The Pros and Cons of Project BioShield - Pharmaceutical Executive


The Pros and Cons of Project BioShield

Pharmaceutical Executive

Again, from a risk management point of view, we don't want to have to commit to a price that seems reasonable today, but two years down the line you realize the manufacturing is 10 times harder than you thought it would be. Now you are locked into a very unattractive price. The freedom to commit to future, longer-term purchases is important. To some degree, it is covered by BioShield, but I think it should be some broader ranging legislative issues associated with that.

What about patent protection? Does BioShield offer enough? My view is that it is pretty much down to the companies to look after their own IP [intellectual property]. Under BioShield, a company could develop a particular product, but couldn't manufacture it, for example. There might be the risk that the government could take the IP or proprietary position and give it to somebody else to manufacture, and therefore, get some kind of large contract on the back of another company's development work. IP is our bread and butter. We are used to protecting ourselves. So I think that to a degree, it's the companies' responsibility.

What about situations in which the government might be tempted to toss out the rules and do what is best for itself or for the public? You mean like the Cipro example? Certainly that particular episode, I'm sure, has scared some people away. No one wants to be caught in that situation again. Likewise, we shouldn't be holding the government and the public health authorities' feet to the fire. At the end of the day, we are commercial companies, but we are also engaged in protecting public health. So there is some balance to be struck there.

One of the administration's claims is that BioShield will spur drug development in areas other than bioterrorism. Do you think that's true? I think it's pretty limited. Because biodefense focuses on particular pathogens that are relatively well understood, and it's just a case of taking the particular disease and developing an approach to try and combat it therapeutically or prophylactically. Does it lead to other technological approaches? Not necessarily.

For Acambis, the contract to develop and produce a smallpox vaccine forced us to build some infrastructure in the company which we can now use for other pipeline products. Operationally, it has been very beneficial for us. Technologically, not particularly. And if you can make some money from these contracts, then obviously that in itself allows you to develop other products from the cash inflow. We have to recognize that the biodefense opportunity is a short- to medium-term one. It's not a long-term piece of pharma's business models.

So you know you have a limited market going into it? Limited in size and limited in time, just by the nature of the market. Those two characteristics make it less attractive for some of the more well-funded pharma companies that are better off spending their time, efforts, and money on longer-term projects. They have earnings curves and growth charts that they want to run smoothly up in a straight line. If they are punctuated by sudden bursts of income or earnings from these government contracts, that then—ironically—gives them headaches in terms of trying to project expectations. So the shape of the earnings curve does not sit well with Big Pharma, which is focused on a 12-15 percent a year earnings growth.

What are some other challenges in working with the government to develop products? Some of the work we are doing now is based on cost reimbursement contracts, but we don't know what size the ultimate prize will be in the form of the procurement contract. And it can all disappear tomorrow, wasting all the good development work that we've done.

And the nature of all the reporting requirements that go with government contracts can really be a burden. It's a system that has been born out of abuse in the past. Because of a few bad cases, suddenly everyone has to do vast amounts of documentation and internal control just to comply with a few regulations. I think it has gone too far the other way now. You almost have to set up a mini-infrastructure simply to cope with the administration and reporting base.


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