http://online.wsj.com/public/article/SB115222460753000013-A_ofQv9POyEHzYFVbwh3ARbMriM_20060714.html?mod=regionallinks

WASHINGTON -- A spat between the U.S. and France is blocking progress on a novel, business-friendly plan to persuade drug companies to develop vaccines for deadly diseases in the developing world.

Despite lobbying by the U.S., Italy and the United Kingdom, chances have faded that President Bush and other leaders of the Group of Eight major powers will endorse the proposal when they meet next weekend in St. Petersburg, Russia, for their annual summit.

The proposal "is now in substantial danger of flopping even though there is an extraordinary level of support among some key stakeholders," said one senior official with direct knowledge of the G-8 vaccine discussions.

A summit-planning meeting last month ended with senior French and U.S. officials in a heated exchange over the plan, in which the G-8 would guarantee a market for pharmaceuticals companies that develop successful vaccines. France refused to endorse the vaccine plan unless the U.S. backed a French proposal for a new international airline-ticket tax to pay for aid to poor countries, and the Bush administration refused to do so, according to the senior official.

Further complicating matters, Germany and Japan are reluctant to contribute much money for the vaccine plan, called an advance market commitment.

The situation marks a sharp reversal for the initiative. The proposal appeared to be on the fast track in February when G-8 finance ministers, including then-Treasury Secretary John Snow, endorsed the idea. At that time, the ministers expected to agree by April on a pilot project to tackle at least one deadly infectious disease.

That meeting led to creation of a panel of experts, who recommended that the first advance market commitment be used to promote development of a vaccine for pneumococcal disease. According to the World Health Organization, the bacterial infection killed 1.6 million people in 2002, 716,000 of them under the age of 5. The panel suggested that the approach could help generate a vaccine for malaria, which kills one million people a year, but predicted that it would take longer than a pneumococcus vaccine.

G-8 officials say that drug companies, although initially skeptical, have rallied behind the idea. "They're ready to give this a go," said the official familiar with the G-8 discussions.

The plan aims to address a problem in global drug markets: The countries that most need new treatments for diseases such as AIDS and tuberculosis are those that can least afford to pay for them. An Italian Finance Ministry paper concluded last year that poor financial prospects have made drug companies reluctant to develop vaccines aimed at diseases found mostly in developing nations.

Under the advance market commitment plan, the G-8 would guarantee a subsidy -- valued at $800 million to $6 billion depending on the disease -- for any company or companies that produce vaccines that meet agreed-upon safety-and-efficacy standards. Once the donors spend that initial subsidy, the pharmaceuticals companies would discount the vaccine sharply for developing-world customers.

"All of the technical work that can be done on an abstract level has been done," said Orin Levine, an epidemiologist who works on pneumococcus vaccines at Johns Hopkins University in Baltimore. "It's time to just commit, to take that step and move into the first stage, which is negotiating the first-ever advance market commitment for a vaccine."

Wyeth, the Madison, N.J., pharmaceuticals company, makes a pneumococcus vaccine, but it doesn't prevent infection by bacterial strains common to the developing world, according to the Treasury Department, which has been helping push the vaccine initiative. The company "has always been supportive of the G-8's efforts around advanced market commitments for vaccine development," Wyeth spokesman Christopher Garland said in a written comment.

Hopes that the G-8 leaders would push the plan in St. Petersburg have gone astray at the negotiating table. The proposal is one of three major drug-finance plans floating around the G-8. While the plans could complement each other, they compete for the limited financial resources -- and political bragging rights.

U.K. Chancellor of the Exchequer Gordon Brown has championed what he calls the International Finance Facility, in which the G-8 would issue bonds to raise money to purchase drugs for poor nations. France, Italy and several other nations have signed on, and the first series of bonds is expected to raise $4 billion in the next few months, according to a French government official. The Bush administration has said the British plan doesn't fit with the U.S. system of yearly budget appropriations.

France has lobbied hard for an airline-ticket tax to fund drug purchases. A week ago, Paris took the lead by imposing a tax of £¿, or about $1.25, on domestically purchased tickets for economy-class flights within Europe, as well as a £¿0 levy on business- and first-class tickets. For flights outside Europe, the tax rises as high as £¿0. The revenue will go for drugs to treat AIDS and other illnesses in poor countries, according to a French official, who says 13 other countries have agreed to the tax plan.

At the summit-preparatory meeting last month, France argued that the G-8 should endorse its approach, provoking opposition from the U.S. and reluctance from Japan on antitax grounds. The U.K. gave only tempered support for its European Union partner. A U.K. Treasury spokesman said London would only go so far as to divert some of its current ticket-tax revenue to the French effort; it won't impose a new tax.

Failing to win support for the ticket tax, the French negotiator blocked the advance-market-vaccine proposal from the G-8 leaders' statement being drafted for the coming summit, according to the senior official.

The French government official played down the disagreement. "We're not expecting to see the U.S. joining the air-ticket tax group on a short horizon -- maybe at a later stage," the official said. The ticket-tax plan does "not require you to have everybody around the same table."

At the same time, Japan and Germany shied away from the vaccine plan because of concern about the cost. "A number of other governments in the G-8 don't want to pony up more money for something right now," said a senior U.S. Treasury official.

Some G-8 officials expressed hope that wealthy nations would find a way to launch an advance market commitment pilot by year's end. Other supporters of the plan are worried it is being slowly derailed.

"I just think it's a tremendous opportunity, and it would be an absolute shame to let the window pass without an announcement in St. Petersburg," said Mr. Levine.