Biowarfare and Health IT: Spoiling Brand USA

By M.L. Baker  |  Posted 07-19-2005

Market-based solutions require a market. But this market need not be simply the average consumer. The Bill and Melinda Gates Foundation has tried to stimulate industry investment in medicines for the developing world by guaranteeing a market for resulting products. The understanding is "If you build it, I will buy." The government has done the same for biosecurity and, to a much lesser degree, health information technology.

When last year's BioShield Act passed, it promised to set aside $5.6 billion over ten years for the government to purchase vaccines and other products to protect citizens from biowarfare attacks. Some pundits predicted that the guarantee of funds would propel plucky start-ups into the business of foiling terrorists.

Several months on, that dream has not just failed to materialize—it's been thwarted, at least according to several companies, including San Diego-based Hollis-Eden Pharmaceuticals Inc.

Government delays have cost the company $600 million dollars, the company's CEO reportedly told the House Government Reform Committeelast week.

Even if that's a gross overestimate, consider that companies typically spend $800 million over more than a decade to bring a drug to market, according to the Tufts Center for the Study of Drug Development.

Hollis-Eden is working on a drug that could prevent radiation from damaging bone marrow, the source of both red and white blood cells. Other companies are working on vaccines for some of the world's most-feared pathogens.

Two senators are planning a new bill to fill the gaps; meanwhile, administration officials protest that the funding processes cannot be rushed.

If processes cannot be rushed, then expectations must be managed. And they must be managed well before companies put themselves on a limb for millions of dollars.

Failure to do so will create problems that go beyond a delay in protection against terrorism: If the government is seen as an unreliable consumer, it will not have the credibility to create market solutions to a myriad of pressing problems.

"If you build it, I mightpay you" creates a much smaller incentive than the previous promise.

And the government is creating a similar kind of uncertainty with health information technology. The same day Congress heard testimony on how government bureaucracy was quashing the innovation it is designed to support, the Senate Appropriations Committee slashed funds for health ITby more than 40 percent.

The committee cut the budget for the Office of the National Health Information Coordinator from a requested $75 million to $42 million. These funds are largely aimed at funding government contracts to show how IT can be used to effectively improve patient care while cutting health care costs. Companies need this seed funding in order to build products that demonstrably pay for themselves and improve performance.

Shortly before slashing the requested funds, Senate leaders introduced a slew of bills, asking for up to half a billion a year in health IT. (Coincidentally, that's about the same per year as the funding approved by BioShield.)

Health IT companies thinking of gearing up the resources to plunge into the market may now be more inclined to dip their toes into a small project.

That's too bad, because biowarfare and health IT are big problems for a big country.

We need companies to feel they can invest in finding big solutions.

M.L. Baker is health IT and biotechnology editor for Ziff Davis Internet's Enterprise Edit group. She can be reached at baker@ziffdavis.com.