Washington Editor

WASHINGTON - The House version of Project BioShield expected to pass the Senate in the next few months is considered a satisfactory first step needed to entice drug companies to enter the biomedical countermeasure business, insiders here said.

But to really convince large pharmaceutical and biotechnology firms to work with the government to discover and develop antidotes for such threats as anthrax or smallpox, experts believe a second BioShield bill will be necessary.

Under the best of circumstances, BioShield II would resolve certain issues missing from the first bill, passed in a 421-2 vote in the House last July. (See BioWorld Today, July 23, 2003.)

The House version does not provide companies with tax incentives, adequate research and development funding, clarity on intellectual property rights or indemnity protection, critics claim.

As a result, Chuck Ludlam, counsel for Sen. Joseph Lieberman (D-Conn.), told BioWorld Today Lieberman's office will submit BioShield II shortly after the first version is approved. Ludlam, on Tuesday, was a featured speaker at a bioterrorism countermeasures conference here sponsored by Defense Week.

While Lieberman and his staff sat back and watched, President Bush presented Project BioShield to the American public during the State of the Union address in January 2003.

According to Ludlam, Bush stole Project BioShield - originally known as Lieberman-Hatch (referring to Sen. Orrin Hatch, R-Utah) - and passed it off as his own idea without giving either of its authors credit.

Project BioShield is the Bush administration's plan to speed development and availability of medical countermeasures in response to current threats. It is designed to streamline government research, create incentives for companies and give the government the ability to make products widely available in a public emergency. The House bill allocates $5.6 billion over 10 years for the project.

Ludlam said the White House version of BioShield "was a complete joke."

"For example, there was a provision that said if you develop a countermeasure that has a consumer market, BioShield would not apply. This is ridiculous, so it was pulled out," Ludlam said. "We will come up with BioShield II and invite them to steal it."

Ludlam credits Frank Rapoport, a conference moderator and partner with McKenna, Long & Aldridge LP, of Philadelphia, with correcting many of the problems in the White House bill, which became the House version. Rapoport's efforts were on behalf of Aventis Pasteur Inc., the vaccines business of Aventis SA, of Strasbourg, France.

The fact that Rapoport had only one client is a bad sign for BioShield, said Ludlam, who fears large companies will not get involved with a government project because it might come with too much control and not enough financial returns.

"The government fears they will lose control while companies fear their products will be stolen," Ludlam said. "The idea is to persuade the chief financial officers that the government will be a reliable partner."

Indeed, while the House version would guarantee a market on a successful product, it probably wouldn't pay for research and development. If companies, particularly smaller companies, are forced to turn to venture capitalists for support, they might run into a host of other problems.

Nancy Saucier, a conference speaker and manager in the medical industry group of the National Venture Capital Association in Arlington, Va., told attendees that after getting burned in the dot-com business, venture capitalists aren't too enthusiastic about biodefense.

"Keep in mind that life sciences is clearly the most regulated industry that VC plays in," Saucier said. "But our guys are looking for three times their money on the back end."

Life sciences is a hot industry, she said, citing her own records from 2003 showing that $4.89 billion, or 27 percent of VC funding, was spent in life sciences.

But if one thing scares investors, Saucier said, it's government price controls. For example, she brought up the situation that Bayer AG, of Leverkusen, Germany, faced with Cipro, an antibiotic used as second-line therapy for the treatment of anthrax exposure.

Tommy Thompson, secretary of Health and Human Services, threatened to erode Bayer's Cipro patent if the company refused to sell the drug to the government at one-fourth the market price following the U.S. anthrax attacks of late 2001.

The government ended up paying 99 cents a dose, which destroyed the market because every other purchaser wanted the government price, Saucier said. "Bayer sold the government 1 billion doses and donated 4 billion doses, then someone sued them because of side effects," she said.

"If you have many more examples like this, my guys will get out," Saucier said. "Venture capitalists are not afraid of risk, but risk that they cannot assess causes them to walk away."

Ludlam said paying for BioShield through an entrepreneurial- or investor-funded model would probably engage the best pharmaceutical and biotechnology companies.

But if the old defense contractor model is used, "the only companies interested will be ones that have never brought a product to market," he said.

Linda Nardone, vice president of clinical and regulatory affairs at EluSys Therapeutics Inc., of Pine Brook, N.J., argued Ludlam's remark, saying smaller companies can conduct a lot of the research needed to develop countermeasures.