When President Bush told drug companies he planned to spend $5.6 billion over 10 years to build a medical arsenal against biological terrorism, the program's backers promised it would radically alter the economics of biodefense.

Companies, they said, would no longer be able to complain that no reliable buyer exists for complex treatments to counter agents such as anthrax, botulism, ebola and plague. By promising to buy finished products, rather than just funding early research as it had in the past, the government would create a guaranteed market for bioterror-fighting medicines.

But three months later, many biotechnology and pharmaceutical companies say the plan known as Project Bioshield may not be radical enough. Enthusiasm for the concept of a government-driven market is nearly unanimous within the industry, and dozens of companies have pledged their support. But executives say that, given the financial and legal hazards of developing drugs, vaccines and diagnostic tests for deadly pathogens, they want a higher guaranteed profit and fewer restrictions than the current proposal would offer.

Some industry representatives are lobbying Congress to sweeten the Bioshield legislation with liability protection for companies if products developed under government contract harm people. Others are pushing for more favorable rules about ownership of the rights to new discoveries made under the program.

Bioshield, announced during the State of the Union address in January, is the linchpin of the administration's plan to protect Americans against biological, chemical and radiological attacks, and its implementation is regarded as a crucial step in creating a sustainable biodefense industry.

Unlike most commercial drug-development efforts, which mostly focus on treatments for chronic diseases that could create a steady stream of customers, biodefense is viewed as a far more risky market. An effective drug could sit unsold in a warehouse if the need for it never arises.

But the early skepticism from the industry illustrates the difficulty the government faces in enlisting drug companies -- particularly the largest and most battle tested -- in the search for biological countermeasures, even if they are assured of a steady buyer.

"There needs to be venture-capital type returns if we want venture-type results," said J. Leighton Read, a California venture capitalist and founder of vaccine company Aviron, who calls the program a good first step.

If approved by Congress, Project Bioshield would create a permanent pot of money -- immune to annual budget cycles -- for federal health officials to tap whenever they find a promising medicine. It would also grant agencies wide latitude to expedite projects in the event of a bioterror attack, including streamlining product reviews, contracting and staff hiring procedures.

It is too early to tell what provisions the final legislation will contain. The Senate Health, Education, Labor and Pensions Committee unanimously passed the bill but it may undergo substantial revisions before it is approved by both houses of Congress.

Support for the bill is running high in Congress, and observers predict that the sudden need for drugs and vaccines to contain the latest public health crisis, severe acute respiratory syndrome, or SARS, may bring many holdouts on board.

Several lawmakers say the program is already favorable to industry, giving the president what one House member called a blank check to entice drug companies to participate. Rep. Henry A. Waxman (D-Calif.) is pressing for stronger congressional and judicial oversight of Bioshield, arguing that it could weaken safeguards against waste and fraud in federal contracts.

Anthony S. Fauci, director of the National Institute of Allergy and Infectious Diseases, said that by ensuring a permanent appropriation for biodefense products, Bioshield would remove the greatest obstacle to industry investment: fears of budget cuts that could make the government an unreliable buyer. Once federal health officials engage companies in a contract, he said, "no matter what, if they come through with a deliverable product, even if we never use it, we will buy it."

The industry likes much of the proposal.

"Bioshield will streamline the entire process," said James H. Davis, general counsel at Human Genome Sciences Inc. in Rockville, which has indicated it is likely to seek funding under the program to manufacture an experimental antidote to anthrax.

Still, some executives contend that the legislation would impose cumbersome restrictions on funding. The bill stipulates that a company must produce and deliver a medicine within five years. In addition, a contract can be terminated -- and payment denied -- for failure to deliver sufficient quantity of a product within three years. In an industry in which the average new drug takes 10 years to bring to market, both of those time requirements are relatively short, executives said.

Further, to prevent government subsidization of money-making drugs, the legislation requires that there be little or no commercial market for a Bioshield-funded treatment, a rule that industry experts say could exclude products already in use -- a drug for cancer, for example, that could be tweaked to treat people exposed to a radiological attack.

Existing medicines that can be repositioned for biodefense "are the lowest hanging fruit," said Gillian R. Woollett, vice president of science and regulatory affairs at the Biotechnology Industry Organization. "It's not an appropriate exclusion."

Then there is what executives say is missing from the bill: protection from liability if medicines developed under federal contract have adverse side affects. "One only has to look at the experience with smallpox vaccinations," Gail H. Cassell, vice president for scientific affairs at Eli Lilly & Co., said of recent deaths tied to the vaccine. "Liability has to be addressed."

Frank M. Rapoport, a lawyer for French vaccine maker Aventis Pasteur SA, has encouraged lawmakers to make production of a medicine, not just research, part of a Bioshield contract. He said large drug manufacturers fear the government will split those tasks, minimizing the financial incentive for the industry's biggest companies.

Without these assurances, experts say, the work of developing critical treatments will fall to small and generally untested biotechnology companies hungry for government funding. The government is increasingly finding willing partners among such firms at a time when they are having trouble raising money from venture capitalists and the stock market.

A year ago, the Department of Health and Human Services passed over huge drug companies, including Merck & Co. and GlaxoSmithKline PLC as potential smallpox contractors in favor of Acambis PLC, a small British biotechnology company with offices in Cambridge, Mass. The Defense Department has ordered anthrax vaccine from BioPort Corp. of Lansing, Mich. The National Institute of Allergy and Infectious Diseases has awarded contracts for a next-generation vaccine to VaxGen Inc. of Brisbane, Calif., and the Avecia Group PLC of Britain.

The Defense Department has also asked Frederick, Md.-based DynPort Vaccine Co., a joint venture between Computer Science Corp. and Porton International Inc., to develop several vaccines, including an improved smallpox vaccine.

The provisions in the Bioshield legislation are aimed at overcoming the qualms of the large drug companies that have long regarded the government as a risky business partner. Many point to the experience of Bayer Corp. with anthrax. Two years ago, when the government decided to stockpile 1.2 billion doses of the anthrax-fighting medicine Cipro, Health and Human Services Secretary Tommy G. Thompson demanded a price of not more than $1 a pill, about half of Bayer Corp.'s already discounted offer. When the company protested, Thompson threatened to circumvent patent laws and order a cheaper genetic version.

"The idea that we are asking this industry to put its capital at risk for the government is obviously a very steep hill to climb," said a Democratic aide familiar with the legislation, speaking on the condition of anonymity. "These are industries that are suspicious [of] government to begin with."

Bioshield's supporters say the promise of a guaranteed market and accelerated purchasing process could do much to change the uneasy relationship.

"There is no perfect incentive mechanism," said NIH's Fauci. But with Bioshield, "the government is acting in good faith to embrace industry."