Effects of Anthrax vaccine downplayed/Skillful lobbying leads vaccine maker to l

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Effects of Anthrax vaccine downplayed

NEWPORT NEWS, VA — The Pentagon never told Congress about more than 20,000

hospitalizations involving troops who took the anthrax vaccine from 1998

through 2000, despite repeated promises that such cases would be publicly

disclosed. Instead, generals and Defense Department officials claimed that

fewer than 100 people were hospitalized or became seriously ill after

receiving the shot, according to an investigation by the Daily Press of

Newport News.

Written policies required that public reports be filed for hospitalizations,

serious illnesses and cases where someone missed 24 hours or more of duty.

But only a few of the cases were actually reported; the rest were withheld

from Congress and the public, according to records obtained by the Daily

Press. Critics of the vaccine, veterans' advocates and congressional

staffers say the Pentagon's deliberate low-balling of hospitalizations

helped persuade Congress and the public that the vaccine was safe.

Withholding the full record contributed to a shorter list of

government-recognized side effects for the drug, which gave patients and

physicians a false idea of what might constitute a vaccine-related illness

or problem. Repeated evidence of the same adverse side effect after a

vaccination is one of the most telling signs of a systematic problem,

vaccine safety experts say.

The newspaper found three cases of amyotrophic lateral sclerosis (ALS),

known as Lou Gehrig's disease, that the military hadn't reported. The

disease destroys muscles and nerves, is always fatal, and rarely hits people

younger than 45. One of the three cases involves Navy Capt. Denis Army of

Virginia Beach, who died in 2000 after developing symptoms less than a week

after his first anthrax vaccination.

His widow filed the first public acknowledgement of his death and its

connection to the vaccine after talking to a Daily Press reporter and

learning that she could file a report with the federal Vaccine Adverse Event

Reporting System (VAERS).

Col. Grabenstein, director of the military's vaccine agency, said no

one from the military intentionally misled Congress or the public. The

20,765 hospitalizations merely followed vaccinations in time, without

documented proof of a cause-and-effect relationship, he claimed. However,

the data that the Daily Press used to document the underreporting came from

an unpublished report that Grabenstein supplied in response to its request.

Quarterly analysis of the vaccine's effects ended just as the nation's only

manufacturer, BioPort, Inc. regained its license in 2002, after a 1998

shutdown by federal inspectors who found safety and other problems. The

decision to discontinue the quarterly monitoring end systematic long-term

studies of the health of those who have taken the drug, the newspaper notes.

Most studies that the Pentagon cites as support for the vaccine's safety

involve monitoring that lasted no longer than a few months.

After the quarterly reviews stopped, more than a million troops were forced

to take the vaccine — until a federal judge ruled last year that the drug

had never been adequately licensed for protection against anthrax use in

warfare. He ordered the military to make vaccination voluntary. The Pentagon

is appealing that ruling. A decision is expected by February.

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Skillful lobbying leads vaccine maker to lucrative profits

BY BOB EVANS

DAILY PRESS (NEWPORT NEWS, VA.)

NEWPORT NEWS, Va. — In a two-year span, the nation's only licensed anthrax

vaccine maker went from pleading poverty to an-nouncing $100 million in

acquisitions, including other pharmaceutical companies and a new

manufacturing plant near Washington, D.C.

It's a pattern that's worked well for BioPort Corp.: Tell the Pentagon or

Congress that it doesn't have the money to keep going, ne-gotiate a new

deal, then count the extra cash rolling in.

During the past seven years, it's transformed an initial investment of less

than $4.5 million into an international biotech firm, with contracts worth

more than $450 million. During that time, the company has capitalized on its

monopoly over the vaccine and on fears that opposing armies and terrorists

will unleash tiny anthrax spores somewhere.

BioPort is an example of how a sole-source government contract can become a

gold mine — especially if you spend wisely on the right lobbyists and public

relations professionals.

BioPort counts a former Cabinet member and assistant secretary of health and

human services among those it pays to gain favor with government agencies.

He says Pentagon officials talked about taking over the anthrax vaccine

plant and operations — especially after the government held the license for

the vaccine as collateral for a series of loans and payments that kept the

company afloat.

“What I never heard in those discussions was why nothing ever came of it,”

he says.

The Pentagon isn't telling that story, and neither is BioPort.

Troops and veterans who've been asked to put BioPort's products in their

bodies often point to the company's problems getting a clean bill of health

for its manufacturing plant, as well as to the company's ability to always

get its way with government officials. They wonder whether BioPort's

connections — not its scientific and medical prowess — are behind the

company's success.

BioPort is a privately held company that doesn't make its stock available

for public sale. As a result, most aspects of its finances and management

aren't open to public scrutiny.

The company declined to provide its officers for interviews with the Daily

Press. Six weeks after receiving a list of detailed ques-tions — and

promising answers — it sent a box containing two books and some news

releases. None of the questions was answered.

Until 1998, the nation's only manufacturing plant for anthrax vaccine was

owned and operated by the state of Michigan. The state agency that ran the

plant was losing money, so the state put the operation and its license for

making the anthrax vaccine up for bid.

Fuad El-Hibri, a 40-year-old German businessman with a Yale University

management degree, formed a team of investors to buy the business, which

included a $100 million contract with the Pentagon.

He and his father, Ibrahim El-Hibri, a wealthy international financier from

Lebanon, dominated ownership of the company, which they named BioPort.

But the U.S. government was not keen on letting a foreign-owned company

control its anthrax vaccine. The only other bidder was also based overseas.

So Fuad El-Hibri played a trump card: A family friend, former Chairman of

the Joint Chiefs of Staff Adm. Crowe, was made a director.

Crowe put no money into BioPort but got about 10 percent of the stock,

government records show. El-Hibri says Crowe immedi-ately advised him to

apply for U.S. citizenship.

Crowe's advice was good, El-Hibri said. But Crowe's connections were better:

He was the military's top officer during the Reagan administration, then

endorsed Bill Clinton for president in 1992. Clinton made him U.S.

ambassador to the United Kingdom, and while serving there, Crowe was close

to the El-Hibri family, congressional testimony shows.

Crowe has persistently declined comment on his investment or role with the

company, except for congressional testimony in 1999, when BioPort was

seeking its second government bailout. During that testimony, he was asked

whether he'd lobbied Pentagon officials for BioPort. Crowe vehemently denied

it.

At that point, BioPort had all the leverage over the Pentagon that it needed

— if the military wanted to continue its year-old pro-gram of inoculating

every service member against anthrax.

Even though the Pentagon gave Michigan more than $20 million for new

equipment and repairs and $100 million in guaranteed con-tracts the previous

decade, the plant had several problems. It was shut for renovations in March

1998, six months before BioPort bought all operations and licenses in a $25

million package of cash, loans and promises of future payments.

Food and Drug Administration inspections found repeated problems before and

after BioPort took over. BioPort brought in more, and better-paid,

consultants and employees to fix things up — even though its minor partners

included managers who had run the plant that provided millions of doses of

vaccine to U.S. troops, congressional records show.

As part of the sale, BioPort assumed the right to sell about $7.9 million of

vaccines already made and promised to the U.S. military. Within weeks, it

signed a new contract with the Pentagon providing for $45.1 million more,

including $16 million in immediate cash for plant renovations. The deal

required the government to pay for vaccine even if the drugs weren't

licensed for use.

That wasn't enough for BioPort: Nine months later, in June 1999, it was

still struggling to get FDA approval of its manufacturing plant. The company

said it was running out of money and needed more help.

Pentagon auditors looked at BioPort's books and concluded that millions of

dollars were unaccounted for. BioPort didn't even know the cost of making a

dose of vaccine, the auditors reported.

It was clear that $1 million had been spent to renovate and furnish offices,

as well as $1.28 million more on bonuses for “senior man-agement.”

One unnamed former manager got $10,000 a month for as much as 40 months —

whether he worked or not, records show.

And $1 million more had been spent on items unrelated to anthrax production,

the auditors said.

They concluded that BioPort's request for extra money didn't meet legal

requirements.

But Pentagon contract officers, citing “the interests of national security,”

overruled them and approved a $24.1 million bailout in September 1999.

The contract addition that they blessed paid all the company's debts and

provided a 144 percent increase in payment for each an-thrax vaccine dose,

from $4.36 to $10.64.

It was $2 million less than BioPort sought. Pentagon officers wrote that by

chopping the amount, they didn't have to notify Congress about the new deal.

Congress found out anyway, but did nothing to stop the deal.

Hearings were held, including one by Sen. Warner, R-Va., chairman of

the Senate Armed Services Committee. His session in-volved only BioPort

officials and others who supported the bailout.

A second hearing involving critics of the company and the renegotiated

contract was promised but never held.

More aggressive questioning took place in the House of Representatives. It

was determined that El-Hibri and his partners had in-vested only $4.5

million of their own money, in cash and loan guarantees.

All that money and the cash the Pentagon had chipped in was gone, spent on

renovations, consultants' fees and physical improve-ments, congressional

investigators found.

Further, the original $25 million deal with Michigan had become $14.45

million.

“The message seems clear: If a company wants to make millions without

providing a product or service, enter into a sole-source contract with the

Department of Defense to produce vaccines,” Rep. Walter , R-N.C., said

in a written statement. “BioPort ap-pears to have the government over a

barrel.”

Louis J. Rodrigues of the Government Accountability Office — a congressional

oversight agency that's frequently criticized BioPort and the Pentagon's

management of the vaccine program — told Congress that it “had no option”

but to pay up if it wanted anthrax vaccine.

The Pentagon contractors who made the original deal with BioPort should have

known there was no way that the company could stay in business, Rodrigues

said.

“We did nothing to force BioPort's hand and make them come up with a

cost-control system,” he said.

Or, he added, a realistic business model.

Pentagon officials promised Congress that they'd do a better job — in part

by assigning government employees to oversee the com-pany's bookkeeping and

quality-control systems.

They denied that they'd been patsies for the well-connected company.

“All I am trying to say is that this is not a sweetheart deal,” R.

Oliver, then principal deputy undersecretary of defense for ac-quisition

technologies, told Congress.

BioPort struggled for more than three years to get licensing for its plant

and product. Meanwhile, batches of vaccine were made and the Pentagon paid

for each — including money for storage of unusable vaccine.

Vaccine made before the plant renovation kept going into the arms of

thousands of troops. Dozens of them came to Congress, com-plaining that the

drug made them permanently ill, giving them headaches, joint pain, loss of

memory and more severe symptoms.

By 2000, even the Pentagon had lost patience and told BioPort to stop making

vaccine until the plant regained its license. But the military agreed to

keep making payments anyway, to keep the company afloat.

Those payments meant that BioPort's owners didn't have to borrow money

elsewhere and didn't have to risk their personal fi-nances, a congressional

auditor testified in 2000.

By January 2002 — when federal drug regulators finally agreed that the plant

and company could resume licensed operations — the Pentagon had paid BioPort

$126 million for drugs that were stored and unlicensed, congressional

records show. It also paid $33.5 mil-lion during that time for vaccine given

to 525,000 troops.

The months before the licensing approval were tumultuous for the company and

the nation.

In August 2001, Congress and the Pentagon publicly said they were

considering giving up on BioPort and its failures in getting op-erations up

to snuff.

Meanwhile, BioPort brought in more business partners and consultants from

established vaccine companies and government con-tractors to figure out how

to regain its license.

Then came Sept. 11, 2001, followed the next month by deadly anthrax-laden

letters to members of Congress and others in Washing-ton, D.C.; Connecticut;

and Florida.

Instead of asking questions about the vaccine's safety, many members of

Congress began asking why more doses weren't available.

Tommy , then secretary of health and human services and the Bush

administration official responsible for vaccine and drug licensing, was

caught between a Congress that wanted action and critics who feared

political pressure would hasten licensure.

“I can assure you nobody is pressuring FDA to approve this,” he said in

October 2001.

Three months later, BioPort had its license back.

A few months after that, it was back to pleading poverty.

This time, BioPort was after a bigger prize: a contract to supply millions

of doses of anthrax vaccine for use by civilians, postal workers, police,

firefighters and others who might encounter domestic terrorism.

A $1 billion contract was being waved in front of vaccine and pharmaceutical

makers, the largest in government history.

BioPort responded as it had in the past.

In a series of interviews, company officials said their business was “at

risk” and in financial jeopardy if the government did not quickly give it

the contract for a domestic vaccine stockpile — or a new Pentagon deal.

If BioPort was on the ropes financially, its biggest stockholders didn't

seem to feel it.

During the same week the president of BioPort pronounced it “at risk,” the

chairman of the board and biggest stockholders — El-Hibri and his wife,

— were in the news because neighbors were complaining about their

plans to build an 88-acre commercial equestrian and polo center near their

home in Gaithersburg, Md., near Washington, D.C.

The El-Hibris had never moved to Michigan to oversee the daily struggle over

licensing at the vaccine plant there.

Washington, D.C., was the focus of much of BioPort's attention anyway.

In 2002, records show, the company increased spending for lobbyists in

Congress, from $30,000 to $110,000. The amount doubled the following year.

BioPort also hired Ruder Finn and Fleishman-Hillard, high-powered public

relations firms staffed by many former government offi-cials.

BioPort, still the nation's only licensed anthrax vaccine manufacturer,

began sponsoring “public education seminars” and studies to build support

for a bigger government stockpile of the drug.

On the first anniversary of the Sept. 11 attacks, six doctors, scientists

and former military officers — described as a “panel of bioter-rorism

experts” by BioPort — announced the need for preparedness. Their primary

recommendation was to not rely on a new anthrax vaccine but to purchase

millions of doses of BioPort's product.

BioPort paid several of the people on that panel to review and endorse the

report, including former military officers who only a year before told

Congress how safe and effective the company's vaccine was.

They included Marine Maj. Gen. Randy West and Lt. Gen. Blanck, a

former Army surgeon general.

West said he was paid $5,000 for reviewing the report, which was written by

either BioPort or its public relations agent — not the experts on the panel.

Even though the ghost writing wasn't known at the time, a critic from the

conservative Cato Institute publicly dismissed the panel's work as “just

BioPort trying to make some money.”

After that, the company's efforts became less obvious.

Muhiuddm Haider, an unpaid member of the panel and a professor in the school

of public health at Washington University, started operating a Web

site for BioPort in support of the anthrax vaccine.

BioPort's name doesn't appear anywhere on the site, but the company supplies

all the money to operate it, $40,000 a year, Haider said.

The Web site says it's sponsored by the Partnership for Anthrax Vaccination

Education, or P.A.V.E., a group of medical organiza-tions that includes the

prestigious American Medical Association.

Earlier this year, Haider and P.A.V.E. petitioned the FDA to license the

anthrax vaccine for use against inhaled spores of the bacte-ria.

The ties to BioPort were not disclosed then, either.

P.A.V.E.'s Web site and the organization's publications extol the need for

vaccine and say the vaccine is safe. They mention none of the side effects,

even the minor ones that the Pentagon acknowledges are suffered by a third

or more of those who get the shots.

“I am not marketing for BioPort,” Haider says. “I am marketing for public

safety.”

P.A.V.E.'s public safety efforts began with a series of forums. Featured

speakers were West, officials from BioPort, Haider and others connected to

BioPort.

People who question the effectiveness and safety of the vaccine aren't on

the agenda for those forums.

A frequent speaker is Jerome Hauer, former assistant secretary of health and

human services for emergency preparedness. He was a leading proponent of

stockpiling anthrax vaccine for civilian use while he was on the government

payroll.

In his first few appearances at P.A.V.E. events, Hauer's connections to

BioPort weren't disclosed. He'd become a paid consultant.

Later, he took over a new bioterrorism institute at Haider's university.

He was named to BioPort's board of directors in June and has been lobbying

for the company's products.

As BioPort's board expanded, so did its business.

By September 2003, the Pentagon was paying $22 a dose — more than double the

price negotiated in the 1999 bailout.

Cash was coming in fast. The company could make a million more doses a year

than the military demanded, El-Hibri told TWST, a Web site that runs

verbatim interviews with business leaders.

“We are debt-free and profitable,” he said.

BioPort was now a subsidiary of Emergent BioSolutions, led by El-Hibri and

his business partners.

By the end of 2003, Emergent announced the purchase of a land drug maker

for more than $3 million and signed a new con-tract with the Pentagon, worth

from $29.7 million to $245 million, depending on the doses sold.

The following year, it began building a second, $95 million, anthrax vaccine

plant in Frederick, Md.

In January of this year, Emergent signed a deal with the British government

to work cooperatively on toxoid and botulism vaccines, including a pledge to

spend at least $2 million during the next two years. Purchase of a British

company working on five vaccines, including an oral anthrax vaccine,

followed weeks later.

But BioPort and its parent still hadn't landed the big prize: supplying

anthrax vaccine for the U.S. domestic stockpile.

BioPort and other companies received seed money to research a new-generation

anthrax vaccine. But when the $1 billion contract was awarded in November

2004, it went to VaxGen Inc., a California company without a licensed

product and in trouble for misre-porting financial results to Wall Street.

VaxGen's vaccine isn't ready for use yet and is in early trials, years away

from licensing. Government grants finance at least 11 other efforts to

provide alternatives to BioPort's vaccine, aiming for a safer, more

effective product.

When BioPort couldn't win in the lab, it doubled its efforts in Congress and

other branches of government, adding more and better lobbyists.

It had hired Louis Sullivan, secretary of health and human services under

President H.W. Bush — the current president's fa-ther. But

higher-powered help was needed.

McKenna Long & Aldridge, a powerful Washington, D.C., law and lobbying firm

also known as “MLA,” was hired Jan. 1 of this year, U.S. Senate lobbying

records show.

Within six months, it reported $140,000 in lobbying fees and helped bring

BioPort a $122.7 million contract to supply 5 million doses of the vaccine

to the Department of Health and Human Services, the second-largest award

under BioShield, the federal law that cre-ated a domestic stockpile of

antiterror vaccines.

The lobbyist's news release was headlined, “MLA Helps Client Secure

BioShield Contract for AVA Anthrax Vaccine.”

MLA had supplied several lawyers, including one who'd helped write the

Homeland Security Act of 2002 and two who'd been tapped by Congress for help

in creating the BioShield law.

But they couldn't do it alone.

Four days before the big contract award, BioPort added lobbyist Hishta

to the team. A few weeks later, he filed a U.S. Senate lobbyist report

saying BioPort had paid him $30,000 for “procuring a government contract for

anthrax vaccine.”

Hishta was executive director of the National Republican Congressional

Campaign Committee during its successful 2002 election campaign. The

committee is the main strategy and fund-raising organization for Republican

candidates in the House of Representa-tives.

Hishta also managed a re-election campaign for Virginia Sen. Warner.

Warner is an important ally of the Pentagon in the an-thrax vaccination

program.

BioPort is still delivering those 5 million doses for the BioShield

contract.

But the company didn't wait to resume its well-practiced, well-rewarded

strategy for success: threatening to stop vaccine produc-tion, then reaping

a new contract.

On July 14, BioPort President Kramer told Congress that if the

government didn't promise to buy even more vaccine for the domestic

stockpile, the company might have to stop producing anthrax vaccine

altogether.

“We'll have to make a very simple business decision,” he testified.

Whether it was the renewed threat — or just coincidence — BioPort once again

got the desired result.

Last month, Health and Human Services posted a notice that it would enter

private negotiations with BioPort to supply an addi-tional 5 million doses

of anthrax vaccine for the domestic stockpile.

The price to taxpayers hasn't been determined yet.