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Firm Sought "Overwhelming" Profit For Smallpox Drug

U.S. government health officials involved in negotiating a contract for a smallpox antiviral were taken aback by the high drug price sought by a pharmaceutical company whose leading shareholder has links to the Democratic Party and the Obama administration, CNN reported on Friday (see GSN, Nov. 28).

SIGA Technologies in May received a single-bid $443 million contract to manufacture 1.7 million doses of the smallpox drug ST-246 for inclusion in the Strategic National Stockpile.

The New York-based pharmaceutical firm's top shareholder is Ronald Perelman, a wealthy fundraiser for the Democratic Party and supporter of President Obama. The one-time president of the Service Employees International Union, Andy Stern, who also has ties with the White House, serves on the SIGA board of directors.

Smallpox has been declared eradicated from nature and samples are formally held only by Russia and the United States. However, some U.S. biodefense officials are concerned that certain nations might have secretly retained strains of the highly virulent virus that could be acquired by extremists or accidentally loosed into nature.

The Health and Human Services Department ultimately agreed to pay SIGA $225 for each dose of the drug -- a price tag that is substantially greater than what contracting experts had said was reasonable, according to previous reports.

E-mails swapped between HHS officials that were viewed by CNN demonstrate that a contracting specialist was taken aback the expense of the deal. An HHS official involved in the negotiations wrote that the price the pharmaceutical firm was seeking would leave it with "an overwhelming 180 percent" profit.

The official continued that the profit "must be cut in half at a minimum" and that "I know you won't find a CO (contracting officer) in government who would sign a 3-digit profit percentage."

A different HHS official replied with "fully concur that 180 percent is outrageous." Additionally, as public funding helped to subsidize research into the smallpox remedy, "we should get a major discount given our support of front-end development."

Several weeks afterward, SIGA chief executive Eric Rose wrote to the department, saying "it was clear that we were at an impasse in negotiations" and requesting that the participating HHS contracting officer on the deal be replaced with "a more senior official." HHS Assistant Secretary Nicole Lurie acquiesced to the demand.

In a message to Rose, she wrote that she had directed her staff "to appoint our most senior procurement official as the final authority for this procurement." The contract was finalized not long afterward.

The treatment is intended to be applied alongside smallpox vaccinations to those infected in a potential bioterror incident. Its efficacy remains in doubt, according to one expert.

University of Pittsburgh smallpox specialist D.A. Henderson said, "The question is, what will it do in the way of treating a patient who's had a fever and how has a funny rash that could be smallpox? Will it treat the disease? I've seen no data to suggest that it will."

The GOP heads of the House Oversight and Investigations and Small Business committees have called on Health and Human Services to provide them with all documents related to the contract.

"You certainly can't ignore the political connections between the company and the administration," Small Business Committee Chairman Sam Graves (R-Mo.) said.

Even some Democrats are alarmed by the deal. Senate Homeland Security and Governmental Affairs subcommittee Chairwoman Claire McCaskill (D-Mo.) has questioned why no other outside companies were asked to compete for the contract.

"Was it justified as a no-bid contract?" the Missouri lawmaker said at a recent press briefing. "Overall, I think we need to begin asking policy questions about the kind of money we're spending developing drugs where the United States is the only customer."

In an e-mailed response to CNN, SIGA said "Never at any time was any elected official or political official asked to intervene in the procurement process by SIGA or anyone affiliated with the company."

An HHS spokesman in a statement said the no-bid contact was given to the company "after a rigorous market analysis determined that SIGA was the only known company in the world with the capability to produce the required antiviral drug within the required time period."

The department said the high expense of the contract was not an issue. "We can't get into the details, but the final rates ended up well within industry standards," the spokesman said.

The decision to put a new contracting officer in charge of negotiations "actually resulted in substantial savings for the U.S. government," the HHS official said (Fitzpatrick/Griffin, CNN, Dec. 9).

Note to our Readers

GSN ceased publication on July 31, 2014. Its articles and daily issues will remain archived and available on NTI’s website.

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