(UPDATED: See below.)
polesi.jpgHouse Speaker Nancy Pelosi apparently has a warm place in her heart for two San Francisco life-science companies. Buried inside a story on how the Democrat-led Congress seems almost as enthusiastic as its scandal-ridden Republican predecessor about “earmarks” that direct federal money to projects favored by individual legislators, Bloomberg News notes that two of fifteen earmarks Pelosi inserted in a defense-funding measure steer millions of dollars to Prosetta, a Mission Bay biotech, and Bioquiddity, a local medical-device developer.

From the Bloomberg story:

Some companies stand to gain from Pelosi’s earmarks. The California Democrat has won funding for six companies in a 2008 defense funding measure. One is a $4 million request to develop a “novel viral biowarfare agent” for Prosetta Corp., based in her San Francisco district. Tom Higgins, the company’s chief executive officer, says he talked to the Speaker’s staff directly rather than hiring a lobbyist and hasn’t given money to her campaign. “We’re just a little company,” he says.

Another of Pelosi’s earmarks was $2.5 million to Bioquiddity, Inc., a San Francisco biotech company with nine employees, to continue developing drug-infusion pumps. Bioquiddity President Josh Kriesel, who ran unsuccessfully as a Republican for the state legislature in 2002, has donated $6,000 to the Democratic Congressional Campaign Committee since last September. The company received a total of $3.9 million in earmarks in the last two years. Kriesel declined to comment directly on the earmarks.

Although Bloomberg reporters Brian Faler and David Rosen describe Prosetta as developing a “novel biowarfare agent” — in other words, a weapon, which would be quite a surprise — it looks a lot like they simply got that wrong. Keep reading to see why. In addition, Bioquiddity seems to be a medical-device maker, not a biotech. Bloomberg doesn’t seem to have corrected either error.

We last covered Prosetta here, when the company raised $2 million in a follow-on to its first round. The company is primarily focused on using small-molecule drugs — basically, traditional pharmaceuticals that can be formulated as pills — to disrupt the protein coats viruses uses to cloak their genes after they replicate.

Prosetta has already raised more than $12 million in defense contracts. In mid-2005, for instance, it announced a $4 million contract called NOVBAIT I in collaboration with a SUNY Buffalo institute called CUBRC from the Defense Threat Reduction Agency to explore possible defenses against viral biowarfare agents. (The DTRA is a Department of Defense office that oversees a variety of programs aimed to defuse threats from nuclear, chemical and biological weapons; for more, see here.) In August 2006, the company announced another $8.6 million contract, denoted by the acronym TMTI, for expanding research on antiviral diagnostics and therapeutics. Three months later, the company announced an undisclosed amount of funding from another DOD contract called NOVBAIT II.

I wasn’t initially certain if it would be possible to tell whether the earlier contracts were also the result of congressional earmarking, as such provisions are usually buried inside thousand-page spending bills, and are frequently worded obliquely so as to identify the recipient company without ever actually naming it. (Kudos to the Democrats for making the earmarking process more transparent, although as Bloomberg notes, they’ve still got a way to go.)

But it turns out that a variety of Internet watchdogs have been on the case. The White House Office of Management and Budget (OMB), for instance, totaled up all earmarks from the 2005 fiscal year and put the database on the Web. (The federal fiscal year ends on Sept. 30 of the named year, so FY2005 runs from October 2004 through September 2005, probably to suit the congressional-recess schedule.) For this, we have to thank President Bush’s January declaration that he wanted to cut the number and cost of earmarks “in half,” although it’s worth noting that he didn’t bother to say so until the Democrats took charge of Congress again.

In any case, the OMB database reveals a $2.4 million 2005 contract to CUBRC — Prosetta’s partner, remember — for “novel viral biowarfare agent ID and treatment,” otherwise known as NOVBAIT (PDF link). OMB didn’t identify the earmark’s sponsor, as the Democrats now do, to their credit. For what it’s worth, a separate tally by Taxpayers for Common Sense revealed a $4 million earmark (Excel file; see line 2052) in last year’s defense appropriations bill for NOVBAIT, although the group didn’t identify either the sponsor or the recipient.

I’ll keep digging, but at this point it certainly looks possible that Prosetta may have been living off of earmarks for some time. For anyone who wants to sleuth on their own, you should also know that TMTI stands for the DTRA’s Chemical and Biological Defense Transformation Medical Technologies Initiative, about which you can read more here — note that the Prosetta contract is listed in position #6 of this PDF file.

Bioquiddity seems to keep a much lower profile. If the company has a Web site, it’s well hidden, and Bioquiddity doesn’t seem to have raised much in the way of venture capital. It is, however, active in Washington; according to opensecrets.org, a lobbying database run by the Center for Responsive Politics, Bioquiddity paid the lobbying firm Donald F. Massey $40,000 in 2005 and again in 2006. Although the opensecrets.org database doesn’t say what the lobbying was for, the Bloomberg story does note that the company received $3.9 million in earmarks over the past two years. (For Massey’s other clients, click here.)

Meanwhile, here’s Pelosi’s response to the story, from Bloomberg:

Pelosi has said some earmarks are “worthy.” And she said there is a distinction between those for public projects, which she sometimes touts with press releases, and special interest earmarks.

Asked about her company-specific earmarks, she says “there are some things that the federal government wants that some of these companies can uniquely do.”

UPDATE: I just spoke with Prosetta CEO Thomas Higgins, who confirmed that Bloomberg was incorrect in stating that the company is developing a “biowarfare agent.” Prosetta’s work counters viral infection, as I wrote earlier.

Higgins also said that the TMTI funding originated with DOD and was competitively bid, meaning that it doesn’t count as an earmark. (His statement appears to be corroborated by this PDF document, which is an unclassified slide deck of the 2007 budget estimates for the Pentagon’s Chemical and Biological Defense Program — search on TMTI for info on the fact that the program arose out of the Pentagon’s Quadrennial Review.)

Higgins added, however, that Prosetta’s earlier funding under the NOVBAIT program was earmarked, although he said he couldn’t recall if Pelosi’s office had been involved at the time. Actually, by his explanation, “earmark” might be putting it too strongly — Higgins says the NOVBAIT funding was added to the defense appropriations bill by Congress, but that the actual contracts were awarded competitively. This gets us into some interesting territory. (Warning: Legislative wonkery ahead.)

Using Thomas, I found NOVBAIT funding for FY2005 and FY2006. Both times it crops up in the Senate Appropriations Committee report — here for FY2005, here for FY2006. In 2005, it turns out, the Senate report requested $4 million for the program, which is exactly what Prosetta announced it had received that year. In 2006, the committee requested $5.7 million for the program, which is presumably NOVBAIT II. Higgins told me that the money just appropriated by the House — but not yet addressed by the Senate — will be NOVBAIT III.

I’m still trying to get a look at the report on the FY2008 appropriations bill that just passed the House, but it’s been close to a half-hour and the thing is still downloading — the PDF is 71MB and counting. I’ll update again once I get a look at it.

UPDATE REDUX: OK, now I get some of the complaints about the earmark “disclosure.” Big chunks of the House appropriations-committee report PDF are bitmapped scans, meaning that most of the report is not only huge, but also unsearchable. Almost all the interesting stuff — most of the numbers, that is — are thus essentially redacted unless you flip through all 493 pages of the PDF yourself, and even then the font is tiny and the resolution is bad. Since I’m a masochist, I did manage to find the $4 million in NOVBAIT funding (it’s on page 372 of the report PDF — you won’t find it in the text-only HTML version, where it’s referenced as “Insert graphic folio 053 36323A.051”). I still don’t have a clue how this amounts to a Prosetta earmark unless they’re the only company that ever got funding through NOVBAIT — which may in fact be the case for all I can tell at the moment.


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