Millions Wasted On Anthrax Vaccine Search?

The California company VaxGen was the first to get a government BioShield contract in 2004 - a huge one worth $877 million dollars - to develop a better anthrax vaccine.

"They were given milestone to meet - production schedules," said Rep. Mike Rogers, R-Michigan, of the House Energy and Commerce Committee. "They didn't meet one of them. Not one of them."

Things were so bad, that recently the government decided to pull the plug on the whole project. VaxGen ends up with only $1.5 million tax dollars. But CBS News discovered taxpayers are actually on the hook for a much larger bill than that.

It turns out VaxGen had already been awarded $100 million tax dollars for the anthrax project from another government agency: the National Institutes of Health.

Congressman Rogers, who represents the district of a VaxGen competitor, says he wonders why the government entrusted VaxGen with so much money to begin with.

VaxGen has never put a single dose of any vaccine on the market.

Before the anthrax vaccine flop, the company was best known for failing to develop an AIDS vaccine, using $8 million in taxpayer dollars.

And VaxGen got delisted from the stock exchange for failing to file proper papers in 2004.

"When you started peeling back the onion, it started to look pretty bad," said Rogers. "It did not pass the smell test. It was a company that had no proven track record, and here was the recipient of almost $100 million of U.S. taxpayer money and had nowhere to go with it."

"We remain confident that with the proper support, we could develop a modern anthrax vaccine," said Lance Ignon, a VaxGen vice president.

He insists they could have worked out the kinks if they'd just had more time, and it's the government that has wasted your tax dollars by pulling the contract midstream. He also adds that the company spent way more shareholder money than tax dollars on the vaccine research.

"There's been a modest investment on the part of the government in the research of this vaccine, and it is, to us, regrettable that that investment will now be squandered because the government decided to terminate this contract."

What's next for the government's Project BioShield quest for a new anthrax vaccine? It's back to the drawing board. What's next for VaxGen? They're working on a new vaccine for smallpox, without tax dollars.