Prepared Testimony of Carl Rausch

  On behalf of Biopure Corporation, I want to thank you for organizing this summit and
allowing me to speak here today. The title of my speech is "Oxygen Therapeutics as
Alternatives to Red Blood Cells." Biopure is a biopharmaceutical company with 175
employees located in Massachusetts, Pennsylvania and New Hampshire. Compared to some of the other
participants in this conference, Biopure can best be described as a grain of sand on the beach of corporate
America. However, our technology could potentially change the practice of transfusion medicine and, in
doing so, affect the lives of millions of people in the United States and around the world. Biopure's
technology includes patented methods for purifying and modifying molecules, which have allowed us to
develop and manufacture a new class of biopharmaceuticals called "oxygen therapeutics." These products
are often called "blood substitutes" because they replace lost fluid in the bloodstream and deliver oxygen
to the body's tissues and organs. However, oxygen therapeutics are pharmaceutical-quality products that
overcome many of the medical, economic and logistical issues associated with blood transfusions.
Because of this, they could have an enormous impact on patient outcomes and on the overall quality and
cost of medical care. Each year in the United States, more than 12 million units of blood are donated and
as many as 4 million patients receive blood transfusions.' The General Accounting Office (GAO) has
calculated that as many as 50 percent of recipients of a red blood cell transfusion would have risked
immediate death had they not received this course of treatment. In the past several years, the government
and the blood industry have taken major steps to improve the availability, safety and efficacy of blood
transfusions. As a result, the blood supply is safer today than it has ever been. But because of the inherent
nature of blood and the blood supply system, the concerns and problems associated with the
administration of blood cannot be completely eliminated. Each year there are regional shortages in the
blood supply, which may soon become a national problem. In April, the Health and Human Services
Advisory Committee on Blood Safety and Availability heard testimony projecting a shortage of up to
300,000 units of red blood cells in the United States next year. The new FDA donor deferral criteria could
increase this shortage to almost 550,000 unitS,4 which would be an enormous stress for patients, blood
collection agencies and the healthcare system in general. Biopure's oxygen therapeutic addresses
availability issues because it can be stored at room temperature for two years and is compatible with all
blood types. Blood is also a product with inherent, unavoidable risks. It is licensed by the FDA, but it
does not have the same standards for purity or effectiveness as a pharmaceutical product, it is classified as
a biohazard, and it is unique among healthcare products in being shielded from most product liability laws.
In contrast, pharmaceutical manufacturers like Biopure are responsible for producing products that adhere
to FDA requirements for safety, identity and strength and that meet the quality and purity characteristics
they are represented to possess. Donated blood will always carry the risk of emerging pathogens for
which no tests initially exist. For example, today nearly 4 million Americans are infected with hepatitis C
viruS,6 many unknowingly, and infection-related illnesses represent a significant economic burden on the
healthcare system. (This is despite the screening tests instituted in the early 1990's). Biopure's oxygen
therapeutics address the issue of known and unknown pathogens because they are purified through a
validated and patented process to remove potential infectious agents. A 1997 GAO report found that 8 out
of every I 0,000 units of blood pose a potentially serious risk to the recipient, including bacterial or viral
infections, allergic reactions or reactions due to blood incompatibility.7 A separate study recently
estimated that the administration of red blood cells was associated with a 35 percent greater risk of serious
bacterial infection and a 52 percent greater risk of pneumonia in the patient group studied. This study
calculated that serious bacterial infection increased hospitalization costs by approximately $14,000 per
patient. This additional cost does not show up in the unit price of blood, but it is an example of how
hidden blood-related expenses drive up the overall cost of healthcare. In addition to availability and safety,
there are also efficacy issues associated with the use of blood. For example, the ability of donated red
blood cells to immediately deliver oxygen depends on how long they have been stored. The FDA's
requirement for preserving red blood cells is that 75 percent of the red cells survive after 24 hours of
storage, which means that 25 percent can be non-functional. In fact, red blood cells cannot be used after
35 to 42 days of storage. Biopure's oxygen therapeutics do not lose their oxygen-carrying capacity during
storage, and deliver oxygen immediately upon administration. The impact of oxygen therapeutics upon
transfusion medicine has already been proven in the field of veterinary medicine. Biopure has a product
called Oxyglobin, which in 1998 became the first FDA-approved oxygen therapeutic for veterinary use.
Since then the product has provided a safe and effective treatment for anemia in dogs, and has helped
save the lives of hundreds of animals. Biopure has a similar oxygen therapeutic for human use, which is
called Hemopure. This product is being evaluated in a pivotal Phase III clinical trial to evaluate its ability
to eliminate red blood cell use in surgery. In trials to date, Hemopure has compared favorably with red
blood cells, and Biopure recently received fast-track review status for the product in South Africa.
Hemopure is also being developed to treat conditions where blood is not normally transfused, such as
heart attack and stroke, and to oxygenate hypoxic (or oxygen-deprived) tumors to increase their response
to chemotherapy or radiation. Biopure's oxygen therapeutics consist of purified bovine hemoglobin that
has been chemically modified for increased stability in the body. These products have a two-year shelf
life, are stored at room temperature, are compatible with all blood types, and are purified to remove
infectious agents. They transport oxygen immediately upon administration and more readily release
oxygen to tissues than blood. Because Hemopure is easily stored and used, it has the potential to improve
treatment in critical care conditions and in emergency situations in the field where immediate oxygen
support is vital to prevent tissue damage or even death. In addition, it could facilitate military preparedness
and medical care in remote geographic areas in the United States and around the world. For example, it is
our understanding that during Desert Storm it cost our military almost $1 million dollars a day to maintain
a state of blood readiness, and most of the blood on hand went unused. It is our belief, then, that
Hemopure will support the world's blood requirements by addressing blood availability issues, costs,
infectious agents and the complexity of our extensive blood- banking infrastructure. The United States has
historically been the leader in the biotechnology industry. However, this leadership position will only be
maintained if economic policy fosters new technologies so products like oxygen therapeutics can fulfill
their potential. Since our inception in 1984, Biopure has raised $300 million to fund development of our
technology and products, and like all companies we ultimately must show a return to our investors. To
achieve a return and to make our innovative product available to the healthcare system, we need a true
understanding of the overall costs of patient management in relation to the collection, storage, distribution
and use of blood. The government, with its payment systems for Medicare, cannot be a bystander.
Reimbursement policies for blood and blood products have not significantly changed for more than twenty
years. Yet, during that time, eleven new tests and multiple new procedures have been mandated to
improve the safety of blood. With oxygen therapeutics now in advanced-stage clinical trials, it is time for
reimbursement guidelines to consider the total costs of the blood infrastructure on our healthcare system.
In addition, the government and particularly the U.S. Patent Office should consider revising patent
protection coverage so that it compensates for the lengthy FDA review process. The full economic value
of patent protection is often greatly reduced because much of the patent's life span elapses prior to
commercialization of a product. At Biopure, we hope to significantly improve medical care for millions of
people worldwide. With your help, we can make this a reality and ensure this technology fulfills its
potential. In closing, I would like to "put a face" on our technology by describing a recent compassionate
use case. In this case, a 21-year-old woman was suffering from severe progressive immune- mediated
hemolytic anemia. Essentially, her immune system was destroying her own red blood cells, which
severely compromised the delivery of oxygen to her tissues and organs. At one point her red blood cell
volume dropped below 4 percent, a level, which cannot sustain life and is far below the non of 40
percent. However, this patient was administered Hemopure over the course of eight days and was
subsequently stabilized until the hemolytic process could be controlled. Although she was at death's
doorstep, she eventually recovered and was discharged from the hospital. This is just one compelling
example of the impact our product can have when blood is not available or cannot be used. Thank you
again for inviting me to speak today. Mr. Chairman, I will be happy to respond to any questions that you
or members of the Committee may have.