Washington Editor

WASHINGTON - Senior Bush administration officials said companies contracted to develop biomedical countermeasures under Project BioShield would not receive full government payment until the FDA approved their products.

FDA commissioner Mark McClellan and other government officials fielded questions from the House Committee on Government Reform Friday about the benefits and pitfalls associated with President Bush's proposed Project BioShield.

First mentioned in his State of the Union address in January, Project BioShield is Bush's plan to speed development and availability of medical countermeasures in response to current threats. The project 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.

Key issues unearthed in discussions on Capitol Hill center on the administration's request for mandatory or indefinite funding, liability protections considered weak by drug company representatives, and other issues related to contracts that could quickly expand and end up costing a biotechnology or pharmaceutical company millions of dollars. (See BioWorld Today, March 28, 2003.)

Take for example McClellan's statement that the government would not pay for failed products. While some payment would come forth during research and development phases, McClellan said the big payment would come at FDA approval, meaning the company would have to prove safety and efficacy.

Rep. Tom Davis (R-Va.), the committee chairman, was pleased to hear that, saying, "At least this is results oriented, unlike an IT contract where we could spend billions of dollars and end up with something that doesn't work."

But on the industry side, Una Ryan, president and CEO of Avant Immunotherapeutics Inc., of Needham, Mass., who testified on behalf of the Washington-based Biotechnology Industry Organization, said, "My greatest concern revolves around whether the BioShield initiative and corresponding efforts at the Defense Department represent a long-term commitment on the part of the government of sufficient size to make the venture worthwhile for our companies. An assumption underpinning BioShield is that the federal government, not the private sector, must create a sufficient market to pull biotech companies into developing and producing countermeasures."

McClellan already said the government would create the market - that is, for products that work.

So what happens if there's a national emergency and an unproven countermeasure in Phase II has to be given to exposed Americans?

Rep. Henry Waxman (D-Calif.), ranking minority member of the committee, worries that such a scenario would give companies the chance to bypass normal regulatory rules and "just not do the testing."

McClellan said that's not how the plan is written. Even if a product were used under emergency circumstances, the company would still be required to follow through on trials.

That leads to another issue. What type of legal protection will the government extend to companies, especially if an investigational product is used in an emergency?

Lawyers and industry representatives say without adequate liability protection, the government will have difficulty signing companies to contracts.

"Just the threat of a lawsuit is enough to keep investors away," Ryan told the committee.

Testifying on behalf of Aventis Pasteur Inc., Frank Rapoport, an attorney with McKenna Long & Aldridge LLP in Washington, said current law gives the secretary of Health and Human Services and the secretary of Homeland Security authority to provide federal indemnity to private entities engaging in research, development and production of biomedical countermeasures. Use of such authority is rare, he said.

McClellan said the administration is aware of concerns connected to liability and has questioned whether current law would offer enough protection.

Regarding actual contracts with companies, Rapoport recommended that lawmakers consider adding a manufacturing commitment. "While this appears to be the intention of the legislation, the proposed legislation does not make this authority clear," he said. "A company like Aventis Pasteur, which not only does research and development but emphasizes the reliable manufacture of millions of doses of vaccines, needs the certainty that satisfactory completion of research and development will lead to a manufacturing agreement."

Legislation creating Project BioShield, authored by Sen. Judd Gregg (R-N.H.), unanimously passed the Senate Health, Education, Labor and Pensions Committee. Davis said he intends to introduce similar legislation in the House.