How Emergent BioSolutions Put an 'Extraordinary Burden' on the U.S.'s Troubled Stockpile - The New York Times - 0 views
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Government purchases for the Strategic National Stockpile, the country’s emergency medical reserve where such equipment is kept, have largely been driven by the demands and financial interests of a handful of biotech firms that have specialized in products that address terrorist threats rather than infectious disease.
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“Today, I think, we would not allow anthrax to take up half the budget for a guaranteed supply of vaccines,” he said, adding, “Surely after such a calamity as the last year, we should take a fresh look at stockpiles and manufacturing and preparing for the next pandemic.”
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Under normal circumstances, Emergent’s relationship with the federal stockpile would be of little public interest — an obscure contractor in an obscure corner of the federal bureaucracy applying the standard tools of Washington, like well-connected lobbyists and campaign contributions, to create a business heavily dependent on taxpayer dollars.
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Security concerns, moreover, keep most information about stockpile purchases under wraps. Details about the contracts and inventory are rarely made public, and even the storage locations are secret.
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Former Emergent employees, government contractors, members of Congress, biodefense experts and current and former officials from agencies that oversee the stockpile described a deeply dysfunctional system that contributed to the shocking shortages last year.
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Purchases are supposed to be based on careful assessments by government officials of how best to save lives, but many have also been influenced by Emergent’s bottom line
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The stockpile has long been the company’s biggest and most reliable customer for its anthrax vaccines, which expire and need to be replaced every few years.
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In the two decades since the repository was created, Emergent’s aggressive tactics, broad political connections and penchant for undercutting competitors have given it remarkable sway over the government’s purchasing decisions related to the vaccines
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While national security officials still consider anthrax a threat, it has not received specific mention since 2012 in the intelligence community’s annual public assessment of dangers facing the country, a report that has repeatedly warned of pandemics.
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Emergent bought the license for the country’s only approved anthrax vaccine in 1998 from the State of Michigan. Over time, the price per dose the government agreed to pay Emergent increased nearly sixfold, accounting for inflation, contributing to record revenues last year that topped $1.5 billion
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The company, whose board is stocked with former federal officials, has deployed a lobbying budget more typical of some big pharmaceutical companies
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Competing efforts to develop a better and cheaper anthrax vaccine, for example, collapsed after Emergent outmaneuvered its rivals, the documents and interviews show.
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preparations for an outbreak like Covid-19 almost always took a back seat to Emergent’s anthrax vaccines
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the government approved a plan in 2015 to buy tens of millions of N95 respirators — lifesaving equipment for medical workers that has been in short supply because of Covid-19 — but the masks repeatedly lost out in the competition for funding over the years leading up to the pandemic
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After Dr. Frieden and others in the Obama administration tried but failed to lessen Emergent’s dominance over stockpile purchases, the company’s fortunes rose under Mr. Trump, who appointed a former Emergent consultant with a background in bioterrorism to run the office that now oversees the stockpile
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“If I could spend less on anthrax replenishment, I could buy more N95s,” Dr. Kadlec said in an interview shortly after leaving office. “I could buy more ventilators. I could buy more of other things that quite frankly I didn’t have the money to buy.”
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And now, as some members of Congress push for larger reserves of ventilators, masks and other equipment needed in a pandemic, a trade group led in part by a top Emergent lobbyist has warned that the purchases could endanger companies focused on threats like anthrax and smallpox by drawing down limited funds.
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Last year, as the pandemic raced across the country, the government paid Emergent $626 million for products that included vaccines to fight an entirely different threat: a terrorist attack using anthrax.
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“They’re very vicious in their behavior toward anybody they perceive as having a different point of view,” said Dr. Tara O’Toole, a former Homeland Security official who says she ran afoul of Emergent in 2010 after telling Congress that the nation needed a newer and better anthrax vaccine.
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That year, the company that would become Emergent — then known as BioPort — paid Michigan $25 million to buy the license for a government-developed anthrax vaccine and an aging manufacturing plant.
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The company opened its doors with one product, called BioThrax, and one customer, the Defense Department, which required the vaccine for service members.
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Emergent’s anthrax vaccine was not the government’s first choice. It was more than 30 years old and plagued by manufacturing challenges and complaints about side effects. Officials instead backed a company named VaxGen, which was developing a vaccine using newer technology licensed from the military.
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Emergent’s successful campaign against VaxGen — deploying a battalion of lobbyists, publicly attacking its rival and warning that it might cease production of its own vaccine if the government didn’t buy it — established its formidable reputation. By 2006, VaxGen had lost its contract and the government had turned to Emergent to supply BioThrax.
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“They were totally feared by everybody,” Dr. Philip Russell, a top health official in the administration of President George W. Bush, said in an interview. He said that he clashed with Emergent when he backed VaxGen, and that his reputation came under attack, which was documented by The Times in 2006. (Dr. Russell died this January.)
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the group of federal officials who make decisions about the stockpile and other emergency preparations — known as the Phemce, for the Public Health Emergency Medical Countermeasures Enterprise — ordered up a study. It found in 2010 that the government could not afford to devote so much of its budget to a single threat.
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Instead, the review concluded, the government should invest more in products with multiple applications, like diagnostic tests, ventilators, reusable respirator masks and “plug and play” platforms that can rapidly develop vaccines for a range of outbreaks.
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from 2010 through 2018, the anthrax vaccine consumed more than 40 percent of the stockpile’s budget, which averaged $560 million during those years.
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Emergent and the government have withheld details of the stockpile contracts, including how much the company has charged for each dose of BioThrax, but executives have shared some of the missing information with investors.
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The company in 1998 agreed to charge the government an average of about $3.35 per dose, documents show. By 2010, the price had risen to about $28, according to financial disclosures and statements by Emergent executives, and now it is about $30
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Over the past 15 years, the company recorded a gross profit margin of about 75 percent for the vaccine, in an arrangement that one Emergent vice president called a “monopoly.”
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Emergent’s rise is the stuff of lore in biodefense circles — a tale of savvy dealings, fortuitous timing and tough, competitive tactics.
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One afternoon in October 2010, Wall Street investors gathered at the Millennium Broadway Hotel in Manhattan for a presentation by Mr. Burrows. He shared with them a secret number: 75 million.That was how many BioThrax doses the government had committed to stockpiling, and it was the backbone of Emergent’s thriving business. In pursuit of that goal, the government had already spent more than $900 million, and it continued to buy virtually every dose Emergent could produce. It had even awarded the company more than $100 million to expand its Michigan factory.
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“The best approach toward anthrax is antimicrobial therapy,” Dr. Anthony S. Fauci, the government’s top infectious-disease expert, told Congress as early as 2007.
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In an analysis published in 2007, the firm determined that giving antibiotics immediately after a large outdoor anthrax attack was likely to reduce serious illnesses by more than 80 percent. Administering the vaccine would then cut serious illnesses only by an additional 4 percent.
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Dr. Ali S. Khan, who ran the C.D.C. office managing the stockpile until 2014, said bluntly: “We overpaid.”
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“A bunch of people, including myself, were sitting in a room and asking what kind of attack might happen,” said Dr. Kenneth Bernard, a top biodefense adviser to Mr. Bush, recalling a meeting in the months after the 2001 attacks.
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“And somebody said, ‘Well, I can’t imagine anyone attacking more than three cities at once,’” he said. “So we took the population of a major U.S. city and multiplied by three.”
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A team of Homeland Security and health officials began doing just that in 2013. The group determined, in a previously undisclosed analysis, that the government could stockpile less BioThrax and still be prepared for a range of plausible attacks, according to two people involved in the assessment. Separately, government researchers concluded that two doses of BioThrax provided virtually the same protection as three.
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the National Intelligence Council, which helped draft the assessments during Mr. Obama’s second term, said in an interview that the idea of a three-city attack affecting 25 million people was “straining credulity.”
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“If you talk to the head of the House Intelligence Committee,” Don Elsey, Emergent’s chief financial officer, told investors in 2011, “and you say, ‘What are you most worried about?’ he’ll say, ‘Let me see: Number one, anthrax; number two, anthrax; number three, anthrax.’”
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Emergent’s sales strategy was to address that fear by promising the federal government peace of mind with its vaccine.
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“There’s a political element involved,” Mr. Burrows, the company’s vice president of investor relations, said at an industry conference in 2016. “I don’t have a marketing expense. I have lobbying expense.”
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Since 2010, the company has spent an average of $3 million a year on lobbying — far outspending similarly sized biotech firms, and roughly matching the outlays of two pharmaceutical companies with annual revenues at least 17 times greater, AstraZeneca and Bristol Myers Squibb
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In 2015, as stockpile managers questioned the large purchases of BioThrax, the spending topped $4 million
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“They were pouring it on — how poor they were and how this was going to ruin the company, and they’d have to close down factories, and America was going to be left without anthrax vaccine,”
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“Their revolving door is moving at 60 miles per hour,” said former Senator Claire McCaskill, a Democrat from Missouri who had questioned spending on the vaccine while in the Senate. “There is really a lot of incestuousness because it’s such a specialized field.”
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Ms. DeLorenzo, the Emergent spokeswoman, said the lobbying was necessary because government investment “in biodefense and other public health threats has not been as strongly prioritized as it should be.”
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Over the past 10 years, Emergent’s political action committee has spread almost $1.4 million in campaign contributions among members of both partie
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The move followed a yearslong pattern of retaining a bipartisan lobbying corps of former agency officials, staff members and congressmen, including Pete Hoekstra of Michigan, Tom Latham of Iowa and Jim Saxton of New Jersey.
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“You have people coming and saying, ‘There’s no market for this — nobody’s going to produce this unless you buy enough of it to keep the production line open,’” he said. “It’s an absolutely appropriate argument to make.”
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Emergent’s campaign proved effective. Despite the 2015 recommendation by the stockpile managers, Senate overseers made clear they opposed the reduction, and the government went ahead and bought $300 million worth of BioThrax.
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Emergent executives, meanwhile, warned that there could be job losses at the factory in Lansing, Mich. — the capital of a swing state at the center of a contentious presidential campaign between Mr. Trump and Hillary Clinton.
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Because Emergent was the sole manufacturer of a product deemed critical to national security, the company has played what one former executive described to The Times as “the we’re-going-to-go-bankrupt card.”
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Dr. Hatchett said the idea gave him pause. But, he explained in an interview, “if there’s only one partner that can provide a product and only one customer for that product, the customer needs the partner to survive.”
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Just a year later, Emergent spent about $200 million in cash, and made other financial commitments, to acquire Sanofi’s smallpox vaccine and GlaxoSmithKline’s anthrax treatment, two products with established pipelines to the stockpile. The purchases expanded Emergent’s hold over the reserve.
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Ms. DeLorenzo said the acquisitions did not suggest the company was better off than it had claimed, but Dr. Bright said he and others involved in the bailout felt used.
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a plan five years earlier to create an emergency supply of N95 respirators was simply not funded. A team of experts had proposed buying tens of millions of the masks to fill the gap during an outbreak until domestic manufacturing could ramp up, according to five officials involved in the assessment, which has not been previously disclosed.
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By the time the novel coronavirus emerged, the stockpile had only 12 million of the respirators. The stockpile has since set a goal of amassing 300 million.
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Dr. Kadlec, the Trump administration official overseeing the stockpile, said he used the previous administration’s mask recommendation to raise alarms as early as 2018.
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Dr. Annie De Groot, chief executive of the small vaccine company EpiVax, spoke about the need to break Emergent’s lock on research dollars at a biodefense forum in 2015.
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“Politicians want to look like they’ve addressed the problem,” she said. “But we need to actually listen to the scientists.”
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Over the last five years, Emergent has received nearly a half-billion dollars in federal research and development funding, the company said in its financial disclosures.
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“We know ahead of time when funding opportunities are going to come out,” Barbara Solow, a senior vice president, told investors in 2017. “When we talk to the government, we know how to speak the government’s language around contracting.”
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The company used federal money to make improvements to BioThrax, and also found a way to earn government money from a competing anthrax vaccine it had excoriated. After the demise of VaxGen in 2006, Emergent bought the company’s unfinished vaccine and in 2010 persuaded the federal government to continue paying for research on it
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By the time the research contract was canceled in 2016, Emergent had collected about $85 million, records show. The company then shelved the vaccine. “If the U.S. government withdraws funding, we re-evaluate whether there is any business case for continuing,” Ms. DeLorenzo said.
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For more than 30 years, the government had been encouraging the development of a BioThrax replacement. In 2002, the Institute of Medicine had concluded that an alternative based on more modern technology was “urgently needed.” By 2019, there were three leading candidates, including one made by Emergent, known as AV7909.
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Emergent’s candidate was hardly the breakthrough the government was seeking, former health officials said. AV7909 was essentially an enhanced version of BioThrax. The competitors were using more modern technology that could produce doses more rapidly and consistently, and were promising significant cost savings for the stockpile.
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To qualify for emergency authorization, a vaccine must be at an advanced stage of development with no approved alternatives. Emergent acknowledged in its financial disclosures that there was “considerable uncertainty” whether the new vaccine met those requirements.
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Dr. Lurie, the senior health official in the Obama administration who had tried to scale back BioThrax purchases, was out. Mr. Trump’s pick to replace her was Dr. Kadlec, a career Air Force physician and top biodefense official in the Bush administration who was fixated on bioterrorism threats, especially anthrax, current and former officials said
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Soon after entering the Trump administration in 2017, Dr. Kadlec took a series of actions that he characterized as streamlining a cumbersome bureaucracy but that had the effect of benefiting Emergent.
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He assumed greater control of purchasing decisions, diminishing the authority of the Phemce, the oversight group that had proposed buying less BioThrax. And in 2018, he backed a decision to move control of the stockpile to his office in the Department of Health and Human Services and away from the C.D.C., which is based in Atlanta and prides itself on being insulated from the influence of lobbyists.
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Dr. Frieden, the former C.D.C. director, was strongly opposed. The move, he said, “had almost as an explicit goal to give the lobbyists more say in what got purchased.”
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That July, the government made the announcement Emergent had been banking on, committing to buying millions of doses. Separately, it said it would stop funding Emergent’s competitors.
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The decision to side with Emergent did not surprise Dr. Khan, the former C.D.C. official overseeing the stockpile.“Again and again, we seem unable to move past an old technology that’s bankrupting the stockpile,” he said.
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Last month, as the death toll from Covid-19 neared a half-million, Mr. Kramer, the company’s chief executive, told analysts there had been no “evidence of a slowdown or a delay or a deprioritization,” and echoed a statement he had made in April when asked whether the pandemic might interrupt Emergent’s sales to the stockpile.“It’s pretty much business as usual,” he said then.