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					        ARNOLD & PORTER ADVISORY

Bioterrorism and Appropriation Bills Expand
Government Purchases and Support for
Medical Countermeasures
January 2002


On January 10, President Bush signed the Department of Defense           WASHINGTON
                                                                         555 Twelfth Street, NW
(DoD) appropriations bill for Fiscal Year 2002, containing over          Washington, DC 20004-1206
$3 billion for programs to address bioterrorism and other public         202.942.5000
health threats. Still pending in Congress are two versions of            202.942.5999 Fax
bioterrorism/public health security authorization legislation, one
passed by the House on December 12 and another passed by the             NORTHERN VIRGINIA
                                                                         Suite 900
Senate on December 20.                                                   1600 Tysons Boulevard
                                                                         McLean, VA 22102-4865
The Senate bill (S. 1765, Kennedy-Frist) focuses primarily on            703 720 7000
programs to address biological terrorism, while the House bill (H.R.     703 720 7399 Fax
3448, Tauzin-Dingell) includes provisions for addressing other public
health emergencies, such as those that may be caused by a                NEW YORK
chemical or nuclear attack. Differences between the two bills will be    399 Park Avenue
                                                                         New York, NY 10022-4690
addressed when Congress returns later this month. Overall, the bills     212.715.1000
provide significant opportunities for companies that are developing or   212.715.1399 Fax
marketing products that may be used to prevent, treat or identify
biological or chemical agents or toxins or other countermeasures to      LOS ANGELES
public health threats.                                                   44th Floor
                                                                         777 South Figueroa Street
                                                                         Los Angeles, CA 90017-5844
DoD Appropriations                                                       213.243.4000
                                                                         213.243.4199 Fax
The DoD appropriations bill recently signed by the President contains
substantially increased funding for a wide range of programs to          CENTURY CITY
prepare for or counter chemical, nuclear, radiological, and              17th Floor
                                                                         1900 Avenue of the Stars
bioterrorism threats, including:                                         Los Angeles, CA 90067-4408
                                                                         310.552.2500
                                                                         310.552.1191 Fax
•   $333 million for improving force protection and chemical and
    biological defense capabilities of DoD.
                                                                         LONDON
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•   $2.5 billion for countering potential biological, disease and        25 Old Broad Street
    chemical threats to civilian populations through the Department of   London EC2N 1HQ
    Health and Services’ (HHS) Public Health and Social Services         20.7786.6100
                                                                         20.7786.6299 Fax
    Emergency Fund, including,
                                                                         DENVER
    §   $865 million to the Centers for Disease Control and              Suite 4500
        Prevention (CDC) for improving state and local capacity.         370 Seventeenth Street
                                                                         Denver, CO 80202-1370
                                                                         303.863.1000
                                                                         303.832.0428 Fax


                                                                         arnoldporter.com
    §   $593 million for the National Pharmaceutical Stockpile (in excess of additional smallpox
        vaccine purchases).

    §   $100 million for upgrading CDC, including research.

    §   $7.5 million for CDC environmental hazard control activities.

Bioterrorism Authorizing Legislation

Both the House and Senate have passed far-reaching bills that would enhance the Federal
infrastructure for preparing for and responding to a biological or chemical attack. Key provisions
of the Senate Kennedy-Frist bill and the House Tauzin-Dingell bill include:

•   Expansion of the National Pharmaceutical Stockpile. Both bills would authorize the
    expansion of the National Pharmaceutical Stockpile to include treatments in case of
    bioterrorism or other public health emergencies.

•   Control of Biological Agents and Toxins. Both bills would further restrict possession and
    transfer of biological agents and toxins listed by HHS.

•   State and Local Grants. Both bills contain provisions for grants to state and local
    governments to enhance emergency preparedness, including purchase of medical supplies
    and pharmaceuticals. The Senate bill contains block grants for bioterrorism preparedness
    only, while the House bill allows funds to be used for general public health activities.

•   Acquisition of Priority Countermeasures. Both bills contain provisions for expanded
    government purchase of drugs and devices through the National Pharmaceutical Stockpile.
    The Senate bill contains additional contracting authority for “ensuring the development of
    priority countermeasures that are necessary to prepare for a bioterrorist attack or other
    significant disease emergency.” The House bill contains a provision that would require HHS
    to evaluate new technologies to detect, identify, diagnose, or conduct public health
    surveillance activities.

•   Security Assistance. Both bills authorize HHS, in consultation with the Department of
    Justice (DoJ) and DoD, to provide assistance and security for facilities that conduct
    development, production, distribution, or storage of priority countermeasures. The Senate
    bill limits security assistance to biological countermeasure facilities only, while the House bill
    would also apply to facilities providing countermeasures for other public health emergencies.

•   Accelerated Approval and Use of Animal Studies. Both bills would authorize FDA to
    review priority countermeasures under the fast-track procedures of 21 U.S.C. § 356. Both
    bills also mandate that FDA complete pending rule-making on the use of animal studies in
    drug trials where human use would not be ethical. The Senate bill is limited to bioterrorism
    countermeasures only, while the House bill includes countermeasures for other public health
    emergencies.




                                                                   Bioterrorism and Appropriations Bills 2
•   Research and Development Funding. Both bills authorize grants for research and
    development of priority countermeasures. The Senate bill is limited to bioterrorism
    countermeasures only, while the House bill includes countermeasures for other public health
    emergencies.

•   Limited Antitrust Exemption. The Senate bill includes a limited antitrust exemption to
    facilitate inter-company cooperation in developing priority countermeasures against
    bioterrorism. This exemption would only apply to meetings convened by HHS and pre-
    approved by and subject to monitoring by the DoJ or Federal Trade Commission. The
    House bill lacks this provision.

•   Medicare/Medicaid Waiver. The House bill authorizes the Secretary of HHS to waive
    certain Medicare and Medicaid requirements during a public health emergency or
    presidentially-declared emergency or disaster. The Senate bill lacks this provision.

Other Legislation

Over 40 bioterrorism-related bills have been introduced in Congress since September 11. For
example, legislation introduced by Senator Lieberman, S. 1764, contains additional incentives
such as R&D tax credits, indemnification, and patent extension for bioterrorism
countermeasures.

Arnold & Porter attorneys are especially capable of representing clients on issues, such as
bioterrorism, that combine public policy, regulatory, and national security considerations. Our
team includes former General Counsels of the Department of Defense, Central Intelligence
Agency, and the National Security Agency, as well as former senior officials of the Department
of Health and Human Services, Food and Drug Administration, Department of Justice, and
lawyers who have served in senior positions in the House and Senate.

If you would like more information about these developments, please contact the following
Arnold & Porter attorneys:

    Food, Drug and Medical Devices
    Bill Vodra        202.942.5088               William_Vodra@aporter.com
    Arthur Levine     202.942.5740               Arthur_Levine@aporter.com
    Grant Bagley      202.942.5928               Grant_Bagley@aporter.com
    Jeff Francer      202.942.5144               Jeffrey_Francer@aporter.com

    National Security Law and Public Policy Practice Group
    Jeff Smith          202.942.5115          Jeffrey_Smith@aporter.com
    Doug Dworkin        202.942.5227          Douglas_Dworkin@aporter.com
    Marti Cochran       202.942.5228          Martha_Cochran@aporter.com
    Ron Lee             202.942.5380          Ronald_Lee@aporter.com
    Jeff Richman        202.942.5098          Jeffrey_Richman@aporter.com
    Gordon Lederman     202.942.6133          Gordon_Lederman@aporter.com
    Mike Ruggiero       202.942.6365          Michael_Ruggerio@aporter.com



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