Order Code RL33907
Project BioShield: Appropriations,
Acquisitions, and Policy Implementation
Issues for Congress
March 8, 2007
Frank Gottron
Specialist in Science and Technology Policy
Resources, Science, and Industry Division

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Project BioShield: Appropriations, Acquisitions, and
Policy Implementation Issues for Congress
Summary
The Project BioShield Act of 2004 (P.L. 108-276) established a 10-year
program to acquire civilian medical countermeasures to chemical, biological,
radiological and nuclear (CBRN) agents for the Strategic National Stockpile.
Provisions of this act were designed to encourage private companies to develop these
countermeasures by guaranteeing a government market for successfully developed
countermeasures. Both the Department of Homeland Security (DHS) and the
Department of Health and Human Services (HHS) have responsibilities in this
program. Funds for this program are appropriated to DHS, while contracts are
executed through HHS. The interagency process responsible for deciding which
countermeasures to procure has changed multiple times since this program’s
inception.
The Homeland Security Appropriations Act, 2004 (P.L. 108-90) provided an
advance appropriation of $5.6 billion to acquire CBRN countermeasures over a 10-
year period (FY2004–FY2013). This act also limited the amount that could be
obligated during specified time periods. The Project BioShield Act of 2004 (P.L.
108-276) assigned the $5.6 billion advance appropriation to Project BioShield
countermeasure acquisitions. The Consolidated Appropriations Act, 2004 (P.L. 108-
199) and the Consolidated Appropriations Act, 2005 (P.L. 108-447) reduced the
total amount available for Project BioShield by a total of $25 million. Congress
retains the power to make additional appropriations and rescissions to this account.
HHS has awarded Project BioShield contracts for a countermeasure against
botulinum toxin, two types of anthrax vaccine, two types of anthrax treatments, and
three kinds of countermeasures against radiological or nuclear agents. HHS reports
that it has obligated approximately $1.831 billion from the Project BioShield
account. However, the largest contract, $878 million for an anthrax vaccine, was
cancelled in December 2006, for failure to meet a contract milestone. Taking this
into account, approximately $2.389 billion remains available for obligation in
FY2007– FY2008 and $4.564 billion available for obligation through the end of the
program in FY2013.
Some outside observers and interested companies have criticized specific HHS
awards decisions and the rate at which they are made. Additionally, contract awards
reported by HHS do not directly correspond with budgetary figures provided in the
President’s annual budget documents, which may suggest problems with interagency
coordination and communication.
This report discusses actions taken by Congress and the Administration that
have affected this program, describes the decision-making process for choosing
countermeasures, describes the countermeasures for which the Department of Health
and Human Services (HHS) has contracted, and discusses accounting discrepancies
present in budget documents describing Project BioShield. This report may be
updated.

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Contents
Overview of Project BioShield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Project BioShield Procurement Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DHS Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
HHS Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Presidential Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Interagency Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Appropriations, Rescissions, and Future Funding Options . . . . . . . . . . . . . . . . . . 7
Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Rescissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Future Funding Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Anthrax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
rPA Vaccine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
AVA Vaccine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ABthrax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Anthrax Immune Globulin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Botulinum Toxin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Radiological and Nuclear Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Potassium Iodide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Chelators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Differences in HHS Contract Awards and Annual Budget Document
Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Remaining Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Concluding Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
List of Figures
Figure 1. Project BioShield Acquisition Process . . . . . . . . . . . . . . . . . . . . . . . . . 2
List of Tables
Table 1. Project BioShield Appropriation and Rescissions
by Years Funding Is Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 2. Project BioShield Appropriation and Rescissions
by Year Money First Becomes Available . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 3. HHS Reported Project BioShield Contract Awards . . . . . . . . . . . . . . . 11
Table 4. Disposition of Project BioShield Special Reserve Fund
According to the President’s Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Table 5. Comparison of HHS Award Reporting
and DHS Budget Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

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Project BioShield: Appropriations,
Acquisitions, and Policy Implementation
Issues for Congress
The need to develop and procure medical countermeasures (e.g., diagnostic
tests, drugs, vaccines, and other treatments) against weapons of mass destruction is
well established. The enactment of the Project BioShield Act of 2004 (P.L. 108-276)
was designed to be an important part of federal efforts to obtain new civilian medical
countermeasures. It provides countermeasure developers with a guaranteed
government market for their products. As Congress continues oversight of federal
efforts to protect the United States, the effectiveness and efficiency of the Project
BioShield implementation may draw legislative attention.
This report discusses actions taken by Congress and the Administration that
have affected this program, describes the decision-making process for choosing
countermeasures, describes the countermeasures for which the Department of Health
and Human Services (HHS) has contracted, and discusses accounting discrepancies
between the President’s Budget and HHS reporting of Project BioShield awards.
Overview of Project BioShield
The Project BioShield Act of 2004 (P.L. 108-276) contains three major
provisions. One relaxes some procedures for bioterrorism-related procurement,
hiring, and research grant awarding. Another permits the emergency use of
treatments not approved by the Food and Drug Administration (FDA). The third
authorizes a 10-year program to encourage the development and production of new
countermeasures for chemical, biological, radiological, and nuclear (CBRN) agents.
This last provision is usually referred as Project BioShield and is the focus of this
report.1

In contrast to federal programs that directly fund research and development of
biomedical countermeasures, Project BioShield is a procurement program. It acts as
a guarantee that the federal government will buy successfully developed
countermeasures for the Strategic National Stockpile (SNS).2 It allows the
government to enter into contracts to procure countermeasures while they still are in
development, up to eight years before product delivery is expected. The government
guarantees that it will buy a certain quantity at a specified price, once the
countermeasure meets specific requirements. The government pays the agreed-upon
1 For brief overview of this program and information on other aspects of this act, see CRS
Report RS21507, Project BioShield, by Frank Gottron.
2 The SNS contains pharmaceuticals, vaccines, medical supplies, and medical equipment to
respond to terrorist attacks and other emergencies.

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CRS-2
amount only after these requirements are met and the product is delivered to the
Strategic National Stockpile. If the product does not meet the requirements within
the specified time frame, the contract can be cancelled without any payment to the
contractor. Thus, Project BioShield reduces the developer’s market risk; that is, the
possibility that no customer will buy the successfully developed product. However,
it does not reduce the development risk; that is, the possibility that the
countermeasure will fail during development.

Project BioShield Procurement Process
The Project BioShield procurement process requires actions by the Department
of Homeland Security (DHS), HHS, and the President, and relies on interagency
working groups. Figure 1 illustrates the Project BioShield decision-making and
acquisition process.
Figure 1. Project BioShield Acquisition Process
DHS
DHS*
Agent pose
HHS*
Yes
Evaluate agent (MTA) and
material threat to
Countermeasure
develop scenarios
national security?
required?
(MTD)
Yes
HHS/DHS
HHS*
HHS*
Secretaries’ joint
Yes
Appropriate for BioShield
Set countermeasure
recommendation for use of
procurement?
requirements
BioShield funds
HHS
HHS
OMB
Yes
Acquisition process:
Countermeasure
Approve use of BioShield
RFI, RFP, award and
acceptable
funds?
manage contract
for delivery?
Yes
HHS
DHS
Accept countermeasure
Pay for countermeasure
into SNS
Note: Bold indicates lead agency, * indicates interagency input. MTA: Material Threat Assessment,
MTD: Material Threat Determination, OMB: Office of Management and Budget, RFI: Request for
Information, RFP: Request for Proposals, SNS: Strategic National Stockpile.
Source: CRS analysis.

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CRS-3
DHS Roles. The first step in the BioShield acquisition process is to determine
whether a particular CBRN agent poses a material threat to national security. This
analysis, generally referred to as a Material Threat Assessment (MTA), is performed
by DHS. Between 30 and 40 subject matter experts are consulted during an MTA.3
On the basis of this assessment, the DHS Secretary determines whether that agent
poses a material threat to national security. The Project BioShield Act of 2004
requires such a written Material Threat Determination (MTD) for procurement using
BioShield funds and authorities. This declaration neither addresses the relative risk
posed by an agent nor determines the priority of its acquisition. Furthermore, the
issuance of an MTD does not guarantee that the government will pursue
countermeasures against that agent.
The MTA process is distinct from the risk assessments that DHS performs under
Homeland Security Presidential Directive (HSPD) 10 and HSPD-18.4 HSPD-10
directed DHS to develop, and periodically update, risk assessments that include a
ranking of relative risks for biological agents. HSPD-10 states that this overall
biological agent risk assessment is to be used to prioritize federal government-wide
planning and response to the threat of biological agent attacks. The first iteration of
this assessment was delivered in 2006. Now that it is completed, this overall
biological agent risk ranking may be used to help determine which agents should
have MTAs.5 HSPD-18 requires DHS to develop a comprehensive risk assessment
that integrates all CBRN agents into a single ranking of relative risk.6
In addition to these roles, DHS develops credible attack scenarios for use by
interagency groups and HHS to establish countermeasure requirements.
HHS Roles. For agents that have received an MTD, HHS assesses the public
health consequences of an attack using that agent. This analysis relies on interagency
working groups (see below) and is coordinated by the HHS Office of Public Health
Emergency Medical Countermeasures (OPHEMC). OPHEMC is within the Office
of the Assistant Secretary for Preparedness and Response (ASPR).7 Following this
3 Dr. John Vitko, Director, DHS Chemical and Biological Division, Public comments at the
Project BioShield Stakeholders Meeting, Washington DC, September 25, 2006.
4 Executive Office of the President, Homeland Security Directive 10, April 28, 2004 and
Executive Office of the President, Homeland Security Directive 18, January 31, 2007.
5 Dr. John Vitko, Director, DHS Chemical and Biological Division, Public comments at the
Project BioShield Stakeholders Meeting, Washington DC, September 25, 2006.
6 The first such assessment is required by June 1, 2008.
7 These offices have undergone several name changes. The Office the Assistant Secretary
for Preparedness and Response (ASPR) was formerly the Office of Public Health
Emergency Preparedness (OPHEP), and was renamed pursuant to P.L. 109-417, The
Pandemic and All-Hazards Preparedness Act, in December 2006. The name OPHEP was
created administratively in August 2004 (69 Fed. Reg. 51679-51680). Prior to that, the
office was called the Office of the Assistant Secretary for Public Health Emergency
Preparedness (ASPHEP), pursuant to P.L. 107-188, the Public Health Security and
Bioterrorism Preparedness and Response Act of 2002 (67 Fed. Reg. 48903-48905). Briefly,
(continued...)

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CRS-4
assessment, HHS determines if this material threat lacks an existing, effective
countermeasure and whether a countermeasure should be procured using Project
BioShield authorities and funds. If so, the HHS and DHS Secretaries may jointly
submit a recommendation for presidential approval to use BioShield funds to acquire
such a countermeasure.
The HHS Secretary is also responsible for establishing countermeasure
requirements, such as dosage, patient administration method (e.g., injection or pill),
minimum effectiveness, and quantity. This process is coordinated by OPHEMC and
relies on input from interagency working groups. HHS is responsible for the entire
Project BioShield contracting process, including issuing Requests for Information,
Requests for Proposals, awarding contracts, managing awarded contracts, and
determining whether contractors have met the minimum requirements for payment.
OPHEMC maintains a website detailing all Project BioShield solicitations and
awards.8
Presidential Roles. Presidential approval is required before HHS enters into
any Project BioShield countermeasure procurement contract or issues a call for
countermeasure development. The President may only make such approval
subsequent to a joint recommendation from the Secretaries of HHS and DHS. The
President delegated this approval responsibility to the Director of the Office of
Management and Budget.9
The Executive Office of the President also coordinates the interagency process,
largely through the Homeland Security Council (HSC), the National Security Council
(NSC), and the National Science and Technology Council (NSTC).
Interagency Roles. Much of the Project BioShield procurement process
relies on interagency working groups and cooperation. In addition to the roles
detailed above, both DHS and HHS participate fully in the interagency process. The
interagency process has been changed multiple times in the past, and will be changed
moving forward as the Administration implements HSPD-18 and the Pandemic and
7 (...continued)
before that, it was called the Office of Public Health Preparedness, which was created
administratively in January 2002 (67 Fed. Reg. 1980). In July 2006, Office of Public Health
of Emergency Medical Countermeasures, an office within ASPR, was renamed, replacing
the name Office of Research and Development Coordination (ORDC, 71 Fed. Reg.
38403-38405). ORDC was created administratively within ASPHEP in December 2002 (67
Fed. Reg. 71568).
8 See online at [http://www.hhs.gov/ophep/ophemc/bioshield/PBSPrcrtPrjct/]. OPHEMC
is also responsible for procurement of countermeasures (e.g., vaccines, antiviral drugs and
tests) for a possible influenza pandemic. Pandemic procurements are not financed through
Project BioShield. See CRS Report RS22576, Pandemic Influenza: Appropriations for
Public Health Preparedness and Response by Sarah A. Lister. See also OPHEMC online
at [http://www.hhs.gov/aspr/ophemc/PanFlu/procurement_activities/index.html].
9 President Bush, “Designation and Authorization to Perform Functions Under Section
319F-2 of the Public Health Service Act,” 69 Fed. Reg. 70349, December 3, 2004.

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CRS-5
All-Hazards Preparedness Act (P.L. 109-417, as discussed in more detail in a
subsequent section of this report).
Weapons of Mass Destruction Medical Countermeasures
Subcommittee. As stated above, much of the priority-setting and requirement-
determining activities have input from multiple agencies, such as HHS (including
FDA and Centers for Disease Control and Prevention (CDC)), DHS, Department of
Defense, and some of the intelligence agencies. The mechanism by which these
inputs are considered has changed over time. In the past, this activity relied on
expertise resident in the Weapons of Mass Destruction Medical Countermeasures
(WMD MCM) Subcommittee. This interagency group predates Project BioShield.
It is part of the National Science and Technology Council (NSTC). This
Cabinet-level Council acts to coordinate science and technology policy across the
federal research and development enterprise.10 The WMD MCM Subcommittee is
a part of the NSTC Committee on Homeland and National Security. According to
HHS, the charter of the WMD MCM Subcommittee was changed in 2005, and it
began reporting to the joint HSC/NSC Biodefense Policy Coordinating Committee
in 2005.11 According to NSTC, the Subcommittee also remains within NSTC.12 The
WMD MCM Subcommittee contains representatives from CDC, FDA, National
Institutes of Health, DHS, Department of Defense, Department of Agriculture,
Nuclear Regulatory Commission, Department of Energy, Department of Veterans
Affairs, Environmental Protection Agency, Homeland Security Council, National
Security Council, Office of the Vice President, Office of Science and Technology
Policy, Office of Management and Budget, and various intelligence agencies.13
Public Health Medical Countermeasures Enterprise. The Public
Health and Emergency Medical Countermeasures Enterprise (PHEMCE) is an
interagency working group that was established in July 2006 during the HHS Office
of Public Health Emergency Preparedness reorganization. It is to:
(1) define and prioritize requirements for public health medical emergency
countermeasures, (2) coordinate research, early and late stage product
development and procurement activities addressing the requirements [including
BioShield procurement], and (3) set deployment and use strategies for medical
countermeasures held in the Strategic National Stockpile.14
10 See online at [http://www.ostp.gov/nstc/index.html].
11 HHS, Project BioShield Annual Report to Congress: July 2004 – July 2006, January 26,
2007, p. 17.
12 See online at [http://www.ostp.gov/nstc/html/_committees.html].
13 HHS, Project BioShield Annual Report to Congress: July 2004 – July 2006, January 26,
2007, p. 17.
14 HHS, “Office of Public Health Emergency Preparedness; Statement of Organization,
Functions, and Delegations of Authority,” 71 Fed. Reg. 38404, July 6, 2006. This regulation
establishes the name of this group as the Public Health Medical Countermeasures Enterprise
(PHMCE). This name was apparently changed to include “Emergency” in the title, making
it the Public Health Emergency Medical Countermeasures Enterprise (PHEMCE). See 71
Fed. Reg. 53097, September 8, 2006.

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CRS-6
PHEMCE is distinct from the HHS Office of Public Health Emergency Medical
Countermeasures (OPHEMC). PHEMCE is an interagency working group while
OPHEMC resides solely within HHS. However, the Director of OPHEMC is also
responsible for coordinating PHEMCE. Neither its establishing regulation nor the
draft PHEMCE strategy15 state to whom this interagency group reports nor detail its
membership.
According to HHS, the WMD MCM Subcommittee’s duties were transferred
to the PHEMCE Governance Board.16 However, the apparent continuance of the
WMD MCM Subcommittee in the NSTC suggests that not all of its duties have
transferred to PHEMCE.17 It is unclear what effect this transfer of duties from a
subcommittee of a Cabinet-level Council to an interagency working group associated
with an office under the Assistant Secretary for Preparedness and Response will have
on the interagency process and the efficiency of the Project BioShield acquisition
process.
HSPD-18. Homeland Security Presidential Directive 18 (HSPD-18), issued
January 31, 2007, when fully implemented, may change the interagency process
described above. HSPD-18 establishes a government-wide strategy for developing
and acquiring civilian WMD countermeasures. One of its provision requires the
HHS Secretary to
establish an interagency committee to provide advice in setting medical
countermeasure requirements and coordinate HHS research, development, and
procurement activities.18
HSPD-18 also requires the HHS Secretary to establish a
dedicated strategic planning activity to integrate risk-based requirements across
the threat spectrum and of the full range of research, early-, mid- and late-stage
development acquisition and life-cycle management of medical
countermeasures.19
The Secretary is to align all relevant HHS programs to support this plan.
These roles are similar to those of the PHEMCE and its draft strategy.20
However, it is unclear if PHEMCE will be interpreted as the interagency group that
HSPD-18 requires. HSPD-18 gave the Secretary 60 days to establish an interagency
15 HHS, “Office of Public Health Emergency Preparedness; Draft HHS Public Health
Emergency Medical Countermeasures Enterprise (PHEMCE) Strategy for Chemical,
Biological, Radiological and Nuclear Threats,” 71 Fed. Reg. 53097, September 8, 2006.
16 HHS, Project BioShield Annual Report to Congress: July 2004 – July 2006, January 26,
2007, p. 18.
17 See online at [http://www.ostp.gov/nstc/index.html].
18 Executive Office of the President, Homeland Security Directive-18, January 31, 2007.
19 Executive Office of the President, Homeland Security Directive-18, January 31, 2007.
20 71 Fed. Reg. 53097, September 8, 2006.

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CRS-7
working group. This directive, issued more than six months after the establishment
of PHEMCE, may indicate that PHEMCE has been deemed insufficient to meet the
needs of the federal government. On the other hand, the issuance of this directive
could simply be a restatement of the need for PHEMCE and a way to formalize the
composition and reporting requirements of this interagency group. HSPD-18
requires this working group to “apprise” the joint HSC/NSC Biodefense Policy
Coordination Committee of countermeasure development and acquisition progress.
The Pandemic and All-Hazards Preparedness Act. The Pandemic and
All-Hazards Preparedness Act (P.L. 109-417), enacted December 19, 2006, may also
affect the Project BioShield interagency decision-making process.21 It gives the HHS
Secretary until June 19, 2007 to
develop and make public a strategic plan to integrate biodefense and emerging
infectious disease requirements with the advanced research and development,
strategic initiatives for innovation, and the procurement of... countermeasures22
This role is similar to that directed by HSPD-18. If finalized, the Draft PHEMCE
Strategy may fulfill this requirement.
Appropriations, Rescissions, and Future Funding
Options
Appropriations
The Department of Homeland Security Appropriations Act, 2004 (P.L. 108-90)
provided an advance appropriation of $5.593 billion to procure civilian medical
countermeasures for a 10-year period (FY2004–FY2013). This appropriation was
enacted October 1, 2003, almost a year before the July 21, 2004 enactment of the
Project BioShield Act of 2004 (P.L. 108-276). The appropriations act established the
“Biodefense Countermeasures” account for “necessary expenses for securing medical
countermeasures against biological terror attacks.”23
Although all the funds for this account were provided in the 2004 appropriations
act, only a portion became available for obligation upon enactment. The Department
of Homeland Security Appropriations Act, 2004 specified that no more than $890
million could be obligated in FY2004, and no more than $3.418 billion could be
obligated from FY2004 through FY2008 (Table 1). Any money not obligated within
these defined periods would remain available through FY2013. Thus, before
rescissions were enacted, DHS had $890 million available as budget authority for this
21 For more on this legislation, see CRS Report RL33589, The Pandemic and All-Hazards
Preparedness Act (P.L. 109-417): Provisions and Changes to Preexisting Law by Sarah A.
Lister and Frank Gottron.
22 The Pandemic and All-Hazards Preparedness Act (P.L.109-417), §401.
23 The Department of Homeland Security Appropriations Act, 2004 (P.L. 108-90), 117
STAT. 1148 (6 USC 320(a)).

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CRS-8
account in FY2004. In FY2005, an additional $2.528 billion would have become
available. The remaining $2.175 billion would become available in FY2009 (Table
2).
The Project BioShield Act of 2004 (P.L. 108-276) designated the “Biodefense
Countermeasures” account established by the Department of Homeland Security
Appropriations Act, 2004 (P.L. 108-90) as the special reserve fund for Project
BioShield acquisitions.24 P.L. 108-276 placed additional restrictions on the use of
these funds, including requiring a determination that an agent constitutes a material
threat to national security, requiring Presidential approval before a countermeasure
can be purchased, and restricting these funds to procurements only (i.e., not for
administrative costs). It also broadened the types of countermeasures that may be
acquired from this account to include those against biological, chemical, radiological,
and nuclear agents.
Rescissions
Although Congress provided the entire appropriation for the 10-year program,
Congress retains the power to increase or decrease the amount available for Project
BioShield. Two separate rescissions have removed $25 million from the Project
BioShield special reserve fund.
The Consolidated Appropriations Act, 2004 (P.L. 108-199) contained an across-
the-board rescission of 0.59%. This rescission applied to the amount of the Project
BioShield advance appropriation that became available for obligation in FY2004
(Table 2). This rescission removed $5 million from the amounts available for
obligation in FY2004, as well as reducing the total special reserve fund by an equal
amount. Thus, the amount available for obligation in FY2004 was reduced from
$890 million to $885 million, and the total amount available for FY2004-2013 was
reduced from $5.593 billion to $5.588 billion (Table 1 and Table 2).
The Consolidated Appropriations Act, 2005 (P.L. 108-447) contained an across-
the-board rescission of 0.8%. This rescission applied to the $2.528 billion that
became available for obligation in FY2005 (Table 2). This removed $20 million
from the amount available for obligation for FY2005–FY2008 as well as reducing
the total special reserve fund by an equal amount. Thus, the amount that became
available for obligation in FY2005 was reduced from $2.528 billion to $2.508 billion,
and the total amount available until FY2013 was reduced from $5.588 billion to
$5.568 billion (Table 1 and Table 2).
Future Funding Options
Across-the-board rescissions generally only affect those amounts that become
available in that fiscal year. Therefore, the special reserve fund is unlikely to be
affected by future across-the-board rescissions, except in FY2009, when the
remaining $2.175 billion becomes available (Table 2). However, Congress retains
the power to make both specific appropriations and rescissions to this account and
24 The Project BioShield Act of 2004 (P.L. 108-276), 118 STAT. 852, (6 USC 320 (b)).

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CRS-9
could thus directly increase or decrease the amount available for Project BioShield
obligations.
Table 1. Project BioShield Appropriation and Rescissions
by Years Funding Is Available
Years Money Is Available
($ in millions)
FY2004–
FY2004–
Public Law
Action
FY2004
FY2008
FY2013
P.L. 108-90
Appropriation
890
3,418
5,593
P.L. 108-199
0.59% Rescission
(-5)
(-5)
(-5)
P.L. 108-447
0.8% Rescission
n.a.
(-20)
(-20)
Total
885
3,393
5,568
Source: CRS analysis of P.L. 108-90, P.L. 108-199, and P.L. 108-447.
Note: Amounts rounded to nearest million.
Table 2. Project BioShield Appropriation and Rescissions
by Year Money First Becomes Available
Year Money First Becomes Available
($ in millions)
Public Law
Action
FY2004
FY2005
FY2009
P.L. 108-90
Appropriation
890
2,528
2,175
P.L. 108-199
0.59% Rescission
(-5)
n.a.
n.a.
P.L. 108-447
0.8% Rescission
n.a.
(-20)
n.a.
Total
885
2,508
2,175
Source: CRS analysis of P.L. 108-90, P.L. 108-199, and P.L. 108-447.
Note: Amounts rounded to nearest million.
Acquisitions
The HHS has reported awarding $1,831.2 million worth of Project BioShield
contracts (Table 3).25 These contracts address three material threats: Bacillus
25 HHS, Project BioShield: Annual Report to Congress July 2004– July 2006, January 26,
2007. HHS also maintains an updated list of awards on their Project BioShield:
Procurement Activities website available online at
(continued...)

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CRS-10
anthracis (the bacteria which cause anthrax), botulinum toxin, and radiological and
nuclear agents. The distribution of contract awards has been uneven between these
threats, with $1,429.2 million against Bacillus anthracis (78%), $363.6 million
against botulinum toxin (20%) and $37.8 million against radiological and nuclear
weapons (2%). While HHS has made additional requests for information from all
companies developing CBRN countermeasures, none have resulted in contract
offers.26
On December 17, 2006, HHS terminated an anthrax countermeasure contract
for failure to meet a contract milestone.27 This contract was the first, and largest to
date, awarded using Project BioShield funds. Its $877.5 million value represented
nearly half of the total funds obligated to date. This cancellation took place after the
preparation of both the HHS’ Project BioShield Annual Report to Congress and the
President’s FY2008 Budget. Thus, neither of these documents reflect the recovery
of these funds. Taking this cancellation into account, the HHS has obligated $953.7
million to date (Table 3).
Anthrax
The Project BioShield countermeasures against anthrax fall into two categories,
vaccines and treatments.28 The vaccines would likely be used after an attack to
prevent those people who were exposed to Bacillus anthracis from developing the
disease anthrax, a procedure called postexposure prophylaxis.29 This contrasts with
the manner in which most vaccines (e.g. childhood vaccines) are administered before
exposure.
25 (...continued)
[http://www.hhs.gov/ophep/ophemc/bioshield/PBSPrcrtPrjct/]. HHS asserts that all of the
obligations from this account are detailed on that website. Personal communication with
HHS staff, November 20, 2006.
26 These requests addressed smallpox, acute radiation syndrome, chemical agents, and a
general request for information from all companies developing CBRN countermeasures. For
details, see [http://www.hhs.gov/ophep/ophemc/bioshield/PBSPrcrtPrjct/].
27 HHS, “Termination Letter - Contract No. HHSO100200500001C,” Letter to VaxGen, Inc.,
December 19, 2006.
28 For a discussion of possible anthrax countermeasures, see Luciana Borio and Gigi
Grönvall, “Anthrax Countermeasures: Current Status and Future Needs,” Biosecurity and
Bioterrorism: Biodefense Strategy, Practice, and Science, Vol. 3, No. 2, 2005, pp. 102-112.
29 Some scientific studies support the use of vaccines in conjunction with antibiotics
following exposure to Bacillus anthracis. For examples, see Z. Altboum et al.,
“Postexposure Prophylaxis Against Anthrax: Evaluation of Various Treatment Regimens
in Intranasally Infected Guinea Pigs,” Infection and Immunity, Vol. 70, No. 11, November
2002, pp. 6231-6241; and N. Vietri et al., “Short-course Postexposure Antibiotic
Prophylaxis Combined with Vaccination Protects Against Experimental Inhalational
Anthrax,” Proceedings of the National Academy of Sciences, Vol. 103, No. 20, May 3, 2006,
pp. 7813-7816.

---

CRS-11
Table 3. HHS Reported Project BioShield Contract Awards
Doses
Cost
Material Threat
Product
(thousands)
($ millions)
Company
Award Date
11/4/04
rPA vaccine
75,000
877.5
VaxGen, Inc.
Cancelled
12/19/06
Anthrax
Emergent BioSolutions (formerly
5/6/05 and
AVA vaccine
10,000
242.7
BioPort Corp.)
5/5/06
ABthrax
20
165.2
Human Genome Sciences
6/19/06
Anthrax Immune
10
143.8
Cangene Corp.
7/28/06
Globulin
Botulinum Antitoxin
Botulinum Toxin
200
362.6
Cangene Corp.
6/1/06
(Heptavalent)
Potassium Iodide
3/18/05 and
4,800
17.5
Fleming & Company
Radiological/
(Liquid)
2/8/06
Nuclear
Ca-DTPA
395
21.9
Akorn, Inc.
2/13/06
Zn-DTPA
80
Total Announced Obligations to Date:
$1,831.2
million
Total Current Obligations:a
$953.7
million
a Accounts for cancellation of the rPA vaccine.
Source: HHS, Project BioShield: Procurement Activities website [http://www.hhs.gov/ophep/ophemc/bioshield/PBSPrcrtPrjct]; Project BioShield: Annual Report to Congress July
2004- July 2006, January 26, 2007; and CRS calculations.

---

CRS-12
rPA Vaccine. The vaccine based on recombinant Protective Antigen (rPA) is
often referred to as the “second generation anthrax vaccine,” to differentiate it from
the anthrax vaccine adsorbed (AVA) vaccine, which is currently used by the
Department of Defense (DOD).30 In 2002, the Institute of Medicine (IOM) stated,
“Although AVA appears to be sufficiently safe and effective for use, it is far from
optimal.”31 The IOM supported the development of a new anthrax vaccine. Officials
at HHS believe that, when fully developed, the rPA vaccine will address many of the
shortcomings of the AVA vaccine as identified in the IOM report.32
In November 2004, HHS awarded VaxGen, Inc. an $877.5 million contract for
the delivery of 75 million doses of rPA vaccine to the Strategic National Stockpile
($11.70 per dose). On December 17, 2006, HHS terminated this contract for
VaxGen’s failure to meet a contract milestone.33
HHS had planned that each person would require a three dose regimen of this
vaccine for protection.34 Thus, 75 million doses would be sufficient for 25 million
people. The Food and Drug Administration (FDA) has not licensed this vaccine.
Although FDA licensing is not required for delivery to the stockpile, this vaccine
required additional clinical testing before it could be accepted by the government.
Under the contract with VaxGen, delivery was to begin by the end of 2006 and be
completed by the end of 2007. Technical difficulties repeatedly delayed delivery.35
This first, largest Project BioShield contract has drawn intense scrutiny. Critics
of this contract award point to VaxGen’s previous unsuccessful attempts to develop
products, financial difficulties, and problems meeting the contract deadlines as
indicative of problems in HHS’ implementation of Project BioShield authorities.36
HHS responded to such criticisms by stating VaxGen won the contract through open
competition after all the proposals were subjected to “a robust technical and business
30 Stewart Simonson, Assistant Secretary, Department of Health and Human Services, Office
of Public Health and Emergency Preparedness, Testimony before the Senate Committee on
Appropriations, Subcommittee on Homeland Security, April 28, 2005.
31 The Anthrax Vaccine: Is It Safe? Does It Work? Institute of Medicine, National Academy
Press: Washington, DC, 2002, p. 20.
32 Stewart Simonson, Assistant Secretary, Department of Health and Human Services, Office
of Public Health and Emergency Preparedness, Testimony before the Senate Committee on
Appropriations, Subcommittee on Homeland Security, April 28, 2005.
33 HHS, “Termination Letter - Contract No. HHSO100200500001C,” Letter to VaxGen, Inc.,
December 19, 2006.
34 HHS, “HHS Buys New Anthrax Vaccine for Stockpile,” News Release, November 4,
2004.
35 Renae Merle, “Anthrax Vaccine Testing Called Off: VaxGen Contract in Doubt as FDA
Raises Concerns,” Washington Post, November 4, 2006.
36 Elizabeth MacDonald and Robert Langworth, “Spore Wars,” Forbes, Vol. 175, No. 12,
p. 162, June 6, 2005; and Eric Lipton, “Bid to Stockpile Bioterror Drugs Stymied by
Setbacks,” New York Times, September 18, 2006.

---

CRS-13
evaluation process.”37 HHS portrayed the delays as part of the normal drug
development process.38 VaxGen reportedly denied responsibility for the delays,
stating that they arose from the government changing its requirements.39
Following the cancellation of the contract, it remains unclear whether HHS still
plans to acquire an rPA anthrax vaccine for the SNS.
AVA Vaccine. The AVA anthrax vaccine was originally licensed in 1970. It
is currently approved by the FDA for use in 18- to 65-year olds prior to exposure to
Bacillus anthracis (pre-exposure prophylaxis). Neither this vaccine, nor the rPA
vaccine, is approved by the FDA for post-exposure prophylaxis. The FDA-approved
regimen for pre-exposure prophylaxis requires a series of six doses administered over
the course of 18 months.
The DOD currently uses this vaccine for troops and other personnel deployed
in certain areas, including South Korea, Afghanistan, and Iraq. Its use has been
controversial, due to complaints of adverse reactions and questions about the
vaccine’s efficacy. In October 2004, a federal judge ordered the DOD to stop
mandatory vaccinations pending FDA review.40 After this order, DOD continued to
use this vaccine on a voluntary, rather than mandatory, basis. The FDA completed
its review in December 2005.41 In October 2006, DOD announced plans to resume
mandatory vaccinations. Reportedly, several DOD employees plan to sue to block
implementation of mandatory vaccinations.42
In May 2005 and May 2006, HHS awarded contracts to Emergent BioSolutions
(formerly BioPort Corp.) for the delivery of AVA vaccine to the Strategic National
Stockpile. Combined, the contracts are for 10 million doses of AVA vaccine for
$242.7 million ($24.27 per dose). According to the company, 9 million doses have
been delivered to the government, and the remainder is to be delivered in 2007.43
This contract award has also drawn criticism on the basis of cost and questions
of policy. Despite the manufacturer carrying no developmental risk, the AVA
37 Stewart Simonson, Assistant Secretary, Department of Health and Human Services, Office
of Public Health and Emergency Preparedness, Testimony before the Senate Committee on
Appropriations, Subcommittee on Homeland Security, April 28, 2005.
38 Darren Fonda, “Inside the Spore Wars,” Time, January 3, 2006.
39 Eric Lipton, “Bid to Stockpile Bioterror Drugs Stymied by Setbacks,” New York Times,
September 18, 2006.
40 Marc Kaufman, “Court Orders Pentagon to Stop Anthrax Vaccinations,” Washington
Post, October 28, 2004.
41 70 Fed. Reg. 75180-75198, December 19, 2005.
42 Josh White, “Defense Employees Set For Another Suit to Halt Mandatory Anthrax Shots,”
Washington Post, December 13, 2006.
43 Emergent BioSolutions, “Emergent BioSolutions Delivers Over 3 Million Doses of
BioThrax(R) to U.S. Department of Health and Human Services for Strategic National
Stockpile,” Press Release, December 14, 2006.

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CRS-14
vaccine cost per dose is twice the cost per dose of rPA. Additionally, critics observe
that DOD studies indicate that up to 35% of people have adverse reactions to this
vaccine and that 6% of vaccine recipients have reported serious complications to the
FDA’s Vaccine Adverse Event Reporting System.44 Critics point to this and
observations in the IOM report to support their conclusion that AVA is an inferior
product. Lastly, since AVA is the only currently licensed vaccine, critics question
whether its acquisition has resulted from its unique status rather than filling a Project
BioShield need.45 Emergent BioSolutions defends it product stating that both the
IOM report and the FDA found its product safe and that, as the only FDA-approved
anthrax vaccine available, it is filling an urgent need.46
ABthrax. ABthrax is an antibody-based treatment that works in a manner
similar to anti-venom treatments for snake bites. It is currently under development
and it is not yet licensed by the FDA. In June 2006, HHS awarded a $165.2 million
contract to Human Genome Sciences for the delivery of 20 thousand doses of
ABthrax ($8,260 per dose). Human Genome Sciences expects to complete the
delivery of ABthrax to the government in 2008.47 This high cost per dose, the
mechanisms of action, and method of patient administration suggest that ABthrax
would be used as a treatment for people who have already developed the symptoms
of anthrax, rather than as a post-exposure prophylactic.
Anthrax Immune Globulin. Anthrax Immune Globulin is also an antibody-
based therapeutic. It is derived from the blood of people who have received the
anthrax vaccine. It is currently under development and is not yet licensed by the
FDA. In July 2006, HHS awarded a $143.8 million contract to Cangene Corp. for
the delivery of 10 thousand doses of Anthrax Immune Globulin ($14,380 per dose).
This high cost per dose, the mechanism of action, and likely method of patient
administration suggest that Anthrax Immune Globulin would be used as a treatment
for people who have already developed the symptoms of anthrax, rather than as a
post-exposure prophylactic.
Botulinum Toxin
Botulinum antitoxin is an antibody-based treatment for botulism, a life
threatening illness caused by a toxin produced by Clostridium botulinum bacteria.
In June 2006, HHS awarded a $362.6 million contract to Cangene Corp. for 200
thousand doses of a botulinum antitoxin ($1,813 per dose). The company expects to
44 Anthrax Vaccine Adsorbed (BioThraxTM) FDA-approved package insert, January 31,
2002.
45 Elizabeth MacDonald and Robert Langworth, “Spore Wars,” Forbes, Vol. 175, No. 12,
p. 162, June 6, 2005; and Eric Lipton, “Bid to Stockpile Bioterror Drugs Stymied by
Setbacks,” New York Times, September 18, 2006.
46 Thomas Williams, “At Odds Over Anthrax,” The Hartford Courant, April 10, 2006.
47 Human Genome Sciences, “U.S. Government Agrees to Purchase ABthrax™ From
Human Genome Sciences for the Strategic National Stockpile,” Press Release, June 20,
2006.

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CRS-15
begin delivery by the end of 2007.48 Botulinum toxin has several different types; an
antitoxin against one type will not be effective against other types. This contract
calls for a combination of antitoxins that will work against seven types of botulinum
toxins. This combination is known as heptavalent antitoxin. Following an
intentional release of botulinum toxin, this antitoxin would probably be administered
to people who have developed symptoms of toxin exposure, consistent with the way
that similar trivalent products are currently used to treat naturally occurring
exposures.
Botulinum antitoxin is produced in a manner similar to anthrax immune
globulin, except in this case, it is extracted from horse blood instead of human blood.
In 2004, after the Department of Homeland Security Appropriations Act, 2004
provided the advance appropriation, but before the Project BioShield Act was
enacted, HHS obligated $50 million to support the botulinum antitoxin program.
These funds were used to process existing horse blood that had been collected by the
DOD and to establish horse farms needed to provide new horse blood.49 This
expenditure would probably not have been eligible for funding from this account
after enactment of the Project BioShield Act, as it limited the use of these funds to
procuring products. Because these funds were not obligated as part of Project
BioShield, they are not included in Table 3, but they are included in Table 4 (see
below).
Radiological and Nuclear Agents
In addition to direct blast effects, attacks using radiological or nuclear agents
can produce injuries resulting from ionizing radiation, which can damage or kill
living cells. HHS determined that the threat posed by both acute radiation sickness
and internal contamination with radioactive particles required countermeasures.
HHS has contracted for two types of countermeasures designed to reduce internal
contamination. Requests for proposals for countermeasures to address acute
radiation sickness did not lead to contract offers.50

Potassium Iodide. The HHS awarded contracts in March 2005 and February
2006 to Fleming & Company Pharmaceuticals for the delivery of a total of 4.8
million doses of liquid potassium iodide (KI)51 for a total cost of $15.9 million ($3.31
per dose). This product is FDA-approved and available without a prescription to
treat people exposed to radioactive iodine.
48 Cangene Corp., Press Release, May 31, 2006.
49 HHS, Personal communication, November 11, 2006.
50 HHS, Project BioShield Procurement Activities website, last accessed March 5, 2007
[http://www.hhs.gov/ophep/ophemc/bioshield/PBSPrcrtPrjct/].
51 Potassium iodide is often abbreviated KI, its chemical formula.

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CRS-16
Potassium iodide might be distributed following a release of radioactive iodine
into the air, possibly following an attack on a nuclear power plant.52 Because the
thyroid gland extracts and stores iodine present in the blood, it is vulnerable to injury
from radioactive iodine. If administered in time, potassium iodide would block
extraction and storage of radioactive iodine by the thyroid. Potassium iodide does
not protect against the effects of any other type of radioactive material. Even before
these acquisitions, potassium iodide tablets were included in the Strategic National
Stockpile, but the tablet formulation was considered poorly suited for children. This
liquid preparation, in contrast, is designed for pediatric use.
Chelators. In February and April 2006, HHS awarded a $21.9 million contract
to Akorn, Inc. for 395 thousand doses of calcium diethylenetriaminepentaacetate (Ca-
DTPA) and 80 thousand doses of zinc diethylenetriaminepentaacetate (Zn-DTPA).
(a nominal average of $46 per dose). These chelators might be used to treat those
exposed to radioactive material through the detonation of a radiological dispersal
device (“dirty bomb”), improvised nuclear device, or terrorist attack against stored
radioactive material.53 These products are FDA-approved for this type of internal
decontamination.
Radioactive materials that may be inhaled or ingested following a dirty bomb
or nuclear attack are treated as minerals in the body. Thus, they enter into biological
processes like other minerals and become incorporated into internal organs. Once
incorporated, they are very difficult to remove and continue to emit radiation,
potentially sickening those exposed. Chelators help remove these radioactive
particles from the body by binding to them and facilitating their excretion through
normal physiological processes.
Differences in HHS Contract Awards and
Annual Budget Document Accounting
The Project BioShield special reserve fund, established by the Department of
Homeland Security Appropriations Act, 2004, is managed by DHS. In FY2006, the
DHS management of this appropriations account passed internally from the Federal
Emergency Management Agency to the Preparedness Directorate. However, the
contracts obligating the appropriated funds are executed through the HHS OPHEMC.
Table 4 shows the accounting from the President’s annual budget documents.
In FY2004, $885 million from the advance appropriation became available for
obligation.54 According to the DHS section of the budget, all available budget
authority was obligated in FY2004; no budget authority was carried into the
52 HHS, “HHS Awards BioShield Contract for Liquid Potassium Iodide,” News Release,
May 18, 2005.
53 HHS, “HHS Awards BioShield Contract for Two Additional Medical Countermeasures
for Radiological or Nuclear Incidents,” News Release, February 13, 2006.
54 These figures account for the across-the-board rescissions in P.L. 108-199 and P.L. 108-
447.

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CRS-17
following fiscal year.55 In FY2005, another $2.508 billion became available for
obligation. The budget documents state that $189 million of this was obligated in
FY2005, leaving $2.324 billion to be carried over into FY2006.56 For FY2006, the
budget states that $856 million was obligated, leaving $1.468 billion to be carried
over into FY2007.57 DHS anticipates obligations of $1.045 billion in FY2007,
leaving only $423 million available for obligation in FY2008. The next part of the
advance appropriation does not become available for obligation until FY2009 (see
Table 2).
Table 4. Disposition of Project BioShield Special Reserve Fund
According to the President’s Budget
($ in Millions)
FY2004
FY2005
FY2006
FY2007
FY2008
Actual
Actual
Actual
Estimate
Estimate
Unobligated Balance
0
0
2,324
1,468
423b
from Previous Years
Recovered Obligations
0
5
0
0b
0
from Previous Year
New Budget Authority
885a
2,508a
0
0
0
Total Amount
Available for
885
2,513
2,324
1,468b
423b
Obligation
New Obligations by
885
189
856
1,045
423
Fiscal Year
Unobligated Balance
0
2,324
1,468
423b
0b
Carried Forward
Cumulative Total of
Obligations at End of
885
1,074
1,930
2,975b
3,398b
Fiscal Year
a Includes recisions made by P.L. 108-199 and P.L. 108-447. See Table 2.
b This figure was estimated by the Administration before the cancellation of the $878 million rPA
anthrax vaccine contract.
Source: Budget of the United States Government, Fiscal Year 2006—Appendix, pp. 513-514; Budget
of the United States Government, Fiscal Year 2007—Appendix, p. 512; Budget of the United States
Government, Fiscal Year 2008—Appendix, p. 479; and CRS calculations.
55 Budget of the United States Government, Fiscal Year 2006—Appendix, p. 513-514.
56 Budget of the United States Government, Fiscal Year 2007—Appendix, p. 512.
57 Budget of the United States Government, Fiscal Year 2008—Appendix, p. 479.

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CRS-18
These figures conflict with totals calculated from the countermeasure awards
reported by HHS (Table 3). Table 5 lists all of the contracts that HHS has
announced for this account along with their dates of award and fiscal year subtotals.58
Table 5. Comparison of HHS Award Reporting
and DHS Budget Accounting
DHS’
Obligations in
HHS announcements
Difference
President’s
$ (millions)
$ (millions)
Budget
$ (millions)
Botulinum Antitoxin Programa
50
FY04
FY04 Total
50
885
-835
rPA, 11/04
878
KI, 3/05
7
AVA, 5/05
FY05
123
FY05 Total
1,008
189
819
KI, 2/06
10
Chelators, 2/06
22
AVA, 5/06
120
Botulinum Antitoxin, 6/06
363
FY06
ABthrax, 6/06
165
AIG, 7/06
144
FY06 Total
824
856
-32
Grand
Total
1,882
1,930
-48
a HHS states that this obligation occurred in FY2004 and does not provide a precise date.
Note: Amounts rounded to nearest million.
Source: HHS, Project BioShield: Procurement Activities website [http://www.hhs.gov
/ophep/ophemc/bioshield/PBSPrcrtPrjct] and Project BioShield: Annual Report to Congress July
2004– July 2006, January 26, 2007; Budget of the United States Government, Fiscal Year
2006—Appendix, pp. 513-514; Budget of the United States Government, Fiscal Year 2007 —
Appendix, p. 512; Budget of the United States Government, Fiscal Year 2008 — Appendix, p. 479;
and CRS calculations. See Table 3 and Table 4.
58 HHS, Project BioShield: Annual Report to Congress July 2004 – July 2006, January 26,
2007. HHS also maintains an updated list of awards on their Project BioShield:
Procurement Activities website available online at [http://www.hhs.gov/ophep/ophemc
/bioshield/PBSPrcrtPrjct/]. HHS asserts that all of the obligations from this account are
detailed on that website. Personal communication with HHS staff, November 20, 2006.

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CRS-19
According to HHS, the only obligation from this account in FY2004 was $50
million to support the botulinum antitoxin program. In contrast, the President’s
FY2006 Budget documents state that $885 million was obligated in FY2004.
Additionally, it describes this obligation as falling under two object classifications;
with $190 million for “other services” (object classification 25.2) and $695 million
for “other purchases of goods and services from Government accounts” (object
classification 25.3).59 It is not clear what these amounts represent. The $50 million
HHS obligated for the botulinum antitoxin program support could fall under the
“other services” category, since it was not an acquisition per se, but the amount of
this contract does not correlate to the amount categorized as “other services.”
Another possibility is that the rPA vaccine contract (awarded in November
2004) was accounted for in FY2004 rather than FY2005. This interpretation is
supported by the FY2007 Budget reporting that only $189 million was obligated in
FY2005.60 However, the total of the $878 million rPA obligation and the $50 million
botulinum antitoxin program obligation is greater than the budget authority made
available in FY2004 ($885 million). This interpretation also would not account for
the division of the funds into the two object classifications. Furthermore, the
FY2007 DHS Preparedness Directorate BioDefense Countermeasures Congressional
Justification materials list acquiring the rPA vaccine as one of its FY2005
accomplishments. The source of the FY2004 account discrepancy of $835 million
is not apparent.
In FY2005, HHS reported awarding three contracts for a total of $1.008 billion.
The FY2007 Budget states that the actual amount obligated in FY2005 was $189
million. The DHS FY2007 Congressional Justification documents state that its
FY2005 accomplishments include the rPA, KI, and AVA contracts. These would
equal the $1.008 billion calculated from the HHS figures. It is not apparent to what
the $189 million stated in the Budget correlates.
Like the preceding two years, the stated obligations for FY2006 are different
according to HHS and the President’s Budget. For FY2006, HHS reported awarding
six contracts, with obligations totaling $824 million. This is $32 million less than
the $856 million stated as “actual obligations” in FY2006 in the President’s FY2008
Budget.61
Combining all of the differences in reporting through FY2006, the President’s
Budgets state that $48 million more have been obligated than the HHS documents
report.
59 Budget of the United States Government, Fiscal Year 2006 — Appendix, p. 514.
60 Budget of the United States Government, Fiscal Year 2007 — Appendix, p. 512.
61 Budget of the United States Government, Fiscal Year 2008 — Appendix, p. 479.

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CRS-20
Remaining Available Funds
Knowing the amount of funds available for the Project BioShield is important
for both effective management of the program and for external oversight. For the
Administration to most effectively plan and prioritize future acquisitions, it must
know the amount of funds remaining available. For Congress, knowing the amount
of funds remaining can be important in assessing program management, the
implementation pace, and general program effectiveness. Due to conflicting
statements from executive branch agencies, the amount of funds remaining available
for obligation for this program is not clear.
According to HHS, as of March 2007, it has obligated $1.882 billion from this
account. This figure does not include the $878 million that should be recovered in
FY2007 from the cancellation of the rPA anthrax vaccine contract. Taking this
recovery into account, $2.389 billion will be available for obligation in FY2007–
FY2008 and $4.564 billion will be available until the end of the program in FY2013.
As stated above, using the President’s Budget figures to calculate obligations would
reduce these numbers by $48 million.
Concluding Observations
Project BioShield plays a key role in the federal government’s response to the
threat of chemical, biological, radiological, and nuclear terrorism. It created a
process for the government to agree to purchase countermeasures while they still are
in development. In addition to increasing the holdings of the Strategic National
Stockpile, it was hoped that this government market guarantee would encourage
companies to continue to develop promising countermeasures that they might have
otherwise abandoned, and induce other companies to begin countermeasure
development. It remains unclear how well Project BioShield is meeting these goals.
The rate by which DHS completes Material Threat Determinations has received
criticism by stakeholders, industry, and policymakers.62 To address these concerns,
legislation has been introduced in the previous and current Congress. In the 110th
Congress, the Project BioShield Material Threats Act of 2007 (H.R. 1089, Langevin)
would require an assessment, and an MTD if appropriate, for all currently known
CBRN agents likely to pose a significant national security threat. These assessments
would be required to be completed by December 31, 2007. By assessing all known
threats and issuing those MTDs necessary, the full spectrum of material threats may
be considered when developing a countermeasure acquisition strategy. Such a
comprehensive acquisition strategy may allow for more efficient prioritization and
balance of countermeasures, providing optimized protection from CBRN attacks
using finite funds in the shortest time. Since HHS has not issued contracts for the all
62 For example, see U.S. House of Representatives Committee on Homeland Security,
Emergency Preparedness, Science, and Technology Subcommittee, Hearing on Project
BioShield, 109th Cong., 1st Sess., July 12, 2005.

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CRS-21
of the agents that already have MTDs, an increase in this number may not increase
the rate of countermeasure awards.
Appropriators set limits on how much could be obligated during specified
periods of time. The pace by which HHS awards countermeasure contracts roughly
corresponds to these limits. By this criterion, this program is on track to fulfill its
goals; HHS cannot obligate the money faster than it becomes available.
HHS has been criticized for some of the countermeasures it has chosen. In
decisions as complicated and weighty as these, any choice is likely to be criticized.
Given the failure of the largest contract to date, some critics may conclude that
Project BioShield has fallen short of its goals, since the majority of the money that
has been obligated, though not the majority of contracts, has not yet resulted in
products in the stockpile. However, one of the unique features of Project BioShield
contracts is that the government may contract for products that require up to eight
years more of development. It was designed to allow the government to promise to
buy something, but only pay for it on delivery. Thus the company, rather than the
government, bears the majority of the development risk, i.e. that the product will
never be deliverable. One industry group estimates that more than half of all
pharmaceuticals will fail during the last eight years of development.63 Thus, it may
be expected that at least some Project BioShield contracts will be cancelled.
Since the money available for obligation is finite, the government bears some
development risk in the form of opportunity costs, i.e., money obligated to a
countermeasure that will ultimately fail in development cannot be simultaneously
obligated to another needed countermeasure.
It is possible that the establishment of the Biodefense Advance Research and
Development Authority (BARDA) in HHS will reduce the likelihood that future
Project BioShield contracts will fail during the advanced development phase.
Established by the Pandemic and All-Hazards Preparedness Act (P.L. 109-417), one
of BARDA’s roles is to support the advanced research and development of promising
countermeasures. In theory, funding this part of the development process through
such a dedicated mechanism could allow countermeasures to further mature through
the development process longer before competing for a Project BioShield contract.
This could reduce the risk that a countermeasure will fail while under a Project
BioShield contract. P.L. 109-417 included authorization for approximately $1 billion
to support this type of activity for FY2007 through FY2008. However, no money
was appropriated for BARDA in FY2007. Even if BARDA becomes operational in
FY2007, it will take some time to determine what projects to fund, provide funding,
and receive returns on this investment.
Additional criticism of the Project BioShield procurement process may stem
from the perceived opacity of its decision-making process. HHS is moving to
address some of these issues by publishing its Draft PHEMCE Strategy for
63 Pharmaceutical Research and Manufacturers of America, Industry Profile 2006, p. 4.

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CRS-22
Chemical, Biological, Radiological and Nuclear Threats,64 inviting public comment,
and reaching out to the public and companies that might develop needed
countermeasures through stakeholder meetings.
Some critics also suggest that the Project BioShield process has been poorly
managed overall. Such suggestions are reinforced by the annual accounting
discrepancies between HHS and DHS. It remains to be seen whether these concerns
will be allayed through the management changes being implemented subsequent to:
the reorganization of the Office of Public Health Emergency Medical
Countermeasures; the establishment of PHEMCE and publication of its draft
strategy; the enactment of the Pandemic and All-Hazards Preparedness Act (P.L.
109-417); and the issuance of HSPD-18.
64 71 Fed. Reg. 53097, September 8, 2006.

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