Global Security Newswire

WASHINGTON -- A spending plan approved last month by U.S. President Barack Obama transfers more than half a billion dollars from the coffers of a leading effort intended to promote development of countermeasures against weapons of mass destruction (see GSN, Jan. 5).

Roughly $609 million was shifted in this fiscal year from the Project Bioshield Special Reserve Fund, according to the Consolidated Appropriations Act. Lawmakers moved $304 million to the Health and Human Services Department's National Institute of Allergy and Infectious Diseases and approved a White House request to transmit $305 million to an account within that department's Biomedical Advanced Research and Development Authority.

The transfer opens the door for the funds to possibly be used in sectors not solely devoted to threats posed by terrorism or rogue nations.

The Bioshield fund will now have roughly $2.4 billion available through fiscal 2013 to "procure and stockpile emergency countermeasures," the legislation states.

The measure also granted an administration proposal to transfer the fund's remaining balance from the Homeland Security Department to Health and Human Services, giving the agency full responsibility for managing the account.

Established in 2004, Project Bioshield was intended to receive about $5.6 billion over 10 years to purchase medicines designed to protect U.S. citizens from the effects of a WMD attack. The program ostensibly provided biotechnology and pharmaceutical companies with assurances that the federal government would purchase successful countermeasures against bioterrorism and other WMD agents, bolstering the medical countermeasure industry.

The program has had its share of troubles. Its largest project, an $877.5 million program for production of a new anthrax vaccine, was canceled in 2006 (see GSN, Dec. 20, 2006). That was followed in 2007 by the suspension of an effort to produce a drug for radiation exposure (see GSN, March 8, 2007).

The effort to date has purchased about $2 billion worth of countermeasures for the U.S. Strategic National Stockpile. That program works to store medical countermeasures and other supplies in the event of a bioterrorism attack or other health emergency.

Congress also has decreased the amount available in the Bioshield account. In fiscal 2004 and 2005 lawmakers removed a total of $25 million and in 2009 they transferred $412 million to other programs to support "countermeasure advanced research and development and pandemic influenza preparedness and response," according to a Congressional Research Service report on Project Bioshield.

House lawmakers, in their version of the fiscal 2010 spending legislation, suggested transferring $500 million to the infectious diseases institute, saying the Bioshield program has "encountered great difficulty in procuring medical countermeasures."

"Without significant increased investment in early stage development through NIAID programs and later stage advanced research and development through the Biomedical Advanced Research and Development Authority, products cannot move along the development pipeline to be procured through Project Bioshield," the text of their bill states. "This investment of the Reserve Fund in NIAID is essential to jump-start Project Bioshield's activities."

The Senate did not propose a similar transfer to the institute. A conference agreement between the two chambers sent $304 million to the organization. It does not specify how the institute will use the money.

Meanwhile, the White House proposed transferring $305 million from the reserve fund to support advanced research and development of countermeasures, a decision conferees ultimately approved.

The National Institute of Allergy and Infectious Diseases conducts "basic and applied" research intended to lead to treatment or prevention of a host of "infectious, immunologic, and allergic diseases" -- only some of which are considered terrorism threats. The Biomedical Advanced Research and Development Authority is then supposed to take that research to the preproduction stage for drugs and therapies for public health medical emergencies. Bioshield was stood up to purchase finished products -- but only for WMD countermeasures.

The move marks the first time an administration specifically requested money be withdrawn from the Bioshield account, according to Brad Smith, a senior associate at the University of Pittsburgh's Center for Biosecurity.

The reserve fund is "being used as a piggy bank for other programs," he told Global Security Newswire this week. "The government needs to be able to show that it's got those funds available. That kind of insurance and good faith by the government ... is being undermined by the constant draining of that fund for various other things."

He noted that last summer the administration floated the idea of using the fund to finance production of the H1N1 flu vaccine. The proposal met considerable resistance from Capitol Hill and industry.

While the two programs benefiting from the latest budgetary moves are "appropriate" recipients of the money because they are related to countermeasure development "we would argue that these things be funded in their own right" and that Bioshield "shouldn't be drained for these other priorities," Smith said.

"We're effectively robbing Peter to pay Paul here," he added.

The administration's intention to move money away from the reserve fund was first detailed in its fiscal 2010 budget request. A spokesman for the Office of Management and Budget, which oversees the budget process, did not respond to questions submitted earlier this week.

The budget moves could hurt biomedical firms and lead them to cut back development of WMD countermeasures, some experts argued.

"From a company's perspective, if they're going to enter into this long-term investment of their time and resources, I think it's appropriate for them to have some confidence that the government will actually have money available to buy it," Smith said.

"Using Bioshield funds for flu preparedness and other issues not associated with national security will severely diminish the nation's efforts to prepare for WMD events and will leave the nation less, not more, prepared," said Randall Larsen, executive director of the congressionally chartered Commission on the Prevention of Weapons of Mass Destruction Proliferation and Terrorism.

The panel has warned that unless steps are taken, an act of WMD terrorism is likely to occur by 2013 and that a biological event is more likely than a nuclear strike. In June, it sent a letter to Obama urging the administration not to make Bioshield funds available for the development of H1N1 influenza vaccine. The commission sent a similar missive to HHS Secretary Kathleen Sebelius.

"People kind of see it as a pot of money, 'Ooo! We can go over here and grab some money.' No. That was put there for a very specific national security reason," Larsen told GSN. "We think [the Bioshield program is] critically important and those funds should be spent exactly for the reasons that Congress initially appropriated them."

Senate Homeland Security and Governmental Affairs Committee Chairman Joseph Lieberman (I-Conn.) would prefer to "fund Bioshield, NIAID, and BARDA fully rather than deplete the Bioshield budget to strengthen the other two," committee spokeswoman Leslie Phillips said in a statement yesterday to GSN.

"The Bioshield program is intended to provide a market incentive for the advanced development and production of needed biodefense medical countermeasures," Phillips said. "Senator Lieberman fears that diverting resources to other research endeavors could weaken that incentive. That said, the senator understands and has accepted the decision of the appropriators in their difficult job of divvying up public funds in a difficult economic environment."

Others, though, said they do not think the money transfers are an issue of concern.

"Money transfers like that are pretty regular," said Patrick Clemins, director of the research and development budget and policy program at the American Association for the Advancement of Science. "When you have a huge initiative ... they put all the pot of money in one place and then, as they find agencies that are more equipped to handle a certain aspect of that project, they'll divvy up" the funds to those agencies.

"That's not a big deal at all," he told GSN. "This isn't anything new or anything to be concerned about."

Both Smith and Clemins predicted Congress and the White House will continue to take dollars from Bioshield.

"I'd like to be optimistic but I think the trend is fairly clear," Smith said. Even though Bioshield has been able to "move some money out the door ... I think folks in Congress will say, 'Well, if you're not spending your money we're going to do something else with it' and I think, clearly, the White House is starting to come along to that view as well."

The money withdrawn from the program this fiscal year "will definitely not be replaced," Clemins said in a follow-up e-mail. He noted that appropriations for the effort are meant to last until 2013 "so we'll probably have to wait until then to see if Congress decides to fund it again."

"If the program is judged to be successful (and necessary) at that point, I'd say there's a good chance that the program would be funded to a lesser degree to maintain the stockpiles of countermeasures as they expire," according to Clemins.

However, if the program "continues to underperform by [congressional] standards" as alluded to in the House version of the legislation that sought to take $500 million from Bioshield, "they won't hesitate to transfer that money to an agency with a strong performance history," he said.

House Homeland Security Committee Chairman Bennie Thompson (D-Miss.) defended the move in a statement yesterday to GSN.

"I agree with the appropriators that the Bioshield process has not lived up to expectations, and that we in Congress need to try to do something to help the project succeed," he said. The Mississippi lawmaker did not elaborate.

"By moving some of the funding from procurement to development, we hope to spur innovation and help these smaller biotech companies obtain funding that will allow them to take medical countermeasure innovations from concept to finished products, thus increasing our homeland security," according to Thompson. "If this works and there are more products that can actually be acquired, we can find more funding in future appropriations to increase the reserve fund as appropriate."

Move to HHS

Both Smith and Clemins approved of the Obama administration's plan to move responsibility for the project's reserve fund from the Homeland Security Department to Health and Human Services.

Homeland Security was responsible for carrying out threat assessments and subsequently issuing determinations stating which materials, such as anthrax, are a threat to the country that demanded attention from Project Bioshield. Health and Human Services could only issue program contracts to procure new medicines and countermeasures for threats identified by Homeland Security.

That model will essentially stay the same but Health and Human will now have full programmatic responsibility for the reserve account, according to Smith.

"It was happening in drips and drabs on a contract by contract basis," he said. "They just moved the whole thing in one fell swoop so now they won't have to do that interagency paperwork."

Clemins predicted the shift would save the effort on overheard and administrative costs.

Other Biodefense Spending

The Defense Department's chemical and biological defense program has a budget request of $1.2 billion for fiscal 2010, up from $1.1 billion the previous year.

The U.S. Army received $34 million for procurement of biodefense equipment.

The Centers for Disease Control and Prevention, which operates within Health and Human Services, received nearly $596 million for its Strategic National Stockpile program. That dollar amount did not change from the White House's initial budget request.

Health and Human Services also received nearly $6.4 billion to carry out disease control research and training, the legislation states.

Homeland Security's Metropolitan Medical Response System received $41 million, according to the conference agreement. The effort is meant to integrate emergency management and health systems into a coordinated response to mass casualty incidents caused by any hazard. The House initially proposed $44 million while the Senate wanted $40 million for the effort.

Conferees rejected the administration's proposal to replace the program with a "medical surge grant program" and advised the Federal Emergency Management Agency to work with the HHS preparedness and response assistant secretary to develop medical surge guidelines for communities.

The agreement also included $89.5 million for Homeland Security's Biowatch program proposed by the Senate instead of roughly $79.5 proposed by the House. The program is designed to detect pathogens released into the air as part of a terrorist attack on major U.S. cities.