Magnified image of Bacillus Anthracis (Anthrax) courtesy Janice Haney Carr – Centers for Disease Control and Prevention.

Another multibillion-dollar program developed during the Bush administration to help fight the war on terror is being seriously dialed back as critics in Washington raise questions about its effectiveness in readying the country for potential biological assaults.

Rep. David Obey, a Democrat from Wisconsin and chair of the House Appropriations Committee, wanted to curtail the possibility of massive teacher layoffs and he did so by pulling $2 billion out of reserves set up to finance pandemic flu preparedness and bioterrorism research. Accounts facing the axe include Project BioShield, created in 2004 to guarantee demand for medical treatments developed by the drug industry.

Pharmaceutical companies say that beyond government incentive, there isn’t a sufficient enough market to research and develop countermeasures for rare diseases or deadly agents like smallpox, anthrax, botulism and radiation. So Congress passed the Project Bioshield Act after former President Bush first proposed it during a State of the Union speech in 2003.

Lawmakers set aside a whopping $5.6 billion through 2013 as part of the act for battling biological apocalypse. The homeland security secretary could commit to buying new medicines up to eight years before a manufacturer might otherwise be able to deliver them, in the process reducing investment risks for companies, according to the Congressional Research Service (reports here, here and here). The government under the act could also acquire treatments before they had received approval and licensing from federal regulatory agencies.

But a White House spokesman told the Los Angeles Times this month that Project BioShield has “not provided a robust pipeline of medical countermeasures.” The spokesman insisted that Obama administration officials weren’t ignoring the threat but instead were looking at other research opportunities and methods for quickly distributing life-saving drugs in the event of an emergency.

In the meantime, plenty of money from Project Bioshield has already been committed to large contracts with drug producers. According to CRS reports, the government so far in recent years has signed deals worth at least $2.1 billion for tens of millions of medical doses. The list includes more than 29 million doses of anthrax vaccinations and treatments worth $1.1 billion, plus over $500 million for 20 million doses of a new smallpox vaccine.

Those figures don’t, however, include one colossal $879 million contract signed in late 2004 with VaxGen, Inc., a biotech firm headquartered near San Francisco, for 75 million doses of an anthrax vaccine. That agreement was ultimately terminated after the company “failed to meet a contract milestone,” as the research service lightly puts it.

There’s a little more to the story. Investigators at the Government Accountability Office found that VaxGen “accepted the contract despite significant risks,” among them a lack of needed technical expertise. It was also excessively optimistic to believe VaxGen could deliver 25 million doses of the vaccine in just two years as the government wanted, something that “would have been unrealistic even for a large manufacturer,” the GAO concluded in a 2007 report.

Officials at VaxGen knew their chances of success were limited and the contract came long before other critical vaccine development projects were expected to be completed by the company. As for why the government rushed into such a large investment, authorities “felt a sense of urgency to demonstrate to the public that a new, improved vaccine was coming.”

Advocates of greater bio-preparedness nonetheless condemned the recent blow to Project BioShield, including Bush’s former bioterrorism advisor, Robert Kadlec. They warn of a biological blindside that could take the lives of 400,000 Americans and do hundreds of billions in damage to the nation’s economy.

“It is incomprehensible to think that an administration and a Congress that is fighting terrorists in Afghanistan, Pakistan and Yemen – some of whom are trying to obtain and use biological weapons against the U.S. – would eliminate monies dedicated to make us better prepared,” Kadlec told the Times.

Former senators Jim Talent (R-Mo.) and Bob Graham (D-Fla.) wrote a letter to the White House July 12 arguing that a betrayal of the initiative “will drive a stake through the heart of America’s fledgling biodefense efforts.” According to the letter: “It was designed to be an iron-clad pledge by the U.S. government to the private sector – if you take the financial risks to research and develop these medical countermeasures, we guarantee the money will be available to purchase them.”

But skeptics of Project Bioshield had their own reactions.

A senior fellow at, George Smith, dismissed the Graham-Talent activist duo as a “mouthpiece” of the biodefense industry. Smith told blogger Steven Aftergood from the Federation of American Scientists that the project hinges on extreme scenarios, and even inside the world of pharmaceutical research and development, the money would be better spent on something else. “The country needs more antibiotics to fight infectious bacterial diseases magnitudes more than it needs anything BioShield could theoretically furnish,” Smith said.

Obey’s move is the biggest setback yet for Project Bioshield, but Washington had already been tinkering with the account, thus demonstrating a lack of surefootedness about the program’s direction. Congress first yanked more than $400 million out of the initiative in 2009, placing much of the money into an advanced biodefense research and development authority controlled by the Department of Health and Human Services. Lawmakers programmed another portion specifically for pandemic influenza preparedness and response.

Then later in the year over $600 million was removed for similar purposes, and account balances for Bioshield on top of that were shifted to health and human services from the Department of Homeland Security.

The Project BioShield Act did more than just entice industry with a mammoth set-aside of taxpayer dollars. Another provision allows unapproved treatments to be released to the public in the event of an emergency, and so far it’s been used several times, including for certain antiviral drugs given to young children suffering from last year’s swine flu outbreak. The list of products includes Tamiflu, respirators and diagnostic kits needed to help identify the disease.

G.W. Schulz is a reporter for Reveal, covering security, privacy, technology and criminal justice. Since joining The Center for Investigative Reporting in 2008, he's reported stories for NPR, KQED,, The Dallas Morning News, the Chicago Tribune, the San Francisco Chronicle, Mother Jones and more. Prior to that, he wrote for the San Francisco Bay Guardian and was an early contributor to The Chauncey Bailey Project, which won a Tom Renner Award from Investigative Reporters and Editors in 2008. Schulz also has won awards from the California Newspaper Publishers Association and the Society of Professional Journalists’ Northern California Chapter. He graduated from the University of Kansas and is based in Austin, Texas.