A sputnik for the 21st Century: with the government taking aim at bioterrorism, new laws may prove a boon for American innovation--and business.

When the nation's attention was riveted in fall 2001 to who might be sending the anthrax spores that had been mailed like so many Christmas cards, Congressional legislators were focusing on a different aspect of the problem: the dearth of options then available for preventing or treating future bioterrorism attacks.

After all, anthrax is not a common condition; only 18 cases of the fatal inhalation type had occurred in the US in the past hundred years. Other bioterrorism threats, like botulism or bubonic plague, have been even more rare--hardly inspiring pharmaceutical companies to spend the millions of dollars necessary to develop cutting-edge treatments. And preventing these deadly agents has been even more neglected than the search for treatment; not only are vaccines not available for many bioterrorism threats, but the slow, laborious technology used to develop and manufacture vaccines hasn't been updated in decades; the currently licensed smallpox vaccine, for example, is the same as that used in the 1960s. So when the Defense Science Board, an advisor to the Department of Defense, examined the nation's readiness to address bioterrorism threats, it was not surprising that of the 57 diagnostics, drugs and vaccines determined necessary for an adequate response, the nation had only one.

As in the past, when the government realized it needed to push an industry towards inventions that help America's defense, Congress has begun to act, passing the Bioshield Act last July and currently working on Bioshield II. While questions and concerns remain about those acts, many see the government's new attention on pharmaceuticals as a trend that could benefit both the industry and the nation in ways that go well beyond even its current important objective. "Simply by focusing on a given area, the government has long proved that it is able to spur wide-ranging innovation in that area," observes Donald Steinberg, co-vice chair of the Intellectual Property Department at Wilmer Cutler Pickering Hale and Dorr. The "space race" with Russia is one obvious example money spent there is credited with developing a whole host of new materials and technologies applicable for numerous consumer products.

With the war on terror, software to enable identity recognition or data mining has already begun to see a similar boost. Now the pharmaceutical industry is poised to gain from this push for innovation. Moreover, thanks to discussions under way with legislators about additional ways to sweeten the pot--perhaps by extending patents on unrelated drugs for companies that develop products the government desires the benefits could be substantial, indeed.

The Birth of Bioshield

"After the September 11th attacks, research-based companies felt that the government was asking them to make major advances in the medical countermeasures against possible biological agents, but there was little economic incentive for them to do so," says Henry Wixon, co-vice chair of Wilmer Cutler Pickering Hale and Dorr's Intellectual Property Department.

The Project Bioshield Act of 2004, which President Bush signed into law last summer, was an effort by Congress to put its dollars where its desire is. The act guarantees a ready market for pharmaceutical companies that invent products to defend against the biological horrors that could be unleashed by enemy terrorists. It does so largely by appropriating some $5.6 billion over 10 years for the federal government to buy and stockpile these products.

The act consists of three major components. It establishes a permanent funding source for the federal government to buy bioterrorism-related medical products from private companies. It provides additional money to support research through the National Institute of Allergy and Infectious Diseases at the NIH, along with slicing the grant process from an average of two years to six months. And it gives the FDA the ability, in emergencies, to make unapproved drugs or devices immediately available.

The Bioshield Act recognizes, however, that, unlike the defense industry, independent- and profit-minded pharmaceutical firms would not agree to be engaged as a cost-plus government partner. As Senator Joe Lieberman stated during a hearing following the passage of the legislation, "If the government funds the research, as it does with defense contractors, the industry can expect to receive [only] the operating margins typical of defense contractors.... Our goal ... should be to engage some of the successful biopharma companies in this research--companies that have successfully brought products to the market. They are not now and will never agree to serve as defense contractors working on a cost-plus basis. They can only be engaged as entrepreneurs."

Law Still Needs Strengthening

Not wanting to appear ungrateful or unpatriotic by not supporting the law, the pharmaceutical industry has applauded the government's willingness to put money behind the rhetoric. But at least so far, the applause hasn't turned into action. Indeed, most of the large, research-based pharmaceutical companies have been holding back from undertaking the massive effort required of such entrepreneurs. The reason: major limitations of the Bioshield Act that industry leaders had noted even as the ink was drying at the Rose Garden ceremony--not enough incentives to justify the risk and too much potential liability.

While the 2004 Bioshield Act "took an important step forward in protecting Americans from bioterrorism," notes Court Rosen, a spokesperson for the Pharmaceutical Research and Manufacturers of America (PhRMA), "there remain significant scientific and other challenges shared by the public and private sectors and inherent in the research and development of bioterrorism countermeasures. We have therefore urged, and still hope for, the enactment of additional measures."

Liability is one key concern. As a statement from the Biotechnology Industry Organization, a group representing more than a thousand companies and institutions nationwide, put it, "Because of the deadly nature of bio-weapons, human efficacy data cannot ordinarily be obtained in advance of an attack. Thus, preclinical and clinical testing data for biomedical countermeasures will necessarily be less complete than for drugs and vaccines targeting other diseases." Moreover, the group observes, unlike most pharmaceuticals, which are administered to very targeted groups, biological countermeasures are likely to be given to all or most Americans. Because of the wider distribution, the number of adverse reactions will likely be high, reactions the group fears will invariably be tagged as side effects of the countermeasure, even though they may not be. The group points to the Department of Defense's anthrax vaccine inoculation effort begun in the last decade, which has attracted significant litigation against the vaccine's manufacturer by soldiers claiming they were harmed by the shots.

"Most companies are looking for a government compensation system, similar to the no-fault Vaccine Injury Compensation Program used for childhood vaccinations," says Wixon, who suspects such a program will ultimately be enacted.

Additional Patent Protection?

More controversial is a key incentive being discussed as a possible lure for reticent companies to invest in a process that remains risky and expensive, even if the government is now a willing buyer of the final product: a patent provision that could give a firm additional exclusivity for an unrelated drug in its portfolio in exchange for developing one to combat bioterrorism. For example, the FDA could extend a pharma company's patent for a blockbuster drug for two years if the company committed to developing, say, a treatment for bubonic plague.

"If the government decides that fighting bioterrorism is that important, it must commit to ways of drawing in major companies," says Hollie Baker, a partner specializing in life sciences patent law in Wilmer Cutler Pickering Hale and Dorr's Intellectual Property Department. "Most drug companies have a few products that are the engine for their whole company, so the prospect of a patent bonus will definitely get their attention."

At a hearing on Bioshield II last fall, Senator Lieberman supported this approach. "I think it is necessary to enact the bonus," he said. "I do not think our strategy to create a biodefense industry will work if we do not. The Congress already has established a policy to grant patent bonuses to persuade biopharma companies to conduct clinical trials to secure pediatric indications for their drugs. This is a new application of an existing policy and practice."

Not surprisingly, the Generic Pharmaceutical Association is strongly opposed. Such a patent bonus, it claims, "would impose a penalty on those who most need prescription drugs, threatening their access to affordable medications. It could easily result in increases of hundreds of billions of dollars in the costs confronting all purchasers, including Medicare and Medicaid."

Other enticements being proposed are also drawing heated exchanges: One provision would double the period of market exclusivity from five to 10 years for any new molecular entity having at least one identified use as a countermeasure. Another would extend the market exclusivity of a countermeasure drug with a new use or dosage form to 10 years from three.

Technological Leaps Ahead?

No one knows whether these measures will ultimately be adopted in an updated bill. But should the final provisions of Bioshield II address the original act's shortcomings enough to bring large players into the research, major pharmaceutical companies could come out big winners. Importantly, however, so might the American healthcare consumer. "When the government declared war on AIDS or cancer decades ago, for instance, and made money available, numerous research efforts were swiftly undertaken," observes Wixon. "While not all of it was good, massive progress in the treatment of these diseases resulted."

Indeed, some doctors are hoping to build such wide-ranging advantages into the Bioshield II legislation. The Infectious Diseases Society of America, a group comprised of thousands of physicians and scientists in the field, wants to see Bioshield expanded to include research into next-generation antibiotics, which it believes will not only protect the public during a terrorist event but in everyday life. "The decline of private investments into antimicrobial research and development and the increasing development of highly resistant infectious strains, coupled with the emergence of new infectious diseases, create a crisis situation that cries out for a similar immediate and long-term solution," an IDSA spokesperson noted at a government committee hearing. "Amending the Project Bioshield Act to include incentives to motivate the production of new tools to address this public health crisis can positively change market dynamics that presently are on a downward spiral."

As with the gains generated for consumer products by research for the space program, observers are confident that the government's new focus on bioterrorism will ultimately result in a great leap forward for the pharmaceutical industry--and perhaps for other industries as well. As Wixon observes, "Money coming into this field can move the whole industry into new research and production modes, which may well yield huge benefits that aid drug companies and consumers alike."

Florida-based journalist Meryl Davids Landau writes about legal, medical, business, political and lifestyle topics.