Pursuant to a congressional request, GAO discussed the contractual relationship between the Department of Defense (DOD) and BioPort Corporation for production of the anthrax vaccine, focusing on: (1) the financial assistance DOD provided BioPort in 1999; and (2) additional financial assistance DOD is providing BioPort in 2000.

GAO noted that: (1) last year, DOD provided BioPort financial assistance so that the company would have sufficient operating capital to preclude disrupting, and possibly ending, the anthrax vaccine program; (2) among other things, DOD substantially increased the original contract price and provided an interest-free advance payment to BioPort of $18.7 million; (3) in providing the assistance, DOD believed the Food and Drug Administration (FDA) would approve the company's vaccine production processes in its renovated facilities by the end of 1999; (4) however, in November 1999, FDA reviewed the company's manufacturing processes and identified numerous deficiencies; (5) according to DOD officials, BioPort is now not expected to obtain FDA approval until the end of 2000; (6) the delay in obtaining FDA approval has caused BioPort to experience continuing financial problems; (7) recognizing the company's financial difficulties, DOD has taken a number of additional actions to help improve BioPort's financial situation; (8) in February 2000, DOD modified BioPort's contract to provide an additional amount of almost $12 million to, in part, hire technical assistance for obtaining FDA approval; (9) DOD also extended the schedule for BioPort to repay the interest-free advance payment and returned about $7.4 million that the company had repaid; (10) in March 2000, DOD notified BioPort that it wants BioPort to stop anthrax vaccine production for now; (11) this action reduces DOD's risk of paying for vaccine that the FDA may ultimately not approve and also allows BioPort to focus on obtaining FDA approval; (12) however, the company's financial condition is worsened because BioPort will no longer receive revenues from producing the vaccine; and (13) to mitigate the consequences of its actions, DOD intends to provide additional financial assistance to BioPort to sustain the production line.

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