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Anthrax Inoculation May Be Delayed

June 30, 1999

WASHINGTON (AP) _The program to vaccinate all 2.4 million military troops with the anthrax vaccine as protection against biological warfare may be delayed while the only company that produces the vaccine figures out how to cover the costs of the shots, according to congressional critics.

BioPort Corp. of Lansing, Mich., the sole producer licensed for manufacture of the vaccine in the United States, is experiencing a cash-flow crisis, a congressional memo says.

The House Government Reform Committee’s national security subcommittee has scheduled a hearing today on the Defense Department’s reliance on the company.

``The Pentagon is locked in a dependent relationship with a new, unproven company,″ according to Rep. Christopher Shays, R-Conn., the panel’s chairman. He said the Pentagon ``may have misjudged the financial and technical capabilities of the company to perform under the contract.″

In a memo sent last Friday to members of his panel, Shays said the General Accounting Office and recent reviews by the Defense Contract Audit Agency indicate the company has ``a cash flow crisis.″

``Without more extraordinary Defense Department assistance, BioPort appears financially incapable of capitalizing and sustaining a highly technical, heavily regulated manufacturing process,″ Shay’s memo said.

Defense Secretary William Cohen last year ordered all 2.4 million active duty and reserve troops to get the anthrax vaccine as protection against biological warfare. Nearly 300,000 service members have been immunized so far, though there have been scattered cases of some troops refusing the inoculations out of safety concerns.

Last year, the Pentagon awarded BioPort a contract valued at $29 million to produce the vaccine against anthrax, which can be used as a weapon when spores are released into the air and people inhale them.

To make the vaccine, BioPort is seeking an advance payment of $10 million _ an approximately five-fold increase in the per-shot price to about $20 _ and permission to sell up to 300,000 doses each year on the open market.

In testimony prepared to be delivered before the House panel, Fuad El-Hibri, president and chief executive of BioPort, said ``the prices paid by the Defense Department for (the anthrax vaccine) are significantly below″ the company’s costs for producing it ``and what is necessary for BioPort to operate as a viable entity.″

A spokeswoman for BioPort, Kelly Rossman-McKinney, said BioPort’s move to restructure the deal was reasonable. Before the company went private last year, it was selling shots well below cost and the state of Michigan was losing about $5 million subsidizing the lab, she said.

BioPort was formerly a state-owned facility called the Michigan Biologics Products Institute. In March 1997, the Food and Drug Administration warned the facility that steps would be taken to revoke its production licenses, including for anthrax vaccine, if it did not correct quality control deficiencies and manufacturing violations.

In March 1998, the plant was closed for $1.8 million in renovations and a $15 million expansion funded by the Defense Department.

In September, BioPort purchased the facility. The new vaccine manufactured by BioPort is not expected before late 1999, congressional aides said.

Rossman-McKinney said the plant now has good quality control.

The Pentagon agreed to take on legal liability if the vaccine harms anyone under a deal Army Secretary Louis Caldera approved last fall.

The Defense Department described the arrangement as routine and a cost saver. Without government protection from lawsuits, the company would have to buy expensive outside insurance, with the cost passed on to the government as part of the contract price, said Army Col. Dick Bridges, a Pentagon spokesman.

With nearly 900,000 shots administered so far, the vaccine has produced just 79 ``adverse reactions,″ the Pentagon said.

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