Labour faces a major row over its financial links with drug companies.
Powderject - the company which has been awarded the £32m government contract to supply emergency stocks of smallpox vaccine - is owned by Paul Drayson, a £50,000 donor to the Labour party. But rival drug companies have claimed they were not allowed to bid for the contract.
The vaccine deal follows a review of the terrorist threat to Britain after September 11. Previously, the government had only around 3m doses of smallpox vaccine for Britain's 60 million population. The new supplies, costing the government £2 a shot, will be enough for 16 million people.
The deal comes in the week that a second major Labour drug company donor was among those whose firms were raided by the serious fraud office on suspicion of overcharging the NHS.
The Department of Health had been keeping its smallpox agreement with Mr Drayson's company secret, citing "national security". News of the contract only emerged from industry sources yesterday, boosting Powderject's share price.
British secrecy contrasts embarrassingly with the open stance of the US, which has announced a major £540m contract to buy 209m smallpox vaccine doses - enough for every US citizen in a biological war - from Acambis, a British rival to Powderject. The decision to give the UK contract to Powderject infuriated rivals, who said yesterday they had not been given a chance to bid.
An industry source said that in January the DoH had asked a number of companies for preliminary information about their capability to make vaccines. This was followed by "radio silence", with no competitive bidding process.
"I'm a bit confused about what's happened here," said a senior executive at one drug company. "We would be looking for some information from the Department of Health about on what basis this decision has been reached."
The vaccine will be produced in a secure area of Powderject's factory in Speke, Merseyside.
A DoH spokesman said: "I can't comment on the grounds of security. There are concerns that any information about the size, location or deployment of smallpox vaccine supplies could be of assistance to people who commit terrorist acts. I can't comment on whether or not a contract exists."
The department refused to discuss why the contract had been awarded to Mr Drayson's company. Asked why the US government was able to make public the details of its deal with Acambis, the spokesman said: "They have got different policies on open government. It is a long-standing policy that the size of the vaccine supply should remain confidential."
Powderject said last night the donation was unconnected with the contract.
The contract is not linked to the present crisis with Iraq. Mr Drayson, as head of the "biodefence group" of drug companies, lobbied the government in November to sell new smallpox and anthrax vaccine stocks in the wake of September 11.
Mr Drayson's smallpox deal was discovered as it emerged separately that one of the six drug companies raided by police this week was headed by another big Labour donor, Isaac Kaye, who has handed over £120,000 in four tranches. Mr Kaye, chairman of IVAX Pharmaceuticals UK, denies any wrongdoing by his company, which is the biggest supplier of generic drugs to the health service.
Six companies, including IVAX, were swooped on by the police and serious fraud office over accusations that they over-charged the NHS and unlawfully fixed the price of drugs.
The Labour party declined to comment.
