Washington Editor

WASHINGTON - The prospect of handing the Bush administration a blank check to fund swift development of biomedical countermeasures has a few members of Congress squirming.

During a joint meeting of two House subcommittees Thursday, Rep. Jim Turner (D-Texas) said President Bush's request for "mandatory" funding as opposed to "discretionary" funding for Project BioShield is essentially unprecedented in government, with the exceptions of Medicare and certain intelligence funding.

When asked to explain this request, Tommy Thompson, secretary of Health and Human Services, said the federal government will have to create a market for countermeasures by way of guaranteeing companies that their products will be purchased.

"Unless there's mandatory spending, it will be difficult to convince companies to spend their money [up front]," Thompson said. "We were using discretionary funding for anthrax and it was taken away from us. Why would a company want to spend $100 million of their own money up front betting on Congress?"

Project BioShield, initially mentioned by President Bush in his State of the Union address in January, is intended to speed the 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.

Last week, the Senate Health, Education, Labor and Pensions Committee unanimously approved the legislation.

But over at the House, there are several elements, aside from the funding, that are raising eyebrows.

Regarding the money, the figure was originally estimated at $6 billion over 10 years, but now Thompson is saying the administration can't really pinpoint a figure because it's difficult to assess future costs as well as future needs.

To that, some members of the House Energy and Commerce Subcommittee on Health and the Committee on Homeland Security Subcommittee on Emergency Preparedness and Response, said if Project BioShield was approved without a sunset element (expiration date) then eventually it would fall into the lap of a new secretary and new administration that may not have the same intentions as the Bush administration.

That's just one area of concern.

Another area of discussion centered on a company's liability, particularly given that the administration wants the authority to make treatments under development available quickly if needed in an emergency situation (only if there are no other effective approved or licensed products available).

On behalf of the Washington-based Biotechnology Industry Organization, J. Leighton Read, general partner with Alloy Ventures, of Palo Alto, Calif., submitted written testimony saying the BioShield initiative should extend a liability protection program that is applicable to research and development, procurement and emergency use. The proposed bill does include some protection under the Federal Tort Claims Act for contractors that participate in personal services contracts under new research and development programs.

Indemnity Viewed As Key Issue

In an interview with BioWorld Today prior to the meeting, Frank Rapoport, an attorney with McKenna Long & Aldridge in Washington, said what BioShield really needs is indemnity.

"Complete indemnity will probably be dealt with on the side because Tommy Thompson and his lawyers understand that this is a huge budgetary issue to hold the government responsible for what could be billions and billions of dollars," Rapoport said.

He added that the Homeland Security Act, which created the Homeland Security Department, provides certain protections under the government contractor-defense provision. "Basically, it says that if you get your product or service deemed eligible as a homeland security item - that is they bless it - you are covered under the government contractor defense, so if you get sued, you move to have the case thrown out of court," he said.

Aside from liabilities, Rapoport believes a larger issue relates to the contracts.

Indeed, at the hearing, Rep. Michael Bilirakis (R-Fla.), chairman of the Subcommittee on Health, asked Thompson to explain what the government would do if it signs a contract with a company to develop a countermeasure, and two years down the road another company discovers a superior countermeasure. "Are you locked into the contract?" he asked.

"We would have to live up to our contract, but that doesn't mean we wouldn't go out and buy the superior product," Thompson said.

But Turner said this type of legislation may actually end up stifling innovation. "If you commit to the inferior product, then the superior company will have no incentive.

"And I hate to base this legislation on the assumption that privately funded research is better than government-funded research," he said.

Finding Interested Companies Could Be Challenging

Thompson explained that much of the early research likely would be conducted by the National Institutes of Health, "and we will take that and go out and look for a company. But I don't think companies are going to be standing in line for this."

While Thompson was implying that the research would be costly and risky, Rep. Nita Lowey (D-N.Y.) shot back, "This really upsets me that large pharmaceuticals are not interested because they won't make a profit and we will have to dig for smaller companies that just don't have the experience."

And there's one more issue - intellectual property rights. Thompson and Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases of the NIH, said patent ownership would depend on several issues, namely, if the patent was owned by the company in the first place. Fauci said such issues would be negotiated between the government and company.

But Rapoport said in order to attract large companies, the government is going to be forced to settle issues surrounding intellectual property rights. "If you manufacture the new drug for the government, once the government buys it, you turn around and say, Where else can I sell this?' To the Japanese, to the Saudis, how about the English? What if the government says, We paid you to develop it, we want part of the profits?' What's a CEO going to say to that?"