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One Small Step for Biosecurity: CAP Reform Proposal Bears Fruit

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The Bush administration this week agreed to spend up to $1.6 billion dollars on tens of millions of doses of a smallpox vaccine from the Danish company Bavarian Nordic A/S—a contract that would never had been signed if not for legislation passed late last year by Congress which included a key recommendation from the Center for American Progress on how to fix the troubled Project BioShield program.

Project BioShield, enacted in 2004, failed to produce tangible results on its primary goal: to stockpile national reserves of vaccines against biological threats. Even with a massive $5.6 billion budget, the project never got off the ground. An $877.5 million deal with California company VaxGen Inc. to develop an anthrax vaccine fell apart when the drugs failed to meet requirements. The real failure, though, was because of the initial BioShield legislation.

Until late 2006, the government could only pay the pharmaceutical companies upon delivery of the medications, which left any company trying to develop new vaccines with the overhead of research and development, and then production. A company like VaxGen had to traverse this so-called “valley of death” alone, when costs are high and confidence is low. Big pharmaceutical companies couldn’t be bothered to take such risks, leaving the field to small biotechnology companies without the financial means to complete the project. The result is a dangerous undersupply of crucial vaccines needed to counter 21st-century biological threats.

Ineffective and unpopular, the BioShield remained unchanged for two years. In 2006, Sen. Richard Burr (R-NC) and Sen. Edward Kennedy (D-MA) crafted the Pandemic and All-Hazards Preparedness Act through Congress, hoping to cure the ailing Project BioShield. Made into law in December 2006, it addressed a flaw identified by CAP Senior National Security Analyst Andrew Grotto and Jonathan Tucker, then of the Center for Nonproliferation Studies, in a study on U.S. biodefense policy: a lack of compelling economic incentives to attract real investment in medical countermeasures.

The new legislation helps address this shortcoming by empowering the government to compensate companies in tranches based on milestones, in the same way that venture capital firms fund biotechnology startups, instead of paying for the vaccines upon completion of the new drugs. Created by the law, the new Biomedical Advancement Research and Development Authority, or BARDA, can make interim payments as vaccine development companies reach certain milestones.

These payments can be a lifeline for small companies trying to complete contracts on limited budgets. As an added benefit, these milestones provide incentive to other private and public investors to back vaccine development.

Money talks: after Bavarian Nordic was assured of its smallpox vaccine contract, its share price jumped 16 percent on the Copenhagen stock market, where the small-cap company trades. The reason: Bavarian Nordic is now eligible for $150 million upon completion of development milestones, and stands to reap millions more if its vaccine development work fully pans out.

Private companies seeking similar contracts from BARDA will be able to tap new venture capital money in the same way upon the completion of these milestones. After all, venture capitalists will be more likely to invest in new financing rounds for vaccine development once these companies agree to a solid timetable and produce results or risk losing a governmental stipend.

This deal will be the first real test of the revamped BioShield. With added incentive and capital, other vaccine development companies should have a fighting chance to compete for BARDA contracts, too.

The Bavarian Nordic A/S deal shows that the United States is beginning to learn how to align private sector incentives with homeland security priorities to address a key gap in biological preparedness: the lack of a suitable smallpox vaccine. Stockpiling alone, though, will not secure America’s safety from a biological threat. The country faces numerous threats from natural pandemics and biological terrorism—ranging from the avian flu to anthrax and cholera.

As Grotto and Tucker argue in their study, the United States needs an integrated biosecurity strategy that strengthens global efforts to prevent the spread of potentially deadly biological materials, equipment, and know-how; remedies critical deficiencies in the nation’s public health infrastructure using an “all-hazards” approach; and implements a new research and development strategy for anti-infective drugs and vaccines.

This means in part that the United States needs medical countermeasures designed to deal with specific threats such as smallpox. But it also means that the United States needs broad-spectrum antimicrobial drugs to counter new and emerging infectious diseases like pandemic flu. That is the next step for Congress and the Bush administration: to ensure that Project BioShield produces the right mix of medical countermeasures given the threats we face.

To this end, the United States should:

  • Formulate a comprehensive strategic plan to guide R&D on countermeasures against the full spectrum of biological threats.
  • Undertake a “needs and new technology assessment” to ensure a modernized, integrated, and standardized disease surveillance system for the entire nation.

These and other recommendations by Grotto and Tucker are included in their BioSecurity Action Plan.

To speak with our experts on this topic, please contact:

Print: Allison Preiss (economy, education, poverty)
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Print: Tom Caiazza (foreign policy, health care, energy and environment, LGBT issues, gun-violence prevention)
202.481.7141 or tcaiazza@americanprogress.org

Print: Chelsea Kiene (women's issues, Legal Progress, Half in Ten Education Fund)
202.478.5328 or ckiene@americanprogress.org

Spanish-language and ethnic media: Tanya Arditi (immigration, race and ethnicity)
202.741.6258 or tarditi@americanprogress.org

TV: Rachel Rosen
202.483.2675 or rrosen@americanprogress.org

Radio: Chelsea Kiene
202.478.5328 or ckiene@americanprogress.org