New anthrax vaccine sunk by lobbying

Shortly after the Sept. 11, 2001, terrorist attacks and the subsequent anthrax mailings, top U.S. science advisors said the country “urgently needed” a new, improved anthrax vaccine.

The existing vaccine often caused swollen arms and muscle and joint pain. Inoculation required six injections over 18 months, followed by yearly booster shots. The estimated shelf life was just three years.

The scientists’ report, issued by the Institute of Medicine, called for “an anthrax vaccine free of these drawbacks” -- a vaccine that would require only two or three injections, achieve protection within 30 days, stay potent for a long time and cause fewer adverse reactions.

Yet nearly six years later, the old vaccine is still the only one available -- and the government is buying it in mass quantities for the Strategic National Stockpile.

The manufacturer, Emergent BioSolutions Inc. of Rockville, Md., prevailed in a bitter struggle with a rival company that was preparing what federal health officials expected to be a superior vaccine. The episode illustrates the clout wielded by well-connected lobbyists over billions in spending for the Bush administration’s anti-terrorism program.

Emergent’s rival, VaxGen Inc. of South San Francisco, had spent four years developing a new anthrax vaccine and had won an $877.5-million federal contract to deliver enough doses for 25 million people. The contract threatened Emergent’s very existence. The old vaccine, its only moneymaker, would likely be obsolete if VaxGen succeeded.

Emergent responded by mobilizing more than 50 lobbyists, including former aides to Vice President Dick Cheney, to make the case that relying on the new vaccine was a gamble and that the nation’s safety depended on buying more of Emergent’s product.

The company and its allies in Congress ridiculed VaxGen and impugned the competence or motives of officials who supported the new vaccine. The lobbying effort damaged VaxGen’s credibility with members of Congress and the Bush administration, a Los Angeles Times investigation found.

When VaxGen encountered a stubborn scientific problem and needed more time to deliver its vaccine, the firm found scant support, even among officials who had earlier backed its efforts. The government then imposed tougher testing requirements on the struggling company.

A senior federal scientist who oversaw the project said she sought authority to allow advance payment to VaxGen to help it work through the difficulties. Top administration officials blocked her requests, she said.

Finally, a year ago, officials canceled VaxGen’s contract, all but capsizing the company.

Emergent, meanwhile, has won federal contracts worth at least $642 million for the old vaccine and is in line to win many millions more as the government expands the strategic stockpile.

Kimberly B. Root, a spokeswoman for Emergent (formerly BioPort Corp.), said the company’s lobbying ultimately served the national interest.

“Had we just thrown up our hands, what position would we be in now?” Root asked. “Where would the government be? There wouldn’t be, potentially, a vaccine in the stockpile.”

Bill Hall, a spokesman for the U.S. Department of Health and Human Services, said VaxGen’s “poor performance” sealed its fate. In canceling the contract, Hall said, officials acted “as effective custodians of government finances.”

Yet Dr. Philip K. Russell, a vaccinologist and retired Army general who was a senior biodefense official in the Bush administration, described the outcome as “a big, dramatic failure.”

“National security took a back seat to politics and the power of lawyers and lobbyists,” said Russell, who supported the decision to award VaxGen the contract.

If officials had granted the company a bit more time, Russell said, it would likely have solved its scientific problem and delivered a superior vaccine. He noted that setbacks are common in developing vaccines and said VaxGen appeared capable of overcoming this one.

“It wasn’t an insurmountable problem,” said Russell, who after leaving the government did not lobby for or advise either of the competing vaccine companies. “It was a solvable problem.”

Effort to contain threats

On the Sunday night after Sept. 11, 2001, Health and Human Services Secretary Tommy G. Thompson convened an urgent meeting of health officials and leading scientists.

“Tommy Thompson was really, really concerned that something could happen,” recalled Dr. Donald A. “D.A.” Henderson, a former World Health Organization physician who led successful efforts to eradicate smallpox. “There was intelligence information coming through and some chatter coming through, suggesting there was going to be a second event, that the second event could very likely be a biologic event.

“And anthrax and smallpox were both raised as possibilities.”

The imperative was clear: Find a way to eliminate both threats.

About 10 p.m., as they filed out of HHS headquarters, Henderson and health department lawyer Stewart Simonson acknowledged their fears.

“I told D.A., ‘We’re going to make this work.’ And he said, ‘I just hope we’re not too late,’ ” Simonson recalled. “That’s how scared we were.”

They and other federal officials later scored a victory over one of the two threats: Working closely with vaccine manufacturers, they assembled 200 million doses of smallpox vaccine.

Countering anthrax quickly proved to be more complicated.

In October 2001, six envelopes containing powdered anthrax were sent through the mail on the East Coast, killing five people and sickening about 20 others. Authorities closed contaminated buildings in Washington and Florida, and treated hundreds of congressional employees with antibiotics. No one has been charged in the attacks.

The anthrax mailings showed that the most reliable way to prevent death is with an antibiotic such as Cipro or doxycycline, administered quickly and for up to 60 days. Inhaled anthrax otherwise can kill up to 90% of those infected. The Strategic National Stockpile now holds enough such antibiotics to treat more than 40 million people.

Dr. Anthony S. Fauci, who directs the National Institute of Allergy and Infectious Diseases and has advised President Bush and Congress on U.S. preparedness, said: “We already know that we prevented a serious problem on the Hill by essentially blanket-treating people with [Cipro]. We know that because when we went back and did surveys, we found that many people who had absolutely no symptoms were actually exposed.”

The success in limiting deaths from the 2001 mailings brought into focus the lack of expert consensus about the magnitude of the anthrax threat. Some scientists have said that terrorists could disperse anthrax over a wide area, inflicting casualties on the scale of a nuclear weapon.

Skeptics, however, note that although anthrax is relatively easy to obtain and can linger tenaciously on surfaces, it is not contagious and is difficult to deliver lethally outdoors.

Another attack, Fauci said, “would create massive panic in this country. It would create economic and other real, logistical problems. But at the end of the day, you’re not going to kill as many people as you would if you blasted off a couple of car bombs in Times Square.”

Nevertheless, fear of a panic-inducing anthrax event generated momentum for amassing millions of doses of vaccine as a backstop to the antibiotics that would be the first line of defense.

Bush underscored the threat as he rallied support for the Iraq war. In an October 2002 speech in Cincinnati, the president told a crowd that Saddam Hussein’s regime had supplies of anthrax and other biological weapons “capable of killing millions.” Such weapons could be easily deployed, Bush added: “All that might be required are a small container and one terrorist or Iraqi intelligence operative to deliver it.”

The U.S. already had a military stockpile of anthrax vaccine, filled with Emergent’s product. Now, support grew for creating a civilian cache, to allow mass inoculations immediately after an attack.

The idea was that a new vaccine -- faster-working, with fewer doses and fewer side effects -- would protect people who couldn’t tolerate antibiotics and would work against anthrax that withstood antibiotic treatment. A vaccine might also help protect people reentering a building that had been contaminated.

In February 2002, the Institute of Medicine released its report, calling the old vaccine “reasonably safe” but “far from optimal” and concluding: “A new vaccine, developed according to more modern principles of vaccinology, is urgently needed.”

Officials meeting privately in late 2003 -- including Russell, Simonson, representatives of the vice president’s office, the Centers for Disease Control and Prevention, the Department of Homeland Security and Fauci’s staff -- decided to push for the purchase of 75 million doses of a new, genetically engineered vaccine.

Dr. Kenneth W. Bernard, then a biodefense advisor to Bush, estimated that such a stockpile -- providing three doses for 25 million Americans -- would be enough to respond to simultaneous attacks on New York, Los Angeles and Washington.

Henderson and Russell said the requirement for 75 million doses was based as well on a desire to keep a manufacturer operating continuously, so it could quickly ramp up production in a crisis.

The problem now, both said in recent interviews, is that the nation has not gotten a newer, better vaccine.

Project BioShield contract

In July 2004, President Bush signed legislation called Project BioShield, providing $5.6 billion for “next generation” vaccines and drugs to counter threats of biological terrorism.

VaxGen had been working for two years on its anthrax vaccine, building on earlier efforts by the Army. VaxGen’s early work had impressed Fauci’s staff, which oversaw $100 million in federal research grants to the company.

Now VaxGen wanted to win the first BioShield contract. The company had been formed in 1995 by scientists from Genentech Inc., which retained an ownership stake. Lance K. Gordon, inventor of the first vaccine for infant meningitis, became VaxGen’s chief executive in 2001.

But by 2003, the company’s survival was in doubt. It had seen an experimental AIDS vaccine fail in late-stage testing. And in August 2004, the Nasdaq stock exchange delisted VaxGen for failing to file timely financial results; the company’s stock price sank 35%.

VaxGen sought the BioShield contract by proposing to genetically engineer an anthrax vaccine with greater purity, more consistent potency and fewer unwanted side effects than Emergent’s old vaccine.

But inside the company’s salmon-colored walls facing San Francisco Bay, technicians were seeing disquieting data: Blood samples drawn from study patients showed that the vaccine failed to trigger enough anthrax-fighting antibodies.

VaxGen hired more vaccine experts, including a new chief scientific officer.

The complication did not deter federal health officials. On Nov. 4, 2004, HHS Secretary Thompson announced that VaxGen had been awarded the BioShield contract, worth $877.5 million. The money would start to flow when the company made its first delivery of vaccine, expected in two years.

“Acquiring a stockpile of this new anthrax vaccine is a key step toward protecting the American public against another anthrax attack,” Thompson said.

The announcement was bad news for Emergent, whose vaccine remained the only revenue generator for its BioPort subsidiary.

“We were worried about it,” recalled retired Navy Adm. William J. Crowe Jr., a former chairman of the Joint Chiefs of Staff who served on the company’s board from 1998 through late 2005. (Crowe was interviewed at a hospital in Virginia in late August, two months before his death at age 82.)

BioPort was founded in 1998 by Ibrahim El-Hibri, a Lebanese financier. Along with Fuad, his U.S.-educated son, El-Hibri formed BioPort by purchasing vaccine-making facilities of the state of Michigan for $24.75 million. The company’s only product was the anthrax vaccine, called BioThrax, which it sold chiefly to the U.S. military. In mid-2004, the company reorganized as Emergent BioSolutions.

To counter the challenge posed by VaxGen, Emergent invested where it could buy immediate impact: lobbying.

“We had 500 employees who were about to lose their jobs, and we went out and became advocates for them,” said Allen Shofe, a company vice president who managed its lobbyists.

In 2005, Emergent’s yearly spending for lobbying nearly quadrupled, to $1.41 million. Last year it reached $2.1 million, federal records show. All told, from 2004 through June 2007, the company used 52 lobbyists at a cost of $5.29 million, the records show.

During the same period, VaxGen spent $720,000 on six lobbyists.

Emergent’s lobbyists stressed a core message:

* U.S. civilians were at risk of death without an immediately expanded stockpile of anthrax vaccine;

* Emergent stood ready to supply the civilian stockpile, whereas VaxGen had yet to prove it could deliver a new product;

* Emergent might stop making the vaccine if the government chose not to buy its product for the stockpile.

The company enlisted friendly members of Congress and recruited a cadre of former government officials to press its attack. Among them was Jerome M. Hauer, a former acting assistant secretary for emergency preparedness at HHS.

Hauer had been in the thick of decisions to pursue a new anthrax vaccine. While at HHS, he told Emergent in a February 2003 letter that the department had concluded a new vaccine was “a better long-range option than investing in expanding manufacturing capacity” for BioThrax. Hauer wrote that “the scientific basis” for a genetically engineered vaccine was “very sound and will result in an improved product.”

But after leaving the Bush administration in late 2003, Hauer did an about-face, delivering Emergent as a client to his new boss, the Fleishman-Hillard public relations and lobbying firm, according to company records and people familiar with the matter.

At a December 2004 biotech-industry conference, Hauer said the government should purchase more of the old vaccine. He also took aim at Simonson, the HHS lawyer, who had succeeded him as assistant secretary. Hauer said that Simonson should be stripped of his authority for his handling of the BioShield contract.

In June 2005, Emergent placed Hauer on its board of directors. In that year and 2006, Emergent paid $360,000 to Fleishman-Hillard, records show.

In an interview, Hauer said he lobbied members of Congress and advised the company how to “educate” the administration. He said he changed his mind about Emergent’s vaccine after concluding that he had relied earlier on “biased information” from his then-colleagues at HHS.

In the spring of 2005, VaxGen became more vulnerable to its rival’s onslaught. VaxGen scientists determined that the problem with the new vaccine’s potency was not the result of a lapse in refrigeration, as they had first speculated. The difficulty lay with the vaccine’s formula. An aluminum additive, expected to increase potency, had the opposite effect.

“Our vaccine had a stability problem,” said Dr. Marc J. Gurwith, a scientific executive with VaxGen. “The problem was going to take more testing to figure out what went wrong and how to fix it.”

VaxGen needed patience and flexibility from its presumed allies in Washington. But Thompson had resigned as HHS secretary, and Emergent’s lobbying had changed the atmosphere. Officials who had backed VaxGen’s drive to deliver a better vaccine were no longer responsive.

“We had a very productive partnership with the government until we encountered a problem,” said Piers Whitehead, VaxGen’s vice president for corporate and business development. “Things deteriorated very rapidly.”

In April 2005, Dr. Noreen A. Hynes took over the HHS office that oversaw development of new drugs and vaccines under Project BioShield. Hynes, previously a bioterrorism advisor in the White House, said she was concerned about whether any small company could shoulder the costs of developing a new vaccine.

The Project BioShield law allowed advance payments of up to 10% of the value of a contract. But when she sought permission to grant such payments, Hynes said, she was turned down.

“I was told that the administration had decided there would be none,” Hynes said in an interview. Asked who made the decision, Hynes said that she did not know but that it flowed from “the highest level.”

Hynes, an infectious-disease specialist now at Johns Hopkins University, added: “It was not surprising, frankly, that this new type of vaccine would have been delayed in development. That’s just the way vaccine development is. . . . It’s one of the reasons why you would want to have the advance-payment authority.”

VaxGen officials said they sought advance payment three times in 2005 and 2006: twice in discussions with HHS and once in writing. Hall, the health department spokesman, said any consideration of such payments “became moot” because of VaxGen’s lack of progress.

Emergent executives knew well the problems inherent in developing and manufacturing vaccines. The state facilities they acquired in Lansing, Mich., had been beset with problems. In 1999 and 2000, inspectors from the Food and Drug Administration found deficiencies in the company’s vaccine, including problems with stability, potency and purity.

The company pledged to rectify the inadequacies -- and the government stuck with it as the sole supplier of anthrax vaccine to the military.

Now, as Emergent sought to neutralize the competitive threat from VaxGen, it added to its lobbying team John V. Hishta, who had deep ties to the Republican congressional leadership.

Hishta was chief of staff to Rep. Thomas M. Davis III (R-Va.) and has continued to serve him as a campaign advisor. Hishta also directed national efforts to elect Republicans to the House from 2000 through 2002.

In July 2005, he arranged for an Emergent executive to appear before the House Government Oversight and Reform Committee, which was chaired by Davis.

In his opening statement, Davis voiced “concern” that federal officials had “made insufficient efforts to stockpile existing countermeasures while new and improved ones are being developed.”

The Emergent executive, Robert G. Kramer, told the committee that health officials were undermining national security by contracting for VaxGen’s product instead of buying more of Emergent’s.

“HHS has staked the nation’s protection against the No. 1 biologic threat on an experimental product,” Kramer said.

Kramer emphasized that Emergent would reassess whether to keep making the anthrax vaccine. The company, he said, “finds itself at a critical juncture in terms of its ability and willingness to commit resources to a product that lacks a committed customer.”

Representatives of VaxGen were not invited to appear.

Asked about his role, Hishta said, “I don’t want to comment on my lobbying work.”

Davis did not respond to questions submitted through an aide.

Another key lobbyist for Emergent was Todd A. Boulanger, who had served as an aide to Republican members of Congress. Boulanger helped shape a letter by Sen. Charles E. Grassley (R-Iowa) to Thompson’s successor as HHS secretary, pressing him to explain why his department had not purchased more anthrax vaccine from Emergent.

The selection of VaxGen, Grassley wrote, was “highly suspect.” In his letter, dated Jan. 28, 2005, Grassley told the new secretary, Mike Leavitt, about “a number of troubling allegations” regarding the vaccine contract. Grassley suggested that HHS “acted prematurely” in awarding it to VaxGen. “Some have questioned the effectiveness” of VaxGen’s product, he wrote, noting that the old vaccine “has been available for use in this country for several decades.”

Nine weeks later, Grassley again wrote to Leavitt: “I remain greatly concerned that the department is not prepared to protect the American people from an anthrax attack.”

Grassley also questioned the independence of Russell, the vaccine specialist who backed awarding the BioShield contract to VaxGen. Grassley claimed the former general had been involved in developing the vaccine years earlier with the Army.

Russell, who left the health department in late 2004, said he had no financial stake in the vaccine and no role in developing it.

“How do you confront a whisper campaign?” Russell asked. “The lobbyists have to earn their pay.”

Boulanger’s role in providing material to Grassley -- including language for the senator’s January 2005 letter -- was described by people who said they had direct knowledge of his actions. Asked for comment, Boulanger said, “I’m not going to say anything about my private conversations with his [Grassley’s] staff.”

Emergent paid Boulanger’s firm, Cassidy & Associates, $300,000 from 2004 to 2006.

A spokeswoman for Grassley, Jill Kozeny, said the senator’s letters were “based on information from a number of sources.”

Grassley’s intervention hurt VaxGen on two fronts, company executives said:

Because of his reputation as a fiscal watchdog, his criticism sowed reticence about VaxGen within Congress and the administration. And the prospect of overcoming potent political opposition while trying to solve a tough scientific challenge weakened the resolve of VaxGen’s major investors.

Emergent, meanwhile, broadened its connections to the White House by hiring Cesar V. Conda and Ron Christie as lobbyists. Both had been policy aides to Vice President Cheney, who championed Project BioShield.

According to people familiar with the lobbyists’ conversations with lawmakers, Conda and Christie raised doubts about Simonson’s handling of the vaccine contract, just as Hauer had.

As assistant secretary for emergency preparedness, Simonson could have made the case within the Bush administration for giving VaxGen an advance on its contract. But that prospect was dimmed after the lobbyists’ attacks, said Russell.

“Simonson was neutralized,” he said.

Simonson, who left the government in mid-2006, declined to comment on Emergent’s lobbying effort.

Neither Conda nor Christie responded to messages seeking comment. Emergent paid their firm, DC Navigators, $340,000 from 2006 through June of this year.

One of Emergent’s other lobbying firms, McKenna Long & Aldrich, has taken credit for helping write the Project BioShield law. Seven members of the McKenna firm subsequently registered to lobby for Emergent.

From 2005 through June 2007, Emergent paid the firm $380,000.

Government changes rules

VaxGen’s contract called for delivery of the first 25 million doses of vaccine by November 2006.

In May of that year, government health officials extended the deadline three years.

But they also erected new hurdles: They required VaxGen to complete, at the company’s expense, new testing of the vaccine in animals, plus an additional study in humans. The original contract had allowed VaxGen to defer such studies until after the company began receiving payments.

VaxGen fought without success for better terms, notably partial payment before delivering the vaccine. It objected to the new regulatory requirements. It kept at work on the stability problem.

After reviewing VaxGen’s progress, the FDA on Nov. 2, 2006, denied approval to begin the new study in humans, citing concern about whether the vaccine was stable enough.

On Dec. 19, 2006, the health department canceled VaxGen’s contract. By this fall, VaxGen had laid off 90% of its workforce, which peaked two years ago at 295 employees, a spokesman said. The company plans to merge with another Bay Area biotech firm.

In an October report, the Government Accountability Office said that health officials and VaxGen had been “unrealistic” in believing the company could deliver its vaccine on schedule. The GAO also said VaxGen was hindered by regulatory requirements that “were not known” to the company when the contract was awarded.

VaxGen’s Gurwith said in an interview that based on lab results, he was convinced as of July that the company had figured out how to maintain the vaccine’s stability. Chief executive James P. Panek said that if the government had stood by VaxGen, it probably would have delivered a better vaccine “well ahead” of any other manufacturer and at far lower cost.

Emergent, meanwhile, has continued to win contracts to deliver more of the old vaccine to the civilian stockpile. In a recent interview, two senior federal health officials, Gerald W. Parker and Carol D. Linden, said they remained determined to buy enough vaccine to inoculate 25 million Americans.

Henderson, the Bush administration advisor and former World Health Organization official, said he was uncertain how much of the old vaccine should be stockpiled for civilians, considering its shortcomings.

“All of us were quite persuaded that once you got the [new] vaccine, you wouldn’t be buying the old stuff,” he said.

david.willman@latimes.com

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Times researchers Janet Lundblad in Los Angeles and Sunny Kaplan in Washington contributed to this report.

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About Fear Inc. This is the second in a series of reports examining companies and government officials central to the U.S. war on terrorism. To read the previous report, on Soviet defector Ken Alibek and his influence on U.S. policy, go to latimes.com/fear .

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(BEGIN TEXT OF INFOBOX)

An anthrax primer

Origin:

Anthrax spores are most commonly found in soil and can be artificially produced in a laboratory. The natural spores can stay dormant for decades before being ingested by grazing animals such as sheep or cattle.

Infection:

Anthrax can enter through a skin cut, through infected food or by inhalation of its tiny spores. Inhaled anthrax is the most lethal, killing 80% to 90% of those not vaccinated in advance or treated promptly with antibiotics.

Threat:

Some experts, citing the possibility of aerosolized anthrax, see it as a weapon of mass destruction. Skeptics note that anthrax is not contagious and is difficult to deliver in lethal concentration outdoors.

Countermeasures:

Prompt treatment with an antibiotic is the most reliable way to avert death. The standard course is 60 days. The U.S. government maintains enough antibiotics to treat 40 million people. Vaccinating people could augment treatment by protecting against any remaining spores and might speed reoccupation of contaminated buildings. The current vaccine requires six injections over 18 months, plus yearly boosters. So far, the government has purchased 29 million doses of it for a civilian stockpile.

Sources: “The Anthrax Vaccine” Institute of Medicine 2002; scientific literature; Los Angeles Times interviews