The only U.S. company that produces anthrax vaccine has run into serious financial trouble, imperiling a Pentagon program launched recently to immunize all U.S. troops against the deadly germ warfare agent.
Top officials from BioPort Corp. said yesterday that renovation delays and other transition problems after their purchase of the vaccine production facility from the state of Michigan have pushed the company close to bankruptcy. Unless the Pentagon agrees to more than triple the price it pays for the vaccine--from $3.50 to about $10 per dose--company officials suggested they have little hope of meeting the terms of a $29 million contract with the Defense Department.
The fact that the contract is proving untenable only months after BioPort took over the plant last autumn drew expressions of alarm and exasperation from Rep. Christopher Shays (R-Conn.), who yesterday chaired a House subcommittee hearing on the matter. He pressed BioPort executives on how they could have so miscalculated, and he chided Pentagon authorities for making a critical program dependent on a newly established manufacturer that evidently was undercapitalized and overly optimistic about its prospects.
"The current procurement strategy should raise grave concerns about the security of the sole production facility and the predictability of vaccine supply," Shays said. "BioPort's financial troubles engender fears that cost-cutting will affect vaccine quality."
Anthrax tops the U.S. government's list of biological warfare threats because it is considered the easiest germ weapon to make and use. The inoculation plan represents the first attempt to protect the entire U.S. military against a germ warfare agent.
But since Defense Secretary William S. Cohen announced the program in December 1997, it has stirred some unease in the ranks--and has generated about 240 cases of outright resistance by service members--prompted by doubts about the vaccine's safety and effectiveness.
Government scientists and independent experts insist the vaccine is safe. Licensed by the Food and Drug Administration, it has been used widely in the United States since the early 1970s by veterinarians and others who regularly handle animals or animal products that might contain anthrax bacteria. Out of more than 300,000 service members inoculated so far, the Pentagon reports only 79 "adverse reactions."
But Shays, a critic of the program, said BioPort's financial troubles raise fresh questions about how well the vaccination initiative was planned and whether it can be executed as intended.
The Michigan facility has been a source of some controversy for several years. In 1997, FDA inspectors found problems at the plant, citing "significant deviations" from federal standards for record-keeping and testing procedures.
As Michigan authorities were looking for a buyer, the plant was shut in early 1998 for extensive renovation, which the Pentagon funded to enable the facility to supply its new inoculation program. But the renovation lasted five months longer than expected, delaying BioPort's planned reopening.
A report by the General Accounting Office, released at yesterday's hearing, found that the delay has resulted in "a serious cash flow problem" for the company and a projected "significant operating loss" for the year.
Fuad Hibri, BioPort's president, acknowledged entering into a contract with the Pentagon based on a best-case scenario, with little provision for a renovation delay or other contingencies. He also said he accepted an unreasonably low Pentagon price for the vaccine in the interest of moving ahead with the deal, given the government's sense of urgency. And he said regulatory issues and a lack of proper accounting systems at the facility have proven more challenging to deal with than anticipated.
Hibri said the price increase that BioPort is seeking for the anthrax vaccine would bring its cost in line with what the Pentagon pays on average for other vaccines. BioPort also is asking the Defense Department to buy less of the vaccine than originally negotiated, so that the firm can sell more on the private market.
Before forming BioPort last summer, Hibri spent 10 years directing a biotech firm in Britain that also markets anthrax vaccine. He set up the new company with Bob Myers, who had run the Michigan plant for state authorities, and enlisted retired Adm. William J. Crowe, a former chairman of the Joint Chiefs of Staff, to serve as a director. Financial backing came from a Netherlands Antilles investment company that Hibri said is owned by his father, Ibrahim Hibri.
Testifying for the Pentagon, retired Rear Adm. David Oliver Jr., a senior acquisition official, expressed some sympathy for BioPort's difficulties. He suggested his staff may have pushed the firm too hard to accept too low a price and said the matter is under review. He said there is enough vaccine stockpiled to meet the Pentagon's needs through August 2000--nearly 1 million doses each year.
Oliver said alternatives to staying with BioPort would be considered, but added that any other option, such as building another plant, would require several years at least.
CAPTION: Rep. Christopher Shays wonders how well the program was planned.