NVCA Viewpoint: U.S. Needs Help from the Private Sector To Combat Bioterrorism –

As legislation for the Department of Homeland Security (DHS) moves forward, Congress and the Administration have shown serious interest in the role that can be played by the private sector in developing and producing terrorism countermeasures. Unfortunately, plans currently on the table-which provide for aggressive federal funding of R&D in government facilities, universities and commercial companies-will leave us far short of the goal of having the countermeasures we need to be prepared for current and future threats.

Our nation’s biosecurity requires discovery of new drugs, vaccines and novel approaches to immunomodulation that can be deployed or stockpiled based on careful threat and response analysis. The extraordinary biomedical research capability in the National Institutes of Health (NIH), Centers for Disease Control and government sponsored academic labs are national treasures, to be sure. But we are only going to get these new countermeasures over the finish line if the DHS is able to engage the enthusiastic participation of the biopharmaceutical industry and the capital sources that support it. The conditions necessary to achieve real participation from our “bioinnovators” are not in place today. Creation of the DHS offers a chance to develop a new approach for engaging the private sector in this effort.

Don’t Spare Change

First, dramatic organizational changes must take place in the way we prioritize our terrorism response needs. the Department of Defense (DOD) and NIH bioterrorism efforts are submerged in large agencies with diverse agendas. The DHS can bring a single-minded focus on the highest priority countermeasures, and it will have the stature to ensure that public and congressional interest does not flag during long development lead times.

Centralizing authority in the DHS for setting priorities, funding solutions and managing incentives is the first and most important step for attracting serious private sector investment. My own experience trying to find the “go-to person” responsible for specific countermeasures reinforces the appalling duplication of responsibilities among the DOD, Department of Health and Human Services and other government departments.

Second, the DHS must signal private sector enterprises and capital markets that a real market exists for these new agents. Congress and the administration must understand the fundamental difference between what drives our remarkable high technology and biotechnology industries and the traditional defense industry. Technology companies whose business plans are based on traditional cost-plus reimbursement cannot compete for the capital pools and talent pools that are drawn to typical venture capital-backed companies. If our nation is to encourage innovative solutions, it also must be willing to structure real-world returns that are commensurate with the risks. This is particularly important where there is little likelihood of commercial sales apart from governments.

Devoting substantial R&D to bioterrorism countermeasures without an understanding of the market forces that will get them deployed is a recipe for failure. To engage our most productive private sector scientists, managers and investors in a new biodefense industry, we need to create the economics seen in companies with defensible intellectual property serving huge markets with significant unmet needs. Thoughtful cost-benefit analysis will support such large market opportunities for certain biodefense agents when the needs of our allies and trading partners are included in the equation.

The failure to seriously address integration of homeland security with DOD efforts is another important omission in current plans for the DHS. We know the military will be required to enforce any meaningful quarantine around a bio-attack. In most threat scenarios, protection of our fighters engaged in a homeland defense operation is inseparable from protection of civilian responders and the general population.

Loosen Regs

The DHS’s relationship with the Food and Drug Administration (FDA) has also been largely overlooked. As a wealthy society in peacetime, we have evolved a highly conservative posture toward regulating medical products in which we continuously balance risk and benefit for drugs and devices. Whenever possible, we will want the public to know that the biodefense vaccines or drugs in reserve carry the benefit of full FDA approval. Some threat scenarios, however, require that the secretary of homeland defense now begin to commission, stockpile and prepare to deploy biological countermeasures that may carry very significant risk to individuals. The DHS must be able to deal with wartime standards for countermeasures that will take years to develop and deploy.

A properly constituted DHS can establish clear and compelling biodefense priorities for the next several years, based on available intelligence information and common sense. Given the proper leadership and legislative mandate, it can unambiguously signal to the private sector that innovation successfully addressing these needs will be rewarded. And, as always, the capital sources that support our high technology and biotechnology industries will respond by supporting entrepreneurs and established companies with the ingredients to succeed in this vital mission.

Leighton Read joined Alloy Ventures in 2001 a general partner after 14 years as a biotechnology entrepreneur and investor. Read is an active member of the NVCA Medical Industry Group.