Inside the Spore Wars

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In fact, the government has so far spent very little on new biodefense drugs, thanks in part to the long and torturous contracting process. Under BioShield, HHS has paid $5.7 million to buy black raspberry--flavored liquid potassium iodide, a child's version of a pill intended to protect against radioactive iodide in a dirty bomb. The agency is also spending $2.2 million on experimental anthrax treatments (although that money is not coming from the BioShield fund), and a contract for a new smallpox vaccine is expected in 2006. But more than a year into the program, drug companies still complain that they don't have a clear sense of what to develop and how much the feds will buy. Although HHS has formally identified four threats--anthrax, smallpox, botulinum toxin, and radiological and nuclear devices--that's only the first step. Requests for treatments must then be issued, competing drug proposals have to be evaluated, and the White House's Office of Management and Budget has to sign off on each contract.

Overall, it's a cumbersome process that can leave companies with promising treatments in limbo for years. "You wouldn't expect a defense contractor to build an aircraft carrier without a contract, but they're expecting pharmaceutical companies to develop these drugs without contracts," says Richard Hollis, CEO of Hollis-Eden, a San Diego biotech hoping to sell the government a treatment for acute radiation syndrome (a blood sickness caused by a dirty bomb or nuclear explosion). Hollis says his company has spent $100 million on the drug, Neumeune, betting the feds would stockpile doses for 12 million to 24 million people. As it turns out, the government intends to buy only 100,000 treatments for now, including alternatives to Neumeune. "If two years ago HHS had said we're looking for 100,000 sources of treatment, I don't think we'd have developed the product," says Hollis. An HHS official says Hollis-Eden's projections were at odds with the nuclear-threat scenario envisioned by the Department of Homeland Security. He also acknowledges that government health officials aren't accustomed to dealing with national- security issues. "It's new to have the medical side of the house working with the intel side," he says. "We're kind of learning as we go." Biodefense companies are also learning that national security can be a messy business.