
domestic manufacturing capacity for a countermeasure to meet a bio-threat, but 
that there is sufficient capacity overseas to produce generic versions of the 
same countermeasure.  Does the Secretary have the ability or the authority to 
import such countermeasures in such circumstance?  

As noted in the answer to question one above, the BioShield Act does have 
provisions to obtain countermeasures from either domestic or foreign sources.  
The issue of manufacturing capacity is addressed in question three above.    
Products acquired under Project BioShield are solely for national security 
purposes.  This program is focused on the development of new countermeasures - 
products for which generic versions generally would not exist. 



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