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The Smallpox Vaccination Plan: Challenges and Next
Steps
Bill Number: Oversight Hearing
Hearing Date: January 30, 2003
Witness:
Kim Bush, President, Vaccines Division
Baxter Healthcare Corporation
Washington, DC
Testimony:
Improving and Creating Opportunities
To Develop Vaccines against
Bioterrorism Threats—
An Industry Perspective
Mr. Chairman, members of the Committee, thank you
for the opportunity to speak today about smallpox
vaccine and the threat of bioterrorism.
I am Kim Bush, President of Baxter Bioscience Vaccines.
Baxter International Inc. is a global health care
company that, through its subsidiaries, provides critical
therapies for people with life-threatening conditions.
Baxter's Bioscience, Medication Delivery and Renal
products and services are used to treat patients with
some of the most challenging medical conditions including
cancer, hemophilia, immune deficiencies, infectious
diseases, kidney disease and trauma. With 2002 sales
of over $8 billion, and approximately 48,000 team
members in 110 countries, Baxter is a global leader
in developing innovative medical therapies that improve
the quality of life for people around the world.
Baxter has a total of five licensed vaccines worldwide,
and a broad pipeline of vaccines with more than a
dozen vaccines at all stages of development from pre-clinical
to pre-launch, including influenza and various meningococcal
combination conjugates. Baxter's NeisVac-C meningococcal
vaccine was approved in the U.K. in 2000 and is now
licensed in 29 countries. Our newest next generation
influenza vaccine has been approved for Phase III
clinical trials this year in the U.S.
Baxter Healthcare Corporation, in conjunction with
Acambis Inc., is participating in the production of
155 million doses of smallpox vaccine for the U.S.
Government.
Mr. Chairman, I would like to make the point that
what has happened in the case of the smallpox vaccine
partnership between Baxter/Acambis is extraordinary
to the point of being unprecedented. As you may be
aware, although smallpox vaccine has been around for
many years, the process used by Baxter and Acambis
– growing the vaccinia virus in cell culture
– is entirely new insofar as large-scale production
is concerned.
Under optimal circumstances, the development of a
new vaccine from the beginning through product delivery
to the ultimate end user is a process that may take
10 years and in some cases has taken much longer.
In the case of our current smallpox effort, however,
through an innovative public-private partnership,
this time frame has been dramatically shortened and
compressed so that the needs of national security
can and have been met. At the same time, neither product
quality nor the need to demonstrate safety and effectiveness
in clinical trials is being compromised. That is a
remarkable feat made possible because the FDA and
all of the other government agencies along with the
manufacturers decided this was not “business
as usual.” I am not sure many Americans know
or appreciate the long hours, weeks of intensive and
exhaustive fact-finding, and all the other hard work
and collaboration that went into this contracting
process. If they did, I am sure they would be very
proud – as I am – of what our civil service
and political leadership can accomplish in partnership
with the private sector when an urgent need arises.
It took only 58 days to complete the decision making
process to award a $400 million contract. That is
unprecedented!
At the same time, we believe there are some lessons
from this experience and we appreciate this opportunity
to share with you some thoughts and ideas based on
our experience as to how the country can enhance its
ability to prepare for and respond to other bioterrorism
threats. It is unfortunate that a disease that scientists
and health care workers throughout the world devoted
decades to eradicating may now be a bioterrorist threat.
We therefore must use whatever scientific and medical
tools at our disposal to defend against the unthinkable.
We believe a number of issues need to be considered
and resolved if we are to have a truly meaningful
and productive public-private partnership in defending
against bioterrorism. I can assure you that the barriers
are not in the willingness or ability of the private
sector to become engaged.
For example, Baxter currently has the capability to
make vaccines for numerous bioterrorism threats. Now
– today – we have the technical ability
to produce and deliver vaccines for smallpox (2nd
generation and next generation/MVA), as well as vaccines
that utilize recombinant, cell culture and conjugate
technology and can protect against a variety of both
viral and bacterial diseases. We can respond to pandemic
threats including influenza, with our proprietary
cell culture based production technology that eliminates
the need for egg-dependent growth platforms and decreases
the risk of adverse reactions. Beyond that, another
5 to 10 vaccines are possible if we select the right
partners. In short, Mr. Chairman, Baxter, like a number
of other companies, is technically able to meet many
of the country’s vaccine needs. The questions
are under what conditions and with what incentives
can these capabilities be optimized and what are the
factors working against them? Let me share with you
some of the issues we and industry are dealing with.
Uncertainty of Market Conditions for Anti-Bioterrorism
Products
Inside a company such as Baxter, proposals to fund
vaccine projects must compete against each other as
well as against non-vaccine projects for R&D dollars.
To put it simply, when you do the math, vaccines often
come out as a less appealing choice for investment
than other medical or pharmaceutical products. If
you add to this the current and growing attacks on
intellectual property protection, particularly as
it pertains to health needs of developing countries
– along with liability issues facing the industry
and the costs of meeting regulatory requirements –
it’s not hard to understand why vaccines are
viewed by some in less and less favorable terms as
an investment priority.
New vaccine development decisions are risky in and
of themselves. Bioterrorism products present even
more difficult challenges because such products, especially
if they are vaccines, may represent one-time-only
opportunities and the market is extremely unpredictable.
Certainly a product that is to be stockpiled and used
only in case of emergency is not one that can by itself
create a sustainable business model or warrant a huge
R&D expenditure. That is even more true when we
factor in the reality that shifts in government policy
or perceived threats could change priorities and funding
initiatives overnight. Today’s urgent need may
become tomorrow’s minor concern, or vice versa.
Beyond that, for a manufacturer of vaccines that
often take months to move through the production process,
scheduling and anticipating needs are critically important.
Also, just as for up-front decisions regarding product
research and development, expensive manufacturing
and production funding priorities and resource allocation
decisions also take place in an environment of competing
and sometimes conflicting demands.
Against this backdrop, it is critical that needs
be clearly stated. This is not always the case for
government needs. Numerous different agencies have
responsibility to foster research related to bioterrorism.
That is a good thing and, indeed, there is a lot going
on. However, from the perspective of industry their
activities are not always coordinated or visible.
Sometimes the procurement process lacks transparency
– RFPs are issued and announcement dates come
and go, sometimes without good communication as to
the reasons for delay or what the issues are. Highly
regulated procurement systems that work well under
normal circumstances and are set up to procure standard
material goods or to support small business R&D,
do not necessarily provide incentives for large, capable
manufacturers of complex biopharmaceuticals –
nor are these standard procurement practices necessarily
the fastest way to get products, especially biopharmaceuticals,
into the hands of the U.S. government.
Another factor adding to the risk is our awareness
of the fact that, in some cases, what the government
is willing or able to pay for a product may be determined
according to the appropriations available, not the
value of the product to be purchased or the cost structure
of the manufacturer. Hence, when investment decisions
for R&D programs or manufacturing are being made
by vaccine producers, we must consider the possibility
that the government agencies may be bound by artificial
limits in terms of determining what constitutes a
fair price for the final product.
To create improved incentives to invest in new bioterrorism
vaccines, it would be very helpful to hear a clearer
and more coordinate message from the federal government
as to the definition of its needs.
Mr. Chairman, I would also like the Committee to
be aware that the vaccine industry today is somewhat
splintered in the sense that – on the one hand
you have a small number of large integrated manufacturers
– and, on the other, a host of small companies
including some small start-ups, that have really focused
on a particular niche or technical capability. From
our standpoint, it would seem very beneficial to the
government to gain a greater understanding of the
strengths of all these different companies, and put
together a comprehensive composite picture of how
all of these companies might be used in varying partnerships
or consortia to bring forth the best possible result
in the shortest possible time.
Currently, the way the system works, the government
will issue an RFP and ultimately award the work to
one prime contractor. It may very well be that alternative
processes might foster partnerships and collaborations
between companies with strengths that complement each
other. I can say from our own Baxter experience that
our partnership with Acambis in producing smallpox
vaccine has been optimal for the government and certainly
has worked well for our two companies. Yet, that partnership
came about only through a series of events and pre-existing
relationships that would not normally occur and were
almost serendipitous. We think the government could
be much more proactive in terms of acquiring a broader
knowledge of the industry’s capabilities and
using that knowledge to foster public-private partnerships.
This could more readily harness the diverse talents
and capabilities of the private sector to achieve
the best possible results in the shortest possible
time.
Accordingly, Mr. Chairman, we recommend that all
of the government agencies that are involved in biodefense
preparation develop a process for working in a more
collaborative fashion to establish and communicate
clear national research and development targets, thoroughly
educate themselves on the capabilities of the industry,
foster partnerships among different companies, and
establish an RFP process that has an overriding goal
of getting the best product in the shortest possible
time. That is what occurred in the case of the smallpox
contract with truly remarkable results and we think
that process can be replicated for other bioterrorism
research initiatives.
Impact of Regulation
The current regulatory system for drugs and biologics
was established around the concept of assuring that
the American people have safe and effective medicines
to treat or prevent the wide range of medical conditions
that can afflict people in a normal lifetime. Biologic
products such as vaccines, because they are made from
living organisms and are generally injected into healthy
people, are subject to particular scrutiny under our
existing regulatory setup – and justifiably
so.
The question I raise today, however, is whether a
regulatory system that works well and is set up to
deal principally with conventional and often predictable
health needs is positioned to deal with the abnormal
and the unpredictable. Can it be better adapted to
expedite the availability of medicines to counter
organisms that have been weaponized or are highly
exotic and almost never encountered during normal
times? Certainly, in the case of the smallpox contract,
we have seen that the regulatory system can quickly
adapt when faced with an issue of overriding national
interest.
The FDA has also moved forward in giving the vaccine
industry better guidance in the critical area of designing
clinical trials for products to protect against bioterrorism
threats. The FDA and the industry agree that, because
of ethical and safety concerns, Phase III efficacy
trials are not possible in the case of vaccines, therapeutics
or drugs to treat bioterrorism agents if such trials
would require challenging human subjects with a deadly
organism or highly toxic substance. Accordingly, the
FDA has been developing alternative testing methods
to be used when human studies are not feasible –
because the product being tested is intended to deal
with chemical, biological, radiological, or nuclear
substances. The FDA deserves enormous credit for undertaking
this initiative, which was underway even before September
11, 2001. This new rule that was made final on May
30, 2002, should provide industry with clear guidance
on how to construct clinical trials.
There are still some issues remaining for which regulatory
solutions remain elusive. Let me give you one example.
Tick-borne encephalitis (TBE) is a viral infection
of the central nervous system that can lead to a number
of serious neurological problems and in a small number
of cases, death. TBE is common in Europe, Eastern
Europe and East Asia. It currently is not known to
exist in the United States. Some bioterrorism experts
have expressed concern that this virus could be weaponized,
and there is also interest on the part of the U.S.
Army in having a vaccine to protect troops that might
be stationed in places where TBE is prevalent.
Baxter has a vaccine for TBE that has been approved
and marketed in Europe for many years. It would be
preferable if the U.S. Army uses that vaccine for
our troops to have FDA approval. For that to happen,
however, Baxter would have to invest millions of dollars
to conduct large and lengthy clinical trials to gain
U.S. regulatory approval of a vaccine already licensed
in Europe. Baxter might make such an investment if
there was a high probability of having a U.S. purchaser
but, otherwise, it would not make sense to seek U.S.
licensing of a vaccine to prevent a disease that does
not exist in the U.S. and for which there is no medical
need.
Mr. Chairman, we are very encouraged by the steps
taken so far by the FDA to assist industry in moving
forward with anti-bioterrorism research projects,
and we are hopeful the agency will build upon this
process to identify and address additional needs as
they become apparent. We do hope to find ways to address
issues such as with the TBE vaccine that, because
of unusual circumstances, falls outside of the range
of solutions that can be sought within the usual regulatory
process. We recommend that there be better collaboration
between international agencies that might help eliminate
duplication of regulatory efforts and harmonize high
standards for licensing quality products.
Issues Relating to Liability and Risk Management
Mr. Chairman, Baxter believes that liability exposure
is one of the most serious impediments to new vaccine
development, especially in the area of preparing for
a bioterrorist threat. This is because, unlike the
situation with childhood vaccines, there is no comprehensive
regime in place today designed to provide rapid and
predictable compensation to persons who may have suffered
a vaccine-related injury from bioterrorism vaccines.
As you may be aware, when Baxter and Acambis first
entered into the contract with HHS to produce smallpox
vaccine, the indemnification protection that was made
available to us was a hastily cobbled together extension
of a 1950s Executive Order – originally developed
for Department of Defense contractors. Under this
system, should our smallpox vaccine be used and result
in adverse patient reactions, Baxter and Acambis would
have to go through the lengthy, costly and difficult
process of defending all lawsuits brought against
us, and pay all claims until our insurance was exhausted.
Then, and only then, would the government step in
and take responsibility for the claims. This system
exposes a manufacturer to tremendous legal costs and
creates enormous difficulties in negotiating an insurance
portfolio with private insurers, not to mention the
uncertainty of how the government might exercise its
discretion in indemnifying claims.
This system is less than optimal and provides a strong
disincentive to get involved in future vaccine contracting
even assuming that the Executive Order could protect
companies contracting for vaccines other than smallpox.
The language included in the Homeland Security Bill
relating specifically to smallpox is a significant
improvement over the Executive Order. Under that legislation,
if HHS makes the appropriate declaration concerning
the need to immunize all or some of the public against
smallpox, then the government will, in effect, stand
in the shoes of the manufacturer for purposes of defending
lawsuits and paying claims.
The system set up in the Homeland Security bill makes
far more sense and we recommend that it be extended
to all bioterrorism vaccine development programs undertaken
by the government. We believe that, if a vaccine is
developed and manufactured at the request of the government
to specifications set forth by the government, and
is delivered to the government to be used only when,
where and how the government specifies, and given
only to those individuals that the government determines
should get the vaccine, then the government should
bear the responsibility in paying the claims of those
who have experienced injury or adverse reactions.
We strongly urge Congress to look at the smallpox
liability language in the Homeland Security bill as
a template for handling liability issues for future
bioterrorism vaccine development.
Intellectual Property Protection
Another point I would like to touch on is the need
to continue to assure adequate intellectual property
protection. In combination with adequate market opportunities,
patents are the means by which manufacturers can recover
the cost of development and fund future research projects.
As I had previously mentioned, it usually takes 10
years to bring a vaccine to the marketplace. Thus,
upon entry into the market following regulatory approval,
most vaccines only have less than ten years of remaining
patent protection. Manufacturers rely on this relatively
short period of protected sales to recoup the considerable
costs of research, development, and clinical trials.
In recent years, especially with respect to diseases
affecting developing countries, we have seen an effort
to require compulsory licensing or otherwise undermine
patent protection as a way of making medications affordable
for those nations, many of which are poor. I should
add that, in many instances, developing nations are
also in tropical regions, and many of the targets
of both conventional vaccine research and bioterrorism
preparation are on diseases of tropical origin.
As a company strongly committed to improving access
to healthcare, Baxter understands the laudable goals
of those who want to make medications more available
to developing nations. At the same time, we need to
recognize that the vaccine industry cannot afford
to develop products for the diseases affecting those
areas, including diseases that can be weaponized,
if it cannot rely upon strong protections for the
inventions and know-how that create those products.
As the U.S. continues the process of developing a
trade agenda for the WTO and related negotiations,
we strongly urge Congress and the Administration to
seek ways to assist the poorer nations in improving
access to health care technologies without undermining
the strong intellectual property protections that
are, in the final analysis, the engine that drives
discovery of those technologies in the first place.
Creating a Solid Base for the Vaccine Industry
Finally, Mr. Chairman, if the vaccine industry is
to make a meaningful contribution to the defense against
bioterrorism, the industry must be healthy and vibrant.
That is not universally the case today. To the contrary,
rising development costs, downward pricing pressure,
high costs of regulatory approval and compliance,
and the constant threat of predatory lawsuits have
combined with the inherent difficulties of manufacturing
vaccines to create a situation where the industry
is having trouble meeting the country’s basic
needs for regular childhood and seasonal vaccines
– let alone meeting the country’s needs
on an emergency basis for innovative vaccines to combat
bioterrorism threats.
Unlike mass-produced pills and tablets, which are
synthesized from chemicals according to a standard
recipe and are manufactured in a highly mechanized
and predictable fashion, vaccines are produced from
living organisms – including viruses and bacteria
and cell cultures and other living systems. Despite
the best efforts of vaccine manufacturers, there can
often occur a great deal of variation and unpredictability
in the way these organisms grow and behave. In some
cases these organisms are cloned or are the result
of recombinant DNA technology. The process of making
a vaccine from beginning to end can take many months,
with many opportunities for unexpected and unwanted
variations to occur. Building facilities to mass-produce
vaccines requires investments of hundreds of millions
of dollars. In other words, making vaccines is a costly,
lengthy, difficult and a complex process.
In recent years we have seen shortages of vaccines
that guard against measles, mumps, rubella, pneumonia,
meningitis, diphtheria, tetanus, pertussis, chicken
pox and adult influenza. We have witnessed a constant
decline in the number of vaccine manufacturers –
for U.S. licensed vaccines, there were 26 different
manufacturers in 1967. Today in the U.S. there are
only four major manufacturers. To our knowledge there
are no stand-alone manufacturers of licensed vaccines
in the U.S. which demonstrates how difficult it is
to build a sustainable business enterprise solely
on a vaccine portfolio.
Mr. Chairman, shortages and contraction are not indicators
of an industry in the best of health. If America wants
to build a dynamic biomedical infrastructure to serve
as a bulwark against bioterrorism, we cannot do so
on a fragile foundation.
The market for vaccines today, both in the U.S. and
around the world, is one that is focused on, if not
obsessed with, getting the lowest possible prices.
Given the financial issues facing many governments
and the problems facing many developing countries,
that’s not hard to understand. But what we must
also understand is that the natural and inevitable
result of downward pricing pressure is that many vaccines
have now become low margin products and, as such,
have the ability to contribute only marginally to
the funding of future research and development for
vaccine initiatives.
We have developed an attitude as a country that vaccines
should be cheap, readily accessible and treated as
an entitlement. Vaccines have done such an effective
job for so many years, there has been a tendency to
take them for granted, and there is a general lack
of appreciation in the public of how difficult it
is to produce vaccines and of the complex and formidable
regulatory environment that faces these products.
We recognize clearly the need to ensure consumer safety
with vaccine products, especially as in many cases
these products are given to individuals who are not
yet ill. However, the overall attitude towards emerging
vaccines for bioterrorism threats cannot be “business
as usual” or these products will never be available.
As one manufacturer capable of and committed to assisting
in this effort, we would be pleased to work with this
committee, others in Congress, the FDA, and other
relevant agencies to determine the best ways to re-tool
this process to expedite the development and availability
of essential vaccines.
Conclusion and Recommendations
In closing, we believe that government can take a
number of steps to improve the investment climate
and willingness of private companies to make a greater
commitment to research on bioterrorism vaccines and
drugs.
We are hopeful that industry can gain a clearer picture
of the government’s needs and develop a collaborative
process to meet those needs. To assist in that process,
we strongly encourage government agencies involved
in biodefense to establish and communicate clear national
research and development targets, and work to better
understand and coordinate the capabilities of the
private sector to achieve those targets. We also hope
that the contracting process will be structured in
a way that reflects the urgency of the situation,
and has the overriding objective of getting the best
product in the shortest possible time, at a cost which
is reasonable to both the government and the contractor.
Obviously, the FDA must be a full partner in that
process so that it can think about and address issues
that would not normally be raised in the process of
approving drugs and biologics for more conventional
uses. International regulatory harmonization of high
standards would be especially useful.
With respect to liability and risk management, we
hope Congress will look closely at the smallpox liability
language in the Homeland Security bill as a template
for handling liability issues for future bioterrorism
vaccine development. This is critical because we expect
that many of the new vaccines that will be developed
as part of this effort will – unlike the smallpox
vaccine – have no previous history and therefore
will raise much more speculative questions of liability
than is the case with smallpox. Getting private insurance
we expect will be next to impossible, so some different
mechanism must be in place.
Finally, Mr. Chairman, we hope that future policy
in the area of vaccines will reflect an understanding
of the difficulties and complexity of the vaccine
manufacturing process, the need for strong intellectual
property protection, and the enormous financial investment
and risks created for the industry due to liability
issues and regulatory compliance. The overall facts
and data concerning the vaccine industry in the U.S.
do not paint a picture of a completely healthy industry.
To the contrary, there are some fairly serious warning
signs based on the overall contraction of the industry
and the shortages of recent years.
We appreciate this opportunity to share our views
with the Committee and would be happy to answer any
questions you might have.
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