Well-connected drug company obtained anthrax vaccine contracts despite side effects


Julie Weisberg
Published: Tuesday May 29, 2007

Two former high-ranking health officials with close ties to the Bush administration helped a Michigan-based pharmaceutical company secure sole-source, multi-million dollar federal contracts for the purchase of its controversial anthrax vaccine, a RAW STORY investigation has found.

Last month, Emergent BioSolutions announced that the Department of Health and Human Services (HHS) intended to purchase more than 18 million doses of its Biothrax vaccine for the Strategic National Stockpile. The strategic stockpile is set aside for civilian use during a large-scale emergency, such as a bioterrorism attack or natural disaster. Once finalized, the contract will be the largest of its kind for Emergent's anthrax vaccine.

BioThrax is the only FDA-licensed vaccine for anthrax in the United States. The Pentagon has used it for the military's mandatory anthrax vaccination program for the last ten years, though not without problems. Although the military continues to publicly claim the vaccine is "safe and effective," thousands of soldiers have suffered adverse reactions, ranging from mild to severe.

In March, RAW STORY revealed that Walter Reed is investigating links between the vaccine and life-threatening autoimmune diseases. Hundreds of U.S. service members have refused the shots, fearing the side-effects experienced by some 80 percent of the soldiers who receive them, according to a 2002 General Accountability Office report.

Last year, the Department of Homeland Security granted BioThrax special protections under its Support Anti-Terrorism by Fostering Effective Technology Act, or SAFETY Act. It was the first vaccine to receive protection under the Act. According to an Emergent press release, the act certifies BioThrax is an "approved product for homeland security" and provides significant liability protection in the event the vaccine is administered to civilians in a terrorist attack.

After an initial contact with DHS spokesperson Christopher Kelly, Kelly did not respond to further RAW STORY requests for additional information on the department's decision to grant BioThrax SAFETY Act protections.

The corruption of revolving doors

According to company documents filed by Emergent BioSolutions with the Security and Exchange Commission, two former officials with the Department of Health and Human Services -- Jerome Hauer, who was Acting Assistant Secretary of the Office of Public Health and Emergency Preparedness in 2002-03, and Dr. Louis Sullivan, who served as HHS Secretary under former President George H.W. Bush -- worked as paid lobbyists in an aggressive and well-connected lobbying effort to secure the Biothrax contracts.

In their administration posts, both Hauer and Sullivan had helped oversee the National Strategic Stockpile and aided in policy development and drug procurement related to countering bioterrorism. After working as lobbyists for Emergent, the two men were invited to sit on the company's board of directors.

"The pharmaceutical industry is a strong case in point of the corruption of revolving doors," says Craig Holman of Public Citizen, a national, nonprofit consumer advocate and government watchdog group.

Holman, who is also the co-author of "A Matter of Trust: How the Revolving Door Undermines Public Confidence in Government -- and What To Do About It," states that "winning" government contracts by establishing or exploiting close personal ties to an administration is part of the "on-going, widespread corruption that plagues the federal government."

"The very businesses subject to regulation have largely taken over the agencies that oversee them through critical governmental appointments, and befriended the same agencies by hiring former key public officials to sit on their boards and make phone calls to their colleagues still in the agencies," Holman said.

However, Marc Wolfson, an HHS spokesperson, says lobbying and connections have not been a factor in Emergent's recent success. "Having these people on the board has not been a factor at all," Wolfson said.

Emergent BioSolutions' vice president for corporate communications, Robert Burrows, agreed. "This company's success is not based in political know-how," Burrows wrote in an email. "The ability to move science from the laboratory bench to product development and through the world's toughest regulatory system -- the Food and Drug Administration review process -- is what matters most."

"Other companies are not competing with Emergent for government contracts for one reason only: they have not developed a product that meets the standards set by the FDA," he added.

Another former Bush administration official, former Federal Emergency Management Director Joe Allbaugh, joined Emergent's board in June 2006. Allbaugh had been George W. Bush's chief of staff when he was governor of Texas and was national campaign manager for the 2000 Bush-Cheney campaign. In 2003, Allbaugh formed his own consulting and lobbying group, Allbaugh Company, which boasts clients such as Kellogg Brown and Root, Northrup Grumman, and BP America.

"The revolving door has been richly rewarding for the pharmaceutical industry -- and those public officials who give the industry what it wants," Holman said.

Hauer declined to be interviewed for this story, and both he and a spokeperson for Allbaugh said all press questions should be directed to Emergent's PR people. RAW STORY was unable to independently contact Sullivan.

Ramping up its lobbying effort
To help jump-start its lobbying effort, from September to November 2004 Emergent board member and former Health and Human Services Secretary Dr. Louis Sullivan provided "consulting services for a fixed fee of $25,000 per month," according to Emergent's proxy report for shareholders, filed last month. During that time, Sullivan set up at least one meeting with government scientists and Emergent officials.

On November 4, 2004, HHS filed an intent to procure five million doses of BioThrax for the nation's strategic stockpile. It was Emergent's first large scale production contract with the department and was worth more than $122 million.

That same day, HHS announced it had awarded an $877.5 million sole-source contract to VaxGen Inc. -- a small pharmaceutical company in California with no marketable products, best known for its failed HIV vaccine -- for the creation and delivery of 75 million doses of a new anthrax vaccine, with 25 million doses due in 2006.

Emergent BioSolutions had not entered a bid for the contract. However, over the next two years, Emergent would spend millions of dollars on a lobbying effort to discredit VaxGen and convince HHS that instead of focusing on a new vaccine, the department should purchase millions of doses of BioThrax for its civilian stockpile.

"They spread a lot of misinformation about us," Lance Ignon, a spokesman for VaxGen said, referring to lobbyists for Emergent.

Emergent's Burrows countered that "the proven safety and efficacy of BioThrax as a preventive therapy for front line troops, first-responders and the start of a general stockpile of careā€¦ speaks for itself" in winning contracts.

The long and well-connected road
Perhaps the best-connected member of Emergent's board is Jerry Hauer. Hauer, who served as an adviser on national security to the National Institute of Health and helped lead the response to the 2001 anthrax mailing attacks, has had a lucrative association with Emergent over several years.

While head of HHS's bioterrorism program, Hauer had urged an increase in the stockpile's amount of anthrax vaccine to allow for the inoculation of thousands of first responders. He also urged mass smallpox vaccinations for health care workers.

Hauer left HHS in November 2003 and was working as a paid lobbyist and consultant for Emergent by December 2004. (Government ethics rules bar top federal officials from lobbying their former administrative agency for one year.)

In January 2005, Hauer joined the lobbying group Fleishman-Hillard as a senior vice president. The same month, Emergent entered into a contract with the firm, paying $20,000 a month for its services, according to the company's SEC filings. That fee was increased to $30,000 several weeks later.

In June 2005, Hauer joined Emergent's board of directors, while still serving as one of the company's paid lobbyists. He continues to maintain both positions with the company.

In March 2006, Hauer left Fleishman-Hillard to form his own consulting and lobbying firm, with himself and his wife as sole owners. That same month, Emergent terminated its lobbying contract with Fleishman-Hillard and entered into an agreement with Hauer's firm to provide "strategic consulting and domestic marketing advice."

Under the terms of the agreement, included in the SEC filing, Emergent BioSolutions pays the Hauer Group $15,000 a month for its services, which includes "relationship management with targeted media outlets and reporters," facilitating "introductions to relevant government officials," and "introductions to potential commercial partners."

Despite requesting RAW STORY's questions for this story, Burrows would not confirm the date when Hauer first began working for Emergent BioSolutions as a paid consultant or if Hauer's service as a board member and employment as a consultant for the company -- as well as other biopharmaceutical companies -- would violate Emergent's conflict of interest code.

VaxGen is squeezed out
Around the same time that Hauer joined Emergent's board of directors, in mid-2005, VaxGen was required to push back its production timeline after running into difficulties with its vaccine's development. "Drug development is unpredictable... you are going to run into twists and turns," Ignon said of the delay.

In fact, a recent GAO report referred to the government's contract with VaxGen as "very aggressive" with "no margin for error."

Up until VaxGen's 2005 stumble, Ignon said, the company had enjoyed a good working relationship with HHS. But then, over the next several months, things started to deteriorate, and "it just became more and more difficult to work with Health and Human Services."

On May 5, 2006, the HHS Assistant Secretary for Public Health Emergency Preparedness -- the position that Hauer held during President Bush's first term -- announced that his department would purchase $120 million in additional doses of Emergent's vaccine for the national stockpile.

A few days later, VaxGen announced that while HHS had granted an extension on the development and delivery of its vaccine, the department had "unilaterally" made significant changes to its contract, imposing new requirements on the California drug maker before the government would purchase and pay for a finished product.

Louis Sullivan joined Emergent BioSolution's board of directors just a few weeks later, in June of 2006, followed by Joe Allbaugh in July. On November 15, 2006, Emergent BioSolutions -- previously a private company -- made an initial public offering.

In early November, the FDA ordered VaxGen to delay its trials, citing concerns over a possible decline in the vaccine's shelf life. In December, HHS cancelled the VaxGen contract, arguing that the company had failed to meet a required deadline to begin clinical trials. The two parties recently settled out of court, after VaxGen appealed the decision.

Although Ignon said he "couldn't draw a direct line" from Emergent's aggressive lobbying tactics and well-connected board of directors to VaxGen's cancelled contract, he did say that it certainly did not make the process go any smoother. "There was a real face off between science and politics," Ignon said. "And I think that in the end, politics won."

Late last month, Emergent announced that Health and Human Services intended to purchase up to more than 18 million doses of BioThrax. The Pentagon also announced it would be purchasing at least four million doses of the vaccine, after resuming its mandatory anthrax vaccination program earlier this year.

HSS spokesman Marc Wolfson said that after canceling VaxGen's contract, HSS had turned to Emergent to help fill civilian stockpile shelves, because it was the only company that manufactured an FDA-licensed anthrax vaccine. He could not yet estimate what the contract would be worth to Emergent, because HHS and the company were still negotiating the details. "It's the sole source," he said. "It's the only one out there."

Additional research for this story was furnished by Larisa Alexandrovna and Muriel Kane.