How a company cashed in on anthrax

The vaccine maker's frequent cries for help brought it millions of additional tax dollars - even when it could not deliver a product that troops could use.

In a two-year span, the nation's only licensed anthrax vaccine maker went from pleading poverty to announcing $100 million in acquisitions, including other pharmaceutical companies and a new manufacturing plant near Washington, D.C.

It's a pattern that's worked well for BioPort Corp.: Tell the Pentagon or Congress that it doesn't have the money to keep going, negotiate a new deal, then count the extra cash rolling in.

During the past seven years, it's transformed an initial investment of less than $4.5 million into an international biotech firm, with contracts worth more than $450 million. During that time, the company has capitalized on its monopoly over the vaccine and on fears that opposing armies and terrorists will unleash tiny anthrax spores somewhere.

BioPort is an example of how a sole-source government contract can become a gold mine - especially if you spend wisely on the right lobbyists and public relations professionals.

BioPort counts a former Cabinet member and assistant secretary of health and human services among those it pays to gain favor with government agencies.

"You always pay a higher price when you're stuck with a sole-source," says Philip Coyle, a former assistant secretary of defense for procurement. "The government has nowhere else to go if it wants what you have to sell."

He says Pentagon officials talked about taking over the anthrax vaccine plant and operations - especially after the government held the license for the vaccine as collateral for a series of loans and payments that kept the company afloat.

"What I never heard in those discussions was why nothing ever came of it," he says.

The Pentagon isn't telling that story, and neither is BioPort.

MOST BIOPORT FINANCES AREN'T OPEN TO PUBLIC

Troops and veterans who've been asked to put BioPort's products in their bodies often point to the company's problems getting a clean bill of health for its manufacturing plant, as well as to the company's ability to always get its way with government officials. They wonder whether BioPort's connections - not its scientific and medical prowess - are behind the company's success.

BioPort is a privately held company that doesn't make its stock available for public sale. As a result, most aspects of its finances and management aren't open to public scrutiny.

The company declined to provide its officers for interviews with the Daily Press. Six weeks after receiving a list of detailed questions - and promising answers - it sent a box containing two books and some news releases. None of the questions was answered.

BioPort's approach to veterans is similar: It sends substitutes to speak for it, often without disclosing that those sources were paid by the company. Those surrogates disregard evidence of deaths or severe health problems from the vaccine, and they provide testimony to government regulators and the public.

Meanwhile, the veterans who think that they've been harmed by the vaccine live on disability payments or suffer in silence.

No government grants support research into their questions about the shot.

EX-JOINT CHIEFS HEAD WAS NAMED DIRECTOR

Until 1998, the nation's only manufacturing plant for anthrax vaccine was owned and operated by the state of Michigan. The state agency that ran the plant was losing money, so the state put the operation and its license for making the anthrax vaccine up for bid.

Fuad El-Hibri, a 40-year-old German businessman with a Yale University management degree, formed a team of investors to buy the business, which included a $100 million contract with the Pentagon.

His bid faced a problem, though: He and his father, Ibrahim El-Hibri, a wealthy international financier from Lebanon, dominated ownership of the company, which they named BioPort.


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