Anthrax Vaccine Loses to Lobbying

Politically Connected Firm Knocked Out Bay Area Start Up for Choice Contracts

Update: The Department of Health and Human Services sent a response after this story was originally posted. The department's comment has been inserted.

Six-and-a-half years after someone mailed finely milled anthrax spores to the U.S. Capitol, the industry created to respond to that attack has received billions in cash but produced little protection. A little-noticed news item last week reveals the most dramatic failure of the $5.6 billion Bioshield program, which was supposed to provide drugs and vaccines against terror agents--its cornerstone being the creation of a safe, effective vaccine against anthrax.

As demonstrated by the anthrax mailings—a case the FBI has yet to crack—deadly anthrax bacteria are a real potential threat. The most likely assailant in the October 2001 attack was an American scientist, perhaps someone who wanted not to kill, but to focus Congress' attention on the bioterror threat.

If that's the case, the attack was extremely successful. But in the so-far fruitless effort to get a better vaccine, the government has ruined one company that was developing an inventive solution while it has allowed another, politically well-connected firm to reap the benefits.

Last week, Emergent Biosolutions, which has been making a crude anthrax vaccine since the 1960s, under various names, quietly purchased recombinant anthrax vaccine technology for the bargain-basement price of $2 million. It bought the vaccine from Vaxgen, a sophisticated, San Francisco-area company that the government drove out of business through its bungled management of the Bioshield program. Vaxgen, which once had more than 300 employees, now has six, and is basically in the process of selling off its assets.

Emergent, which is based in Rockville, Md., but makes the old vaccine at a plant in Lansing, Mich., used an army of lobbyists to undercut Vaxgen’s relationship with the Dept. of Health and Human Services. In late 2006, HHS canceled a $878 million contract with Vaxgen, leaving the company holding the bag for more than $150 million it had spent to develop the vaccine. HHS said Vaxgen had failed to meet production deadlines; Vaxgen executives said they were delayed by minor technical problems that have since been clarified.

Vaxgen continued to improve its recombinant anthrax vaccine after HHS cut it loose, but it was unable to find a major drug company to buy it. After witnessing what HHS had done to Vaxgen, former company officials say, none of the major vaccine makers wanted to enter a contract with the government.

Emergent, on the other hand, was nothing if not politically connected. Its chief executive and his wife, for example, alone donated more than $220,000 to lobbying and political campaigns. Emergent had lobbied for years to paint Vaxgen as unreliable, and it ended up buying its vaccine for a song.

The story of the recombinant anthrax vaccine stands as the most poignant fiasco of the Bioshield program. President George W. Bush announced the program in 2003, during a visit to the National Institutes of Health. Bush said the program would “put NIH squarely in the midst of our war to defend America and to defeat international terrorism.”

The idea was to provide government stimulus to get drug companies to make products that had no market other than the government. Many scientists and public health officials believed it could have the secondary benefit of stimulating the development and manufacturing of much-needed civilian vaccines, at a time when the nation’s vaccine industry had been reduced, effectively, to five companies.

But five years later, companies that signed deals with HHS to produce anthrax vaccines, as well as drugs to fight radiation sickness, have dropped out of the program after acrimonious disagreements. One company, Acambis, has delivered a successful new vaccine against smallpox--a disease that was eradicated in 1980 and is believed to exist only in two secure laboratories. Except for a related effort to make pandemic flu vaccines, none of the big vaccine manufacturers have bought into the biodefense program.

Perhaps the most egregious fallout from Bioshield, however, was the destruction of Vaxgen, a company that included some of the country's most talented and experienced vaccine manufacturers. It was led by Lance Gordon, a scientist who helped create more than a dozen vaccines -- including a groundbreaking meningitis shot now given to all children in the United States, Europe and Latin America.

“It’s a horrible story,” said Donald Francis, the former president of Vaxgen. “We spent $150 million of our own money and $100 money in NIH to develop a vaccine. We miss a deadline and they jerk the contract and destroy the company. And there aren’t many vaccine companies. They took a high-tech company capable of making vaccines and killed it!

“This is a symptom of a government that doesn’t know what it’s doing when it comes to interacting with the private sector,” said Francis, who now leads a non-government organization that promotes vaccination in poor countries. “The Pentagon knows how to do things like this. Health and Human Services had never contracted out anything this big, and they didn’t know what they were doing.”

Under the terms of its contract with HHS, Vaxgen was obligated to use an aluminum-based adjuvant, or immune-stimulator, in the vaccine. But the adjuvant and the anthrax protein interacted in a way that caused the vaccine to lose potency. As a result, the company wasn’t able to meet its deadline for delivering the vaccine. “With trial and error we could have fixed the problem,” another former Vaxgen executive said. “It wasn’t a fundamental safety or efficacy problem.”

But Emergent, which was already producing an outdated anthrax vaccine, spent large sums of money on a lobbying campaign against Vaxgen, including hiring two former aides to Vice President Dick Cheney. Congressmen like Michael McCaul (R-Texas) and Mike Rodgers (R-Mich.), both recipients of Emergent executives’ campaign donations, attacked the Vaxgen contract in committee hearings, while Emergent’s lawyers wrote newspaper op-eds attacking the company.

What’s more, HHS frequently changed officials in charge of overseeing the contract, and none seemed to understand the complexities of making vaccines, the Vaxgen officials said. This impression was echoed by two other officials -- one at another company, the other at the Centers for Disease Control -- who asked not to be named.

While HHS has said it followed the letter of the law in canceling the contract, Vaxgen officials say it caved to political pressure. “We were under the illusion that if we did good science, we’d win out,” the official said. “That’s not how this works. Politics played a more important role than science." A government scientist familiar with the deal said that while Vaxgen was not blameless, its problems were typical of the trial-and-error nature of the vaccine-making process.

HHS spokesman Bill Hall denied that the agency had erred in withdrawing the Vaxgen contract. Vaxgen missed its deadlines and failed to fix its problems, he said, and HHS was still pursuing a recombinant anthrax vaccine.

The Vaxgen vaccine uses a refined anthrax protein and is designed to require three doses for long-term immunity. HHS signed the deal with Vaxgen to place the 1950s-vintage vaccine produced by Emergent, formerly called Bioport. The older vaccine, made from material extracted from living bacteria, requires six doses -- and yearly boosters.

In 1998, Bioport took over the Michigan state biologics laboratory, the nation’s sole manufacturer of anthrax vaccine. Starting with the Gulf War, all U.S. service members have received the vaccine. Many have blamed it for a variety of health problems, including autoimmune disorders. While expert panels have refuted claims that the vaccine causes seriously problems except in rare cases, resistance to the vaccine created a morale problem on some military bases. In 1998, for example, pilots at Dover Air Base in Delaware refused the vaccine, forcing their commander to suspend vaccination against anthrax.

After signing the 2004 contract with HHS, Vaxgen had two years to come up with 25 million doses of vaccine. In November 2006, the vaccine was not ready, and the contract was canceled.

But since the Vaxgen fiasco, the government has relaxed the rules, so that Emergent -- which, according to its Website, expects to seek an HHS contract for the vaccine soon -- will have several years to deliver it. The government will also provide milestone payments and cover development costs -- something it didn't do for Vaxgen.

“If we had had that system two years ago," said Gordon, "Vaxgen would probably already have provided millions of doses of a vaccine already to the national stockpile.”

But the Emergent company spokeswoman, Tracey Schmitt, said, "We believe that Emergent has both the experience and expertise to pursue development of this important medical countermeasure to meet the United States government's stated need." She declined to comment on the rest of this article.

Perhaps the worst fallout of the affair is the loss of Vaxgen. Over the past 30 years, most vaccine manufacturers have gradually gotten out of the business. The United States has to import all of its whooping cough vaccine, as well as more than half the 110 million doses of flu vaccine it uses every year. “If there were a bad flu year—not to speak of a pandemic—we would need hundreds of millions of doses,” says Gordon. “And during bad flu years, most countries prohibit export of their flu vaccine.”

Vaxgen had built a factory in South Korea, originally to make an HIV vaccine (which failed), and has another state-of-the-art factory in South San Francisco sitting idle. “We were becoming a company that could develop and manufacture a number of vaccines,” says Gordon, who recently started a new biotech company. “As a result of the cancellation of contract, that was thrown away.’’

Gordon tries to view the latest twist in a positive light. “I’m glad that someone picked up our recombinant vaccine,” he said. “From my perspective, it’s a good product. I’m hopeful that the huge investment and time and effort that went into it won’t go to waste.”


For $2 million, Emergent bought enough vaccine antigen to make millions of doses, along with the recipes it needs to make the vaccine. Including NIH and other funds, more than $250 million was spent to develop it.


“I hope we never find out whether it’s really effective in humans,” added Gordon. “God willing, another major anthrax attack will never happen.”

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