Project BioShield: Authorities,
Appropriations, Acquisitions, and Issues for
Congress
Frank Gottron
Specialist in Science and Technology Policy
January 22, 2010
Congressional Research Service
7-5700
www.crs.gov
R41033
CRS Report for Congress
P
repared for Members and Committees of Congress
Project BioShield: Authorities, Appropriations, Acquisitions, and Issues for Congress
Summary
Many potential chemical, biological, radiological, and nuclear (CBRN) terrorism agents lack
available medical countermeasures. In 2003, President Bush proposed Project BioShield to
address this need. The Project BioShield Act became law in July 2004 (P.L. 108-276).
This law has three main provisions: (1) relaxing regulatory requirements for some CBRN
terrorism-related spending, including hiring and awarding research grants; (2) guaranteeing a
federal government market for new CBRN medical countermeasures; and (3) permitting
emergency use of unapproved countermeasures. The Department of Health and Human Services
(HHS) has used each of these authorities. The HHS used expedited review authorities to approve
5 contracts and 47 grants related to CBRN countermeasure research and development. The HHS
used the authority to guarantee a government market to obligate approximately $2 billion to
acquire countermeasures against anthrax, botulism, radiation, and smallpox. The HHS has also
employed the emergency use authority several times, including allowing young children with
H1N1 “swine” influenza to receive specific antiviral drugs.
The Department of Homeland Security (DHS) Appropriations Act, 2004 (P.L. 108-90) advance-
appropriated $5.593 billion for FY2004 to FY2013 for CBRN countermeasures acquisition
through Project BioShield. Subsequent Congresses have rescinded or transferred to other
accounts approximately 19% of the advance appropriation. In FY2004 and FY2005, Congress
removed a total of approximately $25 million from this account through rescissions included in
the Consolidated Appropriations Act, 2004 (P.L. 108-199) and the Consolidated Appropriations
Act, 2005 (P.L. 108-447). In the Omnibus Appropriations Act, 2009 (P.L. 111-8), Congress
transferred an additional $412 million to support countermeasure advanced research and
development and pandemic influenza preparedness and response. The Consolidated
Appropriations Act, 2010 (P.L. 111-117) transferred $609 million to support countermeasure basic
and advanced research and countermeasure development. P.L. 111-117 also transferred the
BioShield appropriation account from DHS to HHS.
Since passing the Project BioShield Act, subsequent Congresses have considered additional
measures to further encourage countermeasure development. The 109th Congress passed the
Pandemic and All-Hazard Preparedness Act (P.L. 109-417) which created the Biomedical
Advanced Research and Development Authority (BARDA) in HHS. Amongst other duties, this
office oversees all of HHS’ Project BioShield activities. The Pandemic and All-Hazard
Preparedness Act also modified the Project BioShield procurement process. Questions remain
regarding whether these changes have sufficiently improved countermeasure development and
procurement.
The 111th Congress faces several challenging policy issues. Primary among them is assessing
whether Project BioShield is successfully encouraging medical countermeasure development. A
second issue is whether to allow additional diversions of the Project BioShield advance
appropriation, a key element of the government’s market guarantee, to support other activities. A
third is whether to broaden Project BioShield’s mandate beyond CBRN countermeasures in the
face of other threats, such as pandemic influenza.
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Project BioShield: Authorities, Appropriations, Acquisitions, and Issues for Congress
Contents
Introduction ................................................................................................................................ 1
The Project BioShield Act ........................................................................................................... 1
Expedited Procedures............................................................................................................ 1
Market Guarantee ................................................................................................................. 2
Emergency Use of Unapproved Products............................................................................... 3
Reporting Requirements........................................................................................................ 4
Appropriations ............................................................................................................................ 4
Acquisitions................................................................................................................................ 6
BioShield and BARDA ............................................................................................................... 7
Policy Issues ............................................................................................................................... 8
Agency Responsibilities ........................................................................................................ 9
Diversion of BioShield Funds for Other Purposes.................................................................. 9
Transfers for CBRN Countermeasure Research and Development ................................... 9
Transfer for Pandemic Influenza Preparedness .............................................................. 10
Stockpile Management ........................................................................................................ 10
Broad Spectrum Countermeasures....................................................................................... 11
Tables
Table 1. Project BioShield Rescissions and Transfers .................................................................. 5
Table 2. Project BioShield Acquisition Activity ........................................................................... 7
Contacts
Author Contact Information ...................................................................................................... 12
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Project BioShield: Authorities, Appropriations, Acquisitions, and Issues for Congress
Introduction
Following the terrorist attacks of 2001, the federal government determined that it would need new
medical countermeasures (e.g., diagnostic tests, drugs, vaccines, and other treatments) to respond
to an attack using chemical, biological, radiological, or nuclear (CBRN) agents. Representatives
of the pharmaceutical industry attributed the paucity of CBRN agent countermeasures to the lack
of a significant commercial market.1 They argued that because these diseases and conditions
occur infrequently, the private sector perceives little economic incentive to invest the millions of
dollars required to bring treatments to market.
In 2004, Congress passed the Project BioShield Act (P.L. 108-276) to encourage the development
of CBRN medical countermeasures. The 108th Congress also appropriated $5.6 billion to acquire
countermeasures through Project BioShield for FY2004 through FY2013. Subsequent congresses
have evaluated implementation of Project BioShield. In response to perceived problems with
Project BioShield countermeasure procurement, the 109th Congress created the Biodefense
Advanced Research and Development Authority (BARDA) in the Department of Health and
Human Services (HHS) through the Pandemic and All-Hazards Preparedness Act (P.L. 109-417).
The 111th Congress continues to address several BioShield-related policy issues. These include
whether to change Project BioShield agency responsibilities; whether to continue diverting
BioShield appropriations for other purposes; how to replace stockpiled countermeasures as they
expire; and evaluating whether this program has sufficiently encouraged the development of
broad spectrum countermeasures.
The Project BioShield Act
To encourage the development of new CBRN countermeasures, President Bush proposed Project
BioShield in his 2003 State of the Union address. The 108th Congress considered this proposal
and passed the Project BioShield Act of 2004 (P.L. 108-276, signed into law July 21, 2004).2 This
act has three main provisions. The first provision provides HHS expedited procedures for CBRN
terrorism-related spending, including procuring products, hiring experts, and awarding research
grants. The second provision creates a government-market guarantee by allowing the HHS
Secretary to obligate funds to purchase countermeasures while they still need several more years
of development. The third provision 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 HHS must follow when
procuring property or services used in performing, administering, or supporting CBRN
countermeasure research and development (R&D). These expedited procedures decrease both the
1 Alan Pemberton, Pharmaceutical Research and Manufacturers of America, Testimony before the U.S. House of
Representatives Select Committee on Homeland Security, May 15, 2003.
2 For legislative history of this law, 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.
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amount of paperwork required for these expenditures and the potential for oversight. The act also
increases the maximum amount, from $100 thousand to $25 million, for contracts awarded under
simplified acquisition procedures. It also allows these purchases using other than full and open
competition. According to the Government Accountability Office (GAO), HHS has used the
simplified acquisitions procedure authority for five contracts. These contracts, all executed
between 2004 and 2005 using funds from the National Institutes of Health, totaled approximately
$30 million.3 The HHS stated that it has not exercised its authority to use other than full and open
competition.4
The Project BioShield Act authorizes the HHS Secretary to use an expedited award process for
grants, contracts, and cooperative agreements related to CBRN countermeasure R&D, if the
Secretary deems that a pressing need for an expedited award exists. The act limits this authority
to awards worth $1.5 million or less. This expedited award process replaces the normal peer
review process. Some scientists have expressed concerns that an expedited review process will
reduce research quality.5 The normal peer review process provides proposals with greater
scientific merit a higher probability of receiving funding, a factor potentially lost in an expedited
process. According to HHS, it awarded 5 contracts and 47 grants through this expedited peer
review process between July 2004 through December 2008.6 The National Institutes of Allergy
and Infectious Diseases (NIAID) awarded these expedited grants within three to nine months
after the application deadline.7
Market Guarantee
The Project BioShield Act is designed to guarantee companies that the government will buy new,
successfully developed CBRN 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 promise to buy a product up to eight years before it is reasonably expected to
be delivered.9 Originally, HHS would pay a company only on the delivery of a substantial portion
3 These contracts are distinct from the contracts using Project BioShield funds described later in this report (see
“Acquisitions”). The HHS used these contracts to purchase treatments for botulism and internal radioactive particle
contamination. See U.S. Government Accountability Office, Project BioShield: HHS Can Improve Agency Internal
Controls for Its New Contracting Authorities, GAO-09-820, July 21, 2009, p. 7.
4 U.S. Government Accountability Office, Project BioShield: HHS Can Improve Agency Internal Controls for Its New
Contracting Authorities, GAO-09-820, July 21, 2009, http://www.gao.gov/new.items/d09820.pdf, and U.S. Department
of Health and Human Services, Project BioShield Annual Report to Congress August 2007 through December 2008,
2009, p. 8.
5 John Miller, “Interview with Richard Ebright,” The Scientist, vol. 17 (7), April 7, 2003, p. 52.
6 The HHS has not published 2009 data as of the appearance of this report in January 2010. See U.S. Department of
Health and Human Services, Project BioShield Annual Report to Congress July 2004—July 2006, p. 2; U.S.
Department of Health and Human Services, Project BioShield Annual Report to Congress August 2006—July 2007, p.
32; and U.S. Department of Health and Human Services, Project BioShield Annual Report to Congress August 2007
through December 2008, 2009, p. 9.
7 Grants that go through the normal peer review process typically take 9 to 18 months to receive funding. See
http://www.niaid.nih.gov/ncn/grants/charts/timeline_resub.htm.
8 The SNS contains pharmaceuticals, vaccines, medical supplies, and medical equipment to respond to terrorist attacks
and other emergencies.
9 President Bush delegated the presidential approval step to the Director of the Office of Management and Budget
(OMB). OMB maintains this authority in the Obama administration. See Executive Office of the President,
“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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of the countermeasure. 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.10 Therefore, this guarantee reduces the market risk for the company and the
milestone payments partially reduce its exposure to development risk (i.e., the risk that the
countermeasure will fail during testing and be undeliverable).
The Project BioShield Act allows HHS to purchase unapproved and unlicensed 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 [FDA]
approval or [HHS] licensing ... within eight years.”11 Because most drugs that begin these
processes 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 HHS to write contracts
in which unapproved products may be purchased at lower cost than approved products. The HHS
used some of these authorities when structuring each of the Project BioShield contracts discussed
below (see “Acquisitions”).
Emergency Use of Unapproved Products
The FDA and HHS designed their approval and licensing processes to protect people from
ineffective or dangerous treatments. The Project BioShield Act allows the HHS Secretary to
temporarily 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 that:
• the agent for which the countermeasure is designed can cause serious or life-
threatening disease;
• the product may reasonably be believed to be effective in detecting, diagnosing,
treating, or preventing the disease;
• the known and potential benefits of the product outweigh its known and potential
risks;
• no adequate alternative to the product is approved and available; and
• any other criteria prescribed in regulation are met.12
Such emergency use authorizations (EUAs) remain in effect for one year unless the Secretary
terminates them earlier. The Secretary may renew expiring authorizations.
The HHS Secretary has issued several EUAs. Currently, EUAs permit use of five
countermeasures to the 2009 H1N1 “swine” influenza13 outbreak: the antiviral influenza
10 For more on this law, 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.
11 42 U.S.C. § 247d-6b(c).
12 21 U.S.C. § 360bbb-3(c). For more information on how the Secretary determines whether a product meets these
conditions, see Food and Drug Administration, Guidance - Emergency Use Authorization of Medical Products, July
2007, available at http://www.fda.gov/RegulatoryInformation/Guidances/ucm125127.htm.
13 For additional information, see CRS Report R40554, The 2009 Influenza Pandemic: An Overview, by Sarah A. Lister
and C. Stephen Redhead.
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treatments Tamiflu (oseltamivir) and Relenza (zananivir),14 N95 respirators, and two diagnostic
kits to help identify cases of this disease.15 Another active EUA allows the distribution of
antibiotic kits containing doxycycline hyclate to certain people participating in the Cities
Readiness Initiative.16 One EUA has expired; the HHS Secretary issued an EUA in January 2005
allowing the vaccination of Department of Defense (DOD) personnel with a specified type of
anthrax vaccine.17 This EUA expired in January 2006.
Reporting Requirements
The Project BioShield Act of 2004 requires the HHS Secretary to report annually to Congress on
the use of some of the authorities granted by this law. The reports must summarize each instance
that HHS used the expedited procurement and grant procedures and allowed the emergency use of
unapproved products. The reports must explain why HHS needed to use these authorities. The
HHS has produced three such reports to date.18
This act also requires GAO to assess actions taken under authorities granted by the act, determine
the effectiveness of the act, and recommend additional measures to address deficiencies. In July
2009, GAO published two reports in response to this requirement. The first report recommends
that HHS improve some of its internal controls implemented for the expedited contracting
procedures (see “Expedited Procedures” above).19 The second report determined that HHS has
used Project BioShield to support development and procurement of CBRN medical
countermeasures.20 This report contained no recommendations for improving Project BioShield.21
Appropriations
The Project BioShield Act did not appropriate any funds. Instead, it authorized the appropriation
of up to a total of $5.593 billion for procuring countermeasures from FY2004 through FY2013.
The Department of Homeland Security Appropriations Act, 2004 (P.L. 108-90) appropriated this
amount into a special reserve fund and provided explicit time windows in which the money could
be obligated. P.L. 108-90 specified that $3.418 billion was available for obligation for FY2004 to
FY2008. The balance of the advance appropriation plus unobligated funds remaining from
14 Although the antiviral treatments had been previously approved for treating influenza, the EUA makes it easier to
distribute these treatments and allows their use for infants and children younger than had been previously allowed.
15 For more information on these EUAs, see http://www.cdc.gov/h1n1flu/eua/.
16 For more on this program, see http://www.bt.cdc.gov/cri/.
17 70 Fed. Reg. 5452.
18 Available online at http://www.hhs.gov/aspr/barda/bioshield/annualreport/.
19 U.S. Government Accountability Office, Project BioShield: HHS Can Improve Agency Internal Controls for Its New
Contracting Authorities, GAO-09-820, July 21, 2009, http://www.gao.gov/new.items/d09820.pdf.
20 U.S. Government Accountability Office, Project BioShield Act: HHS Has Supported Development, Procurement,
and Emergency Use of Medical Countermeasures to Address Health Threats, GAO-09-878R, July 24, 2009,
http://www.gao.gov/new.items/d09693r.pdf.
21 Other BioShield-related GAO reports include U.S. Government Accountability Office, Anthrax: Federal Agencies
Have Taken Some Steps to Validate Sampling Methods and to Develop a Next-Generation Anthrax Vaccine, GAO-06-
756T, May 9, 2006, and U.S. 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 23, 2007.
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FY2004 to FY2008 became available in FY2009 for obligation from FY2009 to FY2013. The
Project BioShield Act specified that these funds are only for the procurement of CBRN
countermeasures using the Project BioShield authorities and may not be used for other purposes,
such as for grants to support countermeasure development or program administration.
Congress advance-appropriated the 10-year program but retained the power to annually increase
or decrease the amount in the special reserve fund. Congress removed $25 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). See Table 1.
Congress has transferred funds from this account for other purposes. These transfers fall into two
categories: those related to influenza pandemic preparedness and those related to CBRN
countermeasures research and development. The Omnibus Appropriations Act, 2009 (P.L. 111-8)
transferred to HHS $412 million from the special reserve fund. Of this amount, $137 million went
to help respond to and prepare for pandemic influenza and $275 million went to fund
countermeasure advanced development through the Biodefense Advanced Research and
Development Authority (BARDA, see “BioShield and BARDA”).22 The Consolidated
Appropriations Act, 2010 (P.L. 111-117) transferred $609 million to HHS. Of this amount, $305
million went to BARDA for countermeasure advanced development and $304 million went to the
National Institute of Allergy and Infectious Diseases to fund countermeasure basic research. See
Table 1.
Table 1. Project BioShield Rescissions and Transfers
($ in millions)
Action
Fiscal Year
Public Law
Amount
Rescissions
2004
P.L. 108-199
5
2005
P.L.
108-447
20
Transfer for Pandemic Flu
2009
P.L. 111-8
137
Transfers for Advanced Development
2009
P.L. 111-8
275
2010
P.L.
111-117
305
Transfer for Basic Research
2010
P.L. 111-117
304
Total of Rescissions and Transfers to Date 1,046
Source: CRS analysis of P.L. 108-199, P.L. 108-447, P.L. 111-8, and P.L. 111-117.
Note: Amounts rounded to nearest million.
In his FY2010 budget request, President Obama requested that the remaining balances in the
special reserve fund be transferred from the DHS “Biodefense Countermeasure” account into the
HHS “Public Health and Social Services Emergency Fund” account. Congress approved this
transfer through the Consolidated Appropriations Act, 2010 (P.L. 111-117). These funds are to
remain available for obligation through FY2013 for Project BioShield-related countermeasure
purchases. Congressional appropriators estimated that after accounting for the FY2010 transfers
22 U.S. Congress, House Committee on Appropriations, Omnibus Appropriations Act, 2009 (H.R. 1105; P.L. 111-8),
committee print, 111th Cong., 1st sess., March 2009, p. 1301.
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for basic research and advanced development, $2.424 billion remained available for Project
BioShield acquisitions at the beginning of FY2010.23
Acquisitions
The first Project BioShield contract was announced on November 4, 2004.24 The HHS contracted
with VaxGen, Inc. for delivery of 75 million doses of a new type of anthrax vaccine (rPA) within
three years. This contract was worth $879 million. See Table 2. On December 17, 2006, HHS
terminated this contract because VaxGen, Inc. failed to meet a contract milestone.25 Subsequent
contracts include:
• $690 million for 29 million doses of the currently approved AVA anthrax vaccine
(Emergent BioSolutions, Inc.);
• $315 million for 65 thousand doses of Raxibacumab, a treatment for anthrax
(Human Genome Sciences, Inc.);
• $144 million for 10 thousand doses of Anthrax Immune Globulin, a treatment for
anthrax (Cangene Corporation);
• $505 million for 20 million doses of a new (MVA) smallpox vaccine (Bavarian
Nordic, Inc.);
• $416 million for 200 thousand doses of botulinum antitoxin, a treatment for
botulinum toxin exposure (Cangene Corporation);
• $18 million for 5 million doses of a pediatric form of potassium iodide, a
treatment for radioactive iodine exposure (Fleming Pharmaceuticals); and
• $22 million for 395 thousand doses of Ca-DTPA and 80 thousand doses of Zn-
DTPA, two treatments for internal radioactive particle contamination (Akorn,
Inc.).
Thus, excluding the canceled VaxGen contract, HHS has obligated approximately $2.111 billion
to date. Future targets for Project BioShield procurement include countermeasures against
anthrax, viral hemorrhagic fevers, and radiation.26
23 H.Rept. 111-366, p. 1045.
24 See the U.S. Department of Health and Human Services Project BioShield procurement page for status of current
requests and contracts at http://www.hhs.gov/aspr/barda/procurement/cbrnactivities.html. For issues regarding these
awards, see CRS Report RL33907, Project BioShield: Appropriations, Acquisitions, and Policy Implementation Issues
for Congress, by Frank Gottron.
25 U.S. Department of Health and Human Services, “Termination Letter - Contract No. HHSO100200500001C,” Letter
to VaxGen, Inc., December 19, 2006.
26 U.S. Department of Health and Human Services, Public Health Emergency Medical Countermeasure Enterprise,
“Implementation Plan for Chemical, Biological, Radiological and Nuclear Threats,” 72 Fed. Reg. 20122, April 23,
2007.
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Table 2. Project BioShield Acquisition Activity
Doses
Cost
Threat Product
(thousands)
($ millions)
Company Award
Date
Anthrax
rPA vaccine
75,000
879a VaxGen,
Inc.
11/4/04;
Cancelled
12/19/06
AVA vaccine
28,750
690b
Emergent
5/6/05; 5/5/06;
BioSolutions, Inc.
9/25/07
(formerly BioPort
Corp.)
Raxibacumab 65
315
Human
Genome
6/19/06;
Sciences, Inc.
7/29/2009
Anthrax Immune
10 144
Cangene
Corp. 7/28/06
Globulin
Smallpox
MVA vaccine
20,000
505
Bavarian Nordic, Inc.
6/4/07
Botulinum
Botulinum Antitoxin
200
416c Cangene
Corp.
6/1/06
Toxin
Radiological/
Potassium Iodide
4,800
18
Fleming
3/18/05 and
Nuclear
Pharmaceuticals
2/8/06
Ca-DTPA 395
22 Akorn,
Inc.
2/13/06
Zn-DTPA 80
Total Announced Obligations:
2,989
Total Active Announced Obligations:
2,111d
Source: CRS analysis of HHS, Project BioShield: Annual Report to Congress July 2004—July 2006; HHS, Project
BioShield: Annual Report to Congress August 2006—July 2007; HHS, Project BioShield Annual Report to Congress August
2007 through December 2008; HHS, “CBRN Acquisition Activities,” http://www.hhs.gov/aspr/barda/procurement/
cbrnactivities.html; DHS, Office of Health Affairs, Biodefense Countermeasures Congressional Justification FY2010;
and personal communication with HHS, June 8, 2009.
a. This figure includes approximately $1.5 million that HHS paid to VaxGen, Inc. for mandatory security
upgrades. When HHS terminated the vaccine contract, VaxGen, Inc. kept this amount, while the
approximately $878 million for the vaccine became available for other BioShield procurements. Personal
communication with BARDA, June 8, 2009.
b. This total does not include a $405 million contract for 14.5 million doses of AVA anthrax vaccine that HHS
announced on September 30, 2008. According to HHS, this contract used Centers for Disease Control and
Prevention funds rather than the Project BioShield special reserve fund. Personal communication with HHS,
June 8, 2009.
c. This number includes $50 million HHS obligated from this account to this company in FY2004 after the
DHS Appropriations Act, 2004, funded this account but before passage of the Project BioShield Act. See
HHS, Project BioShield: Annual Report to Congress July 2004—July 2006, January 2007, p. 31.
d. Announced obligations minus $878 for the cancel ed rPA contract (see note a).
BioShield and BARDA
Congressional policymakers have scrutinized the implementation and effectiveness of the Project
BioShield Act since its enactment. In response to perceived problems with Project BioShield
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countermeasure procurement, the 109th Congress created the Biodefense Advanced Research and
Development Authority (BARDA) in HHS through the Pandemic and All-Hazards Preparedness
Act (P.L. 109-417).
Many congressional policymakers determined that Project BioShield had insufficiently
encouraged the transition of promising basic research results into the product development stage.
This period in development is often referred to as the “valley of death” because some seemingly
promising products are not developed past this point due to lack of funding. As discussed above,
Congress amended the Project BioShield Act through the Pandemic and All-Hazards
Preparedness Act to allow HHS to pay up to half a Project BioShield contract’s value as milestone
payments. Thus companies could receive payments while continuing to develop their promising
products. Additionally, Congress created in BARDA a dedicated infrastructure to manage and
fund advanced development and commercialization of CBRN countermeasures. In theory,
BARDA funding can take those promising drugs from the basic research through the advanced
development stage, which may include clinical trials. Congress created the Biodefense Medical
Countermeasure Development Fund to pay for such advanced development contracts. Although
this account is separate from the Project BioShield special reserve fund, Congress has repeatedly
funded the advanced development account through transfers from the Project BioShield account
(see Table 1).
Critics of government programs funding advanced development 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, directly
funding advanced development inserts government decision makers into the countermeasure
development process, a role critics argue is better suited to industry experts and entrepreneurs.27
Some critics would prefer to have the government set product requirements and have industry
determine how best to meet them. As originally enacted, Project BioShield took this latter
approach, an approach that Congress found insufficient in this particular case. Because advanced
development activities generally take several years, it may take a few more years to determine if
this change has yielded better results than the original Project BioShield.
In addition to funding the advanced development of countermeasures, BARDA manages HHS’
role in Project BioShield. BARDA leads the efforts to determine countermeasure requirements
and executes all Project BioShield contracts.
Policy Issues
The 111th Congress faces several BioShield-related policy issues. These include whether to
change Project BioShield agency responsibilities; whether to continue to divert BioShield funds
for other purposes; how to replace stockpiled countermeasures as they expire; and evaluating
whether this program has sufficiently encouraged the development of broad spectrum
countermeasures.
27 See CRS Report RL33528, Industrial Competitiveness and Technological Advancement: Debate Over Government
Policy, by Wendy H. Schacht.
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Agency Responsibilities
As originally designed, three agencies had roles in Project BioShield procurements. The DHS
managed the special reserve fund while HHS designed and executed the Project BioShield
contracts. Both DHS and Office of Management and Budget (OMB) were required to approve
each contract. In the FY2010 budget request, President Obama proposed transferring
management of the Project BioShield special reserve fund from DHS to HHS. While considering
this request Congress could have taken the opportunity to change other agency roles. Congress
granted the President’s request to transfer the Project BioShield account to HHS through the
Consolidated Appropriations Act, 2010 (P.L. 111-117), but chose not to change any other agency
responsibilities.
Diversion of BioShield Funds for Other Purposes
One of the distinguishing features of Project BioShield is the ten-year $5.6 billion advance
appropriation. Potential countermeasure developers considered the establishment of an advance-
funded separate account dedicated solely to countermeasure procurement as integral to their
participation in this program. The advance funding helped assure developers that payment for
countermeasures they successfully developed would not depend on future, potentially uncertain
appropriations processes. Although advance-funding the Project BioShield account may have
provided some assurance of stability to developers, in practice, these funds have been subject to
the annual appropriations processes. Subsequent Congresses have removed approximately 19% of
the advance appropriation through rescissions and transfers to other accounts. See Table 1. These
transfers fall into two categories: those related to CBRN countermeasures research and
development and those related to influenza pandemic preparedness.
Transfers for CBRN Countermeasure Research and Development
Congress transferred $580 million from the special reserve fund to BARDA to support CBRN
countermeasure advanced research and development. The Administration justified its requests for
such transfers by asserting that these funds will support “future successful acquisitions of medical
countermeasures under Project BioShield.”28 Thus, Congress could view such transfers as an
attempt to improve the “lower than expected” rate of Project BioShield acquisitions.29 Congress
also transferred $304 million to the National Institute for Allergy and Infectious Diseases for
countermeasure basic research citing similar reasons.30
In FY2009, Congress set the precedent that research and development activities should be funded
by transfers from the Project BioShield special reserve fund. In FY2010, Congress reinforced this
precedent by approving another transfer for that purpose. This may suggest that similar actions
can be expected for FY2011 and beyond. Annual transfers from this account to fund such activity
would continue to lower the amounts available for procuring CBRN countermeasures, their
originally intended purpose. If funding becomes a limitation to acquiring countermeasures,
28 U.S. Department of Health and Human Services, FY2010 Congressional Justification for the Public Health and
Social Services Emergency Fund, p. 46.
29 U.S. Department of Homeland Security, Office of Health Affairs, Biodefense Countermeasures Congressional
Justification FY2010, p. BIO-2.
30 H.Rept. 111-220, p. 194.
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Congress could appropriate additional money for Project BioShield acquisitions.31 However, such
a course of events might cause potential countermeasure developers to feel dependent on the
actions of future appropriators, precisely the situation that establishment and advanced funding of
the special reserve fund was designed to ameliorate.
Such funding transfers may modify the respective roles of the federal government and the private
sector in Project BioShield. Congress originally designed Project BioShield to minimize the risk
that the government would pay for countermeasures that fail during development (see “Market
Guarantee” above). Congress expected developers to manage this risk, using the government-
market guarantee to entice investors to fund countermeasure development. In the act, Congress
attempted to assure such potential investors that the funding of this program was not subject to
the annual appropriations process by providing ten year advance funding. Industry spokespeople
reportedly have asserted that transferring money from this account weakens the ability of private
firms to raise capital necessary to sustain long-term research and development for
countermeasures and hinders potential participation in Project BioShield.32 However, transferring
the funds to support advanced development may reduce the amount that developers need to raise,
since the government could directly fund product development.
Transfer for Pandemic Influenza Preparedness
In FY2009, Congress transferred $137 million from the Project BioShield special reserve fund to
HHS for pandemic influenza preparedness and response. President Obama did not request a
similar transfer for FY2010. President Obama did request that the conference committee on the
Supplemental Appropriations Act, 2009 (P.L. 111-32) allow the purchase of influenza
countermeasures using the Project BioShield special reserve fund.33 Critics of this move charged
that it would damage the biodefense countermeasure industry and “severely diminish the nation’s
efforts to prepare for WMD events and will leave the nation less, not more, prepared.”34 The
conferees declined to provide this authority.35 Similarly, in the Senate report to accompany the
Department of Homeland Security Appropriations Act, 2010 (S. 1298), the committee “strongly
urges” not using the special reserve fund to purchase influenza countermeasures.36
Stockpile Management
All medicines, including those added to the Strategic National Stockpile (SNS) through Project
BioShield, have explicit expiration dates. The federal government does not allow the use of
31 The House Committee on Appropriations has suggested that they would consider adding additional funds to the
special reserve fund in the future. See H.Rept. 111-220, p. 194.
32 Spencer Hsu, “Bipartisan WMD Panel Criticizes Obama Plan To Fund Flu Vaccine,” Washington Post, June 8, 2009.
33 Letter from President Barack Obama to Speaker of the House Nancy Pelosi, June 2, 2009,
http://www.whitehouse.gov/omb/assets/budget_amendments/supplemental_06_02_09.pdf.
34 Letter from Senator Bob Graham, Chairman of the Commission on the Prevention of Weapons of Mass Destruction
Proliferation and Terrorism, and Senator Jim Talent, Vice Chairman of the Commission on the Prevention of Weapons
of Mass Destruction Proliferation and Terrorism, to President Obama, June 8, 2009, http://www.preventwmd.gov/
6_8_2009/; Spencer Hsu, “Bipartisan WMD Panel Criticizes Obama Plan To Fund Flu Vaccine,” Washington Post,
June 8, 2009; and Matt Korade, “Lawmakers, Industry Jeer Plan to Fund Flu Preparedness With Bioshield Money,” CQ
Homeland Security News, June 9, 2009.
35 P.L. 111-32 and H.Rept. 111-151.
36 S.Rept. 111-31, p. 96.
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expired medicines. Countermeasure expiration raises at least two stockpile management issues:
what to do with expiring countermeasures and how to replace them.
In 2007, the GAO suggested that HHS and DOD establish an inventory-sharing agreement that
would allow DOD to use the HHS-stockpiled vaccine in its active troop anthrax vaccination
program before expiration.37 These agencies subsequently implemented a shared stockpile
approach for both for anthrax vaccines and pandemic influenza countermeasures.38 However, this
shared stockpile solution only applies to countermeasures having other high-volume users.
Countermeasures lacking similar high volume users may simply have to be discarded on
expiration and replaced without compensation from other users.
Because countermeasures expire, HHS must procure a number of doses greater than that stored in
the SNS at any given time. For example, HHS had to buy 29 million doses of anthrax vaccine to
maintain a stockpile of at least 10 million doses from 2006 to 2011.39 To maintain a consistent
readiness level, HHS may require additional periodic countermeasure purchases to replenish the
stockpile as the countermeasures expire. Congress may consider whether such purchases should
be funded through the advance appropriated Project BioShield account or through annual SNS
budget authorities. Between 2005 and 2007, BARDA purchased the AVA anthrax vaccine using
Project BioShield funds (Table 2). However in 2008, HHS switched funding sources for this
vaccine and used SNS funds rather than BioShield funds to purchase an additional 14.5 million
doses of AVA vaccine.40 BARDA adoption of this approach for all expiring stockpiled
countermeasures may require increased annual appropriations for SNS procurements.
Broad Spectrum Countermeasures
Many experts contend that broad spectrum countermeasures, those that address multiple CBRN
agents, would be the most valuable additions to the SNS.41 Such nonspecific countermeasures
might be a 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. The Project BioShield Act 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. The HHS has stated
its interest in using Project BioShield to acquire new broad spectrum countermeasures.42
37 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.
38 Robin Robinson, Deputy Assistant Secretary, Office of the Assistant Secretary for Preparedness and Response, HHS,
testimony before the House Committee on Appropriations, Subcommittee on Defense, April 24, 2008.
39 U.S. Department of Health and Human Services, News Release, “HHS Purchases Additional Anthrax Vaccine For
Stockpile,” September 26, 2007.
40 Personal communication with U.S. Department of Health and Human Services staff, June 8, 2009.
41 Some broad spectrum treatments are available. For example, antibiotics such as ciprofloxacin can be used against
several bacterial diseases. In contrast, antivirals that have similar broad spectrum properties or treatments that target
common disease pathways such as sepsis could be valuable additions to the SNS, but remain targets for development.
For a discussion of such countermeasures, see Gigi Gronvall, Jason Matheny, and Bradley Smith, et al., “Flexible
Defenses Roundtable Meeting: Promoting the Strategic Innovation of Medical Countermeasures,” Biosecurity and
Bioterrorism: Biodefense Strategy, Practice, and Science, vol. 5, no. 3 (2007), pp. 271-277.
42 U.S. Department of Health and Human Services Public Health Emergency Medical Countermeasure Enterprise,
“Implementation Plan For Chemical, Biological, Radiological and Nuclear Threats,” 72 Fed. Reg. 20122, April 23,
2007.
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However, Project BioShield contracts to date have specifically targeted 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.
Author Contact Information
Frank Gottron
Specialist in Science and Technology Policy
fgottron@crs.loc.gov, 7-5854
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