PowderJect's £20m shot-in-the-arm

TONY BLAIR was facing a new cronyism row after new documents revealed how a Labour donor made a huge profit by cornering the market for a Government contract.

Drayson, who was subsequently given a peerage, made an estimated £20m for his PowderJect company when ministers rushed to buy smallpox vaccine after the 11 September terrorist attacks on the US in 2001.

The documents show how Dr Drayson quickly gained a stranglehold on the market by securing a deal with the only manufacturer able to supply the vaccine quickly.

Details of how the story unfolded were revealed yesterday after Health Secretary John Reid was forced to back down after a clash with the Parliamentary Ombudsman, Ann Abraham.

She called his refusal to follow her recommendation to publish the documents 'a matter of great concern'. For the past two years, the Health Department has fought to keep the files secret, claiming they contained national security and commercial secrets.

Abraham had ruled that these claims were mainly bogus.

The new facts about how PowderJect manoeuvred itself into a position to win the £32m Government contract will be a headache for Blair.

The Premier has already been severely criticised because Drayson gave a second £50,000 donation to the Labour Party while the Government was deciding who should be handed the contract.

He was also one of a select group of businessmen who met the Premier at a Downing Street breakfast on 6 December, 2001. The get together came as Whitehall officials were deciding they would go ahead and opt for one particular type of vaccine, the Lister strain.

When scientists and defence officials came to finalise the purchase they discovered Drayson had an exclusive deal with the key Lister manufacturer, Bavarian Nordic.

Under the arrangement the German-Danish firm would sell to the British Government only by using PowderJect as a middleman. It is not clear whether Drayson was aware at the time he forged the link-up with Nordic of Whitehall's decision to opt for the Lister strain.

The arrangement caused huge controversy because it meant PowderJect would not manufacture the 20m doses of the vaccine itself but instead would buy them in from Bavarian Nordic and then sell them on to the Government.

Despite this, the documents show, Health Department officials were not deterred. They advised ministers that they had to buy from PowderJect.

They wrote that the Bavarian Nordic vaccine was 'available only via PowderJect... Only PowderJect could provide vaccines in 2002. The other companies would not be in production until 2003 at the earliest'.

Health minister John Hutton was embarrassed by the discovery that Drayson had made party donations and asked for the PowderJect decision to be reconsidered.

But the documents show officials insisting ministers had to go ahead and buy the Lister strain through PowderJect.

They said the Ministry of Defence had 'carried out their own analysis and are firmly of the view the Lister strain is their preferred option and it is more appropriate that we should go ahead with a joint Health Department/MoD approach'.

Lord Drayson did not respond to requests for comment.