ANTHRAX VACCINE MAKER CALLS FINANCES SHAKY
05 Aug 2002
Source: New York Times, August 5, 2002.
Anthrax Vaccine Maker Calls Finances Shaky
By JUDITH MILLER
LANSING, Mich., Aug. 1 -- The nation's sole producer of anthrax vaccine says it is in financial jeopardy because the Bush administration has failed to say how much vaccine it intends to buy, preventing it from selling vaccine to foreign and private customers at much higher prices.
But the Pentagon has been unable to tell BioPort precisely how much more vaccine the government intends to order because several civilian agencies have not given the military budget commitments to pay for the vaccine they want, despite months of discussion. "Negotiations are ongoing and will be successful," a senior homeland security official said. "Sometimes talks go quickly; sometimes they don't."
The anthrax vaccine is at the heart of the Bush administration's effort to protect American soldiers and civilians against another mass exposure to the deadly pathogen, which last fall killed 5 people, sickened about 17 and led more than 20,000 people to take antibiotics.
The impasse comes at a time when the Bush administration is vowing to oust Saddam Hussein of Iraq, who is believed to be storing thousands of gallons of anthrax that could be used as weapons in war or terrorism.
Senior BioPort executives disclosed that the Department of Defense is paying about $20 a dose for the vaccine, or more than three times the original price negotiated three years ago, and Pentagon officials confirmed this. But company officials say that even this price, while acceptable now, is too low to enable BioPort to make the long-term investments it needs to survive.
"This company is a unique resource," Mr. Kramer said. "It's crazy for us as a business to risk our financial viability due to government indecision. Our long-term viability is at risk given the current situation."
Bush administration officials say that they understand the company's predicament but that BioPort is partly responsible for it because of faulty business assumptions, repeated failures to meet requirements of the Food and Drug Administration and overly optimistic assumptions about its ability to produce vaccine. In June, for instance, the company threw out about 180,000 doses of vaccine it deemed substandard -- the equivalent of two weeks' production.
In late June, the Pentagon announced a new anthrax vaccination policy, which reversed a plan by the Clinton administration to immunize all 2.4 million people in the military. The new policy limits vaccinations to soldiers in areas with a "higher risk" of exposure, widely reported to be the Middle East and the Korean peninsula.
The policy also commits the administration to stockpiling for civilian use from 40 percent to half of the vaccine produced for the Pentagon. Soldiers are being vaccinated now, while civilians -- mostly police officers, firefighters, rescue crews and other "first responders" -- would receive shots only after exposure to anthrax.
While BioPort says confusion exists in the government over how much vaccine should be ordered for both the military and civilians, some Bush administration officials blamed bureaucratic wrangling between civilian agencies and the Pentagon for the delay.
The Department of Homeland Security, which is being created, is supposed to take charge of such orders, but in the interim the Defense Department has been coordinating orders of vaccine for itself and for several civilian agencies that want to stockpile the vaccine to protect government employees overseas, along with F.B.I. and other law enforcement agents, state and local emergency personnel and health workers.
Providing immunity to the lethal anthrax spore is not easy. The Food and Drug Administration says that six shots given over 18 months and a yearly booster should be given to ensure protection. But new federal studies suggest that three shots of the vaccine may be enough, though the F.D.A. has not approved this. [Pentagon officials disclosed on Friday that 68,000 people on active duty in the military had received all six shots and that 440,000 had received at least two shots.]
BioPort had been reluctant to discuss its protracted, often tense negotiations with the government, which officials attribute partly to the Michigan plant's well-documented production problems. The plant was renovated from 1999 to 2001 to meet the drug agency's standards. The military invested some $75 million in the renovations, but even after them, agency inspectors found many deficiencies that kept the plant from making new vaccine and releasing some 500,000 existing doses until late January.
Some problems have lingered, such as the company's decision in June to discard 180,000 doses of vaccine that it called substandard.
Mr. Kramer characterized the incident as a "nonevent" and "a normal part of the manufacturing process." The decision, he said, "had no impact on the production schedule and our ability to meet our obligation to the government."
But Anna Johnson-Winegar, a civilian microbiologist for the Army who oversees some of the military's vaccine programs, said that the incident showed how tricky it was to estimate BioPort's production capacity and to figure how much surplus the company might have for nongovernment customers. The company's production estimates, Dr. Johnson-Winegar said, "assumes that everything will go well."
"It assume a perfect world," she said.
Nevertheless, Dr. Johnson-Winegar expressed some sympathy for the company in its growing frustration with the pace of the government's negotiations.
"They do need money for recapitalization," she said. "But that's difficult since they are for the moment a one-product company with one customer."
At the same time, other Pentagon officials complained, BioPort's financial predicament is partly the result of its own miscalculations.
"They initially underestimated how much it would cost to produce product that could meet F.D.A. standards, or how much of their costs the State of Michigan, which once owned the plant, routinely picked up," one official said. The assumption that the company could turn a profit as the sole supplier of anthrax vaccine "may have been overly optimistic," the official said.
BioPort was bought in 1998 for nearly $25 million by a group of private investors, including executives who had worked at the plant under Michigan ownership; Fuad El-Hibri; and Adm. William J. Crowe Jr., a former chairman of the Joint Chiefs of Staff.
Many details of BioPort's contract and its production obligations are secret. But Pentagon officials said the company was permitted to sell up to 20 percent of its annual production after it produced the estimated 3.4 million doses that the Pentagon agreed to buy in 1999. While neither the government nor the company will say how much vaccine BioPort is producing, or its production capacity, Mr. Kramer said the government was "taking delivery of doses as fast as we can produce them."