Order Code RS21507
Updated June 10, 2005
CRS Report for Congress
.Received through the CRS Web
Project BioShield
Frank Gottron
Analyst in Science and Technology Policy
Resources, Science, and Industry Division
Summary
Many potential biological terrorism agents lack available countermeasures.
President Bush proposed Project BioShield to address this need. The 108th Congress
considered this proposal in S. 15 (Gregg), S. 1504 (Gregg), and H.R. 2122 (Tauzin).
President Bush signed S. 15 into law on July 21, 2004 (The Project BioShield Act of
2004, P.L. 108-276). The main provisions of this law include (1) relaxing procedures
for bioterrorism-related procurement, hiring, and awarding research grants; (2)
guaranteeing a federal government market for new biomedical countermeasures; and (3)
permitting emergency use of unapproved countermeasures. Project BioShield
countermeasure procurement is funded by the Department of Homeland Security
Appropriations Act, 2004 (P.L. 108-90) which advance-appropriated $5.593 billion for
FY2004-FY2013. Additional measures to encourage the development of
countermeasures are being considered by the 109th Congress in S. 3 (Gregg) and S. 975
(Lieberman). This report will be updated in response to legislative developments.
Introduction
The anthrax mailings of 2001 killed five people and required thousands to take
prophylactic treatment. If there had not been effective medical countermeasures against
this strain of anthrax, the death toll would have been higher. Effective countermeasures
exist for few of the biological threats deemed the most dangerous by the Centers for
Disease Control and Prevention (CDC).1 The paucity of bioterrorism countermeasures
is attributed to the lack of a significant commercial market.2 Because these diseases occur
infrequently, there has been little economic incentive to invest the millions of dollars
required to bring a new treatment to market.
1 National Institute of Allergy and Infectious Disease. NIAID Biodefense Research Agenda for
CDC Category A Agents. Department of Health and Human Services. Washington, DC. 2002.
2 Alan Pemberton. Pharmaceutical Research and Manufacturers of America. Testimony before
the U.S. House of Representatives Select Committee on Homeland Security. May 15,
2003.
Congressional Research Service ˜ The Library of Congress

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Project BioShield
To encourage the development of new bioterrorism countermeasures, President Bush
proposed Project BioShield in his 2003 State of the Union address. The Project BioShield
Act of 2003 (S. 15, Senator Gregg), as reported by the Senate Committee on Health,
Education, Labor and Pensions, contained the administration proposal, with some
revisions. The corresponding House bill, H.R. 2122 (Tauzin), and a subsequently
introduced Senate bill, S. 1504 (Gregg), contained many of the same provisions as S. 15.
The House passed H.R. 2122 on July 16, 2003. On May 19, 2004, the Senate passed an
amended S. 15 which contained several important differences from the version which had
been reported from committee.3 S. 15 passed the House on July 14, 2004. The President
signed the Project BioShield Act of 2004 into law on July 21, 2004.

The Project BioShield Act of 2004 (P.L. 108-276) provides expedited procedures for
bioterrorism-related procurement, hiring, and awarding of research grants, making it
easier for the Department of Health and Human Services (HHS) to quickly commit
substantial funds to countermeasure projects. The HHS Secretary can contract to
purchase successfully developed countermeasures while the products still have several
more years of development. The HHS Secretary also gained ability to temporarily allow
the emergency use of countermeasures that lack Food and Drug Administration (FDA)
approval.
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. The Department of Homeland
Security (DHS) Appropriations Act, 2004 (P.L. 108-90) advance-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-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-FY2008 remaining
unobligated will be available for FY2009-FY2013.
The first Project BioShield contract was announced November 4, 2004. VaxGen Inc.
will receive $877.5 million to deliver 75 million doses of a new type of anthrax vaccine
within three years.4 Other acknowledged potential targets for Project BioShield
procurement include more advanced anthrax vaccines and treatments, next generation
smallpox vaccines, botulinum anti-toxin and vaccine, a next generation plague vaccine,
and anti-radiation treatments.5
Relaxing Acquisition Procedures. The Project BioShield Act of 2004 relaxes
procedures under the Federal Acquisition Regulation for procuring property or services
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.
4 Other awards have followed. See the HHS Project BioShield procurement page for status of
current requests and contracts.
[http://www.hhs.gov/ophep/bioshield/PBPrcrtPrjct.htm]
5 Phillip Russell. “Research and Development Update.” HHS Secretary’s Council for Public
Health Preparedness. May 3, 2004.

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used in performing, administering, or supporting biomedical countermeasure research and
development (R&D). 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 DHS and other departments and agencies in the Homeland
Security Act (P.L. 107-296) and the Defense Department Authorization Act, 2004 (P.L.
108-136). These provisions decrease the amount of paperwork required for these
purchases and the potential for oversight. The Project BioShield Act of 2004 requires the
HHS Secretary to report use of these provisions annually to Congress.
Expedited Peer Review. The Project BioShield Act of 2004 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 biomedical 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. Whether these procedures would
apply to only a few such awards, or to many, will depend on what needs the Secretary
deems pressing. Some scientists have expressed concerns that an expedited peer review
process will reduce the quality of the research.6 Peer review is designed to maximize the
chances that only proposals with the greatest scientific merit get funding. The alternative
award process is not described in detail in the law.7
Market Guarantee. The Project BioShield Act of 2004 is designed to guarantee
biotechnology and pharmaceutical companies that the government will buy new,
successfully developed biological countermeasures for the Strategic National Stockpile
(SNS).8 The act allows the HHS Secretary, with the concurrence of the DHS Secretary
and upon the approval of the President, to contract to purchase a product up to eight years
before the product is reasonably expected to be deliverable. Congress will be notified of
a recommendation for a stockpile purchase after Presidential approval. A company will
be 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).
Some experts criticized early versions of Project BioShield for attempting to change
the nature of congressional oversight from the continuous and consultative annual
appropriations process to one of reviewing executive decisions after the fact. Under the
enacted verison of Project BioShield, use of the advanced appropriation is subject to
annual review through the appropriations process. Future Congresses could rescind funds
already appropriated, but not yet obligated. As part of a general rescission in the
Consolidated Appropriations Act, 2004 (P.L. 108-199), Congress reduced the 10-year
6 John Miller. “Interview with Richard Ebright.” The Scientist. Vol. 17 (7). April 7, 2003. p. 52.
7 To see grants being considered under these provisions and for further information, see
[http://www2.niaid.nih.gov/Biodefense/bioshield.htm].
8 The SNS contains pharmaceuticals, vaccines, medical supplies, and medical equipment to
respond to terrorist attacks and other emergencies.

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appropriation to $5.588 billion and the amount available for obligation in FY2004 to $885
million.
Early versions of Project BioShield would have required the HHS Secretary to
determine that no other significant market for the countermeasure exists. Critics
suggested that this would not encourage the development of the most useful
countermeasures, such as new wide-spectrum antibiotics, which might be used against
common, naturally occurring diseases. Such nonspecific countermeasures might be the
best defense against currently unknown threats, such as emerging diseases or genetically
engineered pathogens. P.L. 108-276 does not exclude 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.
The Project BioShield Act of 2004 allows the purchase of unapproved and
unlicenced countermeasures. It requires that the HHS Secretary determine that there is
“...sufficient and satisfactory clinical experience or research data... [to] support a
reasonable conclusion that the product will qualify for approval or licensing... within eight
years.” The approval and licensing processes are designed to preclude the marketing of
ineffective or dangerous treatments. Because most drugs that begin the approval process
fail to become approved treatments, critics of this provision suggest that the government
will end up purchasing countermeasures that will eventually fail to be approved. To
reduce the 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 Project BioShield Act of 2004
allows the HHS Secretary to authorize the emergency use of medical products that have
not yet been 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) there is no adequate
alternative to the product that is approved and available; and 5) any other criteria
prescribed in regulation are met. Although this provision would permit the Secretary to
circumvent the FDA approval process, its use, presumably, would 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.
The Government Accountability Office (GAO) will 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.
Policy Options
Alternative Contract Mechanisms. Some advocates have suggested that the
new contracting authority granted by Project BioShield would more effectively encourage
countermeasure development if modeled after that used by the Defense Advanced
Research Projects Agency (DARPA). DARPA funds many projects with a 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.

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Although the direct funding of risky development projects implies that the government
will fund many products that never make it to market, the government could structure the
contracts so that this assumption of development risk translates into lower procurement
costs. Companies could rationalize to their stockholders that they would be trading
uncertain potential earnings for a guaranteed, albeit lower, profit.
Indemnification. One of the largest barriers preventing more companies from
developing countermeasures is the risk of litigation stemming from adverse effects.9 A
program similar to the National Vaccine Injury Compensation Program (P.L. 99-660),
which provides an alternative to the traditional tort system for resolving claims of adverse
reactions, or, alternately, complete indemnification such as that granted for the smallpox
vaccine by the Homeland Security Act (HSA, P.L. 107-296), might reduce this barrier.10
Arguably, another provision of the HSA, the SAFETY Act, could limit the tort liability
of sellers of countermeasures. However, these provisions do not apply to harm caused
when no act of terrorism has occurred, so it may not cover products, such as vaccines or
detectors, deployed when an attack is only suspected or threatened. Some manufacturers
may feel that this represents an unacceptable litigation risk.

Increasing Basic Research. Following the anthrax attacks, Congress increased
National Institutes of Health bioterrorism research funding budget. It is now greater than
$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.11 Additionally, some scientists argue that the increases in bioterrorism research
has come at the expense of other important infectious disease research.12 Other critics
suggest that the bottleneck for new countermeasures is not in basic research, but in the
transfer of promising leads to the product development stage.
Alternative Policies to Encourage Technology Commercialization. Other
federal programs are designed to encourage research, development, and
commercialization of new treatments. For example, the Orphan Drug Act (P.L. 97-414)
encourages development of new treatments for very rare diseases through tax incentives
and market exclusivity agreements. Other federal programs include cooperative research
and development agreements (CRADAs) between government laboratories and
universities or industry; the Advanced Technology Program, which provides seed money
to develop generic technologies that have broad application across industries; the Central
Intelligence Agency-funded, non-profit 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
9 Dr. Kim Bush, President Vaccines Division, Baxter Healthcare Corp. Testimony before the U.S.
Senate Committee on Health, Education, Labor, and Pensions, Health Subcommittee. January 30,
2003.
10 See CRS Report RL31649 Homeland Security Act of 2002: Tort Liability Provisions by Henry
Cohen.
11 John Miller. “Bioterrorism research: New Money, New Anxieties.” The Scientist. Vol. 17(7),
April 7, 2003. p. 52.
12 Sidney Altman et al. “An Open Letter to Elias Zerhouni.” Science. March 4, 2005. p. 1409.

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long and risky development process, each of these programs offers direct help during the
development process, providing incentives for commercialization of the results.
Expanding these programs may make the market guarantees in Project BioShield more
effective in encouraging countermeasure development.
Legislative Proposals in the 109th Congress
The Protecting America in the War on Terror Act of 2005 (S. 3, Gregg), introduced
January 24, 2005, and the Project BioShield II Act of 2005 (S. 975, Lieberman)
introduced April 28, 2005 include additional measures to encourage the development of
countermeasures. Although the bills share similar goals, there are many differences
between them.
Similarities. Most of the provisions of S. 3 are similar to those found in S. 975,
although the specific language may be different. Both bills would add research tools and
detection technology to the categories of products that could be purchased with BioShield
funds. Both bills provide some protection from tort liability. Each would place claims
arising from the use of certain countermeasures into Federal court and exclude punitive
damages. S. 3 allows the government contractor defense to be used; while S. 975 expands
the Federal Tort Claims Act protections given smallpox manufacturers, distributors, and
administrators to include all covered countermeasures. Both bills contain financial
incentives to encourage the development of countermeasures including tax credits for
research and infrastructure investments and the possibility of patent extensions as a
reward for successfully developing a countermeasure.13 Both bills would grant antitrust
exemptions for certain countermeasure related communication between the government
and industry. Finally, both bills also have provisions for the Food and Drug
Administration to provide help to developers and manufacturers during the licensing
process.
Differences. S. 3 has several provisions, unrelated to countermeasures, not found
in S. 975 which fall outside the scope of this brief summary. S. 975 is a much larger bill
than S. 3 and has many bioterrorism-related provisions not found in S. 3. These
provisions include the formation of a new HHS Assistant Secretary for Public Health
Countermeasure Development, a new DHS Assistant Secretary for Medical Readiness and
Response, and a new DHS “Terrorism and Infectious Disease Countermeasure Fund”
similar to the “special fund” for Project BioShield. Additionally, S.3 has several
provisions designed to increase the efficiency of technology transfer from basic research
into developed countermeasures. Other provisions found only in S. 3 include: additional
incentives such as countermeasure market exclusivity extensions and worker visa
benefits, provisions to encourage formation of emergency countermeasure distribution,
and “other transaction authority” to allow HHS to construct more flexible countermeasure
contracts, similar to those used in the DOD. S. 975 would also remove any consideration
of other commercial markets in the HHS Secretary’s decision to use BioShield funds to
purchase a particular countermeasure.
13 For more information, see CRS Report RL32917 Bioterrorism Countermeasure Development:
Issues in Patents and Homeland Security by Wendy Schacht and John Thomas.

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