June 3- 9, 2004

city beat

Bio-Defense and Offense

A newly approved federal fund could mean a bonanza for Philly pharmaceuticals.

by Amy L. Webb

A new $5.6 billion government fund earmarked for defense against bioterrorism may put Philadelphia-area firms on the offensive -- and in a good position to score big.

Called Project BioShield, the legislation was introduced shortly after the anthrax and ricin attacks on Congress in the fall of 2001. It allows the U.S. government to pay for the production and stockpiling of day-after pills, vaccines and medical devices used to combat the 52 official agents listed as imminent threats by the Department of Homeland Security.

BioShield would have companies research products and submit a bid for a government contract -- those that are approved would be guaranteed a lucrative market. But while BioShield promises some defense against biological agents including plague, smallpox and Ebola -- according to the legislation, the U.S. currently has none ready for mass treatment -- it offers little in the way of free-market competition. With an agreed-upon total budget, there's no telling whether the government has allocated enough -- or too much -- for BioShield to truly be effective.

BioShield passed through the Senate and House and is awaiting President George W. Bush's signature within weeks. Bush mentioned the need for an established defense against bioterror agents during his 2003 State of the Union Address, and a faster drug-approval process for those medications and devices. Now, it can take two to five years for the Food and Drug Administration to approve a new treatment; BioShield would fast-track approvals to within a year.

The legislation, which provides $5.6 billion over the next 10 years, finally gives the pharmaceutical industry an incentive to produce the needed medicines.

To produce a single medication, it can take 10 to 15 years and cost $500 million or more, says Dr. Elizabeth Treher, chief executive officer of The Learning Key, a Washington Crossing-based pharmaceutical-consulting firm. The money for research typically comes from a venture capitalist or from other brave investors who hope to someday recoup a return on their investments. For that reason, most companies won't attempt to produce a new drug or medical device without thinking about the market for it first. And there's no ethical standard requiring medical or biotech firms to create new treatments.

Put into an everyday context, there was a reason for the influenza vaccine shortage during the past two years: Vaccines, like biological-weapon defenses, are expensive to develop and won't necessarily turn a profit. For that reason, companies did not produce enough doses to stave off widespread infection.

"Project BioShield is a healthy start," says Frank Rapoport, a government and contracts lawyer with Philadelphia-based McKenna Long & Aldridge. "In the past, there was no reason for a pharmaceutical company to produce vaccines or antidotes for biological weapons, because where was the market? You only spend money when you know you'll have a buyer. It's just like the defense industry. Who would go out and design a multibillion-dollar plane if there was no market for it? BioShield is at last telling these companies to research and produce medications because there is a guaranteed buyer at the end."

The Delaware Valley region is home to some of the biggest pharmaceutical companies in the country. Wyeth is headquartered in Upper Providence Township, and U.K.-based GlaxoSmithKline has an office here. France-based Aventis Pasteur -- already the country's leading provider of vaccines -- has a U.S. office in Swiftwater.

Wyeth Pharmaceuticals manufactures Dryvax, a smallpox vaccine now part of the government's national stockpile. The company shipped 10 million doses to the federal government after the Sept. 11 attacks.

According to a source familiar with their contract negotiations, GlaxoSmithKline is also considering drug proposals under BioShield.

Aventis Pasteur announced May 27 that it has entered into a contract with the National Institutes of Health to produce an influenza vaccine based on a pandemic virus strain.

U.S. Rep. Curt Weldon, a Republican from Delaware County who sits on the House Select Committee on Homeland Security, helped conceive BioShield and ensure its passage through Congress. "Our area is one of the top in the world for life sciences," says Mike Conallen, Weldon's chief of staff. "A lot of of those federal dollars are coming here."

And the project has spawned some side businesses including Rapoport's eight-member team, which currently handles 45 contracts.

"We started BioDefense Link, which will help local companies put in bids," Rapoport says. "We don't take clients who may compete with each other. So far, we've had to turn down a few."

There is some question as to whether $5.6 billion would be enough money to entice companies to create medicines -- and whether that amount would sustain antidotes to most of the 52 agents. At the same time, some wonder if pharmaceuticals will take this opportunity to fix prices because the market is guaranteed. "We don't yet know how that $5.6 billion amount will work in the long run, but the fact is that it's better than nothing," Conallen says. "And since companies are in theory submitting bids on contracts, the process is competitive. Pharmaceuticals won't just charge whatever they want."

So far, the success of BioShield has led Weldon and other legislators to lobby for BioShield II, which would increase funding and add an indemnification provision for participating companies -- giving companies extra insurance that a buyer would be available for the products they develop. But that, Conallen says, is still on the horizon.