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Congress Gets Serious About A Pandemic

What's scarier in Washington, the prospect of a flu virus that could kill millions or the possibility that voters will toss out any politician who fails to prepare the nation for such a disaster? A pandemic could be a true global catastrophe, of course. But along the Potomac the second threat is also very real. That's a big reason why both the White House and Congress are rushing to boost America's capacity to produce vaccines and drugs against flu and other diseases.

On Oct. 18 the Senate Health, Education, Labor & Pensions Committee hurriedly passed a bill that would offer vaccine makers new liability protections and incentives for research. And the Administration is about to issue a flu pandemic plan expected to be extremely aggressive. "There is a sense of urgency on both sides of Pennsylvania Avenue," says Senate Budget Committee Chairman Judd Gregg (R-N.H.).

In a town where politics is king, it's easy to be cynical about all this action. "There is a lot of posturing so that people can say they've done something in case the worst happens," says one source involved in the negotiations. Pundits also see careful positioning by White House hopefuls. In early October, for instance, Senators Hillary Clinton (D-N.Y.) and Pat Roberts (R-Kan.) introduced a bill that offered, in addition to guarantees of a market for vaccines, liability protections for manufacturers of pandemic flu vaccines. That wins Clinton kudos on a pet issue -- health care. But it also helps position her as a sensible centrist by challenging a Democratic interest group: trial lawyers. Says John Clerici, a partner at McKenna Long & Aldridge in Washington: "It is courageous because she is taking on a key constituency."

Yet even to jaded Washingtonians, it's clear that the government needs to do more than posture. In 2004, Congress approved Project BioShield, a plan that would spend $5.6 billion over 10 years to jump-start production of vaccines and drugs to counter bioterror threats. But few companies have responded. "The current state of affairs is very grim for private sector engagement in vaccines and drugs," says Brad Smith, an associate at the University of Pittsburgh's Center for Biosecurity. "There is nothing in the pipeline." Last year companies couldn't even make enough vaccine for regular flu.

That prompted Senators Gregg, Richard Burr (R-N.C.), and others to push for fixes, starting in early 2005. "We thought we had the problem moving in the right direction with BioShield," says Gregg. "It turns out we didn't. We needed a second run at it." Gregg's effort was going slowly, though, until Hurricanes Katrina and Rita showed how vulnerable the U.S. is to disasters -- and until avian flu began to spread into Europe. "Those events sent a strong signal to Congress that catastrophic events can happen," says Smith.

Now, Washington is in a virtual sprint. Senator Tom Harkin (D-Iowa) on Sept. 29 put $3.9 billion into defense legislation to stockpile antiviral drugs. Clinton jumped in with her bill on Oct. 6. Burr offered his 11 days later. The most likely result: something like the Burr measure, which creates an agency modeled on the Defense Advanced Research Projects Agency to stimulate vaccine development, and also includes liability protection for manufacturers. The biggest hurdle: adjusting liability limits to keep enough Democrats on board. If Congress succeeds, it could better prepare the country -- and help keep the current crop of lawmakers in office.

Business groups are increasingly dismayed at the tough tone of the immigration debate in Washington. That's why they're straight-arming a group allied with President Bush. The group, Americans for Border & Economic Security, was set up last summer at the urging of White House political guru Karl Rove. Headed by ex-Republican National Committee Chair Ed Gillespie, former Representative Cal Dooley (D-Calif.), and former House Majority Leader Dick Armey (R-Tex.), the organization had intended to raise a $3 million war chest, mainly from Big Business and service-sector employers. The money was to pay for advertisements and lobbying to secure passage this fall of legislation that would grant illegals some form of amnesty and guest-worker status.

But White House plans remain sketchy, and business lobbyists are sitting on their wallets. Companies fear that the Bush Administration will embrace efforts by GOP hardliners to seal the southern border and toughen sanctions against employers who hire illegal immigrants. The group has raised just $300,000, mostly from the agriculture, resort, and retail industries. Bush got business even more worried on Oct. 18 when he signed a $32 billion Homeland Security Dept. spending bill: It emphasizes stricter enforcement at borders.

With the avian flu spreading across Asia and beginning to reach Europe, public health experts are warning that it's only a matter of time before the virus makes the leap from birds to people. The result could be a devastating pandemic. It's clear that the world isn't ready. There are limited supplies of drugs, which probably wouldn't work all that well anyway. More important, companies don't have the ability or capacity to make an effective vaccine rapidly.

One way the U.S. and other nations can reduce their vulnerability, not just to flu but to other new diseases or bioterrorism, is to bolster the vaccine industry. Congress tried to do this last year with a bill called Project BioShield. The measure set aside $5.6 billion over 10 years to pay for the development of new vaccines and drugs. But few companies stepped up to the plate. So lawmakers are trying again.

One of the leaders in the effort is Senate Budget Committee Chairman Judd Gregg (R-N.H.). Gregg introduced a bill early this year to provide more incentives for vaccine development and has been pushing hard to make it happen.

"Senator Gregg gets a medal for stimulating the debate," says John Clerici, a partner at law firm McKenna Long & Aldridge in Washington. He's now getting action. On Oct. 18 a Senate committee passed a bill containing many of the incentives Gregg has proposed.

Gregg talked about the threat -- and the solutions -- with BusinessWeek's Washington senior correspondent, John Carey. Here are edited excerpts.

You've been working on this for many months without too much progress. But now, suddenly, Congress seems to be taking action. Why now?

There are a number of reasons. The first BioShield initiative has stalled out because we were not able to entice not just Big Pharma, but medium-sized and startup companies, into the vaccine area. One would have thought that putting $5.6 billion into the pipeline would have done that.

But because of the liability concerns, the big pharmaceutical companies see a negative potential that's so significant they were not willing to get into vaccines. And small companies don't have the investment capital.

Secondly, both the SARS situation and bird flu highlight the situation we are in. We lead the world in pharmaceutical development, but we have virtually no vaccine-production capacity. This is intolerable. We have to have a robust vaccine capacity, because these health threats -- whether SARS or avian flu or bioterror -- are real.

So how do we get that?

What we need is a better structure to encourage production and research. That includes liability protections for companies. It includes getting products through what people call the 'valley of death' [the gap between basic research and creating a product].

Do you see progress on the bill with those provisions?

We have not crossed the finish line yet. But it is moving through the Senate. And it is a major step forward to have the liability provisions in this bill.

[With a vaccine for a new disease, like a new pandemic flu strain or a bioterrorist attack], you don't have any idea what the damages will be. No responsible board of directors or investors will risk capital when the liability potential is huge. Companies have to have immunity that comes from the government.

Won't liability protections be opposed by the trial lawyers and others?

Yes. There will be an effort to change the liability provisions. But if we are able to get the bill through in its present form, I think we will see people get back into the vaccine business.

It won't solve the problem completely, because the problem has to be solved by science. But we'll have the capacity to move in the right direction. I also think we will see the White House come out with a very aggressive bird flu initiative. There is a sense of urgency on both sides of Pennsylvania Avenue.

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