Project BioShield: Purposes and Authorities

Project BioShield: Purposes and Authorities
Frank Gottron
Specialist in Science and Technology Policy
Resources, Science, and Industry Division
Summary
Many potential chemical, biological, radiological, and nuclear (CBRN) terrorism
agents lack available countermeasures. In 2003, President Bush proposed Project
BioShield to address this need. The 108^th Congress passed the Project BioShield Act
of 2004 (S. 15) and President Bush signed it into law on July 21, 2004 (P.L. 108-276).
The main provisions of this law include (1) relaxing procedures for some CBRN
terrorism-related spending, including hiring and awarding research grants; (2)
guaranteeing a federal government market for new medical countermeasures; and (3)
permitting emergency use of unapproved countermeasures. Project BioShield
countermeasure procurement funding comes from the Department of Homeland Security
Appropriations Act, 2004 (P.L. 108-90), which appropriated $5.593 billion for FY2004
to FY2013. Congress considered several additional measures to further encourage
countermeasure development and passed the Pandemic and All-Hazard Preparedness
Act (P.L. 109-417). This law created the Biomedical Advanced Research and
Development Authority (BARDA) in the Department of Health and Human Services.
Questions remain regarding the impact BARDA will have on countermeasure
development, the continuing implementation of Project BioShield, and whether
additional legislation would further encourage countermeasure development.
Introduction
Following the terrorist attacks of 2001, the federal government determined that it
would need additional medical countermeasures (e.g., diagnostic tests, drugs, vaccines,
and other treatments) to respond to an attack using chemical, biological, radiological, or
nuclear (CBRN) agents.¹ The paucity of CBRN agent countermeasures is attributed to the²
lack of a significant commercial market. Because these diseases and conditions occur

¹ For additional information and analysis of the procurement provisions of Project BioShield, see
CRS Report RL33907, Project BioShield: Appropriations, Acquisitions, and Policy
Implementation Issues for Congress, by Frank Gottron.
² Alan Pemberton, Pharmaceutical Research and Manufacturers of America, Testimony before
(continued...)

infrequently, little economic incentive exists to invest the millions of dollars required to
bring treatments to market.
Project BioShield
To encourage the development of new CBRN countermeasures, President Bush
proposed Project BioShield in his 2003 State of the Union address. The 108^th Congress
considered this proposal and passed the Project BioShield Act of 2004 (P.L. 108-276,
signed into law July 21, 2004).³ This act has three main provisions. It provides the
Department of Health and Human Services (HHS) expedited procedures for CBRN
terrorism-related spending including procuring products, hiring experts, and awarding
research grants. The act creates a government-market guarantee by allowing the HHS
Secretary to obligate funds to purchase countermeasures while they still have several more
years of development. However, companies only receive payment when development is
complete and the product is delivered. The act also authorizes the HHS Secretary to
temporarily allow the emergency use of countermeasures that lack Food and Drug
Administration (FDA) approval.
Expedited Procedures. The act relaxes procedures under the Federal
Acquisition Regulation for procuring property or services used in performing,
administering, or supporting CBRN countermeasure research and development (R&D).
This decreases both the amount of paperwork required for these expenditures and the
potential for oversight. The act increases the maximum, from $100,000 to $25 million,
for contracts awarded under simplified acquisition procedures. It also allows these
purchases using other than full and open competition. Another provision increases the
micro-purchase maximum from $2,500 to $15,000. These increases are similar to, but
greater than, changes granted to the Department of Homeland Security (DHS) and other
departments and agencies in the Homeland Security Act (P.L. 107-296) and the National
Defense Authorization Act, 2004 (P.L. 108-136).
The act authorizes the HHS Secretary to use an expedited award process, rather than
the normal peer review process, for grants, contracts, and cooperative agreements related
to CBRN countermeasure R&D activity, if the Secretary deems there is a pressing need
for an expedited award. This power is limited to awards of $1.5 million or less. Some
scientists have expressed concerns that an expedited peer review process will reduce the⁴
research quality. The normal peer review process is designed to provide proposals with
greater scientific merit a higher probability of receiving funding. Congress allowed HHS
to establish the details of this new alternative expedited award process.
Market Guarantee. The act is designed to guarantee companies that the
government will buy new, successfully developed CBRN countermeasures for the

² (...continued)
the U.S. House of Representatives Select Committee on Homeland Security, May 15, 2003.
³ For a detailed comparison of the legislative proposals, see CRS Report RL32549, Project
BioShield: Legislative History and Side-by-Side Comparison of H.R. 2122, S. 15, and S. 1504,
by Frank Gottron and Eric A. Fischer.
⁴ John Miller, “Interview with Richard Ebright,” The Scientist, vol. 17 (7), April 7, 2003, p. 52.

Strategic National Stockpile (SNS).⁵ The act allows the HHS Secretary, with the
concurrence of the DHS Secretary and upon the approval of the President, to promise to
buy a product up to eight years before it is reasonably expected to be delivered. A
company is paid only on the delivery of a substantial portion of the countermeasure.
Therefore, this guarantee reduces the market risk for the company but does not affect its
exposure to development risk (i.e., the risk that the countermeasure will fail during testing
and be undeliverable). The Pandemic and All-Hazard Preparedness Act (P.L. 109-417)
modified the Project BioShield Act to allow for milestone-based payments of up to half
of the total award before delivery.
The Project BioShield Act allows the purchase of unapproved and unlicenced
countermeasures. It requires the HHS Secretary to determine that “... sufficient and
satisfactory clinical experience or research data ... support[s] a reasonable conclusion that
the product will qualify for approval or licensing ... within eight years.”⁶ The approval
and licensing processes are designed to preclude the marketing of ineffective or dangerous
treatments. Because most drugs that begin this process fail to become approved
treatments, critics of this provision suggest that the government will end up purchasing
countermeasures that may never be approved. To reduce the government’s financial risk
associated with this provision, the act allows contracts to be written so that unapproved
products may be purchased at lower cost than approved products.
Emergency Use of Unapproved Products. The act also allows the HHS
Secretary to authorize the emergency use of medical products that are not approved by the
FDA or HHS. To exercise this authority the HHS Secretary must conclude: (1) the agent
for which the countermeasure is designed can cause serious or life-threatening disease;
(2) the product may reasonably be believed to be effective in detecting, diagnosing,
treating, or preventing the disease; (3) the known and potential benefits of the product
outweigh its known and potential risks; (4) no adequate alternative to the product is
approved and available; and (5) any other criteria prescribed in regulation are met.
Although this provision would permit the Secretary to circumvent the normal approval
process, its use appears to be intended to be limited to dire circumstances.
Reporting Requirements. The Project BioShield Act of 2004 requires annual
reports from the HHS Secretary about the exercise of the authorities granted in this bill.⁷
This act also requires the Government Accountability Office (GAO) to produce a report
four years after enactment to assess actions taken under authorities granted by the act, to
determine the effectiveness of the act, and to recommend additional measures to address
deficiencies. This report is due in 2008.
Appropriations. This act did not appropriate any money. Instead, it authorized
the appropriation of up to a total of $5.593 billion for FY2004 to FY2013 for

⁵ The SNS contains pharmaceuticals, vaccines, medical supplies, and medical equipment to
respond to terrorist attacks and other emergencies.
⁶ 118 Stat. 844.
⁷ HHS has completed one such report. See, HHS, Project BioShield: Annual Report to Congress
July 2004 — July 2006, January 2007. Available online at [http://www.hhs.gov/aspr/barda/
bioshield/annualreport/]

countermeasures procurement. The Department of Homeland Security Appropriations
Act, 2004 (P.L. 108-90) appropriated this amount with explicit windows in which the
money could be obligated. The act specified that $3.418 billion is available for obligation
for FY2004 to FY2008. Of that amount, no more than $890 million was available for
obligation in FY2004. The balance of the advance appropriation plus any of the available
funds for FY2004 to FY2008 remaining unobligated will be available for FY2009 to
FY2013. This money is only for the procurement of countermeasures using the Project
BioShield authorities, not for grants to support countermeasure development.
Although Congress advance-appropriated the 10-year program, it retains the power
to annually increase or decrease the amount available for Project BioShield. Congress
removed $25.475 million from this account through rescissions in the Consolidated
Appropriations Act, 2004 (P.L. 108-199) and the Consolidated Appropriations Act, 2005
(P.L. 108-447).
Contract Awards
The first Project BioShield contract was announced November 4, 2004.⁸ VaxGen
Inc. would have received $878 million to deliver 75 million doses of a new type of
anthrax vaccine within three years. On December 17, 2006, HHS terminated this contract
because VaxGen failed to meet a contract milestone.⁹ Other contracts include $691
million for 29 million doses of the currently approved anthrax vaccine (Emergent
BioSolutions); $165 million for 20 thousand doses of ABthrax, a treatment for anthrax
(Human Genome Sciences); $144 million for 10 thousand doses of Anthrax Immune
Globulin, a treatment for anthrax (Cangene); $363 million for 200 thousand doses of
botulinum antitoxin, a treatment for botulinum toxin exposure (Cangene); $16 million for
5 million doses of a pediatric form of potassium iodide, a treatment for radioactive iodine
exposure (Fleming & Company); $22 million for 395 thousand doses of Ca-DTPA and
80 thousand doses of Zn-DTPA, two treatments for internal radioactive particle
contamination (Akorn); and $500 million for 20 million doses of a new smallpox vaccine
(Bavarian Nordic). Future targets for Project BioShield procurement include
countermeasures against anthrax, viral hemorrhagic fevers, and radiation.¹⁰
Policy Issues
Stockpile Replenishment. Like all medicines, those added to the SNS through
Project BioShield have explicit expiration dates, after which they are no longer licensed
as usable. For example, the 29 million anthrax vaccine doses HHS has agreed to buy will

⁸ See the HHS Project BioShield procurement page for status of current requests and contracts
at [http://www.hhs.gov/aspr/barda/procurement/cbrnactivities.html]. For issues regarding these
awards see, CRS Report RL33907, Project BioShield: Appropriations, Acquisitions, and Policy
Implementation Issues for Congress, by Frank Gottron.
⁹ HHS, “Termination Letter - Contract No. HHSO100200500001C,” Letter to VaxGen, Inc.,
December 19, 2006.
¹⁰ HHS Public Health Emergency Medical Countermeasure Enterprise, “Implementation Plan For
Chemical, Biological, Radiological and Nuclear Threats,” 72 Fed. Reg. 20122, April 23, 2007.

only “maintain a stockpile of at least 10 million doses... through 2011.”¹¹ The GAO
suggested an inventory-sharing agreement between HHS and the Department of Defense
(DOD), to allow DOD to use the HHS vaccines in its active troop vaccination program
before expiration.¹² DOD would reimburse HHS for the vaccine, allowing HHS to
replenish the stockpile vaccine. However, this solution would not address the expiration
problems of countermeasures lacking other high-volume users. Such countermeasures
may require additional periodic purchases to replenish the stockpile to maintain a
consistent readiness level. Congress may consider whether such purchases should be
funded through the advance-appropriated Project BioShield account or through annual
SNS budget authorities.
Broad Spectrum Countermeasures. Many experts believe that broad spectrum
countermeasures, those that address multiple CBRN agents, would be the most valuable
additions to the SNS. Such nonspecific countermeasures might be the best defense
against currently unknown threats, such as emerging diseases or genetically engineered
pathogens. Furthermore, such countermeasures are more likely to have other
nonbiodefense-related applications. P.L. 108-276 does not exclude procuring such
countermeasures; however it does require that the presence of another commercial market
be factored into the HHS Secretary’s decision to purchase the countermeasure. HHS has
stated its interest in using Project BioShield to acquire new broad spectrum¹³
countermeasures. However, all the Project BioShield contracts to date have been
specifically targeted at individual threat agents, a strategy commonly described as “one
bug, one drug.” Congress may decide that HHS needs further guidance or authorities to
encourage the development and acquisition of new broad spectrum countermeasures.
Increasing Basic Research. Following the anthrax attacks, Congress increased
the National Institutes of Health budget for CBRN countermeasure research to
approximately $1.5 billion per year. It is difficult to determine the optimal funding level
for basic research, but eventually the law of diminishing returns will apply. Some
scientists have suggested that this has already occurred and inevitably leads to funding
unworthy projects.¹⁴ Additionally, some scientists argue that the increases in bioterrorism
research have come at the expense of other important infectious disease research,¹⁵
although others dispute this assertion.¹⁶

¹¹ HHS News Release, “HHS Purchases Additional Anthrax Vaccine For Stockpile,” September

26, 2007.

¹² Government Accountability Office, Project BioShield: Actions Needed to Avoid Repeating Past
Problems with Procuring New Anthrax Vaccine and Managing the Stockpile of Licensed Vaccine,
GAO-08-88, October 2007.
¹³ HHS Public Health Emergency Medical Countermeasure Enterprise, “Implementation Plan For
Chemical, Biological, Radiological and Nuclear Threats,” 72 Fed. Reg. 20122, April 23, 2007.
¹⁴ John Miller, “Bioterrorism research: New Money, New Anxieties,” The Scientist, vol. 17(7),
April 7, 2003, p. 52.
¹⁵ Sidney Altman, et al., “An Open Letter to Elias Zerhouni,” Science, March 4, 2005, p. 1409.
¹⁶ Gerald Epstein, “Security Is More Than Public Health: Commentary on Casting a Wider Net
For Countermeasure R&D Funding Decisions,” Biosecurity and Bioterrorism: Biodefense
Strategy, Practice, and Science, vol. 5(4), 2007, pp. 353-357.

The Biomedical Advanced Research and Development Authority. Since
the passage of the Project BioShield Act, Congress has scrutinized its implementation and^th
effectiveness. Such evaluation is likely to continue through the 110 Congress and
beyond. As part of the Pandemic and All-Hazards Preparedness Act (P.L. 109-417),
Congress created the Biodefense Advanced Research and Development Authority
(BARDA) in HHS to increase the effectiveness of the government’s ability to acquire
CBRN countermeasures.
Some experts suggested that Project BioShield would more effectively encourage
countermeasure development if modeled after the Defense Advanced Research Projects
Agency (DARPA). DARPA funds many projects with a potential high risk of failure.
These contracts often last a few years and can be renewed if specified milestones are met.
Companies are allowed to make a defined profit during the development phase. Although
the direct funding of risky development projects implies that the government will fund
many products that never make it to market, the government might also structure the
contracts so that this assumption of development risk translates into lower procurement
costs. The Pandemic and All-Hazards Preparedness Act (P.L. 109-417) allows HHS to
use similar contracting mechanisms through BARDA. These transactions are not funded
through Project BioShield appropriations, but rather through a separate account, the
Biodefense Medical Countermeasure Development Fund.
Another area that some experts thought required improvement was how the
government helped transition promising leads from basic research to the product
development stage. This period in development is often referred to as the “valley of
death” for pharmaceuticals since some seemingly promising drugs are not developed past
this point due to lack of funding. Several federal programs exist to encourage research,
development, and commercialization of new products. Such programs include
cooperative research and development agreements (CRADAs) between government
laboratories and universities or industry; the Central Intelligence Agency-funded,
nonprofit, venture capital corporation In-Q-Tel; the Small Business Technology Transfer
Program; and the Small Business Innovation Research Program. In contrast to Project
BioShield’s market guarantee at the end of a potentially long and risky development
process, each of these programs offers direct help during the development process and
provides incentives for commercialization of the results. In BARDA, Congress created
a dedicated infrastructure to manage and fund advanced development and
commercialization of CBRN countermeasures. In theory, BARDA funding will take
those promising drugs from the basic research through the advanced development stage,
which may include clinical trials. Critics of such programs suggest that because of the
high product failure rate in advanced development, the government will inevitably fund
unusable products. In addition to removing the development risks traditionally borne by
industry, it inserts government decision makers into the countermeasure development
process, a role critics argue is better suited to industry experts and entrepreneurs.¹⁷ Some
critics would prefer to have the government set product requirements and have industry
determine how best to meet them. It will likely take several years to determine the effect
BARDA has on U.S. civilian biodefense preparedness.

¹⁷ See CRS Report RL33528, Industrial Competitiveness and Technological Advancement:
Debate Over Government Policy, by Wendy Schacht.