Project Bioshield: Actions Needed to Avoid Repeating Past	 
Problems with Procuring New Anthrax Vaccine and Managing the	 
Stockpile of Licensed Vaccine (23-OCT-07, GAO-08-88).		 
                                                                 
The anthrax attacks in September and October 2001 highlighted the
need to develop medical countermeasures. The Project BioShield	 
Act of 2004 authorized the Department of Health and Human	 
Services (HHS) to procure countermeasures for a Strategic	 
National Stockpile. However, in December 2006, HHS terminated the
contract for a recombinant protective antigen (rPA) anthrax	 
vaccine because VaxGen failed to meet a critical contractual	 
milestone. Also, supplies of the licensed BioThrax anthrax	 
vaccine already in the stockpile will start expiring in 2008. GAO
was asked to identify (1) factors contributing to the failure of 
the rPA vaccine contract and (2) issues associated with using the
BioThrax in the stockpile. GAO interviewed agency and industry	 
officials, reviewed documents, and consulted with biodefense	 
experts.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-88						        
    ACCNO:   A77528						        
  TITLE:     Project Bioshield: Actions Needed to Avoid Repeating Past
Problems with Procuring New Anthrax Vaccine and Managing the	 
Stockpile of Licensed Vaccine					 
     DATE:   10/23/2007 
  SUBJECT:   Anthrax						 
	     Defense procurement				 
	     Emergency preparedness				 
	     Safety regulation					 
	     Product evaluation 				 
	     Trials						 
	     Strategic national stockpile			 
	     Research and development				 
	     Immunization programs				 
	     Procurement planning				 
	     Emergency medical services 			 
	     Federal agencies					 
	     Federal regulations				 
	     Procurement					 
	     Risk assessment					 
	     Risk management					 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-08-88

   

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to [email protected]. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

October 2007: 

Project Bioshield: 

Actions Needed to Avoid Repeating Past Problems with Procuring New 
Anthrax Vaccine and Managing the Stockpile of Licensed Vaccine: 

Project Bioshield: 

GAO-08-88: 

GAO Highlights: 

Highlights of GAO-08-88, a report to congressional requesters. 

Why GAO Did This Study: 

The anthrax attacks in September and October 2001 highlighted the need 
to develop medical countermeasures. The Project BioShield Act of 2004 
authorized the Department of Health and Human Services (HHS) to procure 
countermeasures for a Strategic National Stockpile. However, in 
December 2006, HHS terminated the contract for a recombinant protective 
antigen (rPA) anthrax vaccine because VaxGen failed to meet a critical 
contractual milestone. Also, supplies of the licensed BioThrax anthrax 
vaccine already in the stockpile will start expiring in 2008. GAO was 
asked to identify (1) factors contributing to the failure of the rPA 
vaccine contract and (2) issues associated with using the BioThrax in 
the stockpile. GAO interviewed agency and industry officials, reviewed 
documents, and consulted with biodefense experts. 

What GAO Found: 

Three major factors contributed to the failure of the first Project 
BioShield procurement effort for an rPA anthrax vaccine. First, HHSï¿½s 
Office of the Assistant Secretary for Preparedness and Response (ASPR) 
awarded the procurement contract to VaxGen, a small biotechnology firm, 
while VaxGen was still in the early stages of developing a vaccine and 
had not addressed many critical manufacturing issues. This award 
preempted critical development work on the vaccine. Also, the contract 
required VaxGen to deliver 25 million doses of the vaccine in 2 years, 
which would have been unrealistic even for a larger manufacturer. 
Second, VaxGen took unrealistic risks in accepting the contract terms. 
VaxGen officials told GAO that they accepted the contract despite 
significant risks due to (1) the aggressive delivery time line for the 
vaccine, (2) VaxGenï¿½s lack of in-house technical expertiseï¿½a condition 
exacerbated by the attrition of key company staff as the contract 
progressedï¿½and (3) VaxGenï¿½s limited options for securing any additional 
funding needed. 

Third, important Food and Drug Administration (FDA) requirements 
regarding the type of data and testing required for the rPA anthrax 
vaccine to be eligible for use in an emergency were not known at the 
outset of the procurement contract. In addition, ASPRï¿½s anticipated use 
of the rPA anthrax vaccine was not articulated to all parties clearly 
enough and evolved over time. Finally, according to VaxGen, the 
purchase of BioThrax for the stockpile as a stopgap measure raised the 

bar for the VaxGen vaccine. All these factors created confusion over 
the acceptance criteria for VaxGenï¿½s product and significantly 
diminished VaxGenï¿½s ability to meet contract time lines. ASPR has 
announced its intention to issue another request for proposal for an 
rPA anthrax vaccine procurement but, along with other HHS components, 
has not analyzed lessons learned from the first contractï¿½s failure and 
may repeat earlier mistakes. According to industry experts, the lack of 
specific requirements is a cause of concern to the biotechnology 
companies that have invested significant resources in trying to meet 
government needs and now question whether the government can clearly 
define future procurement contract requirements. 

GAO identified two issues related with the use of the BioThrax in the 
Strategic National Stockpile. First, ASPR lacks an effective strategy 
to minimize the waste of BioThrax. Starting in 2008, several lots of 
BioThrax in the Strategic National Stockpile will begin to expire. As a 
result, over $100 million per year could be lost for the life of the 
vaccine currently in the stockpile. ASPR could minimize such potential 
waste by developing a single inventory system with DODï¿½a high-volume 
user of BioThraxï¿½with rotation based on a first-in, first-out 
principle. DOD and ASPR officials identified a number of obstacles to 
this type of rotation which may require legislative action. Second, 
ASPR planned to use three lots of expired BioThrax vaccine in the 
stockpile in the event of an emergency. This would violate FDA rules, 
which prohibit using an expired vaccine, and could also undermine 
public confidence because the vaccineï¿½s potency could not be 
guaranteed. 

What GAO Recommends: 

GAO is recommending that the HHS Secretary ensure that (1) for future 
procurements the concept of use and all critical requirements for 
medical countermeasures are clearly articulated at the outset, (2) 
expired stockpile vaccines are destroyed, and (3) the HHS and the 
Department of Defense (DOD) Secretaries develop an integrated stockpile 
for BioThrax with rotation based on a first-in, first-out principle. 

HHS and DOD generally concurred with GAOï¿½s recommendations but 
identified legal challenges that may require legislative action. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-88]. For more information, contact Keith 
Rhodes at (202) 512-6412 or [email protected] 

[End of section] 

Contents: 

Letter: 

Scope and Methodology: 

Results in Brief: 

Background: 

Several Factors Contributed to the Failure of ASPR's First Project 
BioShield Effort for the Production of an rPA Anthrax Vaccine: 

ASPR Lacks an Effective Strategy to Minimize Waste in the Strategic 
National Stockpile and Plans to Use Expired Anthrax Vaccine: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Time Line of Events in the First rPA Anthrax Vaccine 
Development and Procurement Effort: 

Appendix II: Comments from the Department of Health and Human Services: 

Appendix III: Comments from the Department of Defense: 

Abbreviations: 

ASPR: Office of the Assistant Secretary for Preparedness and Response: 

AVA: Anthrax Vaccine Adsorbed: 

AVIP: Anthrax Vaccine Immunization Program: 

BARDA: Biomedical Advanced Research and Development Authority: 

CBER: Center for Biologics Evaluation and Research: 

CBRN: chemical, biological, radiological, or nuclear: 

CDC: Centers for Disease Control: 

cGMP: current Good Manufacturing Practices: 

DHS Department of Homeland Security: 

DOD: Department of Defense: 

EUA emergency use authorization: 

FDA: Food and Drug Administration: 

HHS: Department of Health and Human Services: 

IND: investigational new drug: 

IOM: Institute of Medicine: 

NIAID: National Institute of Allergy and Infectious Diseases: 

NIH: National Institutes of Health: 

PHEMCE: Public Health Emergency Medical Countermeasure Enterprise: 

PTA: population threat assessment: 

RFI: request for information: 

RFP: request for proposal: 

rPA: recombinant protective antigen: 

TRL: Technology Readiness Level: 

United States Government Accountability Office: 

Washington, DC 20548: 

October 23, 2007: 

The Honorable Edward M. Kennedy: 
Chairman: 
Committee on Health, Education, Labor and Pensions: 
United States Senate: 

The Honorable Joseph I. Lieberman: 
Chairman: 
The Honorable Susan M. Collins: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Richard Burr: 
United States Senate: 

The anthrax attacks in September and October 2001 highlighted major 
gaps in our civilian preparedness to respond to health emergencies that 
threaten national security. These incidents also led the Congress and 
the federal government to focus attention on the importance of 
developing new drugs, vaccines, and therapeutics to protect U.S. 
citizens. 

In 2002, in response to the anthrax attacks, the National Institute of 
Allergy and Infectious Diseases (NIAID) within the National Institutes 
of Health (NIH) launched an effort to rapidly develop a second 
generation recombinant protective antigen (rPA) anthrax 
vaccine.[Footnote 1] While there is already a licensed anthrax vaccine 
(BioThrax), it is given in six doses over 18 months followed by an 
annual booster. NIAID wanted to have a vaccine that could be 
administered in an immunization series of not more than three 
doses.[Footnote 2] 

In the late 1980s, Department of Defense (DOD) research identified an 
rPA anthrax vaccine, created with a process that (1) is fully defined, 
quantified, and controlled in terms of protective antigens; (2) showed 
development potential; and (3) required fewer doses. DOD researchers 
developed a fully defined manufacturing process to produce highly 
purified rPA. The researchers found that they could protect animals 
using this rPA with fewer doses than the existing licensed 
vaccine.[Footnote 3] In 2002, the Institute of Medicine (IOM) stated 
that although AVA--Anthrax Vaccine Adsorbed, now called BioThrax--is 
safe and effective for use, "it is far from optimal."[Footnote 4] The 
IOM supported the development of a new anthrax vaccine. According to 
the Department of Health and Human Services (HHS), when an rPA vaccine 
is fully developed, it will address the shortcomings of the AVA vaccine 
identified in the IOM report.[Footnote 5] 

In 2002 and 2003, NIAID awarded development contracts for rPA vaccines 
to two companies--VaxGen and Avecia. VaxGen was a small U.S. 
biotechnology company. According to NIAID, one of the objectives was to 
demonstrate how manufacturing efforts might be increased to support 
creation of a national stockpile of medical countermeasures. 

The Project BioShield Act of 2004 formalized this initiative and 
authorized the Secretary of HHS, who in turn entrusted the Office of 
the Assistant Secretary for Preparedness and Response (ASPR)[Footnote 
6] with responsibility for acquiring and ensuring the management of and 
accounting for a Strategic National Stockpile of medical 
countermeasures.[Footnote 7] It is designed to supplement and resupply 
state and local public health agencies in the event of a national 
emergency anywhere and anytime within the United States or its 
territories. Among other medical countermeasures, this stockpile 
contained, as of June 2007, about 10 million doses of BioThrax, the 
licensed anthrax vaccine.[Footnote 8] Since doses of BioThrax, like 
other vaccines, have an expiration date, these doses will be disposed 
of if they are not used before their expiration date. 

The only other large user of BioThrax vaccine is DOD, which has 
procured its own inventory of the vaccine. DOD has a mandatory Anthrax 
Vaccine Immunization Program (AVIP) for military personnel, emergency- 
essential DOD civilians, and contractors, based on defined geographic 
areas or roles. The policy also allows personnel previously immunized 
against anthrax, who are no longer deployed to high-threat areas, to 
receive follow-up vaccine doses and booster shots on a voluntary basis. 

In November 2004, ASPR awarded VaxGen a procurement contract for $877.5 
million for the manufacture and delivery of 75 million doses of its rPA 
anthrax vaccine to the Strategic National Stockpile. Two years later, 
in December 2006, ASPR terminated VaxGen's contract for failure to meet 
a critical contractual milestone. The failure of this procurement 
effort raised larger questions regarding the country's ability to 
develop a new anthrax vaccine and a robust and sustainable biodefense 
medical countermeasure industry by building a partnership between 
pharmaceutical and biotechnology firms and the government. The biotech 
industry has raised concerns whether the government can clearly define 
its requirements for future procurement contracts. 

In our May 2006 testimony, we concluded that ASPR's procurement 
strategy for rPA anthrax vaccine had been very aggressive. We stated 
that "it is important to understand the unique issues at stake in this 
early phase of implementation of the biodefense strategy. The rest of 
the biotechnology sector will be watching to see whether the industry 
and the U.S. government can make this partnership work. Issues with 
this contract might have an effect beyond just this individual vaccine 
procurement. They could have an impact on how the biotechnology 
industry responds to government overtures in the future for the 
development and procurement of medical countermeasures for the many 
biothreat agents still to be addressed." [Footnote 9] 

To assist in ongoing efforts to address these concerns, you asked that 
we identify (1) factors that contributed to the failure of ASPR's first 
Project BioShield procurement effort with VaxGen for an rPA anthrax 
vaccine and (2) issues associated with using the licensed anthrax 
vaccine, BioThrax, in the Strategic National Stockpile. 

Scope and Methodology: 

To determine what factors contributed to the failure of ASPR's 
procurement effort with VaxGen, we interviewed officials from HHS's 
components--ASPR, NIAID, the Food and Drug Administration (FDA), and 
the Centers for Disease Control and Prevention (CDC). In addition, we 
reviewed documents these agencies provided. We visited and interviewed 
the officials of the two companies--Avecia and VaxGen--that NIAID 
contracted with to develop the new rPA anthrax vaccine. We also talked 
to officials of several biotech companies that are currently working on 
biodefense medical countermeasures. We consulted with a small group of 
experts in the manufacturing of biodefense vaccines to ensure that our 
assessments were accurate. Finally, we reviewed scientific literature 
on vaccine development, manufacturing, and safety and efficacy, 
including regulatory requirements for licensing. 

To identify issues associated with using the licensed anthrax vaccine 
(BioThrax) in the stockpile, we interviewed officials from ASPR, CDC, 
and DOD. In addition, we reviewed documents these agencies provided and 
analyzed data on stockpile inventory of the licensed anthrax vaccine. 
We visited and interviewed officials from Emergent Biosolutions, the 
company that manufactures the licensed anthrax vaccine. We also talked 
to officials of several biotech companies that are currently working on 
biodefense medical countermeasures to obtain their views on ways to 
minimize waste in the stockpile. We conducted our review from June 2007 
through August 2007 in accordance with generally accepted government 
auditing standards. 

Results in Brief: 

Three major factors contributed to the failure of the first Project 
BioShield procurement effort. First, ASPR awarded the first BioShield 
procurement contract to VaxGen when its product was at a very early 
stage of development and many critical manufacturing issues (such as 
stability[Footnote 10] and scale-up production[Footnote 11]) had not 
been addressed. ASPR officials told us that they felt a sense of 
urgency to demonstrate to the public that a new, improved vaccine was 
coming; they also stated that at the time of the award, they were 80 
percent to 90 percent confident about VaxGen's chances of success. 
These officials based this confidence level on a subjective assessment 
and not on objective tools to determine a product's level of maturity. 
This award--several years before planned completion of earlier and 
uncompleted NIAID development contracts with VaxGen--preempted critical 
development work. Similarly, the requirement to deliver 75 million 
doses of rPA anthrax vaccine was not based on objective data. This 
requirement, according to the industry experts, would have been 
unrealistic for even a large pharmaceutical firm, given that the 
product was at an early stage of development. 

Second, VaxGen took unrealistic risks in accepting the contract terms. 
According to VaxGen officials, they understood that their chances of 
success were limited. Nonetheless, they accepted the contract terms in 
spite of (1) the aggressive delivery time line, (2) their lack of in- 
house technical expertise in stability and vaccine formulation--a 
condition exacerbated by the attrition of key staff from the company as 
the contract progressed--and (3) their limited options for securing 
additional funding should the need arise for additional testing 
required to meet regulatory requirements. 

Third, important FDA requirements regarding the type of data and 
testing required for the rPA anthrax vaccine to be eligible for use in 
an emergency were not known--to FDA, NIAID, ASPR, and VaxGen--at the 
outset of the procurement contract. They were defined later when FDA 
introduced new guidance on emergency use authorization (EUA). In 
addition, ASPR's anticipated use of the rPA anthrax vaccine was not 
articulated to all parties clearly enough and evolved over time. 
Finally, according to VaxGen, the purchase of BioThrax for the 
stockpile as a stopgap measure raised the requirement for using the 
VaxGen rPA vaccine. All of these factors created confusion over the 
acceptance criteria for VaxGen's product and significantly diminished 
VaxGen's ability to meet contract time lines. 

ASPR had announced its intention to issue another request for proposal 
for an rPA anthrax vaccine procurement in 2007 but had not done so at 
the time of this report.[Footnote 12] Since ASPR and other HHS 
components involved have not completed any formal lessons-learned 
exercise from the first procurement's failure, they may repeat their 
mistakes in the absence of a corrective plan. According to industry 
experts, the lack of clear requirements is a cause of concern to 
companies asked to partner with the government since they invest 
significant resources in trying to meet government needs and now 
question whether the government can clearly define its requirements for 
future procurement contracts. 

We identified two issues related to using the licensed anthrax vaccine, 
BioThrax, in the Strategic National Stockpile: First, ASPR lacks an 
effective strategy to minimize waste.[Footnote 13] Vaccine valued at 
more than $12 million has already expired and is no longer usable. 
Without an effective management strategy in the future, over $100 
million per year could be lost for the life of the licensed anthrax 
vaccine currently in the stockpile. ASPR could minimize such potential 
waste by developing a single inventory system for BioThrax with DOD, 
with rotation based on a first-in, first-out principle. DOD and ASPR 
officials told us that they discussed the rotation option in 2004 but 
identified several obstacles. Specifically, since the funding to 
purchase BioThrax comes from DOD and HHS appropriations, respectively, 
ASPR officials believe funding transfer may be a problem. However, DOD 
officials told us that funding is not an issue. DOD and ASPR officials 
told us that they have used different authorities to indemnify the 
manufacturer against any losses or problems that may arise from use of 
the vaccine.[Footnote 14] Finally, since DOD vaccinates its troops at 
various locations around the world, there may be logistical 
distribution issues. DOD officials acknowledged that these issues could 
be resolved. 

The second issue related to use of the BioThrax in the Strategic 
National Stockpile is ASPR's planned use of expired vaccine in 
violation of FDA's current rules. According to CDC, ASPR told CDC not 
to dispose of three lots of BioThrax vaccine that expired in 2006 and 
2007. ASPR officials told us that the agency's decision was based on 
the possible need to use these lots of vaccines in an emergency. 
However, FDA rules prohibit the use of expired vaccine.[Footnote 15] 
Thus, ASPR's planned use of expired vaccine would violate FDA's current 
rules and could undermine public confidence because ASPR would be 
unable to guarantee the potency of the vaccine. 

To help ensure the success of future medical countermeasures 
procurement, we recommend that the Secretary of HHS direct ASPR, NIAID, 
FDA, and CDC to ensure that the concept of use and all critical 
requirements for such procurements are clearly articulated at the 
outset. 

To ensure public confidence and comply with FDA's current rules, we 
recommend that the Secretary of HHS direct ASPR to destroy the expired 
BioThrax vaccine in the stockpile. 

To minimize waste of the BioThrax anthrax vaccine in the stockpile, we 
recommend that the Secretaries of HHS and DOD develop a single 
integrated inventory system for the licensed anthrax vaccine, with 
rotation based on a first-in, first-out principle. 

HHS and DOD provided written comments on a draft of this report and 
generally concurred with our recommendations. In addition, with regard 
to our recommendation on integrated stockpile, they identified funding 
and legal challenges to developing an integrated inventory system for 
BioThrax in the stockpile, which may require legislative action. 
Although HHS and DOD use different authorities to address BioThrax 
liability and funding issues, both authorities could apply to either 
DOD or HHS; consequently, indemnity does not appear to be an 
insurmountable obstacle for future procurements. 

Background: 

Following the anthrax attacks of 2001, the federal government 
determined that it would need additional medical countermeasures (for 
example, pharmaceuticals, vaccines, diagnostics, and other treatments) 
to respond to an attack involving chemical, biological, radiological, 
or nuclear (CBRN) agents. 

Project BioShield: 

The Project BioShield Act of 2004 (Public Law 108-276) was designed to 
encourage private companies to develop civilian medical countermeasures 
by guaranteeing a market for successfully developed countermeasures. 

The Project BioShield Act (1) relaxes some procedures for bioterrorism- 
related procurement, hiring, and research grant awarding; (2) allows 
for the emergency use of countermeasures not approved by FDA; and (3) 
authorizes 10-year funding (available through fiscal year 2013) to 
encourage the development and production of new countermeasures for 
CBRN agents. The act also authorizes HHS to procure these 
countermeasures for the Strategic National Stockpile. 

Project BioShield is a procurement program that allows the government 
to enter into contracts to procure countermeasures while they still are 
in development, up to 8 years before product licensure is expected. 
Under this program, the government agrees to buy a certain quantity of 
successfully developed countermeasures for the Strategic National 
Stockpile at a specified price once the countermeasure meets specific 
requirements. The government pays the agreed-upon amount only after 
these requirements are met and the product is delivered to the 
Strategic National Stockpile. If the product does not meet the 
requirements within the specified time frame, the contract can be 
terminated without any payment to the contractor. Thus, while Project 
BioShield reduces the producer's market risk--that is, the possibility 
that no customer will buy the successfully developed product--it does 
not reduce the development risk to the producer--that is, the 
possibility that the countermeasure will fail during development. 

In December 2006, the Pandemic and All-Hazards Preparedness Act (Public 
Law 109-417) modified the Project BioShield Act to allow for milestone- 
based payments before countermeasure delivery for up to half of the 
total award. Within HHS, the Biomedical Advanced Research and 
Development Authority (BARDA) has the authority to directly fund the 
advanced development of countermeasures that are not eligible for 
Project BioShield contracts. 

Agency Roles in Developing, Procuring, and Stockpiling Medical 
Countermeasures: 

Project BioShield procurement involves actions by the Department of 
Homeland Security (DHS), HHS (including ASPR, NIAID, FDA, and CDC), and 
an interagency working group. 

DHS's Role: 

The first step in the Project BioShield acquisition process is to 
determine whether a particular CBRN agent poses a material threat to 
national security. DHS performs this analysis, which is generally 
referred to as a population threat assessment (PTA). On the basis of 
this assessment, the DHS Secretary determines whether that agent poses 
a material threat to national security. The Project BioShield Act of 
2004 requires such a written PTA for procurements using BioShield funds 
and authorities. This declaration neither addresses the relative risk 
posed by an agent nor determines the priority for acquisition, which is 
solely determined by ASPR. Furthermore, the issuance of a PTA does not 
guarantee that the government will pursue countermeasures against that 
agent. DHS has issued PTAs for 13 agents, including the biological 
agents that cause anthrax; multi-drug-resistant anthrax; botulism; 
glanders; meliodosis; tularemia; typhus; smallpox; plague; and the 
hemorrhagic fevers Ebola, Marburg, and Junin. 

HHS's Role: 

Various offices within HHS (ASPR, NIAID, FDA, and CDC) fund the 
development research, procurement, and storage of medical 
countermeasures, including vaccines, for the Strategic National 
Stockpile. 

ASPR's role: ASPR is responsible for the entire Project BioShield 
contracting process, including issuing requests for information and 
requests for proposals, awarding contracts, managing awarded contracts, 
and determining whether contractors have met the minimum requirements 
for payment. ASPR maintains a Web site detailing all Project BioShield 
solicitations and awards. 

ASPR has the primary responsibility for engaging with the industry and 
awarding contracts for large-scale manufacturing of licensable 
products, including vaccines, for delivery into the Strategic National 
Stockpile. With authorities recently granted, BARDA will be able to use 
a variety of funding mechanisms to support the advanced development of 
medical countermeasures and to award up to 50 percent of the contract 
as milestone payments before purchased products are delivered. 

NIAID's role: NIAID is the lead agency in NIH for early candidate 
research and development of medical countermeasures for biodefense. 
NIAID issues grants and awards contracts for research on medical 
countermeasures exploration and early development, but it has no 
responsibility for taking research forward into marketable products. 

FDA's role: Through its Center for Biologics Evaluation and Research 
(CBER), FDA licenses many biological products, including vaccines, and 
the facilities that produce them. Manufacturers are required to comply 
with current Good Manufacturing Practices regulations, which regulate 
personnel, buildings, equipment, production controls, records, and 
other aspects of the vaccine manufacturing process. FDA has also 
established the Office of Counterterrorism Policy and Planning in the 
Office of the Commissioner, which issued the draft Guidance on the 
Emergency Use Authorization of Medical Products in June 2005. This EUA 
guidance describes in general terms the data that should be submitted 
to FDA, when available, for unapproved products or unapproved uses of 
approved products that HHS or another entity wishes FDA to consider for 
use in the event of a declared emergency. The final EUA guidance was 
issued in July 2007. 

CDC's role: Since 1999, CDC has had the major responsibility for 
managing and deploying the medical countermeasures stored in the 
Strategic National Stockpile. The Omnibus Consolidated and Emergency 
Supplemental Appropriations Act (Public Law 105-277) first provided the 
stockpile with a fund specially appropriated for purchases. Since then, 
CDC has maintained this civilian repository of medical countermeasures, 
such as antibiotics and vaccines. 

DOD's Role: 

DOD is not currently a part of Project BioShield. Beginning in 1998, 
DOD had a program to vaccinate all military service members with 
BioThrax. DOD's program prevaccinates personnel for deployment to Iraq, 
Afghanistan, and the Korean peninsula with BioThrax. For other 
deployments, this vaccination is voluntary. DOD also has a program to 
order, stockpile, and use the licensed anthrax vaccine. DOD estimates 
its needs for BioThrax doses and bases its purchases on that estimate. 

Interagency Working Group: 

Multiple agencies, including HHS and DHS, provide input on priority- 
setting and requirements activities. For BioShield purchases, the 
Secretaries of HHS and DHS prepare a joint recommendation, which 
requires presidential approval before HHS enters into a procurement 
contract. The Secretary of HHS currently coordinates the interagency 
process; the National Science and Technology Council previously handled 
the coordination. 

The Nature of Anthrax and the Anthrax Vaccine: 

The Nature of Anthrax: 

Anthrax is a rare but serious acute infectious disease that must be 
treated quickly with antibiotics. Anthrax is caused by the spore- 
forming bacterium Bacillus anthracis. It occurs most commonly in 
herbivores in agricultural regions that have less effective veterinary 
and public health programs. Anthrax can infect humans who have been 
exposed to infected animals or products from infected animals such as 
hide, hair, or meat. Human anthrax occurs rarely in the United States 
from these natural causes. However, the anthrax exposures in September 
and October 2001 through mail intentionally contaminated with anthrax 
spores resulted in illness in 22 persons and the death of 5. 

The Licensed Vaccine for Anthrax: 

An FDA-licensed anthrax vaccine, BioThrax, has been available since 
1970. The vaccine has been recommended for laboratory workers who are 
involved in the production of cultures of anthrax or who risk repeated 
exposure to anthrax by, for example, conducting confirmatory or 
environmental testing for anthrax in the U.S. Laboratory Response 
Network for Bioterrorism laboratories; persons who may be required to 
make repeated entries into known Bacillus anthracis contaminated areas 
after a terrorist attack, such as remediation workers; and persons who 
work with imported animal hides, furs, or similar materials, if the 
industry standards and restrictions that help to control the disease 
are insufficient to prevent exposure to anthrax spores. 

Preventive anthrax vaccine is not recommended for civilians who do not 
have an occupational risk. However, in 1998, DOD began a mandatory 
program to administer the vaccine to all military personnel for 
protection against possible exposure to anthrax-based biological 
weapons. By late 2001, roughly 2 million doses of the vaccine had been 
administered, most of them to U.S. military personnel. As the 
vaccination program proceeded, some military personnel raised concerns 
about the safety and efficacy of the vaccine.[Footnote 16] 

The BioShield program stockpiled BioThrax for the Strategic National 
Stockpile for postexposure use in the event of a large number of U.S. 
civilians being exposed to anthrax. ASPR officials characterized the 
acquisition of the licensed vaccine as a "stopgap" measure as they also 
have been engaged in the development and purchase of a new rPA anthrax 
vaccine. ASPR had already acquired 10 million doses of BioThrax from 
Emergent BioSolutions by 2006 and recently purchased an additional 10 
million doses. 

The Vaccine Development Process: 

Vaccine research and development leading to FDA approval for use is a 
long and complex process. It may take 15 years and, according to FDA, 
cost from $500 million to $1.2 billion and require specialized 
expertise. 

Vaccines are complex biological products given to a person or animal to 
stimulate an immune reaction the body can "remember" if it is exposed 
to the same pathogen later.[Footnote 17] In contrast to most drugs, 
they have no simple chemical characterization. As a result, evaluating 
them involves measuring their effects on living organisms, and their 
quality can be guaranteed only through a combination of in-process 
tests, end-product tests, and strict controls of the entire 
manufacturing process. 

Vaccines are highly perishable and typically require cold storage to 
retain potency. Even if they are stored at the recommended temperature, 
most vaccines have expiration dates beyond which they are considered 
outdated and should not be used. A great deal of attention is directed 
to using the vaccine before its expiration date. For example, a recent 
CDC manual advises users: "Check expiration date on container" and 
"rotate stock so that the earliest dated material is used first." After 
the storage vial has been opened, the vaccine begins to deteriorate 
quickly in many cases, often necessitating the opened or reconstituted 
vaccine to be used within minutes to hours or discarded."[Footnote 18] 
Since human challenge studies cannot be conducted for CBRN medical 
countermeasures, FDA requires animal efficacy data instead. 

The FDA process for approving a biologic for use in the United States 
begins with an investigational new drug (IND) application.[Footnote 19] 
A sponsor that has developed a candidate vaccine applies to start the 
FDA oversight process of formal studies, regulated by CBER within FDA. 
Phase 1 trials involve safety and immunogenicity studies in a small 
number of healthy volunteer subjects.[Footnote 20] phase 2 and phase 3 
trials gather evidence of the vaccine's effectiveness in ever larger 
groups of subjects, providing the documentation of effectiveness and 
important additional safety data required for licensing. If the data 
raise safety or effectiveness concerns at any stage of clinical or 
animal studies, FDA may request additional information or halt ongoing 
clinical studies.[Footnote 21] 

In vaccine development, clinical trials typically last up to 6 years. 
After they have been successfully completed, the sponsor applies for 
FDA's approval to market the product. FDA's review of the license 
application includes review of the manufacturing facility and process. 
According to FDA, this process is typically completed within 10 months 
for a standard review and 6 months for a priority review. According to 
industry sources, the challenge in scaling up vaccine production from a 
research laboratory to a large manufacturing environment while still 
maintaining quality requires much skill, sophisticated facilities, and 
a great deal of experience. 

Several Factors Contributed to the Failure of ASPR's First Project 
BioShield Effort for the Production of an rPA Anthrax Vaccine: 

Three major factors contributed to the failure of the first Project 
BioShield procurement effort. First, ASPR awarded the first BioShield 
procurement contract to VaxGen when its product was at a very early 
stage of development and many critical manufacturing issues had not 
been addressed. Second, VaxGen took unrealistic risks in accepting the 
contract terms. Third, key parties did not clearly articulate and 
understand critical requirements at the outset. 

HHS Awarded the Procurement Contract Before Development Had Reached an 
Appropriate Level of Maturity: 

ASPR's decision to launch the VaxGen procurement contract for the rPA 
anthrax vaccine at an early stage of development, combined with the 
delivery requirement for 25 million doses within 2 years,[Footnote 22] 
did not take the complexity of vaccine development into consideration 
and was overly aggressive. Citing the urgency involved, ASPR awarded 
the procurement contract to VaxGen several years before the planned 
completion of earlier and uncompleted NIAID development contracts with 
VaxGen and thus preempted critical development work. (For a time line 
of events for the first rPA anthrax vaccine development and procurement 
effort, see appendix I). 

In response to the anthrax attacks of 2001, NIAID was assigned 
responsibility for developing candidate vaccines leading up to 
licensure, purchase, and storage in the stockpile. NIAID envisioned a 
strategy of minimizing risk by awarding contracts to multiple companies 
to help ensure that at least one development effort would be 
successful. NIAID's strategy was appropriate since failure is not 
uncommon in vaccine development. Toward this end, NIAID designed a 
sequence of two contracts--one to follow the other--to advance pilot 
lots of rPA anthrax vaccine through early characterization work, phase 
1 and phase 2 clinical trials, accelerated and real-time (long-term) 
stability testing, and tasks to evaluate the contractor's ability to 
manufacture the vaccine in large quantities according to current Good 
Manufacturing Practices (cGMP).[Footnote 23] Additionally, these 
contracts were cost reimbursable, an appropriate contracting mechanism 
when uncertainties involved in contract performance do not permit cost 
to be estimated with sufficient accuracy to use a fixed-price contract. 
VaxGen was one of the awardees. The other awardee was Avecia, Ltd., of 
Manchester, United Kingdom. NIAID's development effort with Avecia to 
prepare a candidate rPA anthrax vaccine for potential purchase for the 
stockpile is ongoing. 

VaxGen's first development contract, awarded in September 2002, had 
three major requirements: characterize the chemical composition of the 
pilot lot; conduct phase 1 clinical trials to determine the basic 
safety profile of the vaccine; and produce a feasibility plan to 
manufacture, formulate, fill and finish, test, and deliver up to 25 
million doses of cGMP vaccine. The initial period of performance for 
this first contract was 15 months, to be completed in September 2003. 
However, NIAID twice extended the period of performance to accommodate 
problems, including stability testing. The final completion date of the 
contract was December 2006. 

The second development contract was awarded to VaxGen in September 2003 
to continue development of its vaccine. This contract covered 36 months 
and was scheduled to end in October 2006. Three of the major 
requirements were to (1) manufacture, formulate, fill, finish, release, 
and deliver 3 million to 5 million doses of vaccine from at least three 
different lots that met cGMP requirements; (2) develop, implement, and 
execute accelerated and real-time stability testing programs to ensure 
the safety, sterility, potency, and integrity of the vaccine; and (3) 
conduct phase 2 clinical trials. 

This second development contract covered especially critical steps in 
the development cycle. For example, only during the phase 2 trials is 
the vaccine given to a large enough number of human subjects to further 
project its safety. Under the contract, phase 2 clinical trials, which 
were to determine the optimum dose and dosing regimen, were expected to 
take 2 years to complete.[Footnote 24] This second contract also 
covered accelerated and real-time stability testing programs to ensure 
the safety, sterility, potency, and integrity of the vaccine. Vaccines, 
especially those intended to be stockpiled, need to exhibit the 
necessary stability to ensure they will remain safe and potent for the 
required storage period. 

In early 2004, VaxGen's product entered particularly critical stages of 
development and scale-up production. According to industry officials we 
talked to, the challenge in scaling up vaccine production from a 
research pilot lot to a large manufacturing environment while still 
maintaining quality is not trivial. It requires a great deal of skill, 
sophisticated facilities, and experience. The officials also stated 
that work on the vaccine at this point would have been expected to take 
multiple years to complete, during which time the contractor would work 
back and forth with FDA in evaluating, testing, and then reworking both 
its product and manufacturing capability against criteria for eventual 
licensure. 

However, on November 4, 2004, a little more than a year after NIAID 
awarded VaxGen its second development contract, ASPR awarded the 
procurement contract to VaxGen for 75 million doses of its rPA anthrax 
vaccine. At that time, VaxGen was still at least a year away from 
completing the Phase 2 clinical trials under the second NIAID 
development contract. Moreover, VaxGen was still finishing up work on 
the original stability testing required under the first development 
contract. 

ASPR officials at the time of the award had no objective criteria, such 
as Technology Readiness Levels (TRL), to assess product 
maturity.[Footnote 25] They were, however, optimistic the procurement 
contract would be successful. One official described its chances of 
success at 80 percent to 90 percent. However, a key official at VaxGen 
told us at the same time that VaxGen estimated the chances of success 
at 10 percent to 15 percent. ASPR now estimates that prior to award, 
the rPA vaccine was at a TRL rating of 8. According to industry 
experts, a candidate vaccine product at such a level is generally 
expected to be 5-8 years away from completion and to have only a 30 
percent chance of development into a successful vaccine.[Footnote 26] 

When we asked ASPR officials why they awarded the procurement contract 
when they did, they pointed to a sense of urgency at that time and the 
difficulties in deciding when to launch procurement contracts. However, 
November 2004 was 3 years after the anthrax attacks in 2001, and while 
the sense of urgency was still important, it could have been tempered 
with realistic expectations. According to industry experts, preempting 
the development contract 2 years before completing work--almost half 
its scheduled milestones--was questionable, especially for vaccine 
development work, which is known to be susceptible to technical issues 
even in late stages of development. NIAID officials also told us that, 
in their opinions, it was too early for a BioShield purchase. At a 
minimum, the time extensions for NIAID's first development contract 
with VaxGen to accommodate stability testing should have indicated to 
ASPR that development on its candidate vaccine was far from complete. 

After ASPR awarded VaxGen the procurement contract, NIAID canceled 
several milestones under its development contract with VaxGen to free 
up funds for earlier milestones that VaxGen was having trouble meeting. 
However, this undermined VaxGen's ability to refine product development 
up to the level needed to ensure delivery within the 2-year time frame 
required under the procurement contract. 

VaxGen Took an Unrealistic Risk in Accepting the Procurement Contract, 
Knowing Its Own Technical and Financial Limitations: 

VaxGen officials told us that they understood their chances for success 
were limited and that the contract terms posed significant risks. These 
risks arose from aggressive time lines, VaxGen's limitations with 
regard to in-house technical expertise in stability and vaccine 
formulation--a condition exacerbated by the attrition of key staff from 
the company as the contract progressed--and its limited options for 
securing additional funding should the need arise. 

Industry experts told us that a 2-year time line to deliver 75 million 
filled and finished doses of a vaccine from a starting point just after 
phase 1 trials is a near-impossible task for any company. VaxGen 
officials told us that at the time of the procurement award they knew 
the probability of success was very low, but they were counting on 
ASPR's willingness to be flexible with the contract time line and work 
with them to achieve success. In fact, in May 2006, ASPR did extend the 
contract deadlines to initiate delivery to the stockpile an additional 
2 years. However, on November 3, 2006, FDA imposed a clinical hold on 
VaxGen's forthcoming phase 2 trial after determining that data 
submitted by VaxGen were insufficient to ensure that the product would 
be stable enough to resume clinical testing.[Footnote 27] By that time, 
ASPR had lost faith in VaxGen's technical ability to solve its 
stability problems in any reasonable time frame. When VaxGen failed to 
meet a critical performance milestone of initiating the next clinical 
trial, ASPR terminated the contract. 

According to VaxGen's officials, throughout the two development 
contracts and the Project BioShield procurement contract, VaxGen's 
staff peaked at only 120, and the company was consistently unable to 
marshal sufficient technical expertise. While it is not known how a 
larger pharmaceutical company might have fared under similar time 
constraints, we believe more established pharmaceutical companies have 
staff and resources better able to handle the inevitable problems that 
arise in vaccine development and licensure efforts. For example, 
according to industry experts, a large firm might be able to leverage 
an entire internal department to reformulate a vaccine or pursue 
solutions to a stability issue, while a smaller biotechnology company 
like VaxGen would likely be unable to use more than a few full-time 
scientists. In such situations, the smaller company might have to 
contract out for the necessary support, provided it can be found within 
a suitable time frame. 

External expertise that might have helped VaxGen better understand its 
stability issue was never applied. At one point during the development 
contracts, NIAID--realizing VaxGen had a stability problem with its 
product--convened a panel of technical experts in Washington, D.C. 
NIAID officials told us that at the time of the panel meeting, they 
offered to fund technical experts to work with the company, but VaxGen 
opted not to accept the offer. Conversely, VaxGen officials reported to 
us that at the time NIAID convened the panel of experts, NIAID declined 
to fund the work recommended by the expert panel. 

The lack of available technical expertise was exacerbated when key 
staff at the company began leaving. A senior VaxGen official described 
the attrition problem as "massive." Of special significance, VaxGen's 
Senior Vice President for Research and Development and Chief Scientific 
Officer left during critical phase 2 trials. An official at VaxGen 
described this person's role as key in both development of the assays 
and reformulation of the vaccine.[Footnote 28] 

Finally, VaxGen accepted the procurement contract terms even though the 
financial constraints imposed by the BioShield Act limited its options 
for securing any additional funding needed. In accordance with this 
act, payment was conditional on delivery of a product to the stockpile, 
and little provision could be made, contractually, to support any 
unanticipated or additional development needed--for example, to work 
through issues of stability or reformulation.[Footnote 29] Both 
problems are frequently encountered throughout the developmental life 
of a vaccine. This meant that the contractor would pay for any 
development work needed on the vaccine. VaxGen, as a small 
biotechnology company, had limited internal financial resources and was 
dependent on being able to attract investor capital for any major 
influx of funds. 

In such a firm, fixed-price contractual arrangement, the contractor 
assumes most of the risk because the price is not subject to any 
adjustment based on the contractor's cost experience. Thus, even if the 
contractor costs go up, the delivery price does not. We believe these 
contracts are appropriate in situations where there are no performance 
uncertainties or the uncertainties can be identified and reasonable 
estimates of their cost impact can be made, but this was not the 
situation in the VaxGen procurement contract. VaxGen had to be willing 
to accept the firm, fixed-price contract and assume the risks involved. 
VaxGen did so even though it understood that development on its rPA 
vaccine was far from complete when the procurement contract was awarded 
and that the contract posed significant inherent risks. 

Key Parties Did Not Clearly Articulate and Understand Critical 
Requirements: 

Important requirements regarding the data and testing required for the 
rPA anthrax vaccine to be eligible for use in an emergency were not 
known at the outset of the procurement contract. They were defined in 
2005 when FDA introduced new general guidance on EUA. In addition, 
ASPR's anticipated use of the rPA anthrax vaccine was not articulated 
to all parties clearly enough and evolved over time. Finally, purchase 
of BioThrax raised the requirement for use of the VaxGen rPA vaccine. 
All of these factors created confusion over the acceptance criteria for 
VaxGen's product and significantly diminished VaxGen's ability to meet 
contract time lines. 

Guidance on Emergency Use Authorization Appeared: 

Midcontract and Created Confusion: 

Criteria for product acceptance need to be clearly articulated and 
understood by all parties before committing to a major procurement. 
Terms of art that leave critical requirements unclear are problematic 
in contract language. After VaxGen received its procurement contract, 
draft guidance was issued that addressed the eventual use of any 
unlicensed product in the stockpile. This created confusion over the 
criteria against which VaxGen's product would be evaluated, strained 
relations between the company and the government, and caused a 
considerable amount of turmoil within the company as it scrambled for 
additional resources to cover unplanned testing. 

In June 2005, FDA issued draft EUA guidance, which described for the 
first time the general criteria that FDA would use to determine the 
suitability of a product for use in an emergency.[Footnote 30] This was 
7 months after the award of the procurement contract to VaxGen and 14 
months after the due date for bids on that contract. 

Since the request for proposal for the procurement contract was issued 
and the award itself was made before the EUA guidance was issued, 
neither could take the EUA requirements into consideration. The 
procurement contract wording stated that in an emergency, the rPA 
anthrax vaccine was to be "administered under a 'Contingency Use' 
Investigational New Drug (IND) protocol" and that vaccine acceptance 
into the stockpile is dependent on the accumulation and submission of 
the appropriate data to support the "use of the product (under IND) in 
a postexposure situation." FDA officials told us they do not use the 
phrase "contingency use" under IND protocols. 

When we asked ASPR officials about the requirements for use defined in 
the contract, they said that the contract specifications were 
consistent with the statute and the needs of the stockpile. They said 
their contract used "a term of art" for BioShield products. That is, 
the contractor had to deliver a "usable product" under FDA guidelines. 
The product could be delivered to the stockpile only if sufficient data 
were available to support emergency use. ASPR officials told us that 
FDA would define "sufficient data" and the testing hurdles a product 
needed to overcome to be considered a "usable product." 

While VaxGen and FDA had monthly communication, according to FDA, data 
requirements for emergency use were not discussed until December 2005, 
when VaxGen asked FDA what data would be needed for emergency use. In 
January 2006, FDA informed VaxGen, under its recently issued draft EUA 
guidance, of the data FDA would require from VaxGen for its product to 
be eligible for consideration for use in an emergency. The draft 
guidance described in general FDA's current thinking concerning what 
FDA considered sufficient data and the testing needed for a product to 
be considered for authorization in certain emergencies. 

Because the EUA guidance is intended to create a more feasible protocol 
for using an unapproved product in a mass emergency than the term 
"contingency use under an IND protocol" that ASPR used in the 
procurement contract, it may require more stringent data for safety and 
efficacy. Under an IND protocol, written, informed consent must be 
received before administering the vaccine to any person, and reporting 
requirements identical to those in a human clinical trial are 
required.[Footnote 31] The EUA guidance--as directed by the BioShield 
law--eased both informed consent and reporting requirements. This makes 
sense in terms of the logistics of administering vaccine to millions of 
people in the large-scale, postexposure scenarios envisioned. Because 
EUA guidance defines a less stringent requirement for the government to 
use the product, it correspondingly may require more testing and 
clinical trial work than was anticipated under contingency use. 

Several of the agencies and companies involved in BioShield-related 
work have told us the EUA guidance appears to require a product to be 
further along the development path to licensure than the previous 
contingency use protocols would indicate. VaxGen officials told us that 
if the draft EUA guidance was the measure of success, then VaxGen 
estimated significant additional resources would be needed to complete 
testing to accommodate the expectations under this new guidance. NIAID 
told us that the EUA guidance described a product considerably further 
along the path to licensure (85 percent to 90 percent) than it had 
assumed for a Project BioShield medical countermeasure (30 percent) 
when it initially awarded the development contracts. 

The Concept of Use for the rPA Vaccine Was Not Clearly Articulated to 
All Parties: 

FDA considers a vaccine's concept of use important information to gauge 
the data and testing needed to ensure the product's safety and 
efficacy. Under the EUA statute, FDA must determine on the basis of the 
specific facts presented whether it is necessary and appropriate to 
authorize use of a specific product in an emergency. According to FDA, 
data and testing requirements to support a product's use in an 
emergency context may vary depending on many factors, including the 
number of people to whom the product is expected to be administered. 
The current use of an unlicensed product involves the assessment of 
potential risks and benefits from use of an unapproved drug in a very 
small number of people who are in a potentially life-threatening 
situation. In such situations, because of the very significant 
potential for benefit, safety and efficacy data needed to make the risk 
benefit assessment might be lower than in an emergency situation where 
an unlicensed vaccine might be offered to millions of healthy people. 
This distinction is critical for any manufacturer of a product intended 
for use in such scenarios--it defines the level of data and testing 
required. Product development plans and schedules rest on these 
requirements. 

In late 2005, as VaxGen was preparing for the second phase 2 trial and 
well into its period of performance under the procurement contract, its 
officials participated in meetings, primarily with FDA but also with 
ASPR and NIAID representatives, to receive FDA comments on its product 
development plans and responses to specific requests for regulatory 
advice. VaxGen needed to have a clear understanding of FDA's data and 
testing requirements for the rPA vaccine for the upcoming phase 2 trial 
to be able to plan for and implement the necessary clinical and 
nonclinical work to generate that data. Without it, VaxGen did not have 
adequate means to determine how far along it was toward meeting FDA's 
requirements. 

However, in these meetings, it became clear that FDA and the other 
parties had different expectations for the next phase 2 trial. FDA 
officials concluded from the discussion that VaxGen, ASPR, and CDC 
anticipated the next phase 2 trial to produce meaningful safety and 
efficacy data to support use of the vaccine in a contingency protocol 
under IND. However, FDA officials stated that this was a new idea to 
the agency.[Footnote 32] From FDA's perspective, the purpose of phase 2 
trials was to place the product and sponsor (VaxGen) in the best 
position possible to design and conduct a pivotal phase 3 trial in 
support of licensure.[Footnote 33] The lack of a definition of concept 
of use caused FDA to delay replying to VaxGen until it could confer 
with ASPR and CDC to clarify this issue. Thus, we conclude that neither 
VaxGen nor FDA understood the rPA anthrax vaccine concept of use until 
this meeting. 

Purchase of BioThrax for the Stockpile Raised Requirements for Use of 
rPA Vaccine: 

The introduction of BioThrax into the stockpile undermined the 
criticality of getting an rPA vaccine into the stockpile and, at least 
in VaxGen's opinion, forced FDA to hold it to a higher standard that 
the company had neither the plans nor the resources to achieve. ASPR 
purchased 10 million doses of BioThrax in 2005 and 2006 as a stopgap 
measure for post-exposure situations. After discussions between VaxGen 
and FDA, VaxGen concluded that this raised the bar for its rPA vaccine. 
Although BioThrax is currently licensed for use in pre-exposure, and 
not postexposure, scenarios, the draft EUA guidance states that FDA 
will evaluate each EUA candidate's safety and efficacy profile. The EUA 
guidance states that FDA will "authorize" an unapproved or unlicensed 
product--such as the rPA anthrax vaccine candidate--only if "there is 
no adequate, approved and available alternative." [Footnote 
34]According to the minutes of the meeting between FDA and VaxGen, in 
January 2006, FDA reported that the unlicensed rPA anthrax vaccine 
would be used in an emergency after the stockpiled BioThrax, that is, 
"when all of the currently licensed [BioThrax] had been deployed." This 
diminished the likelihood of a scenario where the rPA vaccine might be 
expected to be used out of the stockpile. 

ASPR Lacks an Effective Strategy to Minimize Waste in the Strategic 
National Stockpile and Plans to Use Expired Anthrax Vaccine: 

We identified two issues related to using the BioThrax in the Strategic 
National Stockpile. First, ASPR lacks an effective strategy to minimize 
waste. As a consequence, based on current inventory, over $100 million 
is likely to be wasted annually, beginning in 2008. Three lots of 
BioThrax vaccine in the stockpile have already expired,[Footnote 35] 
resulting in losses of over $12 million. According to the data provided 
by CDC, 28 lots of BioThrax vaccine will expire in calendar year 2008. 
ASPR paid approximately $123 million for these lots. For calendar year 
2009, 25 additional lots--valued at about $106 million--will reach 
their expiration dates. ASPR could minimize the potential waste of 
these lots by developing a single inventory system with DOD--which uses 
large quantities of the BioThrax vaccine--with rotation based on a 
first-in, first-out principle.[Footnote 36] 

Because DOD is a high-volume user of the BioThrax vaccine, ASPR could 
arrange for DOD to draw vaccine from lots long before their expiration 
dates. These lots could then be replenished with fresh vaccine from the 
manufacturer. DOD, ASPR, industry experts, and Emergent BioSolutions 
(the manufacturer of BioThrax) agree that rotation on a first-in, first-
out basis would minimize waste. 

DOD and ASPR officials told us that they discussed a rotation option in 
2004 but identified several obstacles. In July 2007, DOD officials 
believed they might not be able to transfer funds to ASPR if DOD 
purchases BioThrax from ASPR. However, in response to our draft report, 
DOD informed us that funding is not an issue. However, ASPR continues 
to believe that transfer of funds would be a problem. DOD stated 
smallpox vaccine (Dryvax) procurement from HHS is executed under such 
an arrangement. Further, DOD and ASPR officials told us that they use 
different authorities to indemnify the manufacturer against any losses 
or problems that may arise from use of the vaccine. According to DOD, 
this area may require legislative action to ensure that vaccine 
purchased by ASPR can be used in the DOD immunization program. Finally, 
since DOD vaccinates its troops at various locations around the world, 
there may be logistical distribution issues. A DOD official 
acknowledged that these issues could be resolved. 

Second, ASPR plans to use expired vaccine from the stockpile, which 
violates FDA's current rules.[Footnote 37] Data provided by CDC 
indicated that two lots of BioThrax vaccine expired in December 2006 
and one in January 2007. CDC officials stated that their policy is to 
dispose of expired lots since they cannot be used and continuing 
storage results in administrative costs. FDA rules prohibit the use of 
expired vaccine. 

Nevertheless, according to CDC officials, ASPR told CDC not to dispose 
of the three lots of expired BioThrax vaccine. ASPR officials told us 
that ASPR's decision was based on the possible need to use these lots 
in an emergency. ASPR's planned use of expired vaccine would violate 
FDA's current rules and could undermine public confidence because ASPR 
would be unable to guarantee the potency of the vaccine. 

Conclusions: 

The termination of the first major procurement contract for rPA anthrax 
vaccine raised important questions regarding the approach taken to 
develop a new anthrax vaccine and a robust and sustainable biodefense 
medical countermeasure industry by bringing pharmaceutical and 
biotechnology firms to form a partnership with the government. With the 
termination of the contract, the government does not have a new, 
improved anthrax vaccine for the public, and the rest of the biotech 
industry is now questioning whether the government can clearly define 
its requirements for future procurement contracts. 

Since HHS components have not completed a formal lessons-learned 
exercise after terminating VaxGen's development and procurement 
contracts, these components may repeat the same mistakes in the future 
in the absence of a corrective plan. Articulating concepts of use and 
all critical requirements clearly at the outset for all future medical 
countermeasures would help the HHS components involved in the anthrax 
procurement process to avoid past mistakes. If this is not done, the 
government risks the future interest and participation of the 
biotechnology industry. 

Given that the amount of money appropriated to procure medical 
countermeasures for the stockpile is limited, it is imperative that 
ASPR develop effective strategies to minimize waste. Since vaccines are 
perishable commodities that should not be used after their expiration 
dates, finding other users for the stockpile products before they 
expire would minimize waste. Because DOD requires a large amount of the 
BioThrax vaccine on an annual basis, it could use a significant portion 
of BioThrax in the stockpile before it expires. 

Recommendations for Executive Action: 

To avoid repeating the mistakes that led to the failure of the first 
rPA procurement effort, we recommend that the Secretary of HHS direct 
ASPR, NIAID, FDA, and CDC to ensure that the concept of use and all 
critical requirements are clearly articulated at the outset for any 
future medical countermeasure procurement. 

To ensure public confidence and comply with FDA's current rules, we 
recommend that the Secretary of HHS direct ASPR to destroy the expired 
BioThrax vaccine in the stockpile. 

To minimize waste of the BioThrax vaccine in the stockpile, we 
recommend that the Secretaries of HHS and DOD develop a single 
integrated inventory system for the licensed anthrax vaccine, with 
rotation based on a first-in, first-out principle. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Department of Health and 
Human Services and the Department of Defense for review and comment. 
HHS and DOD provided written comments on our draft, which are reprinted 
in appendixes II and III, respectively. Both agencies also provided 
technical comments, which we have addressed in the report text as 
appropriate. 

HHS and DOD generally concurred with our recommendations. However, with 
regard to our recommendation on an integrated stockpile, they 
identified funding and legal challenges to developing an integrated 
inventory system for BioThrax in the stockpile, which may require 
legislative action. Although HHS and DOD use different authorities to 
address BioThrax liability and funding issues, both authorities could 
apply to either DOD or HHS; consequently, indemnity does not appear to 
be an insurmountable obstacle for future procurements. 

HHS also disagreed with a number of our specific findings. We have 
addressed these areas of disagreement in detailed comments in appendix 
II. 

We are sending copies of this report the Secretary of the Department of 
Defense and the Secretary of the Department of Health and Human 
Services. We are also sending a copy of this report to other interested 
congressional members and committees. In addition, the report will be 
available at no charge on GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions about this report or would 
like additional information, please contact me at (202) 512-6412 or 
[email protected], or Sushil K. Sharma, Ph.D., Dr.PH, at (202) 512-3460 
or [email protected]. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. 

GAO staff who made major contributions to this report included Noah 
Bleicher, William Carrigg, Barbara Chapman, Crystal Jones, Jeff 
McDermott, and Linda Sellevaag. 

Signed by: 

Keith Rhodes, Chief Technologist: 

Center for Technology and Engineering Applied Research and Methods: 

[End of section] 

Appendix I: Time Line of Events in the First rPA Anthrax Vaccine 
Development and Procurement Effort: 

Table 1: 

Year: 2001; 
Month: Oct.-Nov; 
Event: Letters contaminated with anthrax spores sent through U.S. 
Postal Service, resulting in death of five persons. 

Year: 2002; 
Month: April; 
Event: National Institute of Allergy and Infectious Diseases (NIAID) 
issues first rPA anthrax vaccine request for proposal (RFP). 

Year: 2002; 
Month: Sept; 
Event: NIAID awards rPA contracts to Avecia and VaxGen for first RFP. 

Year: 2003; 
Month: May; 
Event: NIAID issues second rPA anthrax vaccine RFP. 

Year: 2003; 
Month: Aug; 
Event: Health and Human Services (HHS) issues request for information 
(RFI) for large-scale manufacturing capabilities for next generation 
anthrax vaccines. 

Year: 2003; 
Month: Oct; 
Event: NIAID awards Avecia and VaxGen contracts for second rPA RFP. 

Year: 2004; 
Month: Mar; 
Event: HHS issues Strategic National Stockpile rPA anthrax vaccine RFP. 

Year: 2004;
Month: July; 
Event: President George W. Bush signs Project BioShield into law. 

Year: 2004;
Month: Nov; 
Event: HHS awards Strategic National Stockpile contract to VaxGen for 
rPA anthrax vaccine procurement. 

Year: 2005; 
Month: May; 
Event: HHS awards Emergent Strategic National Stockpile contract for 5 
million doses of BioThrax Vaccine. 

Year: 2005: 
Month: June; 
Event: Food and Drug Administration (FDA) issues draft Guidance for 
Emergency Use Authorization of Medical Products. 

Year: 2006; 
Month: June; 
Event: NIAID issues RFP for third-generation anthrax vaccine. 

Year: 2006; 
Month: Sept; 
Event: HHS issues broad RFI regarding Technology Readiness Levels for 
medical countermeasures. 

Year: 2006; 
Event: HHS issues draft Public Health Emergency Medical Countermeasure 
Enterprise (PHEMCE) Strategy. 

Year: 2006; 
Month: Nov; 
Event: FDA issues clinical hold notice on Vaxgen's trial. 

Year: 2006; 
Month: Nov; 
Event: HHS issues "cure" notice on VaxGen. 

Year: 2006; 
Month: Dec; 
Event: HHS terminates contract with VaxGen for rPA anthrax vaccine. 

Year: 2007; 
Month: Feb; 
Event: NIAID cancels RFP for third-generation anthrax vaccine. 

Year: 2007; 
Month: Mar; 
Event: HHS issues PHEMCE Strategy. 

Year: 2007; 
Month: Apr; 
Event: HHS issues PHEMCE Implementation Plan. 

Year: [Empty]; 
Month: Apr; 
Event: Year: Biomedical Advanced Research and Development Authority 
(BARDA) releases presolicitation notice for BioThrax. 

Year: [Empty]; 
Month: May; 
Event: BARDA releases sources sought notice for rPA vaccine. 

Source: GAO. 

[End of table] 

[End of section] 

Appendix II: Comments from the Department of Health and Human Services: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

Department Of Health & Human Services: 
Office of the Assistant Secretary for Legislation: 
Washington, D.C. 20201: 

October 4 2007: 

Mr. Keith Rhodes: 
Director/Chief Technologist: 
Center for Technology and Engineering: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Rhodes:

Enclosed are the Department's comments on the U.S. Government 
Accountability Office's (GAO) draft report entitled, "Actions Needed to 
Avoid Repeating Past Problems with Procuring New Anthrax Vaccine and 
Managing Stockpile of Licensed Vaccine" (GAO-08-88). 

The Department has provided several technical comments directly to your 
staff. The Department appreciates the opportunity to review and comment 
on this draft before its publication.

Sincerely,

Signed by: 

Rebecca Hemard for: 

Vincent J. Ventimiglia; 

Assistant Secretary for Legislation: 

General Comments From The U.S. Department Of Health And Human Services 
(HHS) On The U.S. Government Accountability Office's (GAO) Draft 
Report: "Project Bioshield: Actions Needed To Avoid Repeated Past 
Problems With Procuring New Anthrax Vaccine And Managing Stockpile Of 
Licensed Vaccine" (GAO-08-88): 

The U.S. Department of Health and Human Services (HHS) is grateful for 
the opportunity to comment on the draft report from the U.S. Government 
Accountability Office (GAO) entitled Project BioShield: Actions Needed 
to Avoid Repeated Past Problems with Procuring New Anthrax Vaccine and 
Managing Stockpile of Licensed Vaccine. 

Overview: 

Anthrax remains a top priority for the ongoing public health emergency 
preparedness efforts at HHS, and the Department is committed to 
developing and acquiring a robust portfolio of medical countermeasures 
against this threat. This prioritization is reflected in the discussion 
of anthrax medical countermeasures in the HHS Public Health Emergency 
Medical Countermeasures Enterprise (PHEMCE) Implementation Plan for 
Chemical, Biological, Radiological, and Nuclear (CBRN) Threats (HHS 
PHEMCE Implementation Plan), providing a road map for future medical 
countermeasure development and acquisition activities throughout HHS. 

The Department continues to pursue a comprehensive strategy for the 
development and acquisition of products to respond to the threat of 
anthrax. Antibiotics represent the first line of defense to protect the 
nation following an anthrax attack. We currently have over 40 million 
courses of antibiotics in the Strategic National Stockpile (SNS). 
Anthrax vaccines are also an essential element of our national 
preparedness. Vaccines may be given as post-exposure prophylaxis in 
combination with antibiotics to potentially provide longer-term 
protection; this combination may also allow for a reduction in the 
duration of the antibiotic regimen. HHS has awarded contracts for the 
acquisition of nearly 30 million doses of anthrax vaccine since 2005, 
including the recent contract award of 18.75 million doses of Anthrax 
Vaccine Adsorbed (AVA, BioThrax(TM)). In addition, antitoxins are 
necessary to treat individuals with advanced stages of infection, and 
may contribute to a more successful therapeutic outcome. HHS has 
awarded contracts to two manufacturers to deliver antitoxins sufficient 
for treating 30,000 people. These vaccine and antitoxin contracts were 
awarded under the authorities of the Project BioShield Act of 2004. 

Maintaining a diversified medical countermeasure program requires a 
number of concurrent initiatives to improve near-term preparedness 
while also supporting the development of next- generation products. For 
example, while procuring currently available anthrax vaccine, HHS is 
using authorities made available under the Pandemic and Ml-Hazards 
Preparedness Act of 2006 to invest over $40 million in the continued 
development of an rPA anthrax vaccine. This investment complements the 
rPA vaccine program that has been ongoing at the National Institute of 
Allergy and Infectious Diseases (NIAID) since 2002. In addition, the 
Office of the Biomedical Advanced Research and Development Authority 
(BARDA) and NIAID released a Broad Agency Announcement in September 
2007 that is designed to support multiple third generation anthrax 
vaccine candidates. 

(See comment 1): 

This GAO report does not accurately and completely reflect the anthrax 
vaccine programs at the Department of Health and Human Services. 
Evaluations regarding past procurement activities: 

(See comment 2): 

must be considered in the context of the sense of urgency felt in the 
aftermath of the 2001 anthrax attacks, and the authorities available to 
HHS at the time. We are also concerned that the draft report fails to 
recognize the many important strides made in the transparency and 
effectiveness of medical countermeasure initiatives at HHS. The process 
of developing the HHS PHEMCE Strategy and the HHS PHEMCE Implementation 
Plan, published in the spring of 2007, brought together experts from 
across the federal government to come to a consensus on priorities for 
medical countermeasure development and acquisition. This process was 
also informed by substantial input solicited at the 2006 BioShield 
Stakeholders Workshop, and in response to the publication of the draft 
HHSPHEMCE Strategy in September 2006. In addition, the public release 
of these documents provided a clear signal of the path forward to our 
external stakeholders. We continue to improve transparency and foster 
strong relationships with product developers through the Enterprise 
Stakeholder Workshops, BARDA Industry Day, and [hyperlink, 
http://www.MedicalCountermeasures.gov], and through continued dialogue 
with the public through other meetings and forums. Feedback about these 
initiatives from our stakeholders has been universally positive and 
encouraging. 

Below, we have repeated each of the draft recommendations, and 
responded to each. 

Responses to GAO Recommendations Recommendation: To avoid repeating the 
mistakes that led to the failure of the first rPA procurement effort, 
we recommend that the Secretary of HHS direct ASPR, NIAID, FDA, and CDC 
to ensure that the concept of use and all critical requirements are 
clearly articulated at the outset for any future medical countermeasure 
procurement. 

Response: HHS agrees with the importance of clearly establishing and 
articulating the concept of use and critical requirements for each 
medical countermeasure. For this reason, many of the Requests for 
Proposal (RFP) issued through BioShield are preceded by a Request for 
Information (RFI) or draft RFP, to ensure that the final RFP is 
informed by the best scientific and industry expertise possible. In 
furtherance of this goal, HHS has published the HHS PHEMCE 
Implementation Plan, which provides guidance concerning the priorities 
and requirements for future medical countermeasures.

(See comment 3): 

With respect to the rPA procurement process, the concept of use and 
critical requirements for anthrax vaccine have not changed, and are 
clearly articulated in many public documents from HHS, including the 
HHS PHEMCE Implementation Plan. Anthrax vaccine is to be used in 
combination with antibiotics as post-exposure prophylaxis. However, 
more specific requirements for the formulation, dosage, and studies 
necessary to achieve regulatory approval must be made on the basis of 
each individual product, through the process of direct communication 
with FDA that is undertaken by every medical product developer. Given 
that the Project BioShield legislation provides for a time period of 
eight years during which products must achieve licensure and that the 
process of product development can be fraught with unexpected 
complications and delays, it is nearly impossible to know the exact 
regulatory specifications for a product at the beginning of this 
process. Nonetheless, HHS has encouraged: 

(See comment 4): 

and now requires potential bidders to demonstrate early engagement with 
FDA and understanding of regulatory requirements based upon those 
discussions. 

Recommendation: To ensure public confidence and comply with FDA's 
current rules, we recommend that the Secretary of HHS direct ASPR to 
destroy the expired BioThrax vaccine in the stockpile. 

Response: HHS agrees with GAO that expired vaccines cannot be used. The 
Department has never planned to use any expired products in an 
emergency, and we strongly disagree with the claim that the Department 
"planned to use three lots of expired BioThrax vaccine in the stockpile 
in the event of an emergency". HHS fully understands the regulations 
surrounding the use of expired medical products, and has no such plans 
to administer expired doses of BioThrax. The expired vaccine in 
question is being quarantined until a decision on disposition is made. 
HHS continues to develop comprehensive life cycle plans for all medical 
countermeasures in the SNS. 

(See comment 5): 

Recommendation: To minimize waste of the BioThrax vaccine in the 
stockpile, we recommend that the Secretaries of HHS and DOD develop a 
single integrated inventory system for the licensed anthrax vaccine 
with rotation based on a first-in, first-out principle. 

Response: HHS agrees with the importance of an inventory management 
strategy to minimize attrition of BioThrax vaccine doses in the SNS 
resulting from expiration of the product. The Department is engaged in 
a broad effort to develop comprehensive life cycle management plans for 
all medical countermeasures in the SNS. To this end, HHS and the 
Department of Defense (DOD) are currently exploring a number of 
inventory management strategies that would include potential exchange 
of BioThrax between the HHS and DOD stockpiles. However, there are 
important liability issues and funding differences between DOD and HHS 
contracts that currently preclude this exchange. These issues are 
currently the focus of work by both Departments. The efficient transfer 
of short-dated vaccine from HHS to DOD could save the US Government up 
to $25 million per year. The report inaccurately claims that the amount 
of money lost is "over $100 million per year". 

{See comment 6 and comment 7): 

The very nature of these products dictates that they have a fixed 
dating period. If not used during an event, all medical countermeasures 
will eventually expire and will need to be properly discarded. HHS 
continues to work diligently as an effective steward of its 
investments, and seeks to limit unnecessary spending as much as 
possible, but it is inaccurate to suggest that all expired product 
represents wasted or lost investments. 

{See comment 8): 

HHS Response to GAO Findings: 

In addition to our response to specific GAO recommendations above, we 
would like to correct several particular misconceptions and 
inaccuracies contained in the draft report. 

First, HHS strongly disagrees with the assertion that VaxGen's 
candidate rPA vaccine was not sufficiently advanced to warrant a 
Project BioShield contract award. The Project BioShield Act of 2004 is 
intended to allow medical countermeasure contracts to be awarded that 
support both product development and acquisition activities. The VaxGen 
contract award was wholly consistent with the terms of the legislation, 
and this was validated through findings of an investigation by the HHS 
Office of the Inspector General. However, we recognize that commitments 
to acquiring products at early stages of development adds risk and 
uncertainty to the program. This risk was deemed to be appropriate 
given the urgency of the requirement. Additionally, HHS was continuing 
to support another rPA vaccine candidate through research and 
development contracts at NIAID. Fortunately, through modifications to 
the Project BioShield Act instituted in the Pandemic and All-Hazards 
Preparedness Act of 2006, BARDA now has the ability to include 
milestone payments in these contracts that will provide financial 
support for manufacturers as important product development activities 
are completed. BARDA is working to incorporate these payments into its 
future Project BioShield procurements, but this mechanism was not 
available to be used for the VaxGen rPA contract. 

{See comment 9): 

The report also claims that the evaluation of VaxGen's rPA vaccine 
candidate was a subjective one. HHS maintains stringent processes to 
evaluate objective criteria and make the most appropriate contract 
awards. The determination of capabilities of the four different 
manufacturers who responded to the Request for Proposals (RFP) was 
based on a rigorous technical evaluation process. In addition, a 
Request for Information (RFI) for rPA vaccines was released in 2003, 
and those results were used to inform the requirements of the RFP in 
2004. The responses to the RFI indicated that the anticipated timeline 
for rPA development and acquisition was achievable. The respondent to 
any solicitation is required to provide a full and honest assessment of 
their technical and financial capabilities. At the time of contract 
award, VaxGen provided the government with comprehensive project plans 
and timelines that projected a successful vaccine development and 
manufacturing process. 

{See comment 10): 

It is also important to note that, contrary to that stated in the draft 
report, the VaxGen Project BioShield award did not pre-empt other 
support for product development that was being provided to VaxGen 
through its NIAID contract. Simultaneously, HHS continued to support 
development programs by other anthrax vaccine manufacturers with grants 
administered by NIAID.

(See comment 11): 

Next, it is inaccurate to state that "the purchase of BioThrax for the 
stockpile as a stopgap measure raised the bar for the VaxGen vaccine." 
The minimum amount of data and information needed to consider VaxGen's 
rPA vaccine potentially "usable" under either a "Contingency Use" IND 
or, subsequently, an EUA, did not change because there was a stockpile 
of BioThrax. Although the necessary data and information to support the 
use of the rPA vaccine in an emergency did not change, the likelihood 
of using the rPA in an emergency was reduced given ASPR's decision to 
first use the licensed BioThrax. Furthermore, using this logic, HHS 
could never buy existing medical countermeasures while next-generation 
products were in: 

(See comment 12): 

development. Maintaining a robust product pipeline requires concurrent 
efforts to improve near- term preparedness by acquiring available 

products while also supporting the development of improved next-
generation products. More specifically, we do not see any particular 
characteristics of the BioThrax products that would adversely impact 
the expectations for an rPA vaccine.

The draft report claims that HHS changed the requirements for the 
VaxGen rPA vaccine. However, the requirement for the acquisition of 25 
million courses of anthrax vaccine was established following medical 
consequence modeling and input from public health experts. Since the 
Project BioShield legislation provides for up to eight years of 
development prior to achieving licensure, it is very difficult to 
predict when a contract is awarded exactly what the required studies 
and specific characteristics of each product will be. To resolve this 
problem, HHS is very clear that any companies interested in responding 
to a solicitation will be in frequent contact with the Food and Drug 
Administration (FDA) to keep the FDA up-to-date with their progress and 
to maintain a clear understanding of the studies that will be required 
for their product to achieve licensure. It is now a requirement of 
Project BioShield contracts that companies communicate with FDA early 
and often to ensure the success of each acquisition program. 

(See comment 13): 

In the field of medical product development, it is the responsibility 
of all manufacturers to be responsive to and communicative with FDA, 
and to incorporate regulatory feedback into their product development 
plans. Over the course of the VaxGen rPA contract, HHS was similarly 
responsive to the evolution of the candidate product. VaxGen 
experienced a failure in its Phase 2 clinical trial in 2004 that 
produced results that could not be interpreted. As a result of this and 
other product development delays, HHS instituted a contract 
modification that extended VaxGen's delivery schedule for an additional 
three years. It is not clear that VaxGen made equivalent efforts to 
remain aware of FDA guidance. There are no regulated or mandated 
timelines for development of a new product. The interactions of FDA's 
Center for Biologics Evaluation and Research (CBER) with VaxGen were 
typical of those with any sponsor during the IND stages of development 
of any product, especially during early stages, prior to VaxGen getting 
the BioShield contract. Post-contract award, November 2004, VaxGen, 
CBER and other HHS agencies had frequent meetings and extensive 
technical discussions to aid in development of this important product. 
VaxGen did not request information regarding the specific data and 
information needed by CBER to potentially allow use under a 
"Contingency Use" IND, as specified in the RFP, until December 2005, so 
they could more appropriately account for development costs, predict 
manufacturing and delivery timelines and have a clear understanding of 
the criteria which would make their product considered "usable (term 
used by HHS)" and thus appropriate for acquisition and stockpiling. 
CBER provided this information in January 2006. 

One of the central claims of this report is that product requirements 
were not known to VaxGen at the outset of the procurement contract. As 
with any medical product development program, it is the responsibility 
of the manufacturer to engage effectively with FDA. It is also unclear 
what GAO is trying to convey by the following two sentences: "This 
confused FDA officials and: 

(See comment 14): 

caused them to balk at replying to VaxGen until it could meet with ASPR 
and CDC to clarify this issue. As a result, VaxGen was placed in a 
position where it had to respond to different requirements." The 
meeting referenced occurred in December 2005. It is also CBER's 
impression that VaxGen wanted the next Phase II trial to support use of 
the vaccine in a "contingency use" protocol under IND. However, the 
purpose of Phase H trials, in order to position the product for the 
pivotal Phase III trial in support of licensure, is to collect 
additional safety, and when possible efficacy data, as well as to 
determine the dose, route and schedule for administration. Since VaxGen 
had not previously requested information regarding the specific data 
and information needed by CBER to potentially allow use under a 
"Contingency Use" IND, as specified in the RFP, it appears that VaxGen 
may not have clearly understood that the data needed to support this 
use should be gathered using final drug product administered by the 
dose, route and schedule determined to be most immunogenic and safe in 
the Phase II trials. Since CBER was asked the question regarding use 
during an emergency during this meeting, CBER needed time to respond 
and provided the information in January 2006. 

The report also makes inaccurate statements regarding Emergency Use 
Authorization guidance from FDA. The draft guidance "Emergency Use 
Authorization of Medical Products" which was issued in June 2005, and 
published as final guidance in July 2007, was drafted directly from and 
intended to provide information regarding the Agency's current thinking 
concerning one way to meet the statutory requirements defined in 
Section 564 of the Federal Food, Drug, and Cosmetic Act, as it was 
amended by the Project BioShield Act of 2004. Section 564 is self-
executing and does not require implementing regulations or guidance. As 
stated in the guidance "The document is intended to inform industry, 
government agencies, and FDA staff of the Agency's general 
recommendations and procedures for issuance of EUAs." It goes on to 
clarify that the amount of data and information needed will be 
determined on a case-by-case basis and that this document summarizes 
the types of data that FDA would recommend submitting. The EUA guidance 
also discusses the conditions that must be met to authorize use of a 
product under an EUA, as well as other conditions of authorization that 
may be imposed. In discussing these issues, the guidance clarifies that 
the exact type and amount of data may vary depending on the nature of 
the declared emergency and the product under consideration. 

(See comment 15): 

HHS is dedicated to building a comprehensive stockpile of medical 
countermeasures that would be available in the case of a public health 
emergency. The very nature of these products dictates that they have a 
fixed dating period. If not used during an event, all medical 
countermeasures will eventually expire and will need to be properly 
discarded. However, all expired product does not represent wasted or 
lost investments, and it is disingenuous to suggest as much. HHS 
continues to serve as a responsible and effective steward of its 
investments as it works to achieve our mission to prevent, prepare for, 
and respond to the adverse health effects of public health emergencies.

(See comment 16): 

The following are GAO's comments on the Department of Health and Human 
Services' letter dated October 4, 2007. 

GAO Comments: 

1. Our draft report acknowledged the Office of the Assistant Secretary 
for Preparedness and Response's (ASPR) sense of urgency to develop an 
rPA anthrax vaccine following the 2001 attack. However, our report also 
stated that by November 2004, ASPR had had sufficient time and 
opportunity to thoroughly evaluate contractual risks and issues without 
being overly influenced by the sense of urgency. By November 2004, it 
was clear that significant manufacturing issues needed to be overcome 
and that a 2-year time scale to produce 25 million doses was 
accordingly unrealistic. 

2. We agree that ASPR has taken several steps to develop and 
communicate its strategy and plans to acquire medical countermeasures 
to potential manufacturers. In addition, HHS has conducted several 
workshops to stimulate discussion with potential manufacturers. 
However, these steps were taken just before or after VaxGen's 
procurement contract was terminated. While we reviewed the HHS Public 
Health Emergency Medical Countermeasures Enterprise Strategy and 
Implementation Plan for Chemical, Biological, Radiological, and Nuclear 
Threats, we did not find these documents to be relevant to our 
evaluation of ASPR's performance with regard to VaxGen's procurement 
contract. 

3. ASPR's definition of the concept of use refers, as expressed in its 
comments, to the anthrax vaccine in combination with antibiotics as 
post-exposure prophylaxis. However, our report discusses the potential 
use of the unlicensed rPa vaccine in the stockpile when the licensed 
anthrax vaccine was already available. We cite the Food and Drug 
Administration's position that it would give preference to the licensed 
vaccine over the unlicensed vaccine. 

With regard to critical requirements, HHS acknowledged that critical 
requirements would change for different products. Therefore, HHS should 
have known the consequences of changing requirements for a fixed-price 
contract with a 2-year time limit. 

4. We agree with HHS that it is not always possible to know the exact 
regulatory specifications for a product at the beginning of the 
procurement process. However, ASPR failed to recognize that changing 
requirements under a fixed-price procurement contract could 
significantly affect the finances and the 2-year delivery time line it 
established. 

5. The acting director of ASPR told us that the principal deputy of 
ASPR had decided not to destroy the expired lots in case they were 
needed for use in an emergency. However, using the expired vaccine 
would violate the FDA rule. In response to the draft of this report, 
HHS now states that it is quarantining the expired lots until a 
decision can be made regarding disposal. We do not understand HHS's 
rationale for continuing to hold the vaccine in quarantine for nearly a 
year and the justification for the administrative expenses involved. 

6. Although HHS and the Department of Defense (DOD) use different 
authorities to address BioThrax liability and funding issues, both 
authorities could apply to vaccines purchased by either DOD or HHS; 
consequently, indemnity does not appear to be an insurmountable 
obstacle for future procurements. As indicated in our report, DOD and 
HHS should continue to explore the legal implications of different 
indemnity authorities and present a legislative proposal to Congress if 
they determine that a statutory change is required to establish a joint 
inventory. 

7. Since, as ASPR acknowledges, it does not have a strategy to minimize 
waste, we calculated the potential $100 million annual wastage based on 
expiration dates of the current vaccine inventory. ASPR stated that the 
annual saving would only be up to $25 million per year but did not 
provide any basis for this estimate. However, according to DOD, in 
contract year 2006, it purchased BioThrax valued at about $55 million, 
a savings of more than double ASPR's estimate. 

A strategy to minimize waste in the stockpile should include not only 
integration of inventory based on a first-in, first-out principle but 
also reexamination of requirements derived from consequence modeling 
with regard to the size of the inventory. Such a strategy would result 
in savings closer to $100 million. 

8. We did not mean to suggest that all expired products represent waste 
or lost investment. We clarified our definition of waste in the report. 
When there is a large-volume user for the stockpile product, not having 
an effective strategy to ensure that stockpile product would be used 
constitutes waste. However, since DOD is a large user of BioThrax, 
unnecessary waste will result from ASPR not making an effort to ensure 
that to the extent possible, DOD uses the vaccine in the stockpile. 

9. We did not question the legality of the contract award to VaxGen but 
rather the rationale underlying the contract's requirement for 25 
million doses in 2 years. 

10. ASPR officials told us that they did not have tools to assess 
product maturity at the time of the contract award, and that they were 
guided by a sense of urgency. On the basis of these statements, we 
concluded that their assessment was subjective. 

11. We disagree that the VaxGen Project BioShield award did not preempt 
other support for product development that was being provided to VaxGen 
through its National Institute of Allergy and Infectious Diseases 
contract. According to our analysis of the contract document and 
discussions with NIAID officials, funding under the development 
contract largely ceased once the procurement contract was awarded. 

12. We clarified the report text to attribute to VaxGen officials the 
statement that the purchase of BioThrax for the stockpile as a stopgap 
measure raised the bar for the VaxGen vaccine. 

13. Our draft report did not say that HHS changed the requirements for 
the VaxGen rPA vaccine. However, we have clarified the text to state 
that purchase of BioThrax for the stockpile raised the requirement for 
the use of rPA anthrax vaccine. 

14 We clarified the report text to indicate that neither FDA nor VaxGen 
understood the concept of use prior to January 2006. 

15. We clarified the report text to indicate that ASPR officials told 
us that FDA would define "sufficient data" and the testing hurdles a 
product needed to overcome to be considered a "usable product." 

16. See our response to comment 8. 

[End of section] 

Appendix III: Comments from the Department of Defense: 

Assistant To The Secretary Of Defense: 
3050 Defense Pentagon: 
Washington, DC 20301-3050: 

Nuclear And Chemical And Biological Defense Programs: 

October 3, 2007: 

Mr. Keith Rhodes: 
Director/Chief Technologist, Center for Technology and Engineering: 
U.S. Government Accountability Office: 
441 G Street, N.W.: 
Washington, DC 20548: 

Dear Mr. Rhodes: 

This is the Department of Defense (DoD) response to the GAO draft 
report 08-88, "Project Bioshield: Actions Needed to Avoid Repeated Past 
Problems with Procuring New Anthrax Vaccine and Managing Stockpile of 
Licensed Vaccine," dated September 20, 2007, (GAO Code 460590). 

The Department partially concurs with the GAO recommendation. Our 
position on this recommendation is explained in the enclosure. 

My point of contact for this matter is Dr. Robert Borowski, who can be 
reached at (703) 416-4682 or at [email protected]. 

Signed by: 

David G. Jarrett, COL, MC, USA: 
Deputy and Medical Director: 
OSA(CBD&CDP): 

Enclosure: 

GAO Draft Report Dated September 20, 2007 GAO-08-88 (GAO CODE 460590): 

"Project Bioshield: Actions Needed To Avoid Repeated Past Problems With 
Procuring New Anthrax Vaccine And Managing Stockpile Of Licensed 
Vaccine": 

Department Of Defense Comments To The Gao Recommendation:  

Recommendation: The GAO recommends that in order to minimize waste of 
the BioThraxï¿½ vaccine in the stockpile, HI-IS and DoD develop a single 
integrated inventory system for the licensed anthrax vaccine with 
rotation based on a first-in, first-out principle. (p. 25/GAO Draft 
Report) 

DOD Response: The DoD partially concurs with the GAO recommendation. ï¿½ 
While the recommendations in the draft GAO report have merit, it should 
be underscored that there are operational, logistical, and legal 
challenges to implementation that may require potential legislative 
action to overcome. 

(See comment 1): 

* Logistical challenge: The HHS stockpile is far larger than the amount 
DoD consumes on an annual basis and hence, if a joint stockpile is 
created, DoD will only be able to use a fraction of the expiring doses. 
It should also be noted that DoD can not distribute expiring stocks at 
the last minute and would require some level of lead time to distribute 
and dispense the soon-to-expire stocks. The DoD will also work with HHS 
to specifically analyze the potential cost avoidance with the proposal.

* Legal challenge: DoD and HHS have differing methods of liability 
protection. DHHS plans to use the Public Readiness and Emergency 
Preparedness (PREP) Act provisions to limit the liability of 
manufacturers of medical countermeasures, versus DoD's use of P.L. 85-
804 indemnification. DoD has identified this area of differing methods 
of liability protection as one that will require further discussion 
between the agencies' legal staffs. This area may require legislative 
action to ensure that vaccine purchased by DHHS can be used in the DoD 
immunization program. 

* The DoD and HI-IS have been and will continue to coordinate the 
actions of this effort in the best interests of the United States 
Government.

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

See comment 1. 

The following is GAO's comment on the Department of Defense's letter 
dated October 3, 2007. 

GAO Comment: 

1. Although HHS and DOD use different authorities to address BioThrax 
liability, both authorities could apply to vaccines purchased by either 
DOD or HHS; consequently, indemnity does not appear to be an 
insurmountable obstacle for future procurements. As indicated in our 
report, DOD and HHS should continue to explore the legal implications 
of different indemnity authorities and present a legislative proposal 
to Congress if they determine that a statutory change is required to 
establish a joint inventory. 

[End of section] 

Footnotes:  

[1] The vaccine based on rPA is often referred to as a second 
generation anthrax vaccine to differentiate it from BioThrax. 
Recombinant refers to a product created using a genetic engineering 
technology in which one or more pieces of DNA are combined together. A 
protective antigen is a biochemical that produces an immunologic 
response that then protects animals or humans against challenges from 
the infectious agent. 

[2] National Institute of Allergy and Infectious Diseases, "Production 
and Testing of Anthrax Recombinant Protective Antigen (rPA) Vaccine." 
Request for Proposal (RFP) No. NIH-NIAID-DMID-03-29. 

[3] B. Ivins and others, "Immunization Studies with Attenuated Strains 
of Bacillus anthracis," Journal of Infection and Immunity, 52(1986):454-
58. B. E. Ivins, "The Search for a New-Generation Human Anthrax 
Vaccine," Clinical Immunology Newsletter, 9(1988): 30-32; and Y. Singh 
and others, "Study of Immunization against Anthrax with the Purified 
Recombinant Protective Antigen of Bacillus anthracis," Journal of 
Infection and Immunity, 66(1998): 3447-48. 

[4] Institute of Medicine, The Anthrax Vaccine: Is It Safe? Does It 
Work? (National Academy Press: Washington, D.C., 2002), p. 20. 

[5] Stewart Simonson, Assistant Secretary, Department of Health and 
Human Services, Office of Public Health and Emergency Preparedness (now 
ASPR), testimony before the Senate Committee on Appropriations, 
Subcommittee on Homeland Security, April 28, 2005. 

[6] he Office of the Assistant Secretary for Preparedness and Response 
(ASPR) is the lead agency within HHS on this issue. These offices have 
undergone several name changes. ASPR was formerly the Office of Public 
Health Emergency Preparedness (OPHEP) and was renamed pursuant to 
Public Law 109-417, the Pandemic and All-Hazards Preparedness Act in 
December 2006. The name OPHEP was created administratively in August 
2004. Prior to that change, the office was called the Office of the 
Assistant Secretary for Public Health Emergency Preparedness (ASPHEP), 
pursuant to Public Law 107-188, the Public Health Security and 
Bioterrorism Preparedness and Response Act of 2002. Briefly, before 
that change, it had been called the Office of Public Health 
Preparedness, which was created administratively in January 2002. In 
July 2006, Office of Public Health Emergency Medical Countermeasures 
(OPHEMC), an office within ASPR, was renamed, replacing the name Office 
of Research and Development Coordination. ORDC was created 
administratively within ASPHEP in December 2002. OPHEMC has been 
renamed Biomedical Advanced Research and Development Authority (BARDA). 

[7] The Strategic National Stockpile, formerly known as the National 
Pharmaceutical Stockpile, contains pharmaceuticals, vaccines, medical 
supplies, and medical equipment to respond to terrorist attacks and 
other emergencies. 

[8] The Department of Homeland Security provides indemnification to the 
manufacturer of BioThrax for civilian use of the vaccine. 

[9] GAO, Anthrax: Federal Agencies Have Taken Some Steps to Validate 
Sampling Methods and to Develop a Next Generation Anthrax Vaccine, GAO-
06-756T (Washington, D.C.: May 9, 2006) pp. 20-21. 

[10] Stability refers to the physical, chemical, biological, 
biopharmaceutical, and microbiological characteristics of a vaccine, 
during and up to the end of the expiration dating period and storage 
periods of samples under expected handling and storage conditions. The 
results of stability studies are used to recommend storage conditions 
and to establish the shelf life and/or the release specifications. 

[11] Scale-up production occurs when the decision is made to take a 
vaccine produced in small amounts in a pilot facility and increase 
production to commercial levels. This is one of the most difficult, 
complex, time-consuming, and resource-intensive aspects of vaccine 
development for manufacturers. 

[12] HHS issued a Source Sought Notice in May 2007. 

[13] All vaccines will eventually expire. However, when there is a 
large-volume user for stockpile product, not having an effective 
strategy to ensure stockpile products would be used constitutes waste. 

[14] Indemnification was originally granted by DOD to the manufacturer 
in the late 1990s because of the manufacturer's inability to get 
commercial insurance at a reasonable price. 

[15] FDA regulations do allow the extension of the expiration date of a 
vaccine under certain limited circumstances. See 21 C.F.R. 610.53. 

[16] GAO, Anthrax Vaccine: GAO's Survey of Guard and Reserve Pilots and 
Aircrew, GAO-02-445 (Washington, D.C.: Sept. 20, 2002). 

[17] Biological products are typically derived from living sources, 
such as humans, animals, bacteria, and viruses. 

[18] Centers for Disease Control and Prevention, Vaccine Management: 
Recommendations for Storage and Handling of Selected Biologicals, 
(Atlanta, Georgia: January 2007). 

[19] FDA will permit an investigational drug to be used under a 
treatment IND if there is preliminary evidence of drug efficacy and the 
drug is intended to treat a serious or life-threatening disease or if 
there is no comparable alternative drug or therapy available to treat 
that stage of the disease in the intended patient population. 

[20] Immunogenicity" refers to the ability of a vaccine to stimulate a 
protective immune response. 

[21] When FDA decides to halt drug development activity, it issues a 
"clinical hold," which begins a series of review activities. 

[22] The contract called for 75 million doses overall, but only 25 
million were required within 2 years of award. 

[23] Pharmaceutical and biotech firms follow the cGMP to ensure that 
the products produced meet specific requirements for identity, 
strength, quality, and purity. FDA regulates these industries to ensure 
cGMPs are being followed. 

[24] Industry experts told us that even this time scale is very 
optimistic. 

[25] TRLs have been used by federal agencies (DOD, the National 
Aeronautics and Space Administration, and others) to assess the 
maturity of evolving technologies prior to incorporating that 
technology into a system or subsystem. The primary purpose of using 
TRLs is to help management in making decisions concerning the 
development and transitioning of technology. 

[26] In December 2006, at the time the contract was terminated, 
according to ASPR officials, the TRL level was still at 8. 

[27] A clinical hold is the mechanism that FDA uses to stop a study 
when it finds that the study should not proceed because of an 
identified deficiency. When the deficiency is identified in FDA's 
initial review of the IND application, FDA contacts the sponsor within 
30 days of submission of the IND. FDA may also impose a clinical hold 
on an ongoing study based on its review of newly submitted protocols 
and amendments, safety reports, or other information. When a clinical 
hold is issued, a sponsor must address the issue before the hold is 
removed. FDA has issued a regulation that identifies the deficiencies 
that provide the basis for a clinical hold. A clinical hold may be 
imposed, as in this case, because a plan or a protocol for the 
investigation is clearly deficient in design to meet its stated 
objectives. All clinical holds are reviewed by FDA management to ensure 
consistency and quality in FDA's clinical hold decisions. 

[28] An assay is a laboratory test or procedure carried out in order to 
measure the amount of a substance present in a product and/or to 
measure its activity. 

[29] Under Project BioShield, advance payments of up to 10 percent of 
the contract value could be made if the HHS Secretary deemed it 
necessary for the success of the program. ASPR officials told us that 
VaxGen did request such a payment, but ASPR did not grant it. 

[30] FDA is ultimately responsible for determining if available 
products (unapproved products or approved products for unapproved 
usage) in the stockpile can be used in an emergency. The data FDA needs 
to determine whether a product can be used in an emergency are critical 
to manufacturers to adequately plan and estimate the time and resources 
required for generating the data. 

[31] It also requires an approval from the Institutional Review Board. 

[32] See FDA's minutes of the December 2005 meeting with VaxGen. 

[33] In commenting on the draft report, FDA indicated that the purpose 
of the phase 2 trial is to collect additional safety and, when 
possible, efficacy data, as well as to determine the dose, route, and 
schedule for administration. 

[34] This is a requirement of the BioShield law. 

[35] These lots contained 167,990, 168,130, and 183,990 doses of 
vaccine respectively. 

[36] In 1999, CDC created a stockpile of licensed medical products. CDC 
officials told us that CDC had a strategy to rotate products in that 
stockpile on a first-in, first-out principle with other high-volume 
users, such as the Department of Veterans Affairs. 

[37] See footnote 15. 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation, and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. Government Accountability Office: 
441 G Street NW, Room LM: 
Washington, DC 20548: 

To order by Phone: 
Voice: (202) 512-6000: 
TDD: (202) 512-2537: 
Fax: (202) 512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: [email protected]: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Gloria Jarmon, Managing Director, [email protected]: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, DC 20548: 

Public Affairs: 

Susan Becker, Acting Manager, [email protected]: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, DC 20548: 

*** End of document. ***