Tuesday, October 03, 2006

Another Privatization Failure

The U.S. military loves to contract out to the private sector. It embraced the P3 model of Reinventing Government promoted by both Al Gore and the neo-cons.

Of course the failures of privatization of service delivery have been revealed in Iraq and the resulting failures of the U.S. government following Katrina. Now it appears there is another billion dollar privatization boondoogle in the works.

Bioshield dispute underscores problems with US defense program

The anthrax attacks of 2001 prompted passage of Project Bioshield, which promised to build national drug stockpiles to be used in case of a bioterror attack.

The project was supposed to jump start a national security renaissance among drug makers by guaranteeing contracts to develop drugs for combatting potential bioweapons. But it has been greeted with skepticism by many in the industry.

The anthrax project, the first and largest Bioshield contract, was to be the crown jewel.

In November 2004, the $877.5 million (euro690.2 million) contract was awarded to VaxGen to genetically engineer a replacement for the current anthrax vaccine, which requires six shots to be administered over 18 months. VaxGen's is expected to require no more than three shots.

Since winning the contract, however, VaxGen has repeatedly stumbled, starting with its disclosure it would miss the original deadline of November 2005 by a year.

Even before winning the contract, the company had a checkered past highlighted by the 2003 flop of its experimental AIDS vaccine, which failed to protect inoculated volunteers from getting infected.

Since then, it was dropped from the Nasdaq Stock Market for failing to file financial reports, its chief scientific officer left the company in July, and its stock price hovers near $4.40 -- at the low end of its 52-week range -- as VaxGen and the government try to work out their differences.

Then, in March, the government said it wouldn't pay VaxGen until the company completed a costly and time-consuming human test to ensure the vaccine was safe. The new requirement forced the company to sell its stake in another biotechnology company for $79 million (euro62.1 million) to stay afloat and finance the new test.



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